<PAGE>
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 Period Ended September 30, 1999
or
{ } Transition Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
Commission File No. 0-19923
STM WIRELESS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 95-3758983
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification number)
One Mauchly
Irvine, California 92618-2305
(Address of principal executive offices) (Zip code)
(949) 753-7864
(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 and (2) has been subject to such filing requirements for
the last 90 days.
Yes No
X _____
---
As of November 10, 1999, there were 7,042,204 shares of Common Stock, $0.001 par
value per share, outstanding.
Page 1 of 25
<PAGE>
STM Wireless, Inc.
Index
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at September 30, 1999
and December 31, 1998............................................................. 3
Condensed Consolidated Statements of Operations for
the three and nine month periods ended September 30,
1999 and
September 30, 1998................................................................ 4
Condensed Consolidated Statements of Cash Flows for the nine
month periods ended September 30, 1999 and September 30, 1998..................... 5
Notes to Condensed Consolidated Financial Statements.............................. 6-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................................. 13-21
Item 3. Quantitative and Qualitative Disclosures
About Market Risk................................................................. 22
Part II. Other Information........................................................................... 23
</TABLE>
Item 1. Legal Proceedings
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
2
<PAGE>
PART I - FINANCIAL INFORMATION (Item 1 - Financial Statements)
STM WIRELESS, INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
ASSETS
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 9,286 $ 11,016
Short-term investments - 1,106
Restricted cash and short-term investments 2,195 2,224
Accounts receivable, net 7,444 17,016
Inventories, net 12,112 13,108
Current portion of long-term receivables - 702
Prepaid expenses and other current assets 226 1,623
------------------ -----------------
Total current assets 31,263 46,795
Property & equipment, net 8,407 11,056
Long-term receivables - 788
Equity and other investments 157 4,151
Other assets 456 411
------------------ -----------------
$ 40,283 $ 63,201
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 8,800 $ 10,650
Current portion of long-term debt 339 384
Accounts payable 6,795 9,582
Accrued liabilities 4,784 7,256
Customer deposits and deferred revenue 50 1,910
Income taxes payable 765 1,000
------------------ -----------------
Total current liabilities 21,533 30,782
Long-term debt 4,135 4,306
Redeemable minority interest - 6,355
Other long-term liabilities 1,177 -
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000,000 shares
authorized, none issued or outstanding - -
Common stock, $0.001 par value; 20,000,000 shares
authorized; issued and outstanding 7,042,204 shares
at September 30,1999 and December 31, 1998 7 7
Additional paid in capital 38,161 38,140
Accumulated deficit (24,730) (16,389)
------------------ -----------------
Total stockholders' equity 13,438 21,758
------------------ -----------------
$ 40,283 $ 63,201
================== =================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
STM WIRELESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
(Note 10) (Note 10)
<S> <C> <C> <C> <C>
Revenues:
Products $ 6,135 $ 13,257 $ 14,278 $ 28,210
Services 401 1,066 1,331 2,170
--------- --------- -------- ---------
Total revenues 6,536 14,323 15,609 30,380
Cost of revenues:
Products 3,794 8,939 10,508 20,491
Services 155 569 2,008 1,973
--------- --------- -------- ---------
Total cost of revenues 3,949 9,508 12,516 22,464
Gross profit 2,587 4,815 3,093 7,916
Operating costs and other operating items:
Selling, general & administrative expenses 1,448 2,890 6,814 8,919
Research & development 1,264 1,595 3,988 6,559
Restructuring costs - - 1,042 -
Move and relocation charges - - - 980
--------- --------- -------- ---------
Total operating costs and other operating
items 2,712 4,485 11,844 16,458
Operating income (loss) (125) 330 (8,751) (8,542)
Other income 25 109 87 19
Foreign currency devaluation costs (122) - (1,984) -
Gain on sale of assets - - 2,964 9,950
Interest income 355 296 872 654
Interest expense (379) (470) (1,195) (1,099)
-------- --------- -------- ---------
Income (loss) before income taxes and minority interest (246) 265 (8,007) 982
Income tax expense - (77) - (321)
-------- --------- -------- ---------
Income (loss) before minority interest (246) 188 (8,007) 661
Equity in net (loss) of
unconsolidated affiliate - - (59) -
Minority interest - (150) (275) (260)
-------- --------- -------- ---------
Net income (loss) $ (246) $ 38 $ (8,341) $ 401
======== ========= ======== =========
Net income (loss) per common share:
Basic $ (0.03) $ 0.01 $ (1.18) $ 0.06
----- -------- --------- -------- ---------
Diluted $ (0.03) $ 0.01 $ (1.18) $ 0.06
------- ======== ========= ======== =========
Common shares used in computing per share amounts:
Basic 7,042 7,042 7,042 6,900
-----
Diluted 7,042 7,072 7,042 7,117
-------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
STM WIRELESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
1999 1998
---- ----
<S> <C> <C>
Net cash used in operations $ (869) $ (17,213)
---------- ----------
Cash flows provided by investing activities:
Proceeds from the sale of stock in DTPI 2,500 -
Proceeds from repayment of note by DTPI 2,500 -
Cash forfeited on deconsolidation of DTPI (3,149) -
Proceeds from the sale of TMSI - 17,299
Equity investment in affiliate company (1,145) (2,130)
Decrease in restricted cash (46) -
Net decrease in short-term investments 1,106 2,300
Acquisition of property and equipment (263) (1,105)
---------- ----------
Net cash provided by investing activities 1,503 16,364
---------- ----------
Cash flows provided by (used in) financing activities:
Net decrease in long-term receivable 790 307
Issuance of common stock - 4,102
Issuance of redeemable preferred stock in DTPI - 5,886
Increases (repayments) of short-term borrowings (1,850) 3,350
Repayment of long-term debt (216) (250)
---------- ----------
Net cash provided by (used in) financing activities (1,276) 13,395
----------- ----------
Effect of exchange rate changes on cash and cash equivalents (1,088) -
Net increase (decrease) in cash and cash equivalents (1,730) 12,546
Cash and cash equivalents at beginning of period 11,016 4,095
---------- ----------
Cash and cash equivalents at end of period $ 9,286 $ 16,641
========== ==========
Supplemental disclosure of cash flow information:
Interest paid 947 715
Income taxes paid 235 -
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE>
STM WIRELESS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 1999 and 1998
(Unaudited)
1. Basis of Presentation:
These financial statements are unaudited; however, the information
contained herein for STM Wireless, Inc. (the "Company" or "STM") gives
effect to all adjustments necessary, in the opinion of Company management,
to present fairly the financial statements for the interim periods
presented.
