Wednesday November 10, 8:32 am Eastern Time
Company Press Release
General Magic Announces Third Quarter 1999 Results
Company Signs Definitive Agreement with OnStar
SUNNYVALE, Calif.--(BUSINESS WIRE)--November 10, 1999--General Magic (Nasdaq:GMGC - news) today announced its operating results for the third quarter ended September 30, 1999.
Separately today, the Company announced a definitive agreement with OnStar, a division of General Motors Corporation. OnStar has agreed to make a $15 million equity investment in General Magic, pay a $5 million technology and licensing fee and use a customized version of General Magic's magictalk(TM) voice-user interface for deployment in select General Motors cars and trucks. The agreement is subject to routine regulatory review.
''We are very excited about our strategic partnership with OnStar,'' said Steve Markman, chairman, chief executive officer and president of General Magic. ''This partnership validates the acceptance of voice-enabled services for the consumer market. By working with a strong consumer-oriented company like OnStar, we have the opportunity to expose many potential subscribers to the benefits of using their voice to access content.''
Financial Results
Revenue for the third quarter ended September 30, 1999, was $1.7 million, compared to $374 thousand in the third quarter of 1998. Licensing revenue in the three-month and nine-month period ended September 30, 1999 included $1.5 million associated with a license agreement to Mitsubishi Electric Corporation (MELCO) which became effective in August 1999. The $1.5 million license is the culmination of a settlement agreement with MELCO originating in June 1997 and reflects the application of a pre-paid licensing fee for rights to use certain General Magic intellectual property rights.
The Company incurred a net loss of $10.6 million, or $0.25 per share in the third quarter of 1999, compared to a net loss of $10.0 million or $0.34 per share, in the third quarter of 1998. The net loss per share for the three months ended September 30, 1999 included the net loss for the period and a $708 thousand adjustment to accumulated deficit related to preferred stock sold during the period with favorable conversion and redemption rights and dividends on preferred stock. Excluding the effect of these adjustments, the net loss per share for the three months ended September 30, 1999 would have been $0.24.
Revenue for the nine months ended September 30, 1999, was $2.0 million, compared to $2.2 million for the nine months ended September 30, 1998. The Company incurred a net loss of $38.2 million, or $1.00 per share for the nine months ended September 30, 1999, compared to a net loss of $45.6 million, or $1.58 per share for last year's first nine months. The net loss per share for the nine months ended September 30, 1999 included the net loss for the period and a $1.6 million adjustment to accumulated deficit related to preferred stock sold during the period with favorable conversion and redemption rights and dividends on preferred stock.
Excluding the effect of these adjustments, the net loss per share for the nine months ended September 30, 1999 would have been $0.96. The net loss per share for the nine months ended September 30, 1998 included the net loss for the period and a $21.8 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 nine months ended September 30, 1998 would have been $0.83.
Operating expense for the third quarter of 1999 was $11.4 million compared to $11.9 million for the third quarter of 1998. For the nine months ended September 30, 1999, the operating expense was $36.0 million, compared to $32.6 million for the same period in 1998.
Cash and short-term investments totaled $14.1 million, as of September 30, 1999, compared to $33.9 million as of December 31, 1998. As of September 30, 1999, there are 41.2 million shares of common stock outstanding.
Company Update
-- In October, General Magic announced the addition of a new Chief
Financial Officer, Rose Marcario. Marcario joins the Company with
extensive accounting and financial experience.
-- This week, BellSouth Mobility deployed a customized version of
General Magic's Portico service in the Atlanta area. BellSouth
Mobility continues to add customers on a daily basis, and the
trial is expected to last four months.
-- Intuit recently notified General Magic that it is re-evaluating
its plans to voice enable its Quicken.com service.
-- General Magic announced several new enhancements to the myTalk
service, including voicemail, 2-minute free long distance calling
and pager notification. As of November 1, 1999, myTalk had
over 150,000 subscribers.
''Our subscribers continue to be very pleased with myTalk's capabilities,'' said Markman. ''The free access to services such as myTalk will fuel the growth of voice-enabled services. General Magic will continue to expand its voice-enabled services to meet consumers' needs.''
