<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
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 000-23305
FVC.COM, INC.
(formerly First Virtual Corporation)
(Exact name of registrant as specified in its charter)
DELAWARE 77-0357037
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3393 OCTAVIUS DRIVE
SANTA CLARA, CA 95054
(Address of principal executive offices)
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(408) 567-7200
(Registrant's telephone number, including area code)
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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
--- ---
Common Stock, $0.001 par value 16,308,952
- ------------------------------ ------------------------------------
(Class) Outstanding as of September 30, 1998
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<PAGE>
FVC.COM, INC.
FORM 10-Q/A
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets
at September 30, 1998 (Restated) and December 31, 1997..................................... 3
Condensed Consolidated Statements of Operations
for the three and nine months ended September 30, 1998 (Restated) and 1997................. 4
Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 1998 (Restated) and 1997........................... 5
Notes to Condensed Consolidated Financial Statements....................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................................. 9
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.................................................. 16
Item 6. Exhibits and Reports on Form 8-K........................................................... 17
SIGNATURES ............................................................................................... 18
Exhibit Index ............................................................................................ 19
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FVC.COM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- -------------
ASSETS (UNAUDITED)
(RESTATED -
SEE NOTE 3)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 29,457 $ 2,500
Accounts receivable, net 7,135 2,469
Inventory 3,740 4,178
Prepaid expenses and other current assets 1,652 627
------------- -------------
Total current assets 41,984 9,774
Property and equipment, net 2,129 1,043
Other assets 3,620 287
------------- -------------
$ 47,733 $ 11,104
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under short-term credit facilities $ - $ 1,306
Notes payable 1,300 -
Current portion of long-term debt 128 848
Accounts payable 2,961 4,141
Accrued liabilities 1,806 1,326
Deferred revenue 153 262
------------- -------------
Total current liabilities 6,348 7,883
------------- -------------
Long-term debt, net of current portion 294 1,312
------------- -------------
Stockholders' equity:
Convertible Preferred Stock, $.001 par value; 5,000,000 and
10,000,000 shares authorized, respectively; 0 and
8,040,153 shares issued and outstanding, respectively - 8
Common Stock, $.001 par value; 35,000,000 and 30,000,000
shares authorized, respectively; 16,308,952 and
4,824,684 shares issued and outstanding, respectively 16 5
Additional paid-in capital 61,032 17,267
Notes receivable from stockholders (569) (837)
Accumulated deficit (19,388) (14,534)
------------- -------------
Total stockholders' equity 41,091 1,909
------------- -------------
$ 47,733 $ 11,104
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
FVC.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA; UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- ---------------------------
1998 1997 1998 1997
------------ ------------- ----------- -----------
(RESTATED - (RESTATED -
SEE NOTE 3) SEE NOTE 3)
<S> <C> <C> <C> <C>
Revenues $ 12,022 $ 4,980 $ 32,055 $ 11,123
Cost of revenues 6,042 3,002 16,847 6,477
------------ ------------- ------------ -----------
Gross profit 5,980 1,978 15,208 4,646
------------ ------------- ------------ -----------
Operating expenses:
Research and development, 2,791 1,544 6,668 3,749
Selling, general and administrative 3,208 2,030 8,549 4,978
Acquired in-process research and development 4,664 - 4,664 -
------------ ------------- ------------ -----------
Total operating expenses 10,663 3,574 19,881 8,727
------------ ------------- ------------ -----------
Operating loss (4,683) (1,596) (4,673) (4,081)
Other income (expense), net 200 (96) (181) (147)
------------ ------------- ------------ -----------
Net loss $ (4,483) $ (1,692) $ (4,854) $ (4,228)
------------ ------------- ------------ -----------
------------ ------------- ------------ -----------
Basic net loss per share $ (0.29) $ (0.53) $ (0.48) $ (1.45)
------------ ------------- ------------ -----------
------------ ------------- ------------ -----------
Diluted net loss per share $ (0.29) $ (0.53) $ (0.48) $ (1.45)
------------ ------------- ------------ -----------
------------ ------------- ------------ -----------
Shares used in basic
net loss per share calculation 15,355 3,163 10,120 2,908
------------ ------------- ------------ -----------
------------ ------------- ------------ -----------
Shares used in diluted net loss
per share calculation 15,355 3,163 10,120 2,908
------------ ------------- ------------ -----------
------------ ------------- ------------ -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
FVC.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1998 1997
------------ -----------
(RESTATED -
SEE NOTE 3)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (4,854) $ (4,228)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,218 379
Non-cash stock compensation 891 1,009
Acquired in-process research and development 4,664 -
Other 144 211
Changes in assets and liabilities:
Accounts receivable (4,653) (730)
Inventory 474 (442)
Prepaid expenses and other current assets (1,025) 14
Other assets (351) -
Accounts payable (1,241) 1,359
Accrued liabilities 337 532
Deferred revenue (109) (38)
------------- ------------
Net cash used in operating activities (4,505) (1,934)
------------- ------------
Cash flows used in investing activities:
Acquisition of ICAST Corporation, net of cash received (360) -
Acquisition of property and equipment (1,434) (376)
------------- -------------
Net cash used in investing activities (1,794) (376)
-------------- -------------
Cash flows from financing activities:
Borrowings under short-term credit facilities 3,600 801
Repayment of short-term credit facilities (4,906) (494)
Proceeds from long-term debt - 1,250
Repayment of long-term debt (2,014) (141)
Proceeds from issuance of stock, net 36,713 1,885
Repayment of capital lease obligations (137) (161)
------------- --------------
Net cash provided by financing activities 33,256 3,140
------------- --------------
Net increase in cash and cash equivalents 26,957 830
Cash and cash equivalents at beginning of period 2,500 676
------------- --------------
Cash and cash equivalents at end of period $ 29,457 $ 1,506
------------- --------------
------------- --------------
Supplemental cash flow information:
Cash paid for interest $ 198 $ 185
Issuance of warrants to third parties 1,213 112
Common stock issued and options and warrants assumed
in connection with acquisition of ICAST Corporation 5,179 -
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
FVC.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Change of Name
On August 3, 1998, the Company changed its name from First Virtual
Corporation to FVC.COM, Inc.