As a result of the Company reducing its ownership in Direc-To-Phone
International, Inc. ("DTPI") to approximately 44% of the voting stock of
DTPI (see Notes 9 and 10), the Company will no longer consolidate the
results of DTPI. Accordingly, the accompanying Condensed Consolidated
Statements of Operations include the results of DTPI through June 17, 1999
and the Condensed Consolidated Balance Sheet at September 30, 1999,
excludes the assets and liabilities of DTPI.
The results of operations for the current interim period are
not necessarily indicative of the results to be expected in future
periods.
Although the Company believes that the disclosures in these financial
statements are adequate to make the information presented not misleading,
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 (the "SEC"), and
these financial statements should be read in conjunction with the financial
statements included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1998, which is on file with the SEC.
2. Inventories:
Inventories are summarized as follows:
(amount in thousands)
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Raw materials $ 6,362 $ 7,423
Work in process 2,040 823
Finished goods 3,710 4,862
------------ -------------
$ 12,112 $ 13,108
============ =============
</TABLE>
6
<PAGE>
3. Net Income (Loss) per Share:
(amount in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income (loss) $ (246) $ 38 $ (8,341) $ 401
--------- --------- --------- ----------
Basic:
-----
Weighted average common shares outstanding used
in computing basic net income (loss) per
share 7,042 7,042 7,042 6,900
--------- --------- --------- ----------
Basic net income (loss) per share $ (0.03) $ 0.01 $ (1.18) $ 0.06
--------- --------- --------- ----------
Diluted:
-------
Weighted average common shares outstanding
7,042 7,042 7,042 6,900
Dilutive options outstanding - 30 - 217
--------- --------- --------- ----------
Shares used in computing diluted net income
(loss) per share 7,042 7,072 7,042 7,117
--------- --------- --------- ----------
Diluted net income (loss) per share $ (0.03) $ 0.01 $ (1.18) $ 0.06
--------- --------- --------- ----------
Anti-dilutive options excluded from calculation
of net income (loss)
per share 1,250 1,056 1,250 869
--------- --------- --------- ----------
</TABLE>
4. Recently Issued Accounting Pronouncements:
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133, as
amended by SFAS 137, is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. SFAS 133, establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging
activities. Adoption of SFAS 133 is not expected to have a material impact
on the Company's consolidated financial position, results of operations or
liquidity.
5. Geographic and Business Segment Information:
The Company operates in one principal industry segment: the design,
manufacture and provision of wireless-based satellite communications
infrastructures.
7
<PAGE>
<TABLE>
<CAPTION>
Revenues by Three Months Ended Nine Months Ended
geographic areas September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total:
Latin & South America $ 2,737 $ 10,509 $ 7,671 $ 16,109
Africa & Middle East 1,782 2,060 2,551 6,132
China 1,090 - 1,090 -
Asia 457 1,140 2,742 5,583
United States 414 610 624 1,964
Europe 56 4 931 592
---------- ---------- ----------- -----------
Total $ 6,536 $ 14,323 $ 15,609 $ 30,380
========== ========== =========== ===========
Products:
Latin & South America $ 2,737 $ 9,508 $ 7,433 $ 14,365
Africa & Middle East 1,499 2,060 2,122 6,091
China 1,090 - 1,090 -
Asia 357 1,075 2,282 5,476
United States 396 610 481 1,706
Europe 56 4 870 572
---------- ---------- ----------- -----------
Total $ 6,135 $ 13,257 $ 14,278 $ 28,210
========== ========== =========== ===========
Services:
Latin & South America $ - $ 1,001 $ 238 $ 1,744
Africa & Middle East 283 - 429 41
Asia 100 65 460 107
United States 18 - 143 258
Europe - - 61 20
---------- ---------- ----------- -----------
Total $ 401 $ 1,066 $ 1,331 $ 2,170
========== ========== =========== ===========
Operating income (loss) by area:
Latin & South America $ (109) $ 1,365 $ (2,301) $ 341
Africa & Middle East - - - -
China - - - -
Asia 7 28 (71) (15)
United States (23) (1,063) (6,379) (8,868)
Europe - - - -
---------- ---------- ----------- -----------
Total $ (125) $ 330 $ (8,751) $ (8,542)
========== ========== =========== ===========
September December
30, 1999 31, 1998
Identifiable assets by area:
Latin & South America $ 1,413 $ 11,487
Africa & Middle East - -
Asia 1,084 1,146
United States 37,786 50,568
Europe - -
----------- -----------
Total $ 40,283 $ 63,201
=========== ===========
</TABLE>
(The identifiable assets at September 30, 1999 exclude the assets of DTPI.
See Notes 9 and 10.)
8
<PAGE>
6. Foreign Currency Devaluation Costs:
The Company has certain overseas accounts receivable balances due primarily from
Brazilian customers which can vary depending upon the timing and nature of
projects. In addition, the Company has overseas cash balances which can
vary in value depending upon the timing of cash receipts from customers in
Brazil and the remittance of those balances back to the United States.
