SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
Amendment No. 1
[Mark One]
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________________ to _____________________.
Commission file no.: 0-22848
U.S. WIRELESS DATA, INC.
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(Name of small business issuer in its charter)
Colorado 84-1178691
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2200 Powell Street, Suite 450, Emeryville, California 94608
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 596-2025
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Exchange Act
No Par Value Class A Common Stock
---------------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes _X_ No___
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The issuer's revenues for the fiscal year ended June 30, 1997 were $1,315,542
The aggregate market value of the issuer's voting stock held as of August 31,
1997 by non-affiliates of the Registrant was approximately $18,581,000 based on
an average price of $3.49 as of August 29, 1997.
As of August 31, 1997, the issuer had 9,113,952 shares of its no par value
common stock outstanding.
Transitional Small Business Disclosure Format (check one):
Yes ___ No _X_
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
U.S. Wireless Data, Inc. was incorporated on July 30, 1991, and is in
the business of designing, manufacturing and marketing a line of wireless and
portable credit card and check authorization terminals. The Company completed an
initial public offering in December of 1993, and in 1994, completed development
of its initial product, negotiated agreements with suppliers of components,
developed a marketing strategy, and initiated sales of the POS-50(R) portable
credit card and check verification terminal. During fiscal 1996, the Company
continued to promote its product through Independent Sales Organization (ISO)
channels and began development on its new CDPD product line. The Company
continued its efforts on the POS-50(R) and in the second half of the year,
introduced two new CDPD-based products. Substantially all the revenue of the
Company for fiscal year 1996 was derived from the sale of inventories for which
the Company had previously paid.
As the Company entered fiscal year 1997, it continued to struggle with
profitability and liquidity. In October 1996, the Company closed its Boulder
office and consolidated operations in Colorado Springs, Colorado. A small
customer service and POS-50 deployment office was opened in Wheat Ridge,
Colorado. As part of the restructuring plan, Michael J. Brisnehan, its
president, principal executive officer and chief financial officer resigned. Rod
L. Stambaugh, chairman and former vice president of marketing and business
development was appointed president and chief executive officer. During fiscal
year 1997, headcount was maintained at approximately 10 employees and ended
June, 1997 at eight.
A strategic decision was made to transition the Company from a "box
maker" to providing a credit/debit card processing solution to the marketplace.
In January, 1997 the Company executed a Member Service Provider agreement with
NOVA Information Systems that establishes U.S. Wireless Data as a transaction
processing service provider to retail merchants. The NOVA arrangement also
allows the Company to generate a recurring revenue stream from each installation
instead of the previous per unit sales approach. Another key piece of the
strategic direction was to significantly broaden distribution of the TRANZ
Enabler CDPD based product by developing distribution agreements with large
communications carriers for direct distribution of products and services to the
merchant. In preparation for this effort, the company signed CDPD air time
agreements with AT&T Wireless Services, Bell Atlantic NYNEX Mobile and initiated
discussions with GTE regarding a joint marketing and operating agreement. USWD
has specific commitments under these agreements including minimum purchase
obligations and staffing requirements.
In the fourth quarter of fiscal 1997, it was clear that the Company had
a very significant market opportunity but had extremely limited financial and
human resources to apply to an aggressive CDPD product roll-out. In June 1997,
the Company engaged entrenet Group, LLC., (entrenet), a management consulting
group, to assist with the development of a detailed marketing and business plan
and introduction of financing sources. The Agreement has a term of one year and
USWD agreed to pay entrenet $150,000 in the form of a convertible debenture,
bearing interest at 10% per annum. Entrenet is entitled to a finder's fee for
locating direct financing sources for the Company. USWD and entrenet are
discussing certain modifications to the compensation terms of the agreement and
USWD expects to issue the debenture to entrenet in the immediate future. In
August 1997, through an introduction by entrenet, the Company retained Liviakis
Financial Communications Inc. (Liviakis) to advise and assist the company in
matters concerning investor relations, corporate finance and strategic
management planning. Through Liviakis, the Company completed a private placement
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<PAGE>
of restricted securities. Through this financing, the Company raised $500,000 in
cash for common stock and warrants which, if all warrants were exercised, would
total 5.1 million shares of common stock. See "Subsequent Events", below.
The Company undertook a focused effort to strengthen and broaden its
management team. In early August 1997, the Company retained Evon Kelly as its
chief executive officer. Also in August, the Company hired a vice president of
sales, vice president of major accounts, and in September added a chief
financial officer. The company is actively recruiting and hiring marketing and
sales personnel for deployment on a nationwide basis as joint marketing programs
with the major wireless carriers are implemented. The retention of these people
is expected to bring the necessary expertise to implement the Company's business
plan.
In August 1997, GTE and USWD announced a joint marketing and operating
agreement to distribute the Company's TRANZ Enabler credit card processing
system through GTE's CDPD sales network to merchants . Both companies are
engaged in a nation wide deployment which will extend TRANZ Enabler sales
through over 400 GTE sales representatives. The Company has also executed a
purchase agreement with Wellex Corporation for the manufacture of the TRANZ
Enabler units and is negotiating an agreement with GTE Leasing for the financing
of the inventory procurement.
The development of the Company's infrastructure and expansion of the
sales and marketing organization requires additional financing resources. U.S.