2. Basis of Presentation
The unaudited condensed consolidated financial statements included
herein reflect all adjustments, consisting only of normal recurring adjustments,
which in the opinion of management are necessary to fairly state the Company's
consolidated financial position, results of operations and cash flows for the
periods presented. These consolidated financial statements should be read in
conjunction with the Company's audited consolidated financial statements
included in the Company's Registration Statement on Form S-1, File No.
333-38755, declared effective on April 29, 1998. The results of operations for
the periods ended September 30, 1998 are not necessarily indicative of the
results to be expected for any subsequent quarter or for the entire year ending
December 31, 1998. The December 31, 1997 balance sheet was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles.
3. Acquisition of ICAST Corporation
On August 26, 1998, the Company acquired ICAST Corporation ("ICAST").
Since its inception, ICAST has been developing software designed for Internet
and intranet broadcasting of real-time video, audio and data. The Company
acquired all of the outstanding stock of ICAST in exchange for 401,389 shares
of FVC.COM Common Stock, a cash payment of $327,000 and the assumption of
certain debt and outstanding ICAST stock options and warrants. The
transaction was accounted for as a purchase; accordingly, the purchase price
was allocated to the assets acquired and liabilities assumed based upon their
estimated fair market values at the date of acquisition, as determined by an
independent appraisal. The acquired in-process research and development
("IPR&D") represents the estimated fair market value, using a risk-adjusted
income approach, of specifically identified technologies which had not
reached technological feasibility and had no alternative future uses.
The purchase price, including liabilities assumed of $1.8 million,
aggregated approximately $7.6 million, of which $6.2 million was initially
allocated to IPR&D. As a result of recent views expressed by the Securities
and Exchange Commission (the "SEC") staff, as discussed below, the Company
subsequently reduced its estimate of the amount allocated to IPR&D by $1.5
million to $4.7 million and allocated $2.5 million to goodwill and other
identified intangibles. As a result of the reduction in the IPR&D charge,
amortization of intangibles increased by $29,000, from $14,000 to $43,000 for
the three and nine months ended September 30, 1998.
The amount originally allocated to IPR&D and intangible assets in the
third quarter of 1998 was determined in a manner consistent with widely
recognized appraisal practices at the date of acquisition. Subsequent to the
acquisition, the SEC staff expressed views that took issue with certain
appraisal practices generally employed by companies in determining the
fair value of the IPR&D that was the basis for the Company's measurement of
its IPR&D charge. The charge of $6.2 million, as first reported by the
Company, was based upon the work of an independent valuation firm that had
utilized the methodologies the SEC subsequently announced it does not
consider appropriate.
As a result of computing IPR&D using the current SEC preferred
methodology, the Company has revised the amount originally allocated to
IPR&D. This Report on Form 10-Q/A amends the previously filed Report on Form
10-Q for the quarterly period ended September 30, 1998 to give effect to this
revision.
At the time of the acquisition, ICAST was a privately held,
development stage company involved in research and development of a low-bit
rate software product designed for Internet and intranet broadcasting of
real-time video, audio and data. The value assigned to IPR&D was based on
this project for which technological feasibility had not been established.
The value was determined by estimating the expected cash flows from this
project once commercially viable, discounting the net cash flows back to
their present value and then applying a percentage of completion.
The percentage of completion for this project was determined by
comparing both effort expended and research and development costs incurred as
of August 1998, to the remaining effort to be expended and research and
development costs to be incurred, based on management's estimates, to bring
the project to technological feasibility. Based on these comparisons
management estimated the project to be approximately 83% complete as of the
date of acquisition.
Management believes that the restated IPR&D charge of $4.7 million is
valued consistently with the SEC staff's current views regarding valuation
methodologies. There can be no assurances, however, that the SEC staff will
not take issue with any assumptions used in the Company's valuation model and
require the Company to further revise the amount allocated to IPR&D.
6
<PAGE>
The following pro forma information reflects the results of operations
for the nine month periods ended September 30, 1998 and 1997 as if the
acquisition of ICAST had occurred as of the beginning of the periods
presented, after giving effect to certain pro forma adjustments and excludes
the charge relating to IPR&D. These pro-forma results have been prepared for
comparative purposes only and do not purport to be indicative of what
operating results would have been had the acquisition actually taken place as
of the beginning of such periods or what operating results may occur in the
future (in thousands, except per share data).
<TABLE>
<CAPTION>
Nine months ended
September 30,
------------------------------
1998 1997
------------- -------------
(restated) (restated)
<S> <C> <C>
Revenues $ 32,299 $ 11,167
Net loss $ (2,244) $ (5,698)
Net loss per share $ (0.21) $ (1.72)
</TABLE>
4. Inventory
Inventories as of September 30, 1998 and December 31, 1997 were as
follows (in thousands):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
September 30, December 31,
1998 1997
- -----------------------------------------------------------------
<S> <C> <C>
Raw materials $1,432 $1,418
Finished goods 2,308 2,760
- -----------------------------------------------------------------
Total inventory $3,740 $4,178
- -----------------------------------------------------------------
- -----------------------------------------------------------------
</TABLE>
5. Net Loss Per Share
Earnings (loss) per share is computed in accordance with Statement of
Financial Accounting Standards No. 128 "Earnings Per Share" ("FAS 128"). FAS 128
requires the Company to report both basic earnings (loss) per share, which is
based on the weighted-average number of common shares outstanding excluding
contingently issuable or returnable shares such as shares of unvested restricted
Common Stock, and diluted earnings (loss) per share, which is based on the
weighted-average number of common shares outstanding and dilutive potential
common shares outstanding.