Arising primarily from the devaluation of the Brazilian Real, the
Company incurred losses of $122,000 and $1,984,000 for the three months and
nine months ended September 30, 1999, respectively, on cash balances, on
certain account receivable balances (where the Company negotiated a
settlement of its long-term receivable due to the currency devaluation) and
on other accounts receivable balances (where the customer has only
partially compensated the Company for the reduction in the value of the
Brazilian Real). In accordance with SFAS 52, the Company recognized these
losses in the period in which the exchange rate fluctuation occurred. At
September 30, 1999, the Company had assets of approximately $2,500,000 that
are still subject to foreign currency exposure risks.
7. Restructuring Costs:
In recognition of the low overall level of revenues and the foreign
currency losses incurred primarily in the quarter ended March 31, 1999, the
Company implemented cost reduction programs in both Quarter 1, 1999 and
Quarter 2, 1999 to improve the operating performance of the business. As a
result of these cost reduction programs, the Company has exited its Atlanta
facility, relocated its manufacturing operations back to California and
terminated its Atlanta workforce. Restructuring costs of $1,042,000 were
recognized in the nine months ended September 30, 1999, respectively,
comprising severance obligations of $502,000 for approximately 70
terminated employees, costs of $190,000 associated with writing-off the
assets of the Company's Brazilian subsidiary and costs of $350,000
associated with exiting the Atlanta lease commitment, which was excess to
current requirements. During the quarter and nine months ended September
30, 1999, payments of approximately $274,000 and $502,000, respectively,
were made to terminated employees. At September 30, 1999, the restructuring
accrual balance was approximately $336,000 primarily for the lease
commitment.
8. Short-Term Borrowings:
To increase its short-term cash resources, in June 1999 the Company
completed a financing package which made funds of approximately $9,600,000
available to STM (see Note 9) and in October 1999, the Company refinanced
its corporate headquarters through a deed of trust for $7,000,000, thereby
paying off existing debt on the headquarters of approximately $4,000,000
and generating additional cash of approximately $3,000,000. (See Note 13.)
9
<PAGE>
In connection with the Company's short-term borrowings under a secured
$10,000,000 revolving line of credit (the "loan agreement") with Wells
Fargo HSBC Trade Bank N.A. guaranteed by the Export-Import Bank of the
United States ("EXIM") under its Working Capital Guarantee Program
(collectively, the "Bank"), the Company was not in compliance with certain
covenants at December 31, 1998. In addition, the line of credit expired on
April 1, 1999, with the borrowings at $9,050,000. In June 1999, the Company
reached an agreement with the bank whereby the bank agreed to forbear from
exercising its rights under the loan agreement through August 31, 1999, in
consideration for the paydown of the line of credit by $2,250,000 (to
$6,800,000) and the provision of additional collateral to the bank. There
has been no formal extension of this agreement.
In October 1999, the Company paid down the line of credit by
$4,000,000 to approximately $2,800,000 and is completing negotiations for a
new line of credit expected to be approximately $4,000,000, approximately
$2,800,000 of which will be used to fully repay Wells Fargo HSBC Trade Bank
N.A. (Trade Bank). However, there can be no assurance that this new line of
credit will be consummated.
9. New Financing
On June 17, 1999, the Company and DTPI completed a financing whereby
the Company sold shares in DTPI representing approximately 31% of the
voting stock of DTPI for approximately $7,100,000 to REMEC, Inc. (NASDAQ NM
Symbol: REMC) ("REMEC") and Pequot Private Equity Fund ("Pequot"). The
proceeds comprised cash of $2,500,000, a reduction in accounts payable of
approximately $2,200,000 and an offset against future purchases of
inventory for approximately $2,400,000. DTPI also received loans in the
amount of $7,500,000 from REMEC and Pequot.
In connection with the sale of the shares in DTPI, the Company agreed
to a price adjustment with REMEC whereby the purchase price of all future
purchases of committed product from REMEC will be increased.
The loans to DTPI from Pequot and REMEC are repayable after two years,
bear interest at 10% and are automatically converted into equity upon the
consummation of a future DTPI financing of at least $10,000,000.
From the proceeds of the loans received, DTPI repaid STM $2,500,000 of
a $10,000,000 note payable to STM and STM granted DTPI a concession of
$1,600,000 against future purchases of product by DTPI from STM. The
remaining $7,500,000 of the note is repayable to STM out of the
proceeds of future DTPI financings, if any.
10. Sale of Shares in DTPI
On June 17, 1999, the Company reduced its ownership in DTPI from 75%
to approximately 44% through the sale of shares in DTPI for approximately
$7,100,000 (see Note 9). In addition, on June 3, 1999, DTPI announced the
appointment of Claude Burgio as Chairman and Chief Executive Officer of
DTPI. As a result, STM does not control DTPI. Therefore, STM changed its
accounting for DTPI from a full consolidation method to the equity method,
effective June 17, 1999.
10
<PAGE>
The accompanying Condensed Consolidated Statements of Operations for
the nine months ended September 30, 1999, only includes the results of DTPI
through June 17, 1999, and the balance sheet at September 30, 1999,
excludes the assets and liabilities of DTPI.
For the year ended December 31, 1998, DTPI earned revenues of
$13,603,000 and incurred an operating loss of approximately $3,500,000 with
a net loss of approximately $4,400,000.
For the three months ended March 31, 1999, DTPI earned revenues of
$990,000 and incurred an operating loss of approximately $2,200,000 with a
net loss of approximately $2,500,000.
At March 31, 1999, the total assets of DTPI were approximately
$21,050,000.
Reference is made to Form 8-K dated July 2, 1999, filed with the SEC
which includes Pro-Forma Condensed Consolidated Financial Statements in
accordance with Article 11 of Regulation S-X.
Due to the losses incurred by DTPI from inception through June 17,
1999, and the receipt of proceeds from the sale of shares in DTPI, STM's
equity investment in DTPI has been reduced to zero. In addition, STM has no
funding obligations to DTPI nor has STM guaranteed any obligations of DTPI.
Therefore, in accordance with Accounting Principles Board Opinion No. 18,
STM will not accrue any future losses of DTPI and will discontinue applying
the equity method of accounting for DTPI, until such time that DTPI is
profitable.
