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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JULY 28, 1999
GENERAL MAGIC, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 77-0250147
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
420 NORTH MARY AVENUE SUNNYVALE, CALIFORNIA 94086
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 774-4000
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Not applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
On July 28, 1999, General Magic, Inc., the Registrant, issued a press
release announcing its second quarter 1999 financial results and additional
information regarding the Company's operations. A copy of the press release is
filed as Exhibit 99.1 and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. Not applicable.
(b) PRO FORMA FINANCIAL INFORMATION. Not applicable.
(c) EXHIBITS.
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Exhibit No. Description
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<S> <C>
99.1 Press release of the Registrant, dated July 28, 1999,
announcing operating results for the second quarter
ended June 30, 1999.
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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 hereunto duly authorized.
General Magic, Inc.
By: /s/ Mary E. Doyle
August 3, 1999 -------------------------------------
Mary E. Doyle
General Counsel and Secretary
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EXHIBIT INDEX
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Exhibit No. Description
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99.1 Press release of the Registrant, dated July 28, 1999, announcing
operating results for the second quarter ended June 30, 1999.
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Laura Crowley Christina Carrabino (General)
General Magic, Inc. Anne-Marie Stapelman (Investors)
1 + 408 774 4457 The Financial Relations Board, Inc.
[email protected] 1 + 415 986 1591
[email protected]
GENERAL MAGIC ANNOUNCES SECOND QUARTER 1999 RESULTS
COMPANY SURPASSES 250,000 COMBINED SUBSCRIBERS;
SIGNS LETTER OF INTENT FOR $20 MILLION EQUITY LINE OF FINANCING
SUNNYVALE, Calif. (July 28, 1999) - General Magic, Inc. (Nasdaq: GMGC)
today announced its operating results for the second quarter ended June 30,
1999. The Company said today that it had surpassed 250,000 combined subscribers
for the myTalk(TM) and Excite Voicemail services within the first six weeks of
deployment. Additionally, the Company announced it had signed a letter of intent
for up to $20 million in equity financing from a private investor.
"We are adding thousands of new subscribers every day," said Steve
Markman, chairman, chief executive officer and president of General Magic, "and
the services are being enthusiastically received by consumers. We expect to see
a notable increase in our subscriber base in the coming months beyond this
initial 250,000 and will continue to expand our voice-enabled services to meet
consumers' needs in the future."
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During the quarter, General Magic introduced its myTalk(TM) service and
announced an agreement with EXCITE@HOME. Additionally, EXCITE@HOME made a $6
million investment in General Magic.
"We are very pleased with the initial response to our Excite Voicemail
service and can see the potential for additional Internet-voice capabilities in
the future", stated George Bell, president, Excite@Home. "The quality of
magicTalk will help us extend the value of our Web services to our customers."
In May, the Company announced its agreement with BellSouth Mobility to
launch it's Portico(TM) virtual assistant service with a 3-4 month initial
deployment in the Atlanta area. The deployment of the service was originally
expected to begin in June and is now expected to begin late in the third quarter
due to third party delays in supplying long distance capacity. In general, the
growth of the company's Portico business and market deployment by
telecommunications carriers has developed slower than the Company had
anticipated. The Company does not expect a full commercial deployment by a
telecommunications carrier in 1999. As a result, the Company expects lower
revenues from the telecommunications sector of its business in the second half
of 1999. The Company anticipates that this shortfall may be offset by growth in
revenue from the Internet sector. The Company is therefore evaluating the
opportunities presented by its respective businesses.
The Company also submitted a plan to the Nasdaq Market during the
quarter to comply with the continued listing requirements through the 1999
fiscal year. The plan contemplated conclusion of a financing transaction by July
30.
The Company has signed a letter of intent for an equity line of
financing of up to $20 million from a private investor, which it expects to
conclude shortly. Under the terms of the agreement, the Company may offer stock
under an equity line of credit arrangement. This would give the Company the
right, from time to time, to exercise a put right requiring the investor to buy
common stock. The price and the number of shares would be determined prior to
each settlement date, based on the market price of the common stock at the time.