Wireless is working both directly and through its consultants to secure a
capital infusion which will finance the Company's growth. See "Financial
Condition, Capital Resources and Liquidity", below.
Fiscal 1997 Compared to Fiscal 1996
Net sales of $1,315,542 for fiscal 1997 decreased from net sales of
$1,582,553 generated during fiscal 1996. Unit sales during both years were
approximately the same. The decrease in sales dollars is attributable to: a)
reductions in retail prices from one year to the next, and b) slower than
anticipated sales of the CDPD-based POS-500(R) unit.
Gross margins increased from a negative $1,303,879 in fiscal 1996 to a
positive $506,095 for fiscal 1997. This increase is attributable to a $1,525,000
write-down of inventories during fiscal 1996, resulting from declines in market
value of such inventories relative to cost, compared to the 1997 gross margin
which shows a significant increase due mainly to lower costs for the POS-50(R)
from a major supplier.
Selling, general and administrative expenses decreased from $1,365,235
in fiscal 1996 to $812,687 in fiscal 1997. This decrease was due primarily to:
a) headcount reductions in sales, marketing and administration over 1996
staffing levels reduced salary expense by approximately $182,000; b) legal
expense reductions in 1997 from the approximately $226,000 incurred in fiscal
1996 (related to class action lawsuits filed against the Company due to the
Direct Data failure); and c) significant reductions in bad debt expense,
depreciation, royalty expense, relocation expense, and rent expense.
Inventory write-offs decreased from $1,525,000 in fiscal 1996 (due to
declines in the market value of inventories relative to cost) to $15,400 in
fiscal 1997.
Financial Condition, Capital Resources and Liquidity
The Company continues to have significant concerns regarding its
financial condition and liquidity. While the Company is optimistic with its
medium and long term opportunities, it is constrained by its immediate financial
condition and requirement for increased liquidity. The Company has accumulated a
deficit of approximately $17.0 million since inception and currently has a
negative working capital position. The Company's CDPD based products, the GTE
joint marketing and distribution agreement, pending distribution agreements and
transition to a recurring revenue focus present an opportunity for significant
revenue growth, an eventual return to profitability, and the generation of a
positive cash flow from operations. At present, the development of the Company's
infrastructure and expansion of the sales and marketing organization requires
additional financing. Implementation of the Company's business plan is dependent
on the infusion of new debt or equity financing. As of the date of this report,
the Company is seeking to raise between $2 to $4 million. The Company is working
both directly and through its consultants to secure additional debt or equity
financing which is expected to fund the Company's growth. While management is
confident it can accomplish this objective, there is no guarantee that this
additional funding will occur in the required time frame.
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<PAGE>
Forward-Looking Statements
The Company may, in discussions of its future plans, objectives and
expected performance in periodic reports filed by the Company with the
Securities and Exchange Commission (or documents incorporated by reference
therein) and in written and oral presentations made by the Company, include
projections or other forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 or Section 12E of the Securities Act of 1934,
as amended. Such projections and forward-looking statements are based on
assumptions which the Company believes are reasonable, but are by their nature
inherently uncertain. In all cases results could differ materially from those
projected. Some of the important factors that could cause actual results to
differ from any such projections or other forward-looking statements follow.
History of Losses and Potential Fluctuations in Operating Results.
Through the end of the fiscal year ending June 30, 1997, the Company had
experienced significant operating losses. In addition, because the Company
generally ships its products on the basis of purchase orders, operating results
in any quarter are highly dependent on orders shipped in that quarter and,
accordingly, may fluctuate materially from quarter to quarter. The Company's
operating expense levels are based on the Company's internal forecasts for
future demand and not on firm customer orders. Failure by the Company to achieve
these internal forecasts could result in expense levels which are inconsistent
with actual revenues. The Company's results may also be affected by fluctuating
demand for the Company's products and by increases in the costs of components
acquired from the Company's vendors.
Distribution Program. In the past fiscal year CSI accounted for
over 50% of the Company's revenue. The roll-out of the GTE distribution program
is expected to have a material impact on the Company's future revenue stream.
While the Company anticipates it will execute distribution agreements with other
significant partners, the loss of, or substantial diminution of purchases from
the Company through any of these distributors could have a material effect on
the Company.
The Company's Dependence on a Single Type of Product. and
Technological Change. All of the Company's revenues are derived from sales of
its credit card transaction or CDPD enabling products. Demand for these products
could be affected by numerous factors outside the Company's control, including,
among others, market acceptance by prospective customers, or the introduction of
new or superior competing technologies. The Company's success will depend in
part on its ability to respond quickly to technological changes through the
development and improvement of its products.
Competition by Existing Competitors and Potential New Entrants Into
the Market.. The Company has identified several potential competitors attempting
to develop CDPD based terminals and solutions. In addition, companies with
substantially greater financial, technical, marketing, manufacturing and human
resources, as well as name recognition, than the Company may also enter the
market.
Requirement for Additional Capital. Implementation of the Company's
business plan is dependent on the infusion of new debt or equity financing. As
of the date of filing this report, the Company is seeking to raise between $2 to
$4 million through such financing. While management is confident it can
accomplish this objective, there is no guarantee that this additional funding
will occur in the required time frame.