11. Gain on sale of assets
In June 1998, the Company completed the sale of its then majority-
owned subsidiary, Telecom Multimedia Systems, Inc. ("TMSI") to Inter-Tel,
Inc. ("Inter-Tel"), pursuant to which Inter-Tel agreed to purchase certain
assets and assume certain liabilities of TMSI for approximately $25,000,000
in cash. A gain of $9,950,000 (net of costs incurred and reserves
established at the time which were considered necessary) was realized and
is included in the accompanying Condensed Consolidated Statements of
Operations for the nine months ended September 30, 1998.
In June 1999, upon the release of the final funds from escrow, the
Company reevaluated certain accruals that were established at the time of
the sale and concluded that certain of these accruals were no longer
required, resulting in an additional gain of approximately $3,000,000 which
has been classified as a gain on the sale of assets in the nine months
ended September 30, 1999. At September 30, 1999, the Company has a
remaining accrual of approximately $925,000 for exposures associated with
this transaction.
11
<PAGE>
12. Termination of Merger Discussions with Remec
On April 14, 1999, the Company announced that it had entered into a
letter of intent with REMEC which provided for the merger of the Company
with REMEC, or a subsidiary of REMEC. On May 17, 1999, the Company
announced that the Board of Directors of both STM and REMEC had mutually
agreed to terminate merger discussions, but instead entered into a
financing arrangement. (See Note 9.)
13. Subsequent Event
Subsequent to September 30, 1999, the Company refinanced its corporate
headquarters through a deed of trust for $7,000,000, thereby paying off existing
debt on the headquarters of approximately $4,000,000 and generating additional
cash of approximately $3,000,000 which was used by the Company along with an
additional $1,000,000 of working capital to pay down its line of credit with the
Bank by $4,000,000, to approximately $2,800,000.
14. Reclassifications
Certain reclassifications have been made to the 1998 Condensed
Consolidated Financial Statements to conform to the 1999 presentation.
12
<PAGE>
Item 2 - Management's Discussion and Analysis of Results of Operations and
Financial Condition
General:
- -------
STM Wireless, Inc. (the "Company" or "STM"), founded in 1982, is a
developer, manufacturer, supplier and service provider of wireless-based
satellite communications infrastructure and user terminal products utilized in
public and private telecommunications networks. These networks support data,
fax, voice and video communication and are used to either bypass or extend
terrestrial networks or provide a communications infrastructure where a network
does not currently exist. The Company's product line is based on proprietary
hardware and software and primarily consists of two-way earth stations sometimes
referred to as VSATs (very small aperture terminals), associated infrastructure
equipment and software, transceivers, modems and other networking equipment. The
Company has historically focused its sales efforts on the international
marketplace, particularly developing countries. The Company's former subsidiary,
Direc-To-Phone International, Inc. ("DTPI"), provides broadband Internet and low
and medium density ("LMD") telephony services to customers in developing markets
and is a provider of fixed-station satellite-based LMD telephony services with
operations in Venezuela and Mexico. DTPI plans to leverage its unique strength
in LMD markets to provide IP-based data and voice services to urban markets as
well. The Company's customers include government agencies, telephone companies,
multi-location corporations and others.
On June 17, 1999, the Company sold shares of DTPI for approximately
$7,100,000 to REMEC, Inc. ("REMEC") and Pequot Private Equity Fund, Inc.
("Pequot") and DTPI received loans in the amount of $7,500,000 from REMEC and
Pequot. The loans to DTPI from REMEC and Pequot are repayable by DTPI after two
years, bear interest at 10% per annum and are automatically converted into
equity upon the consummation of a future DTPI financing of at least $10,000,000.
As a result of this transaction, STM reduced its ownership in the voting stock
of DTPI from 75% to approximately 44% and due to STM no longer controlling DTPI,
has de-consolidated DTPI as of June 17, 1999.
Therefore, (a) the results of operations for the three and nine months
ended September 30, 1998, include the results of DTPI, (b) the results of
operations for the nine months ended September 30, 1999, include the results of
DTPI through June 17, 1999, and (c) the balance sheet at September 30, 1999,
excludes the assets and liabilities of DTPI. (See Note 10 of the Notes to the
Condensed Consolidated Financial Statements.)
Results of Operations:
- ---------------------
Total revenues (including DTPI through June 17, 1999) were $6,536,000 and
$15,609,000, respectively, for the three and nine month periods ended September
30, 1999, compared to $14,323,000 and $30,380,000, respectively, for the
corresponding periods in 1998, representing decreases of 54% and 49%,
respectively, over the prior year periods. Product revenues were $6,135,000 and
$14,278,000, respectively, for the three and nine month periods ended September
30, 1999, compared to $13,257,000 and $28,210,000, respectively, for the
corresponding periods in 1998, representing decreases of 54% and 49%,
respectively, over the prior year periods. Service revenues were $401,000 and
$1,331,000, respectively for the three and nine months periods ended
13
<PAGE>
September 30, 1999, compared to $1,066,000 and $2,170,000 respectively, for the
corresponding periods of 1998, representing decreases of 62% and 39%
respectively, over the prior year periods.
Excluding DTPI (in which the Company sold its controlling interest
effective June 17, 1999) from both 1999 and 1998, total revenues, product
revenues and service revenues would have been $6,536,000, $6,135,000 and
$401,000 respectively for the three months ended September 30, 1999, compared
with $3,977,000, $3,772,000 and $205,000 respectively, for the three months
ended September 30, 1998, representing increases of 64%, 63% and 96%
respectively. Excluding DTPI, for the nine months ended September 30, 1999,
total revenues, product revenues and service revenues would have been
$14,776,000, $13,538,000 and $1,238,000 respectively, compared to $18,808,000,
$18,223,000 and $585,000 respectively, for the nine months ended September 30,
1998, representing decreases of 21% and 26% for total revenues and product
revenues respectively and increase of 112% in service revenues. The increase in
service revenues reflects the higher service content of certain 1999 projects
and increased revenue earned by the Company's Asian Service Center in 1999.