FINANCIAL RESULTS
Revenue for the second quarter ended June 30, 1999, was $180 thousand,
compared to $91 thousand in the second quarter of 1998. The Company incurred a
net loss of $13.0 million,
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or $0.34 per share in the second quarter of 1999, compared to a net loss of
$7.3 million or $0.82 per share, in the second quarter of 1998. The net loss per
share for the second quarter of 1998 included the net loss for the period and a
$16.4 million adjustment to accumulated deficit related to preferred stock sold
during the period with favorable conversion and redemption rights. Excluding the
effect of these adjustments, the net loss per share for the second quarter of
1998 would have been $0.25.
Revenue for the six months ended June 30, 1999, was $335 thousand,
compared to $1.8 million for the six months ended June 30, 1998. In the first
quarter of 1998 the Company received a $1.5 million nonrefundable fee from
Microsoft for the license of certain of the Company's technologies. The Company
incurred a net loss of $26.7 million, or $0.75 per share for the six months
ended June 30, 1999, compared to a net loss of $13.8 million, or $1.25 per share
for last year's first six months.
Operating expense for the second quarter of 1999 was $12.2 million
compared to $9.9 million for the second quarter of 1998. For the six months
ended June 30, 1999, the operating expense was $24.5 million, compared to $20.7
million for the same period in 1998.
Cash and short-term investments totaled $32.2 million, as of June 30,
1999, compared to $33.9 million as of December 31, 1998.
SECOND QUARTER REVIEW
General Magic introduced the myTalk(TM) service on June 15, 1999, and
has added tens of thousands of subscribers since its introduction. This free
Internet service allows consumers free voice access and response to their e-mail
from any telephone using a toll-free number and their own voice. The Company
plans to generate revenue from Web and audio based advertising as well as
advertising sponsorships. General Magic announced during the second quarter a
partnership with LinkShare, the leader in Web-based partnership marketing to
begin an affiliate marketing program aimed at building the myTalk subscriber
base.
On June 21, 1999, General Magic and Excite@Home announced that General
Magic will use its magicTalk(TM) voice-user interface and its network operation
center for the Excite Voicemail service. Excite Voicemail is a free,
advertising-supported service that allows Excite users to receive voicemail and
faxes in their Excite e-mail boxes.
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General Magic continues development efforts with Intuit and the two
companies are currently working on the integration of the voice user interface
into the Quicken.com site.
ONGOING BUSINESS
In February, the Company announced a relationship with Wireless
Knowledge, a joint venture between Microsoft and Qualcomm. General Magic is
currently reviewing its development requirements against the subscriber and
revenue potential for this service.
Development of a commercial service for Qwest Communications
International has been delayed due to Qwest's recent merger with LCI and
subsequent personnel changes. It is not expected that Qwest will progress from a
market trial to a commercially available service this year. Qwest is currently
the backbone provider to General Magic for its telecommunication needs.
General Magic has completed the physical expansion of its Network
Operations Center, with the goal of accommodating 500,000 active users by the
end of 1999.
ABOUT GENERAL MAGIC
General Magic offers voice-enabled services and technology that make
communication and access to information easy and convenient. The company's
innovative, patent-pending magicTalk voice interface lets people interact with
information using their own words, as if they were talking to another person.
For more information about General Magic, visit the company's Web site at
http://www.generalmagic.com
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General Magic notes that this press release contains forward-looking statements.
There are risks and uncertainties that may cause actual results to vary
materially. These risks and uncertainties include, but are not limited to,
adequacy of the Company's financial resources to execute its business plan; the
challenges inherent in the development and delivery of complex technologies,
including the capability for the Network Operations Center to handle potential
increases in demand; the market acceptance of the Company's services and
technologies; the ability of the Company's third-party technology partners to
timely develop, license or support technology
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necessary for the Company's services; the Company's ability to respond to
competitive developments; and the Company's reliance on attracting, retaining
and motivating key technical, marketing and management personnel. These and
other risk factors are detailed in General Magic's 1998 Form 10-K filed with the
Securities and Exchange Commission and the Form S-3A filed with the SEC on July
26, 1999.
General Magic, magicTalk, myTalk and Portico are trademarks of General Magic,
Inc., and may be registered in certain jurisdictions.
