<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 27, 2000
REGISTRATION NO. 333-38852
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
--------------------------
POST-EFFECTIVE
AMENDMENT NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
CELLPOINT INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
NEVADA 52-2032380
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
------------------------
3000 HILLSWOOD DRIVE
HILLSWOOD BUSINESS PARK
CHERTSEY, SURREY KT16 ORS, ENGLAND
+44-1932-895-310
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
--------------------------
KRANBORGRAND 7
164 46 KISTA, SWEDEN
+46-8-5947-4900
(Address, including zip code, and telephone number, including area code,
of Registrant's principal place of business)
--------------------------
3000 HILLSWOOD DRIVE
HILLSWOOD BUSINESS PARK
CHERTSEY, SURREY KT16 ORS, ENGLAND
+44-1932-895-310
ATTENTION: PETER HENRICSSON
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
STEVEN R. BERGER, ESQ.
SALANS HERTZFELD HEILBRONN CHRISTY & VIENER
620 FIFTH AVENUE
NEW YORK, NEW YORK 10020
--------------------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
PROSPECTUS REGISTRATION NO. 333-38852
CELLPOINT INC.
1,883,801 SHARES OF COMMON STOCK
This Prospectus is being used by certain stockholders (the "Selling
Stockholders") of CellPoint Inc. (together with its subsidiaries, unless the
context otherwise requires, the "Company" or "CellPoint") to sell an aggregate
of up to 1,883,801 shares (the "Shares") of the Common Stock of the Company. The
Selling Stockholders will sell the Common Stock, from time to time, at prices
then attainable, less ordinary brokers' commissions and dealers' discounts, as
applicable. The Shares were offered and sold to the Selling Stockholders
pursuant to private offerings in which the Shares were not registered with the
Securities and Exchange Commission. The Shares are being offered solely for the
account of the Selling Stockholders and we will receive no part of the proceeds
of this Offering. For more information about the Selling Stockholders, please
refer to the sections entitled "Summary of Offering" and "The Selling
Stockholders".
Our Common Stock trades on the NASDAQ National Market ("NASDAQ") under the
symbol CLPT. On December 21, 2000 the last reported sale price per share of
Common Stock was $5.25.
INVESTING IN THE COMMON STOCK INVOLVES RISKS THAT ARE DESCRIBED IN THE "RISK
FACTORS" SECTION OF THIS PROSPECTUS.
<TABLE>
<CAPTION>
PROCEEDS TO ISSUER
PRICE TO PUBLIC OR OTHER PERSONS(2)
<S> <C> <C>
Per Share................................. $5.25(1) (1),(2)
Total................................... $ 9,889,955.25(1) (1),(2)
</TABLE>
------------------------
(1) Estimated, based upon the last reported sale price of our Common Stock on
December 21, 2000.
(2) We will receive no part of the proceeds from the sale of the shares
described in this Prospectus. All proceeds will go to the Selling
Stockholders, and the amount set forth above assumes that all Shares
described in this Prospectus are sold. Our estimated expenses in connection
with this Prospectus are approximately $87,000.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is August 4, 2000, as amended as of December 27,
2000.
<PAGE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING OR SOLICITATION WITH RESPECT
TO THESE SECURITIES BY THE COMPANY TO ANY PERSON WHO MAY BE CONSIDERED TO BE AN
UNDERWRITER OR TO ANY PERSON IN ANY STATE IN WHICH SAID OFFERING OR SOLICITATION
IS NOT AUTHORIZED BY THE LAWS THEREOF OR IN WHICH THE PERSON MAKING SAID
OFFERING OR SOLICITATION IS NOT QUALIFIED TO ACT AS DEALER OR BROKER OR
OTHERWISE TO MAKE SUCH OFFERING OR SOLICITATION.
WE HAVE AGREED TO FILE AMENDMENTS TO THE REGISTRATION STATEMENT OF WHICH
THIS PROSPECTUS IS A PART IN ORDER TO INFORM POTENTIAL PURCHASERS OF THE COMMON
STOCK OF ANY FACTS OR EVENTS ARISING AFTER THE DATE OF THIS PROSPECTUS WHICH ARE
MATERIAL TO SUCH PURCHASER'S INVESTMENT DECISION. WE WILL DISTRIBUTE ANY SUCH
AMENDMENTS TO THIS PROSPECTUS TO THE SELLING STOCKHOLDERS AFTER SUCH AMENDMENT
HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We file reports, proxy statements and other information with the Securities
and Exchange Commission (the "SEC") (our SEC file number is 000-25205). Our SEC
filings are also available over the Internet at the SEC's website at
HTTP://WWW.SEC.GOV. You may also read and copy any document we file at the
public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
more information on the Public Reference Room and their copy charges. We
maintain a website at http://www.cellpt.com.
IN CONNECTION WITH THIS OFFERING, CERTAIN SELLING STOCKHOLDERS MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK OF THE COMPANY ON NASDAQ
IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "PLAN OF DISTRIBUTION".
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain "forward-looking statements". We have based
these forward-looking statements on our current expectations and projections
about future events, and they do not relate strictly to historical or current
facts. Our actual results could differ materially from the results discussed in
the forward-looking statements. These forward-looking statements are subject to
risks, uncertainties and assumptions about CellPoint, including, among other
things:
- The rate of market development and acceptance of location and telematics
technologies;
- The unpredictability and length of our sales cycle;
- The limited revenues and significant operating losses we have generated to
date;
- Our ability to achieve adequate levels of revenue to recover our
investment in capitalized software development costs;
- The dependence on the efforts of mobile networks operators;
- The possibility of significant ongoing capital requirements;
- The loss of any significant customer;
- Our ability to secure additional financing as and when necessary;
- Our ability to retain the services of our key management and to attract
new members of the management team; and
- Our ability to effect and retain appropriate patent, copyright and
trademark protection of our products.
We undertake no obligation to update publicly or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events contained or incorporated by reference in this Prospectus might not
occur.
------------------------
We have not authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent information,
you should not rely on it. We are not making an offer to sell these securities
in any jurisdiction where the offer or sale is not permitted. You should assume
that the information appearing in this Prospectus, as well as information we
previously filed with the SEC, is accurate as of the date on the front cover of
this Prospectus only. Our business, financial condition, results of operations
and prospects may have changed since that date.
3
<PAGE>
SUMMARY INFORMATION
THE FOLLOWING SUMMARY CONTAINS BASIC INFORMATION ABOUT OUR BUSINESS AND THIS
OFFERING. IT MAY NOT CONTAIN ALL THE INFORMATION THAT IS IMPORTANT TO YOU. YOU
SHOULD READ THIS ENTIRE PROSPECTUS, INCLUDING "RISK FACTORS" AND OUR
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN THIS
PROSPECTUS, BEFORE DECIDING TO INVEST IN SHARES OF COMMON STOCK.
OUR BUSINESS
CellPoint Inc. and its subsidiaries promote, market, develop, offer, sell,
support and distribute digital cellular, or GSM (Global System for Mobile
Communications, "GSM") technologies and applications for mobile phone location
services and telematics. We are primarily an enabler of location technology and
services for mobile phones and other mobile devices. Location services for
mobile phones are made possible by combining location technology, a location
services platform (similar to an operating system) and applications to deliver
various location services. Our operating system also supports our telematics
terminals to enable telemetry services with broad industrial scope.
CellPoint is an end-to-end provider of location services. Our location
technology enables users to determine the position of a cellular telephone or
object in unmodified GSM cellular networks. The primary location service
applications include resource management of mobile workforce assets, friend-
finding relative to one's own location, personal security services and fleet
management and vehicle tracking for security, including positioning and tracking
for recovery in the event of theft. In the resource and fleet management
application, companies can view and track their mobile service personnel over
the Internet. Information services can include location-sensitive traffic
reports, weather, and concierge information services such as the location of the
nearest hotel, restaurant or repair shop. Emergency applications could include
locating persons making emergency calls, roadside assistance in the event of
vehicle breakdown or location of a disabled or impaired person who may be lost
or missing.
Unwire, our telematics subsidiary, focuses on the worldwide marketing,
support, development, distribution and sales of our technologies and products
for telematics. Telematics involves wireless remote management and control of
machines and equipment. The field of applications spans all industries and
includes, for example, logistics, alarm management, elevator systems, vending
machines, container management, meter reading, fleet management, vehicle
monitoring and remote control, quality control, cash and ATM terminals, gate and
door management, security, supervision and service information.
As used herein, "we", "us", "our" and "the Company" refer to CellPoint Inc.
and its subsidiaries, collectively; "CellPoint" refers to our wholly-owned
subsidiaries, CellPoint Systems AB in Sweden, CellPoint Europe Limited in
England and CellPoint Systems SA (Pty) Ltd. In South Africa; and "Unwire" refers
to our wholly-owned subsidiary, Unwire AB.
OUR ADDRESS
We were originally organized on February 28, 1997, as Technor
International, Inc., a corporation organized under the laws of the State of
Nevada, pursuant to the provisions of General Corporation Law of the State of
Nevada. On October 4, 1999, we changed our corporate name to "CellPoint Inc." in
order to generate wider name recognition in the business and financial
communities. Our Common Stock trades on the NASDAQ National Market under the
symbol CLPT.
Our principal business address and telephone numbers are Kronborgsgrand 7,
164 46 Kista, Sweden, telephone +46 (0)8 5947-4900, facsimile +46 (0)8 35 87 90.
We also maintain executive offices at 3000 Hillswood Drive, Hillswood Business
Park, Chertsey, Surrey, KT16 ORS, England,
4
<PAGE>
telephone +44 1932 895 310. The Company maintains a website at WWW.CELLPT.COM.
Information contained in our website is not a part of this Prospectus.
RECENT DEVELOPMENTS
On August 28, 2000, Unwire announced a contract with PhoneTrans AG of
Germany, pursuant to which PhoneTrans has committed to purchase a minimum of
24,000 telematics terminals from Unwire over 29 months. The purchase price under
the contract is expected to aggregate $8,000,000. In the vending machine
marketplace, Unwire's terminals will automatically notify owners of low stock
levels, saving companies time and money by ensuring stock levels are always
there. Unwire will earn revenues from the sale of hardware, consulting services
and application license fees.
On September 8, 2000, Unwire announced its agreement with ItsMobile of
Ireland to provide telematics terminals for vending machines in Europe. The
purchase price under the contract is expected to aggregate $2,800,000 in
revenues. Unwire's terminals will notify owners automatically of low stock
levels and will provide such owners with remote management information for the
vending machines.
On September 27, 2000, Unwire and CellPoint announced a contract with Car
Tracking Company Ltd. of Thailand. This contract combines Unwire's
purpose-designed in-vehicle telematics terminals with CellPoint's location
technology to provide security and fleet management for police and government
vehicles in Thailand. The contract is expected to aggregate $12,000,000 in
revenues over three years.
On October 9, 2000, we announced a commercial agreement with EuroTel
Praha Ltd. of the Czech Republic for our Mobile Location Services platform and
applications. EuroTel, using CellPoint's latest location-based service
technology, is able to offer its customers our Resource Manager service based on
their current mobile phones and SIM cards.
On December 6, 2000, we completed a private placement with Castle Creek
Technology Partners LLC ("Castle Creek"). In such transaction, we issued to
Castle Creek 6% convertible notes in the aggregate principal amount of
$10,000,000 and five-year warrants to purchase up to 210,526 shares of the
Company's Common Stock. The convertible notes are due September 30, 2002, and
may be prepaid prior to such date upon the satisfaction of certain conditions
(including the issuance of additional warrants). The warrants are exercisable
initially at $11.40 per share. The conversion ratio of the notes and the
exercise price of the warrants are subject to anti-dilution adjustments.
THE SELLING STOCKHOLDERS
This Prospectus relates to the registration of the resale of 3,802,908
shares of our Common Stock, beneficially owned by certain of the Company's
stockholders (the "Selling Stockholders"). Of the shares covered by this
Prospectus, 898,320 are being registered for sale by purchasers in a private
placement through Madison Securities in 1999 and 985,481 are being registered
for sale by the former stockholders of Unwire.
We do not know when or if the Selling Stockholders will exercise their
warrants or whether the Selling stockholders will sell any of the Shares. See
"The Selling Stockholders" and "Plan of Distribution".
THE OFFERING
The Shares offered pursuant to this Prospectus are shares of our Common
Stock beneficially owned by the Selling Stockholders. We will not receive any
proceeds from the sale of the Shares by the Selling Stockholders, except to the
extent that any of the Selling Stockholders exercise their warrants and elect to
pay the exercise price in cash.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA
THE FOLLOWING TABLES SUMMARIZE THE FINANCIAL DATA FOR OUR BUSINESS. YOU
SHOULD READ THIS INFORMATION TOGETHER WITH "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION OR PLAN OF OPERATION" AND OUR CONSOLIDATED FINANCIAL
STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN THIS PROSPECTUS.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
(AUDITED) (UNAUDITED)
---------------------------------------- -------------------------
2000 1999 1998 2000 1999
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues............ $ 915,478 $ -- $ -- $ 978,121 $ 81,319
Gross profit.................. 385,522 -- -- 724,186 81,319
(Loss) from operations........ (11,787,375) (2,873,479) (835,808) (5,195,019) (1,277,225)
Other Income (Expense)........ (43,885) (96,272) 23,237 (152,279) (510,760)
Net (Loss).................... (11,831,260) (2,969,751) (812,571) (5,347,298) (1,787,985)
(Loss) per share basic and
diluted..................... (1.35) (.40) (.18) (.61) (.22)
BALANCE SHEET DATA:
Current assets................ 7,781,060 $ 236,193 7,272,737 5,281,906 1,426,083
Total assets.................. 86,706,310 11,756,542 11,632,829 81,127,119 12,463,714
Total liabilities............. 6,606,234 595,460 919,495 6,376,987 2,433,638
Working capital............... 5,174,826 (359,447) 6,353,242 2,904,919 (1,007,555)
Stockholders' equity.......... 80,100,076 11,160,902 10,713,334 74,750,132 10,030,076
</TABLE>
6
<PAGE>
RISK FACTORS
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER
THE RISKS DESCRIBED BELOW BEFORE YOU DECIDE TO BUY OUR SHARES. IF ANY OF THE
FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, RESULTS OF OPERATIONS AND
FINANCIAL CONDITION WOULD BE LIKELY TO SUFFER. IN THAT CASE, THE MARKET PRICE OF
OUR COMMON STOCK COULD DECLINE, AND YOU COULD LOSE ALL OR PART OF YOUR
INVESTMENT.
RISKS RELATED TO OUR BUSINESS
OUR LIMITED OPERATING HISTORY MAKES EVALUATION OF OUR BUSINESS AND PROSPECTS
DIFFICULT.
We have only a limited operating history on which you can base an evaluation
of our business and prospects. While we have generated limited revenues since
July 1999, we cannot assure you that we will generate sufficient revenues to
fund our operations or that we will be profitable at such level of operations.
Our business and prospects must be considered in light of the risks,
uncertainties, expenses and difficulties frequently encountered by companies in
their early stages of development, particularly companies in new and rapidly
evolving markets, such as the market for positioning services.
WE HAVE A HISTORY OF LOSSES AND WE ANTICIPATE SIGNIFICANT FUTURE LOSSES.
For the year ended June 30, 2000, we had aggregate commercial revenues of
$915,478. We incurred a loss of ($11,787,375) for fiscal year 2000, as compared
to a loss of ($2,873,479) for the fiscal year ended June 30, 1999. If we were to
record profits, we do not anticipate paying dividends on our Common Stock in the
foreseeable future.
WE MAY NEED ADDITIONAL FINANCING FOR OUR FUTURE CAPITAL NEEDS WHICH MAY NOT
BE AVAILABLE ON FAVORABLE TERMS, IF AT ALL.
We are likely to need additional cash in order to implement our strategies,
including cash for (i) payment of increased operating expenses; and
(ii) further implementation of our business strategies. We may raise such
additional capital through additional public or private financings, as well as
borrowings and other resources. While we have no commitments in place as of the
date of this Prospectus, we are actively negotiating with several investment
banks to undertake a financing. To the extent that additional capital is raised
through the sale of equity or equity-related securities, the issuance of such
securities could result in dilution to our stockholders. We cannot be assured
that we will have access to the capital markets in the future, or that financing
will be available to us on acceptable terms to satisfy our cash requirements. If
we cannot obtain the necessary capital, our business and financial condition
will be materially and adversely affected. In such event, we may be required to
curtail operations significantly or to obtain funds through entering into
arrangements with collaborative partners or others that may require us to
relinquish rights to certain of our assets that we would not otherwise choose to
do.
WE DEPEND HEAVILY ON OUR KEY PERSONNEL, AND OUR INABILITY TO RETAIN THEM
COULD ADVERSELY AFFECT OUR BUSINESS.
Our success will depend, in part, on the continued availability of our
senior management team, particularly Peter Henricsson, President and Chief
Executive Officer, Lynn Duplessis, Vice President, Lars Persson, Chief Executive
Officer of CellPoint Europe Limited, and Lars Wadell, Chief Financial Officer.
We have employment agreements with each of these executive officers.
Mr. Henricsson and Ms. Duplessis are husband and wife. The loss of any of these
key employees could have a material adverse effect on our business and
prospects. We believe that all commercially reasonable efforts have been made to
minimize the risks that might arise should any of our key personnel depart from
the Company. We do not maintain any key man life insurance with respect to any
of our executive employees.
7
<PAGE>
AN INVESTMENT IN OUR COMPANY MUST BE CONSIDERED SPECULATIVE.
We cannot assure you that you will realize a return on your investment or
that our stockholders will not lose their investments in our Company in their
entirety. In the event we are forced to dissolve or commence insolvency
proceedings, any proceeds from the liquidation of our assets will be distributed
to our stockholders only after the satisfaction of the claims of our creditors.
Your ability to recover all or any portion of an investment in our capital stock
will depend upon the amount of the dissolution proceeds.
WE MAY NOT BE ABLE TO MANAGE OUR EXPANDING OPERATIONS EFFECTIVELY.
We are currently experiencing a period of rapid expansion. Due to the
limited deployment of our services to date, the ability of our systems and
operations to connect and manage a substantially larger number of customers
while maintaining adequate performance is unproven. In addition, rapid growth is
likely to place a strain on managerial and operational resources. To accommodate
this growth, we must accomplish the following:
- implement new or upgraded operating and financial systems, procedures and
controls in many different locations;
- expand customer service, billing and other related support systems;
- devise and implement new advertising and marketing campaigns focused on
the CellPoint brand and certain of new products and services; and
- obtain sufficient resources or additional capacity from network operators.
We may not succeed with these efforts. Our failure to accomplish these goals
in an efficient manner could cause expenses to grow and revenues to decline or
grow more slowly than expected, and could otherwise have a material adverse
effect on our business, financial condition and results of operations.
WE HAVE NOT YET ACHIEVED FULL MARKET ACCEPTANCE OF OUR PRODUCTS.
We are currently implementing commercial operations of the CellPoint System.
Our first commercial agreement was signed in April 1999 with Tele2, a GSM
network operator in Sweden, for positioning services for GSM telephones. Tele2
launched commercial services in Sweden for positioning of mobile phones based on
the CellPoint System in November 1999. We announced a commercial agreement where
France Telecom Mobiles will license CellPoint's location platform and one
location services application, Resource Manager. A commercial agreement was
announced on October 9, 2000 with EuroTel Praha Ltd. of the Czech Republic for
our Mobile Location Services Platform and applications. Further strategic
alliances are in place to co-market new services internationally, such as with
Yahoo Sverige AB, where Yahoo! has branded CellPoint's Finder! product as Yahoo!
Find-A-Friend, and with Matrix Vehicle Tracking (Pty) Ltd. for deploying vehicle
tracking and fleet management services with purpose-designed terminals. We have
begun to receive contract revenues from these initial contracts. Though we are
marketing the CellPoint System throughout Europe and Asia, we cannot assure you
that we will be successful in procuring additional contracts, or that the
contracts obtained will be profitable. We also cooperate with numerous cellular
industry suppliers including application developers and cellular phone and SIM
card manufacturers. We are seeking additional strategic alliances for
distribution and marketing channels to sell the positioning and telematics
services for GSM cellular phones and proprietary hardware terminals to
end-users.
We cannot assure you that the CellPoint System will achieve a significant
degree of market acceptance, and that acceptance, if achieved, will be sustained
for any significant period or that product life cycles will be sufficient (or
substitute products developed) to permit the Company to recover
8
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start-up and other associated costs. Failure of the CellPoint System to achieve
or sustain market acceptance could have a material adverse effect on our
business, financial conditions, and results of operations.
OUR SALES CYCLES ARE LONG AND OUR REVENUE IS UNPREDICTABLE.
Our products and services are complex and it typically takes a cellular
network operator a significant amount of time to reach a decision to purchase
them. We may spend a significant amount of time, effort and expense during a
particular period that does not yield any orders during that period or at all.
If orders or payments are delayed, then it may be difficult to meet cash flow
requirements or obtain credit. Furthermore, deployment of services by a network
operator may take several months. A delay in sales of our products could cause
operating results to vary significantly from projected results. The sales of
services by the network operators will depend on how quickly the network
operator is able to roll-out mobile location service. Since we have no control
over the timing of the roll-out and since we have limited revenue history, it is
particularly difficult to predict revenue and operating results. If the timing
and magnitude of sales are not accurately predicted, then it may be difficult to
meet customers' delivery requirements. These problems could impede our growth,
restrict our ability to take advantage of new opportunities, and ultimately have
a material adverse effect on our financial condition.
WE MAY HAVE DIFFICULTY IDENTIFYING AND FINANCING SUITABLE ACQUISITIONS,
JOINT VENTURES OR STRATEGIC ALLIANCES, AND THOSE THAT WE DO COMPLETE COULD
ADVERSELY AFFECT OPERATING RESULTS.
As part of our business strategy, senior management reviews potential
acquisitions, joint ventures and strategic alliances that may complement or
expand existing business or increase revenues. We may not be able to identify
appropriate joint ventures, acquisitions or alliances or be able to finance
these transactions successfully once identified. Any failure to identify or
finance future transactions may impair our growth.
Any acquisitions that are not completed will be accompanied by the risks
commonly encountered with acquisitions of companies, such as the difficulty of
integrating the operations and personnel of the acquired businesses, the
potential disruption of our business, the assumption of unexpected liabilities
relating to the acquired assets, the imposition and maintenance of common
standards, controls, procedures and policies and the impairment of relationships
with employees and customers as a result of difficulties arising out of
integration. Furthermore, the value of any business acquired may be less than
the amount paid for it if, for example, there is a decline in the position of
that business in the relevant market in which it operates or there is a decline
in that market generally.
WE MAY ENCOUNTER DIFFICULTIES IN IMPLEMENTING OUR BUSINESS STRATEGY.
Although we intend to pursue a strategy of aggressive product marketing,
development and distribution, implementation of this strategy will depend in
large part on our ability to (i) establish a significant customer base and
maintain favorable relationships with those customers, (ii) effectively
introduce acceptable products to our customers, (iii) obtain adequate financing
on favorable terms to fund our business strategy, (iv) maintain appropriate
procedures, policies, and systems, (v) hire, train, and retain skilled
employees, and (vi) continue to operate in the face of increasing competition.
If we are unable to achieve any or all of these goals, we will not be able to
successfully implement our business strategy, which could have a material
adverse effect on our results of operations and financial condition.
9
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THE PERFORMANCE OF OUR PRODUCTS COULD RESULT IN PRODUCT LIABILITY FOR OUR
BUSINESS OR PRODUCT RECALLS.
We are responsible for product performance and liabilities of our products
based on our core technology. We currently have product liability insurance, but
there can be no assurance that we will be able to obtain additional insurance or
maintain such insurance on acceptable terms that such insurance will provide
adequate coverage against potential liabilities. We face a business risk of
exposure to product liability, claims for consequential damages and other claims
in the event that the use of our technology and services or the failure of our
technology to perform in accordance with specifications is alleged to result in
adverse effects. We cannot assure you that we will avoid significant product
liability exposure or that insurance coverage will be available in the future on
commercially reasonable terms, or at all. A loss of insurance coverage or the
assertion of a product liability claim or claims would likely materially
adversely affect our business, financial condition and results of operations.
While we have taken, and will continue to take, what we believe are appropriate
precautions, there can be no assurance that we will avoid significant liability
exposure. An inability to obtain product liability insurance at acceptable cost
or to otherwise protect against potential product liability claims could prevent
or inhibit the marketing and distribution of the CellPoint System.
WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS AND
MAY BE SUBJECT TO CLAIMS ALLEGING INFRINGEMENT OF THE INTELLECTUAL PROPERTY
RIGHTS OF OTHERS.
We cannot be certain that the steps we have taken to protect our
intellectual property rights will be adequate to deter misappropriation of
proprietary information or prevent others from independently developing or
offering similar products or services. Given the global reach of mobile
communications, trademarks and other forms of intellectual property could be
displayed in countries that offer less intellectual property protection than the
United States, Sweden, South Africa and the United Kingdom. Furthermore,
although we have and expect to have confidentiality and non-competition
agreements with our employees, suppliers and manufacturers, no assurances can be
made that such arrangements will be adequate to protect our trade secrets and
intellectual property rights. We are not aware of any infringement by our
technology on the proprietary rights of others and have not received any notice
of claimed infringement. However, we have not conducted any investigation as to
possible infringement. In addition, we cannot be sure that a third-party will
not assert an infringement claim in the future, or if asserted, that we will be
able to successfully defend against any such claim. Any such misappropriation or
claim could have a material adverse effect on our future financial results
and/or our ability to operate the business.
A FEW STOCKHOLDERS OWN A SUFFICIENT NUMBER OF SHARES OF OUR COMMON STOCK CAN
EXERT A MAJOR INFLUENCE ON MAJOR DECISIONS TO BE TAKEN BY OUR STOCKHOLDERS.
Mr. Henricsson and Ms. Duplessis, the founders of the Company, beneficially
own together approximately 19.1% of our issued and outstanding shares of Common
Stock. Novel Electronics Systems & Technologies, Ltd., the company from whom we
purchased the core technology, beneficially owns approximately 24.1% of our
issued and outstanding shares of Common Stock. Mr. Henricsson and Ms. Duplessis
are not shareholders of Novel. Because of such ownership, Mr. Henricsson,
Ms. Duplessis and Novel together could have a major influence on the election of
all members of the Board of Directors of the Company and determine our corporate
action. Stockholders are not entitled to accumulate their votes for the election
of directors or otherwise.
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RISKS RELATED TO OUR INDUSTRY
IF WE DO NOT RESPOND EFFECTIVELY AND ON A TIMELY BASIS TO RAPID
TECHNOLOGICAL CHANGES AND CHANGES IN CUSTOMER NEEDS, WE MAY LOSE SALES.
The mobile industry is characterized by rapidly changing technologies,
industry standards, customer needs and competition, as well as frequent new
product and service introductions. We will need to maintain technological
competitiveness, achieve market acceptance and meet an expanding range of
customer requirements in order to attract and retain customers and manage
customer data effectively.
Our services are integrated with mobile devices and must also be compatible
with the networks of mobile network operators. We may not be successful in
developing and marketing, on a timely and cost-effective basis, new services
that respond to technological changes, evolving industry standards including
GPRS and UMTS, or changing customer requirements. Our ability to grow and
achieve profitability will depend, in part, on our ability to accomplish the
following in a timely and cost-effective manner:
- effectively use and integrate new mobile technologies;
- continued development and maintenance of technical expertise;
- develop applications to adapt to new mobile systems and personal devices;
- influence and respond to emerging industry standards and other changes;
- effectively market our services; and
- develop innovative services that continue to satisfy the needs of our
customers.
We cannot assure you that we will be able to achieve these goals and our
failure to do so could have a material adverse effect on our future financial
results and/or ability to operate the business.
THERE IS NO ESTABLISHED MARKET FOR LOCATION SERVICES.
The success of our business depends heavily on the development of a market
for mobile location products and services. Since this market is new, and its
potential is uncertain, there can be no assurances that it will develop or be
sustained for a period sufficient to recover start-up and other associated
costs. In order to be successful, we need mobile network operators to launch and
maintain mobile location services utilizing our location services platform and
location applications. Although we intend to market our products aggressively,
we cannot assure you that network operators will accept our products or that
consumers will purchase mobile location services from their network operators.
If significant sales of location services do not develop, our financial
condition and results of operations may suffer.
OUR SUCCESS DEPENDS ON ESTABLISHING AND MAINTAINING RELATIONSHIPS WITH, AND
OBTAINING SUFFICIENT CAPACITY FROM MOBILE NETWORK OPERATORS.
The primary source of our location services revenue is based on the volume
of subscribers using our services through a mobile network operator. Our success
depends heavily on the success of mobile network operators in pricing and
marketing new location services to their customers. If one or more network
operators are unable to gain location services subscribers, then our earnings
may suffer. We also depend on mobile network operators to provide uninterrupted
service and we will not be able to satisfy our customers' needs if the network
operators fail to provide the required level of service, including bandwidth. In
addition, our expenses may increase and profitability could be materially
adversely affected if network operators were to increase the prices of their
services. Some network operators are, or could become, competitors and, if they
become competitors, they may refuse to
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provide their services to us or only provide them to us on less advantageous
terms. This could have a material adverse effect on our future financial results
and/or our ability to operate the business.