As a result of the losses incurred by the Company for the three and the
nine month periods ended September 30, 1998 and 1997, all potential common
shares were anti-dilutive and were excluded from the diluted net loss per share
calculations for such periods.
The following table summarizes securities outstanding as of each period
end which were not included in the calculation of diluted net loss per share
since their inclusion would be anti-dilutive (in thousands):
<TABLE>
<CAPTION>
September 30, 1998 September 30, 1997
------------------ ------------------
<S> <C> <C>
Unvested restricted Common Stock 641 1,407
Preferred Stock - 7,937
Preferred Stock warrants - 41
Common Stock warrants 290 -
Common Stock options 3,408 1,858
</TABLE>
Unvested restricted Common Stock represents stock that has been issued
but which is subject to repurchase to the extent the holder does not remain
associated with the Company until such shares are vested. Each share of
Preferred Stock converted into one share of Common Stock upon the closing of
7
<PAGE>
the Company's initial public offering in May 1998. The Common Stock warrants
are exercisable at $8.00 to $13.00 per share and expire at various times from
three to five years following the closing of the Company's initial public
offering. The stock options outstanding at September 30, 1998 and 1997, had a
weighted average exercise price per share of $7.80 and $4.90, respectively,
and expire beginning in July 2001 through September 2008.
6. Credit Facilities
In February 1998, the Company agreed in principle to enter into a
transaction with Hambrecht & Quist Guaranty Finance, LLC ("Guaranty Finance"),
whereby Guaranty Finance would loan the Company up to $5 million. Under the
related agreements which were executed on March 12, 1998 and subsequently
amended on April 24, 1998, (i) Guaranty Finance agreed to lend the Company up to
$5 million at an interest rate of 12% per annum, $1.1 million of which was
loaned to the Company in March 1998 and $1.5 million of which was loaned to the
Company in April 1998 (the "Loan") and (ii) Guaranty Finance purchased from the
Company for $1,250 a warrant to purchase 125,000 shares of the Company's Common
Stock at a per share purchase price equal to the initial public offering price
of $13.00. The warrant is exercisable through March 1, 2003. The fair value of
this warrant was estimated to be $563,000 and is being expensed as an additional
cost of financing in 1998. The Company also paid a $100,000 fee to Guaranty
Finance in consideration for entering into the Loan.
In June 1998, the Company amended its working capital line of credit
agreement with a bank. The amended agreement provides for borrowings of up to
$10 million. Borrowings under the line of credit are limited to a specified
percentage of eligible accounts receivable and inventory, and are secured by
substantially all of the Company's accounts receivable and inventory. Interest
on borrowings is set at the bank's prime rate (8.5% at September 30, 1998).
Among other provisions, the Company is required to maintain certain financial
covenants and is prohibited from paying dividends. The line of credit agreement
expires in June 2000. As of September 30, 1998, the Company had no borrowings
outstanding under this line.
7. Initial Public Offering
In May 1998, the Company completed its initial public offering whereby
the Company sold 3,132,000 shares of Common Stock. Net proceeds to the Company
aggregated $36.1 million. The Company used $6.9 million of the net proceeds from
the offering to repay outstanding indebtedness, including $2.3 million for
borrowings under the working capital line of credit and $2.6 million for the
outstanding balance of the Loan.
8. New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (FAS 133). The new standard requires
companies to record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Under FAS 133, gains or losses resulting from changes in
the values of derivatives are to be reported in the statement of operations or
as a deferred item, depending on the use of the derivatives and whether they
qualify for hedge accounting. The key criterion for hedge accounting is that the
derivative must be highly effective in achieving offsetting changes in fair
value or cash flows of the hedged items during the term of the hedge. The
Company is required to adopt FAS 133 in the first quarter of 2000. To date, the
Company has not engaged in any foreign currency hedging activity and does not
expect adoption of this new standard to have a significant impact on the
Company.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE COMPANY NOTES THAT, EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED
HEREIN, THE MATTERS DISCUSSED BELOW CONTAIN FORWARD-LOOKING STATEMENTS WHICH
INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE
THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY, OR INDUSTRY
RESULTS, TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE
COMPANY EXPRESSLY DISCLAIMS ANY OBLIGATION TO UPDATE THIS INFORMATION OR
PUBLICLY RELEASE ANY REVISIONS OR REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE
OF THIS REPORT. SUCH FACTORS INCLUDE, AMONG OTHERS: THE COMPANY'S LIMITED
OPERATING HISTORY AND VARIABILITY OF OPERATING RESULTS, MARKET ACCEPTANCE OF
VIDEO TECHNOLOGY, DEPENDENCE ON ATM BACKBONE TECHNOLOGY AND THE NEXT GENERATION
INTERNET, POTENTIAL INABILITY TO MAINTAIN BUSINESS RELATIONSHIPS WITH
DISTRIBUTORS AND SUPPLIERS, RAPID TECHNOLOGICAL CHANGES, COMPETITION IN THE
VIDEO NETWORKING INDUSTRY, THE IMPORTANCE OF ATTRACTING AND RETAINING PERSONNEL,
MANAGEMENT OF THE COMPANY'S GROWTH, CONSOLIDATION AND COST PRESSURES IN THE
VIDEO NETWORKING INDUSTRY, DEPENDENCE ON KEY EMPLOYEES, THE RISK THAT THE
INTEGRATION OF THE COMPANY'S AND ICAST'S RESPECTIVE BUSINESS OPERATIONS WILL NOT
BE ACHIEVED IN A TIMELY AND EXPECTED MANNER, OR THAT KEY PERSONNEL OF ICAST ARE
NOT SUCCESSFULLY RETAINED, AND OTHER RISK FACTORS REFERENCED IN THE COMPANY'S
REGISTRATION STATEMENT ON FORM S-1, FILE NO. 333-38755, DECLARED EFFECTIVE ON
APRIL 29, 1998.