Untimely Filing of 1996 Proxy Statement. The Company apparently
inadvertently failed to file its 1996 Proxy Statement with the Securities and
Exchange Commission within 120 days of the end of fiscal year 1996. Copies of
the Proxy Statement were distributed to all shareholders of the Company in
conjunction with the Company's 1996 Annual Shareholder Meeting, which involved
only the election of directors and the retention of accountants. The Company has
since filed the 1996 Proxy Statement with the Commission. It is not certain what
liability, if any, the Company might have as a result of its untimely filing.
Subsequent Events
Subsequent to June 30, 1997, the Company has continued to experience
inadequate sales volume on its products through its traditional sales channels.
As a result, the Company is implementing a strategic decision to shift from only
a "box maker" to also a reseller of credit card processing products and services
which generate recurring revenue. The Company is focused on strengthening the
management team, building a sales and support organization, implementing the GTE
15
<PAGE>
distribution roll-out, starting the transition to a recurring revenue
orientation and acquiring additional funding. Key subsequent events are outlined
as follows:
o In August 1997, the Company retained Liviakis Financial
Communications, Inc. to advise and assist the Company in matters concerning
investor relations, corporate finance and strategic management planning.
Remuneration for the consulting agreement which has a term of one year includes
$10,000 in cash over a one year period and 300,000 shares of unregistered stock
with 150,000 shares of the stock payable over a 10-month period. The Company
completed a private placement of restricted securities pursuant to Regulation D
of the Securities Act of 1933 with two officers of Liviakis. The Company raised
$500,000 in cash for 3.5 million shares of common stock and 1.6 million warrants
to purchase common stock for $.01 per share, exercisable from January 15, 1998
through August 4, 2002. The securities carry future registration rights,
including a one-time demand registration, with fees to be paid by the Company.
o In early August 1997, the Company announced the appointment of Evon
Kelly to the position of Chief Executive Officer. At this same time, Rod
Stambaugh assumed the position of President. Also in August, the Company hired
Clyde Casciato, Vice President Sales; Tom Cote, Vice President Major Accounts;
and in September hired Robert Robichaud, Chief Financial Officer.
o In August 1997, GTE Wireless and U.S. Wireless Data, Inc. announced a
joint marketing and operating agreement to distribute USWD's proprietary TRANZ
Enabler credit card processing system using GTE's CDPD network. Both companies
are engaged in a nation wide deployment which will extend TRANZ Enabler sales to
merchants through over 400 GTE sales representatives. The agreement contains
certain operational and financial performance criteria, directly related to the
joint marketing program, which must be met by the Company.
o In September 1997, the Company executed a lease for office space in
Emeryville, California. The lease provides for approximately 4,000 square feet
at an initial rate of $9,942 per month commencing October, 1997 and containing
an initial term of 5 years. The monthly rent will progress to a rate of $11,640
in year five.
o In September 1997, the Company signed an agreement with Unicard
Systems Inc. to develop terminal application software that will perform both the
Unicard enrollment process as well as deliver wireless credit card transaction
processing. Unicard Systems will become a registered agent of U.S. Wireless Data
and has placed an initial order for 400 TRANZ Enabler units. Unicard Systems is
a Dallas based service provider to over 500 restaurants and nightclubs in Texas.
o In October 1997, the Company signed an exclusive agreement with
GoldCan Recycling, Inc. for wireless monitoring of its state of the art
automated aluminum redemption centers. This is the first application of USWD's
TRANZ Enabler technology outside the credit card/point-of-sale industry. USWD
will receive a monthly equipment and wireless service fee on every TRANZ Enabler
placed by GoldCan. GoldCan anticipates placing in excess of 3,000 units over the
next three years.
o Between October 14 and 20, 1997, the Company received a bridge loan
from Liviakis Financial Communications, Inc. for $200,000 pending completion of
more permanent financing. Following a significant funding (greater than $2
million) the Company will repay the bridge loan along with interest of nine
percent.
16
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors and Executive Officers
<TABLE>
<CAPTION>
The following table sets forth information with respect to the
directors and executive officers of the Company.
Name Age Position
- ---- --- --------
<S> <C> <C>
Evon A. Kelly..................... 56 Chief Executive Officer and Director
Rod L. Stambaugh.................. 37 Chairman of the Board and President
Robert E. Robichaud............... 44 Chief Financial and Principal
Accounting Officer, Treasurer and
Assistant Secretary
Alan B. Roberts................... 51 Director
Chester N. Winter................. 66 Director
Caesar Berger..................... 50 Director
Clyde Casciato.................... 42 Vice President - Sales
Thomas Cote....................... 49 Vice President - Major Account Sales
</TABLE>
Information on each of the Company's Executive Officers and Directors
is set forth below:
Evon Kelly, Chief Executive Officer and Director since August 1997. Until
joining the Company in August of 1997, and since 1991, Mr. Kelly was president
of Kelly Learning Alliance, a consulting firm he founded, which addresses areas
in human resource development, organizational development and sales dynamics.
Kelly Learning Alliance clients have included Motorola, Xerox Corp. and NEC
Corp. From 1988 to 1991, Mr. Kelly was vice president of sales and operations at
Wilson Learning Corp., where he was responsible for developing and implementing
sales and marketing strategies. From 1986 to 1988, Mr. Kelly was a regional vice
president of store operations for Federated Department Stores Inc., where he
supervised over 1,500 employees and was responsible for profit and loss
performance. From 1973 to 1983, Mr. Kelly held several key positions with Xerox
Corp., including manager of supply business center where he was directed a
national sales force of 400. Mr. Kelly received his Bachelor of Arts degree from
Boston College. Mr. Kelly devotes full time to the affairs of the Company.