The higher level of revenues, excluding DTPI, in the third quarter of 1999
compared to 1998 relates to a higher level of sales in Latin America and China
in 1999. China represents a new market for the Company's products. The lower
level of revenues in the nine months ended September 30, 1999, compared to 1998
relates to a lower level of revenues earned in Asia and the Middle East in 1999,
partially offset by increases in revenues in China and Latin America. The
Company's revenues in total and by region can vary significantly depending upon
the timing of projects and the value of individual projects. In addition, the
economic uncertainty in emerging markets continues to impair the sales cycle for
the Company's products. Revenue opportunities were also adversely impacted by
the significant devaluation and continued instability in the Brazilian currency
in 1999. As part of its restructuring of the operations of the Company,
management has reorganized its sales activities through personnel changes and
there is more direct involvement by the Chief Executive Officer of the Company
in the sales activities. Sales efforts are focused on specific customers and
specific known and identified projects, however, there can be no assurance that
such efforts will generate any revenue or any specific level of revenues.
The gross profit percentage earned for the three months ended September 30,
1999, was 40% in 1999 compared to 34% in the corresponding period of 1998. For
the nine months ended September 30, 1999, the gross profit was 20% compared to
26% for the corresponding period of 1998. Excluding DTPI (in which the Company
sold its controlling interest on June 17, 1999) the gross profit percentages
would have been 40% and 34% for the three and nine months ended September 30,
1999, respectively, compared to 119% and 45% for the three and nine months ended
September 30, 1998, respectively. The gross profit excluding DTPI for the three
and nine months ended September 30, 1998, was positively impacted by profits
realized by STM on the sale of equipment by DTPI in the third quarter of 1998.
The original sale of the equipment from STM to DTPI had occurred in 1997.
Adjusted for this profit, the gross profit excluding DTPI, for comparative
purposes would have been negative 3.0% and positive 19% for the three and nine
months ended September 30, 1998. The improved gross profit percentages for STM
excluding DTPI, in 1999, reflects improved margins earned on the Company's new
lower cost products and higher gross profits negotiated on certain orders.
Selling, general and administrative (SG&A) expenses for the three months
ended September 30, 1999, decreased to $1,448,000 (22% of revenue) from
$2,890,000 (20% of revenue) for the
14
<PAGE>
corresponding period of the prior year. For the nine months ended September 30,
1999, such expenses decreased to $6,814,000 (44% of revenue) from $8,919,000
(29% of revenue) for the corresponding period of the prior year. Excluding DTPI
(in which the Company sold its controlling interest on June 17, 1999), in the
three months ended September 30, 1999, SG&A would have decreased to $1,448,000
(22% of revenue) from $2,184,000 (55% of revenue, excluding DTPI), for the three
months ended September 30, 1998, and in the nine months ended September 30,
1999, would have decreased to $5,304,000 (36% of revenues, excluding DTPI), from
6,772,000 (36% of revenues, excluding DTPI) for the nine months ended September
30, 1998. Excluding DTPI, the reduction in SG&A in 1999 compared to 1998 in
dollar terms reflects reduced costs primarily in the second and third quarters
of 1999 arising from the cost reduction programs implemented by the Company in
the first and second quarters of 1999.
Research and development (R&D) expenses for the three month period ended
September 30, 1999 decreased to $1,264,000 (19% of revenues) from $1,595,000
(11% of revenues) in the corresponding period of 1998. For the nine month period
ended September 30, 1999, such expenses decreased to $3,988,000 (26% of
revenues) from $6,559,000 (22% of revenues) in the corresponding period of 1998.
There were no R&D expenses associated with DTPI. The decreases in R&D costs in
the three months ended September 30, 1999, compared to the three months ended
September 30, 1998, primarily relates to cost reductions (including some
headcount reductions) due to completion of the development of the Company's new
low cost VSAT products. The decrease in R&D expenses in the nine months ended
September 30, 1999, compared to 1998 related to a charge of approximately
$1,400,000 in 1998, for a contractually committed R&D project with no
discernable future benefit, the absence in 1999 of any R&D expenses associated
with TMSI (the assets of which were sold in June 1998) and cost reductions in
1999 due to completion of the development of the Company's new, low cost VSAT
products.
The restructuring costs of $1,042,000 recognized in the nine months ended
September 30, 1999, respectively, comprised severance costs associated with
approximately 70 terminated employees, the write-off of certain assets in the
Company's Brazilian subsidiary and an accrual for exiting a lease commitment,
which was determined to be in excess of current requirements. (See note 7 to the
Condensed Consolidated Financial Statements.)
The move and relocation charges of $980,000 in 1998 primarily comprised
severance, relocation and move costs incurred in connection with the
consolidation of the Company's Network Systems Division in Georgia.
The foreign currency devaluation costs of $122,000 and $1,984,000,
recognized in the three and nine months ended September 30, 1999, respectively,
arose primarily from the devaluation of the Brazilian Real and comprised losses
on cash balances, on certain account receivable balances (where the Company has
negotiated a settlement of its long-term receivable due to the currency
devaluation) and on other accounts receivable balances (where the customer has
only partially compensated the Company for the reduction in the value of the
Brazilian Real).
The gain on sale of assets of $9,950,000 for the nine months ended
September 30, 1998, represented a gain (net of costs incurred and reserves
established at the time which were considered necessary) on the sale of
substantially all the assets of TMSI. In June 1999, upon the release of the
15
<PAGE>
final funds from escrow, the Company re-evaluated certain accruals that were
established at the time of the sale, resulting in the recognition of $2,964,000
as an additional gain on the sale of assets of TMSI in the nine months ended
September 30, 1999.