OVERVIEW
The Company provides a high quality, cost effective video networking
solution for the Next Generation Internet that integrates video with voice and
data, while leveraging existing network infrastructures. The Company's products
enable end-to-end video in a wide range of room and desktop environments for
video applications such as distance learning, distance meetings and distance
medicine. The Company was incorporated in California in October 1993 and
reincorporated in Delaware in December 1997. The Company first shipped its video
networking products in 1995.
The Company sells its products worldwide through original equipment
manufacturer ("OEM") partners, distributors and resellers. The Company
established strategic relationships with Bay Networks, Inc. ("Bay Networks")
in November 1995, Northern Telecom, Inc. ("Nortel") in May 1997 and Ascend
Communications, Inc. ("Ascend Communications") in May 1998. In November 1995,
the Company granted Bay Networks the worldwide non-exclusive right to market
and sell certain of the Company's products. In September 1996, the Company
granted Bay Networks the worldwide non-exclusive right to market and sell all
of the Company's current and future products, under both the Company's and
Bay Networks' names. In May 1997, the Company granted similar rights to
Nortel to market the Company's products under the Company's name. In May
1998, the Company granted rights to Ascend Communications to market and sell
certain of the Company's products under the Company's name on a worldwide
non-exclusive basis. Sales through Bay Networks represented 52%, 64% and 29%
of the Company's revenues in the nine months ended September 30, 1998 and the
years ended December 31, 1997 and 1996, respectively. Sales by Nortel and
Ascend Communications have not been significant to date. The Company also
plans to enter into additional distribution agreements. Nortel recently
completed its acquisition of Bay Networks. In connection with the
acquisition, Nortel changed its name to Nortel Networks.
The Company recognizes revenues upon shipment of products to customers,
provided that no significant obligations remain and collectibility is probable.
The OEM partners generally have no rights of return and have historically
carried limited amounts of inventories of the Company's products.
9
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Agreements with certain distribution partners contain price protection
provisions and certain return rights. Accordingly, the Company records a
provision for estimated future returns and price protection upon revenue
recognition. To date, returns and charges for price protection have not been
material.
Direct sales from shipments to customers outside of North America
accounted for approximately 19%, 20% and 36% of the Company's revenues in the
nine months ended September 30, 1998, and the years ended December 31, 1997 and
1996, respectively. The Company expects that direct sales from shipments to
customers outside of North America will continue to represent a significant
portion of its future revenues. In addition, the Company believes that a small
portion of its sales through Bay Networks and other distribution partners is
sold to international end-users. Revenues from the Company's international
operations are subject to various risks. To date, the Company has not engaged in
any foreign currency hedging activity.
The Company has in the past experienced, and may from time to time in
the future experience, fluctuations in revenues, gross margins and operating
results. The Company adopted a strategy in the fourth quarter of 1996 to focus
on a limited number of substantial end-user projects, rather than on the
implementation of a large number of evaluation and demonstration projects. The
Company's focus on a limited number of large end-user projects has resulted in,
and may in the future result in, significant fluctuations in quarterly revenues.
There can be no assurance that revenues will increase on a quarterly basis or at
all. The Company's gross margins have also historically fluctuated from period
to period and are expected to continue to fluctuate in the future. Gross margins
are significantly influenced by a variety of factors, including product mix,
percentage of revenues derived from OEM partners versus distributors or
resellers, pricing within the video networking industry and the prices of
significant components used in the Company's products. The Company generally
recognizes higher margins from video products and value added switch modules and
lower margins from base model V-Switches and adapter cards.
Various factors, in addition to those discussed above, contribute to
the fluctuations in revenues, gross margins and operating results, including but
not limited to the development of the market for video networking and for the
Company's products, the Company's success in developing, introducing and
shipping new products and product enhancements, the Company's success in
accurately forecasting demand for new orders, new product introductions and
price reductions by the Company's competitors. Further, a significant portion of
the Company's expenses is fixed in advance. The Company expects that operating
expenses will increase in the future to fund expanded operations. To the extent
that these increased expenses are not accompanied by an increase in revenues,
the Company's business, financial condition and results of operations would be
materially adversely affected. If revenues or gross margins were below Company
expectations in any given period, the Company's inability to adjust operating
expenses in response would adversely affect operating results.
The Company outsources certain functions to independent service
providers. The Company's products are manufactured primarily by Tanon
Manufacturing, Inc. (now a part of Smartflex Systems, Inc.) and accounting
and data processing functions are performed by KPMG Peat Marwick LLP.
ICAST ACQUISITION. On August 26, 1998, the Company acquired ICAST
for total consideration of approximately $7.6 million, including $1.8 million
for the assumption of liabilities. Prior to the acquisition, ICAST was a
privately-held, development-stage company that had minimal revenues since its
inception in May 1996. Since its inception, ICAST has been engaged in
developing software designed for Internet and Intranet broadcasting of
real-time video, audio and data.
RESULTS OF OPERATIONS
10
<PAGE>
The following table sets forth certain items from the Company's
condensed consolidated statements of operations as a percentage of total
revenues for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
(RESTATED - (RESTATED -
SEE NOTE 3) SEE NOTE 3)
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues 50.3% 60.3% 52.6% 58.2%
------------ ------------ ------------ ------------
Gross profit 49.7% 39.7% 47.4% 41.8%
------------ ------------ ------------ ------------
Operating expenses:
Research and development 23.2% 31.0% 20.8% 33.7%
Selling, general and
administrative 26.7% 40.8% 26.7% 44.8%
Acquired in-process research and
development 38.8% 0.0% 14.5% 0.0%
------------ ------------ ------------ ------------
Total operating expenses 88.7% 71.8% 62.0% 78.5%
------------ ------------ ------------ ------------
Operating loss (39.0%) (32.0%) (14.6%) (36.7%)
Other income (expense), net 1.7% (1.9%) (0.5%) (1.3%)
------------ ------------ ------------ ------------
Net loss (37.3%) (34.0%) (15.1%) (38.0%)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
(1) Operating expenses include non-cash employee stock compensation
charges of $212,000 (0.7% of total revenues) and $758,000 (6.8% of total
revenues) for the three months ended September 30, 1998 and 1997,
respectively, and $891,000 (2.8% of total revenues) and $1,009,000 (9.1%
of total revenues) for the nine months ended September 30, 1998 and
1997, respectively.