Rod L. Stambaugh, President since October 1996 and Chairman of the Board of
Directors since July 1995. Mr. Stambaugh served as Chief Executive Officer of
the Company from October 1996 until August 1997, when Mr. Kelly joined the
Company. He was a Vice President in charge of marketing and business development
for the Company from 1991 through October 1996. Mr. Stambaugh was also the
Corporate Secretary from September 1995 until October 1996. Mr. Stambaugh is one
of the founders of the Company and has devoted his full business time to the
Company since August 1991. He co-founded U.S. Wireless, Inc., a nonaffiliated
retail cellular phone center, at which he worked full time from January 1990
through July 1991. Mr. Stambaugh served on the Company's Board of Directors from
July 1991 through October 1994, rejoining the Board as Chairman in July 1995.
Mr. Stambaugh graduated from Baker University in 1982 with a B.S. degree in
psychology, and a minor in business administration.
Robert E. Robichaud, Chief Financial and Principal Accounting Officer since
September 1997. Since 1985 Mr. Robichaud has held several key financial
management positions at Triad Systems Corp. including Director of Financial
Planning and Analysis and most recently, Director of Finance. Triad Systems is a
provider of software, hardware and information management solutions which
recorded 1996 revenues in excess of $180 million. Triad Systems was a NASDAQ
listed company and was acquired by Cooperative Computing Inc. on Feb. 27, 1997,
for approximately $200 million. Mr. Robichaud received a bachelors degree in
economics from Fairfield University in 1976 and a MBA from Rutgers Graduate
School of Business in 1978.
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<PAGE>
Alan B. Roberts, Director since October 1994. Mr. Roberts is the Director of
Product Development and Vice President of U.S. Operations for International
Verifact, Inc. He was President and Chief Executive Officer of USWD from October
1, 1994, until July 10, 1995, and Vice President of Operations for Direct Data,
Inc. (the Company's wholly-owned subsidiary that was dissolved in October 1995)
from February 1994 until September 1994. Prior to that time, Mr. Roberts was
Director of Product Marketing for Verifone, Inc., the industry leader in
point-of-sale terminal products. While at Verifone from 1986 to 1994, he also
held various other management positions, including Director of Product
Management. Mr. Roberts graduated from the University of Texas in 1967 with a
bachelors degree in Mathematics and in 1969 with a masters degree in Computer
Sciences.
Chester N. Winter, Director since February 1994. Mr. Winter is a general partner
of Colorado Incubator Fund, L.P., a venture capital fund, and also works as a
business consultant at Paradigm Partners, L.L.C. From 1989 to 1992, he was
Chairman and Chief Executive Officer of Clinical Diagnostics, Inc., a home
health care product distributor. Also from 1989 to 1992, he was Senior Vice
President of Sinco International Investments, Inc., a real estate investment and
development company. He received a Masters degree from the University of
Colorado.
Caesar Berger, Director since December 1995. Mr. Berger is a senior Vice
President of Cardservice International, Inc. where he is responsible for the
Technology Group. Mr. Berger joined Cardservice International in August of 1994.
Prior to that, Mr. Berger served for more than ten years as President, and was
the founder of, Computer Based Controls, Inc. a wholly-owned subsidiary of
Electronic Clearing House Inc. Mr. Berger was a principal on the American
Express Money Order project which resulted in the deployment of over 17,000 of
the Money Order dispensers operating today in over 10,000 retail locations
nationwide. Mr. Berger graduated in 1970 from Lvov Polytech Institute with the
equivalent of an M.S. degree in Electronics and Computer Science.
Clyde Casciato, Vice President of Sales since August 1997. Since 1989, Mr.
Casciato has held several management positions at AT&T Wireless Services, the
wireless business unit of AT&T Corp., including Director of Sales and Marketing,
District Manager - Major/National Accounts and most recently, Western U.S.
Regional Sales/Distribution manager - Wireless Data. Mr. Casciato played a key
role in helping to establish AT&T Wireless Services as the market leader in the
emerging wireless data (packet and circuit switched) business segment. From 1984
to 1989, he held key sales management positions at Xerox Corp. including Major
Account Manager and Program Sales Manager.
Tom Cote, Vice President of Corporate & Major Account Sales since August 1997.
Mr. Cote has over 20 years experience in the investment industry, working with
corporations, investment advisors, banks and trust departments throughout the
United States and Europe. From 1994-1996 Mr. Cote was Director of Bank
Securities Association where he managed all activities of this bank trade
association. From 1992 through 1994 he served as Corporate Vice President -
Institutional Services for Meridian Investment Management. Mr. Cote's experience
also includes Vice President - Global Custody Sales (Europe & Middle East) for
Security Pacific National Bank, Vice President - Institutional Sales for GT
Global Financial Services, Institutional Account Executive for Fidelity
Investments, Consultant Investment Services for Coopers & Lybrand, Assistant
Vice President - Corporate Trust Sales for Security Pacific National Bank,
Director of Marketing for Pacific Stock Exchange, and Marketing Service
Representative for Foster & Kleiser Outdoor Advertising. Mr. Cote received a BA
in Fine Arts from the University of California at Los Angeles in 1971.
