Socket Communications, Inc. Reports Record Second Quarter Revenue
Business Editors
NEWARK, Calif.--(BUSINESS WIRE)--July 26, 2000--
Record Revenue, Nasdaq NMS listing, Bluetooth Alliances and
Distribution Contracts Highlight Quarter
Socket Communications, Inc. (Nasdaq: SCKT; Pacific Stock Exchange:
SOK) today reported record revenue for the quarter ended June 30, 2000
of $2.4 million, an increase of 34 percent compared to revenue for the
same quarter a year ago and an increase of 21 percent compared to
revenue for the previous quarter. Proforma net loss applicable to
common stockholders for the quarter ended June 30, 2000 (excluding
non-cash compensatory charges of $490 thousand relating to stock
option grants) was $380 thousand or $0.02 per share compared to the
proforma net loss applicable to common stockholders for the same
quarter a year ago of $94 thousand or $0.01 per share, and compared to
the proforma net loss applicable to common stockholders in the
previous quarter of $339 thousand or $0.02 per share.
Second quarter highlights include:
-- Record revenue of $2.4 million, a 34 percent increase over Q2
1999 and a 21 percent increase over Q1 2000.
-- Listing on Nasdaq National Market System completed.
-- Sprint distribution contract signed for Digital Phone Cards.
-- Targus distribution contract signed to increase Socket's
retail presence.
-- Bluetooth Personal Network Card demonstrated at Pocket PC
launch.
-- Bluetooth development relationship with Axis Communications
announced for LAN access points.
-- Bluetooth development relationship with Intermec announced for
Intermec bar code scanning products.
-- New Secure Digital (SD) form factor announced.
-- Palm Computing adopts SD for next Palm Pilot and Microsoft
endorses SD for Windows-Powered handhelds.
-- Public warrant exercise completed. $5.9 million raised from
warrant and option exercises since year end.
-- New directors Leon Malmed, Enzo Torresi and Burnett Donoho
joined Socket's board.
-- Order backlog entering third quarter was more than $1 million.
"Socket's record revenues were due primarily to increased sales of
Digital Phone Cards and bar code scanning products introduced in the
second half of last year," said Kevin Mills, president and chief
executive officer of Socket Communications. "We have seen steady
growth across all of our product lines in revenues from our
CompactFlash products, which today account for more than half of our
quarterly revenues, up from less than one-third of our revenues in the
first quarter of 2000 and less than ten percent of our revenues one
year ago. This growth reflects the increasing popularity of handheld
mobile computers with CompactFlash slots. In addition to increasing
our second quarter revenues, we entered the third quarter with orders
for more than $1 million of product shippable in the third quarter,
giving us a head start on expected revenue growth in the third quarter
of this year."
Added Mills, "We have been especially pleased with the market
potential from our new distribution arrangements with Sprint for our
Digital Phone Cards and with Targus, whereby our products will gain a
widespread retail presence in the second half of this year. We were
also pleased with the considerable progress we made during the quarter
in our Bluetooth product development, and in announcing relationships
with Axis Communications and with Intermec, leaders in their
respective fields, for products that will be using our Bluetooth
personal area networking technology. Our first Bluetooth product
shipments are expected to commence in the fourth quarter. We are also
excited about two other development programs which are proceeding
well: adding removable memory slots to our connection products so that
files recorded on MultiMediaCard memory may be easily added and
removed; and our newest SD I/O form factor which will bring this
smaller open-standard form factor to the market next year. The
adoption of the SD I/O standard by Palm Computing for the next
generation Palm Pilot and its endorsement by Microsoft for future
Pocket PC handheld computers, will expand Socket's presence in the
growing mobile computing market space.
"To continue to sustain our growth and maintain our strong
technology advantages, Socket is focused on building our team in line
with our expanding opportunities," said Mills. "Recently, we added
three new directors to Socket's Board, all of whom bring exceptional
and diverse backgrounds to the Company. We also allowed our expenses
to grow in line with our revenue growth in the second quarter by
adding some key team members. Going forward, we expect to further
increase our expenses through the remainder of the year as we attract
the right level of talented resources to maintain our development
programs and build our sales, marketing, customer service, operations
and finance and administrative teams."