OUR BUSINESS COULD SUFFER IF MOBILE DEVICES ARE NOT WIDELY ADOPTED FOR
INTERNET-BASED SERVICES.
The success of our business depends in part on the acceptance by the market
of mobile devices as a method of accessing the Internet. There are a number of
technological and market barriers to the widespread use of mobile devices for
this purpose. These barriers include limited display capability, difficulty of
data input, slower connection speeds, lack of acceptable security technologies,
concerns over privacy and inconsistent quality of service.
ACTUAL OR PERCEIVED HEALTH RISKS ASSOCIATED WITH THE USE OF MOBILE PHONES
COULD REDUCE THE NUMBER OF MOBILE USERS.
We are aware of recent concerns expressed that there may be risks associated
with the effects of electromagnetic signals from mobile handsets and
transmission masts, which serve as antennae for transmitting radio signals.
While there is currently no substantiated link between radio waves and long-term
health issues, the actual or perceived risk of mobile communications devices and
masts could affect us through a reduction in the number of mobile handset users
or a reduction in the average usage per mobile subscriber.
COMPETITION COULD HARM OUR BUSINESS.
The markets for the location and telematics services offered by us are
becoming increasingly competitive. If we are unable to either respond adequately
to the competitive challenges we face or establish a sustainable competitive
advantage, we may lose market share or be forced to lower prices to unprofitable
levels. In addition, we have a number of existing and potential competitors,
located in various service categories, and may be unable to predict or plan
adequately for the strategies of competitors. Accordingly, we may be unable to
respond quickly or adequately to the changes in the marketplace brought on by
new service offerings and the marketing and promotional efforts of existing or
new competitors.
As many of our agreements with mobile network operators are non-exclusive,
competitors may use the same networks in competition with us. It may be possible
for competitors to develop technologies, products and services that are more
effective than our technologies, products and services or that could render our
technology, products and services obsolete and non-competitive. Competitors
could include mobile network operators, software developers, systems
integrators, media companies and Internet portals. Many potential competitors
have significantly greater financial, technical, marketing and other resources
than we have. No assurances can be made that existing competitors or other
companies will not provide services that could be more attractive to consumers
or companies than those provided by us or that we will be able to respond
adequately to the competitive challenges we face. Additional information
regarding competition is described under "Business--Competition".
WE ARE DEPENDENT ON INTERNATIONAL SALES, AND OUR BUSINESS IS SUBJECT TO THE
LOCAL BUSINESS RISKS IN EACH COUNTRY IN WHICH WE DO BUSINESS.
We anticipate that a significant portion of the revenue from the sale of our
location services and telematics products and services will be derived from
customers located outside of the United States. Our sales and operations could
be subject to certain risks of international trade, including tariffs and other
barriers, difficulties in staffing and managing foreign subsidiary and branch
operations, currency exchange risks and exchange controls, potentially adverse
tax consequences and the possibility of difficulty in accounts receivable
collection. Any of these factors could adversely affect our business, financial
condition and results of operations.
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Our products may be subject to foreign government standards and regulations
that are continually being amended and may vary from country to country.
Although we will endeavor to satisfy foreign technical and regulatory standards,
there can be no assurance that the CellPoint System or the Unwire telemetry
terminals will comply in all respects with such government standards and
regulations, or changes thereto, or that it will be cost effective for us to
redesign our products to comply with such standards or regulations. Our
inability to design or redesign products to comply with foreign standards could
have a material adverse effect on our business, financial condition and results
of operations.
FLUCTUATIONS IN THE VALUE OF FOREIGN CURRENCIES COULD RESULT IN CURRENCY
EXCHANGE LOSSES.
Our products and services are sold in currencies other than the U.S. Dollar,
which makes the management of currency fluctuations difficult and exposes us to
risks. Fluctuations in the value of foreign currencies relative to the U.S.
Dollar could cause us to incur currency exchange losses. The risk will increase
to the extent international revenue increases. The effect of exchange rate
fluctuations on future operating results cannot be predicted. We have no
experience in entering into currency hedging contracts, and if we use hedging to
try to manage any future foreign currency exposure, we may incur hedging-related
losses.
NEW LAWS AND REGULATIONS THAT IMPACT OUR INDUSTRY COULD INCREASE COSTS OR
REDUCE OPPORTUNITIES TO EARN REVENUE.
We are currently subject to certain regulations specifically aimed at
e-commerce and Internet-related services in addition to regulations applicable
to businesses in general. In the future, however, we may become subject to
further regulation by local or national regulatory authorities including, among
other issues, in relation to e-commerce and taxation. Concerns about personal
privacy could also result in regulations limiting the use of mobile location
services. For example, the European Union has issued a revised
telecommunications data protection directive that covers advanced location
systems such as the CellPoint System. The revised directive provides that
location data may only be used with the consent of the subscriber and that
subscribers and users must be provided with a simple means of temporarily
denying the processing of their location data. The revised directive, which is
not expected to take effect in Europe until 2002, may affect the extent to which
network operators are able to use the CellPoint System. In addition to
regulations covering CellPoint, the network operators that supply us with
capacity are subject to laws and regulations that could cause them to increase
our costs or reduce our ability to continue selling and supporting our services.
RISKS RELATED TO THIS OFFERING
OUR SHARES MAY EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS.
The market price for our Common Stock may fluctuate significantly in
response to a variety of reasons, some of which are beyond our control:
- variations in quarterly operating results;
- changes in financial estimates by securities analysts;
- changes in market valuation of our competitors or perceived competitors;
- changes in market valuation of companies in the telecommunications
industry;
- announcements by us of significant contracts, acquisitions, strategic
partnerships, joint ventures or capital commitments;
- additions or departures of key personnel;
- sales of common stock or termination of stock transfer restrictions; and
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- fluctuations in trading volume, which are particularly common among high
technology companies.
In addition, the stock market has, from time to time, experienced significant
price and volume fluctuations that have affected the market prices for
securities generally.
Our Common Stock is currently traded on the NASDAQ National Market. Although
we believe that we will continue to meet the criteria necessary to maintain such
listing, there can be no assurance that we will meet the criteria to continue
such listing. To the extent that we do not maintain such listing, our
stockholders could find it more difficult to dispose of, or to obtain accurate
quotations as to the market value of, our Common Stock. In addition, failure to
maintain a listing for our Common Stock may make our Common Stock ineligible for
use as, or make our Common Stock substantially less attractive as, collateral
for margin and purpose loans, for investment by financial institutions under
their internal policies or state legal investment laws, as consideration in the
financing of future acquisitions of businesses or assets by us, and for issuance
by us in future capital raising transactions.
SALES OF SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK COULD ADVERSELY
AFFECT OUR STOCK PRICE.
As a result of the limited trading market for our Common Stock and the large
number (relative to such trading markets) of shares of our Common Stock
available for sale in the public market pursuant to Rule 144 under the
Securities Act, sales by our stockholders of our Common Stock in the public
market could materially adversely affect the prevailing market price for our
Common Stock and could impair our ability to raise capital through offerings of
our equity securities. Any such sales could materially adversely affect the
then-prevailing market price for our Common Stock or the ability of our
stockholders to sell their shares.
CERTAIN ANTI-TAKEOVER PROVISIONS MAY PRODUCE RESULTS DISFAVORED BY OUR
STOCKHOLDERS.
Our Articles of Incorporation permit us, without further stockholder action,
to issue up to 3,000,000 shares of preferred stock, having such rights and
preferences as our Board of Directors may determine. In addition, our Articles
and Amended and Restated By-laws contain various provisions that, under certain
circumstances, could make it more difficult for a third party to gain control of
the Company (e.g., by means of a tender offer), prevent or substantially delay
such a change of control, discourage bids for our Common Stock at a premium, or
otherwise adversely affect the market price of our Common Stock.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the Shares by the Selling
Stockholders. Some of the Shares included in this Prospectus have not yet been
issued, but are issuable upon the exercise of warrants held by certain of the
Selling Stockholders, which warrants have exercise prices ranging from $7.49 to
$8.89. In connection with the exercise of such warrants, each warrant holder may
elect to pay the exercise price by (i) cash or check or (ii) net issuance; i.e.,
cashless exercise. To the extent that a warrant holder elects the net issuance
method, we would not receive any cash as a result of such exercise. To date, the
holders of warrants for 114,750 shares of our Common Stock have exercised their
warrants, resulting in the issuance of 83,594 shares of Common Stock. While the
majority of the holders of such warrants chose to pay the exercise price by the
net issuance method, we received proceeds of $149,800 from holders that paid
their exercise price in cash. We have used these proceeds for our working
capital. Additional proceeds, if any, that we receive from the exercise of the
warrants will be used for working capital.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock, and
do not currently anticipate paying any cash dividends on our common stock in the
foreseeable future.
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CAPITALIZATION
Our capitalization, at September 30, 2000, was as follows:
<TABLE>
<S> <C>
Preferred stock, par value $0.001........................... --
Common stock, par value $0.001..............................
Stated capital............................................ 10,485
Additional paid-in capital................................ 95,584,128
Cumulative translation adjustment........................... (140,420)
Accumulated deficit......................................... (20,984,901)
------------
Total stockholders' equity.................................. $ 81,127,119
============
</TABLE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table contains selected financial information derived from our
financial statements set forth elsewhere in this Prospectus, and should be read
in conjunction with such financial statements and notes thereto. The following
tables summarize certain financial data derived from our audited consolidated
financial statements for the fiscal years ended June 30, 2000, 1999 and 1998,
respectively.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JUNE 30, (AUDITED) SEPTEMBER 30, (UNAUDITED)
---------------------------------------- ---------------------------
2000 1999 1998 2000 1999
------------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues........... $ 915,478 $ -- $ -- $ 978,121 $ 81,319
Gross profit................. 385,522 -- -- 724,186 81,319
(Loss) from operations....... (11,787,375) (2,873,479) (835,808) (5,195,019) (1,277,225)
Other Income (Expense)....... (43,885) (96,272) 23,237 (152,279) (510,760)
Net (Loss)................... (11,831,260) (2,969,751) (812,571) (5,347,298) (1,787,985)
(Loss) per share basic and
diluted.................... (1.35) (.40) (.18) (.61) (.22)
BALANCE SHEET DATA:
Current assets............... 7,781,060 $ 236,193 7,272,737 5,281,906 1,426,083
Total assets................. 86,706,310 11,756,542 11,632,829 81,127,119 12,463,714
Total liabilities............ 6,606,234 595,460 919,495 6,376,987 2,433,638
Working capital.............. 5,174,826 (359,447) 6,353,242 2,904,919 (1,007,555)
Stockholders' equity......... 80,100,076 11,160,902 10,713,334 74,750,132 10,030,076
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS AND THE NOTES THERETO WHICH APPEAR ELSEWHERE IN THIS
PROSPECTUS. THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT
REFLECT OUR PLANS, ESTIMATES AND BELIEFS, AND IS SUBJECT TO UNCERTAINTIES AND
RISKS. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW AND ELSEWHERE
IN THIS PROSPECTUS, PARTICULARLY IN "RISK FACTORS".
GENERAL
Except for historical information, the material contained in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations is forward-looking. This discussion includes, in addition to
historical information, forward-looking statements, which involve risks and
uncertainties. Our actual results could differ materially from the results
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences are discussed below. These risks and
uncertainties include the rate of market development and acceptance of
positioning technology, the unpredictability of our sales cycle, the limited
revenues and significant operating losses generated to date, and the possibility
of significant ongoing capital requirements. For the purposes of the safe harbor
protection for forward-looking statements provided by the Private Securities
Litigation Reform Act of 1995, you are urged to review the risk factors set
forth elsewhere in this prospectus.
For purposes of the discussion contained herein, unless otherwise stated,
all information is reported on a consolidated basis for CellPoint and its
wholly-owned subsidiaries. With our acquisition of Unwire during the fiscal year
ended June 30, 2000 ("Fiscal 2000"), we now operate in two segments of the
wireless services market-location services and telematics services. Accordingly,
our results of operations are discussed on the basis of these two segments.
OVERVIEW
Since incorporation in 1997, we have been developing and marketing location
and telemetry technology and services that utilize GSM networks. GSM is the
world's leading wireless communications standard and is deployed in more than
140 countries on five continents. With more than 350 million subscribers today,
GSM accounts for approximately 58 percent of the world's wireless market, and
67 percent of the total digital wireless market. (Source: EMC World Cellular
Database).
Our business strategy is to provide location technology, enabling platforms
and location service applications in targeted GSM markets around the world.
CellPoint's technology and services enable users to determine the position of a
cellular telephone or mobile device, such as a Personal Digital Assistant
("PDA"), for use in a broad range of consumer and business applications. Our
technology is also used for telematics services for industrial and in-vehicle
applications. We begin with installing the CellPoint Mobile Location System
platform with a GSM cellular network operator. The network operator, or a third
party, will then market the chosen location services as value-added services
offered to the end-users of the cellular network. The Company earns revenues
through (i) percentage or fixed price participation in the revenue streams
resulting from the new services offered by the network operator, (ii) sale of
tiered licenses to network operators, such as a fixed price for the first 50,000
users with increases for additions of 100,000, 500,000 and 1,000,000 users,
(iii) usage revenues from service providers, based on transaction volumes or
time frames, (iv) sale of the CellPoint System to strategic partners where
partners are licensed to operate the technology in a specified geographic area,
(v) advertising revenues for Internet applications, (vi) consulting and
professional services, and (vii) programming interfaces.
Unwire's business strategy is to provide telematics technology, terminals
and applications in target markets around the world. Telematics services are
marketed directly to larger industrial users, either directly or through systems
integrators, and the GSM telematics terminals are programmed for specific
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applications such as ventilation system management, vehicle tracking, container
management or for remote management, supervision and control of security systems
or automatic door systems. Revenues are realized from (i) sale of telematics
terminals, (ii) licensing fees on application software, (iii) professional
services such as consulting, education and development, (iv) usage revenues,
(v) revenue sharing on phone line usage, and (vi) programming interfaces.
FISCAL 2000 VS. FISCAL 1999
RESULTS OF OPERATIONS
REVENUES. In Fiscal 2000, gross revenues from operations were $915,478, as
compared to no revenues from operations for the fiscal year ended June 30, 1999
("Fiscal 1999"). For Fiscal 2000, $839,003 in revenues, or approximately 91.6%
of our total revenues, were attributable to the location services segment. Of
such revenues from location services, $536,306 were derived from the Tele2
contract. We acquired Unwire on February 29, 2000. Results of operations from
Unwire are included in our results of operations for the period from March 1,
2000 through June 30, 2000. The telematics segment had revenues of $76,475, or
approximately 8.4% of total revenues, for Fiscal 2000. On a PRO FORMA basis, if
the acquisition of Unwire were deemed to have occurred as of July 1, 1998, the
beginning of Fiscal 1999, we would have shown revenues of $186,546 for Fiscal
1999 and $1,053,989 for Fiscal 2000. PRO FORMA results do not necessarily
indicate the results which would have occurred had the acquisition occurred on
that date, nor are they intended to indicate our expected revenues for the next
fiscal year.
COST OF REVENUES. We incurred costs of $529,956 in Fiscal 2000 in producing
revenues. Costs of producing revenues were $506,254 for the location services
segment and $23,702 for the telematics segment. No costs of revenues were
recorded in Fiscal 1999 as we had no revenues from commercial operations in that
fiscal year.
GROSS PROFIT. For Fiscal 2000, we had a gross profit of $385,522. The
location services segment had a gross profit of $332,749 (or 86.3% of our gross
profit) and the telematics segment had a gross profit of $52,773 (or 13.7% of
our gross profit) in Fiscal 2000. We did not have any gross profit for Fiscal
1999 as we had no revenues from commercial operations in such fiscal year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $3,144,859, from $1,637,240 in Fiscal 1999
to $4,782,099 in Fiscal 2000. Selling, general and administrative expenses were
$4,320,399 (or 90.3% of the total of such expenses) for the location services
segment and $461,700 (or 9.7% of the total of such expenses) for the telematics
segment in Fiscal 2000. Professional fees, including technology development
consulting services, were $1,742,848 in Fiscal 2000, as compared to $534,176 in
Fiscal 1999. The increase in selling, general and administrative expenses in the
location services segment was substantial as we continued to build its
infrastructure at both the corporate and operational levels. The primary
components of the increased selling, general and administrative expenses in
Fiscal 2000 were an increase in personnel costs due to an increase in the number
of employees and an increase in rent and other property costs resulting from a
relocation to new premises. We expect selling, general and administrative
expenses to continue at a similar level in the near future as we continue to
devote resources to the expansion of our business.
PROFESSIONAL FEES. Professional fees increased by $1,208,672 from $534,176
in Fiscal 1999 to $1,742,848 in Fiscal 2000. Professional fees were $1,526,806
(87.7% of such expenses) for the location services segment, and $216,042 (12.3%
of such expenses) for the telematics segment in Fiscal 2000. In Fiscal 1999, all
such expenses were incurred by the location services division. Professional fees
primarily related to costs incurred in connection with the move from the
Electronic Bulletin Board to the Nasdaq National Market, certain costs related
to potential financing transactions that did not come to fruition, and other
professional fees incurred in connection with the acquisition of Unwire.
Management expects
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<PAGE>
to continue to incur significant professional fees while in its expansion phase
and in connection with anticipated financing transactions.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense increased from $702,063 in Fiscal 1999 to $5,647,950 in Fiscal 2000. The
location services segment recorded depreciation and amortization expense of
$2,418,978, or 42.8% of the total of such expenses, for Fiscal 2000, while the
telematics segment recorded such expenses of $3,228,972, or 57.2% of the total
of such expenses. For Fiscal 1999, all of the depreciation and amortization
expense was recorded in the location services segment, as we did not acquire
Unwire's telematics business until the third quarter of Fiscal 2000. The
increase in depreciation and amortization expense from Fiscal 1999 to Fiscal
2000 is substantial not only because of the acquisition of the telematics
business in Fiscal 2000, but also because of the acquisition of the core
location technology from Novel that occurred in Fiscal 1999. The costs of
developing the location services technology prior to establishing a product's
technological feasibility are expensed as incurred. After technological
feasibility has been demonstrated, the development costs are capitalized until
the product is available for release. The development costs for the location
services technology are amortized over an estimated useful life of three years.
On February 29, 2000, we acquired all of the outstanding shares of Unwire
for 1,075,000 shares of our common stock, having a fair market value of
approximately $72,000,000. Such fair market value was determined based on the
average of the closing prices of our common stock for the two days immediately
prior to our announcement of the transaction on February 17, 2000. The
acquisition of Unwire was recorded as a purchase. The excess cost over fair
market value of the net tangible liabilities has been allocated to acquired
technology and will be amortized over seven years. Unwire's telematics
technology enables remote control and monitoring of machines and equipment, and
uses existing GSM cellular networks. Objects would typically be assets such as
motor vehicles including cars, trucks, boats, construction machinery and other
assets possessing battery power, fleet management, vehicle monitoring and remote
control, quality control, cash and ATM terminals, gate and door management,
security supervision and service information.
LOSS FROM OPERATIONS. Loss from operations for Fiscal 2000 was
($11,787,375) versus ($2,873,479) in Fiscal 1999. For Fiscal 2000, the location
services segment had a loss from operations of ($7,614,318), or approximately
64.6% of the total loss from operations, and the telematics segment had a loss
from operations of ($4,173,057), or approximately 35.4% of the total loss. All
of our loss from operations in Fiscal 1999 was attributable to the location
services segment. The loss from operations was larger in Fiscal 2000 because we
greatly expanded our infrastructure, tripled the number of our full-time
employees and increased our marketing and selling expenses as we sought to
commercialize our products and obtain contracts for the sale of our services and
products.
FINANCIAL ITEMS. Financial items resulted in an expense of $43,885 in
Fiscal 2000 compared to a net expense of $96,272 in Fiscal 1999. Interest income
was $144,221 in Fiscal 2000, compared to $33,895 in Fiscal 1999. The increase in
interest income was attributable to the investment of net proceeds of $9,000,000
from a private placement in the first and second quarters of Fiscal 2000.
Interest expense was $190,122 in Fiscal 2000, as compared to no interest expense
in Fiscal 1999. In Fiscal 2000, we had realized and unrealized exchange gains
aggregating $2,016 whereas in Fiscal 1999, the Company had a net realized
exchange loss of ($130,167). These items result primarily from exchange rate
fluctuations among the currencies of the United States, Sweden and South Africa.
LOSS BEFORE INCOME TAXES. We generated a loss before income taxes of
($11,831,260) in Fiscal 2000 as compared to ($2,969,751) in Fiscal 1999. The
increased loss before income taxes is primarily attributable to the costs of
expansion of our infrastructure, the hiring of additional personnel, the
expenses associated with commercialization of our products and the acquisition
of Unwire.
NET LOSS AND LOSS PER SHARE. Net loss was ($11,831,260) for Fiscal 2000,
versus ($2,969,751) for Fiscal 1999. On a PRO FORMA basis, if the acquisition of
Unwire were deemed to have occurred as of
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July 1, 1998, the beginning of Fiscal 1999, we would have shown a net loss of
($4,083,273) for Fiscal 1999 and ($12,665,312) for Fiscal 2000. PRO FORMA
results do not necessarily indicate the results that would have occurred had the
acquisition occurred on that date, nor are they intended to indicate our
expected results for the next fiscal year. Loss per share was ($1.35) based on
weighted average shares outstanding of 8,743,630, while the Fiscal 1999 loss per
share was ($.40) based upon a weighted average of 7,440,000 shares outstanding.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL. At June 30, 2000, we had $7,781,060 in current assets.
Cash and cash equivalents amounted to $6,624,662. Current liabilities were
$2,606,234 at June 30, 2000. At June 30, 1999, we had $236,193 in current
assets, of which $180,073 consisted of cash and cash equivalents. Working
capital at the end of Fiscal 2000 was $5,174,826, as compared to ($359,447) at
the end of Fiscal 1999. The increase in working capital is attributable to our
completion of a private placement of equity in the first and second quarters of
Fiscal 2000 resulting in net proceeds to us of $9,000,000. In addition, at
June 30, 2000, the Company had an outstanding loan of $4,000,000. The loan bears
interest at 9% per annum and matures in July 2001. The ratio of current assets
to current liabilities was 3.0 to 1.0 at the end of Fiscal 2000 as compared to
0.4 to 1.0 at the end of Fiscal 1999.
CASH FLOW FROM OPERATIONS. For Fiscal 2000, we used net cash in operating
activities of $6,308,878, as compared to $2,436,193 for Fiscal 1999. The
significant increase in Fiscal 2000 was largely attributable to our net loss
(($11,831,260) for Fiscal 2000 compared to ($2,969,751) for Fiscal 1999), offset
in Fiscal 2000 by non-cash amortization expense of $5,513,984.
CASH FLOW FROM INVESTING ACTIVITIES. For Fiscal 2000, we had a net cash
outflow from investing activities of $443,647 versus a net cash outflow of
$512,320 in Fiscal 1999. In Fiscal 1999, we purchased the South African
development team and certain fixed assets now in its South African subsidiary.
The total purchase price included $500,000 in cash. In Fiscal 2000, we purchased
fixed assets of $443,647. We do not currently have any commitments for capital
expenditures during the next fiscal year, but we may make such expenditures if
an opportunity consistent with our business strategy presents itself.
CASH FLOW FROM FINANCING ACTIVITIES. For Fiscal 2000, we had a net cash
inflow from financing activities of $12,858,499 versus a net cash inflow of
$2,366,667 in Fiscal 1999. We received net proceeds of $9,000,000 from a private
placement of shares and warrants and $4,000,000 from a bank loan in Fiscal 2000,
while in Fiscal 1999, we received net proceeds of $2,466,667 from a private
placement of our Common Stock.
STOCKHOLDERS' EQUITY. Our stockholders' equity at June 30, 2000 was
$80,100,076, including an accumulated deficit of ($15,637,603) Our stockholders'
equity was $11,160,902 at June 30, 1999, including an accumulated deficit of
($3,806,343). The increase in stockholders' equity during Fiscal 2000 is
primarily attributable to our receipt of proceeds from its private placement
($8,898,875), the additional paid-in capital of $70,680,175 attributable to the
issuance of shares in connection with the Unwire acquisition, and $660,000 in
original issue discount in connection with the private placement.
FISCAL 1999 VS. FISCAL 1998
RESULTS OF OPERATIONS
For fiscal 1999, we had no revenues from commercial operations. We funded
our operations out of proceeds from equity offerings. For fiscal 1999, we
incurred a net loss of ($2,969,751).
The remaining $120,000 stock subscription outstanding at June 30, 1998 was
paid in November 1998 and in March 1999 such that at June 30, 1999, there was a
zero balance.
We had no revenues from operations during the fiscal year ended June 30,
1998. In March 1997, we sold 500,000 shares of our Common Stock at $0.20 per
share pursuant to Rule 504 of Regulation D
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under the Securities Act of 1933, as amended (the "Securities Act"). We received
gross proceeds of $100,000 from such offering. During the period from the
commencement of operations until June 1997, the end of our first fiscal year, we
spent approximately $40,100. This amount was spent for general and
administrative purposes, including the costs of setting up offices.
For our fiscal year ended June 30, 1998, we did not have any revenues from
commercial operations. In February 1998, we sold 715,000 shares of our Common
Stock at $1.25 per share, pursuant to Rule 504 of Regulation D under the
Securities Act. We received gross proceeds of $893,750 from such offering. In
June 1998, we sold 775,000 shares of our Common Stock at $4.00 per share,
pursuant to Regulation S under the Securities Act. All such shares were sold to
"non-U.S. Persons" as defined in Regulation S. We received gross proceeds of
$3,100,000 from such offering.
We incurred a loss of ($812,571) for our 1998 fiscal year. For that period,
selling, general and administrative expenses were $513,652, professional fees
were $315,431, and depreciation expense was $6,725. We also realized a net gain
of $23,237 for financial items, consisting mainly of exchange rate differences
during the financing together with interest on capital. Labor costs for fiscal
1998 were $196,300 as we grew from two to seven employees. We purchased computer
equipment for $110,000.
In fiscal 1998, we issued 1,950,000 shares of our Common Stock and paid
$500,000 for the initial license of the technology platform underlying the
CellPoint System. Such transaction was amended and restated in 1999 so that we
acquired the technology outright for additional 500,000 shares of our Common
Stock.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, we had $236,193 in current assets. Cash and cash
equivalents amounted to $180,073. The decrease in cash and cash equivalents from
June 30, 1998 is attributable to our ongoing operations without receiving any
commercial revenues during that period. During such fiscal year, current assets
decreased by $7,036,544 mostly as a result of the restated agreements during the
period. This includes $5,400,000 relative to the exercise of the option to
purchase our core technology and related assets. Current liabilities decreased
from $919,495 at June 30, to $595,640 at June 30, 1999.
Our stockholders' equity was $11,160,899 at June 30, 1999, including an
accumulated deficit of $3,806,343.
At June 30, 1998, we had $7,272,737 in current assets. Cash and cash
equivalents amounted to $764,603. We also had $2,346,667 in subscription
receivable from our Regulation S offering, which subscriptions of $2,226,667
were subsequently paid during the first fiscal quarter of 1999. We had
indebtedness to an employee of $151,554, and owed $250,000 in connection with
the acquisition of the technology license.
Our stockholders' equity was $10,713,334 at the end of fiscal 1998,
including an accumulated deficit of $836,592.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Our auditors from the fall of 1997 through January 27, 1999 were Ohrlings
Coopers & Lybrand of Sweden. By mutual agreement, we and Ohrlings Coopers &
Lybrand terminated our professional relationship in January 1999. Such decision
was approved by our Board of Directors. The report of Ohrlings Coopers & Lybrand
on our financial statements for the fiscal year ended June 30, 1998 did not
contain an adverse opinion or disclaimer of opinion, nor was it modified as to
uncertainty, audit scope or accounting principles. Such report, however,
included a statement that the Company was a development stage company, with no
revenues, which has sustained losses from operations since inception. Ohrlings
Coopers & Lybrand stated that there was substantial doubt about our ability to
continue as a going concern. We did not disagree with such statements at that
time.
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As of January 1999, our auditors were BDO International AB of Stockholm,
Sweden. BDO International AB has audited our financial statements for the fiscal
years ended June 30, 1999 and June 30, 1998 For the fiscal year ended June 30,
2000, BDO International AB assigned the overall audit responsibility to its
member firm, BDO Stoy Hayward of England.
FISCAL QUARTER ENDED SEPTEMBER 30, 2000 VS. FISCAL QUARTER ENDED SEPTEMBER 30,
1999
RESULTS OF OPERATIONS
REVENUES. In the fiscal quarter ended September 30, 2000 (the "Current
Quarter"), the Company's gross revenues from operations were $978,121, as
compared to revenues from operations of $81,319 for the fiscal quarter ended
September 30, 1999 (the "Comparable Quarter"). For the Current Quarter, $925,553
in revenues, or approximately 94.6% of the Company's total revenues, were
attributable to the location services segment. Of such revenues from location
services, $623,690 were derived from France Telecom Mobiles and $172,267 were
derived from the Tele2 contract. All of the Company's revenues in the Comparable
Quarter, of $81,319, were attributable to the location services segment, since
the Company acquired Unwire on February 29, 2000. The telematics segment
(Unwire) had revenues of $52,568, or approximately 5.4% of the Company's total
revenues, for the Current Quarter.
