<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 4, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 000-22221
FIELDWORKS, INCORPORATED
(Exact name of registrant as specified in its charter)
Minnesota 41-1731723
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
7631 Anagram Drive
Eden Prairie, Minnesota 55344
(Address of principal executive offices)
(Zip Code)
(612) 974-7000
(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 [ ]
The number of shares of the registrant's Common Stock, $.001 par value,
outstanding as of August 5, 1999 was 8,894,426.
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<PAGE>
PART I. FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
FIELDWORKS, INCORPORATED AND SUBSIDIARY
Consolidated Balance Sheets
<TABLE>
<CAPTION>
July 4, January 3,
1999 1999
------------- ----------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.......................................................... $ -- $ 1,690,469
Accounts receivable, net of allowance for doubtful
accounts of $269,100 and $269,800, respectively................................. 3,171,848 3,930,366
Inventories........................................................................ 3,939,095 3,400,744
Prepaid expenses and other......................................................... 117,171 121,780
------------ ------------
Total current assets......................................................... 7,228,114 9,143,359
------------ ------------
PROPERTY AND EQUIPMENT:
Computers and equipment............................................................ 2,026,287 1,620,455
Furniture and fixtures............................................................. 1,134,759 1,109,895
Leasehold improvements............................................................. 458,216 458,216
Less: Accumulated depreciation..................................................... (1,763,118)
------------ ------------
(1,393,342)
Property and equipment, net.................................................. 1,856,144 1,795,224
DEPOSITS AND OTHER ASSETS, net........................................................ 14,598 17,385
------------ ------------
$ 9,098,856 $ 10,955,968
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit..................................................................... $ 529,199 $ 681,981
Accounts payable................................................................... 2,007,877 1,804,186
Accrued warranty and product upgrade............................................... 928,106 1,102,798
Accrued compensation and benefits.................................................. 280,108 376,932
Other accrued liabilities.......................................................... 352,351 321,532
Deferred revenue................................................................... 778,504 765,184
Current maturities of capitalized lease obligations................................ 39,597 13,548
------------ ------------
Total current liabilities.................................................... 4,915,742 5,066,161
CAPITALIZED LEASE OBLIGATIONS, less current maturities................................ 59,677 96,868
------------ ------------
Total liabilities............................................................ 4,975,419 5,163,029
------------ ------------
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value, 30,000,000 shares authorized;
8,894,426 and 8,823,926 issued and outstanding, respectively..................... 8,894 8,824
Common stock warrants.............................................................. 150,640 150,640
Additional paid-in capital......................................................... 20,155,441 20,085,011
Accumulated deficit................................................................ (16,191,538) (14,451,536)
------------ ------------
Total shareholders' equity................................................... 4,123,437 5,792,939
------------ ------------
$ 9,098,856 $ 10,955,968
============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
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<PAGE>
FIELDWORKS, INCORPORATED AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
--------------------------- ---------------------------
July 4, July 5, July 4, July 5,
1999 1998 1999 1998
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
NET SALES .................................................. $ 7,119,348 $ 3,833,969 $ 13,528,544 $ 9,219,771
COST OF SALES............................................... 5,210,601 3,761,768 9,556,880 6,975,289
----------- ----------- ------------ -----------
Gross profit....................................... 1,908,747 72,201 3,971,664 2,244,482
----------- ----------- ------------ -----------
OPERATING EXPENSES:
Sales and marketing.................................... 1,497,508 1,424,294 2,471,952 2,863,898
General and administrative............................. 842,416 746,093 1,554,144 1,582,528
Research and development............................... 814,111 857,446 1,667,115 1,566,376
Product upgrade and restructuring costs................ -- 1,284,810 -- 1,284,810
----------- ----------- ------------ -----------
Total operating expenses........................... 3,154,035 4,312,643 5,693,211 7,297,612
----------- ----------- ------------ -----------
Operating loss..................................... (1,245,288) (4,240,442) (1,721,547) (5,053,130)
INTEREST INCOME (EXPENSE) AND OTHER, net.................... (20,311) 46,429 (18,456) 102,936
----------- ----------- ------------ -----------
NET LOSS ................................................... $(1,265,599) $(4,194,013) $(1,740,003) $(4,950,194)
=========== =========== =========== ===========
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE:
Net loss per common share................................ $ (.14) $ (.48) $ (.20) $ (.56)
=========== =========== =========== ===========
Weighted average common shares outstanding............... 8,876,745 8,799,427 8,854,519 8,782,521