Interest income increased by $59,000 to $355,000 for the three month period
ended September 30, 1999 from $296,000 for the three month period ended
September 30, 1998. Interest income increased by $218,000 to $872,000 for the
nine month period ended September 30, 1999, from $654,000 for the nine month
period ended September 30, 1998. Excluding DTPI (in which the Company sold its
controlling interest on June 17, 1999) interest income would have been $355,000
and $631,000 for the three and nine months ended September 30, 1999,
respectively, compared with $221,000 and $499,000 for the three and nine months
ended September 30, 1998, respectively. The increase in interest income,
excluding DTPI, for both the three and nine months ended September 30, 1999,
represents interest income received subsequent to the deconsolidation of DTPI by
STM on a note receivable due from DTPI. (See Note 9 and 10 to the Condensed
Consolidated Financial Statements.)
Interest expense decreased $91,000 to $379,000 for the three month period
ended September 30, 1999, from $470,000 for the three month period ended
September 30, 1998. Interest expense increased by $96,000 to $1,195,000 for the
nine month period ended September 30, 1999, from $1,099,000 for the nine month
period ended September 30, 1998. There was no external interest expense
associated with DTPI. The decrease in interest expense for the three months
ended September 30, 1999, compared with the corresponding period of 1998
reflects a lower level of borrowings under the Company's line of credit and the
absence of fees due to the expiration of the credit facility. For the nine
months ended September 30, 1999, the increase in interest expense relates to
fees incurred for the Company's credit facility for a Brazilian customer.
The absence of a tax provision in 1999 is due to continued losses by the
Company. No deferred tax benefit has been recognized due to uncertainty as to
relizability of such benefit due to the continuing losses. The tax liabilities
recognized represent estimated liabilities for foreign exposures. The tax
provision of $77,000 and $321,000 for the three and nine months ended September
30, 1998, represented the Company's estimated tax provision on its income for
the nine months ended September 30, 1999.
The minority interest charge in 1999 relates to accrued dividends on the
mandatory redeemable shares issued in March 1998 by DTPI. In 1998, the minority
interest charge represented the accrued dividends on the mandatory redeemable
shares of DTPI and a minority interest credit associated with TMSI through the
date of sale of the assets of TMSI.
Liquidity and Capital Resources:
- -------------------------------
On June 17, 1999, the Company and DTPI completed a new financing whereby
the Company sold shares in DTPI representing approximately 31% of the voting
stock of DTPI for approximately $7,100,000 (comprising cash of $2,500,000, a
reduction in accounts payable of approximately $2,200,000 and an offset against
future purchase of inventory for approximately $2,400,000) to REMEC and Pequot
and DTPI received loans in the amount of $7,500,000 from REMEC and Pequot.
16
<PAGE>
In connection with the sale of the shares in DTPI, the Company granted DTPI
a concession of $1,600,000 against future purchases of product by DTPI from STM
and agreed to a price adjustment with REMEC whereby the purchase price of all
future purchases of committed product from REMEC will be increased.
The loans to DTPI from REMEC and Pequot are repayable by DTPI after two
years, bear interest at 10% and are automatically converted into equity upon the
consummation of a financing of at least $10,000,000.
From the proceeds of the loans, DTPI repaid STM $2,500,000 of a $10,000,000
note payable to STM. The remaining $7,500,000 of the note is repayable to STM
out of the proceeds of future DTPI financings, if any.
In connection with the Company's short-term borrowings under a secured
$10,000,000 revolving line of credit (the "loan agreement") with Wells Fargo
HSBC Trade Bank N.A. (Trade Bank) guaranteed by the Export-Import Bank of the
United States ("EXIM") under its Working Capital Guarantee Program
(collectively, the "Bank"), the Company was not in compliance with certain
covenants at December 31, 1998. In addition, the line of credit expired on April
1, 1999, with the borrowings at $9,050,000. In June 1999, the Company reached an
agreement with the bank whereby the bank agreed to forbear from exercising its
rights under the loan agreement through August 31, 1999, in consideration for
the paydown of the line of credit by $2,250,000 (to $6,800,000) and the
provision of additional collateral to the bank. There has been no formal
extension of this agreement.
Subsequent to September 30, 1999, the Company refinanced its corporate
headquarters through a deed of trust for $7,000,000, thereby paying off existing
debt on the headquarters of approximately $4,000,000 and generating
approximately $3,000,000 of cash. This $3,000,000 of cash plus an additional
$1,000,000 of cash from working capital was used to paydown the line of credit
by $4,000,000 to approximately $2,800,000.
The Company is in the process of completing negotiations for a new line of
credit expected to be approximately $4,000,000 with a new lender and the
intention is to repay the remaining $2,800,000 due to the Bank out of the
proceeds of this line of credit.
The result of this refinancing subsequent to September 30, 1999, is to
increase long-term borrowings by approximately $3,000,000 and to reduce short-
terms borrowings by approximately $3,000,000, thereby improving the Company's
current ratio from 1.45 to 1.0 at September 30, 1999, to approximately 1.69 to
1.0 and improving the Company's quick ratio (cash plus receivables divided by
current liabilities) from 0.88 to 1.0 at September 30, 1999, to approximately
1.0 to 1.0.
For the nine months ended September 30, 1999, the Company had negative cash
flows from operating activities of $869,000. The negative cash flows from
operating activities are primarily due to operating losses substantially offset
by non-cash items and other changes in working capital. The net cash used in
operating activities for the nine months ended September 30, 1998, represented
losses for the period investment in accounts receivable and inventory and a
reduction in accounts payable.
17
<PAGE>
Cash generated by investing activities in the nine months ended September
30, 1999, totaled $1,503,000 comprising $2,500,000 received from the sale of
shares in DTPI, $2,500,000 received from the repayment of the DTPI note
receivable and a decrease in a short-term investments of $1,106,000 partially
offset by $3,149,000 cash forfeited upon deconsolidation of DTPI, a $1,145,000
increase in equity investments and $263,000 purchases of property plant and
equipment.
Cash used in financing activities during the nine months ended September
30, 1999, totaled $1,276,000, comprising a repayment of short-term borrowings of
$1,850,000 and long-term debt of $216,000 partially offset by proceeds from
long-term receivables of $790,000.