The Company's balance sheet at June 30, 2000 had cash balances of
$9.3 million, an increase of $5.0 million in cash since December 31,
1999, reflecting the exercise of stock options and warrants. Over 99
percent of the Company's public warrants were exercised by their
expiration date of June 5, 2000.
Mills concluded, "As a result of our strengthened balance sheet,
we are well capitalized to pursue growth of our resources while not
losing sight of our goal to grow revenues to profitable operating
levels. Our recent listing on the Nasdaq National Market System should
improve our visibility to investors and broaden opportunities for
investment, and we are seeking analyst coverage to start later this
year."
Review of Financial Performance
Record revenue of $2.4 million for the quarter ended June 30, 2000
represented an increase of 34 percent over the prior year's second
quarter and 21 percent over the previous quarter, respectively. Record
revenue for the six months ended June 30, 2000 of $4.4 million
represented an increase of 36 percent over revenue in the same period
in the prior year. Gross margin on sales was $1.4 million, or 58
percent of revenue, for the quarter ended June 30, 2000, compared to
gross margin on sales of 61 percent for the same quarter one year ago
and 58 percent in the previous quarter. Moderate declines in average
selling prices were generally offset by reduced manufacturing costs.
Second quarter gross margins in 1999 also benefited from higher
margins from funded engineering revenue.
Research and development expense of $607 thousand for the quarter
represented an approximate doubling of expense over the same quarter
one year ago and an increase of 27 percent over the previous quarter,
reflecting increases in engineering personnel and increased
development activities over these periods.
Sales and marketing expense of $933 thousand for the quarter
represents an increase of 70 percent over the same quarter one year
ago, and an increase of 27 percent over the previous quarter,
reflecting increases in personnel, additional travel from
participation in more sales events and higher advertising expense.
General and administrative expense of $337 thousand for the
quarter represents an increase of 27 percent from the same quarter one
year ago, reflecting higher financial mailing and reporting costs to
Socket's stockholders during the quarter, which increased from
approximately 1,100 stockholders in 1999 to over 11,000 stockholders
today, and a decrease of 2 percent from the first quarter, reflecting
audit costs that are predominantly recognized in the first quarter.
The Company also incurred non-cash charges of $490 thousand ($0.02
per share) for the quarter and $578 thousand ($0.03 per share) for the
six month period ended June 30, 2000 relating to the vesting of stock
option grants to consultants and to the vesting of options granted in
1998 to the Company's Chairman, Charlie Bass, for his services as
Chief Executive Officer from April 1997 to the end of March 2000. The
charge results from a change in status for Mr. Bass from Chairman and
Chief Executive Officer to Chairman following the appointment of Kevin
Mills as President and Chief Executive Officer.
Proforma net loss applicable to common stockholders for the
quarter ended June 30, 2000 (excluding non-cash charges of $490
thousand relating to the vesting of compensatory stock options) was
$380 thousand or $0.02 per share. Reported net loss applicable to
common stockholders for the quarter was $870 thousand ($0.04 per
share) compared to a net loss applicable to common stockholders of
$110 thousand ($0.01 per share) for the second quarter of 1999.
Proforma net loss applicable to common stockholders for the six
months ended June 30, 2000 was $719 thousand or $0.04 per share.
Reported net loss applicable to common stockholders for the six months
ended June 30, 2000 was $1.3 million ($0.07 per share), compared to a
net loss applicable to common stockholders of $567 thousand ($0.07 per
share) for the same period in 1999.
About Socket Communications
Socket Communications, Inc. develops and sells connection products
for Windows-powered computers and other devices. Socket's products
include the Battery Friendly(R) family of plug-in cards for enhancing
mobile computers by adding wireless Internet connectivity, networking,
bar code scanning, and data communication. Socket's products utilize
the Company's low-power chip technology, making them ideal for
battery-operated mobile computers. Socket is an Associate member of
the Bluetooth Special Interest Group (SIG) and is developing products
that will add Bluetooth wireless technology to handheld computers,
notebooks and other electronic appliances. Information about Socket's
complete range of products is available on the Company's web site at
socketcom.com.
