<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 8-K/A
AMENDMENT NO. 2 TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) MARCH 28, 1998
--------------
P-COM, INC.
-----------
(Exact name of registrant as specified in charter)
DELAWARE 0-25356 77-02893711
- ------------------------------ ----------- ------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3175 S. WINCHESTER BOULEVARD, CAMPBELL, CALIFORNIA 95008
---------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 866-3666
--------------
NOT APPLICABLE
--------------
(Former name or former address, if changed since last report.)
<PAGE>
AMENDMENT NO. 2
P-Com, Inc. ("P-Com") hereby amends the following items to its Current
Report on Form 8-K and Form 8-K/A, originally filed with the Securities and
Exchange Commission on April 9, 1998 and April 17, 1998, respectively, as set
forth in the pages attached hereto:
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS:
- ------ ------------------------------------------------------------------
The following financial statements and pro forma financial information
are filed as a part of this report.
(a) Financial Statements of Business Acquired. Wireless Communications
-----------------------------------------
Group of Cylink Corporation (a division of Cylink Corporation).
(1) Report of Independent Accountants (Price Waterhouse LLP);
(2) Balance Sheet for the fiscal year ended December 31, 1997;
(3) Statement of Operations and Divisional Equity for the fiscal year
ended December 31, 1997;
(4) Statement of Cash Flows for the fiscal year ended December 31,
1997; and
(5) Notes to Financial Statements for the fiscal year ended December
31, 1997.
(b) Pro Forma Financial Information. P-Com, Inc. (on a consolidated
-------------------------------
basis) and the Wireless Communications Group of Cylink Corporation (a division
of Cylink Corporation).
(1) Pro forma Combined Condensed Statement of Operations for the year
ended December 31, 1997 (unaudited); and
(2) Pro forma Combined Condensed Balance Sheet for the year ended
December 31, 1997 (unaudited).
(3) Unaudited Notes to Pro forma Financial Information.
(c) Exhibits. The following documents are filed as exhibits to this
--------
report:
(1) Exhibit 7(c)(99.1) - Financial Statements of Business Acquired,
Wireless Communications Group of Cylink Corporation (a division
of Cylink Corporation).
A. Report of Independent Accountants (Price Waterhouse
LLP);
2.
<PAGE>
B. Balance Sheet for the fiscal year ended December 31,
1997;
C. Statement of Operations and Divisional Equity for the
fiscal year ended December 31, 1997;
D. Statement of Cash Flows for the fiscal year ended
December 31, 1997; and
E. Notes to Financial Statements for the fiscal year ended
December 31, 1997.
(2) Exhibit 7(c)(99.2) - Pro Forma Financial Information, P-Com,
Inc. (on a consolidated basis) and the Wireless Communications
Group of Cylink Corporation (a division of Cylink Corporation).
A. Pro forma Combined Condensed Statement of Operations for
the year ended December 31, 1997 (unaudited); and
B. Pro forma Combined Condensed Balance Sheet for the year
ended December 31, 1997 (unaudited).
C. Unaudited Notes to Pro Forma Financial Information.
3.
<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 hereunto duly authorized.
P-Com, Inc.
-----------
(Registrant)
Date: June 12, 1998 By:/s/ Michael J. Sophie
---------------------
Name: Michael J. Sophie
Title: Chief Financial Officer
4
<PAGE>
INDEX
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
- ------ ------------------------------------------------------------------
<TABLE>
<CAPTION>
Document Page Number
- -------- -----------
<S> <C>
Exhibit 99.1 Financial Statements of Business Acquired. Wireless
-----------------------------------------
Communications Group of Cylink Corporation (a division of
Cylink Corporation).
(1) Report of Independent Accountants (Price Waterhouse 1
LLP)
(2) Balance Sheet for the fiscal year ended December 31, 2
1997
(3) Statement of Operations and Divisional Equity for the 3
fiscal year ended December 31, 1997
(4) Statement of Cash Flows for the fiscal year ended 4
December 31, 1997
(5) Notes to Financial Statements for the fiscal year ended 5
December 31, 1997
Exhibit 99.2 Pro Forma Financial Information. P-Com, Inc. (on a consolidated basis)
-------------------------------
and the Wireless Communications Group of Cylink Corporation (a division
of Cylink Corporation).