COST OF REVENUES. Costs incurred by the Company in producing revenues in
the Current Quarter were $253,935, as compared to costs of producing revenues of
$nil in the Comparable Quarter. Costs of producing revenues were $228,833 for
the location services segment and $25,102 for the telematics segment.
GROSS PROFIT. For the Current Quarter, the Company had a gross profit of
$724,186. The location services segment had a gross profit of $696,720 (or 96.2%
of the Company's gross profit) and the telematics segment had a gross profit of
$27,466 (or 3.8% of the Company's gross profit) in the Current Quarter. In the
Comparable Quarter, the Company had a gross profit of $81,319, all of which was
attributable to the location services segment.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. The Company's selling,
general and administrative expenses increased by $1,897,256, from $668,054 in
the Comparable Quarter to $2,565,310 in the Current Quarter. Selling, general
and administrative expenses were $2,134,078 (or 83.2% of the total of such
expenses) for the location services segment and $431,232 (or 16.8% of the total
of such expenses) for the telematics segment in the Current Quarter. The
increase in selling, general and administrative expenses in the location
services segment was substantial as the Company continued to build its
infrastructure at both the corporate and operational levels. The primary
components of the increased selling, general and administrative expenses in the
Current Quarter were an increase in personnel costs due to an increase in the
number of employees and an increase in rent and other property costs resulting
from a relocation to new premises. Management expects selling, general and
administrative expenses to continue to increase in the near future as the
Company continues to devote resources to the expansion of the Company.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense increased from $509,235 in the Comparable Quarter to $3,124,646 in the
Current Quarter. The location services segment recorded depreciation and
amortization expense of $523,095, or 17% of the Company's total of such
expenses, for the Current Quarter, while the telematics segment recorded such
expenses of $2,601,551, or 83% of the Company's total of such expenses. The
increase in depreciation and amortization expense from the Comparable Quarter to
Current Quarter is substantial because of the acquisition of the telematics
business in Fiscal 2000. The costs of developing the location services
technology prior to establishing a product's technological feasibility are
expensed as incurred. After technological feasibility has been demonstrated, the
development costs are capitalized until the product
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is available for release. The development costs for the location services
technology are amortized over an estimated useful life of three years.
LOSS FROM OPERATIONS. Loss from operations for the Current Quarter was
($5,195,019) versus ($1,277,225) in the Comparable Quarter. For the Current
Quarter, the Company's location services segment had a loss from operations of
($2,181,951), or approximately 42% of the Company's total loss from operations,
and the Company's telematics segment had a loss from operations of ($3,013,068),
or approximately 58% of the Company's total loss. The loss from operations of
the telematics segment includes depreciation and amortization of $2,601,551
attributable to the acquisition of Unwire. All of the Company's loss from
operations in the Comparable Quarter was attributable to the Company's location
services segment. The loss from operations was larger in the Current Quarter
because the Company greatly expanded its infrastructure, tripled the number of
its full-time employees and increased its marketing and selling expenses as the
Company sought to commercialize its products and obtain contracts for the sale
of its services and products.
FINANCIAL ITEMS. Financial items resulted in expense of $152,279 in the
Current Quarter compared to a net expense of $510,760 in the Comparable Quarter.
Interest income was $62,813 in the Current Quarter. Interest expense was
$215,092 in the Current Quarter. Both Interest Income and Interest Expense were
negligible in the Comparable quarter. In the Current Quarter, the Company had
realized exchange loss aggregating $(7,122) whereas in Comparable Quarter, the
Company had net realized exchange loss of $(2,841). These items result primarily
from exchange rate fluctuations among the currencies of the United States,
Sweden and South Africa.
LOSS BEFORE INCOME TAXES. The Company generated a loss before income taxes
of ($5,347,298) in the Current Quarter as compared to ($1,787,985) in the
Comparable Quarter. The increased loss before income taxes is primarily
attributable to the costs of expansion of the Company's infrastructure, the
hiring of additional personnel, the expenses associated with commercialization
of its products and the depreciation and amortization expense associated with
the acquisition of Unwire.
NET LOSS AND LOSS PER SHARE. Net loss was ($5,347,298) for the Current
Quarter, versus ($1,787,985) for the Comparable Quarter. Loss per share for the
Current Quarter was ($0.61) based on weighted average shares outstanding of
8,743,630, while the Comparable Quarter loss per share was ($0.22) based upon a
weighted average of 8,190,000 shares outstanding.
RECENT DEVELOPMENTS. During the quarter, the Company announced a
network-based location technology for positioning of any mobile phone in a GSM
operator's network, complementing its portfolio of handset-based location
technologies already deployed. iMate-TM- was launched--a location-based
information application for mobile Internet users, and a new release of Resource
Manager-TM- was announced with Swedish GSM operator Tele2 as the first customer.
Additional agreements through subsidiary Unwire were announced with future
anticipated revenues of $22.8 million.
The Company was also accepted for trading on the Nasdaq National Market
during the quarter, and Lars Persson was appointed Chief Executive Officer of
CellPoint's worldwide location services business.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL. At September 30, 2000, the Company had working capital of
$2,904,919 as compared to working capital of $5,174,826 at June 30, 2000. At the
end of the Current Quarter, the Company had $5,281,906 in current assets versus
$1,426,083 in current assets at the end of September 1999. At September 30,
2000, cash and cash equivalents amounted to $3,600,302; cash, cash equivalents
and accounts receivable amounted to $4,598,361.
CASH FLOW FROM OPERATIONS. For the Current Quarter, the Company used net
cash in operating activities of $2,977,105, as compared to $703,567 for the
Comparable Quarter. This increase is because
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the Company greatly expanded its infrastructure, tripled the number of its
full-time employees and increased its marketing and selling expenses as the
Company sought to commercialize its products and obtain contracts for the sale
of its services and products.
CASH FLOW FROM INVESTING ACTIVITIES. For the Current Quarter, the Company
had a net cash outflow from investing activities of $44,609 versus a net cash
outflow of $26,517 in the Comparable Quarter. The Company does not currently
have any commitments for capital expenditures during the current fiscal year,
but the Company may make such expenditures if an opportunity consistent with the
Company's business strategy presents itself.
STOCKHOLDERS' EQUITY. The Company's stockholders' equity at September 30,
2000 was $74,750,132, including an accumulated deficit of ($20,984,901), as
compared to stockholders' equity of $80,100,076 at June 30, 2000 with an
accumulated deficit of ($15,637,603).
We may require additional capital during our fiscal year ending June 30,
2001 to implement our business strategies, including cash for (i) payment of
increased operating expenses such as salaries for additional employees; and
(ii) further implementation of those business strategies. Such additional
capital may be raised through additional public or private financing, as well as
borrowings and other resources. No assurance can be given, however, that we will
have access to the capital markets in the future, or that financing will be
available on acceptable terms to satisfy our cash requirements to implement its
business strategies. If we were unable to access the capital markets or obtain
acceptable financing, our results of operations and financial conditions could
be materially and adversely affected. We may be required to raise substantial
additional funds through other means. If adequate funds are not available to us,
we may be required to curtail operations significantly or to obtain funds
through entering into arrangements with collaborative partners or others that
may require us to relinquish rights to certain of our technologies or products
that we would not otherwise relinquish. While we have begun to receive
commercial revenues, there can be no assurances that its existing commercial
agreements will provide adequate cash to sustain its operations. If we decide to
expand our business faster, or to geographic areas outside of Europe during the
next twelve months, we may need to raise further capital.
RECENT DEVELOPMENTS
On December 6, 2000, we completed a private placement with Castle Creek.,
pursuant to which we issued to Castle Creek 6% convertible notes in the
aggregate principal amount of $10,000,000 and five-year warrants to purchase up
to 210,526 shares of the Company's Common Stock. The convertible notes are due
September 30, 2002, and may be prepaid prior to such date upon the satisfaction
of certain conditions (including the issuance of additional warrants). The
warrants are exercisable initially at $11.40 per share. The conversion ratio of
the notes and the exercise price of the warrants are subject to anti-dilution
adjustments. See "Description of Securities--Castle Creek Convertible Notes and
Warrants".
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BUSINESS
POSITIONING TECHNOLOGY AND LOCATION SERVICES (CELLPOINT)
We focus on the worldwide marketing, development, support, distribution and
sales of the CellPoint technologies and applications for digital cellular
positioning and communication. Our positioning technology, location services
platform and the applications of the technology are collectively marketed under
the name, the "CellPoint System". The current existing applications are marketed
under the names "Resource Manager", "Finder!", "iMate" and "Personal Security".
The CellPoint System enables users to determine the position of a cellular
telephone or mobile device, such as a Personal Digital Assistant (PDA), for use
in a broad range of consumer and business applications. The primary location
service applications today include resource management of mobile workforce
personnel, friend finding relative to one's own location, personal security
services and information services. In the resource and fleet management
application, companies can view and track their mobile service personnel over
the Internet. Information services include location-sensitive traffic reports,
weather, and concierge information services such as the location of the nearest
hotel, restaurant, bank machine or repair shop. Emergency applications could
include locating persons making emergency calls, roadside assistance in the
event of vehicle breakdown or location of a disabled or impaired person who may
be lost or missing. Friend-finding allows users to maintain buddy lists and view
the location of pre-defined, consenting individuals relative to their own
location, send messages to these people or call them. Personal security services
offer added security to people in higher risk occupations such as night security
guards, chauffeurs, tax collectors, health care personnel, postal delivery
persons and couriers.
INDUSTRY OVERVIEW
We believe that location services will play a key role in the mobile
Internet and mobile commerce, and that the location component will be a
cornerstone in the majority of mobile Internet use. There has been an explosive
growth of wireless communications and the Internet, with mobile telephony being
the fastest growing technology of all time. Mobile Internet access will offer
corporate and mass-market utility in saving time and money. Merrill Lynch
(WIRELESS INTERNET, June 5, 2000) projects 1.5 billion people will have wireless
access to the Internet by 2005. Most experts agree that more people will access
the Internet from mobile devices than from fixed computers before 2005.
Mobile operators are facing increased competition, lower revenues per user
through falling prices and churn among subscribers from one operator to another.
Voice services alone have become a commodity service. The key to unlocking
further value in the operators' investments in network infrastructure is through
offering unique value-added services to attract more customers and more airtime
use per customer. Services such as voice mail, pre-paid subscriptions and short
message service (SMS) are value-added service offerings beyond voice that are
also becoming commonplace. Location services can offer operators new value-added
services to unlock new revenue potential and differentiate operators from their
competitors.
The industry for mobile location services is still very much in its infancy,
but new wireless services are an explosive growth area. It has taken longer than
we expected for this industry to 'take off', but most experts agree that growth
is about to accelerate to massive proportions. We believe that 70% - 80% of
mobile phone users will employ location services by 2005, and that the location
component is key to using the Internet from mobile devices. Location services
for mobile users offer broad utility, and can be grouped into four categories:
management and tracking, information, entertainment and security. While the
industry is very new, we expect that commercial services with a strong business
case for management and service applications will be the first to enter the
market, but the mass market
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services including information and entertainment services will be much larger
over time. We have developed applications that span all four key application
areas.
COMPANY HISTORY
Effective February 28, 1999, CellPoint acquired technology and intellectual
property rights from Novel Electronic Systems & Technologies ("Novel") for the
core GSM positioning technology originally developed in South Africa. We own the
technology, and have the right to use it worldwide, with the exception of
sub-Saharan Africa where such rights were acquired by Wasp SA (Pty) Ltd., a
corporation organized under the laws of South Africa ("Wasp SA"). Prior to
acquiring the technology, we had licensed it from Wasp International (Pty) Ltd.
("Wasp") the company that developed the initial technology used within the GSM
networks for positioning and telematics. We also purchased 100% of Wasp, the
business of which consists only of a development team and tools used in the
development of proprietary GSM positioning and telematics technologies (Wasp has
subsequently been renamed as CellPoint Systems S.A. (Pty) Ltd. ("CellPoint SA").
We acquired 10% of Wasp SA, which is the South African corporation with rights
to the GSM technology in sub-Saharan Africa.
The GSM positioning technology was originally commercialized by Wasp and
Matrix Vehicle Tracking (Pty) Ltd., a corporation organized under the laws of
South Africa ("Matrix"), and has been in commercial use in South Africa for
almost four years. There are more than 20,000 commercial users of the technology
in South Africa. We have entered into a cooperation agreement with Matrix
whereby Matrix will make available to us its knowledge and know-how regarding
GSM positioning applications, strategies and service delivery.
APPLICATIONS
RESOURCE MANAGER. Our Resource Manager is a valuable tool for fleet and
personnel managers such as service and repair companies, sales organizations,
courier and shipping agencies, coach companies, taxi services, car rental
agencies, delivery firms, railroad companies, etc., that want to manage their
mobile resources and assets more effectively. The communication and positioning
system will help fleet owners to optimize routes and allocate resources.
Customers of these organizations can also benefit from increased information
being made available to them through the delivery of new location services, such
as when to expect a delivery, installation or service repair person. While we
believe that the potential cost savings for fleet owners and personnel managers
using the CellPoint System are significant, we have not had extensive experience
yet in the commercial use of these products.
Our first commercial agreement was signed in April 1999 with Tele2, a GSM
network operator in Sweden, for positioning services for GSM mobile phones. This
is a significant contract in that it constitutes the first commercial use of the
technology outside of South Africa. We will receive revenue percentage
participation with the operator based on a sliding scale, such that a higher
percentage is received for the first few thousand users, and that percentage is
reduced beyond higher volume users of the technology. Further, we will receive
minimum monthly payments regardless of the number of users. Tele2 launched
commercial services in Sweden for positioning of mobile phones based on the
CellPoint System in November 1999. Through June 30, 2000, we received $536,306
in revenues from the Tele2 contract.
On July 28, 1999, we signed an agreement with France Telecom Mobiles for the
purchase of a system for an evaluation project of our CellPoint positioning
technology and services for commercial fleet management. The CellPoint System
has been installed and undergone technical testing since March 1999 to provide
location technology and related services in France. A commercial testing phase
commenced in September 1999. Revenues commenced during the evaluation project
with further revenues to be billed pursuant to a commercial agreement entered
into on July 13, 2000 where France
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Telecom Mobiles will license CellPoint's location platform and one location
services application, Resource Manager. France Telecom Mobiles has not yet
disclosed the date of commercial launch of the new location services enabled by
CellPoint.
On October 9, 2000, we announced a commercial agreement with EuroTel
Praha Ltd. of the Czech Republic for our Mobile Location Services platform and
applications. EuroTel, using CellPoint's latest location-based service
technology, is able to offer its customers our Resource Manager service based on
their current mobile phones and SIM cards.
FINDER! Finder! is designed for and targeted to the mass consumer market.
It allows users to maintain buddy lists and view the location of pre-defined,
consenting individuals relative to their own location, send messages to these
people or call them. We believe Finder! offers both entertainment value as well
as practical value for business users.
On May 4, 2000, we entered into an agreement with Yahoo! We have agreed with
Yahoo! to co-market a person-to-person locator service for mobile phones in
specified countries in Europe. The service will be called "Yahoo!
Find-A-Friend". Using our Finder! technology, Yahoo! Find-A-Friend allows users
to pinpoint the location of the friend or colleague they are trying to contact.
The service can easily be bundled with pre-paid network packages sold by mobile
network operators as an added value feature to maintain customer loyalty and
attract new subscribers. Our Finder! and Yahoo! Find-A-Friend can be used
anywhere in the world where there is a GSM network in place.
IMATE. iMate addresses the broadest range of needs in mass-market mobile
use. iMate is both a full-featured information service for mobile users and a
powerful content collector and integrator. Information can be sourced from any
number of websites or databases. Internet content and geographical information
is delivered to users based on their location. Content delivered includes
weather and traffic reports to personal navigation, proximity services, and
concierge services. Information is structured in a navigable hierarchy to
optimize ease of use. Through the integrated use of mobile device positioning
and profiling, the user has a very powerful and user friendly tool to simplify
everyday life or to get more out of a visit to an unfamiliar area.
PERSONAL SECURITY. This service is based on our core positioning technology
and allows personalized user profiles in case of emergency or threat. In a
distressed situation, the user may press predefined buttons on the mobile phone.
The phone sets up a voice call to an alarm center and sends positioning
information for the caller to the alarm center via CellPoint's location services
platform. The caller's position is shown to the operator on a digital map. Each
user makes an action plan when he or she subscribes to the service. The action
plan can contain medical information about blood type or allergies, contact
persons at work or home and other information such as hazardous cargo the person
may be transporting. With this information at hand, the emergency operator has
the caller's location and a much better chance to provide the distressed person
with the appropriate assistance.
STANDARDS
A wide assortment of standard cellular telephones and WAP ("Wireless
Application Protocol") telephones support the CellPoint technology today. We
believe that more than 90% of the cellular phones sold in Europe this year are
compatible with the CellPoint technology and location services. As GSM standards
open up for competition between system layers in location-based systems, a clear
division between location platforms and location applications will develop over
time. CellPoint provides systems in all layers--the positioning technology, the
middleware and the location applications--and provides open interfaces for third
party development. Operating entirely within GSM, Internet and WAP standards,
CellPoint's location technology and services platform require no network add on
or overlay and work in any GSM network regardless of infrastructure vendor or
vendors, allowing for worldwide roaming capabilities.
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We contribute to the setting of standards through our membership and
participation in the WAP forum (we also hold the Secretary position for Location
Services), ETSI (European Telecommunications Standards Institute, "ETSI") and
the Location Interoperability Forum (LIF) where we chair the Mobile Location
Protocol/Application Programming Interface (MLP/API) definition group.
The United States Federal Communications Commission (the "FCC") adopted a
ruling in June 1996 (Docket No. 94-102) that mandates all cellular telephone
carriers to provide location information on all 911 calls by October 2001. We
believe that other countries may mandate similar requirements in the future.
Even without such additional regulations, we believe that many cellular carriers
are interested in providing new value-added services incorporating cellular
location such as the services available from CellPoint.
SYSTEM COMPONENTS
CellPoint is an end-to-end developer, supplier and enabler of location
technology and services. CellPoint provides systems in all layers--the location
technology, the middleware and the location applications. CellPoint's location
technologies utilize standard GSM functionality that is already supported by all
major GSM infrastructure suppliers today. The main component of the technology
is the CellPoint Mobile Location System. This third generation location platform
supports our location technology, provides open interfaces aligned with third
generation standards and is designed to support all or most location
technologies expected to reach commercial success in the future. It is through
this platform that all operations and services run.
The Mobile Location System provides a generic location and messaging
platform that can be shared by several different applications, such as Finder!,
iMate or Resource Manager. The application servers utilize the Mobile Location
System through an Application Programmers Interface (APIs), which enables
location of a mobile terminal using a uniform protocol that is independent of
the type of location provider used. CellPoint also makes the API available to
other application developers who can then deliver their location-based services
through CellPoint's platform. There are a number of third party developers
already doing this, which will provide us with even more applications which the
GSM operators can offer their subscribers. A positioning server is attached to
the Mobile Location System, as are the map servers, dedicated terminal servers
and other databases.
The CellPoint System utilizes:
- A standard, unmodified GSM cellular network;
- Proprietary server system, the CellPoint Mobile Location System, (server
hardware and software) interacting with the GSM cellular network
operator's system, placed at the operator's site, at CellPoint's premises
or third party premises;
- A standard GSM cellular phone, WAP phone other GSM mobile device;
- Application software; and
- The Internet.
The server consists of a number of computers that manage the traffic between
the GSM network and the application software. It is designed to handle large
quantities of messages used in complex applications. The Mobile Location System
manages the communication processes, including routing of messages, calculation
of positions, database management and bi-directional message confirmation.
Remote billing features are also integrated. The CellPoint Mobile Location
System is fully scaleable and provides carrier-grade availability.
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Application software has been developed based on market and customer driven
principles. Normally these applications provide a graphical or text interface to
display positions on a computer terminal or mobile phone and can also present
information relative to another person's position. Tracking features are also
supported as well as remote updating of message text for defined users.
Information services relative to a user's location are also supported through
application software.
BUSINESS STRATEGY AND COMMERCIAL APPLICATIONS
Our business strategy is to provide location services technology, enabling
platforms and location service applications in target markets around the world.
We begin with installing the CellPoint location services platform with a GSM
cellular network operator. The network operator, or a third party, will then
market the chosen location services as value-added services offered to the
end-users of the cellular network. We earn revenues through (i) percentage or
fixed price participation in the revenue streams resulting from the new services
offered by the network operator, (ii) sale of tiered licenses to network
operators, such as a fixed price for the first 50,000 users with increases for
additions of 100,000, 500,000 and 1,000,000 users, (iii) usage revenues from
service providers, based on transaction volumes or time frames, (iv) sale of the
CellPoint System to strategic partners where partners are licensed to operate
the technology in a specified geographic area, (v) advertising revenues for
Internet applications, (vi) consulting and professional services, and
(vii) programming interfaces.
We are currently running pilot projects and technology evaluations with
cellular network providers for positioning services throughout Europe and other
parts of the world. We cannot assure our stockholders that any of these pilot
projects will result in the execution of definitive contracts for its products
and services. We cannot rely on the anticipated revenue from these projects to
meet our current growth and expense projections. There can be no assurance that
the CellPoint System will achieve a significant degree of market share, and that
such acceptance, if achieved, will be sustained for any significant period or
that life cycles of that technology will be sufficient (or substitute products
available) to permit us to recover start-up and other associated costs.
We are also cooperating with numerous companies of all sizes in the areas of
marketing and sales, distribution, application development, standards setting,
systems integration and installation and support.
COMPETITION
The wireless industry continues to undergo rapid change, and competition is
intense and is expected to increase. We are aware that other companies and
businesses market, promote and develop technologies and products which could be
competitive with or are functionally equivalent to those which we have. We
expect that companies or businesses which may have developed or are developing
such technologies and products, as well as other companies and businesses that
have the expertise which could encourage them to develop and market competitive
products and technologies, may attempt to develop technologies and products
directly competitive with ours. Many of these competitors have greater financial
and other resources than we have.
Although we believe that the CellPoint System is unique, there can be no
assurances that other companies will not introduce similar or more advanced
technologies. The location services market can be divided into three parts,
(i) the location technology, (ii) the location services platform and (iii) the
applications. We are very active in all three areas.
TECHNOLOGY. There are two different types of positioning technologies:
handset-based and network-based. Our technology was originally handset-based
positioning technology, but we have also developed a unique integrated
network-based solution. Our positioning technologies are all software-based with
no need for hardware overlays or add-ons to an operator's network.
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<PAGE>
Network-based solutions can be divided into overlay systems and integrated
solutions. Most companies have pursued overlay systems. These systems are very
costly and time-consuming to implement, since they require hardware changes
and/or add-ons to the network. We are not aware of the implementation of a
commercial overlay system to date. Most companies in the industry pursued
network-based overlay system location technology solutions subsequent to a
mandate by the FCC in the United States in 1996. The FCC mandate requires that
all mobile phones be positioned by October 2001, irrespective of the type or
vintage of phone. This led companies to pursue network-based overlay location
technologies. In September 2000, we announced a network-based solution to
position any cellular phone in a GSM network, regardless of age of the phone or
network infrastructure supplier. This new technology developed by us is an
integrated software only solution for network-based positioning and now extends
our location service applications to all mobile GSM users.
Handset-based technologies can require new model phones, programmed SIM
cards or use of WAP phones to be positioned. Our positioning technology was
originally developed out of the need to track stolen cars. The concept was to
utilize information that was already in existence in a GSM network and have a
'smart terminal' that could gather sufficient information from the network and
allow a server system to calculate the location very quickly.
In November 1998, we announced the capability to position normal cellular
phones. The technology from the special terminals could now be utilized in
normal mobile phones with a standard SIM card containing a program developed by
CellPoint, which opened up a vast market for us for new location services.
Location services for normal mobile phones are the focus of our developments and
service offerings today. This type of handset-based technology is in commercial
operation with MTN in South Africa, Tele2 in Sweden, EuroTel in the Czech
Republic and France Telecom, in each case delivered by us. CT Motion, a location
services developer in Israel, claims to have a handset-based positioning
technology implemented with Partner Network in Israel.
We believe that the technology and applications offered by CellPoint have
distinct advantages over other systems currently being marketed by other
companies. For instance, another handset-based solution is built on Global
Positioning System (GPS) which uses satellites to determine an X,Y position. GPS
requires free line of sight to a minimum of 3 satellites. We view GPS not as a
competing technology but rather complementary to our offerings. We use GPS in
our telematics terminals today, but as an optional accessory rather than the
only technology for positioning. GPS provides excellent location coordinates,
but our engineers' research has shown that it is insufficient as a stand-alone
solution for location services for mobile phones.
Network-assisted GPS enhances GPS availability but it is widely accepted
that it still is not sufficient for mass commercial location services because
users demand functionality 100% of the time. GPS phones will start to become
commercially available in 2001, albeit as a very limited percentage (projected)
of the total mobile device market and more of a niche solution. We support GPS
today and will continue to do so in the future, as we view GPS as an excellent
complement to the CellPoint System.
LOCATION SERVICES PLATFORM. We view ourselves primarily as enablers of
location technology and services. Our location services platform is the
"middleware" in the total solution. It is fully GSM compliant, thus works with
all GSM networks, regardless of infrastructure supplier, and it also works in
multi-vendor infrastructure environments. We believe that there will be multiple
positioning technologies available in the future and no single one will be most
suitable in all cases. Consequently, our Location Services Platform will support
all or most positioning technologies expected to reach commercial success.
Middleware vendors, such as SignalSoft, Ericsson and Airflash have begun to
market location platform solutions. Many others are expected to come to market
in the future, but we believe that our ability to offer an end-to-end solution
to GSM operators will give us a significant time
29
<PAGE>
advantage in deploying our platform. We also intend to cooperate with these
companies to increase the number of applications being offered to the operators.
APPLICATIONS. Today, we have several applications for commercial use. We
also have open API's (Application Programmers Interface) available to partners
that are developing location-based applications. We will continue to develop
further applications on our own and some in cooperation with third parties. We
expect that in the next few years that hundreds of applications will be
delivered via our platform, with the majority being developed by other companies
using our API's.
TELEMATICS (UNWIRE)
INDUSTRY OVERVIEW
Telematics involves wireless remote management and control of machines and
equipment. In other words, machines send each other messages over a mobile
network without the need for human intervention. For example, electricity meters
can send in usage readings rather than requiring someone to come to your house,
vending machines can send messages indicating that they are low on products,
cars can send automatic messages to emergency services when an airbag is
deployed. The field of applications spans all industries and includes, for
example, logistics, alarm management, elevator systems, vending machines,
container management, meter reading, fleet management, vehicle monitoring and
remote control, quality control, cash and ATM terminals, gate and door
management, security, supervision and service information. Telematics services
combined with our location technology can also be used to monitor location,
speed, rpm, distance traveled, time at certain locations, fuel tank content and
consumption of fuel.
HISTORY
On February 29, 2000, we acquired all of the capital stock of Unwire. Unwire
develops systems and equipment for GSM positioning and telematics and holds
unique patents for positioning. We paid the purchase price by issuing to the
stockholders of Unwire an aggregate of 1,075,000 shares of Common Stock with a
market value of approximately $72.2 million. We registered 25% of the shares
issued to the former stockholders of Unwire in a registration statement filed
with the SEC on August 4, 2000. We are registering all such shares that were not
sold pursuant to such registration statement, as well as the balance of the
Shares issued to the former stockholders of Unwire, in this Prospectus.
APPLICATIONS
Unwire focuses on the worldwide marketing, support, development,
distribution and sales of the Company's technologies for telematics. Unwire's
hardware terminals, the UP-100, UP-200, GT-1 and GT-3 are GSM telematics
terminals that are installed in various industrial equipment, vehicles or
machinery with associated application software to manage the operation of the
terminals.
The hardware terminals used for industrial and in-vehicle applications
contain a GSM module. These terminals are built to be installed in vehicles and
withstand the harsh in-vehicle operating environment, or in industrial
environments without constant supervision by personnel. Terminals have
input-output devices for telematics functions. One version of the terminal used
in positioning applications also includes an optional GPS that is a satellite
tracking technology that complements GSM tracking technology. Unwire's products
also utilize our proprietary technology in the positioning calculations.
Unwire's GSM terminals can also be programmed to activate by remote control
when, for example, someone reports an item missing, presses a distress button,
or when a conventional alarm is triggered. The terminals can also be
pre-programmed for movement restriction applications, such as to indicate when a
vehicle passes certain limits, for example, being driven on board a ferry or
crossing a country
30
<PAGE>
border. Tabulation for maintenance purposes can be pre-programmed, such as when
an industrial garage door has been opened a certain number of times and thus
requires maintenance. The terminal can monitor the performance of a system and
automatically send an alarm if performance is deteriorating. The remote
configuration will allow the customer to locate an asset, lock doors on a
vehicle, make its lights flash, shut off fuel injection, etc. as well as
automatically trigger service calls on a wide variety of industrial equipment.
These telematics terminals can be installed at the point of manufacture or after
the fact.