REVENUES. Revenues increased 141%, to $12.0 million for the three
months ended September 30, 1998, from $5.0 million for the three months ended
September 30, 1997. Revenues increased 188%, to $32.1 million for the nine
months ended September 30, 1998, from $11.1 million for the nine months ended
September 30, 1997. The increases in revenues for both the three and nine month
periods resulted from higher unit shipments due to wider acceptance of the
Company's products as a result of marketing efforts of the Company and its
strategic partners. Revenues attributable to the acquisition of ICAST were
immaterial for the three months ended September 30, 1998. Sales through Bay
Networks increased 71%, to $5.8 million for the three months ended September 30,
1998, from $3.4 million for the three months ended September 30, 1997, and
increased 164%, to $16.6 million for the nine months ended September 30, 1998,
from $6.3 million for the nine months ended September 30, 1997.
GROSS PROFIT. Gross profit consists of revenues less the cost of
revenues, which consists primarily of costs associated with the manufacture of
the Company's products by Tanon Manufacturing, Inc. and other manufacturers and
related costs of freight, inventory obsolescence, royalty and warranty. These
manufacturers procure the majority of materials, except for certain key
components which the Company purchases from third-party vendors.
Gross profit increased to $6.0 million for the three months ended
September 30, 1998, from $2.0 million for the three months ended September 30,
1997. Gross margin (gross profit as a percentage of revenues) increased to 49.7%
for the three months ended September 30, 1998, from 39.7% for the three months
ended September 30, 1997. Gross profit increased to $15.2 million for the nine
months ended September 30, 1998, from $4.6 million for the nine months ended
September 30, 1997. Gross margin increased to 47.4% for the nine months ended
September 30, 1998, from 41.8% for the nine months ended September 30, 1997. The
increases in gross profit for both the three and nine month periods ended
11
<PAGE>
September 30, 1998 over the comparable periods in 1997 were primarily due to the
related increases in revenues. The increases in gross margin for both the three
and nine month periods ended September 30, 1998 over the comparable periods in
1997 were primarily due to a shift in product mix to higher margin products, an
increase in the percentage of total revenues derived from higher margin reseller
channels and decreases in product costs for certain of the Company's products.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of personnel costs, costs of contracts and outside consultants,
supplies and material expenses, equipment depreciation and overhead costs.
Research and development expenses increased 81.0%, to $2.8 million for the
three months ended September 30, 1998, from $1.5 million for the three months
ended September 30, 1997. As a percentage of total revenues, research and
development expenses decreased to 23.2% for the three months ended September
30, 1998, from 31.0% for the three months ended September 30, 1997. Research
and development expenses increased 78.0%, to $6.7 million for the nine months
ended September 30, 1998, from $3.7 million for the nine months ended
September 30, 1997. As a percentage of total revenues, research and
development expenses decreased to 20.8% for the nine months ended September
30, 1998, from 33.7% for the nine months ended September 30, 1997. The
increases in absolute dollars were due in part to the hiring of additional
engineers and consultants for product development. In addition, research and
development expenses for the three months ended September 30, 1998 include a
charge of $1.0 million for the acquisition of certain voice access
technology, as well as personnel costs associated with hiring additional
engineers in connection with the ICAST acquisition. These increases were
offset in part by a decrease in non-cash compensation charges relating to the
Company's employee stock plans, which decreased to $99,000 and $391,000,
respectively, for the three and nine month periods ended September 30, 1998,
from $337,000 and $457,000, respectively, for the three and nine month
periods ended September 30, 1997. The decreases as a percentage of revenues
were due to the relatively greater increases in revenues for the three and
nine month periods ended September 30, 1998 than in the level of research and
development expenses for those periods. The Company believes that research
and development expenses will continue to increase in absolute dollars for
the foreseeable future. However, such expenses will fluctuate depending on
various factors, including the status of development projects.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses include personnel and related overhead costs for sales,
marketing, finance, human resources and general management. Such expenses also
include costs of outside contractors, advertising, trade shows and other
marketing and promotional expenses. Selling, general and administrative expenses
increased 58%, to $3.2 million for the three months ended September 30, 1998,
from $2.0 million for the three months ended September 30, 1997. As a percentage
of total revenues, selling, general and administrative expenses decreased to
26.7% for the three months ended September 30, 1998, from 40.8% for the three
months ended September 30, 1997. Selling, general and administrative expenses
increased 72%, to $8.5 million for the nine months ended September 30, 1998,
from $5.0 million for the nine months ended September 30, 1997. As a percentage
of total revenues, selling, general and administrative expenses decreased to
26.7% for the nine months ended September 30, 1998, from 44.8% for the nine
months ended September 30, 1997. The increases in absolute dollars were the
result of the expansion of the Company's sales and marketing infrastructure, as
well as higher marketing costs associated with advertising and promotional
activities, and higher selling costs related to the increases in revenues. These
increases were offset in part by a decrease in non-cash compensation charges
relating to the Company's employee stock plans, which decreased to $113,000 and
$499,000, respectively, for the three and nine month periods ended September 30,
1998, from $421,000 and $552,000, respectively, for the three and nine month
periods ended September 30, 1997. The decreases as a percentage of revenues were
due to the relatively greater increases in revenues for the three and nine month
periods ended September 30, 1998 than in the level of selling, general and
administrative expenses for those periods.
12
<PAGE>
The Company anticipates that selling, general and administrative expenses
will continue to increase in absolute dollars in the foreseeable future as
the Company expands its selling and marketing efforts and incurs the
administrative costs associated with being a publicly held company.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT. On August 26, 1998, the
Company acquired ICAST for total consideration of approximately $7.6 million,
including $1.8 million for the assumption of liabilities. Prior to the
acquisition, ICAST was a privately held, development-stage company that had
minimal revenues since its inception in May 1996. Since its inception, ICAST
has been engaged in developing software designed for Internet and intranet
broadcasting of real-time video, audio and data. The acquisition was
accounted for under the purchase method of accounting. Accordingly, the
results of operations of ICAST are included in the consolidated financial
statements from the date of acquisition.