(1) Pro forma Combined Condensed Statement of Operations 10
for the year ended December 31, 1997 (unaudited)
(2) Pro forma Combined Condensed Balance Sheet for the year 11
ended December 31, 1997 (unaudited)
(3) Unaudited Notes to Pro Forma Financial Information 12
</TABLE>
<PAGE>
EXHIBIT 99.1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Cylink Corporation
In our opinion, the accompanying balance sheet and the related statement of
operations and divisional equity and of cash flows present fairly, in all
material respects, the financial position of the Wireless Communications
Group (a division of Cylink Corporation) at December 31, 1997 and the
results of its operations and its cash flows for the year in conformity with
generally accepted accounting principles. These financial statements are
the responsibility of Cylink's management; our responsibility is to express
an opinion on these financial statements based on our audit. We conducted
our audit of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
As disclosed in Note 1 of the Notes to Financial Statements, certain
administrative services are provided to the Wireless Communications Group by
Cylink Corporation. It is possible that the terms of these services are not
the same as those that would result from transactions among wholly unrelated
parties.
/s/ PRICE WATERHOUSE LLP
--------------------------
PRICE WATERHOUSE LLP
San Jose, California
May 15, 1998
<PAGE>
WIRELESS COMMUNICATIONS GROUP
(a division of Cylink Corporation)
Balance Sheet
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
ASSETS
Current Assets:
Accounts receivable, net of allowances of $155 $ 10,688
Inventories 4,300
Deferred income taxes 933
--------
Total current assets 15,921
Property and equipment, net 440
Other assets 7
--------
$ 16,368
========
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Accounts payable $ 1,874
Accrued employee benefits 602
--------
Total current liabilities 2,476
--------
Commitments (Note 6) --
Divisional Equity 13,892
--------
$ 16,368
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
WIRELESS COMMUNICATIONS GROUP
(a division of Cylink Corporation)
STATEMENT OF OPERATIONS AND DIVISIONAL EQUITY
(in thousands)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
Revenue $ 31,267
Cost of Revenue 13,461
--------
Gross profit 17,806
--------
Operating expenses:
Research and development 3,608
Selling and marketing 6,934
General and administrative 3,576
--------
Total operating expenses 14,118
--------
Income from operations 3,688
Royalty and other income, net 115
--------
Income before income taxes 3,803
Provision for income taxes 1,135
--------
Net income 2,668
Division equity at beginning of year 8,646
Net advances from Cylink Corporation 2,578
--------
Divisional equity at end of year $ 13,892
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
WIRELESS COMMUNICATIONS GROUP
(a division of Cylink Corporation)
STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
Cash flows from operating activities:
Net income $ 2,668
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 186
Changes in assets and liabilities:
Accounts receivable (5,916)
Inventories (377)
Deferred income taxes 116
Other assets (7)
Accounts payable 824
Accrued liabilities 209
--------
Net cash used in operating activities (2,297)
--------
Cash flows from investing activities:
Acquisition of property and equipment (281)
--------
Net cash used in investing activities (281)
--------
Cash flows from financing activities:
Net advances from Cylink Corporation 2,578
--------
Net cash provided by financing activities 2,578
--------
Net change in cash and cash equivalents --
Cash and cash equivalents at beginning of year --
--------
Cash and cash equivalents at end of year $ --
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
WIRELESS COMMUNICATIONS GROUP
(a division of Cylink Corporation)
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY AND A SUMMARY OF ITS SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Wireless Communications Group ("Wireless") is a division of Cylink
Corporation ("Cylink") which develops, manufactures and sells wireless
communication products. On March 28, 1998, Cylink sold Wireless to P-Com,
Inc. for approximately $46.0 million in cash and a $14.5 million unsecured
note receivable due July 6, 1998.
BASIS OF PRESENTATION
The statement of operations includes all revenues and expenses directly
attributable to Wireless as well as an allocation of costs for management
and administrative functions and services performed by Cylink on behalf of
Wireless. The allocation of these costs is based on various factors
including, but not limited to, revenues, employees and operating space using
a methodology that Cylink management believes is reasonable. For the year
ended December 31, 1997 these allocated costs were $2,764,000.