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
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<PAGE>
FIELDWORKS, INCORPORATED AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
-------------------------------
July 4, July 5,
1999 1998
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss.................................................... $(1,740,003) $(4,950,194)
Adjustments to reconcile net loss to net cash used for
operating activities-
Depreciation and amortization.......................... 369,859 295,211
Accrued product upgrade and restructuring costs........ (174,692) 1,284,810
Change in operating items:
Accounts receivable............................... 758,518 4,068,805
Inventories....................................... (538,351) 771,121
Prepaid expenses and other........................ 7,313 62,547
Accounts payable.................................. 203,691 (392,319)
Accrued expenses.................................. (66,004) (435,054)
Deferred revenue.................................. 13,320 209,513
----------- -----------
Net cash provided by (used for) operating activities (1,166,349) 914,440
----------- -----------
INVESTING ACTIVITIES:
Purchase of property and equipment.......................... (430,696) (793,510)
----------- -----------
Net cash used for investing activities................. (430,696) (793,510)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock...................... 70,500 95,500
Net line of credit borrowings (repayments).................. (152,782) --
Payment of capitalized lease obligations.................... (11,142) (29,071)
----------- -----------
Net cash (used for) provided by financing activities... (93,424) 66,429
----------- -----------
CHANGE IN CASH AND CASH EQUIVALENTS.............................. (1,690,469) 187,359
CASH AND CASH EQUIVALENTS, beginning of period................... 1,690,469 3,218,759
----------- -----------
CASH AND CASH EQUIVALENTS, end of period......................... $ -- $ 3,406,118
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest...................................... $ 45,489 $ 3,961
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
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<PAGE>
FIELDWORKS, INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation:
The accompanying unaudited consolidated financial statements of FieldWorks,
Incorporated (FieldWorks or the Company), should be read in conjunction with the
consolidated financial statements and notes thereto filed with the Securities
and Exchange Commission in the Company's Annual Report on Form 10-K, for the
fiscal year ended January 3, 1999. In the opinion of management, the
accompanying consolidated financial statements reflect all adjustments
(consisting only of normal recurring adjustments) considered necessary to
present fairly the financial results for the interim periods presented. The
results of operations for the interim periods are not necessarily indicative of
the results to be expected for the entire fiscal year.
2. Inventories:
Inventories are stated at the lower of cost or market value, as determined
by the first-in, first-out cost method, and consisted of the following:
July 4, January 3,
1999 1999
---------- ----------
Raw materials.................................. $2,438,420 $2,478,662
Work in process................................ 702,682 173,791
Finished goods................................. 797,993 748,291
---------- ----------
Total..................................... $3,939,095 $3,400,744
========== ==========
3. Earnings (Loss) Per Share:
The Company presents earnings (loss) per share (EPS) data in accordance
with the requirements of the Statement of Financial Accounting Standards No.
128. Under SFAS No. 128, basic EPS is computed by dividing net income by the
weighted average number of shares of common stock outstanding during the period.
No dilution for potentially dilutive securities is included. Diluted EPS is
calculated using the treasury stock method and reflects the dilutive effect of
outstanding options, warrants and other securities. In the Company's
calculations, the impact of common stock equivalents has been excluded from the
computation of weighted average common shares outstanding as the effect would be
antidilutive. As a result, basic and diluted EPS are equal for all periods
presented in the accompanying Consolidated Statements of Operations.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Cautionary Statement Regarding Forward Looking Statements
This Quarterly Report on Form 10-Q contains 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. When used in
this Form 10-Q and in future filings by the Company with the Securities and
Exchange Commission, in the Company's press releases and in oral statements made
with the approval of an authorized executive officer, the words or phrases
"believes," "anticipates," "expects," "intends," "estimates," "should," "may" or
similar expressions are intended to identify such forward-looking statements,
but are not the exclusive means of identifying such statements. These
forward-looking statements involve risks and uncertainties that may cause the
Company's actual results to differ materially from the results discussed in the
forward-looking statements. Factors that might cause such differences include,
but are not limited to, the following: risks associated with the development of
new products, market acceptance of new products, technological obsolescence,
dependence on third-party manufacturers and suppliers, risks associated with the
Company's dependence on proprietary technology, and the long customer sales
cycle. The Company wishes to caution readers not to place undue reliance on any
such forward-looking statements, which speak only as of the date made. The
Company undertakes no obligation to revise any forward-looking statements in
order to reflect events or circumstances after the date of such statements.