Initially, approximately $6.2 million of the total purchase price of
ICAST was allocated to the value of in-process research and development
("IPR&D") and was charged to the Company's operations in the third quarter
ended September 30, 1998. Since the acquisition, and as a result of the
recent views expressed by the Securities and Exchange Commission (the "SEC")
staff, as discussed below, the Company has reduced its estimate of the amount
allocated to IPR&D as a result of the ICAST acquisition by $1.5 million to
$4.7 million and allocated $2.5 million to goodwill and other identified
intangibles. As a result of the reduction in the IPR&D charge, amortization
of intangibles increased by $29,000, from $14,000 to $43,000 for the three
and nine months ended September 30, 1998.
The amount allocated to IPR&D and intangible assets in the third
quarter of 1998 was made in a manner consistent with widely recognized
appraisal practices at the date of acquisition. Subsequent to the
acquisition, however, the SEC staff expressed views that took issue with
certain appraisal practices generally employed in determining the fair value
of the IPR&D that was the basis for the Company's measurement of its IPR&D
charge. The charge of $6.2 million, as first reported by the Company, was
based upon the work of an independent valuation firm that had utilized the
methodologies the SEC has since announced it does not consider appropriate.
As a result of computing IPR&D using the SEC's current preferred
methodology, the Company, in consultation with its independent accountants,
decided to revise the amount originally allocated to IPR&D. This Report on
Form 10-Q/A amends the previously filed Report on Form 10-Q for the quarterly
period ended September 30, 1998 to give effect to this revision.
At the time of the acquisition, ICAST was a privately held,
development stage company involved in research and development of a low
bit-rate software product designed for Internet and intranet broadcasting of
real-time video, audio and data. The value assigned to IPR&D was based on
this project for which technological feasibility had not been established.
The value was determined by estimating the expected cash flows from this
project once commercially viable, discounting the net cash flows back to
their present value and then applying a percentage of completion. The net
cash flows from the identified project are based on management estimates of
revenues, cost of sales, research and development costs, selling, general and
administrative costs, and income taxes from the project. The research and
development costs included in the model reflect costs to sustain the project,
but exclude costs to bring the in-process project to technological
feasibility. The estimated revenues are based on management projections for
the project and are expected to peak in the year 2000 and decline thereafter
as other new products are expected to become available. These projections
are based on management estimates of market size and growth, expected trends
in technology, and the nature and expected timing of new product
introductions by the Company and its competitors. Projected gross margins
approximate recent historical performance of other Company products. The
estimated selling, general and administrative costs, and research and
development costs were estimated excluding synergies expected from the
acquisition.
The discount rate used in discounting the net cash flows from IPR&D is
22%. This discount rate reflects the uncertainties surrounding the successful
development of the IPR&D, market acceptance of the technology, the useful
life of such technology, the profitability levels of such technology and the
uncertainty of technological advances that could potentially impact the
estimates described above.
The percentage of completion for this project was determined by
comparing both effort expended and research and development costs incurred as
of August 1998 to the remaining effort to be expended and research and
development costs to be incurred, based on management's estimates, to bring
the project to technological feasibility. Based on these comparisons
management estimated the project to be approximately 83% complete as of the
date of acquisition.
Management believes that the restated IPR&D charge of $4.7 million is
valued consistently with the SEC staff's current views regarding valuation
methodologies. There can be no assurances, however, that the SEC staff will
not take issue with any assumptions used in the Company's valuation model and
require the Company to further revise the amount allocated to IPR&D.
OTHER INCOME (EXPENSE), NET. Other income (expense), net consists
primarily of interest expense relating to the Company's credit facilities and
long-term debt, offset in part by interest income earned on cash balances. Net
other income totaled $200,000 for the three months ended September 30, 1998,
compared to net other expense of $96,000 for the three months ended September
30, 1997. The change was primarily due to interest income earned on the proceeds
from the Company's initial public offering completed in May 1998 and a reduction
in interest expense due to the repayment of borrowings under short-term credit
facilities with the proceeds from the initial public offering. Other income
(expense), net increased to a net expense of $181,000 for the nine months ended
September 30, 1998, from a net expense of $147,000 for the nine months ended
September 30, 1997. The increase for the nine month period ended September 30,
1998 resulted from the relatively higher level of borrowings during the 1998
period as compared to the corresponding 1997 period.
INCOME TAXES. The Company has incurred losses since inception. No
benefit has been recorded for income taxes for any of the periods presented as
the Company believes that, based on the history of such losses and other
factors, the weight of available evidence indicates that it is more likely than
not that it will not be able to realize the benefit of these net operating
losses, and thus a full valuation reserve has been recorded.
LIQUIDITY AND CAPITAL RESOURCES
Since inception through completion of its initial public offering in
May 1998, the Company financed its operations primarily through private
placements of equity securities, and to a lesser extent through certain credit
facilities and long-term debt. As of September 30, 1998, the Company had cash
and cash equivalents of $29.5 million and working capital of $35.6 million.
During the nine months ended September 30, 1998, the Company had a net
loss of $6.4 million, which was substantially the result of a non-cash charge
for acquired in-process research and development of $4.7 million. The Company
also experienced an increase in accounts receivable of $4.7 million, resulting
in $4.5 million of cash used in operating activities. The increase in accounts
receivable was due to increased sales. During the nine months ended September
30, 1997, the Company had a net loss of $4.2 million which was offset in part by
a non-cash compensation charge of $1.0 million and an increase in accounts
payable of $1.4 million, resulting in $1.9 million of cash used in operating
activities.