Rental companies (e.g., of machinery, vehicles, equipment and containers)
can use Unwire's technology and applications for surveillance and allocation
purposes. Additionally, they can use the remote control feature to shut off
ignition and fuel, lock doors, etc., in case a customer misuses the equipment or
does not return the vehicle. Fleet managers can realize these same benefits. In
case of theft, the vehicle can also be located and recovered.
SYSTEM COMPONENTS
The microprocessor-controlled telematics terminals contains a GSM unit and
has a number of inputs and outputs for customized uses. It consists of a GSM
transmitter and receiver, a computer circuit board, memory and backup battery
power. The battery provides auxiliary power in the event that the primary power
source is disconnected. In the case of positioning, the antenna is very small
and does not need to be mounted visibly, in the open or at the exterior, so the
units can be completely concealed and hidden in the asset or vehicle. Unwire
also has a more advanced version of the terminals, with a broader range of GSM
functions and additional satellite capability, making it more flexible for
extensive fleet management services.
The Unwire telematics platform is the same core platform used in the
CellPoint System which consists of a number of computers that manage the traffic
between the GSM network and the application software. It is designed to handle
large quantities of messages used in complex applications. The telematics
platform manages the communication processes, including routing of messages,
database management and bi-directional message confirmation. Remote billing
features are also integrated. Point-to-point connections are also available,
though an integrated solution using the CellPoint System delivers capacity for
large-scale implementations.
BUSINESS STRATEGY AND APPLICATIONS
Unwire's business strategy is to provide telematics technology, terminals
and applications in target markets around the world. Telematics services are
marketed directly to larger industrial users, either directly or through systems
integrators, and the GSM terminals are programmed for specific applications such
as ventilation system management, container management or for remote management,
supervision and control of security systems or automatic door systems.
Instructions are programmed in the telematics terminals in advance, allowing for
performance of a multitude of tasks from a remote location. Other telematics
applications being marketed include wireless remote management and control of
machines and equipment, such as for alarm management, elevator systems, vending
machines, container management, meter reading, fleet management, quality
control, cash and ATM terminals, gate and door management, security, supervision
and service information.
Revenues are realized from (i) sale of telematics terminals, (ii) licensing
fees on application software, (iii) professional services such as consulting,
education and development, (iv) usage revenues, (v) revenue sharing on phone
line usage, and (vi) programming interfaces.
On August 28, 2000, Unwire announced a contract with PhoneTrans AG of
Germany, pursuant to which PhoneTrans has committed to purchase a minimum of
24,000 telematics terminals from Unwire over 29 months. The purchase price under
the contract is expected to aggregate $8,000,000. In the vending machine
marketplace, Unwire's terminals will automatically notify owners of low stock
levels, saving companies time and money by ensuring stock levels are always
there. Unwire will earn revenues from the sale of hardware, consulting services
and application license fees.
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<PAGE>
On September 8, 2000, Unwire announced its agreement with ItsMobile of
Ireland to provide telematics terminals for vending machines in Europe. The
purchase price under the contract is expected to aggregate $2,800,000 in
revenues. Unwire's terminals will notify owners automatically of low stock
levels and will provide such owners with remote management information for the
vending machines.
On September 27, 2000, Unwire and CellPoint announced a contract with Car
Tracking Company Ltd. of Thailand. This contract combines Unwire's
purpose-designed in-vehicle telematics terminals with CellPoint's location
technology to provide security and fleet management for police and government
vehicles in Thailand. The contract is expected to aggregate $12,000,000 in
revenues over three years.
COMPETITION
We are aware that other companies and businesses market, promote and develop
technologies and products which could be competitive with the Unwire telematics
terminals and applications. There may exist other technologies and products that
are functionally equivalent or similar the Unwire telematics terminals and
applications. We expect that companies or businesses that may have developed or
are developing such technologies and products, as well as other companies and
businesses that have the expertise that could encourage them to develop and
market competitive products and technology, may attempt to develop technology
and products directly competitive with Unwire's. Many of these competitors have
greater financial and other resources than we have.
There can be no assurance that competitors have not or will not succeed in
developing technologies and products that are more effective than any that we
are developing or which would render Unwire's technology and applications
obsolete or noncompetitive. Many of our competitors have substantially greater
experience, financial resources and marketing capabilities than us. Although we
believe that the Unwire products are unique, there can be no assurances that
other companies will not introduce similar or more advanced technologies.
RESEARCH AND DEVELOPMENT
In Fiscal 2000, we spent approximately $1,000,000 on development activity.
We spent approximately $225,000 on research and development activities in Fiscal
1999, as compared to $7,000 spent on research and development in the previous
fiscal year.
The research and development organizations for CellPoint and Unwire are
coordinated between the CellPoint and Unwire subsidiaries in Sweden and South
Africa. Our personnel have substantial experience in the areas of GSM and UMTS
architecture, SS7 signaling, positioning technologies, WAP, Mobile Internet,
Unix and Windows.
Development projects are carried-out in-line with the time-to-market process
that span from pre-studies to first customer application and roll-out. The
process provides activity and documentation guidelines, management decision
points, configuration management, testing and release control. No product or
application development is finalized without a commitment from at least one
operator or customer.
EMPLOYEES
At December 1, 2000, we had 102 full-time employees. We expect to expand
technical and marketing resources across all of our operations by hiring 50
additional full-time staff for CellPoint in the next seven months and 33
additional full-time staff for Unwire in the next seven months for a total of
185 full-time staff by June 30, 2001. None of our employees is represented by a
labor union. We consider our relations with our employees to be very good.
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TRADEMARKS AND PATENTS
CellPoint and Unwire are maintaining and building a patent portfolio within
their defined target markets in order to maximize competitiveness and to avoid
infringements on other parties' technical solutions. The existing portfolio
consists of approved location technology patents and a number of filed location
technology, middleware and application patents. Since 1997, the Company has
applied for several patents for the CellPoint System; most of which are
currently pending; three of which have been accepted. In addition, we have
applied for several additional patents with respect to our CellPoint and Unwire
technologies.
We believe that the complexity involved in developing these technologies
offers considerable protection against similar developments. Both our CellPoint
and Unwire technologies have been under development for five years and are
continually being refined and improved.
PROPERTY
We maintain our executive offices, consisting of 2,500 square feet of rented
furnished office space at 3000 Hillswood Drive, Hillswood Business Park in
Chertsey, KT16 0RS Surrey, England. We pay the equivalent of $31,000 per month
in rent for those facilities. We also occupy completely furnished facilities
consisting of 10,720 square feet of leased office space located at
Kronborgsgrand 7, 164 46 Kista, Sweden. We occupy those facilities on a lease
basis and pay the equivalent of $14,500 per month in rent for those facilities.
The facilities are leased until May 2003. The leased property is covered by a
comprehensive insurance policy covering property, fire, theft, business
interruption, general and liability, legal and litigation. We believe that the
premises will be adequate through the remainder of the lease. Unwire, in Sweden,
occupies 5,000 square feet of leased office space located at Solna Torg 13, 171
45 Solna, Sweden. Unwire occupies such space on a lease basis and pays the
equivalent of $5,100 per month in rent for those facilities. The lease held by
Unwire expires in October 2001. We believe this space will be adequate through
the remainder of the lease.
CellPoint SA occupies 7,800 square feet of leased office space located at
Ibhubezi House, Howick Close, Waterfall Park, Midrand, South Africa. The rent
expense is equivalent to $5,900 per month for those facilities. The lease held
by CellPoint SA expires in May of 2002. The leased property is covered by a
comprehensive insurance policy covering fire, theft, business interruption,
public liability, electronic equipment, office contents, and accident insurance
for staff. We believe this space will be adequate through the remainder of the
lease.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Our capital structure consists of 22,000,000 authorized shares of Common
Stock, of which 10,548,688 shares were issued and outstanding as of
December 14, 2000 and 3,000,000 shares of preferred stock, none of which is
outstanding. We believe there are approximately 1,700 beneficial owners of our
Common Stock. Each share of Common Stock is entitled to one vote per share.
The following table sets forth certain information regarding the beneficial
ownership of our Common Stock as of December 14, 2000, by (i) each person who is
known by us to own beneficially more than 5% of our outstanding Common Stock;
(ii) each of our officers and directors; and (iii) all officers and directors as
a group.
<TABLE>
<CAPTION>
SHARES OF PERCENT OF
COMMON STOCK COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL BENEFICIALLY BENEFICIALLY
OWNERS AND DIRECTORS AND OFFICERS OWNED OWNED
--------------------------------- ------------ ------------
<S> <C> <C>
5% BENEFICIAL OWNERS
Novel Electronics Systems & Technologies ......... 2,302,000 21.0%
5 Duke of Edinburgh Ave
Port Louis, Mauritius
Castle Creek Technology LLC ...................... 526,379(a) 4.99%(a)
2000 Powell Street, Suite 1625
Emeryville, California 94608
DIRECTORS AND EXECUTIVE OFFICERS
Stephen Childs ................................... 0(b) *
4800 Abbey Road
Placerville, California 95667
United States
Lynn Duplessis ................................... 2,150,000(c) 20.00%
PO Box 1604
Ascot
Berks SL5 9EX
England
Peter Henricsson ................................. 2,150,000(d) 20.00%
PO Box 1604
Ascot
Berks SL5 9EX
England
Mats Jonnerhag ................................... 35,890(e) *
Borsinsikt AB
Box 6044
S-192 06 Sollentuna
Sweden
Bengt Nordstrom .................................. 35,000(f) *
Northstream AB
Sjoangsvagen 7
S-19172 Sollentuna
Sweden
Lars Persson ..................................... 0(g) *
Heindalsvagen 10
SE-162 63 Djursholm
Sweden
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SHARES OF PERCENT OF
COMMON STOCK COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL BENEFICIALLY BENEFICIALLY
OWNERS AND DIRECTORS AND OFFICERS OWNED OWNED
--------------------------------- ------------ ------------
<S> <C> <C>
Albert van Urk ................................... 75,000(h) *
20 Van Rooy Street
Potchefstroom
South Africa
Lars Wadell ...................................... 0(i) *
Artillergatan 50
5 Tr, SE-114 54 Stockholm
Sweden
Officers and Directors as a Group (8 persons)..... 2,314,740 21.60%
</TABLE>
------------------------
* Less than 1%
(a) Represents shares issuable upon conversion of notes and the exercise of
warrants, subject to the limitation that the warrants and the notes are not
exercisable or convertible to the extent that, if converted by the holder,
such holder would be the beneficial owner of more than 4.99% of the
outstanding shares of our Common Stock. The 4.99% limitation may not prevent
Castle Creek from converting all of its notes or exercising all of its
warrants in a series of transactions such that the 4.99% limitation may not
prevent Castle Creek from selling more than 4.99% of our Common Stock in the
aggregate. The Castle Creek notes would otherwise be currently convertible
into an aggregate of 400,000 shares of our Common Stock, if they are
converted before June 5, 2001. If converted on or after June 5, 2001, they
are convertible at the lesser of (i) $25 per share, and (ii) 90% of the
average of the five lowest Volume Weighted Average Prices of the Common
Stock during the 20 consecutive trading days ending on the trading day
immediately prior to the date of determination. If the market price of our
Common Stock is generally lower than $25 per share, we will be required to
issue to the holders of the notes substantially more than 400,000 shares
upon conversion. The lower the market price of Common Stock at the time of
conversion, the greater the number of shares are issuable upon such
conversion. Furthermore, the number of shares of Common Stock issuable upon
the exercise of the warrants or conversion of the notes is subject to
increases in the event that we issue or sell shares of our Common Stock or
other securities convertible into shares of our Common Stock for no
consideration or for a price, or at an exercise price, less than the market
price of our Common Stock on the date such securities are issued or sold.
Because of these terms, holders of our Common Stock face the risk that their
holdings will be substantially diluted by the issuance of additional shares
of common stock upon the exercise of the warrants and the conversion of the
notes. Castle Creek Partners LLC, an Illinois limited liability company
managed by its members, is the investment manager of Castle Creek Technology
Partners LLC and has the ability to direct the voting and investment
decisions of the selling stockholder. Castle Creek Partners LLC and its
members disclaim beneficial ownership of the securities owned by Castle
Creek Technology Partners LLC.
(b) Mr. Childs holds options to acquire 20,000 shares, none of which is
currently exercisable.
(c) Includes (1) 1,500,000 shares beneficially owned by Peter Henricsson,
Ms. Duplessis' husband, (2) options to acquire 75,000 shares issued to
Ms. Duplessis, and (3) options to acquire 75,000 shares issued to
Mr. Henricsson.
(d) Includes (1) 500,000 shares beneficially owned by Lynn Duplessis,
Mr. Henricsson's wife, (2) options to acquire 75,000 shares issued to
Mr. Henricsson and (3) options to acquire 75,000 shares issued to
Ms. Duplessis.
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<PAGE>
(e) Includes (1)12,350 shares held by Borsinsikt AB, of which Mr. Jonnerhag is a
66% stockholder (owning 10,890 shares), and (2) options to acquire 25,000
shares, all of which are currently exercisable.
(f) Mr. Nordstrom holds options to acquire 35,000 shares, all of which are
currently exercisable.
(g) Mr. Persson holds options to acquire 90,000 shares, none of which is
currently exercisable.
(h) Mr. van Urk holds options to acquire 75,000 shares, all of which are
currently exercisable.
(i) Mr. Wadell holds options to acquire 40,000 shares, none of which is
currently exercisable.
STOCK INCENTIVE PLAN
In February 1998, we adopted a stock incentive plan (the "Plan"). Pursuant
to the provisions of the Plan, as amended, 2,000,000 shares of our Common Stock
are reserved for issuance upon exercise of options. The Plan is designed to
retain qualified and competent officers, employees, and directors.
Our Board of Directors, or a committee thereof, shall administer the Plan
and is authorized, in its sole and absolute discretion, to grant options
thereunder to all eligible employees, including our officers and directors
(whether or not employees). Options will be granted pursuant to the provisions
of the Plan on such terms and at such prices as determined by our Board of
Directors. The exercise price will not be lower than the closing price on the
date the options are issued, or if such price is not available, at the fair
market value as determined by the Board of Directors. Options granted under the
Plan will be exercisable after the period specified in the option agreement.
Options granted under the Plan will not be exercisable after the expiration of
ten years from the date of grant. The Plan will also authorize our Board of
Directors, in its discretion, to make loans to optionees to enable them to
exercise their options. To date, 1,186,000 options have been granted, and 100
have been exercised. To date, we have not issued any stock appreciation rights.
To date, we have not issued any SARs. With respect to Peter Henricsson, we
granted, in Fiscal 1999, no options, and in fiscal 1998, 75,000 options, with an
exercise price of $2.75 per share.
STOCK WARRANT PLAN
In April 2000, we adopted a stock warrant plan (the "Warrant Plan").
Pursuant to the provisions of the Warrant Plan, eligible employees, consultants
and affiliates will be given the opportunity to purchase warrants, which
warrants can be exercised, upon vesting, to purchase shares of our Common Stock.
An aggregate of 1,000,000 shares of our Common Stock have been reserved for
issuance pursuant to the Warrant Plan. The Plan is designed primarily to retain
qualified and competent officers, employees, and directors.
Our Board of Directors, or a committee thereof, shall administer the Plan
and is authorized, in its sole and absolute discretion, to grant options
thereunder to all eligible employees, consultants and affiliates including our
officers and directors (whether or not employees). Warrants will be sold to
eligible persons at prices determined by independent appraisers to be fair
market prices at the time of such sale. Each warrant will have an exercise price
equal to no less than 150% of the closing price of our Common Stock on the date
immediately preceding the date of sale. Each warrant sold pursuant to the
Warrant Plan will be subject to a vesting period as determined by our Board of
Directors, and will expire no later than five years from the date of issuance.
To date, warrants with respect to an aggregate of 374,000 shares have been sold.
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<PAGE>
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The following table sets forth our directors and executive officers:
<TABLE>
<S> <C>
Stephen Childs....................... Director
Lynn Duplessis....................... Director, Vice President, Secretary
and Treasurer
Peter Henricsson..................... Director, President, Chief Executive
Officer and Chairman of the Board
Mats Jonnerhag....................... Director
Bengt Nordstrom...................... Director
Lars Persson......................... Director; President of CellPoint
Europe Ltd.
Albert van Urk....................... Director; Vice President of CellPoint
Systems AB
Lars Wadell.......................... Chief Financial Officer
</TABLE>
STEPHEN CHILDS, 53, has been a director of the Company since May 2000. He
has more than 15 years international experience in the telecom industry and has
held senior management positions with Orange from 1997 - 2000 as Group
Director--New Business Ventures; Deutsche Telecom from 1995 - 1996 as Vice
President, International Business Development; US West International from
1993 - 1995, Assistant Vice President; Pakcom from 1990 - 1993 as CEO and McCaw
Cellular from 1986 - 1988 in the United States as General Manager. He has over
20 years of proven success in general management, sales and marketing and an
extensive network in the telecom industry.
LYNN DUPLESSIS, 40, has been Vice President, Secretary, Treasurer and
director of the Company since its formation in 1997. She has 19 years of
experience in the technology industry. Ms. Duplessis has been employed by
Minerva Technology Inc, Vancouver, British Columbia, (1996), director of
industry solutions with The Capstan Group, Vancouver, British Columbia,
(1992 - 1993), and was employed in marketing, management and systems engineering
by IBM Canada Ltd., Vancouver, British Columbia and Toronto, Ontario, Canada
(1981 - 1992). She is also a director of CellPoint SA, Unwire AB, CellPoint
Europe Ltd. and CellPoint AB. Ms. Duplessis is married to Peter Henricsson, a
director and the President and Chief Executive Officer of the Company.
PETER HENRICSSON, 48, has been President, Chief Executive Officer, and
director of the Company since its formation in 1997. He has over 20 years of
experience in executive management, international marketing, venture capital,
consulting and financing, with both multinational corporations and emerging
companies. Mr. Henricsson has been President of Iform Sverige AB of Sweden,
(1996 - 1997), owner of HIM Inc. (Henricsson International Marketing),
Vancouver, British Columbia, (1991 - 1996), Senior Vice President with Allied
Environmental, Vancouver, British Columbia, (1986 - 1991), and manager at Atlas
Copco MCT AB, Stockholm, Sweden, Hong Kong and Indonesia (1980 - 1986). He is
also a director of CellPoint SA, and Chairman of the Board and a director of
CellPoint AB, Unwire AB and CellPoint Europe Ltd. Mr. Henricsson is married to
Lynn Duplessis, a director and Vice President, Secretary and Treasurer of the
Company.
MATS JONNERHAG, 47, has been a director of the Company since December 1998.
Mr. Jonnerhag is the founder and majority owner of Borsinsikt AB. He founded
Borsinsikt in 1982 and has more than 20 years of experience with the Swedish
stock market. Borsinsikt publishes a weekly stock market newsletter. Subsidiary
operations include Borsinsikt Broker, which is a brokerage company, and
Borsinsikt BorsData AB, which markets analysis software developed in-house and
other research products.
37
<PAGE>
BENGT NORDSTROM, 43, has been a director of the Company since
September 1998. He was the Chief Technology Officer and Executive Director of
SmarTone Telecommunications Ltd., a cellular network operator in Hong Kong,
until January 1999. He is now the President and Senior Partner of Northstream AB
of Sweden, a GSM advisory company specializing in data over GSM. Mr. Nordstrom
is a member of the Executive Committee of the GSM Association which represents
the interests of over 400 GSM and satellite network operators around the world.
He was with SmarTone from 1993 to 1998, and was previously with Comviq GSM AB
from 1989 - 1993 and with Ericsson Telecom AB from 1983 - 1989.
LARS PERSSON, 44, has been a director of the Company since July 2000. He was
President of Telia Mobile International and Executive Vice President of Telia, a
leading mobile operator in the Nordic countries, from 1997 - 2000. He was the
Managing Director for France Telecom in the Nordic countries from 1992 - 1997.
From 1986 - 1992, he was the Managing Director of GPI Sweden, a wholly-owned
subsidiary of the Norwegian public company GPI A/S. Prior to that he held other
senior management positions in telecommunications and technology companies
dating back to 1980. Mr. Persson is also on the boards of Wireless Maingate and
CyberCom, both Swedish companies.
ALBERT VAN URK, 33, is co-founder of Wasp International and has been a
director of the Company since 1999. He is also a director and Vice President of
Technology for CellPoint AB and a director of CellPoint SA. He had been the
Director of Research and Development of Wasp International from 1993 to 1999.
Mr. van Urk is a director of Wasp SA. He led the development of the CellPoint
GSM positioning technology platform and continues research and development
activities for the CellPoint System.
LARS WADELL, 41, was appointed Chief Financial Officer in December 2000. He
was Vice President of International Business Management with Telia Mobile with
the mission to create value for the Telia Group by investing, developing and
nurturing wireless business through deploying Telia's competitive capabilities.
He has previously held senior financial positions with Sellberg's
(1993 - 1997), Reuter's Scandinavian department (1988 - 1993) and Merkantildata
Communication (1997 - 2000).
Each of our directors was elected by the stockholders at the stockholders
meeting held in December 2000. Each director will serve until the next annual
meeting of the stockholders, at which time his or her successor will be elected
and duly qualified.
EXECUTIVE COMPENSATION
The following table shows compensation for services rendered to the Company
during the fiscal years ended June 30, 2000, 1999 and 1998, respectively, by the
Chief Executive Officer and the Vice President. Each executive officer serves
under the authority of the Board of Directors. Directors that are also employees
of the Company receive no additional compensation for their service on the Board
of Directors of the Company.
38
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ---------------------
------------------------------------ SECURITIES
RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
FISCAL SALARY BONUS COMPENSATION AWARD(S) SARS(1) PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
--------------------------- -------- -------- -------- ------------ ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Peter Henricsson,
President & CEO........ 2000 $140,000 0 0 0 0 0 6,500
1999 71,000 0 0 0 0 0 0
1998 35,500 0 0 0 75,000/0 0 0
Lynn Duplessis,
Vice President, Secretary
and Treasurer.......... 2000 $125,000 0 0 0 0 0 6,500
1999 60,000 0 0 0 0 0 0
1998 30,000 0 0 0 75,000/0 0 0
</TABLE>
We have no set bonus policy or plan. Bonuses may be awarded by the
independent directors of the Board. The Board has established a Compensation
Committee consisting of two independent directors and the Chairman of the Board.
The Compensation Committee will review salaries for all senior staff. The
directors of the Company do not receive salaries for being directors but do have
stock options in the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since our formation Peter Henricsson and Lynn Duplessis, our founders and
directors and executive officers, have made interest-free loans to us to fund
our cash needs. During the fiscal year ended June 30, 1997, Mr. Henricsson and
Ms. Duplessis paid all of our operating expenses in the amount of $40,100.
During the fiscal year ended June 30, 1998, they continued to finance our
operations, by extending loans which ranged from a low of $40,000 to a maximum
of $180,000 outstanding at any one time. A portion of these loans was also used
to fund the initial payment made in connection with the acquisition of our
technology. At June 30, 1998, the outstanding amount of our indebtedness to
Mr. Henricsson and Ms. Duplessis was $150,000. We have repaid these loans as and
when we have sufficient excess cash to do so. At no time, has interest been
charged on the outstanding loans. The above loans were repaid in full in
November 1998.
In addition, Mr. Henricsson and Ms. Duplessis have loaned us an aggregate of
$300,000 in June and July 1999. Interest of 5% was charged on the outstanding
balance of this loan, such interest was repaid in full in December 1999.
Upon the organization of the Company in 1997, Mr. Henricsson and
Ms. Duplessis invested $1,500 and $500, respectively, in consideration of which,
we issued to them 1,500,000 shares and 500,000 shares of Common Stock,
respectively. These investments were made when we had no assets and no
operations.
In connection with our offering of Common Stock at $4.00 per share pursuant
to Regulation S under the Securities Act, we paid a commission of 5% of the
purchase price to Mats Jonnerhag, a director of the Company, and Borsinsikt
A.B., a company in which Jonnerhag is a 66% stockholder. Mr. Jonnerhag and
Borsinsikt placed a total of 260,000 shares, and together they received a total
commission of $52,000.
Effective February 1999, we amended and restated our agreements with Wasp
International and Novel Electronics Systems & Technologies, Ltd., in connection
with the Company's acquisition of the
39
<PAGE>
technology platform supporting the CellPoint System. In May 1998, we issued
1,950,000 shares of our Common Stock as part of the consideration for the
license for the technology, and the option to acquire the technology, that was
originally granted to us in May 1998. Such shares were applied to the
consideration payable to Novel for the acquisition of the technology when such
agreements were amended and restated effective as of February 1999. In addition,
as part of the February 1999 agreements, in October 1999, we issued to Novel an
additional 75,000 shares of Common Stock since, for the twenty trading days
immediately prior to September 30, 1999, the average trading price of our Common
Stock was less than $16.00 per share.
As part of the February 1999 transaction, we acquired 10% of the outstanding
equity of Wasp SA. One of our directors, Mr. van Urk, is also a director and
shareholder of Wasp SA. From time to time, we may purchase from Wasp SA certain
hardware for the implementation of the CellPoint System. To date, the amounts
paid to Wasp SA for such hardware have not been material. The Company believes
that its equipment purchases from Wasp SA have been and will continue to be on
terms comparable to those available to unaffiliated third parties.
MARKET PRICE OF AND DIVIDENDS ON OUR COMMON EQUITY AND OTHER STOCKHOLDER MATTERS
Our Common Stock commenced trading on the NASDAQ Electronic Bulletin Board
on January 7, 1998. Our Common Stock began trading on the NASDAQ National Market
on July 11, 2000. The Company's fiscal year ends on June 30 of each year. On
December 21, 2000, the closing price of our Common Stock was $5.25. Set forth
below are the high and low closing prices for our Common Stock for each fiscal
quarter during the last two fiscal years:
<TABLE>
<CAPTION>
COMMON STOCK
PRICES
-------------------
FISCAL QUARTER HIGH LOW
-------------- -------- --------
<S> <C> <C>
1st Qtr 99.................................................. 4.800 2.500
2nd Qtr 99.................................................. 6.375 2.750
3rd Qtr 99.................................................. 5.375 2.940
4th Qtr 99.................................................. 5.000 3.125
1st Qtr 00.................................................. 15.875 4.750
2nd Qtr 00.................................................. 49.750 13.750
3rd Qtr 00.................................................. 94.500 39.500
4th Qtr 00.................................................. 57.750 17.000
1st Qtr 01.................................................. 44.500 15.250
2nd Qtr 01 (through December 21)............................ 21.650 5.250
</TABLE>
40
<PAGE>
DESCRIPTION OF SECURITIES
We are authorized to issue 22,000,000 shares of Common Stock and 3,000,000
shares of preferred stock. As of December 14, 2000, 10,548,688 shares of our
Common Stock were issued and outstanding and no shares of preferred stock were
outstanding.
COMMON STOCK
The holders of our Common Stock are entitled to one vote for each share held
of record on all matters to be voted on by those stockholders. There is no
cumulative voting with respect to the election of directors of the Company, with
the result that the holders of more than 50% of our Common Stock voted for the
election of directors can elect all of those directors. The holders of our
Common Stock are entitled to receive dividends when, as, and if declared by the
Company's Board of Directors from funds legally available therefor. In the event
of liquidation, dissolution, or winding up of the Company, the holders of our
Common Stock are entitled to share ratably in all assets remaining available for
distribution to them after payment of the Company's liabilities and after
provision has been made for each class of stock, if any, having preference over
our Common Stock. Holders of shares of our Common Stock, as such, have no
conversion, preemptive or other subscription rights, and there are no redemption
provisions applicable to our common stock. All of the outstanding shares of our
Common Stock are fully paid and non-assessable.
NONCUMULATIVE VOTING
The holders of shares of our Common Stock will not have cumulative voting
rights, which means that the holders of more than 50% of our outstanding Common
Stock, voting for the election of directors of the Company, may elect all of the
directors of the Company to be elected, if they so desire, and, in such event,
the holders of our remaining Common Stock may not be able to elect any of the
Company's directors.
REGISTRATION RIGHTS
Holders of shares of our Common Stock are not entitled to rights with
respect to the registration of such shares under the Securities Act. However, in
connection with our private placement of 1,125,000 shares of our Common Stock in
October and November 1999, we agreed to file a registration statement with
respect to those shares. All such shares were included in a registration
statement that became effective on August 4, 2000 and all such unsold shares are
included in this Prospectus. Pursuant to the acquisition of Unwire, a portion of
the shares issued to former stockholders of Unwire were included in a
registration statement that became effective on August 4, 2000 and all such
unsold shares, as well as the balance of the shares issued to the former
stockholders of Unwire, are included in this Prospectus.
Pursuant to a Registration Rights Agreement with Castle Creek, we agreed to
register the shares that may be issuable upon conversation of the notes and the
exercise of the warrants issued to Castle Creek. Accordingly, we intend to
register 1,789,473 shares for the benefit of Castle Creek in a Registration
Statement on Form S-3. In addition, we agreed to register such number of
additional shares as may become issuable pursuant to the anti-dilution
provisions of the notes and the warrants issued to Castle Creek, and shares
issuable pursuant to warrants that we will be required to issue to Castle Creek
upon any prepayment of the notes.