Overall, the Company's cash and cash equivalents totaled $9,286,000 at
September 30, 1999, as compared to $11,016,000 at December 31, 1998.
Management expects to have sufficient cash generated through operations,
through availability under lines of credit and through other sources to meet the
anticipated cash requirements for the next twelve months.
18
<PAGE>
New Accounting Standards:
- ------------------------
In June 1998, the Financial Accounting Standards Board issued a statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133, as amended by SFAS
137, is effective for all fiscal quarters of fiscal years beginning after June
15, 2000. SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities. Adoption of SFAS 133 is not expected to
have a material impact on the Company's consolidated financial position, results
of operations or liquidity.
Year 2000:
- ---------
Many computer programs have been written using two digits rather than four
to define the applicable year. This poses a problem at the end of the century
because such computer programs would not properly recognize a year that begins
with "20" instead of "19". This, in turn, could result in major system failures
or miscalculations, and is generally referred to as the "Year 2000 issue". The
Company has formulated a Year 2000 Plan to address the Company's Year 2000
issues and has created a Year 2000 Task Force to implement the Year 2000 Plan.
The Company's Year 2000 Plan has seven phases, which are as follows: 1)
Phase 1 - Organization Awareness, which entails educating employees, senior
management and the board of directors about the Y2k problem and how to deal with
it; 2) Phase 2 Inventory and Supply Management, which entails taking a complete
inventory of systems and their relative priority to continuing operations and
implementing a supply management process for top vendors and critical
components; 3) Phase 3 - Assessment, which entails assessing systems and their
Y2k compliance status; 4) Phase 4 - Planning, which entails preparing an
estimate of costs and identifying potential solutions and their cost in dollars,
schedule and ripple effect; 5) Phase 5 - Renovation, which entails
implementation of fixes; 6) Phase 6 - Validation, which entails testing the
fixes for compliance; and 7) Phase 7 - Contingency Planning, which entails
preparing for rollover staffing, inventory adjustment and other actions which
would mitigate the effect of a Y2k failure.
The Company's Year 2000 Plan will be applied in five different areas of
coverage: a) internal systems; b) current products; c) vendors; d) existing
customers; and e) key business partners.
Internal Systems - The Company's internal business systems and PC
applications will be a primary area of focus. The Company has evaluated its
software applications, including, but not limited to, its business systems
software, personal computers, computerized manufacturing equipment and embedded
chips to identify any Year 2000 issues that could significantly disrupt the
Company's operations.
The Company has completed the Inventory and Assessment phase of
substantially all critical systems. The Planning, Renovation and Validation
phases are scheduled to be completed by December 31, 1999. With the exception of
a scheduled upgrade to the Company's Infoflow business management software
system, upgrades primarily consist of implementing free bug patches or planned
software upgrades to current versions. The Company expects to be Year 2000
compliant on all critical systems which rely on the calendar year before
December 31, 1999. Some non-critical
19
<PAGE>
systems may not be addressed until after January 2000, however, the Company
believes such systems will not disrupt the Company's operations significantly.
Current Products - The Company's certification group has conducted
evaluations of its current products to determine if they are Year 2000
compliant. The Company does not currently believe that there are any material
Year 2000 defects in its products. With respect to components in the Company's
products that are manufactured by third parties, the Company has completed the
Inventory and Assessment phase and does not currently believe that there are any
material Year 2000 defects.
Vendors - The Company has completed the Inventory phase and is currently in
the Assessment phase with respect to the Year 2000 status of critical suppliers.
The Company has contacted the top 99% of critical suppliers, and has completed
most of the Assessment phase with no serious risks discovered. The Company does
not currently believe that any Year 2000 compliance issues related to its
suppliers will result in a material adverse effect on the business operations or
financial performance of the Company.
Existing Customers - With respect to products that have been shipped to
existing customers, the Company has identified certain problems that will
require upgrades to operational networks to make them Year 2000 compliant. The
Company has contacted substantially all of its customers to notify them of such
problems and expects to complete all upgrades requested to date by December 31,
1999. The Company currently estimates that the total cost of implementing such
upgrades will not exceed $1,000,000 and will likely be offset by service fees
charged in connection with completing such upgrades. The Company believes that a
small portion of the upgrades will be provided free of charge as part of the
warranty coverage or software maintenance agreements on the products being
upgraded.
Key Business Partners - The Company has completed the Inventory phase and
Assessment phase with respect to most of its key business partners, with no
serious risks discovered. However, a small number of key business partners have
yet to certify to the Company that they are Year 2000 compliant.
Contingency Plan - A contingency plan has not yet been developed for
dealing with the most reasonably likely worst case scenario with respect to the
Company's Year 2000 compliance, and such scenario has not yet been clearly
identified. It is impossible to fully assess potential consequences in the event
service interruptions from suppliers occur or in the event that there are
disruptions in such infrastructure areas as utilities, communications,
transportation, banking and government. Assuming no major public infrastructure
service disruption occurs, the Company believes that it will be able to manage
its Year 2000 transition without a material effect on its results of operations
or financial condition. The Company has not completed contingency plans in the
event that a disruption in the public infrastructure does occur.
The Company currently estimates that the cost of implementing its Year 2000
Plan will not exceed $1,000,000 (including the cost of upgrading the operational
networks of current customers). Costs incurred to date have been less than
$200,000.
20
<PAGE>
The Company anticipates that the Year 2000 issue will not have a material
adverse effect on the financial position or results of operations of the
Company. There can be no assurance, however, that the systems of other companies
or governmental entities, on which the Company relies for supplies, cash
payments, and future business, will be timely converted, or that a failure to
convert by another company or the governmental entities, would not have a
material adverse effect on the financial position or results of operations of
the Company. If third party service providers and vendors, due to the Year 2000
issue, fail to provide the Company with components or materials which are
necessary to manufacture its products, with sufficient electrical power and
other utilities to sustain its manufacturing process, or with adequate, reliable
means of transporting its products to its customers worldwide, then any such
failure could have a material adverse effect on the Company's ability to conduct
business, as well as the Company's financial position and results of operations.