Readers are urged to carefully review and consider the various disclosures made
by the Company in this report and in the Company's other reports filed with the
Securities and Exchange Commission that attempt to advise interested parties of
the risks and factors that may affect the Company's business. The Company's
forward-looking statements are qualified in their entirety by the cautions and
risk factors set forth under the "Cautionary Statement" filed as Exhibit 99.1 to
its Form 10-K for the year ended January 3, 1999.
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<PAGE>
Results of Operations
The following table sets forth certain financial data expressed as a
percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------
July 4, July 5, July 4, July 5,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales................................................. 100% 100% 100% 100%
Cost of sales............................................. 73 98 71 76
---- ---- ---- -----
Gross profit......................................... 27 2 29 24
Operating expenses:
Sales and marketing.................................. 21 37 18 31
General and administrative........................... 12 19 12 17
Research and development............................. 12 22 12 17
Product upgrade and restructuring costs.............. -- 34 -- 14
---- ---- ---- -----
Total operating expenses........................ 45 112 42 79
---- ---- ---- -----
Operating loss............................................ (18) (110) (13) (55)
Interest income (expense) and other, net.................. * 1 * 1
---- ---- ---- -----
Net loss.................................................. (18)% (109)% (13)% (54)%
==== ==== ==== =====
</TABLE>
*Less than .5%.
Net Sales. The Company's net sales increased 86% from $3.8 million in the
second quarter of fiscal 1998 to $7.1 million for the second quarter of fiscal
1999 and increased 47% from $9.2 million in the first six months of 1998 to
$13.5 million for the comparable period in 1999. The increase was partially due
to significant customer contracts for the 5000 Series Workstation, offset by a
slight decrease in sales of the 7000 Series Workstation. Unit volumes of the
5000 Series Workstation increased 285% from the second quarter of 1998 to the
second quarter of 1999 and 126% from the first six months of 1998 to the
comparable period in 1999. Unit volumes of the 7000 Series Workstation decreased
16% from the second quarter of 1998 to the second quarter of 1999 and 14% from
the first six months of 1998 to the first six months of 1999. Sales of the 5000
Series Workstations represented 38% and 49% of net sales for the six months
ended July 5, 1998 and July 4, 1999, respectively. Professional Services
revenue, including product upgrades, technical support and non-standard product
sales accounted for $0.9 million, or 13% of net sales, for the second quarter of
1999 and $1.8 million, or 13% of net sales, for the first six months of 1999.
Professional services revenue was not reported separately during 1998. In
addition, sales of the 2000 Series Mobile Embedded Vehicle System began at the
end of the second quarter of 1999 primarily in the public safety sector.
The Company has focused its marketing efforts on the transportation, public
services and government/military markets with emphasis on service bay, mobile
communications and test measurement/data acquisition applications. One customer,
Ryder Transportation Services, represented over 10% of the Company's net sales
or $3.2 million for the second quarter of 1999 and two customers, Freightliner
Corporation and the United States Coast Guard, represented revenues of $0.8
million and $0.4 million, respectively, in the second quarter of 1998.
International sales decreased from 28% of net sales, or $2.6 million, for
the first six months of 1998 to 14% of net sales, or $1.9 million, for the
second quarter of 1999. The decrease from the first six months of 1998 was due
to the level of significant contracts with domestic customers in the comparable
period of 1999 and order acceleration by international customers in late 1998.
The majority of international sales, approximately 72%, are in Europe. The
Company believes that international sales, as a percentage of net sales, will be
in the mid-teen to 20% range for the remainder of 1999, with little impact on
the Company's results of operations or liquidity.
Gross Profit. Gross profit increased from $72,000, or 2% of net sales, for
the second quarter of 1998 to $1.9 million, or 27% of net sales, for the second
quarter of 1999. Gross profit increased from $2.2 million, or 24% of net sales,
for the first six months of 1998 to $4.0 million, or 29% of net sales, for the
first six months of 1999. Gross margin in 1998 was negatively impacted by an
inventory writedown of $1.0 million. This writedown related to
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<PAGE>
excess and obsolete inventory due to product changes in response to
technological developments and market needs. In 1999, sales under high volume
contracts, which include volume discounts, comprised a significant portion of
sales for the first six months. Additionally, gross margin was negatively
impacted by disposition of previously identified obsolete inventory of
approximately $400,000 during the second quarter of 1999. Recovery on this
inventory has been less than anticipated. The Company's gross profit margin will
fluctuate as a result of a number of factors, including mix of products sold,
the proportion of international sales, utilization of manufacturing capacity,
large customer contracts (with the assorted volume discounts) and outsourcing
expenses. The Company continues to evaluate contract manufacturers for
outsourcing of work to reduce production costs, inventory and operating
expenses. The Company anticipates gross profit margins in the low 30% range in
the near future.