DIVIDENDS
Whether or not we pay any dividends in the future will be determined by our
Board of Directors, in its discretion, and will depend among other things, upon
our earnings, our capital requirements, and our financial condition, as well as
other relevant factors. We have not paid or declared any dividends to
41
<PAGE>
date. We intend to retain any earnings for the operation and expansion of its
business and do not anticipate paying cash dividends in the foreseeable future.
PREFERRED STOCK
We are authorized to issue preferred stock with such designations, rights
and preferences as may be determined from time to time by our Board of
Directors. Accordingly, our Board of Directors is empowered, without stockholder
approval, to issue preferred stock with liquidation privileges, dividend,
conversion, voting, or other rights that could adversely affect the voting power
or other rights of the holders of our Common Stock. In the event of issuance,
our preferred stock could be utilized, under certain circumstances, as a method
of discouraging, delaying or preventing a change in control of the Company.
CASTLE CREEK CONVERTIBLE NOTES AND WARRANTS
On December 6, 2000, the Company and Castle Creek entered into a Securities
Purchase Agreement, pursuant to which the Company issued to Castle Creek 6%
convertible notes in the aggregate principal amount of $10,000,000 and five-year
warrants to purchase up to 210,526 shares of the Company's Common Stock. The
convertible notes are due September 30, 2002, and may be prepaid prior to such
date upon the satisfaction of certain conditions (including the issuance of
additional warrants).
Interest on the notes is due semi-annually and is payable in cash. The notes
are due September 30, 2002 and is convertible into shares of Common Stock (the
"Conversion Shares"), at the option of the holders thereof, at the rate of $25
per share if converted prior to June 5, 2001, or, if converted on or after
June 5, 2001, at the lesser of (i) $25 per share or (ii) 90% of the average of
the five lowest Volume Weighted Average Prices of the Common Stock during the 20
consecutive trading days prior to the trading day immediately prior to the date
of determination. We have the option to prepay the notes at any time on
45 days' notice at (i) 115% of the principal amount being prepaid plus all
accrued but unpaid interest on such amount, for all prepayments made prior to
June 5, 2001, and (ii) 120% of the principal amount being prepaid plus all
accrued but unpaid interest on such amount, for all prepayments made on or after
June 5, 2001. In the event of such prepayment, we are obligated to issue to the
note holder warrants to purchase that number of shares of Common Stock equal to
5% of the aggregate amount of the note prepaid divided by the Prepayment Market
Price (as such term is defined in the note).
The warrants may be exercised at any time prior to 5:59 p.m. New York City
time on December 5, 2005 at an exercise price of $11.40 per share. The warrants
and the notes are subject to weighted average anti-dilution adjustments, except
for shares issued in connection with strategic transactions, underwritten public
offerings, acquisitions and the Company's Stock Incentive Plan and Stock Warrant
Plan.
Pursuant to the Securities Purchase Agreement, the aggregate number of
Conversion Shares and shares issuable upon exercise of the warrants may not
exceed 2,109,717 shares without approval of the Company's stockholders. In the
event stockholder approval is required but not obtained, the holders of the note
may require the Company to redeem the notes at 120% of their face value plus
accrued interest.
STOCK INCENTIVE PLAN
In February 1998, we adopted a stock incentive plan (the "Plan"). See
"Security Ownership of Certain Beneficial Owners and Management--Stock Incentive
Plan."
42
<PAGE>
STOCK WARRANT PLAN
In April 2000, we adopted a stock warrant plan (the "Warrant Plan"). See
"Security Ownership of Certain Beneficial Owners and Management--Stock Warrant
Plan."
TRANSFER AGENT
The Transfer Agent for our Common Stock is U.S. Stock Transfer Corporation,
1745 Gardena Avenue, Suite 200, Glendale, California 91204, telephone
818-502-1404.
RECENT SALES OF UNREGISTERED SECURITIES
In February 1998, we sold 715,000 shares of our Common Stock at US $1.25 per
share, pursuant to Rule 504 of Regulation D under the Securities Act. We
received gross proceeds of $893,750 from such offering.
In June 1998, we sold 775,000 shares of our Common Stock at $4.00 per share,
pursuant to Regulation S under the Securities Act. All such shares were sold to
"non-U.S. Persons" as defined in Regulation S. We received gross proceeds of
$3,100,000 from the offering. We paid a commission of 5% of the purchase price
per share to Mats Jonnerhag, a director of the Company, and Borsinsikt A.B., a
company in which Mr. Jonnerhag is a 66% stockholder. Mr. Jonnerhag and
Borsinsikt placed a total of 260,000 shares, and together they received a total
commission of US $52,000.
In August 1999, we completed a bridge financing of $2,000,000 of 12%
promissory notes through Madison Securities, Inc. of Chicago, Illinois. In
connection with such bridge financing, we issued an aggregate of 180,000 common
stock purchase warrants which have an exercise price of $8.04 per share. On
October 29, 1999, we completed the first tranche of our private placement
financing, in which it sold an aggregate of 393,750 shares of Common Stock for
gross proceeds of $3,500,000. In such offering, $1,200,000 of bridge notes were
exchanged for shares of our Common Stock. We used $841,557 of the gross proceeds
to repay in full the balance of the bridge notes plus interest accrued on all of
the bridge notes. After paying underwriting commissions, we received $1,108,443
in proceeds from the first tranche of the offering. On November 12, 1999, we
completed the second and final tranche of the private placement, in which we
sold an aggregate of 731,250 shares of Common Stock for gross proceeds of
$6,500,000. After paying underwriting commissions, we received $5,850,000 in net
proceeds from the second tranche. We believe that these offerings were exempt
from registration under the Securities Act pursuant to Section 4(2) and
Rule 506 of Regulation D thereunder on August 4, 2000, we registered the shares
issued and the shares underlying the warrants issued in these offerings.
On February 29, 2000, we acquired all of the capital stock of Unwire. Unwire
develops systems and equipment for GSM positioning and telematics and holds
unique patents for positioning. The purchase price for the Unwire stock was
approximately $72 million. We paid the purchase price by issuing to the
stockholders of Unwire an aggregate of 1,075,000 shares of Common Stock with a
market value of approximately $72.2 million. On August 4, 2000, we registered
268,772 of the shares issued to the former stockholders of Unwire. We agreed to
register the remaining Shares under the Securities Act no later than
December 31, 2000.
On December 6, 2000, the Company and Castle Creek entered into a Securities
Purchase Agreement, pursuant to which the Company issued to Castle Creek 6%
convertible notes in the aggregate principal amount of $10,000,000 and five-year
warrants to purchase up to 210,526 shares of the Company's Common Stock. The
convertible notes are due September 30, 2002, and may be prepaid prior to such
date upon the satisfaction of certain conditions (including the issuance of
additional warrants). See "Description of Securities--Castle Creek Convertible
Notes and Warrants".
43
<PAGE>
THE SELLING STOCKHOLDERS
The persons listed below are the Selling Stockholders:
<TABLE>
<CAPTION>
AMOUNT OF
AMOUNT OF COMMON
COMMON AMOUNT OF STOCK TO BE
STOCK COMMON AFTER HELD
BENEFICIALLY STOCK OFFERING IS
NAME OF SELLING STOCKHOLDER OWNED REGISTERED COMPLETE*
--------------------------- ------------ ---------- -----------
<S> <C> <C> <C>
1999 PRIVATE PLACEMENT SELLING STOCKHOLDERS
Aburano, Timothy and JoEllen................................ 3,125 3,125 0
Amelio, Nick R.............................................. 5,625 5,625 0
Anderson, Michael and Florence.............................. 2,625 2,625 0
Baffoe, Joseph.............................................. 6,023 6,023 0
Batterson, Jeff............................................. 2,893 2,893 0
Bemoras, David.............................................. 5,625 5,625 0
Benton, Bruce Declaration of Trust.......................... 33,750 33,750 0
Bernstein, Alfred E......................................... 5,625 5,625 0
Binder, Jeffrey T........................................... 3,000 3,000 0
Bobb, Robert J.............................................. 11,000 11,000 0
Bonello, Philip H........................................... 5,625 5,625 0
Bones, Daniel............................................... 250 250 0
Bonfitto, Joseph............................................ 11,250 11,250 0
Bjorklund, Craig A. and Mundt, Kelly M...................... 5,625 5,625 0
Bourjaily, Paul and Barbara................................. 5,625 5,625 0
Brent, Jason................................................ 350 350 0
Broderick, Dennis and Barbara............................... 5,625 5,625 0
Broman, Donald Scott........................................ 263 263 0
Brophy, Michael F........................................... 5,625 5,625 0
Bullough, Shane H........................................... 11,250 11,250 0
Capra, Christopher.......................................... 8,942 8,942 0
Carlson, Robert............................................. 1,052 1,052 0
Chhabria, Shakuntala Irrevocable Trust...................... 5,625 5,625 0
Clark, James E.............................................. 5,625 5,625 0
Clauss, Robert.............................................. 5,625 5,625 0
Crawford, Doug.............................................. 1,841 1,841 0
Cochrane, Joyce M........................................... 5,625 5,625 0
Eugene E. Cook Trust........................................ 5,625 5,625 0
Corkhill Insurance Agency Inc............................... 11,250 11,250 0
Craig, Steven J............................................. 11,250 11,250 0
Del Ghingaro, Robert Sr. and Del Ghingaro, Robert Jr........ 2,813 2,813 0
Demnicki, Michael R......................................... 5,625 5,625 0
Dale A. Drake, Trustee for Drs. Drake LTD Pension Plan...... 6,000 5,625 375
Constance Dubois, Trustee................................... 5,625 5,625 0
Dunnett, Richard............................................ 1,052 1,052 0
Egan, John W................................................ 5,625 5,625 0
ELK Realty & Building Co., Inc.............................. 5,625 5,625 0
Everett, W. Allan........................................... 5,625 5,625 0
Flynn, Thomas............................................... 15,250 15,250 0
Franks, Malcolm............................................. 5,625 5,625 0
Gary C. Garrett Revocable Trust............................. 11,250 11,250 0
Gedelman, Frank............................................. 5,625 5,625 0
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF
AMOUNT OF COMMON
COMMON AMOUNT OF STOCK TO BE
STOCK COMMON AFTER HELD
BENEFICIALLY STOCK OFFERING IS
NAME OF SELLING STOCKHOLDER OWNED REGISTERED COMPLETE*
--------------------------- ------------ ---------- -----------
<S> <C> <C> <C>
Gilpin, Wayne A............................................. 25,000 25,000 0
Gilpin, Marital Trust....................................... 5,219 5,219 0
Gleaves, William............................................ 2,104 2,104 0
Gosney, Gregory S........................................... 5,625 5,625 0
Hadley, Peter F............................................. 1,406 1,406 0
Hayes, Robert............................................... 11,250 11,250 0
Hein, Curtis................................................ 263 263 0
Hiler, Lawrence............................................. 11,250 11,250 0
John J. Holzer Revocable Living Trust....................... 3,625 3,625 0
Hull, Chris................................................. 3,604 3,604 0
Humphrey, Todd.............................................. 7,625 7,625 0
Javier, Ramon and Emma...................................... 5,625 5,625 0
Joyner, Courtney K.......................................... 5,625 5,625 0
Kilrea, Scott W............................................. 5,625 5,625 0
Kozak, James................................................ 2,630 2,630 0
Kozin, David and Renee...................................... 5,625 5,625 0
Kromelow, Basil............................................. 11,250 11,250 0
Lamphere, Robert G.......................................... 15,250 15,250 0
Lee, C. Glenn and Karen..................................... 5,625 5,625 0
Lehman, John W.............................................. 7,625 7,625 0
Macke, Elmer H.............................................. 5,625 5,625 0
Madison Securities Inc...................................... 5,000 5,000 0
Mann, James L............................................... 11,250 11,250 0
Marassa, Robert............................................. 3,682 3,682 0
Martin, Rex................................................. 2,813 2,813 0
MBS Holdings LLC............................................ 11,250 11,250 0
Midwest Investment Group.................................... 20,875 20,875 0
Mikels, Ken Wayne........................................... 1,315 1,315 0
Miller, Bradford............................................ 5,625 5,625 0
Moore, Gerald and Monica.................................... 15,250 15,250 0
Morgan, Scott C............................................. 263 263 0
Morse Sr., James A. Trust................................... 11,250 11,250 0
Morse, Robert J. Trust...................................... 11,250 11,250 0
Moss, Jeff.................................................. 7,890 7,890 0
Muasher, Issa E............................................. 7,625 7,625 0
Mulack, Virginia W.......................................... 4,000 4,000 0
Munden, Evelyn Munden Family LP............................. 5,625 5,625 0
Murphy, Dean and Dawn....................................... 5,625 5,625 0
Orland, Keith B. and Margaret............................... 5,625 5,625 0
Owens, Michael.............................................. 250 250 0
Pederson, William Scott..................................... 5,625 5,625 0
Pohl, Michael and Vivian.................................... 5,625 5,625 0
Pravecek, Christopher....................................... 30,131 30,131 0
Pruitt, John P.............................................. 26,875 26,875 0
Prutzman, George W.......................................... 1,944 1,944 0
Rasmussen, James E.......................................... 8,000 8,000 0
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF
AMOUNT OF COMMON
COMMON AMOUNT OF STOCK TO BE
STOCK COMMON AFTER HELD
BENEFICIALLY STOCK OFFERING IS
NAME OF SELLING STOCKHOLDER OWNED REGISTERED COMPLETE*
--------------------------- ------------ ---------- -----------
<S> <C> <C> <C>
Ridge, James P.............................................. 5,625 5,625 0
Robinson, John P............................................ 5,625 5,625 0
Rogers, Shaun............................................... 3,419 3,419 0
Ronald Stone, Trustee, Ronald Stone Insurance Trust......... 16,875 16,875 0
Rosenak, Dave............................................... 2,813 2,813 0
Ryan, Michael TTEE Michael Ryan Revocable Trust............. 5,625 5,625 0
Sanders, Helen McKay........................................ 4,625 4,625 0
Saunders, Thomas B. and Karen M............................. 5,625 5,625 0
Scheumann, Dennis........................................... 11,250 11,250 0
Schreiber, Marc............................................. 7,031 7,031 0
Shelby Limited Partnership.................................. 5,625 5,625 0
Slevin, John F.............................................. 5,625 5,625 0
Smithburg, William D........................................ 5,625 5,625 0
Spencer, Robert J........................................... 5,625 5,625 0
Sterling CellPoint, LLC..................................... 84,250 84,250 0
Stabus, Brain............................................... 1,713 1,713 0
Straus, Richard R........................................... 2,500 2,500 0
Tenex Investment Club....................................... 11,250 11,250 0
Tenzer, Lee................................................. 8,000 8,000 0
Thompson, Randy............................................. 5,625 5,625 0
Tierney, James and Marita................................... 11,250 11,250 0
Toolamation Inc............................................. 5,625 5,625 0
Trandel, David.............................................. 8,260 8,260 0
Tyrone, James............................................... 4,000 4,000 0
Tyrone, James and Nancy..................................... 9,250 9,250 0
Unkel, Robert and Mary...................................... 5,625 5,625 0
Weiss, Fred................................................. 5,625 5,625 0
Weiss, Joanna Lee........................................... 1,841 1,841 0
Weiss, Joshua............................................... 500 500 0
Wieseneck Enterprises LP.................................... 11,250 11,250 0
Wilbers, David L............................................ 5,625 5,625 0
TOTAL....................................................... 898,695 898,320 375
</TABLE>
------------------------
* Assumes all shares covered by this Prospectus are sold.
Since August 4, 2000, the effective date of the original prospectus issued
pursuant to a registration statement that became effective on August 4, 2000,
the 1999 Private Placement Selling Stockholders sold an aggregate of 494,935 of
Common Stock. These sales have been reflected in the 1999 Private Placement
Selling Stockholders information above.
<TABLE>
<CAPTION>
AMOUNT OF
AMOUNT OF COMMON
COMMON AMOUNT OF STOCK TO BE
STOCK COMMON AFTER HELD
BENEFICIALLY STOCK OFFERING IS
NAME OF SELLING STOCKHOLDER OWNED REGISTERED COMPLETE*
--------------------------- ------------ ---------- -----------
<S> <C> <C> <C>
UNWIRE SELLING STOCKHOLDERS
AB Basen.................................................... 13,023 3,256 9,767
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF
AMOUNT OF COMMON
COMMON AMOUNT OF STOCK TO BE
STOCK COMMON AFTER HELD
BENEFICIALLY STOCK OFFERING IS
NAME OF SELLING STOCKHOLDER OWNED REGISTERED COMPLETE*
--------------------------- ------------ ---------- -----------
<S> <C> <C> <C>
Carlson, Roger(1)........................................... 2,441 611 1,830
Dahlin, Anna................................................ 4,651 1,164 3,487
eRasmus Management AB....................................... 36,491 9,124 27,367
Foretagspartner AB.......................................... 36,491 9,124 27,367
Gellberg, Kaj............................................... 9,767 2,443 7,324
Hoglund, Thomas(2).......................................... 3,276 2,811 465
Johansson, Kent............................................. 9,802 0 9,802
Jundin, Christopher......................................... 465 117 348
Jundin, Per(3).............................................. 30,210 3,000 27,210
Jundin, Peter............................................... 2,325 582 1,743
Karl Stockman AB............................................ 275,148 31,996 243,152
Ledstiernan Kapitalforvaltning AB........................... 5,581 1,396 4,185
Ledstiernan BV.............................................. 36,491 9,124 27,367
Ledstiernan Business Development AB......................... 36,491 9,124 27,367
Ledstiernan Investment Ltd.................................. 36,491 9,124 27,367
Ledstiernan KB.............................................. 20,466 5,117 15,349
Ljung, Mats................................................. 1,151 289 862
Lundberg, Jakob(4).......................................... 4,651 1,164 3,487
Lundberg, Per............................................... 56,657 15,116 45,341
Lundberg, Sara.............................................. 4,651 1,164 3,487
Norra Brofastet I Sundvall AB............................... 36,491 9,124 27,367
Olesen, Kerstin............................................. 5,180 1,295 3,885
Olesen, Lykke............................................... 5,180 1,295 3,885
Procuritas Investment Partners (PIP) BV..................... 164,211 0 164,211
Rosen, Thomas............................................... 23,611 5,904 17,707
Soderberg, Bertil........................................... 121,400 30,350 91,050
Soderberg, Orjan............................................ 3,837 961 2,876
Stenhammar, Olof............................................ 11,323 2,831 8,492
Strombom, Krister........................................... 6,102 1,526 4,576
Unium AB.................................................... 130,939 16,751 114,188
Wallon, Michael(5).......................................... 465 0 465
TOTAL....................................................... 1,135,459 185,883 953,376
</TABLE>
------------------------
* Assumes all shares covered by this Prospectus are sold.
(1) Roger Carlson is presently part of Senior Technical Management of Unwire.
(2) Thomas Hoglund was a founder of Unwire. He is presently part of the Senior
Management of Unwire.
(3) Per Jundin was previously the Managing Director of Unwire.
(4) Per Lundberg was previously a member of the Board of Directors of Unwire.
(5) Michael Wallon was a founder of Unwire and has served as the Interim
Managing Director of Unwire. He is presently part of the Senior Management
of Unwire.
With respect to the 1,075,000 shares of Common Stock issued to the Selling
Stockholders in connection with the Unwire acquisition, we registered 268,772 of
those shares pursuant to a registration statement that became effective on
August 4, 2000. The Unwire Selling Stockholders sold an aggregate of 89,500
shares of common stock pursuant to such registration statement.
47
<PAGE>
PLAN OF DISTRIBUTION
We will not receive any of the proceeds of the sale of the Shares offered
hereby. Some of the Shares included in this Prospectus have not yet been issued,
but are issuable upon the exercise of warrants held by certain of the Selling
Stockholders, which warrants have exercise prices ranging from $7.49 to $8.89.
In connection with the exercise of such warrants, each warrant holder may elect
to pay the exercise price by (i) cash or check or (ii) net issuance; i.e.,
cashless exercise. To the extent that a warrant holder elects the net issuance
method, we would not receive any cash as a result of such exercise. To date, the
holders of warrants for 114,750 shares of our Common Stock have exercised their
warrants, resulting in the issuance of 83,594 shares of Common Stock. While the
majority of the holders of such warrants chose to pay the exercise price by the
net issuance method, we received proceeds of $149,800 from holders that paid
their exercise price in cash. We have used these proceeds for our working
capital. Additional proceeds, if any, that we receive from the exercise of the
warrants will be used for working capital.
The Shares may be sold from time to time to purchasers directly by the
Selling Stockholders. Alternatively, the Selling Stockholders may from time to
time offer the Shares through brokers, dealers or agents who may receive
compensation in the form of discounts, concessions or commissions from the
Selling Stockholders and/or the purchasers of the Shares for whom they may act
as agent. The Selling Stockholders and any such brokers, dealers or agents who
participate in the distribution of the Shares may be deemed to be
"underwriters", and any profits on the sale of the Shares by them and any
discounts, commissions or concessions received by any such brokers, dealers or
agents might be deemed to be underwriting discounts and commissions under the
Securities Act. To the extent the Selling Stockholders may be deemed to be
underwriters, the Selling Stockholders may be subject to certain statutory
liabilities of the Securities Act, including, but not limited to, Sections 11,
12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act.
The Shares offered hereby may be sold from time to time in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
at varying prices determined at the time of sale or at negotiated prices. The
Shares may be sold by one or more of the following methods, without limitation:
(a) a block trade in which the broker or dealer so engaged will attempt to sell
the Shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction; (b) purchases by a broker or dealer as
principal and resale by such broker or dealer for its account pursuant to this
Prospectus; (c) ordinary brokerage transactions and transactions in which the
broker solicits purchasers; (d) an exchange distribution in accordance with the
rules of such exchange; (e) face-to-face transactions between sellers and
purchasers without a broker-dealer; (f) through the writing of options; and
(g) other. At any time a particular offer of the Shares is made, a revised
prospectus or prospectus supplement, if required, will be distributed which will
set forth the aggregate amount and type of Shares being offered and the terms of
the offering, including the name or names of any underwriters, dealers or
agents, any discounts, commissions and other items constituting compensation
from the Selling Stockholders and any discounts, commissions or concessions
allowed or reallowed or paid to dealers. Such prospectus supplement and, if
necessary, a post-effective amendment to the Registration Statement of which
this Prospectus is a part, will be filed with the SEC to reflect the disclosure
of additional information with respect to the distribution of the Shares. In
addition, the Common Stock covered by this Prospectus may be sold in private
transactions or under Rule 144 rather than pursuant to this Prospectus.
To our knowledge, the Selling Stockholders do not currently have any plans,
arrangements or understandings with any broker, dealer, agent or underwriter
regarding the sale of the Shares. There is no assurance that any Selling
Stockholder will not sell any or all of the Shares offered by him, her or it
hereunder or that any such Selling Stockholder will not transfer, devise or gift
such Shares.
The Selling Stockholders and any other person participating in such
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and the rules and regulations
thereunder, including, without limitation, Regulation M, which may limit the
timing of purchases and sales of any of the Shares by the Selling Stockholders
and any other such person. All of the
48
<PAGE>
foregoing may affect the marketability of the Shares and the ability of any
person or entity to engage in market activities with respect to the Shares.
Pursuant to the registration rights set forth in the various subscription
agreements between the Company and the Selling Stockholders, each of the Company
and the Selling Stockholders will be indemnified by the other against certain
liabilities, including certain liabilities under the Securities Act, or will be
entitled to contribution in connection therewith. We have agreed to pay
substantially all of the expenses incidental to the registration, offering and
sale of the Shares to the public other than commissions, fees and discounts of
underwriters, brokers, dealers and agents, transfer taxes and fees and expenses
of Selling Stockholders' counsels.
INDEMNIFICATION
We shall, to the fullest extent permitted by Section 78.7502 of the
Corporation Law of the State of Nevada, as the same may be amended and
supplemented, indemnify under said section any director, officer, employee or
agent from and against any and all expenses, liabilities or other matters
referred in or covered by said section, and the indemnification provided for
herein shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any By-Law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person. We will have the power to purchase and maintain officers' and
directors' liability insurance in order to insure against the liabilities for
which such officers and directors are indemnified pursuant to our Amended and
Restated By-Laws.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT
MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE COMPANY
PURSUANT TO THE FOREGOING PROVISIONS, OR OTHERWISE, THE COMPANY HAS BEEN
INFORMED THAT IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION SUCH
INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE SECURITIES ACT AND
IS THEREFORE UNENFORCEABLE. IN THE EVENT THAT A CLAIM FOR INDEMNIFICATION
AGAINST SUCH LIABILITIES (OTHER THAN THE PAYMENT BY THE COMPANY OF EXPENSES
INCURRED OR PAID BY A DIRECTOR, OFFICER OR CONTROLLING PERSON OF THE COMPANY IN
THE SUCCESSFUL DEFENSE OF ANY ACTION, SUIT OR PROCEEDING) IS ASSERTED BY SUCH
DIRECTOR, OFFICER OR CONTROLLING PERSON IN CONNECTION WITH THE SECURITIES BEING
REGISTERED, WE WILL, UNLESS IN THE OPINION OF OUR COUNSEL THE MATTER HAS BEEN
SETTLED BY CONTROLLING PRECEDENT, SUBMIT TO A COURT OF APPROPRIATE JURISDICTION
THE QUESTION WHETHER SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED
IN THE SECURITIES ACT AND WILL BE GOVERNED BY THE FINAL ADJUDICATION OF SUCH
ISSUE.
We carry directors' and officers' liability insurance covering losses up to
$3,000,000 (subject to certain deductible amounts).
LEGAL OPINIONS
The law firm of Salans Hertzfeld Heilbronn Christy & Viener, our counsel,
620 Fifth Avenue, New York, New York 10020, has rendered an opinion regarding
the validity of the Shares offered hereby.
EXPERTS
The financial statements of CellPoint for Fiscal year ended June 30, 2000
and 1999 and the financial statements of Unwire AB for the years ended
December 31, 1999 and 1998 included in this Prospectus have been audited by BDO
Stoy Hayward, independent accountants, to the extent and for the periods set
forth in their report appearing elsewhere herein and are included in reliance
upon such report given upon the authority of said firm as experts in auditing
and accounting.
49
<PAGE>
<TABLE>
<S> <C>
FINANCIAL STATEMENTS
CELLPOINT INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS (AUDITED)
FOR THE FISCAL YEARS ENDED JUNE 30, 2000 AND 1999
Report of BDO Stoy Hayward, Independent Auditors............ F-2
Consolidated Balance Sheets as of June 30, 2000 and 1999.... F-3
Consolidated Statements of Operations for the years ended
June 30, 2000 and 1999.................................... F-4
Consolidated Statements of Stockholders' Equity and
comprehensive income/(loss) for the years ended June 30,
2000 and 1999............................................. F-5
Consolidated Statements of Cash Flows for the years ended
June 30, 2000 and 1999.................................... F-7
Notes to the Consolidated Financial Statements.............. F-8
UNWIRE SYSTEMS AB
FINANCIAL STATEMENTS (AUDITED)
FOR THE FISCAL YEARS ENDED DECEMBER 31, 1999 AND 1998
(a) Unwire Systems AB
Report of the Independent Accountants....................... F-22
Balance Sheets as of December 31, 1999 and 1998............. F-23
Statements of Operations for the years ended December 31,
1999 and 1998............................................. F-24
Statements of Stockholders' Equity (deficit) for the years
ended December 31, 1999 and 1998.......................... F-25
Statements of Cash Flows for the years ended December 31,
1999 and 1998............................................. F-26
Notes forming part of the Financial Statements.............. F-27
(b) Pro Forma Financial Information
Unaudited Pro Forma Consolidated Financial Information...... F-33
Unaudited Pro Forma Consolidated Statement of Operations for
the Year Ended June 30, 1999.............................. F-34
Unaudited Pro Forma Consolidated Statement of Operations for
the Nine Months Ended March 31, 2000...................... F-35
CELLPOINT INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
AS OF AND FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
Consolidated Balance Sheets as of September 30, 2000
(Unaudited) and June 30, 2000............................. F-36
Consolidated Statements of Operations for the three month
period ended September 30, 2000 and September 30, 1999
(Unaudited)............................................... F-37
Consolidated Statements of Comprehensive Income for the
three-month period ended September 30, 2000 and
September 30, 1999 (Unaudited)............................ F-38
Consolidated Statements of Cash Flows for the three-month
period ended September 30, 2000 and September 30, 1999
(Unaudited)............................................... F-39
Notes to Consolidated Financial Statements.................. F-40
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS REPORT
To the Board of Directors and Stockholders
CellPoint Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of
CellPoint Inc. and subsidiaries (the Company) as of June 30, 2000 and 1999 and
the related consolidated statements of operations, stockholders' equity and
comprehensive income (loss) and cash flows for each of the years ended June 30,
2000 and 1999. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. These standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
CellPoint Inc. and Subsidiaries as of June 30, 2000 and 1999, and the results of
their operations and their cash flows for the years ended June 30, 2000 and 1999
in conformity with generally accepted accounting principles in the United
States.
\s\ BDO STOY HAYWARD
London,
United Kingdom
September 1, 2000
F-2
<PAGE>
CELLPOINT, INC. AND SUBSIDIARIES
(FORMERLY TECHNOR INTERNATIONAL, INC.)