21
<PAGE>
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
To avoid the risk of fluctuating exchange rates associated with
international sales, the Company conducts most international sales in United
States currency. However, the Company has generated, and expects to continue
generating, revenues in Brazil based in the local currency of Brazil. While the
contracts relating to such arrangements contain provisions that call for
payments to be adjusted to take into account fluctuations in foreign currency
exchange rates, the Company's customers in Brazil have expressed an
unwillingness to adjust contract amounts to fully reflect the exchange rate
fluctuations. Brazilian counsel has advised the Company that there is
uncertainty as to the enforceability of provisions which tie payments to foreign
currency rates. The Company, therefore, has negotiated and is negotiating
settlements of its receivables from its Brazilian customers. The Company's
currency exposure in Brazil is also exacerbated by the Brazilian exchange
control rules, which limit the Company's ability to repatriate its Brazilian
currency. As of September 30, 1999, the Company's cash assets included
approximately $400,000 in Brazil and Brazilian accounts receivable balance of
approximately $820,000 (based on the exchange rates as of such date). While the
Company is in the process of repatriating such funds, there can be no assurance
that such process will be completed in a timely fashion or that the Company will
not suffer additional losses as a result of the Brazilian currency fluctuation.
The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's investment rate and credit risks. The Company's
exposure to market risk is not expected to be material. The Company does not use
derivative financial instruments in its investment portfolio.
Risk Factors and Forward Looking Statements:
- -------------------------------------------
THIS DOCUMENT CONTAINS CERTAIN FORWARD LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, THAT INVOLVE RISKS AND
UNCERTAINTIES. IN ADDITION, THE COMPANY MAY FROM TIME TO TIME MAKE FORWARD
LOOKING STATEMENTS, ORALLY OR IN WRITING. THE WORDS "ESTIMATE", "PROJECT",
"POTENTIAL", "INTENDED", "EXPECT", "BELIEVE" AND SIMILAR EXPRESSIONS OR WORDS
ARE INTENDED TO IDENTIFY FORWARD LOOKING STATEMENTS. ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE PROJECTED OR SUGGESTED IN ANY FORWARD LOOKING STATEMENTS
AS A RESULT OF A WIDE VARIETY OF FACTORS AND CONDITIONS, AMONG OTHERS, LACK OF
LIQUIDITY AND WORKING CAPITAL, INABILITY TO RAISE DEBT OR EQUITY FINANCING,
LONG-TERM CYCLES INVOLVED IN COMPLETING MAJOR CONTRACTS, PARTICULARLY IN FOREIGN
MARKETS, INCREASING COMPETITIVE PRESSURES, GENERAL ECONOMIC CONDITIONS,
TECHNOLOGICAL ADVANCES, THE TIMING OF NEW PRODUCT INTRODUCTIONS, THE EFFECTS OF
THE YEAR 2000 ISSUES, POLITICAL AND ECONOMIC RISKS INVOLVED IN FOREIGN MARKETS
AND FOREIGN CURRENCIES AND THE TIMING OF OPERATING AND OTHER EXPENDITURES.
REFERENCE IS HEREBY MADE TO "RISK FACTORS" IN THE COMPANY'S 10-K FOR THE YEAR
ENDED DECEMBER 31, 1998.
BECAUSE OF THESE AND OTHER FACTORS THAT MAY AFFECT THE COMPANY'S OPERATING
RESULTS, PAST FINANCIAL PERFORMANCE SHOULD NOT BE CONSIDERED AN INDICATOR OF
FUTURE PERFORMANCE, AND INVESTORS SHOULD NOT USE HISTORICAL TRENDS TO ANTICIPATE
RESULTS OR TRENDS IN FUTURE PERIODS.
22
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. As of September
30, 1999, the Company was not engaged in any material legal proceedings which
the Company expects, individually or in the aggregate, will have a material
adverse effect on the Company's results of operations or its financial
condition. However, see Management's Discussion and Analysis of Results of
Operations and Financial Condition for a discussion of the status of the
Company's relationship with its Bank.
Item 3 - Defaults Upon Senior Securities
See Management's Discussion and Analyses of Results of Operations and
Financial Condition for a description of the Company's defaults under its bank
line of credit.
Item 4 - Submission of Matters to a Vote of Security Holders
The 1998 Annual Meeting of Stockholders of the Corporation was held on
September 16, 1999. The following matters were voted on:
(1) The Stockholders of the Corporation elected the following individuals
to the Company's board of directors
Name Votes For Votes Withheld
---- --------- --------------
Emil Youssefzadeh 5,858,927 53,541
Frank T. Connors 5,858,927 53,541
Dr. Ernest U. Gambaro 5,858,927 53,541
Lawrence D. Lenihan, Jr. 5,858,927 53,541
Claude Burgio 5,858,927 53,541
(2) The Stockholders of the Corporation ratified the appointment of KPMG
Peat Marwick LLP as independent auditors of the Company for the fiscal
year ending December 31, 1999. The voting results were as follows:
Votes For Votes Against Abstain
--------- ------------- -------
5,904,598 4,270 3,600
23
<PAGE>
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
The Company filed a report on Form 8-K on July 2, 1999, in which it
presented Proforma Condensed financial statements in connection with
the deconsolidation of DTPI with the associated stock purchase
agreements.
The Company filed a report on Form 8-K on September 3, 1999, in which
the Company disclosed the terms of a commitment letter between STM and
CIT for a new line of credit and disclosed the terms of a Forbearance
Agreement between STM and Trade Bank.
24
<PAGE>
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.
STM Wireless, Inc.
Date: November 15, 1999 By: JOSEPH WALLACE
----------------------
Joseph Wallace
Vice President, Finance and
Chief Financial Officer
(Principal Financial and Accounting Officer
and Duly Authorized Officer)
25
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
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<RECEIVABLES> 7,444
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