Sales and Marketing. Sales and marketing expenses include salaries,
sales commissions, travel, technical support and professional services
personnel, advertising, promotions and trade shows. In addition, these expenses
include the technical support costs related to maintaining the Company's
standard one year warranty on its products. Sales and marketing expenses
increased slightly from $1.4 million for the second quarter of 1998 to $1.5
million for the comparable period in 1999. As a percentage of net sales, sales
and marketing expenses decreased from 37% for the second quarter of 1998 to 21%
for the second quarter of 1999. In the first six months of 1998, sales and
marketing expenses were $2.9 million and 31% of net sales as compared to $2.5
million and 18% of net sales in the first six months of 1999. The decrease was
due to a reduction in promotion and advertising expenses as vertical market
strategies were developed, as well as other cost control initiatives. In
addition, warranty expense decreased due to component level repair and improved
performance. The Company expects to expand its direct sales force and moderately
increase its promotion and marketing efforts through 1999 within its target
markets of trucking, public services and government/military. Accordingly, the
Company anticipates increases in sales and marketing expenditures in future
periods.
General and Administrative. General and administrative expenses include the
Company's executive, finance and administration, human resources, and
information services departments. These expenses increased slightly from $0.7
million for the quarter ended July 5, 1998, to $0.8 million for the quarter
ended July 4, 1999. As a percentage of net sales, general and administrative
expenses decreased from 19% for the quarter ended July 5, 1998 to 12% for the
quarter ended July 4, 1999. General and administrative expenses remained
constant at $1.6 million for the first six months of 1998 and 1999 and
represented 17% and 12% of net sales, respectively. The Company anticipates
holding the growth of general and administrative expenses to a level less than
the growth of sales.
Research and Development. Research and development expenses are incurred in
the design, development and testing of new or enhanced products and services and
customized computing platforms. These costs are expensed as incurred. Research
and development expenses decreased slightly from $0.9 million or 22% of net
sales during the second quarter of 1998 to $0.8 million or 12% of net sales for
the second quarter of 1999. Research and development expenses increased slightly
from $1.6 million for the first six months of 1998 to $1.7 million for the
comparable period in 1999. As a percentage of net sales, research and
development expenses decreased from 17% for the first six months of 1998 to 12%
for the first six months of 1999. The $0.1 million increase was primarily due to
the development of new products, including the FieldWorks 2000 Series Mobile
Embedded Vehicle System and engineering support of customer-specific
applications. The Company expects research and development expenses to remain
constant in dollar amounts for the foreseeable future as it finalizes its new
product development efforts and expands its application solutions offerings. As
a percentage of net sales, however, research and development expenses are
expected to remain relatively stable or slightly decrease.
Product Upgrade and Restructuring Costs. Product upgrade and restructuring
costs were $1.3 million, or 34% of net sales, for the second quarter of 1998
with no comparable cost incurred in 1999. In 1998, these costs related to the
discontinuation of the 5000 Series I Workstation, as well as other internal
reorganization efforts.
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<PAGE>
Interest Income (Expense) and Other, Net. Net interest income was
approximately $46,000 for the second quarter of 1998 compared to net interest
expense of $20,000 for the comparable period in 1999. Net interest income for
the first six months of 1998 was $103,000 compared to net interest expense of
$18,000 for the comparable period in 1999. The increase in interest expense is
due to borrowings on the Company's line of credit. The Company will continue to
draw on its line of credit to fund operations and anticipates recording net
interest expense for the foreseeable future.
Liquidity and Capital Resources
In November 1998, the Company entered into a two-year, $3.0 million line of
credit agreement. Borrowings bear interest at the greater of 3% over prime or
9%. At July 4, 1999, the interest rate was 11%. Amounts outstanding were $0.5
million as of July 4, 1999, as compared to $0.7 million at January 3, 1999. The
borrowing base consists of 75% of eligible receivables plus the lesser of
$600,000 or 30% of eligible inventory as defined in the agreement. Availability
based on the borrowing base calculation for accounts receivable only was $1.8
million as of July 4, 1999 and $1.7 million as of January 3, 1999. The agreement
contains a covenant requiring cumulative year-to-date profit on a quarterly
basis. The Company was out of compliance with the covenant as of July 4, 1999,
and has requested a waiver of default. Failure to comply with this covenant in
the future could result in default, interest rate increases and accelerated
repayment requirements.