Board of Directors and Committees
The Company has a standing audit committee which consists of Messrs.
Winter and Roberts. The audit committee recommends engagement of the Company's
independent accountants, approves services performed by such accountants, and
reviews and evaluates the Company's accounting system of internal controls. The
audit committee did not meet during fiscal year 1997; however, these issues were
discussed at the board meeting. The Company does not have standing nominating or
compensation committees. The functions which these committees would perform are
performed by the Board as a whole.
The Company's Board of Directors met once during fiscal year 1997. All
directors attended the meeting. Business of the Company was conducted primarily
through consultation among management and directors followed by consent
resolutions adopted by all members of the Board of Directors.
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Compensation of Directors
Directors who are not employees of the Company receive an annual stock
option to purchase 20,000 shares of the Company's Common Stock. The grant is
made pursuant to the Company's 1992 Stock Option Plan as of each director's
anniversary date, with an exercise price equal to the market value of the
underlying stock as of the date of grant. Options vest 25% on the date of grant
and 25% on each six-month anniversary thereafter. This is the only arrangement
for compensation of directors. A total of 20,000 stock options were granted to
non-employee directors during the fiscal year ended June 30, 1997, and an
additional 40,000 options are issuable under the Plan.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors, and persons owning more than ten percent of a
registered class of the Company's equity securities ("ten percent shareholders")
to file reports of ownership and changes of ownership with the Securities and
Exchange Commission ("SEC"). Officers, directors, and ten percent shareholders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) reports they file with the SEC.
To the Company's knowledge, based solely on its review of the
copies of such reports and amendments thereto furnished to the Company, and
written representations that no other reports were required, the Company
believes that during the Company's fiscal year ended June 30,1997, all Section
16(a) filing requirements applicable to the Company's officers, directors, and
ten percent shareholders were complied with except as follows: Mr. Alan Roberts
did not timely file a Form 4 or Form 5 to report the acquisition of a 20,000
share stock option as of September 29, 1996; Mr. Caesar Berger did not file
Forms 4 or a Form 5 to report the exercise of a 10,000 share stock option on
June 12, 1997, or the sale of 10,000 shares of Common Stock on or about June 30,
1997.
ITEM 10. EXECUTIVE COMPENSATION
Executive Compensation
The following table shows all the compensation paid or to be paid by
the Company to its Chief Executive Officer (the "Named Executive Officer")
during the fiscal year ended June 30, 1997. Mr. Stambaugh did not serve as CEO
for the Company during the fiscal years ended June 30, 1996 and 1995.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Annual Compensation Compensation
------------------- ------------
Securities
Underlying
Name, Principal Options All Other
Position and Period Salary ($) Bonus ($) Other ($) Granted (#) Compensation ($)
---------- --------- --------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Rod L. Stambaugh (1), Chief 79,881 -0- (2) -0- -0-
Executive Officer
1997
===========================================================================================================
<FN>
(1) Mr. Stambaugh commenced service as CEO as of October 23, 1996. Mr. Stambaugh
succeeded Mr. Michael Brisnehan, who resigned as CEO at that time.
(2) No amounts are shown under "Other" as the aggregate incremental cost to the
Company of personal benefits provided to the executive officer did not exceed
10% of his annual salary and bonus during the year.
</FN>
</TABLE>
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<PAGE>
Option Grants in Last Fiscal Year
No stock options were granted to the Named Executive Officer during the fiscal
year ended June 30, 1997.
<TABLE>
<CAPTION>
Aggregate Options Exercised in the Last Fiscal Year
and Fiscal Year End Option Values
Number Number of Unexercised Options Value of Unexercised,
of Shares Held at June 30, 1997 In-the-Money
Acquired Value -------------------------------
on Exercise Realized ($) Exercisable Unexercisable Options at June 30, 1997 (1)
-------- ------------ ----------------------------- ----------------------------
Name Exercisable Unexercisable
----------------------
<S> <C> <C> <C> <C> <C> <C>
Rod L. Stambaugh -0- -0- 133,400 21,600 $20,010 $3,240
<FN>
(1) Based on the average traded price of the underlying shares of Common Stock
of $.28 per share at June 30, 1997, less the per share exercise price of the
options.
</FN>
</TABLE>
Employment Agreements and Change In Control Provisions
The Company presently has an employment agreement with Evon A. Kelly,
its current CEO, pursuant to which Mr. Kelly receives $150,000 in cash
compensation per year, plus certain bonus compensation to be determined by the
Board of Directors. Mr. Kelly has also been granted a non-qualified stock option
to purchase up to 600,000 shares of the Company's Common Stock at $1.00 per
share, exercisable as to 10% as of the date of grant (August 4, 1997) and
vesting at the rate of 3% per month thereafter so long as Mr. Kelly remains in
the employ of the Company. All options must be exercised within 10 years of the
date of grant. All options immediately vest and become exercisable upon a change
in control.