FINANCIAL TABLES ATTACHED
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GENERAL MAGIC, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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<CAPTION>
ASSETS June 30, 1999 December 31, 1998
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Current assets:
Cash and cash equivalents (including restricted cash of
$2,280 in 1998) $ 31,235 $ 21,845
Short-term investments 1,000 12,075
Other current assets 1,008 1,700
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Total current assets 33,243 35,620
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Property and equipment, net 10,489 7,507
Other assets 4,189 4,171
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Total assets $ 47,921 $ 47,298
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,634 $ 1,348
Accrued expenses 10,949 9,980
Current portion of long-term debt 2,333 2,333
Other current liabilities 20 54
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Total current liabilities 14,936 13,715
Deferred revenue, noncurrent 2,000 2,000
Long-term debt 2,611 3,778
Other long-term liabilities 589 683
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Total liabilities 20,136 20,176
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Commitments
Redeemable, convertible Series D preferred stock, $0.001
par value
Stated at involuntary liquidation preference
Authorized: 2 shares
Issued and outstanding: 1999 - 2; 1998 - None 20,252 --
Redeemable, convertible Series C preferred stock, $0.001
par value
Stated at involuntary liquidation preference
Authorized: 3 shares
Issued and outstanding: 1999 - None; 1998 - 2 -- 20,658
Redeemable, convertible Series B preferred stock, $0.001
par value
Stated at involuntary liquidation preference
Authorized: 12 shares
Issued and outstanding: 1999 - None; 1998 - 6 -- 7,577
Stockholders' deficit:
Convertible Series A preferred stock, $0.001 par value
Liquidation preference: 1999 - $4,500; 1998 - $4,500
Authorized: 50 shares
Issued and outstanding: 1999 - 50; 1998 - 50 -- --
Convertible Series E preferred stock, $0.001 par value
Liquidation preference: 1999 - $5,990; 1998 - None
Authorized: 699 shares
Issued and outstanding: 1999 - 599; 1998 - None -- --
Preferred stock, $0.001 par value
Authorized: 435 shares
Issued and outstanding: 1999 and 1998 - None -- --
Common stock, $0.001 par value
Authorized: 100,000 shares
Issued and outstanding: 1999 - 41,099; 1998 - 33,400 41 33
Additional paid-in capital 244,826 208,557
Deficit accumulated during development stage (237,131) (209,500)
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7,736 (910)
Less treasury stock, at cost: 1999 and 1998 - 46 (203) (203)
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Total stockholders' deficit 7,533 (1,113)
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$ 47,921 $ 47,298
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GENERAL MAGIC, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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Three Month Periods Ended Six Month Periods Ended
June 30, June 30,
(unaudited) (unaudited)
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1999 1998 1999 1998
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Revenue:
Service revenue $ 164 -- $ 301 --
Licensing revenue 16 4 34 1,514
Other revenue -- 87 -- 272
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Total revenue $ 180 91 $ 335 1.786
Operating expenses:
Cost of other revenue -- 51 -- 198
Network operations 1,588 -- 3,500 --
Research and development 3,183 4,784 6,749 9,494
Selling, general and administrative 6,275 4,373 12,181 7,550
Depreciation and amortization 1,145 736 2,118 1,440
Write-off of in-process research and development -- -- -- 2.050
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Total costs and expenses 12,191 9,944 24,548 20,732
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Loss from operations (12,011) (9,853) (24,213) (18,946)
Total other income (expense), net (1,017) 2,535 (2,510) 5,205
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Loss before income taxes (13,028) (7,318) (26,723) (13,741)
Income taxes -- 19 22 19
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Net loss (13,028) (7,337) (26,745) (13,760)
Basic and diluted loss per share $ (0.34) (0.82) $ (0.75) (1.26)
Shares used in computing per share amounts 39,242 29,104 36,807 28,258
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Net loss per share for the six-month period ended June 30, 1999 includes the net
loss for the period and $885 thousand in adjustments to accumulated deficit
related to dividends earned on preferred stock during the period and warrants
associated with preferred stock sold. Net loss per share for the six-month
period ended June 30, 1998 includes the cumulative effect of $21.8 million
related to preferred stock issuances with favorable conversion and redemption
rights.
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