Forward Looking Statements
This press release contains forward looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended,
including statements forecasting future revenue growth and activities
relating to this growth including market acceptance of our products
leading to revenue growth and future profitable operations,
expectations for our strategic partnerships including distribution of
our products by new distribution partners and acceptance of our
products by new development partners, and the introduction of new
products for this market. Such statements involve risks and
uncertainties, and actual results could differ materially from the
results anticipated in such forward looking statements as a result of
a number of factors, including, but not limited to, the risk of delays
in the availability of new products due to technological, market or
financial factors including the availability of necessary working
capital, the availability of announced Windows CE hardware and
software, the market acceptance of handheld computers and the
Company's related connection products, the failure of our strategic
partnerships to benefit our business as expected or the other factors
described in the Company's most recent Form 10-KSB filed with the
Securities and Exchange Commission.
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Proforma Summary Statements of Operations (Unaudited)(a)
(Amounts in Thousands except per share)
Three months ended Six months ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
Revenue $ 2,418 $ 1,802 $ 4,422 $ 3,263
Cost of revenue 1,017 703 1,849 1,314
Gross Margin 1,401 1,099 2,573 1,949
GM Percent 58% 61% 58% 60%
R & D 607 294 1,086 562
Sales & marketing 934 550 1,671 1,106
General/administrative 337 263 681 597
Interest (income)
expense, net (104) 11 (166) 18
Proforma net loss (373) (19) (699) (334)
Preferred Stock Dividend (7) (75) (20) (159)
Proforma net loss applicable
to common stockholders $ (380) $ (94) $ (719) $ (493)
Proforma net loss per share $ (0.02) $ (0.01) $ (0.04) $ (0.06)
Weighted Avg. Shares O/S 20,500 8,259 19,082 7,875
Note (a): Excludes charges for compensatory stock option grants.
Proforma results are not in conformance with GAAP accounting.
Condensed Summary Statements of Operations (Unaudited)
(Amounts in Thousands except per share)
Three months ended Six months ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
Revenue $ 2,418 $ 1,802 $ 4,422 $ 3,263
Cost of revenue 1,017 703 1,849 1,314
Gross Margin 1,401 1,099 2,573 1,949
GM Percent 58% 61% 58% 60%
R & D 607 294 1,086 562
Sales & marketing 934 550 1,671 1,106
General/administrative 337 263 681 597
Compensatory stock
option grants 490 16 578 74
Interest (income)
expense, net (104) 11 (166) 18
Net loss (863) (35) (1,277) (408)
Preferred Stock Dividend (7) (75) (20) (159)
Net loss applicable to
common stockholders $ (870) $ (110) $ (1,297) $ (567)
Net loss per share $ (0.04) $ (0.01) $ (0.07) $ (0.07)
Weighted Avg. Shares O/S 20,500 8,259 19,082 7,875
Condensed Summary Balance Sheets
(Amounts in Thousands)
June 30, Dec. 31,
2000 1999(b)
(Unaudited)
----------- --------
Cash $ 9,259 $ 4,285
Receivables 1,769 1,557
Inventories 1,019 736
Other current assets 203 41
Property and Equipment, net 468 320
Other assets 91 73
-------- --------
Total Assets $ 12,809 $ 7,012
-------- --------
Accounts payable and accrued liabilities $ 2,125 $ 1,657
Deferred revenue 477 346
Convertible preferred stock 192 888
Common stock 32,277 23,190
Deferred compensation (compensatory options) (1,896) --
Accumulated deficit (20,366) (19,069)
-------- --------
Total Liabilities and Equity $ 12,809 $ 7,012
-------- --------
Note (b): Derived from audited financial statements.
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--30--ik/sf*
CONTACT: Socket Communications, Inc.
David Dunlap, 510/744-2735
KEYWORD: CALIFORNIA
INDUSTRY KEYWORD: HARDWARE TELECOMMUNICATIONS EARNINGS
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