Cash used for investing activities for acquisition of property and
equipment was $1.4 million for
13
<PAGE>
the nine months ended September 30, 1998, compared to $376,000 for the nine
months ended September 30, 1997. The capital expenditures consisted of
purchases of computers and related equipment, furniture and fixtures
necessary to support the Company's growth. To date the Company has not made
significant outlays for capital expenditures because of its strategy to
outsource manufacturing and certain other functions.
The Company has a working capital line of credit with a bank, which
provides for borrowings of up to $10 million. Borrowings under the line of
credit bear interest at the bank's prime rate (8.5% at September 30, 1998), are
secured by certain assets of the Company and are limited to certain percentages
of the Company's accounts receivable and inventory balances. As of September 30,
1998, the Company had no borrowings outstanding under this line. The line, which
expires in June 2000, requires the Company to comply with certain financial
ratios and covenants, and also limits the Company's ability to pay dividends.
In February 1998, the Company agreed in principle to enter into a
transaction with Hambrecht & Quist Guaranty Finance, LLC ("Guaranty Finance"),
whereby Guaranty Finance would loan the Company up to $5 million. Under the
related agreements which were executed on March 12, 1998 and subsequently
amended on April 24, 1998, (i) Guaranty Finance agreed to lend the Company up to
$5 million at an interest rate of 12% per annum, $1.1 million of which was
loaned to the Company in March 1998 and $1.5 million of which was loaned to the
Company in April 1998 (the "Loan") and (ii) Guaranty Finance purchased from the
Company for $1,250 a warrant to purchase 125,000 shares of the Company's Common
Stock at a per share purchase price equal to the initial public offering price
of $13.00. The warrant is exercisable through March 1, 2003. The fair value of
this warrant was estimated to be $563,000 and is being expensed as an additional
cost of financing in 1998. The Company also paid a $100,000 fee to Guaranty
Finance in consideration for entering into the Loan.
In May 1998, the Company completed its initial public offering whereby
the Company sold 3,132,000 shares of Common Stock. Net proceeds to the Company
aggregated $36.1 million. The Company used $6.9 million of the net proceeds from
its initial public offering to repay outstanding indebtedness, including $2.3
million for borrowings under the working capital line of credit and $2.6 million
for the outstanding balance of the Loan.
The Company believes that its cash and cash equivalents of $29.5
million at September 30, 1998, together with existing sources of liquidity, will
provide adequate cash to fund its operations for at least the next 12 months.
Thereafter, if cash generated by operations is insufficient to satisfy the
Company's liquidity requirements, the Company may be required to sell additional
equity or debt securities or increase its lines of credit. The sale of
additional equity or convertible debt securities may result in additional
dilution to the Company's stockholders.
YEAR 2000 COMPLIANCE
The Year 2000 problem is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's information technology hardware, embedded technologies, such as
microprocessors, or software that is date-sensitive may recognize a date
using "00" as the year 1900 rather than the year 2000. Because the Company
uses a significant number of computer software programs and operating systems
in its internal operations, as well as in its products, Year 2000 issues
create certain risks for the Company. If the Company's internal management
information systems do not correctly recognize and process date information
beyond the year 1999, there could be an adverse impact on the Company's
operations. To address these Year 2000 issues, the Company has initiated a
program to evaluate its internal systems. Assessment and remediation are
proceeding in parallel, and the Company currently plans to have changes to
these information systems completed and tested by June 1999. These activities
are intended to encompass all major categories of internal systems used by
the Company. The Company has not yet determined the potential cost of
purchasing, installing, modifying or testing its internal systems.
14
<PAGE>
To assist customers in evaluating their Year 2000 issues, the Company
has begun a program to assess the capability of its current products and
products no longer being produced to handle the Year 2000. Testing has not
yet been completed, but based on preliminary tests, the Company believes that
all current products shipping are "Year 2000 Compliant." Testing of older
products that are no longer shipping has only recently been initiated and the
Company considers it likely that some older products may not be Year 2000
Compliant. It is expected that assessment and remediation will be on-going
throughout calendar year 1998 and 1999 with the goal of appropriately
resolving all material product issues by June 1999. The costs incurred to
date related to these programs have not been material. The costs that will be
incurred by the Company regarding the testing of current or older products
for Year 2000 compliance, and answering and responding to customer requests
related to Year 2000 issues, including both incremental spending and
redeployed resources, have not yet been determined but are currently not
expected to be material. Based on currently available information, the
Company does not believe that the Year 2000 matters discussed above related
to internal systems or products sold to customers will have a material
adverse impact on its financial condition or overall trends in results of
operations; however, it is still uncertain to what extent the Company may be
affected by such matters. In addition, customers may delay purchase decisions
because of uncertainty about Year 2000 issues.
Except as implied in any limited product warranty, the Company does not
believe it is legally responsible for costs incurred by customers related to
ensuring Year 2000 compliance. Nevertheless, the Company is incurring various
costs to provide customer support and customer satisfaction services
regarding Year 2000 issues and it is anticipated that these expenditures will
continue through calendar year 1999 and thereafter. As used by the Company,
"Year 2000 Compliant" means that when used properly and in conformity with
the product information provided by the Company, and when used with "Year
2000 Compliant" computer systems, the Company's product will accurately
store, display, process, provide, and/or receive data from, into, and between
the twentieth and twenty-first centuries, including leap year calculations,
provided that all other technology used in combination with the Company's
product properly exchanges date data with the Company's product. There can be
no assurance that (i) third party technologies used in combination with the
Company's products will be Year 2000 Compliant and (ii) the Company's
products will not be adversely affected when used with such third party
technologies, nor can the Company represent that any modifications to its
products made by a party other than the Company will be Year 2000 Compliant.