The Company also has employment arrangements with Robert E. Robichaud,
Clyde Casciato and Tom Cote. Mr. Robichaud receives a salary of $125,000 per
year and may be entitled to a performance bonus of up to $25,000 for fiscal year
1998, as determined by the Board of Directors based on the performance of the
Company. Mr. Robichaud was also granted options to purchase up to 50,000 shares
of Common Stock at $3.95 per share under the Company's 1992 Stock Option Plan,
with a vesting schedule of 10% as of his date of hire and 3% per month
thereafter. Messrs. Casciato and Cote receive salaries of $80,000 and $70,000
per year, respectively, and may be entitled to bonuses of $30,000 each for
fiscal year 1998, as determined by the Board of Directors based on the
performance of the Company. These employees have also been granted stock options
under the Company's 1992 Stock Option Plan to purchase up to 50,000 shares of
Common Stock, exercisable at $4.24 per share, with the same vesting schedule as
Mr. Robichaud's options. All options immediately vest and become exercisable
upon a change in control.
Stock Option Plan
General. The Company's Amended 1992 Stock Option Plan (the "Plan") was
adopted for the purpose of granting employees, directors, and consultants of the
Company options to purchase common stock so that they may have the opportunity
to participate in the growth of the Company and to provide the participants an
increased incentive to promote the interests of the Company.
Administration of the Plan. The Plan is administered by at least two
disinterested members of the Board of Directors (the "Board") or the Board
itself. The Board may from time to time adopt rules and regulations as it deems
advisable for the administration of the Plan, and may alter, amend or rescind
any rules and regulations in its discretion. The Board has the power to
interpret, amend or discontinue the Plan.
Grant of Options. Options may be granted under the Plan for a total of
2,680,000 shares of Common Stock. The number of shares underlying options
available to the Plan was increased to 2,680,000 from 880,000 on August 6, 1997
by the Board of Directors, subject to shareholder approval at the next Annual
Meeting of Shareholders. As of September 30, 1997, there were a total of 526,399
options outstanding under the Plan, as amended, 341,599 of which were vested. An
35
<PAGE>
additional 40,000 options are issuable under the Plan to non-employee directors
for Fiscal year 1997. Additional grants of options may be made only to
employees, directors and consultants of the Company and any parent or
subsidiary. The Board determines the terms of options granted under the Plan,
including the type of option (which can be an incentive stock option within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or a non-qualified stock option), the exercise price, the number of
shares subject to the option, and the exercisability thereof. The Board also
determines, at the time of grant, the period during which the option will be
exercisable.
Terms and Conditions of Options. The Board may impose on an option any
additional terms and conditions which it deems advisable and which are not
inconsistent with the Plan. The exercise price of any stock option granted under
the Plan must not be less than 100% of the fair market value of a share of
Common Stock on the date of grant, except as to an optionee who at the time an
incentive stock option is granted owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company, the exercise
price of such incentive stock option must be at least equal to 110% of the fair
market value of the shares as of the date prior to the date of the grant. In
addition, no incentive stock option can be granted to any employee where the
aggregate fair market value of the shares (determined at the date of such option
grant) for which such incentive stock options are exercisable for the first time
in any calendar year exceeds $100,000. In connection with a merger, sale of all
of the Company's assets, or other transaction which results in the replacement
of the Company's Common Stock with the stock of another corporation, all granted
options (including unvested options) become exercisable immediately prior to the
consummation of the transaction, unless other provisions are made with respect
to those options.
Exercise of Options. An optionee may exercise less than all of the
matured portion of an option, in which case such unexercised, matured portion
shall continue to remain exercisable, subject to the terms of the Plan, until
the option terminates. Vested options must be exercised within three months of
an optionee's termination with the Company.
Federal Income Tax Consequences.
Incentive Stock Options. The Company anticipates that all options
granted under the Plan and treated by the Company as "incentive stock options,"
that is, a stock option described in Section 422 of the Code, will have the
following anticipated (but not guaranteed) federal income tax consequences,
among others: the optionee will recognize no income at the time of grant; upon
exercise of the incentive stock option, no income will result to any party; if
there is no disposition of the shares until a date that is both (i) two years
from the grant of an incentive stock option and (ii) one year from its exercise,
no amount will be ordinary income and, upon disposition in a taxable
transaction, the employee will receive long-term capital gain or loss treatment
equal to the difference between his amount realized and the option price; any
gain realized upon a disposition other than as set forth above may result in
ordinary income tax treatment to the optionee; generally, the Company receives
no deduction in connection with the transaction; and, certain optionees may
incur alternative minimum tax treatment under the Code upon exercise of an
incentive stock option.
Non-qualified Stock Options. The Company anticipates that all
non-qualified stock options granted under the Plan will have the following
anticipated (but not guaranteed) federal income tax consequences, among others:
the optionee will recognize no income at the time of grant; upon exercise of the
non-qualified stock option, the individual to whom the option is granted should
be deemed to receive ordinary income at the time of exercise equal to the
excess, if any, of the fair market value of the acquired shares at such time
over the option price for such shares; if the shares acquired upon the exercise
of a non-qualified stock option are disposed of in a taxable transaction, the
individual disposing of such shares will have a realized and recognized capital
gain or loss equal to the difference, if any, between the amount realized and
the adjusted basis of such shares to him; such gain or loss will be long-term or
short-term depending on whether or not such shares are held for longer than six
months; and, the adjusted basis usually (but not always) will include the option
price plus any ordinary income described above with respect to such shares.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership of the
Company's Common Stock as of September 30, 1997, for (i) each director and Named
Executive Officer of the Company, (ii) all directors and executive officers of
the Company as a group, and (iii) each person known by the Company to own
beneficially 5% or more of the outstanding shares of Common Stock. All
beneficial ownership is sole and direct unless otherwise indicated. As of
September 30, 1997, there were a total of 9,192,270 shares of Common Stock
outstanding.