Cash used for operating activities totaled $1.2 million for the first six
months of 1999. The Company's accounts receivable decreased $0.7 million from
$3.9 million at January 3, 1999 to $3.2 million at July 4, 1999, primarily due
to timing of payments received in the second quarter of 1999. Inventories
increased $0.5 million to $3.9 million at July 4, 1999. This was mainly due to
purchases for anticipated sales.
During the first six months of 1999, the Company purchased $0.4 million of
property, plant and equipment. The expenditures related primarily to
manufacturing tooling for the FieldWorks 2000 Series Mobile Embedded Vehicle
System. Increases in tooling expenditures are expected in the foreseeable
future, as new product line development is completed and existing platforms are
enhanced. However, the Company's overall property, plant and equipment
expenditures are expected to decrease slightly as compared to prior years due to
no additional planned leasehold improvements.
The Company is currently seeking additional equity or debt financing to
fund expansion of products and service offerings. The Company anticipates that
its line of credit, anticipated operating cash flows, and other potential
financing sources should be sufficient to fund its cash flow needs at least for
the remainder of 1999. Cash requirements for periods during and beyond the next
twelve months depend on demand for the Company's products, cash management
operations and its rate of growth, among other factors. There can be no
assurances that additional financing will be available, or if it is available,
that it would be on terms favorable to the Company and would not be dilutive to
existing shareholders.
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<PAGE>
Year 2000
The year 2000 issue is the result of computer programs using only the last
two digits to identify the year. These programs may not be able to interpret
dates beyond the year 1999, which could cause computer system failure or other
errors disrupting operations. The Company is aware of the potential computing
difficulties that the issue presents for the Company's operations in the year
2000 and as a result, has established an internal team, reporting to upper
management, to address the issue. This team's focus includes the functioning of
the Company's products, internal computer systems and non-computer operations,
production processes, key vendors, vital business partners and critical
customers.
The Company's major internal information systems software was upgraded
during the first quarter of 1998 to ensure year 2000 compliance and provide
enhanced systems capabilities. The total cost of the implementation was
$110,000. The Company plans to perform other minor upgrades to its software and
hardware by the end of the third quarter of 1999. Approximately 75% of the
expected costs associated with internal systems software alterations have been
incurred to date. The Company's internal production processes and
non-information systems software have been assessed and the Company believes
these items are year 2000 compliant.
Management believes its current products are year 2000 compliant and is
offering updated configuration software for products shipped in prior periods.
Notification to customers of the availability of updated software has occurred.
Associated costs are expected to be under $100,000. Approximately 95% of the
expected costs associated with ensuring that the Company's products are year
2000 compliant have been incurred to date.
The source of funds for upgrades to internal software, production processes
and previously sold products is existing operating cash flows. There are
currently no other projects within the Company that are affected by the outlay
of significant resources to ensure year 2000 compliance.
The Company's operations with respect to the year 2000 may also be affected
by other entities with which the Company transacts business. The Company has
requested documentation from its vendors regarding compliance, and will evaluate
alternative courses of action for vendors who are not or will not be year 2000
compliant. To date, varying confirmations have been received from the Company's
vendors. The Company has identified its critical vendors and is in the process
of verifying which are currently year 2000 compliant. Contingency plans will be
developed for all critical vendors by the end of the third quarter of 1999.
The year 2000 issue creates risk for the Company from unforeseen problems
in its own computer systems and from the Company's vendors. Although the Company
does not believe that the year 2000 issue will have a material impact on its
business, financial position, results of operations or liquidity, it is
uncertain what effect any failure of the Company's systems or its vendors'
systems might have on its operations.
Although the Company intends to fully address the year 2000 issue, without
further assessment or resources assigned, the Company can give no assurance that
the year 2000 issue will not cause significant business disruption, including
delays in parts availability resulting in potential shipping delays and/or lost
revenues.
The Company identified all critical, external entities by the end of the
first quarter of 1999. Notification of these entities and determination of their
year 2000 status occurred in the second quarter of 1999. The development of
alternative plans, if necessary is to be completed by the end of the third
quarter of 1999.