These allocated costs are not necessarily indicative of the costs and
expenses that would have resulted if Wireless had operated as a separate
entity. As more fully described in Note 3, current and deferred income taxes
and related tax expense have been allocated to Wireless as if it was a
separate taxpayer.
The balance sheet includes all assets and liabilities directly
attributable to Wireless. Divisional equity is the result of the difference
between residual earnings of Wireless plus borrowings from Cylink less cash
paid to Cylink. All liabilities related to allocated costs of Cylink have
been considered paid through divisional equity.
CASH
Wireless participated in Cylink's centralized cash management system. In
general, the cash funding requirements of Wireless were met by, and all cash
generated by Wireless was transferred to, Cylink.
INVENTORIES
Inventories are stated at the lower of cost or market, cost being
determined on a first-in, first-out basis.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
assets, generally five years.
REVENUE RECOGNITION
Revenue is recognized upon shipment to customers. Concurrently, a
provision is made for estimated costs to repair or replace products under
warranty arrangements. Revenue from sales to distributors is recognized upon
shipment; no right of return, stock rotation or price protection is given.
Revenue from sales to value added resellers is recognized upon shipment and
concurrently a provision for estimated returns is recorded.
SOFTWARE DEVELOPMENT COSTS
Software development costs are classified as research and development
costs and are expensed as incurred. Statement of Financial Accounting
Standards No. 86 requires the capitalization of certain software development
costs once technological feasibility is established, which Wireless defines
as completion of a working model. The capitalized cost is then amortized on
a straight-line basis over the estimated product life, or on the ratio of
current revenues to total projected product revenues, whichever is greater.
To date, the period between achieving technological feasibility and the
general availability of such software has been short and software
development costs qualifying for capitalization have been insignificant.
Accordingly, Wireless has not capitalized any software development costs.
5
<PAGE>
INCOME TAXES
Deferred tax assets and liabilities are recognized for the expected tax
consequences of temporary differences between the tax bases of assets and
liabilities and their financial statement reported amounts. The measurement
of deferred income tax assets is reduced, if necessary, by the amount of any
tax benefits that, based on available evidence, are not expected to be
realized.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject Wireless to significant
concentration of credit risk consist primarily of accounts receivable.
Wireless performs on-going credit evaluations and maintains reserves for
potential credit losses; historically such losses have been immaterial.
Three customers accounted for 31%, 17% and 10%, respectively, of total
accounts receivable at December 31, 1997. Two customers accounted for 13%
and 11%, respectively, of revenue in 1997.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. DETAILS OF BALANCE SHEET COMPONENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
(IN THOUSANDS)
<S> <C>
Inventories:
Raw materials $ 2,590
Work in process and subassemblies 1,474
Finished goods 236
-------
$ 4,300
=======
Property and equipment:
Machinery and equipment $ 1,600
Accumulated depreciation (1,160)
-------
$ 440
=======
</TABLE>
3. INCOME TAXES
The provision and related deferred tax assets are presented as if
Wireless was a separate taxpayer. In 1997, Cylink utilized various tax
planning strategies and elections to minimize its total income tax expense.
Tax payments are made by Cylink on a consolidated basis. It is not practical
to identify the effects of these strategies, elections, and payments on the
results of operations of Wireless.
6
<PAGE>
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
-------------
(IN THOUSANDS)
<S> <C>
Current:
Federal $1,196
State 55
------
1,251
------
Deferred:
Federal (104)
State (12)
------
(116)
------
$1,135
======
Deferred income tax assets comprise the following:
Research and development tax credit carryforwards $ 184
Allowances for sales returns and doubtful accounts 62
Inventory reserves and basis differences 615
Accrued expenses 73
------
Total deferred income tax assets $ 933
======
</TABLE>
Net deferred income tax assets result from temporary differences between
the financial carrying value and the tax basis of Wireless' assets and
liabilities and are expected to be utilized in future years.
The provision reconciles to the amount computed by applying the federal
statutory rate to income before income taxes as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
U.S. federal statutory income tax rate 34.0%
State taxes, net of federal tax benefit 5.8
Research and development tax credits (7.0)
Other (3.0)
----
Effective tax rate 29.8%
====
</TABLE>
Wireless had research and development credit carry forwards of
approximately $765,000 at December 31, 1997 which expire at various times
through 2010.