36
<PAGE>
Except as otherwise indicated, the address of each of the following persons
is c/o U.S. Wireless Data, Inc., 2200 Powell Street, Suite 450, Emeryville,
CA 94608.
<TABLE>
<CAPTION>
Shares Beneficially Owned (1)
-----------------------------
Percent of
Name of Beneficial Owner Number Class
- ----------------------------------------------------------- --------- -----
<S> <C> <C>
Rod L. Stambaugh .......................................... 422,900(2) 4.5%
Evon A. Kelly ............................................. 96,000(3) 1.0%
Alan B. Roberts ........................................... 23,740(4) *
Chester N. Winter ......................................... 80,281(5) *
Caesar Berger ............................................. 202,704(6) 2.2%
John Liviakis ............................................ 2,748,750(7) 29.5%
2420 "K" Street, Suite 220
Sacramento, CA 95816
Robert B. Prag ........................................... 916,250(8) 9.9%
2420 "K" Street, Suite 220
Sacramento, CA 95816
entrenet Group, LLC ...................................... 700,000(9) 7.1%
5213 El Mercado Parkway, Suite D
Santa Rosa, CA 95403
All directors and executive officers as a group (8 persons) 852,625(10) 8.9%
<FN>
* Represents less than 1% of outstanding shares.
(1) The persons named in this table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and except as otherwise
indicated in the other footnotes to this table. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of Common Stock
subject to options, warrants or rights held by that person that are
currently exercisable or exercisable or issuable within 60 days are deemed
outstanding. Such shares, however, are not deemed outstanding for the
purpose of computing the percentage ownership of any other person.
(2) Includes shares underlying a total of 145,500 options exercisable within 60
days of September 30, 1997.
(3) Represents shares underlying a total of 96,000 options exercisable within
60 days of September 30, 1997.
(4) Includes shares underlying a total of 15,000 options and 2,631 warrants
exercisable within 60 days of September 30, 1997.
(5) Includes shares underlying a total of 67,781 options exercisable within 60
days of September 30, 1997.
(6) Includes 192,704 shares owned of record by Cardservice International, Inc.
("CSI"), a company for which Mr. Berger serves as executive vice president
and which is a significant customer of the Company. See "Certain
Transactions." Mr. Berger disclaims any beneficial ownership of the shares
owned or record by CSI. Also includes 10,000 shares underlying options
exercisable within 60 days of September 30, 1997.
(7) Information based upon Schedule 13D dated August 6, 1997 and Schedule 13D
Amendment No. 1 dated September 16, 1997. The number of shares shown
includes a total of 123,750 shares of Common Stock issuable to Liviakis
Financial Communications, Inc. ("LFC") pursuant to a consulting agreement
between the Company and LFC, under which the Company is obligated to issue
the shares as of November 15, 1997. See "Certain Transactions."
37
<PAGE>
(8) Information based upon Schedule 13D dated August 6, 1997 and Schedule 13D
Amendment No. 1 dated September 16, 1997. The number of shares shown
includes a total of 41,250 shares of Common Stock issuable to LFC pursuant
to a consulting agreement between the Company and LFC, under which the
Company is obligated to issue the shares to Mr. Prag, a vice president of
LFC, as of November 15, 1997. See "Certain Transactions."
(9) Includes 700,000 shares underlying convertible debentures issuable as
consulting fees to entrenet Group, LLC.
(10) Includes all shares underlying options and warrants as described in
footnotes (2) - (6) of this table. Also includes a total of 27,000 shares
underlying options issued to three additional executive officers which are
exercisable within 60 days of September 30, 1997. See "Executive
Compensation."
</FN>
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions between the Company and Cardservice International, Inc.
- --------------------------------------------------------------------
Mr. Caesar Berger, a director of the Company, is also an officer of
Cardservice International, Inc. The Company and CSI have been involved in what
is primarily a customer - vendor relationship, and CSI purchased approximately
$698,000 and $398,000 in product from the Company in the fiscal years ended June
30, 1997 and 1996, respectively. In fiscal 1996, CSI advanced the Company
$162,500 for the purchase of raw materials in exchange for warrants to purchase
a total of 142,544 shares of Common Stock, exercisable at 150% of the then
current market price, including registration rights on the underlying shares.
The Company is obligated to pay royalties to CSI on future sales of POS-50
product built with the inventory, although through June 30, 1997, no units had
been built using the inventory.
Transactions with Liviakis Financial Communications, Inc. ("LFC") and Affiliates
- --------------------------------------------------------------------------------
of LFC
- ------
In August of 1997, the Company entered into a Consulting Agreement with
Liviakis Financial Communications, Inc. ("LFC") pursuant to which the Company is
obligated to issue a total of 300,000 shares of its Common Stock as consulting
fees to LFC over the one year term of the Consulting Agreement. Pursuant to the
Consulting Agreement, the Company will also pay LFC cash equal to 2.5% of the
gross proceeds received as a finder's fee as a result of any direct financing
located for the Company by LFC.