-10-
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not utilize derivative or other financial instruments for
hedging or speculative purposes, and accordingly, is not exposed to these types
of market risk.
The Company is subject to interest rate risk related to its outstanding
line of credit borrowings and any existing money market or other investment
amounts. The Company's line of credit bears interest at a rate based on the
prime lending rate, and any money market investments also earn interest based on
market rates. Based on current interest rate conditions, the Company does not
believe that it is exposed to significant associated market risk.
All of the Company's transactions are conducted and accounts are
denominated in United States dollars and as such, the Company does not currently
have exposure to foreign currency risk.
PART II. OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
The Company is involved in legal actions in the ordinary course of its
business. Although the Company cannot predict the outcome of any such legal
actions, management believes that there is no pending legal proceeding against
or involving the Company for which the outcome is likely to have a material
adverse effect upon the Company's financial position, results of operations or
cash flows.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
An Annual Meeting of Shareholders was held on May 18, 1999. The
shareholders voted on two matters: (1) to elect six directors, each of whom will
serve until such director's successor shall have been elected and shall qualify
or until such director's earlier death, resignation, removal or
disqualification, and (2) to amend the Company's 1994 Long-Term Incentive and
Stock Option Plan (the Plan) increasing the number of shares subject to the Plan
from 2,000,000 to 2,500,000. The shareholders voted in favor of all matters by
the following votes:
Votes Votes
Election of Board For Withheld
of Directors --------- --------
Gary J. Beeman 7,849,190 118,800
James A. Bernards 7,865,250 102,740
Robert W. Heller 7,866,250 101,740
David C. Malmberg 7,866,050 101,940
Robert C. Szymborski 7,849,690 118,300
Richard J. York 7,865,050 102,940
Votes Votes Votes Broker
For Against Abstained Non Vote
--------- ------- ------ ---------
Amend the 1994
Long-Term Incentive
And Stock Option Plan 4,530,260 438,221 26,100 2,973,409
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<PAGE>
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 3.1 Second Amended and Restated Articles of
Incorporation of the Company (incorporated by
reference to Exhibit 3.2 to the Company's
Registration Statement filed on Form S-1, File No.
333-18335)
Exhibit 3.2 Second Amended and Restated Bylaws of the Company
(incorporated by reference to Exhibit 3.4 to the
Company's Registration Statement filed on Form S-1,
File No.
333-18335)
Exhibit 3.3 Employment Agreement with David C. Mell, dated
July 15, 1999 (filed herewith)
Exhibit 27.1 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
None.
SIGNATURE
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.
FIELDWORKS, INCORPORATED
Date: August 10, 1999 /s/ Karen L. Engebretson
----------------------------------------
Karen L. Engebretson, Vice President
of Finance and CFO (as authorized
officer and principal financial officer)
-12-
<PAGE>
Exhibit 3.3
[FIELDWORKS LETTERHEAD]
David Mell
9211 Knollwood Drive No.
Stillwater, MN 55082
July 15, 1999
David,
This letter will confirm our earlier agreement regarding salary continuation.
Should your service with FieldWorks be terminated without cause, FieldWorks will
provide you with six months of salary continuation.
Please sign this form and return it to Steve Wagner in Human Resources.
Sincerely,
/s/ David Malmberg
David Malmberg
Chairman and CEO FieldWorks
/s/ David C. Mell 7/15/99
- -------------------------- ---------------
David C. Mell Date
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-02-2000
<PERIOD-START> JAN-04-1999
<PERIOD-END> JUL-04-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 3,171,848
<ALLOWANCES> 0
<INVENTORY> 3,939,095
<CURRENT-ASSETS> 7,228,114
<PP&E> 3,619,262
<DEPRECIATION> 1,763,118
<TOTAL-ASSETS> 9,098,856
<CURRENT-LIABILITIES> 4,915,742
<BONDS> 0
0
0
<COMMON> 8,894
<OTHER-SE> 4,114,543
<TOTAL-LIABILITY-AND-EQUITY> 9,098,856
<SALES> 13,528,544
<TOTAL-REVENUES> 13,528,544
<CGS> 9,556,880
<TOTAL-COSTS> 9,556,880
<OTHER-EXPENSES> 1,667,115
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,456
<INCOME-PRETAX> (1,740,003)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,740,003)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,740,003)
<EPS-BASIC> (.20)
<EPS-DILUTED> (.20)
</TABLE>