7
<PAGE>
4. STOCK OPTION PLAN
Wireless employees participate in Cylink's 1994 Flexible Stock Incentive
Plan ("1994 Plan"). The 1994 Plan provides for the grant of incentive stock
options and nonqualified stock options to executives, employees and
consultants to purchase up to 5,950,000 common shares. Stock options may be
granted at prices not less than 100% and 85% for incentive and nonqualified
stock options, respectively, of the fair market value of the stock on the
date of grant. Through December 31, 1997, all nonqualified stock options
have been granted at 100% of the fair market value of the stock on the date
of grant. Options granted under the 1994 Plan are exercisable at such times
and under such conditions as determined by the Board of Directors, and
generally vest over five years. Options expire ten years from the date of
grant. Shares issued upon exercise of options are subject to certain
restrictions on their transferability. The Company has the right to
repurchase such shares, at a price equal to the fair market value, when the
optionee is no longer associated with Cylink. Shares repurchased increase
the number of shares available for grant under the Plan.
5. GEOGRAPHIC INFORMATION
Wireless operates in one industry segment. All operating expenses and
identifiable assets of Wireless were generated in the United States.
Revenue, classified by the major geographic areas in which the Company
operates, was as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
--------------------
(IN THOUSANDS)
Revenue:
<S> <C>
Asia $13,374
Central and South America 8,804
United States and Canada 5,910
Europe 2,896
Other 283
-------
$31,267
=======
</TABLE>
6. COMMITMENTS
As part of the sale of Wireless to P-Com, Cylink entered into an
agreement with P-Com to allow Wireless the right to occupy and use portions
of Cylink's properties including the use of the phone system and any
necessary services which Cylink provides to its employees. As consideration,
P-Com will pay Cylink a sum of $120,000 on the first day of each month
beginning July 1998. In addition, P-Com is required to pay $20,000 each
month beginning June 1998 for the use of the Company's computer network.
This agreement expires no later than December 31, 1998.
Prior to the sale of Wireless to P-Com, Wireless shared facilities
leased by Cylink under various noncancelable operating leases. These leases
expire at various dates through June 2001 and certain of the leases are
renewable for an additional five years. In addition to the minimum lease
payments, Cylink is responsible for insurance, repairs and certain other
operating costs under the terms of the leases. Cylink incurred rent expense
of $860,000 under operating leases during the year ended December 31, 1997.
Future minimum lease payments for Cylink under all noncancelable
operating leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
--------------
(IN THOUSANDS)
<S> <C>
1998 $1,175
1999 721
2000 393
2001 197
------
$2,486
======
</TABLE>
8
<PAGE>
EXHIBIT 99.2
ITEM 7(b) Pro Forma Financial Information
-----------------------------------------
Effective March 28, 1998 and April 1, 1998, P-Com, Inc., a Delaware
corporation ("P-Com"), completed its acquisition of substantially all of the
assets of the Wireless Communications Group of Cylink Corporation, a California
corporation ("Wireless"), for $60,500,000 consisting of $46,000,000 in cash and
$14,500,000 in a short-term non interest bearing unsecured subordinated
promissory note. The transaction was accounted for using the purchase method;
accordingly, the purchase price was allocated to the assets acquired and
liabilities assumed based on their estimated fair market values at the date of
acquisition.
The following unaudited pro forma financial information gives effect to
the acquisition as if the transaction had taken place at the beginning of 1997
for the pro forma combined condensed statement of operation and the pro forma
combined condensed balance sheet.
The unaudited pro forma statement of operations and pro forma combined
condensed balance sheet are not necessarily indicative of the operating results
that would have been achieved if the transaction had occurred on the date
indicated and should not be construed as representative of future operations.
The historical financial statements of Wireless are included elsewhere in this
filing, and the unaudited pro forma financial information presented herein
should be read in conjunction with those financial statements and related
notes.
<PAGE>
P-COM, INC.
PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS-UNAUDITED
For the year ended December 31, 1997
(in thousands, except per share data)
<TABLE>
<CAPTION>
CYLINK
P-COM CYLINK ADJUSTMENTS PRO FORMA
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 220,702 $ 31,267 $ - $ 251,969
Cost of sales 129,235 13,461 - 142,696
---------- ---------- ----------- -----------
Gross profit 91,467 17,806 - 109,273
---------- ---------- ----------- -----------
Operating expenses:
Research and development 29,127 3,608 - 32,735
Sales and marketing 15,696 6,934 - 22,630
General and administrative 16,948 3,576 1,585 22,109
---------- ---------- ----------- -----------
Total operating expenses 61,771 14,118 1,585 77,474
---------- ---------- ----------- -----------
Income from operations 29,696 3,688 (1,585) 31,799
Interest and other income 247 115 362
---------- ---------- ----------- -----------
Income before taxes 29,943 3,803 (1,585) 32,161
Provision for income taxes 11,052 1,135 - 12,187
---------- ---------- ----------- -----------
Net income $ 18,891 $ 2,668 $ (1,585) $ 19,974
========== ========== =========== ===========
Net income per share
Basic 0.45 0.47
Diluted 0.43 0.46
</TABLE>
10
<PAGE>
P-COM, INC.
PRO FORMA COMBINED CONDENSED
BALANCE SHEET-UNAUDITED
For the year ended December 31, 1997
(in thousands)
<TABLE>
<CAPTION>
P-COM CYLINK ADJUSTMENT PRO FORMA
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 88,145 $ - $ - $ 88,145
Accounts receivable 70,863 10,688 - 81,571
Notes receivable 205 - - 205
Inventory 58,003 4,300 - 62,303
Prepaid expenses 12,329 933 - 13,262
---------- ---------- ----------- -----------
Total current assets 229,565 15,921 - 245,486
Property and equipment, net 32,313 440 - 32,753
Goodwill and other assets 43,643 7 - 43,650
---------- ---------- ----------- -----------
$ 305,521 $ 16,368 $ 0 $ 321,889
========== ========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 38,043 $ 1,874 $ - $ 39,917
Accrued employee benefits 3,930 602 - 4,532
Other accrued liabilities 6,255 - - 6,255
Income taxes payable 6,409 - - 6,409
Notes payable 293 - - 293
---------- ---------- ----------- -----------
Total current liabilities 54,930 2,476 - 57,406
Long-term debt 101,690 - - 101,690
---------- ---------- ----------- -----------
Minority interest 604 - - 604
---------- ---------- ----------- -----------
Stockholders' equity:
Preferred stock - - - -
Common stock 4 - - 4
Additional paid-in capital 131,735 - - 131,735
Retained earnings 18,380 13,892 - 32,272
Cumulative translation adjustment (1,822) - - (1,822)
---------- ---------- ----------- -----------
Total stockholders' equity 148,297 13,892 - 162,189
---------- ---------- ----------- -----------
$ 305,521 $ 16,368 $ - $ 321,889
========== ========== =========== ===========
</TABLE>
11
<PAGE>
Unaudited Notes to Pro Forma Financial Information
--------------------------------------------------
1. PERIOD PRESENTED
The unaudited pro forma combined condensed statement of operations and
the unaudited pro forma combined condensed balance sheet for the year ended
December 31, 1997 combines the results of operations of P-Com on a consolidated
basis and the results of operations of Wireless for the same period. The results
of operations of P-Com reported in its Quarterly Report on Form 10-Q ("Form
10-Q") for the three month period ended March 31, 1998 include the results of
operations of Wireless for the period from the date of acquisition (March 28,
1998 and April 1, 1998) through March 31, 1998. All of the outstanding accounts
receivable of Wireless were purchased by P-Com on April 1, 1998.
2. THE ACQUISITION
The total purchase price aggregated approximately $63 million and includes
$2.5 million of direct acquisition costs. The purchase price was allocated to
the assets acquired and liabilities assumed based on the estimated fair market
values for all other identifiable tangible and intangible assets at the
acquisition date. The allocation of the purchase price is as follows (in
thousands) (assume purchases on March 28, 1998):
Accounts receivable, net $ 9,065
Inventory 5,109
Property and equipment, net 461
In-process research and development 33,856
Intangible assets 15,847
Current liabilities assumed (1,355)
-------
$62,983
3. ADJUSTMENTS TO STATEMENT OF OPERATIONS
To reflect the amortization of intangible assets over the estimated lives
(in thousands)
Value at Estimated
acquisition lives Quarter Year
----------- --------- --------- ---------
Goodwill 15,847 10 396 1,585
12