The Company also sold a total of 3,500,000 shares of Common Stock and
warrants to purchase an additional 1,600,000 shares of Common Stock exercisable
at $.01 per share, to two affiliates of LFC, John Liviakis and Robert B. Prag.
Pursuant to this transaction, Messrs. Liviakis and Prag became significant
shareholders of the Company.
In October 1997, the Company received a bridge loan from Liviakis Financial
Communications, Inc. For $200,000 pending completion of more permanent
financing. Following a significant funding (greater than $2 million) the Company
will repay the bridge loan along with interest of nine percent
The above transactions are described in more detail under Item 6 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Subsequent Events."
Transactions with entrenet Group, LLC
- -------------------------------------
In June 1997, the Company entered into a consulting agreement with entrenet
Group, LLC, for consulting services. The transaction is described in the
Company's Annual Report on Form 10-KSB for the Fiscal Year Ended June 30, 1997
under Item 6 - "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Results of Operations." The Company has renegotiated the
consideration it will pay to entrenet under the Consulting Agreement. The
Company anticipates issuing a $150,000 convertible debenture to entrenet, with
interest payable at 10% per annum, due in full on or before June 2, 1998.
Principal and interest are to be convertible into Common Stock of the Company
over the year ending June 2, 1998, at the lesser of $.50 per share or the price
at which the Company offers its Common Stock for sale during such period, but in
no event lower than $.2143 per share. At $.50 per share, the Company would be
required to issue a total of 300,000 shares of Common Stock; at $.2413 per
38
<PAGE>
share, the Company would be required to issue 700,000 shares of Common Stock. In
addition, the Company expects to issue a second convertible debenture to
entrenet for $40,000 bearing interest at 7% per annum, payable in full on or
before July 24, 1998, which will be convertible on the same terms and for the
same security as any financing secured by the Company of at least $2,000,000.
This debenture is in payment of a finder's fee to entrenet for the financing
received from the affiliates of LFC, as described above. Entrenet has been
granted "piggyback registration rights" covering all shares of Common Stock
issuable to it under these debentures.
39
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits Required by Item 601 of Regulation S-B
-------------------------------------------------------
Exhibit Description
------- -----------
<S> <C>
3.1 Copy of Amended Articles of Incorporation (2)
3.2 Copy of Amended Bylaws (2)
10.1 License and Volume Purchase Agreement with OMRON Systems of America with
Solectron Addendum (1)
10.2 Promissory Note with OMRON Systems, Inc. (2)
10.3 Supply Agreement with Novatel Communications LTD. (2)
10.4 Release Agreement with Richard P. Draper (2)
10.5 Copy of Amended 1992 Stock Option Plan
10.6 Agreement for Manufacture and Purchase between USWD, Uniform Industrial Corp
and Cardservice International, Inc.
10.7 AT&T CDPD Value Added Reseller Agreement dated April 30. 1997
10.8 Bell Atlantic AIRBRIDGE Packet Service Agreement dated
August 12, 1997 10.9 Engagement Agreement between USWD and
entrenet Group, LLC dated June 3, 1997 10.10 GTE Leasing
Corporation Promissory Note dated August 6, 1997
10.11 GTE Mobilnet Communications Service and Equipment
Agreement dated August 1, 1997 10.12 Form of Demand Note issued
to private investors during the fourth quarter of 1997
10.13 Liviakis Financial Communications, Inc. Consulting Agreement, and Subscription
Agreement for the purchase of U.S. Wireless Data, Inc. Common Stock and
Warrants dated July 25, 1997
10.14 Member Service Provider Sales and Service Credit Card Processing Agreement
between U.S. Wireless Data, Inc. and NOVA Information Systems, Inc. dated
January 1, 1997
10.15 Purchase Agreement with Unicard Systems, Inc. dated September 18, 1997
10.16 Purchase Agreement with Wellex Systems Manufacturing & Distribution Group dated
August 7, 1997
21.1 List of Subsidiaries (2)
23.1 Consent of Independent Accountants
27 Financial Data Schedule
<FN>
(1) Incorporated by reference to the reference Exhibit and Exhibit number in Registration Statement No. 33-69776-D.
(2) Incorporated by reference to the Company's report on Form 10-KSB filed on October 13, 1996. (Control No. 95201388)
</FN>
</TABLE>
(b) Reports on Form 8-K
-------------------
There were no reports on Form 8-K that were filed during the last quarter
of the fiscal year ended June 30, 1997.
40
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: October 14, 1997
U.S. WIRELESS DATA, INC.
\s\ Evon A. Kelly Chief Executive Officer and October 14. 1997
- ------------------------ Director ----------------
Evon A. Kelly
In accordance with the Exchange Act, this Report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated:
\s\ Evon A. Kelly Chief Executive Officer and October 14, 1997
- ------------------------ Director ----------------
Evon A. Kelly
\s\ Rod L. Stambaugh President and Chairman of the October 14, 1997
- ------------------------ Board of Directors ----------------
Rod L. Stambaugh
\s\ Robert E. Robichaud Chief Financial Officer and October 14, 1997
- ------------------------ Principal Accounting Officer ----------------
Robert E. Robichaud
- ------------------------ Director ---------------
Alan B. Roberts
\s\ Chester N. Winter Director October 14, 1997
- ------------------------ ----------------
Chester N. Winter
\s\ Caesar Berger Director October 14, 1997
Caesar Berger ----------------
41