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN USD)
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
NOTE 2000 1999
-------- ----------- -----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 6,624,662 $ 180,073
Accounts receivable, net of allowance for doubtful
accounts of $36,732 and $Nil, respectively.............. 211,948 --
Prepaid expenses.......................................... 5 160,717 19,597
Other receivables......................................... 242,198 20,533
Inventory................................................. 6 169,635 --
Other current assets...................................... 371,900 15,990
----------- -----------
TOTAL CURRENT ASSETS........................................ 7,781,060 236,193
----------- -----------
LONG-TERM ASSETS
Acquired technology, net of amortization of $3,415,787 and
$Nil.................................................... 7 $68,801,585 $ --
Investments in affiliated companies....................... 500,000 500,000
Other intangible assets................................... 8 8,993,080 10,910,209
Furniture, equipment, and motor vehicles net of
depreciation of $180,108 and $46,142, respectively...... 9 630,585 110,140
----------- -----------
TOTAL LONG-TERM ASSETS...................................... 78,925,250 11,520,349
----------- -----------
TOTAL ASSETS................................................ $86,706,310 $11,756,542
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued expenses and other current liabilities............ 10 $ 1,623,441 $ 223,633
Accounts payable.......................................... 786,766 39,518
Deferred revenue.......................................... -- 58,690
Due to shareholders....................................... -- 150,000
Due to affiliate.......................................... 11 55,517 123,799
Other loans and overdraft................................. 12 140,510 --
----------- -----------
TOTAL CURRENT LIABILITIES................................... 2,606,234 595,640
LONG TERM DEBT, NET OF CURRENT MATURITIES
Bank loans................................................ 13 4,000,000 --
----------- -----------
TOTAL LIABILITIES........................................... 6,606,234 595,640
----------- -----------
STOCKHOLDERS' EQUITY
Common shares ($0.001 par value; 22,000,000 shares
authorized; 10,465,000 issued as at June 30, 2000 and
7,440,000 shares issued and 750,000 shares to be issued
as of June 30, 1999..................................... 10,465 8,190
Additional paid in capital................................ 95,434,348 14,961,373
Cumulative foreign currency translation adjustment........ 292,866 (2,318)
Accumulated deficit....................................... (15,637,603) (3,806,343)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY.................................. 80,100,076 11,160,902
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $86,706,310 $11,756,542
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
CELLPOINT, INC. AND SUBSIDIARIES
(FORMERLY TECHNOR INTERNATIONAL, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN USD)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
NOTE 2000 1999
-------- ------------ -----------
<S> <C> <C> <C>
Revenues.................................................... $ 915,478 $ --
Cost of revenues............................................ (529,956) --
------------ -----------
Gross profit................................................ 385,522 --
Selling, general and administrative expenses................ (4,782,099) (1,637,240)
Professional fees........................................... (1,742,848) (534,176)
Depreciation and amortization............................... (5,647,950) (702,063)
------------ -----------
Loss from operations........................................ (11,787,375) (2,873,479)
Financial items, net........................................ 15 (43,885) (96,272)
------------ -----------
Loss before income tax...................................... (11,831,260) (2,969,751)
Income tax.................................................. 16 -- --
------------ -----------
Net loss.................................................... $(11,831,260) $(2,969,751)
============ ===========
Net loss per common share:
Basic and diluted......................................... $ (1.35) $ (0.40)
Weighted average number of shares outstanding, basic and
diluted................................................... 8,743,630 7,440,000
============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
CELLPOINT, INC. AND SUBSIDIARIES
(FORMERLY TECHNOR INTERNATIONAL, INC.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
(AMOUNTS IN USD)
<TABLE>
<CAPTION>
COMMON SHARES COMMON SHARES TO BE
ISSUED ISSUED
-------------------- --------------------- ADDITIONAL
NUMBER NUMBER OF PAID-IN DEFICIT SUBSCRIPTIONS
OF SHARES AMOUNT SHARES AMOUNT CAPITAL ACCUMULATED RECEIVABLE
--------- -------- ---------- -------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1998....... 4,715,000 $4,715 2,725,000 $2,725 $ 11,662,123 $ (836,592) $ (120,000)
--------- ------ ---------- ------ ------------- ------------- -------------
1998--shares issued.......... 2,725,000 2,725 (2,725,000) (2,725) -- -- --
Comprehensive income (loss):
Net loss..................... -- -- -- -- -- (2,969,751) --
Other comprehensive income
(loss):
Currency translation......... -- -- -- -- -- -- --
--------- ------ ---------- ------ ------------- ------------- -------------
Comprehensive loss for fiscal
year.......................
--------- ------ ---------- ------ ------------- ------------- -------------
Subscriptions paid........... -- -- -- -- -- -- 120,000
Shares to be issued in
connection with purchased
technology................. -- -- 500,000 500 2,299,500 -- --
Shares to be issued in
connection with marketing
agreement.................. -- -- 250,000 250 999,750 -- --
--------- ------ ---------- ------ ------------- ------------- -------------
Balance, June 30, 1999....... 7,440,000 $7,440 750,000 $ 750 $ 14,961,373 $ (3,806,343) $ --
========= ====== ========== ====== ============= ============= =============
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME/(LOSS) TOTAL
------------- -----------
<S> <C> <C>
Balance, June 30, 1998....... $ 363 $10,713,334
------- -----------
1998--shares issued.......... -- --
Comprehensive income (loss):
Net loss..................... -- (2,969,751)
Other comprehensive income
(loss):
Currency translation......... (2,681) (2,681)
------- -----------
Comprehensive loss for fiscal
year....................... (2,972,432)
------- -----------
Subscriptions paid........... -- 120,000
Shares to be issued in
connection with purchased
technology................. -- 2,300,000
Shares to be issued in
connection with marketing
agreement.................. -- 1,000,000
------- -----------
Balance, June 30, 1999....... $(2,318) $11,160,902
======= ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
CELLPOINT, INC. AND SUBSIDIARIES
(FORMERLY TECHNOR INTERNATIONAL, INC.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
(LOSS)(CONTINUED)
(AMOUNTS IN USD)
<TABLE>
<CAPTION>
COMMON SHARES TO
COMMON SHARES ISSUED BE ISSUED
--------------------- -------------------- ADDITIONAL
NUMBER NUMBER OF PAID-IN DEFICIT SUBSCRIPTIONS
OF SHARES AMOUNT SHARES AMOUNT CAPITAL ACCUMULATED RECEIVABLE
---------- -------- --------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1998............ 7,440,000 $ 7,440 750,000 $ 750 $14,961,373 $ (3,806,343) $ --
November 1999 private placement
(net of issuance costs)......... 1,125,000 1,125 -- -- 8,998,875 -- --
1999--shares issued............... 750,000 750 (750,000) (750) -- -- --
Shares issued in connection with
with the acquisition of Unwire
AB.............................. 1,075,000 1,075 -- -- 70,680,175 -- --
Original issue debt discount...... -- -- -- -- 660,000 -- --
Shares issued in connection with
purchased technology (note 3)... 75,000 75 -- -- (75) -- --
Sale of warrants to employees
(note 17)....................... -- -- -- -- 134,000 -- --
Comprehensive income (loss)
Net loss.......................... -- -- -- -- -- (11,831,260) --
Other comprehensive income (loss):
Currency translation.............. -- -- -- -- -- -- --
---------- ------- -------- ----- ----------- ------------ ---------
Comprehensive loss for fiscal
year............................
---------- ------- -------- ----- ----------- ------------ ---------
Balance, June 30, 2000............ 10,465,000 $10,465 -- $ -- $95,434,348 $(15,637,603) $ --
========== ======= ======== ===== =========== ============ =========
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME/(LOSS) TOTAL
------------- -----------
<S> <C> <C>
Balance, June 30, 1998............ $ (2,318) $11,160,902
November 1999 private placement
(net of issuance costs)......... -- 9,000,000
1999--shares issued............... -- --
Shares issued in connection with
with the acquisition of Unwire
AB.............................. -- 70,681,250
Original issue debt discount...... -- 660,000
Shares issued in connection with
purchased technology (note 3)... -- --
Sale of warrants to employees
(note 17)....................... -- 134,000
Comprehensive income (loss)
Net loss.......................... -- (11,831,260)
Other comprehensive income (loss):
Currency translation.............. 295,184 295,184
-------- -----------
Comprehensive loss for fiscal
year............................ (11,536,076)
-------- -----------
Balance, June 30, 2000............ $292,866 $80,100,076
======== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
CELLPOINT, INC. AND SUBSIDIARIES
(FORMERLY TECHNOR INTERNATIONAL, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN USD)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
2000 1999
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................. $(11,831,260) $(2,969,751)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH PROVIDED BY
OPERATING ACTIVITIES (NET OF ACQUISITION OF BUSINESS)
Depreciation.............................................. 133,966 39,282
Amortization.............................................. 5,513,984 662,781
Increase in other current assets.......................... (49,437) (15,990)
Increase in accounts receivable........................... (207,042) --
Increase in prepaid expenses.............................. (324,710) 21,056
Increase in other receivables............................. (87,665) 50,281
Increase in accrued expenses and other current
liabilities............................................. 31,223 11,425
Increase/(decrease) in accounts payable................... 636,764 (207,522)
(Decrease)/increase in due to affiliate................... (51,319) 123,799
(Decrease) in advance from employee....................... -- (151,554)
Increase in inventory..................................... (73,382) --
------------ -----------
NET CASH USED IN OPERATING ACTIVITIES....................... (6,308,878) (2,436,193)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of shares in affiliate........................... -- (500,000)
Purchase of fixed assets.................................. (443,647) (12,320)
------------ -----------
NET CASH USED IN INVESTING ACTIVITIES....................... (443,647) (512,320)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances(payments) of stockholders' loans................. (150,000) (100,000)
Net proceeds from issuance of shares...................... 9,000,000 2,466,667
Advances of bank loans.................................... 4,000,000 --
Net cash acquired through acquisition of Unwire AB........ 8,499 --
------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES................... 12,858,499 2,366,667
------------ -----------
Effects of exchange rate changes on cash.................... 338,615 (2,684)
------------ -----------
Net increase in cash and cash equivalents................... 6,444,589 (584,530)
Cash and cash equivalents at beginning of period............ 180,073 764,603
------------ -----------
Cash and cash equivalents at end of period.................. $ 6,624,662 $ 180,073
============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE>
CELLPOINT, INC. AND SUBSIDIARIES
(FORMERLY TECHNOR INTERNATIONAL, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN USD)
1 THE BUSINESS
CellPoint, Inc. and Subsidiaries (formerly Technor International, Inc.)
("the Company" or "CellPoint"), was incorporated in the state of Nevada on
February 28, 1997. CellPoint owns a GSM (Global System for mobile
communications) positioning system technology which can be used for a variety of
positioning and telematics applications including positioning standard mobile
phones for resource management, information, safety and security, locating
vehicles, management of security and alarm systems, surveillance of rented
objects as well as for remote control of industrial equipment.
On January 16, 1998 CellPoint formed a wholly-owned subsidiary in Sweden,
CellPoint Systems AB. This is CellPoint's commercial arm focusing primarily on,
but not limited to, Europe.
Effective February 28, 1999, CellPoint acquired 100% of Wasp International
(Pty) Limited, a South African Company ("Wasp") (see note 3).
Effective February 29, 2000 CellPoint acquired 100% of Unwire AB, a Swedish
Company ("Unwire") (see note 4). Unwire focuses on the worldwide marketing
development and sales of products for telematics. Telematics involves wireless
remote management and control of machines and equipment.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
The accompanying consolidated financial statements include the financial
statements of CellPoint and all its subsidiaries and have been prepared in
accordance with United States generally accepted accounting principles and are
presented in US dollars. All material inter-Company transactions and balances
have been eliminated.
(B) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investments with
original maturities of three months or less.
(C) INVENTORY
Inventory consists primarily of purchased parts and subassemblies and are
valued at the lower of cost (on a first in first out basis) and net realisable
value.
(D) ACQUIRED TECHNOLOGY
Acquired technology is the difference between the value of the consideration
paid and the value of the assets and liabilities acquired. It is amortised
through the statement of operations over a period of seven years, which is
management's best estimate of its useful economic life.
F-8
<PAGE>
CELLPOINT, INC. AND SUBSIDIARIES
(FORMERLY TECHNOR INTERNATIONAL, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN USD)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(E) INVESTMENT IN AFFILIATE
The investment in an affiliate is recorded at the lower of cost or net
realizable value, as no significant influence is exercised over the financial
and operating decisions of that affiliate.
(F) DEVELOPED TECHNOLOGY AND PATENTS
Patent costs represent the expense of preparing and filing applications to
patent the Company's proprietary technologies, in addition to certain patent and
license rights obtained in the Company's acquisitions. Such costs are amortized
over a period of three years, beginning on the date the patents or rights are
issued or acquired. Amortization expense for fiscal 2000 and 1999 was $62,905
and $Nil, respectively.
Developed technology costs for products and certain product enhancements are
capitalized subsequent to the establishment of their technological feasibility
(as defined in Statement of Financial Accounting Standards No. 86) based upon
the existence of working models of the products which are ready for initial
customer testing. Costs incurred prior to such technological feasibility or
subsequent to a product's general release to customers are expensed as incurred.
During fiscal 2000 and 1999, the Company capitalized costs of $58,761 and $Nil,
respectively. Amortization of these costs commenced in fiscal 2000 when the
related product was released to customers. Amortization expense reported for the
fiscal years 2000 and 1999, was $46,953 and $Nil, respectively. The development
technology is amortized over it estimated life of three years.
(G) OTHER INTANGIBLE ASSETS
Other intangible assets are amortized on a straight-line basis over their
estimated lives, as follows: purchased technology seven years, the Matrix
franchising concept, the term of the agreement, which is three years, and
employment contracts, the length of the employment contracts, which is two
years.
(H) FURNITURE, EQUIPMENT AND MOTOR VEHICLES
Furniture and equipment are recorded at acquisition cost less accumulated
depreciation. Depreciation is calculated using a straight-line method over the
estimated useful lives of the related assets. Computer equipment is depreciated
over three years and other furniture and equipment over five years. Furniture
and equipment acquired during the year is depreciated from the date the assets
are put to service. Motor vehicles are depreciated over three years.
Expenditures for normal maintenance and repairs are charged to income.
Significant improvements are capitalized.
(I) IMPAIRMENT OF LONG-LIVED ASSETS
The Company periodically evaluates potential impairment of long-lived assets
based upon cash flows. A loss relating to an impairment of assets occurs when
the aggregate of the estimated undiscounted future cash inflows to be generated
by the Company's assets groups (including any salvage values) are less than the
related assets' carrying value. Impairment is measured based on the difference
between the higher of the fair value of the assets or present value of the
discounted
F-9
<PAGE>
CELLPOINT, INC. AND SUBSIDIARIES
(FORMERLY TECHNOR INTERNATIONAL, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN USD)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
expected future cash flows and the assets' carrying value. No impairment has
been recorded through June 30, 2000.
(J) DEFERRED REVENUE
Income arises from contracts with cellular service providers. Contracts
consist of a basic monthly fee and a performance related element. Where the
period related to the performance related element exceeds the balance sheet date
an estimate, based upon available information of the amount earned to date is
made.
(K) INCOME TAXES
The Company utilizes the asset and liability method to account for income
taxes whereby deferred tax assets and liabilities are recognized to reflect the
future tax consequences attributable to temporary differences between the
financial reporting basis of existing assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are measured using
enacted tax rates expected to be recovered and settled. The effect of a change
in tax rates on deferred tax assets and liabilities is recognized in the period
in which the change is enacted.
(L) MAJOR CUSTOMERS
The Company's two largest customers accounted for 68% and 22% of the group's
sales for the fiscal year ended June 30, 2000. Accounts receivable from these
two customers represented 81% and Nil% of accounts receivables at June 30, 2000
and 1999, respectively.
(M) EARNINGS PER SHARE
The Company calculated its earnings per share pursuant to SFAS No. 128,
"Earnings per Share", which requires the presentation of both basic and fully
diluted earnings per share (EPS). Assumed exercise of options has not been
included in the calculation of diluted EPS since the effect would be
anti-dilutive. Accordingly, basic and diluted net loss per share do not differ
for any period presented. EPS is computed based on the loss to common
stockholders and the weighted average number of shares outstanding. The weighted
average number of shares outstanding were 8,743,630 and 7,440,000 for the
periods ended of June 30, 2000 and 1999, respectively.
(N) FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign units are translated at balance sheet date
rates to USD. Income statements are translated at the average exchange rate for
the period. Translation differences that arise are recorded directly as a
component of stockholders' equity.
Receivables and liabilities denominated in foreign currencies are translated
at balance sheet date rates. Unrealized exchange gains and losses on translation
are reported in the income statement.
F-10
<PAGE>
CELLPOINT, INC. AND SUBSIDIARIES
(FORMERLY TECHNOR INTERNATIONAL, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN USD)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(O) USE OF ESTIMATES
The preparation of financial statements 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 dates of
the financial statements and the reported amounts of expenses during the
reporting periods. Actual results could differ from those estimates.
(P) STOCK COMPENSATION
The Company accounts for stock options granted to employees under the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25"), as permitted by SFAS No. 123
("SFAS 123"),"Accounting for Stock-Based Compensation". APB 25 provides for
compensation cost to be recognized over the vesting period of the options based
on the difference, if any, between the fair market value of the Company's stock
and the option price on the grant date. SFAS No. 123 requires the Company to
provide pro forma disclosures of net income and earnings per share as if the
optional fair value method had been applied to determine compensation costs for
the Company's stock option plans.
(Q) RECLASSIFICATIONS
Certain numbers relating to the fiscal year ended June 30, 1999 have been
reclassified to conform to the current year presentation.
(R) EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, as amended by SFAS No. 137 "Accounting for Derivative Instruments
and Hedging Activities," which requires the Company to value derivative
financial instruments, including those used for hedging foreign currency
exposures, at current market value with the impact of any change in market value
being charged against earnings in each period. SFAS No. 133 will be effective
for and adopted by the Company in the first quarter of the fiscal year ended
May 31, 2002. The Company has not in the past nor does it anticipate that it
will engage in transactions involving derivative instruments, and therefore does
not expect this pronouncement to have any effect on the financial statements.
In December 1999, the Securities Exchange Commission issued Staff Accounting
Bulletin ("SAB") No. 101, "Revenue Recognition". This bulletin summarizes views
of the Staff on applying generally accepted accounting principles to revenue
recognition in financial statements. The Company will be required to adopt SAB
No. 101 in the fourth quarter of fiscal 2001. Management believes that the
current revenue recognition policy complies with the guidelines in SAB No. 101
and, therefore, does not believe the adoption of SAB No. 101 will have a
material impact on the financial position or results of operations.
In March 2000, the FASB issued Financial Interpretation No. 44, "Accounting
for Certain Transactions involving Stock Compensation an interpretation of APB
Opinion 25". Interpretation No. 44 is effective July 1, 2000. Interpretation
No. 44 clarifies the application of APB Opinion 25 for
F-11
<PAGE>
CELLPOINT, INC. AND SUBSIDIARIES
(FORMERLY TECHNOR INTERNATIONAL, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN USD)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
various matters, specifically: the criteria for determining whether a plan
qualifies as a non-compensatory plan; the accounting consequence of various
modifications to the terms of a previously fixed stock option or award; and the
accounting for an exchange of stock compensation awards in a business
combination. Management believes that the adoption of Interpretation No. 44 note
will not have a material impact on the Company's financial position or results
of operations.
In March 2000, the FASB's Emerging Issue Task Force ("EITF") reached a
consensus on EITF 00-2, "Accounting for Web Site Development Costs". EITF 00-2
discusses how an entity should account for costs incurred to develop a web site.
The EITF is effective in the first quarter of fiscal 2001. Management believes
that the adoption of EITF 00-2 will not have a material impact on the Company's
financial position or results of operations.
3 TRANSACTIONS WITH NOVEL ELECTRONIC SYSTEMS & TECHNOLOGIES("NOVEL"), WASP
INTERNATIONAL (PTY) LIMITED ("WASP"), MATRIX VEHICLE TRACKING (PTY) LIMITED
("MATRIX") AND WASP SA (PTY) LIMITED ("WASP SA")SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
On May 26, 1998, the Company entered into a license agreement with Wasp for
Wasp's positioning system technology and a two step option to purchase 100% of
the shares in Wasp in exchange for a combination of shares of the Company and
cash.
On June 20, 1998, the Company exercised the first option and purchased 25%
of the shares of Wasp.
The total transaction amounted to a share transfer of 1,950,000 shares of
CellPoint's stock valued at $4.00 per share and $500,000 in cash.
The original agreements we amended and restated effective February 28, 1999
as follows:
CellPoint acquired:
- 100% of Wasp International including, the development team (18 persons, as
at the date of the transaction, were employed in Wasp International).
- Intellectual Property Rights (IPR) and total ownership of the technology
for use throughout the world, except Africa, south of the Sahara, which
had previously been acquired form the owners of the technology by Novel.
- 10% of the common stock of Wasp SA--Wasp SA is the Company with the
current operations in South Africa and Intellectual Property Rights (IPR)
for Africa, south of the Sahara.
The total consideration in the above transactions was as follows:
- 2,450,000 shares in CellPoint at the then current market price of $4 per
share which amounted to $9,800,000 plus a $50,000 cash payment to Novel
for the Intellectual Property Rights. (Of the above shares, 1,950,000
shares had already been issued under the previous agreements before the
amendment).
F-12
<PAGE>
CELLPOINT, INC. AND SUBSIDIARIES
(FORMERLY TECHNOR INTERNATIONAL, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN USD)
3 TRANSACTIONS WITH NOVEL ELECTRONIC SYSTEMS & TECHNOLOGIES("NOVEL"), WASP
INTERNATIONAL (PTY) LIMITED ("WASP"), MATRIX VEHICLE TRACKING (PTY) LIMITED
("MATRIX") AND WASP SA (PTY) LIMITED ("WASP SA")SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
- $950,000 to the stockholders of Wasp International (Pty) Limited
(subsequently renamed CellPoint Systems SA (Pty) Limited) comprising
$450,000 for the acquisition of Wasp International (Pty) Limited and
$500,000 for the 10% interest in Wasp SA (of the above amount, $500,000
had already been paid under the previous agreements before the amendment).
The acquisition of Wasp International and the technology have been accounted
for at fair value since neither the former shareholders of Wasp International
nor Novel were promoters of CellPoint. The investment in Wasp SA is accounted
for under the cost method since CellPoint does not exercise significant
influence over he financial or operating decisions of Wasp SA.
In accordance with the agreements, CellPoint was required to issue an
additional 75,000 shares during the current fiscal year since certain stock
price targets were not met. The cost of shares was recorded at market value at
the time of the agreement of $4.00 per share with a corresponding credit to
additional paid-in capital. Under the terms of the agreements CellPoint could
have been required to pay a maximum of $750,000 at the end of 1999 if certain
stock price targets were not met. These targets were met and the additional
consideration did not fall due.
In connection with the acquisitions, the Company also concluded an agreement
with Matrix Vehicle Tracking (Pty) Limited ("Matrix"), the company that has
commercialized the technology in South Africa. Matrix received 250,000 shares in
CellPoint, with a market value of $4.00 per share (the then current market
price), for services Matrix performed in the acquisition of the technology and
the development team and its transfer of know-how and procedures of vehicle
tracking. Matrix will also continue to provide its services to CellPoint for
three years under the current agreement commencing March 1, 1999.
In connection with the acquisition of Wasp International, the excess
purchase price over the book value of assets acquired amounted to $422,990 which
was allocated to employment contracts.
This intangible asset will be amortized over the term of the agreements
which is two years. The purchased technology will be amortized over its
estimated useful life of seven years and the Matrix Service agreement will be
amortized over three years, the term of the agreement.
4 ACQUISITION
On February 29, 2000, the Company acquired all of the outstanding shares of
Unwire AB for 1,075,000 shares of the Company's common stock, having a fair
market value of approximately $72.2 million. Such fair market value was
determined based on the average of the closing prices of the Company's common
stock for the two days immediately prior to the Company's announcement of the
transaction on February 17, 2000. The Company accounted for this acquisition as
a purchase. The excess cost over fair market value of the net tangible
liabilities acquired was approximately $72.2 million and was allocated to
acquired technology which will be amortized over seven years. Results of
operations have been included in the Company's consolidated financial statements
for the period from March 1, 2000 through June 30, 2000.
F-13
<PAGE>
CELLPOINT, INC. AND SUBSIDIARIES
(FORMERLY TECHNOR INTERNATIONAL, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN USD)
4 ACQUISITION (CONTINUED)
The pro forma unaudited results of operations for the years ended June 30,
2000 and 1999, combining the acquisition of Unwire AB as though it was acquired
by the Company as of July 1, 1998, are as follows:
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
2000 1999
----------- ----------
<S> <C> <C>
Revenue..................................................... $ 1,053,989 $ 186,546
Net loss.................................................... $12,665,312 $4,083,273
Net loss per common share................................... $ (1.35) $ (0.40)
</TABLE>
The purchase price of $71,341,250 has been allocated to assets acquired and
liabilities assessed based on the fair market value of the date of acquisition
as follows:
<TABLE>
<S> <C> <C>
Current assets.............................................. $ 564,372
Acquired technology......................................... 72,217,372
Current liabilities......................................... (1,440,494)
----------- ----------
$71,341,250
=========== ==========
</TABLE>
5 PREPAID EXPENSES
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
2000 1999
----------- ----------
<S> <C> <C>
Rent........................................................ 96,636 --
Other general prepayments................................... 64,081 19,597
----------- ----------
$ 160,717 $ 19,597
=========== ==========
</TABLE>
6 INVENTORY
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
2000 1999
----------- -----------
<S> <C> <C>
Work in progress........................................... $ 86,879 $ --
Finished goods............................................. 82,756 --
----------- -----------
$ 169,635 $ --
=========== ===========
</TABLE>
F-14
<PAGE>
CELLPOINT, INC. AND SUBSIDIARIES
(FORMERLY TECHNOR INTERNATIONAL, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN USD)
7 ACQUIRED TECHNOLOGY
Acquired technology at June 30, 2000 and 1999 consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
2000 1999
----------- -----------
<S> <C> <C>
Arising on the acquisition of Unwire AB.................... $72,217,372 $ --
Amortization............................................... (3,415,787) --
----------- -----------
$68,801,585 $ --
=========== ===========
</TABLE>
8 OTHER INTANGIBLE ASSETS
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
2000 1999
----------- -----------
<S> <C> <C>
Purchased technology, net of amortization of $1,933,338 and
$483,336 respectively.................................... $ 8,216,662 $ 9,666,664
Matrix franchising concept, net of amortization of $444,445
and $111,112, respectively............................... 555,555 888,888
Employment contracts, net of amortization of $273,331 and
$68,333, respectively.................................... 149,659 354,657
Patents, net of amortization of $62,905 and $Nil,
respectively............................................. 59,396 --
Developed technology, net of amortization of $46,953 and
$Nil, respectively....................................... 11,808 --
----------- -----------
$ 8,993,080 $10,910,209
=========== ===========
</TABLE>
9 FURNITURE, EQUIPMENT AND MOTOR VEHICLES
Furniture, equipment and motor vehicles at June 30, 2000 and 1999 consisted
of the following:
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
2000 1999
----------- -----------
<S> <C> <C>
Furniture and equipment.................................... $ 835,011 $ 156,282
Motor vehicles............................................. 18,538 --
----------- -----------
853,549 156,282
Accumulated depreciation................................... (222,964) (46,142)
----------- -----------
$ 630,585 $ 110,140
=========== ===========
</TABLE>
F-15
<PAGE>
CELLPOINT, INC. AND SUBSIDIARIES
(FORMERLY TECHNOR INTERNATIONAL, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN USD)
10 ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
2000 1999
---------- ---------
<S> <C> <C>
Professional fees........................................... $ 660,000 $ 76,636
Accrued vacation pay........................................ 389,558 112,541
Payroll taxes and social security costs..................... 204,930 18,580
Other....................................................... 368,953 15,876
---------- --------
$1,623,441 $223,633
========== ========
</TABLE>
11 RELATED PARTIES
Included within balance due to affiliates is the following balance
<TABLE>
<CAPTION>
JUNE 30,
2000
---------
<S> <C>
Amounts due to Wasp SA (Pty) Ltd............................ $ 55,517
========
</TABLE>
The company has incurred expenses of $55,517 for services provided by an
affiliated company.
12 OTHER LOANS AND OVERDRAFTS
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
2000 1999
--------- ---------
<S> <C> <C>
Overdraft................................................... $ 54,995 $ --
Other loans................................................. 85,515 --
-------- -------
$140,510 $ --
======== =======
</TABLE>
The bank overdraft is secured by a floating charge over the assets of a
Unwire AB. Interest is charged at 8.7%.
The bank loan is secured by a floating charge over the assets of Unwire AB.
Interest is charged at 10.2% per annum. The loan is repayable by quarterly
instalment.