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 generalmagic.com
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GENERAL MAGIC, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
September 30, December 31,
ASSETS 1999 1998
Current assets:
Cash and cash equivalents (including
restricted cash of $2,280 in 1998) $ 10,676 $ 21,845
Short-term investments 3,467 12,075
Other current assets 1,427 1,700
Total current assets 15,570 35,620
Property and equipment, net 11,767 7,507
Other assets 3,588 4,171
Total assets $ 30,925 $ 47,298
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 1,710 $ 1,348
Accrued expenses 8,324 9,980
Current portion of long-term debt - 2,333
Other current liabilities 5 54
Total current liabilities 10,039 13,715
Deferred revenue, noncurrent 2,000 2,000
Long-term debt - 3,778
Other long-term liabilities 518 683
Total liabilities 12,557 20,176
Commitments
Redeemable, convertible Series D
preferred stock, $0.001 par value
Stated at involuntary liquidation
preference
Authorized: 2 shares, Issued
and outstanding: 1999 - 1;
1998 - None 10,252 -
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' equity (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: 1 shares, Issued and
outstanding: 1999 - 599; 1998 - None - -
Convertible Series F preferred stock,
$0.001 par value
Liquidation preference: 1999 - $10,252;
1998 - None
Authorized: 1 shares, Issued and
outstanding: 1999 - 1; 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 - 41,225;
1998 - 33,400 41 33
Additional paid-in capital 256,020 208,557
Deficit accumulated during
development stage (247,742) (209,500)
8,319 (910)
Less treasury stock, at cost:
1999 and 1998 - 46 (203) (203)
Total stockholders' equity
(deficit) 8,116 (1,113)
$ 30,925 $ 47,298
GENERAL MAGIC, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three-Month Periods Nine-Month Periods
Ended Ended
September 30, September 30,
1999 1998 1999 1998
Revenue:
Service revenue $ 206 $ - $ 507 $ -
Licensing revenue 1,503 63 1,537 1,577
Other revenue 4 311 4 583
Total revenue 1,713 374 2,048 2,160
Operating expenses:
Cost of other
revenue - 165 - 363
Network operations 1,905 1,709 5,405 1,709
Research and
development 2,863 3,651 9,612 13,145
Selling, general
and administrative 5,321 5,610 17,502 13,160
Depreciation and
amortization 1,320 783 3,438 2,223
Write-off of
in-process research
and development - - - 2,050
Total costs and
expenses 11,409 11,918 35,957 32,650
Loss from operations (9,696) (11,544) (33,909) (30,490)
Total other income
(expense), net (205) 1,498 (2,715) 6,703
Loss before income
taxes (9,901) (10,046) (36,624) (23,787)
Income taxes 1 - 23 19
Net loss (9,902) (10,046) (36,647) (23,806)
Basic and diluted
loss per share $ (0.25) $ (0.34) $ (1.00) $ (1.58)
Shares used in
computing per
share amounts 41,170 30,017 38,277 28,849
Net loss per share for the three-month period ended September 30, 1999 includes the net loss for the period and $708 thousand in adjustments to accumulated deficit related to favorable conversion and redemption rights on preferred stock issued and dividends on preferred stock during the period.
Net loss per share for the nine-month period ended September 30, 1999 includes the net loss for the period and $1.6 million in adjustments to accumulated deficit related to favorable conversion and redemption rights on preferred stock issued and dividends on preferred stock during the period. Net loss per share for the nine-month period ended September 30, 1998 includes the effect of $21.8 million related to issuances of preferred stock with favorable conversion and redemption rights and dividends on preferred stock.
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, the adequacy of the Company's financial resources to execute its business plan; the Company's ability to attract advertisers and sponsors and its ability to generate revenues from advertising sales; the Company's ability to attract, retain and motivate key technical, marketing and management personnel; the capability of the Network Operations Center to handle increases in demand; market acceptance of the Company's services and technologies; the challenges inherent in the development and delivery of complex technologies; the ability of the Company's third-party technology partners to timely develop, license or support technology necessary for the Company's services; and the Company's ability to respond to competitive developments. These and other risk factors are detailed in General Magic's Registration Statement on Form S-3, filed on October 29, 1999.
Note to Editors: General Magic, magicTalk, myTalk, and Portico are trademarks of General Magic, Inc. and may be registered in certain jurisdictions.
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