The Company has contacted its key suppliers of goods or services and
other relevant third parties to determine if they are adequately addressing
Year 2000 issues and what might be the possible effects on the Company if
those parties are not adequately prepared for the year 2000. Based on these
inquiries, the Company believes that the majority of its key suppliers of
goods and services are Year 2000 Compliant. However, failure of any key
supplier or other relevant third party to address Year 2000 readiness could
potentially have a material effect on the Company's business, financial
condition and results of operations. The Company has not yet developed a
contingency plan to address situations that may result if its key suppliers
and other relevant third parties are unable to achieve Year 2000 readiness.
There can be no assurance that the Company will be able to develop a
contingency plan to adequately address issues that may arise in the year
2000. The failure of the Company to develop and implement, if necessary, an
appropriate contingency plan could have a material impact on the operations
of the Company.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(c) On August 26, 1998, the Company completed its previously announced
acquisition of ICAST. The Company acquired all of the outstanding stock of ICAST
in exchange for 401,389 shares of FVC.COM Common Stock, a cash payment of
$327,000 and the assumption of certain outstanding ICAST stock options and
warrants.
The issuance of securities in the transaction described in the
paragraph above was deemed to be exempt from registration under the Securities
Act of 1933, as amended by virtue of Regulation D promulgated thereunder. The
purchasers in each case represented their intention to acquire the securities
for investment only and not with a view to the distribution thereof. The stock
certificates were issued with a legend to the effect that such securities had
not been registered under the Securities Act or any state securities laws and
could not be sold or transferred in the absence of such registration or an
exemption therefrom. All recipients were knowledgeable, sophisticated and
experienced in making investment decisions of this kind and received either
adequate information about the registrant or had access, through employment or
other relationships, to such information.
(d) The effective date of the Company's registration statement, filed on Form
S-1 under the Securities Act of 1933 (File No. 333-38755), was April 29, 1998
(the "Registration Statement"). The class of securities registered was Common
Stock and all securities registered were sold in the offering. The managing
underwriters for the offering were BancAmerica Robertson Stephens; Bear, Stearns
& Co. Inc.; and Hambrecht & Quist LLC. Pursuant to the Registration Statement,
the Company sold 3,132,000 shares of its Common Stock for an aggregate offering
price of $40,716,000. Also pursuant to the Registration Statement, certain
selling stockholders of the Company sold 180,000 shares of Common Stock of the
Company for an aggregate offering price of $2,340,000.
In connection with the public offering, the Company incurred expenses
of approximately $4.7 million, of which approximately $2.9 million represented
underwriting discounts and commissions and approximately $1.8 million
represented other expenses related to the offering. All such expenses were
direct or indirect payments to others. The net offering proceeds to the Company
and the selling stockholders after total expenses were $36.1 million and $2.2
million, respectively.
Through September 30, 1998, the Company has used $6.9 million of the
net proceeds from the offering to repay outstanding indebtedness, including $2.3
million for borrowings under the working capital line of credit and $2.6 million
for the outstanding balance of the Loan, and $20.2 million for working capital
and general corporate purposes. The Company has invested the remainder of the
net proceeds in short-term, investment-grade, interest bearing financial
instruments. The use of the proceeds from the offering does not represent a
material change in the use of the proceeds described in the Registration
Statement.
16
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENTS
- -------- -------------------------
<C> <S>
3.1(1) Amended and Restated Certificate of Incorporation
3.1(i)(2) Certificate of Ownership and Merger, effective August 3, 1998
3.2(1) Bylaws of the Registrant
4.1(2) Specimen Common Stock Certificate
11.1(3) Statement of Computation of Earnings (Loss) Per Share
27.1 Financial Data Schedule
</TABLE>
(1) Filed as an exhibit to the Company's Registration Statement on
Form S-1, File No. 333-38755, declared effective on April 29,
1998, incorporated herein by reference.
(2) Filed as an exhibit to the Company's Quarterly Report on Form
10-Q on June 10, 1998, incorporated herein by reference.
(3) See Note 5 to Condensed Consolidated Financial Statements.
(b) REPORTS ON FORM 8-K
The Company filed one Current Report on Form 8-K during the
quarter ended September 30, 1998. The report was filed on
September 10, 1998, and reported the Company's acquisition of
ICAST.
17
<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.
Date: April 29, 1999 FVC.COM, Inc.
By: /s/ James O. Mitchell
--------------------------------------
James O. Mitchell
Chief Financial Officer
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
18
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENTS
- ------- ------------------------
<C> <S>
3.1(1) Amended and Restated Certificate of Incorporation
3.1(i)(2) Certificate of Ownership and Merger, effective August 3, 1998
3.2(1) Bylaws of the Registrant
4.1(2) Specimen Common Stock Certificate
11.1(3) Statement of Computation of Earnings (Loss) Per Share
27.1 Financial Data Schedule
</TABLE>
(1) Filed as an exhibit to the Company's Registration Statement on
Form S-1, File No. 333-38755, declared effective on April 29,
1998, incorporated herein by reference.
(2) Filed as an exhibit to the Company's Quarterly Report on Form
10-Q on June 10, 1998, incorporated herein by reference.
(3) See Note 5 to Condensed Consolidated Financial Statements.
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF FVC.COM FOR THE NINE MONTHS ENDED SEPTEMBER
30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 29,457
<SECURITIES> 0
<RECEIVABLES> 7,450
<ALLOWANCES> 315
<INVENTORY> 3,740
<CURRENT-ASSETS> 41,984
<PP&E> 3,883
<DEPRECIATION> 1,754
<TOTAL-ASSETS> 47,733
<CURRENT-LIABILITIES> 6,348
<BONDS> 0
0
0
<COMMON> 16
<OTHER-SE> 41,075
<TOTAL-LIABILITY-AND-EQUITY> 47,733
<SALES> 32,055
<TOTAL-REVENUES> 32,055
<CGS> 16,847
<TOTAL-COSTS> 36,728
<OTHER-EXPENSES> 19,881
<LOSS-PROVISION> 100
<INTEREST-EXPENSE> 830
<INCOME-PRETAX> (4,854)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,854)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,854)
<EPS-PRIMARY> (0.48)
<EPS-DILUTED> (0.48)
</TABLE>
