ATLANTA, May 5 /PRNewswire/ -- Preferred Networks, Inc.
(OTC Bulletin Board: PFNT) (PNI), a leading provider of network services to
the wireless industry and a developer and supplier of advanced communications
networking products, today reported its financial results for the three months
ended March 31, 2000.
PNI posted an important milestone in the first quarter, shipping its first
commercial networking products to customers. In the first quarter, PNI began
to ship iTerminal(TM) desktop messaging terminals and also accepted orders for
its Platform1(TM) modular switch product, which it expects to begin shipping
in the second quarter. In addition, earlier this week, PNI announced that it
has introduced and started shipments of its iLink TNPP Internet router
product.
Revenues associated with the initial shipments of networking products for
the first quarter were $69,000, which PNI expects to increase significantly in
the second quarter. Total revenues for the first quarter were $3.9 million
compared to $4.9 million for the prior year period. As PNI reported in its
year-end results, the decrease in total revenues resulted primarily from lower
pager sales to network services customers, due to lower inventory levels at
the end of 1999. This resulted from PNI's limited working capital resources
prior to its financial restructuring that was completed in December of 1999.
Cost of networking products for the first quarter was $97,000. The
majority of this expense represents an allocation of existing S,G&A expenses
that had previously been included in research and development costs and are
now associated with the delivery of commercial products. Due to the limited
revenues associated with PNI's initial shipments of networking products, this
relatively fixed expense allocation exceeded the networking product revenues
for the period. However, PNI expects that its future increases in networking
product shipments and associated revenue will result in positive gross profit
after these allocated expenses. Total operating expenses decreased by
$1.8 million to $5.7 million for the first quarter compared to $7.5 million
for the prior year period. The decrease in total expenses is due to lower
pager sales and lower selling, general and administrative expenses resulting
from continued efforts by PNI to gain greater operating efficiencies.
PNI posted continued improvements in net loss from continuing operations
(before the adoption of SOP 98-5 and write-off of market start-up expenses),
reducing its loss by $1.0 million to $2.0 million for the first quarter
compared to $3.0 million for the prior year period. The improvement is the
result of an overall decrease in operating expenses and decreased net interest
expense resulting from the reduced outstanding debt balance.
The net loss attributable to Common Stock decreased by $2.8 million to
$2.9 million for the first quarter compared to $5.7 million for the prior year
period.
Mark Dunaway, CEO of PNI, said, "This was a very exciting quarter for PNI.
We continued to post significant improvements in our bottom line performance
and we achieved our first commercial shipments of networking products. We are
receiving a very positive response from the marketplace and we are building a
backlog of customer orders for our iTerminal(TM) product, our Platform1(TM)
product, and our recently introduced iLink router. We expect to make
deliveries of all of these products to customers during the second quarter,
which we expect to result in a meaningful increase in total networking product
revenues for the next reporting period."
PNI is a developer and supplier of advanced networking hardware and
software products for companies that operate in the wireless, fixed network
and Internet marketplaces. These products provide companies with greater
processing efficiencies, cost savings, and an open platform to bring them
closer to their customers through unified service offerings. PNI also owns
and operates one-way wireless messaging networks in the Eastern United States
and provides unbranded, wholesale network services to companies. PNI's
address on the World Wide Web is: http://www.pniaccess.com .
Safe Harbor Statement Under the Private Securities Litigation Reform Act
of 1995: The statements contained in this release which are not historical
facts, are forward-looking statements that are subject to risks and
uncertainties, including those identified in PNI's 1999 Annual Report on Form
10-K, and actual results could differ materially from those anticipated in the
forwarding-looking statements. Certain information included in this release
contains statements that are or will be forward-looking. Such forward-looking
information involves important risks and uncertainties that could
significantly effect anticipated results in the future and, accordingly, such
results may differ from those expressed in any forward-looking statements made
by or on behalf of PNI. These risks and uncertainties include, but are not
limited to, risks related to technological change in the wireless industries;
risks associated with PNI's efforts to commercialize and market successfully
its networking products, such as the Platform1(TM) and iTerminal(TM) products;
the relatively unproven nature of PNI's networking products, which represent a
new product line for PNI; and challenges to PNI's technologies (such as
challenges to the validity of patents on PNI's switching technology). PNI
operates in a highly competitive marketplace and new product developments by
competitors can occur at any time, thereby diminishing the attractiveness of
PNI's products.
Summary Financial Information
Three Months Ended
March 31,
2000 1999
Revenues
Network services $2,936,601 $3,306,154
Pager sales 818,835 1,589,835
Networking products 69,491 ---
Other services 37,756 53,848
Total revenues 3,862,683 4,949,837
Costs of revenues
Network services 1,979,020 2,125,363
Pager sales 719,622 1,507,839
Networking products 97,458 ---
Other services 1,119 2,567
Total costs of revenues 2,797,219 3,635,769
Gross margin 1,065,464 1,314,068
Selling, general and administrative expenses 1,601,948 2,621,767
Depreciation and amortization 1,299,903 1,226,284
Operating loss (1,836,387) (2,533,983)
Interest expense (163,172) (483,750)
Interest income 26,017 37,161
Net loss from continuing operations before
cumulative effect of change in
accounting principle (1,973,542) (2,980,572)
Net loss from discontinued operations, net
of income tax(1) --- (59,841)
Cumulative effect of change in accounting
principle(2) --- (1,832,398)
Net loss
(1,973,542) (4,872,811)
Accretion of Redeemable Preferred Stock
(155,631)
(155,642)
Redeemable Preferred Stock dividend
requirements
(724,728) (675,000)
Net loss attributable to Common
Stock
$(2,853,904) $(5,703,453)
Net income (loss) per share of Common Stock from:
Continuing operations before cumulative
effect of change in accounting principle
$(0.17) $(0.24)
Discontinued operations, net of income tax --- (0.00)
Cumulative effect of change in accounting
principle --- (0.11)
Net loss per share of Common Stock $(0.17) $(0.35)
Weighted average number of common shares used
in calculating net loss per share of
Common Stock 16,401,418 16,265,377
Summary Balance Sheet Data
March 31, 2000 December 31,1999
Cash $4,965,648 $5,489,898
Total assets 37,429,517 39,142,754
Total debt 6,289,989 6,068,587
Redeemable Preferred Stock 28,310,946 27,430,576
Stockholders' equity (445,640) 2,100,944
Notes to Summary Financial Data
(1) On May 28, 1999, PNI sold substantially all of the assets of its
wholly-owned subsidiary, Preferred Technical Services, a provider of
wireless network equipment installation, maintenance and engineering
services. On December 10, 1999, PNI sold its wholly-owned subsidiary
EPS Wireless, Inc., a provider of paging and cellular product repair
services, sales of new, used, and refurbished paging and cellular
products and inventory management services. Operating results for
these subsidiaries for 1999 have been reclassified and reported as
discontinued operations in accordance with Accounting Principles
Board Opinion No. 30.
(2) Effective January 1, 1999, PNI adopted the Accounting Standards
Executive Committee issued Statement of Position 98-5, which required
it to write-off of any previously capitalized start-up or
organizational costs, to be reported as a cumulative effect of a
change in accounting principle. PNI wrote off the unamortized amount
of its market entry costs in the amount of $1,832,398.
SOURCE Preferred Networks, Inc.
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http://www.pni.access.com
Company News On-Call:
http://www.prnewswire.com/comp/109794.html or fax,
800-758-5804, ext. 109794
CONTACT:
Kathryn Loev Putnam, Senior Vice President
and Chief Financial Officer of Preferred Networks, Inc.,
770-582-3507
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