13 BANK LOANS
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
2000 1999
----------- ---------
<S> <C> <C>
Bank loans.................................................. $ 4,000,000 $ --
=========== =======
</TABLE>
F-16
<PAGE>
CELLPOINT, INC. AND SUBSIDIARIES
(FORMERLY TECHNOR INTERNATIONAL, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN USD)
13 BANK LOANS (CONTINUED)
Interest on the loan is payable quarterly in arrears and is charged at 9%
per annum. Security for the loan is given by items of corporate governance as
may reasonably by required by the tenders attorneys. The loan is required to be
repaid in total no later than July 31, 2001.
14 SEGMENT INFORMATION
The Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" for fiscal 2000 year end reporting. The
statement requires disclosure of certain financial information related to
operating segments. The Company has determined that it operates in two
reportable segments, positioning technology/location services and telematics.
The positioning segment is primarily engaged in the development, manufacture and
sales of its proprietary positioning systems to provide identifiable locations
for specific cellphone handsets. The telematics segment is engaged in the
development manufacture and sales of telematics based applications. Its
equipment and process innovations are used in a broad range of industries and
applications including credit transfer for financial instructions.
The accounting policies of the reportable segments are the same as those
described in note 2, "Summary of significant accounting policies". The segments
are measured on operating profits or losses before net interest income and
income taxes.
A summary of the Company's operations by segment for the years ended
June 30, 2000 and 1999, respectively are as follows:
<TABLE>
<CAPTION>
POSITIONING TELEMATICS TOTAL
------------ ------------ ------------
<S> <C> <C> <C>
YEAR ENDED JUNE 30, 2000
Revenues.................................... $ 839,003 $ 76,475 $ 915,478
Loss from operations........................ (7,614,318) (4,173,057) (11,787,375)
Total assets................................ 16,560,540 70,145,770 86,706,310
Depreciation and amortization............... 2,418,978 3,228,972 5,647,950
YEAR ENDED JUNE 30, 1999
Revenues.................................... -- -- --
Loss from operations........................ (2,873,475) -- (2,873,475)
Total assets................................ 11,756,542 -- 11,756,542
Depreciation and amortization............... 702,063 -- 702,063
</TABLE>
F-17
<PAGE>
CELLPOINT, INC. AND SUBSIDIARIES
(FORMERLY TECHNOR INTERNATIONAL, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN USD)
15 FINANCIAL ITEMS, NET
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
2000 1999
--------- ---------
<S> <C> <C>
Interest income............................................. $ 144,221 $ 33,895
Interest expense............................................ (190,122) --
Unrealized exchange losses.................................. -- (22,755)
Realized exchange gains/(losses)............................ 2,016 (107,412)
--------- ---------
$ (43,885) $ (96,272)
========= =========
</TABLE>
16 INCOME TAXES
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
2000 1999
--------- ---------
<S> <C> <C>
Current tax expenses:
Federal................................................... $ -- $ --
State..................................................... -- --
Foreign................................................... -- --
Deferred tax expense:
Federal................................................... -- --
State..................................................... -- --
Foreign................................................... -- --
--------- ---------
Total tax provision......................................... $ -- $ --
========= =========
</TABLE>
CellPoint's wholly-owned subsidiaries, CellPoint Systems AB, Unwire AB and
CellPoint Systems SA, had net operating losses for the year ended June 30, 2000
and were not subject to tax in Sweden and South Africa, respectively.
The significant components of the Company's deferred income tax assets are
as follows:
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
2000 1999
----------- -----------
<S> <C> <C>
Deferred income tax assets:
Net operating losses..................................... $ 4,022,628 $ 1,294,000
Unrealized currency gain................................. (99,600) (7,700)
Valuation allowance...................................... (3,923,028) (1,286,300)
----------- -----------
Net deferred income tax asset.............................. $ -- $ --
=========== ===========
</TABLE>
The Company's combined net operating tax losses carried forward amount to
approximately US $11,831,260 at June 30, 2000.
F-18
<PAGE>
CELLPOINT, INC. AND SUBSIDIARIES
(FORMERLY TECHNOR INTERNATIONAL, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN USD)
16 INCOME TAXES (CONTINUED)
Reconciliation of the effective tax rate to the statutory rate is as
follows:
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
2000 1999
----------- -----------
<S> <C> <C>
Tax expense at average statutory rate for group
companies................................................ (30.7)% (34.0)%
Permanent differences...................................... 0.5 0.5
Change in valuation allowance.............................. 30.2 33.5
----------- -----------
Effective tax rate......................................... -- % -- %
=========== ===========
</TABLE>
17 STOCK OPTIONS AND WARRANTS
(A) STOCK INCENTIVE PLAN
In 1998, the Company adopted a Stock Incentive Plan ("the Stock Incentive
Plan") for its employees, officers and directors (whether or not employees). The
Stock Incentive Plan provides for the grant of non-qualified stock options. The
Stock Incentive Plan provides that for each option granted under the Stock
Incentive Plan, the exercise price shall not be less than 100% of the fair
market value of the common share on the date before the option is granted. The
Stock Incentive Plan provides that options granted vest in one, two or three
installments: the first being six to twelve months, the second being one year to
two years, and the third being eighteen months to twenty-eight months after the
anniversary of the date of grant, and expire no later than 10 years subsequent
to the grant date.
The number of shares authorized for grants under the Share Option Plan is
1,500,000 and the number of options granted at June 30, 2000 was 1,126,000. As
of June 30, 2000, no options had been exercised.
The following table summarizes information about stock options outstanding
at June 30, 2000.
<TABLE>
<CAPTION>
WEIGHTED
OUTSTANDING AVERAGE WEIGHTED WEIGHTED
RANGE OF AS OF REMAINING AVERAGE EXERCISABLE AS AVERAGE
EXERCISE JUNE 30, CONTRACTUAL EXERCISE OF JUNE 30, EXERCISE
PRICES 2000 YEARS PRICES 2000 PRICES
--------------------- ----------- ----------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
$1.00 125,000 8.2 1.00 -- $ --
$2.50-$2.75 335,000 7.8 2.70 125,000 2,65
$3.00-$3.88 60,000 8.2 3.25 60,000 3.25
$4.00-$4.63 180,000 8.4 4.29 100,000 4.03
$7.00 130,000 9.2 7.00 -- --
$13.63-$14.94 115,000 9.2 14.45 -- --
$17.00-$23.88 175,000 9.9 19.13 -- --
$64.00 6,000 9.7 64.00 -- --
--------- -------
1,126,000.. 285,000
========= =======
</TABLE>
F-19
<PAGE>
CELLPOINT, INC. AND SUBSIDIARIES
(FORMERLY TECHNOR INTERNATIONAL, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN USD)
17 STOCK OPTIONS AND WARRANTS (CONTINUED)
Information concerning the Stock Incentive Plan is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
YEAR ENDED OPTION AVERAGE
OPTION PRICE PER PRICE PER
SHARES SHARE SHARE
---------- -------------------- ---------
<S> <C> <C> <C>
Outstanding at June 30, 1998...................... 405,000 $1.00-$2.75 $ 2.21
Granted........................................... 435,000 2.50-$4.63 3.63
Exercised......................................... -- -- --
Cancelled/expired................................. -- -- --
---------- -------------------- ------
Outstanding at June 30, 1999...................... 840,000 $1.00-$4.63 $ 2.94
Granted........................................... 661,000 $7.00-$74.00 18.97
Exercised......................................... -- -- --
Cancelled/expired................................. (375,000) $3.38-$74.00 26.15
---------- -------------------- ------
Outstanding at June 30, 2000...................... 1,126,000 $1.00-$64.00 $ 7.02
========== ==================== ======
</TABLE>
(B) WARRANTS
In May, 2000 the Company instituted a warrant plan whereby warrants may be
granted to employees, officers and directors. The warrant plan provides that the
exercise price of each warrant granted will be 150% or 125% of the market price
of the company's shares on the day such warrants are granted. Such warrants are
purchased by the employee, officer or director at a price equal to the fair
market value of the warrant on the date of the grant. The fair market value is
determined using the Black Scholes valuation method. The plan provides for half
of the warrants to vest two years or three years after the date of grant, and
have a life of six months from the vesting date.
The following table summarizes information about the warrant plan at
June 30, 2000:
<TABLE>
<CAPTION>
OUTSTANDING WEIGHTED
RANGE OF AS OF AVERAGE EXERCISABLE
EXERCISE JUNE 30, EXERCISE AS OF
PRICES 2000 PRICES JUNE 30, 2000
-------- ----------- -------- --------------
<S> <C> <C> <C> <C>
$25.50 322,000 $25.50 --
======= ======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED WARRANT EXERCISABLE
WARRANT PRICE PER PRICE PER
SHARES SHARE SHARE
---------- --------- -----------
<S> <C> <C> <C>
Granted............................................... 322,000 $ 0.40 $25.50
------- ------ ------
Outstanding at June 30, 2000.......................... 322,000 $ 0.40 $25.50
=======
</TABLE>
F-20
<PAGE>
CELLPOINT, INC. AND SUBSIDIARIES
(FORMERLY TECHNOR INTERNATIONAL, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN USD)
17 STOCK OPTIONS AND WARRANTS (CONTINUED)
The Company has used the Black Scholes pricing model to determine fair value
of each option and warrant, as follows:
<TABLE>
<CAPTION>
OPTIONS WARRANTS
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Risk free interest rate..................................... 6.10 4.97 6.10 --
Expected option life........................................ 3.0 3.0 0.5 --
Volatility.................................................. 45.8 % 65.0% 45.8% --
Dividends expected.......................................... -- -- -- --
</TABLE>
SFAS 123 requires the Company to provide pro forma disclosures of net loss
and net loss per share as if the fair value method had been used to determine
compensation costs.
The following represents the Company's net loss and net loss per share under
the fair value method of accounting for stock compensation.
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
2000 1999
------------ -----------
<S> <C> <C> <C>
Net loss As reported........................................ $(11,831,260) $(2,961,751)
Compensation--options.............................. (766,500) (630,900)
Compensation--warrants............................. -- --
------------ -----------
Pro forma.......................................... (12,597,760) (3,592,651)
============ ===========
Loss per share As reported........................................ (1.35) (0.40)
Compensation--options.............................. (0.09) (0.08)
Compensation--warrants............................. -- --
------------ -----------
Pro forma.......................................... (1.44) (0.48)
============ ===========
</TABLE>
18 COMMITMENTS AND CONTINGENCIES
A significant portion of the Company's business is conducted in currencies
other than the US dollar (the currency in which its financial statements are
stated), primarily the Swedish krona. The Company incurs a significant portion
of its expenses in Swedish krona and South African Rand, including all of its
product development expenses and a substantial portion of its general and
administrative expenses. As a result, the value of the Swedish krona and South
African Rand relative to the other currencies in which the Company generates
revenues, particularly the US dollar, could adversely affect operating results.
The Company does not currently undertake hedging transactions to cover its
currency.
The Company rents an office under an operating lease agreement, on a month
by month basis. Rental expense amounted to $49,855 and $4,612 for 2000 and 1999,
respectively. On July 1, 1999 the Company signed a lease for nine months with
future minimum rental payments of $35,714.
The Company is obligated under various employment agreements with certain
officers, which provide for base annual compensation aggregating $378,959. All
agreements are for two years with two expiring May 31, 2001 and two expiring
July 31, 2001.
F-21
<PAGE>
UNWIRE AB
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Unwire AB
We have audited the accompanying balance sheets of Unwire AB (the "Company")
as of December 31, 1999 and 1998 and the related statements of operations,
stockholders' equity (deficit) and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with US generally accepted auditing
standards. Those standards require that we plan and perform our 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Unwire AB as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for the years then ended in conformity with US generally accepted accounting
principles.
/s/ BDO Stoy Hayward
London, England
May 9, 2000
F-22
<PAGE>
UNWIRE AB
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
NOTE 1999 1998
---- ------------- -------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............................... $ 11,251 $ 89,076
Stock subscriptions receivable.......................... -- 352,224
Trade receivables, net of allowance
for losses of $1,732 and $6,052 in 1999 and 1998,
respectively 81,544 46,323
Prepaid expenses........................................ 36,185 38,639
Other receivables....................................... 71,577 102,240
Inventories............................................. 188,334 8,459
----------- ----------
Total current assets.................................. 388,891 636,961
----------- ----------
Other assets:
Software development costs, net......................... 4 109,841 67,379
Patents and trademarks, net............................. 5 164,443 97,556
Furniture and equipment, net............................ 6 39,054 35,827
----------- ----------
Total other assets.................................... 313,338 200,762
----------- ----------
Total Assets.............................................. $ 702,229 $ 837,723
=========== ==========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Trade payables.......................................... $ 375,941 $ 205,846
Factor borrowings....................................... 44,281 63,203
Notes payable bank...................................... 7 147,758 18,506
Notes payable- stockholders............................. 8 46,822 --
Accrued expenses........................................ 208,236 99,263
----------- ----------
Total current liabilities............................. 823,038 386,818
----------- ----------
Non current liabilities:
Convertible debentures.................................. 9 585,480 --
Long term debt, net of current portion.................. 7 70,233 166,553
----------- ----------
Total non-current liabilities......................... 655,713 166,553
----------- ----------
Stockholders' (deficit) equity:
Common shares ($0.08 par value; 1,805,900 shares
authorised; 1,000,000 shares issued and
outstanding).......................................... 81,556 81,556
Additional paid in capital.............................. 1,243,017 1,243,017
Cumulative foreign currency translation adjustment...... 29,850 1,831
Accumulated deficit..................................... (2,130,945) (1,042,052)
----------- ----------
Total stockholders' (deficit) equity.................. (776,522) 284,352
----------- ----------
Total liabilities and stockholders' (deficit) equity...... $ 702,229 $ 837,723
=========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements
F-23
<PAGE>
UNWIRE AB
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
NOTE 1999 1998
-------- ------------- -------------
<S> <C> <C> <C>
REVENUES, NET............................................... $ 712,067 $ 160,331
Cost of revenues............................................ (764,254) (579,009)
----------- -----------
GROSS LOSS.................................................. (52,187) (418,678)
Selling expenses............................................ (335,076) (256,638)
Administrative expenses..................................... (541,112) (327,469)
Research and development costs.............................. (133,305) (156,229)
Other operating income...................................... 15,090 27,638
----------- -----------
LOSS FROM OPERATIONS........................................ (1,046,590) (1,131,376)
Financial items, net........................................ 10 (42,303) (6,866)
----------- -----------
LOSS BEFORE INCOME TAXES.................................... (1,088,893) (1,138,242)
Provision for income taxes.................................. 3 -- --
----------- -----------
NET LOSS.................................................... $(1,088,893) $(1,138,242)
=========== ===========
BASIC AND DILUTED LOSS PER SHARE............................ $ (1.089) $ (1.476)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING, BASIC AND
DILUTED................................................... 1,000,000 771,041
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-24
<PAGE>
UNWIRE AB
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMMON SHARES ADDITIONAL COMPREHENSIVE
-------------------- PAID IN ACCUMULATED INCOME
SHARES AMOUNT CAPITAL DEFICIT (LOSS) TOTAL
--------- -------- ---------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1998........................ 714,000 $58,232 $ 318,318 $ 96,190 -- $ 472,740
-----------
Comprehensive income loss:
Net loss.................................... -- -- -- (1,138,242) -- (1,138,242)
Other comprehensive income loss
Foreign currency translation.............. -- -- -- -- 1,831 1,831
-----------
Comprehensive loss for fiscal year.......... (1,136,411)
-----------
September 1998 share subscription at SEK29.167
per share net of offering costs............... 60,000 4,893 214,683 -- -- 219,576
November 1998 subscription at SEK26.316 per
share......................................... 95,000 7,748 305,930 -- -- 313,679
November 1998 subscription at SEK21.126 per
share net of offering costs................... 71,000 5,790 182,409 -- -- 188,198
November 1998 subscription at SEK20.833 per
share net of offering costs................... 60,000 4,893 158,087 -- -- 162,980
Shareholders contributions...................... -- -- 63,590 -- -- 63,590
--------- ------- ---------- ----------- ------- -----------
BALANCE, DECEMBER 31, 1998...................... 1,000,000 81,556 1,243,017 (1,042,052) 1,831 284,352
Comprehensive income loss:
Net loss.................................... -- -- -- (1,088,893) -- (1,088,893)
Other comprehensive income loss
Foreign currency translation.............. -- -- -- -- 28,019 28,019
-----------
Comprehensive loss for fiscal year.......... -- -- -- -- -- (1,060,874)
--------- ------- ---------- ----------- ------- -----------
BALANCE, DECEMBER 31, 1999...................... 1,000,000 $81,556 $1,243,017 $(2,130,945) $29,850 $ (776,522)
========= ======= ========== =========== ======= ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-25
<PAGE>
UNWIRE AB
CASH FLOW STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(AMOUNTS IN USD)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
CASH INFLOW FROM OPERATING ACTIVITIES
Net loss.................................................. $(1,088,893) $(1,138,242)
Depreciation.............................................. 10,268 8,706
Amortization.............................................. 162,432 98,175
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN
OPERATING ACTIVITIES:
Increase in accounts receivable........................... (35,221) (44,190)
(Increase)/decrease in prepaid expenses................... 2,454 (717)
Decrease in other receivables............................. 30,663 8,865
Increase in inventories................................... (179,875) (8,459)
Increase in accounts payable.............................. 170,159 177,759
Increase/(decrease) in factor borrowings.................. (18,922) 63,203
Increase/(decrease) in accrued expenses................... 108,973 (39,282)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES..................... (837,962) (874,182)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture and equipment....................... (13,559) (44,468)
Additions to patents and trademarks....................... (138,798) (146,334)
Software development costs................................ (132,983) (116,776)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES..................... (285,340) (307,578)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock.................... 352,224 975,031
Proceeds from bank loan................................... 32,932 185,059
Proceeds from stockholders' loans......................... 46,822 --
PROCEEDS FROM ISSUANCE OF CONVERTIBLE DEBENTURES.......... 585,480 --
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES................. 1,017,458 1,160,090
----------- -----------
EFFECT OF CHANGES IN EXCHANGE RATES ON CASH................. 28,019 1,831
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (77,825) (19,839)
CASH AND CASH EQUIVALENTS, AT THE BEGINNING OF THE YEAR..... 89,076 108,915
----------- -----------
CASH AND CASH EQUIVALENTS, AT THE END OF THE YEAR........... $ 11,251 $ 89,076
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-26
<PAGE>
UNWIRE AB
NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 31, 1999 AND 1998
1 THE COMPANY
Unwire AB ("the Company", Unwire), was incorporated in Sweden July 28, 1997.
Unwire has produced a GSM (Global System for mobile communications) positioning
system technology (the Technology) which can be used for a variety of
positioning and telematics applications including positioning standard mobile
phones for resource management, information, safety and security, locating
vehicles, management of security and alarm systems, surveillance of rented
objects as well as for remote control of industrial equipment.
Unwire is marketing and further developing the positioning and telematics
applications. Unwire's systems consists of a UP Platform with a powerful
processor and a large flash memory that makes it possible to use in virtually
any communication task, mobile or fixed.
On November 3, 1997, Unwire acquired a wholly-owed subsidiary in Sweden,
Unwire Positioning AB ("Positioning"), Positioning is now dormant with the trade
and intangible assets having been transferred to the Company.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements represent the financial statements of
Unwire and have been prepared in accordance with US generally accepted
accounting principles and are presented in US dollars.
REVENUE RECOGNITION
The Company records revenues on product sales at the time of shipment.
FOREIGN CURRENCY TRANSLATION
Monetary assets and liabilities are translated at the rates prevailing at
the balance sheet date to US dollars. Non-monetary assets and liabilities have
been translated at the date of transaction. Income statements are translated at
average exchange rate for the period. Translation differences that arise are
recorded directly as a component of stockholders' equity. Receivables and
liabilities denominated in foreign currencies are translated at the rates
prevailing at the balance sheet date. Unrealised exchange gains and losses on
translation are reported in the income statement.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investments with
original maturities of three months or less. The majority of the Company's cash
and cash equivalents reside with high quality Swedish financial institutions.
Therefore, the cash balances are not insured by the US Federal Deposit Insurance
Corporation. The Company has not experienced any losses in such accounts.
INVENTORIES
Inventories are valued at the lower of cost or market value, with cost
determined using the first-in, first-out method. At December 31, 1999 and 1998,
inventories consisted of work in process which amounted to $188,334 and $8,459,
respectively.
F-27
<PAGE>
UNWIRE AB
NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FURNITURE AND EQUIPMENT
Furniture and equipment are recorded at acquisition cost less accumulated
depreciation. Depreciation is calculated using a straight line method over the
estimated useful lives of the related assets. Furniture and equipment is
depreciated over 5 years. Furniture and equipment acquired during the year are
depreciated from the date the assets are put to service. Expenditures for normal
maintenance and repairs are charged to income. Significant improvements are
capitalised.
PATENTS AND TRADEMARKS
Patent and trademark costs represent the cost of preparing and filing
applications to patent the Company's proprietary technologies. Such costs are
amortized over the shorter of the life of the patent or the economic lives of
the assets, generally three years, beginning on the date the patents or rights
are issued. Amortization expense for 1999 and 1998 was $71,911 and $48,788,
respectively.
SOFTWARE DEVELOPMENT COSTS
Software development costs for products and certain product enhancements are
capitalised subsequent to the establishment of their technological feasibility
(as defined in Statement of Financial Accounting Standards No. 86) based upon
the existence of working models of the products which are ready for initial
customer testing. Costs incurred prior to such technological feasibility or
subsequent to a product's general release to customers are expensed as incurred.
During 1999 and 1998, the Company incurred and capitalized $137,892 and $116,776
of Software development costs. Amortization expense reported for the years 1999
and 1998 was $90,521 and $49,397, respectively. Amortization expense is based
upon the ratio that current gross revenues bear to total estimated gross
revenues which was an amount approximating the amortization on a straight line
method over the estimated economic life of the product of three years.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company periodically evaluates potential impairment of long-lived assets
based upon cash flows. A loss relating to an impairment of assets occurs when
the aggregate of the estimated undiscounted future cash inflows to be generated
by the Company's assets (including any salvage values) are less than the related
assets' carrying value. Impairment is measured based on the difference between
the higher of the fair value of the assets or present value of the discounted
expected future cash flows and the assets' carrying value. No impairment was
recorded in fiscal 1999 and 1998.
INCOME TAXES
The Company utilizes the assets and liability method to account for income
taxes whereby deferred tax assets and liabilities are recognized to reflect the
future tax consequences attributable to temporary differences between the
financial reporting basis of existing assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are measured using
enacted tax rates expected to be recovered and settled. The effect of exchange
in tax rates on deferred tax assets and liabilities is recognized in the period
in which the change is enacted.
F-28
<PAGE>
UNWIRE AB
NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARE
The Company calculated its earnings per share pursuant to SFAS No. 128,
"Earnings per Share", which requires the presentation of both basic and fully
diluted earnings per share (EPS). Assumed exercise of options and conversion of
debt have not been included in the calculation of diluted EPS since the effects
would be anti-dilutive. Accordingly, basic and diluted net loss per share do not
differ for any period presented. EPS is computed based on the loss to common
stockholders and the weighted average number of shares outstanding. The weighted
average number of shares outstanding was 1,000,000 and 771,041 as of
December 31, 1999 and 1998, respectively.
USE OF ESTIMATES
The preparation of financial statements 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 dates of
the financial statements and the reported amounts of expenses during the
reporting periods. Actual results could differ from those estimates.
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998 the Financial Accounting Standards Board FASB issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities",
which establishes accounting and reporting requirements for derivative
instruments SFAS No. 133, as amended by SFAS No.137 is effective for fiscal
years beginning after June 30, 2000. The Company has not in the past nor does it
anticipate that it will engage in transactions involving derivative instruments,
and therefore does not expect this pronouncement to have any effect on the
financial statements.
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 130 "Reporting Comprehensive Income" in the first quarter of fiscal 1998.
SFAS No 130 sets standards for the reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is
comprised of net income and all changes in stockholders' equity except those due
to investments by owners and distributions to owners, which for the Company
includes unrealized gains (losses) on marketable securities. The Company has
elected to disclose comprehensive income in its Statement of Changes in
Stockholders' Equity.
STOCK SPLIT
During November 1998, the Company completed a 1,000 for 1 stock split of its
common stock. Accordingly, all shares and per share amounts have been
retroactively restated in the financial statements to reflect this split.
F-29
<PAGE>
UNWIRE AB
NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
3 INCOME TAXES
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Current tax expenses:....................................... -- --
Federal................................................... -- --
State..................................................... -- --
Foreign................................................... -- --
Deferred tax expenses:
Federal................................................... -- --
State..................................................... -- --
Foreign................................................... -- --
-------- --------
Total tax provision....................................... -- --
======== ========
</TABLE>
Unwire AB did not have taxable income for the period from January 1 1998 and
therefore does not have any current income tax expenses.
The significant components of the company's deferred income tax assets are
as follows:
Deferred income tax assets:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Net operating losses.................................. $ 596,000 $ 292,000
Valuation allowance................................... (596,000) (292,000)
--------- ---------
Net deferred income tax asset......................... $ -- $ --
========= =========
</TABLE>
The Swedish net operating losses amount to approximately US$2,100,000 at
December 31, 1999. These net operating losses do not expire.
Reconciliation of the effective tax rate to the US statutory rate is as
follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Tax expense at Swedish statutory rate....................... (28)% (28)%
Change in valuation allowances.............................. 28% 28%
--- ---
Effective income tax rate................................... -- --
=== ===
</TABLE>
4 SOFTWARE DEVELOPMENT COSTS, NET
Software development costs at December 31, 1999 and 1998 consisted of the
following:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Software development costs.............................. $200,362 $116,776
Less accumulated amortization........................... (90,521) (49,397)
-------- --------
$109,841 $ 67,379
======== ========
</TABLE>
F-30
<PAGE>
UNWIRE AB
NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
5 PATENTS AND TRADEMARKS, NET
Patents and trademarks at December 31, 1999 and 1998 consisted of the
following:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Patents and trademarks................................ $ 285,132 $ 146,334
Less accumulated amortization......................... (120,689) (48,778)
--------- ---------
$ 164,443 $ 97,556
========= =========
</TABLE>
6 FURNITURE AND EQUIPMENT
Furniture and equipment at December 31, 1999 and 1998 consisted of the
following:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Furniture and equipment................................. $ 49,322 $ 44,533
Less accumulated depreciation........................... (10,268) (8,706)
-------- --------
$ 39,054 $ 35,827
======== ========
</TABLE>
7 LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Note payable--bank...................................... $217,991 $185,059
Less: current maturities................................ 147,758 18,506
-------- --------
$ 70,233 $166,553
======== ========
</TABLE>
Note payable--bank is payable in quarterly principal installments of
$4,627.00, with a balloon payment in June 2001. The note bears interest at 9.85%
and is due June, 2000. The note is collateralized by the assets of the Company.
8 NOTES PAYABLE--STOCKHOLDERS
All of the stockholders of the Company, lent the Company $46,822 during the
year. The notes are payable on demand and are non-interest bearing.
9 CONVERTIBLE DEBENTURES
During the year the company issued an aggregate of $585,480 convertible
debentures ("the Debentures") to stockholders of the Company. The Debentures are
immediately convertible at the option of the holders into 500,000 shares of the
Company's common stock. The Debentures are non interest bearing.
F-31
<PAGE>
UNWIRE AB
NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
10 FINANCIAL ITEMS NET
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Interest income......................................... $ 1,082 $ 4,580
Interest expenses....................................... (43,385) (11,446)
-------- --------
$(42,303) $ (6,866)
======== ========
</TABLE>
11 SUBSEQUENT EVENTS
In January 2000, the Company issued 805,900 shares for cash of approximately
$650,000.
On February 29, 2000 all of the capital stock of the company was acquired by
another entity; CellPoint Inc ("CellPoint"), a US corporation. The purchase
price was paid by the issuance of an aggregate of 1,075,000 shares of common
stock in CellPoint. CellPoint is a US company with subsidiary operations in
Sweden, the United Kingdom and South Africa delivering positioning and telematic
services in co-operation with cellular operators worldwide.
F-32
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial information ("the
Unaudited Pro Forma Consolidated Financial Information") has been derived from
the application of pro forma adjustments to the historical financial statements
of CellPoint Inc. ("CellPoint"), as included elsewhere herein, and the unaudited
historical financial statements for the nine months ended March 31, 2000 as
included elsewhere herein.
The Unaudited Pro Forma Consolidated Financial Information gives effect to
the acquisition of Unwire AB as if such event had occurred as of July 1, 1998
for purposes of the Unaudited Pro Forma Consolidated Statements of Operations
for the year ended June 30, 1999 and the nine months ended March 31, 2000. A Pro
Forma balance sheet has not been presented since the transaction is already
reflected in the historical Consolidated Balance Sheet of CellPoint Inc. as of
March 31, 2000 presented elsewhere herein.
The Unaudited Pro Forma Consolidated Financial Information is presented for
information purposes only and does not purport to represent what CellPoint's
financial position and results of operations would actually have been if the
aforementioned event had occurred on the dates specified, or to project
CellPoint's results of operations for any future periods. The Unaudited Pro
Forma Consolidated Financial Information should be read in conjunction with the
consolidated historical financial statements of CellPoint Inc. as included
elsewhere herein.
F-33
<PAGE>
CELLPOINT INC.
UNAUDITED PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
CELLPOINT INC. UNWIRE AB PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS CONSOLIDATED
-------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue..................................... -- 497,212 497,212
Cost of goods sold.......................... -- (565,957) (565,957)
---------- ---------- -----------
Gross Profit (Loss)......................... -- (68,745) (68,745)
---------- ---------- -----------
Selling, general and administrative
expenses.................................. (1,637,240) (697,097) (2,334,337)
Professional fees........................... (534,176) (117,549) (651,725)
Depreciation and amortization............... (702,063) (150,784) (10,208,253) (11,061,100)
---------- ---------- ----------- -----------
Operating loss.............................. (2,873,479) (1,034,175) (10,208,253) (14,115,907)
Financial items, net........................ (96,272) (20,391) (116,663)
---------- ---------- -----------
Net loss before taxes....................... (2,969,751) (1,054,566) (10,208,253) (14,232,570)
Income taxes................................ -- -- --
---------- ---------- ----------- -----------
NET LOSS.................................... (2,969,751) (1,054,566) (10,208,253) (14,232,570)
========== ========== =========== ===========
</TABLE>
ADJUSTMENTS REFLECT TWELVE MONTHS OF AMORTIZATION OF GOODWILL ARISING ON THE
ACQUISITION OF UNWIRE.
THE GOODWILL WILL BE AMORTIZED OVER SEVEN YEARS.
F-34
<PAGE>
CELLPOINT INC.
UNAUDITED PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
UNWIRE
CELLPOINT INC. AB PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS CONSOLIDATED
-------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue........................................ 605,808 352,818 958,626
Cost of goods sold............................. (61,027) (701,327) (762,354)
---------- -------- -----------
Gross Profit (Loss)............................ 54,460 (348,509) 196,272
---------- -------- -----------
Selling, general and administrative expenses... (2,459,142) (541,572) (3,000,714)
Professional fees.............................. (1,247,634) (185,676) (1,422,310)
Depreciation and amortization.................. (1,543,336) (181,321) (7,635,750) (9,360,407)
---------- -------- ---------- -----------
Operating loss................................. (4,705,511) (908,569) (7,635,750) (13,794,431)
Financial items, net........................... (815,573) (38,884) (854,457)
---------- -------- -----------
Net loss before taxes.......................... (5,521,084) (947,453) (7,635,750) (14,648,888)
Income taxes................................... -- --
---------- -------- ---------- -----------
NET LOSS....................................... (5,521,084) (947,453) (7,635,750) (14,648,888)
========== ======== ========== ===========
</TABLE>
Adjustments reflect six months of amortization of goodwill arising on the
acquisition of Unwire. The goodwill will be amortized over seven years.
F-35
<PAGE>
CELLPOINT INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN US$)
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000 JUNE 30, 2000
------------------- --------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................... $ 3,600,302 $ 6,624,662
Accounts receivable, net of allowance for doubtful accounts
of $nil and $36,732, respectively......................... 998,059 211,948
Other assets................................................ 268,333 371,900
Prepaid expenses............................................ 163,137 160,717
Other receivables........................................... 32,843 242,198
Inventory (Note 2).......................................... 219,232 169,635
------------ ------------
TOTAL CURRENT ASSETS........................................ 5,281,906 7,781,060
LONG-TERM ASSETS:
Other intangible assets, net of amortization of $3,306,426
and $2,760,972, respectively.............................. 8,397,105 8,993,080
Investment in affiliated company............................ 500,000 500,000
Acquired technology, net of amortization of $5,994,979 and
$3,415,787, respectively.................................. 66,222,393 68,801,585
------------ ------------
Furniture, equipment and motor vehicles, net of depreciation
of $228,482 and $180,108, respectively.................... 725,715 630,585
------------ ------------
TOTAL LONG-TERM ASSETS...................................... 75,845,213 78,925,250
------------ ------------
TOTAL ASSETS................................................ $ 81,127,119 $ 86,706,310
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued expenses and other current liabilities.............. $ 1,539,140 $ 1,623,441
Accounts payable............................................ 830,463 786,766
Due to affiliate............................................ -- 55,517
Other loans and overdrafts.................................. 7,384 140,510
------------ ------------
TOTAL CURRENT LIABILITIES................................... $ 2,376,987 $ 2,606,234
------------ ------------
LONG TERM DEBT, NET OF CURRENT MATURITIES................... 4,000,000 4,000,000
------------ ------------
TOTAL LIABILITIES........................................... $ 6,376,987 $ 6,606,234
------------ ------------
STOCKHOLDERS' EQUITY:
Common Stock ($0.001 par value; 22,000,000 shares
authorized, 10,485,000 shares issued and 10,465,000 shares
issued, respectively)..................................... $ 10,485 $ 10,465
Additional paid-in capital.................................. 95,584,128 95,434,348
Cumulative translation adjustment........................... (140,420) 292,866
Accumulated deficit......................................... (20,984,901) (15,637,603)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY.................................. 74,750,132 80,100,076
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $ 81,127,119 $ 86,706,310
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
F-36
<PAGE>
CELLPOINT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN US$)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------- -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Sales, net.................................................. $ 978,121 $ 81,319
Cost of sales............................................... 253,935 --
----------- -----------
Gross profit................................................ 724,186 81,319
----------- -----------
Selling, general and administrative expenses................ (2,565,310) (668,054)
Professional fees........................................... (229,249) (181,255)
Depreciation and amortization............................... (3,124,646) (509,235)
TOTAL OPERATING EXPENSES.................................. (5,919,205) (1,358,544)
----------- -----------
Loss from operations........................................ (5,195,019) (1,277,225)
Interest expense, net of interest income and other.......... (152,279) (510,760)
NET LOSS.................................................... $(5,347,298) $(1,787,985)
=========== ===========
Net loss per share basic and diluted........................ (0.61) (0.22)
=========== ===========
Weighted average shares outstanding basic and diluted....... 8,743,630 8,190,000
</TABLE>
See accompanying notes to consolidated financial statements
F-37
<PAGE>
CELLPOINT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(AMOUNTS IN US$)
<TABLE>
<CAPTION>
THREE MONTH
PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
-------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Net loss.................................................... $(5,347,298) $(1,787,985)
Other comprehensive income (loss), cumulative foreign
exchange adjustments...................................... (152,446) (2,841)
----------- -----------
Comprehensive loss for fiscal year.......................... $(5,194,852) $(1,790,826)
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-38
<PAGE>
CELLPOINT INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
-------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $(5,347,503) $(1,787,985)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................... 3,124,646 509,235
Noncash financing costs..................................... -- 330,000
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Increase in accounts receivable............................. (786,111) (39,118)
(Increase) decrease in inventory............................ (49,597) --
Decrease in other assets.................................... 103,567 (193)
Increase in prepaid expenses................................ 206,935 (33,504)
Increase in accrued expenses and other current
liabilities............................................... (217,427) 177,463
Increase (decrease) in accounts payable..................... 43,697 119,603
Decrease in advances from employee.......................... -- --
(Decrease) increase in due from affiliate................... (55,517) 20,932
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES....................... (2,977,105) (703,567)
=========== ===========
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets.................................... (44,609) (26,517)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES....................... (44,609) (26,517)
=========== ===========
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of stockholders' loans........................... -- (150,000)
Proceeds from notes payable................................. -- 2,000,000
Net proceeds from issuance of shares........................ 149,800 --
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES................... 149,800 1,850,000
=========== ===========
Effect of changes in exchange rates on cash................. (152,446) (2,841)
----------- -----------
Increase (decrease) in cash and cash equivalents............ (3,024,360) 1,117,075
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 6,624,662 180,073
----------- -----------
CASH AND CASH EQUIVALENT, END OF PERIOD..................... $ 3,600,302 $ 1,297,148
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
NATURE OF REPORT. The consolidated balance sheet at the end of the
preceding fiscal year has been derived from the audited consolidated balance
sheet contained in the Company's Annual Report on Form 10-KSB, on file with the
Securities and Exchange Commission, and is presented for comparative purposes.
All other financial statements are unaudited. In the opinion of management, all
adjustments, which include only normal recurring adjustments necessary to
present fairly the financial position, results of operations and changes in cash
flows, for all periods presented, have been made. The results of operations for
interim periods are not necessarily indicative of the operating results for the
full year.
INVENTORIES. Inventories are valued at the lower of cost or market value,
with cost determined using First-in, First-out method.
PATENTS AND TRADEMARKS. Patent and trademark costs represent the cost of
preparing and filing applications to patent the Company's proprietary
technologies. Such costs are amortized over shorter of the life of the patent or
the economic "lives" of the assets, generally three years, beginning on the date
the patents or rights are issued.
SOFTWARE DEVELOPMENT COSTS. Software development costs for products and
certain product enhancements are capitalized subsequent to the establishment of
their technological feasibility (as defined in Statement of Financial Accounting
Standards No. 86) based upon the existence of working models of the products
which are ready for initial customer testing. Costs incurred prior to such
technological feasibility or subsequent to a product's general release to
customers are expensed as incurred. Amortization expense is based on the ratio
that current gross revenues bear to total estimated gross revenues, which was an
amount approximating the amortization on a straight-line method over the
estimated economic life of the product of three years.
FOOTNOTES. Certain footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted in accordance with the published rules and regulations of the
Securities and Exchange Commission. These consolidated financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB, on file with the
Securities and Exchange Commission.
ESTIMATES AND UNCERTAINTIES. 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 the reported amounts of revenues and expenses
during the reporting period. Actual results, as determined at a later date,
could differ from those estimates. Estimates relate primarily to recoverability
of the Company's tangible and intangible assets.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
F-40
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. INVENTORIES
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------- -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Work in progress............................................ $ -- $ 86,879
Finished goods.............................................. 219,232 82,756
-------- --------
$219,232 $169,635
</TABLE>
3. ACQUISITION
On February 29, 2000, the Company acquired all of the outstanding shares of
unwire AB for 1,075,000 shares of the Company's Common Stock, having a fair
market value of approximately $72 million. Such fair market value was determined
based on the average of the closing prices of the Company's common stock for the
two days immediately prior to the Company's announcement of the transaction on
February 17, 2000. The Company accounted for this acquisition as a purchase. The
excess cost over fair market value of the net tangible assets acquired was
approximately $72 million and was allocated to acquired technology which will be
amortized over seven years. Results of operations have been included in the
Company's consolidated financial statements for the period from July 1, 2000
through September 30, 2000.
The pro forma unaudited results of operations for the three months ended
September 30, 1999, combining the acquisition of Unwire AB as though it was
acquired by the Company as of July 1, 1999, are as follows:
<TABLE>
<CAPTION>
<S> <C>
Revenue..................................................... $ 150,886
Net Loss.................................................... $2,028,697
</TABLE>
4. SEGMENT INFORMATION
The Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" for fiscal 2000 year end reporting. The
statement requires disclosure of certain financial information related to
operating segments. The Company has determined that it operates in two
reportable segments, positioning technology/location services and telematics.
The positioning segment is primarily engaged in the development, manufacture and
sales of its proprietary positioning systems to provide identifiable locations
for specific cellphone handsets. The telematics segment is engaged in the
development manufacture and sales of telematics based applications. Its
equipment and process innovations are used in a broad range of industries and
applications including credit transfer for financial instructions.
The accounting policies of the reportable segments are the same as those
described in the financial statements. The segments are measured on operating
profits or losses before net interest income and income taxes.
F-41
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. SEGMENT INFORMATION (CONTINUED)
A summary of the Company's operations by segment for the three months ended
September 30, 2000 as follows:
<TABLE>
<CAPTION>
POSITIONING TELEMATICS TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
THREE MONTHS ENDED SEPTEMBER 30, 2000
Revenues.............................................. $ 925,553 $ 52,568 $ 978,121
Loss from operations.................................. 2,181,951 3,013,068 5,195,019
Total assets.......................................... 14,439,993 66,687,124 81,127,119
Depreciation and amortization......................... 523,095 2,601,551 3,124,646
THREE MONTHS ENDED SEPTEMBER 30, 1999
Revenues.............................................. $ 81,319 -- $ 81,319
Loss from operations.................................. 1,227,225 -- 1,227,225
Total assets.......................................... 12,483,714 -- 12,483,714
Depreciation and amortization......................... 509,235 -- 509,235
</TABLE>
F-42
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS ON BEHALF OF THE COMPANY NOT
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER
THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR THE SOLICITATION OF AN
OFFER TO BUY, ANY SECURITIES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
CELLPOINT INC.................................. 3
WHERE YOU CAN FIND MORE INFORMATION ABOUT US... 3
FORWARD-LOOKING STATEMENTS..................... 3
SUMMARY INFORMATION............................ 4
SUMMARY CONSOLIDATED FINANCIAL INFORMATION AND
OTHER DATA................................... 6
RISK FACTORS................................... 7
USE OF PROCEEDS................................ 14
DIVIDEND POLICY................................ 14
CAPITALIZATION................................. 15
SELECTED CONSOLIDATED FINANCIAL INFORMATION.... 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION.................................... 17
BUSINESS....................................... 25
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT............................... 35
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS.............................. 38
EXECUTIVE COMPENSATION......................... 39
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS................................. 40
MARKET PRICE OF AND DIVIDENDS ON OUR COMMON
EQUITY AND OTHER STOCKHOLDER MATTERS......... 42
DESCRIPTION OF SECURITIES...................... 42
RECENT SALES OF UNREGISTERED SECURITIES........ 44
THE SELLING STOCKHOLDERS....................... 45
PLAN OF DISTRIBUTION........................... 50
INDEMNIFICATION................................ 51
LEGAL OPINIONS................................. 51
EXPERTS........................................ 51
FINANCIAL STATEMENTS........................... F-1
</TABLE>
1,883,801 SHARES
OF
COMMON STOCK
CELLPOINT INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
August 4, 2000, as amended
as of December 27, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
PART II
ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company shall, to the fullest extent permitted by Section 78.7502 of the
Corporation Law of the State of Nevada, as the same may be amended and
supplemented, indemnify under said section any director, officer, employee or
agent from and against any and all expenses, liabilities or other matters
referred in or covered by said section, and the indemnification provided for
herein shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any By-Law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person. The Company will have the power to purchase and maintain
officers' and directors' liability insurance in order to insure against the
liabilities for which such officers and directors are indemnified pursuant to
its By-Laws.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT
OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE
COMPANY PURSUANT TO THE FOREGOING PROVISIONS, OR OTHERWISE, THE COMPANY HAS BEEN
INFORMED THAT IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION SUCH
INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS
THEREFORE UNENFORCEABLE. IN THE EVENT THAT A CLAIM FOR INDEMNIFICATION AGAINST
SUCH LIABILITIES (OTHER THAN THE PAYMENT BY THE COMPANY OF EXPENSES INCURRED OR
PAID BY A DIRECTOR, OFFICER OR CONTROLLING PERSON OF THE COMPANY IN THE
SUCCESSFUL DEFENSE OF ANY ACTION, SUIT OR PROCEEDING) IS ASSERTED BY SUCH
DIRECTOR, OFFICER OR CONTROLLING PERSON IN CONNECTION WITH THE SECURITIES BEING
REGISTERED, THE COMPANY WILL, UNLESS IN THE OPINION OF ITS COUNSEL THE MATTER
HAS BEEN SETTLED BY CONTROLLING PRECEDENT, SUBMIT TO A COURT OF APPROPRIATE
JURISDICTION THE QUESTION WHETHER SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY
AS EXPRESSED IN THE ACT AND WILL BE GOVERNED BY THE FINAL ADJUDICATION OF SUCH
ISSUE.
The Company carries directors' and officers' liability insurance covering
losses up to $3,000,000 (subject to certain deductible amounts).
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Registration Fees........................................... $ 8,458
Transfer Agent Fees......................................... 1,000
Blue Sky Filing Fees........................................ 7,500
Printing and Mailing........................................ 20,000
Professional Fees........................................... 50,000
-------
$86,958
=======
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In February 1998, the Company sold 715,000 shares of its Common Stock at US
$1.25 per share, pursuant to Rule 504 of Regulation D under the Securities Act.
The Company received gross proceeds of $893,750 from such offering.
In June 1998 the Company sold 775,000 shares of its Common Stock at US $4.00
per share, pursuant to Regulation S under the Securities Act. All such shares
were sold to "non-U.S. Persons" as
II-1
<PAGE>
defined in Regulation S. The Company received gross proceeds of $3,100,000 from
the offering. The Company paid a commission of 5% of the purchase price per
share to Mats Jonnerhag, a director of the Company, and Borsinsikt A.B., a
company in which Mr. Jonnerhag is a 66% stockholder. Mr. Jonnerhag and
Borsinsikt placed a total of 260,000 shares, and together they received a total
commission of US $52,000.
On July 27, 1999, the Company signed two letters of intent with Madison
Securities, Inc. of Chicago Illinois for the raising of additional capital
through a bridge financing of $2,000,000 and a private placement of up to
$10,000,000 of equity. On August 31, 1999, the bridge financing of $2,000,000 of
12% promissory notes was completed. In connection with such bridge financing,
the Company issued an aggregate of 180,000 common stock purchase warrants which
have an exercise price of $7.49 per share. On October 29, 1999, the Company
completed the first tranche of its private placement financing, in which it sold
an aggregate of 393,750 shares of Common Stock for gross proceeds of $3,500,000.
In such offering, $1,200,000 of bridge notes were exchanged for shares of Common
Stock, and $841,557 of the gross proceeds were used to repay in full the balance
of the bridge notes plus interest accrued on all of the bridge notes. After
paying underwriting commissions, the Company received $1,108,443 in proceeds
from the first tranche of the offering. On November 12, 1999, the Company
completed the second and final tranche of the private placement, in which it
sold an aggregate of 731,250 shares of Common Stock for gross proceeds of
$6,500,000. After paying underwriting commissions, the Company received
$5,850,000 in net proceeds from the second tranche. The Company believes these
additional funds will enable it to grow rapidly and expand it's staff and
resources. The Company believes that these offerings were exempt from
registration under the Securities Act pursuant to Section 4(2) and Rule 506 of
Regulation D thereunder.
On February 29, 2000, the Company acquired, through its wholly-owned
indirect subsidiary, CellPoint Swedish Holdings Ltd., a corporation organized
under the laws of England and Wales ("Holdings"), all of the capital stock (the
"Unwire Stock") of Unwire AB (publ), org. no. 556522-7617, a corporation
organized under the laws of Sweden ("Unwire"). Unwire develops systems and
equipment for GSM positioning and telematics and holds unique patents for
positioning. The purchase price for the Unwire Stock was approximately
$72 million. The Company paid the purchase price by (i) issuing to the
stockholders of Unwire an aggregate of 1,075,000 shares (the "Shares") of the
Company's common stock, par value $0.001 per share (the "Common Stock"), and
(ii) paying to such stockholders and aggregate of US $1,178 as compensation for
fractional shares not issued. The Company issued the Shares in reliance upon the
exemption from registration contained in Section 4(2) of the Securities Act of
1933, as amended (the "Securities Act"). On August 4, 2000, the Company
registered 268,772 of the Shares issued to the former stockholders of Unwire.
The Company has agreed to register the remaining Shares under the Securities Act
no later than December 31, 2000.
On December 6, 2000, the Company and Castle Creek entered into a Securities
Purchase Agreement, pursuant to which the Company issued to Castle Creek 6%
convertible notes in the aggregate principal amount of $10,000,000 and five-year
warrants to purchase up to 210,526 shares of the Company's Common Stock. The
convertible notes are due September 30, 2002, and may be prepaid prior to such
date upon the satisfaction of certain conditions (including the issuance of
additional warrants).
Interest on the notes is due semi-annually and is payable in cash. The notes
are due September 30, 2002 and is convertible into shares of Common Stock (the
"Conversion Shares"), at the option of the holders thereof, at the rate of $25
per share if converted prior to June 5, 2001, or, if converted on or after
June 5, 2001, at the lesser of (i) $25 per share or (ii) 90% of the average of
the five lowest Volume Weighted Average Prices of the Common Stock during the 20
consecutive trading days prior to the trading day immediately prior to the date
of determination. We have the option to prepay the notes at any time on
45 days' notice at (i) 115% of the principal amount being prepaid plus all
accrued but unpaid interest on such amount, for all prepayments made prior to
June 5, 2001, and (ii) 120% of the
II-2
<PAGE>
principal amount being prepaid plus all accrued but unpaid interest on such
amount, for all prepayments made on or after June 5, 2001. In the event of such
prepayment, we are obligated to issue to the note holder warrants to purchase
that number of shares of Common Stock equal to 5% of the aggregate amount of the
note prepaid divided by the Prepayment Market Price (as such term is defined in
the note).
The warrants may be exercised at any time prior to 5:59 p.m. New York City
time on December 5, 2005 at an exercise price of $11.40 per share. The warrants
and the notes are subject to weighted average anti-dilution adjustments, except
for shares issued in connection with strategic transactions, underwritten public
offerings, acquisitions and the Company's Stock Incentive Plan and Stock Warrant
Plan.
Pursuant to the Securities Purchase Agreement, the aggregate number of
Conversion Shares and shares issuable upon exercise of the warrants may not
exceed 2,109,717 shares without approval of the Company's stockholders. In the
event stockholder approval is required but not obtained, the holders of the note
may require the Company to redeem the notes at 120% of its face value plus
accrued interest.
ITEM 27. EXHIBITS
The following Exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ------------------------------------------------------------
<C> <S>
3.1 Articles of Incorporation (incorporated by reference to the
Company's filing on Form 10-SB, filed on December 23,1998)
3.2 Amended and Restated By-Laws Incorporated by reference to
the Company's Registration Statement on Form SB-2, filed on
June 8, 2000
3.3 Certificate of Amendment to the Articles of Incorporation of
the Company, filed with the Secretary of State of Nevada on
October 4, 1999 (incorporated by reference to the Company's
Current Report on Form 8-K, filed on October 5, 1999)
4.1 Registration Rights Agreement, dated as of February 29,
2000, by and among CellPoint Inc., CellPoint Swedish
Holdings Ltd., and the Sellers named therein (incorporated
by reference to the Company's Current Report on Form 8-K,
filed on March 13, 2000, as amended by Form 8-K/A, filed on
May 15, 2000).
4.2 Securities Purchase Agreement, dated as of December 6, 2000,
by and among CellPoint Inc. and the Purchaser set forth
therein (incorporated by reference to the Company's Current
Report on Form 8-K, filed on December 12, 2000).
4.3 Registration Rights Agreement, dated as of December 6, 2000,
by and among CellPoint Inc. and the Initial Investor (as
such term is defined therein) (incorporated by reference to
the Company's Current Report on Form 8-K, filed on
December 12, 2000).
4.4 Convertible Note of CellPoint Inc., dated December 6, 2000,
payable to the order of Castle Creek Technology Partners
LLC, in the aggregate principal amount of $10,000,000
(incorporated by reference to the Company's Current Report
on Form 8-K, filed on December 12, 2000).
4.5 Stock Purchase Warrant of CellPoint Inc., dated December 6,
2000, with respect to the right of Castle Creek Technology
Partners LLC to purchase an aggregate of 210,526 shares of
common stock of CellPoint Inc. at a price of $11.40 per
share (incorporated by reference to the Company's Current
Report on Form 8-K, filed on December 12, 2000).
5.1 Opinion of Salans Hertzfeld Heilbronn Christy & Viener
(incorporated by reference to the Company's Registration
Statement on Form SB-2, filed on June 8, 2000).
10.1 Amended and Restated Stock Incentive Plan*
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ------------------------------------------------------------
<C> <S>
10.2 Agreement between Matrix Vehicle Tracking (Pty) Ltd. and
Technor International Inc., dated May 11, 1999*
10.3 Amended and Restated Option Agreement, dated May 13, 1999*
10.4 Sale of Technology Agreement between Novel Electronic
Systems & Technologies and Technor International Inc., dated
May 13, 1999*
10.5 Share Sale Agreement, dated May 13, 1999, between Gerrit van
Urk, Albert van Urk, Guy Redford and Technor
International, Inc.*
10.6 Memorandum of Understanding between AU-System and CellPoint
Systems AB, dated Feb. 17, 1999*
10.7 Limited Sale of Business, dated as of March 1, 1999, between
Wasp International (Pty) Limited and Wasp S.A. (Pty)
Limited*
10.8 Project Agreement, dated April 23, 1999, between Tele2 and
CellPoint Systems AB*
10.9 Contract, dated August 1999, between France Telecom and
CellPoint Systems AB*
10.10 Employment Agreement, dated as of April 1, 2000, between
CellPoint Inc. and Peter Henricsson (incorporated by
reference to the Company's Annual Report on Form 10-KSB,
filed on September 29, 2000)
10.11 Employment Agreement, dated as of June 1, 1999, between
CellPoint Inc. and Lynn Duplessis (incorporated by reference
to the Company's Annual Report on Form 10-KSB, filed on
September 29, 2000)
10.12 Employment Agreement, dated as of July 31, 1998, between
Wasp International (Pty) Ltd. and Albert van Urk***
10.13 Purchase and Sale Agreement, dated as of February 16, 2000,
by and among CellPoint Inc., CellPoint Swedish Holdings
Ltd., and the Sellers named therein**
10.14 Registration Rights Agreement, dated as of February 29,
2000, by and among CellPoint Inc., CellPoint Swedish
Holdings Ltd., and the Sellers named therein**
10.15 Escrow Agreement, dated as of February 29, 2000, by and
among CellPoint Inc., CellPoint Swedish Holdings Ltd., the
Sellers named therein, Salans Hertzfeld Heilbronn Christy &
Viener, as Escrow Agent, U.S. Stock Transfer Corporation, as
Depositary, and Per Lundberg, as Sellers' Agent**
10.16 Agreement, dated May 4, 2000, by and between CellPoint
Systems AB and Yahoo! Sverige AB (incorporated by reference
to the Company's Registration Statement on Form SB-2, filed
on June 8, 2000; omits portions based upon a request for
confidential treatment pursuant to Rule 406 under the
Securities Act of 1933)
10.17 Agreement, dated April 5, 2000, by and between Unwire AB
(PUBL) and Ericcson Business Consulting (Malaysia) SDN BHD
(incorporated by reference to the Company's Annual Report on
Form 10-KSB, filed on September 29, 2000; omits portions
based upon a request for confidential treatment pursuant to
Rule 24b-2 under the Securities Exchange Act of 1934)
10.18 Employment Agreement, dated as of July 9, 2000, by and
between CellPoint Inc. and Lars Persson (incorporated by
reference to the Company's Annual Report on Form 10-KSB,
filed on September 29, 2000)
10.19 Agreement, dated as of June 30, 2000, by and between France
Telecom Mobiles and CellPoint Systems AB (incorporated by
reference to the Company's Annual Report on Form 10-KSB,
filed on September 29, 2000; omits portions based upon a
request for confidential treatment pursuant to Rule 24b-2
under the Securities Exchange Act of 1934)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ------------------------------------------------------------
<C> <S>
10.20 Loan Agreement, dated June 7, 2000, by and between M&S Trust
Company Limited and CellPoint Inc. (incorporated by
reference to the Company's Annual Report on Form 10-KSB,
filed on September 29, 2000)
16.1 Letter from Kelly & Co. (incorporated by reference to the
Company's Current Report on Form 8-K, filed December 8,
1999)
16.2 Letter from PricewaterhouseCoopers (incorporated by
reference to the Company's Current Report on Form 8-K,
originally filed on September 23, 1999, as amended on
October 26, 1999), as supplemented
21 Subsidiaries of Registrant (incorporated by reference to the
Company's Registration Statement on Form SB-2, filed on
June 8, 2000)
23.1 Consent of Independent Accountants (filed herewith)
23.2 Consent of Independent Accountants (filed herewith)
23.3 Consent of Independent Counsel (filed herewith)
</TABLE>
------------------------
* Incorporated by reference to the Company's Registration Statement on
Form 10-SB/A-2, filed January 18, 2000.
** Incorporated by reference to the Company's Current Report on Form 8-K, filed
on March 13, 2000, as amended by Form 8-K/A, filed on May 15, 2000.
*** Incorporated by reference to the Company's Registration Statement on
Form 10-SB/A-1, filed on September 16, 1999.
II-5
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly,
authorized, in the City of London, England, on December 27, 2000.
<TABLE>
<S> <C> <C>
CELLPOINT INC.
By: /s/ PETER HENRICSSON
-----------------------------------------
Peter Henricsson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
December 27, 2000
By: /s/ LARS WADELL
-----------------------------------------
Lars Wadell
CHIEF FINANCIAL OFFICER
</TABLE>
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ STEPHEN T. CHILDS
------------------------------------------- Director December 27, 2000
Stephen T. Childs
/s/ LYNN DUPLESSIS
------------------------------------------- Director December 27, 2000
Lynn Duplessis
/s/ PETER HENRICSSON
------------------------------------------- Director December 27, 2000
Peter Henricsson
/s/ MATS JONNERHAG
------------------------------------------- Director December 27, 2000
Mats Jonnerhag
------------------------------------------- Director , 2000
Bengt Nordstrom
/s/ LARS PERSSON
------------------------------------------- Director December 27, 2000
Lars Persson
/s/ ALBERT VAN URK
------------------------------------------- Director December 27, 2000
Albert Van Urk
</TABLE>
II-6
