SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-QSB
[X] Quarterly Report under Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended December 31, 1999.
[ ] Transition Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the transition period from to .
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Commission File No.: 0-22848
U.S. Wireless Data, Inc.
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(Exact name of registrant as specified in its charter)
Colorado 84-1178691
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(State of incorporation) (IRS Employer Identification No.)
2200 Powell Street, Suite 800
Emeryville, California 94608
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(Address of principal executive offices, including zip code)
(510) 596-2025
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(Registrant's Telephone Number, including area code)
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 ninety days.
Yes [X] No [ ]
As of January 31, 2000 there were outstanding 22,669,986 shares of the
Registrant's Common Stock (no par value per share).
Transitional Small Business Disclosure Format
Yes [ ] No [X]
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U.S. WIRELESS DATA, INC.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION Page
Item 1. Financial Statements (Unaudited)
Balance Sheets --
December 31, 1999, and June 30, 1999 ......................... 3
Statements of Operations --
Three Months and Six Months Ended December 31, 1999 and 1998.. 4
Statements of Cash Flows --
Six Months Ended December 31, 1999 and 1998................... 5
Notes to Financial Statements ....................................6-11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................11-16
PART II OTHER INFORMATION
Item 1. Legal Proceedings.................................................. 16
Item 2. Changes in Securities.............................................. 16
Item 3. Defaults Upon Senior Securities.................................... 17
Item 5. Other Information.................................................. 18
Item 6. Exhibits and Reports on Form 8-K................................... 19
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PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
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U.S. WIRELESS DATA, INC.
BALANCE SHEET
(Unaudited)
December 31, 1999 June 30, 1999
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ASSETS
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Current Assets:
Cash ..................................................................... $ 114 ,000 $ 425,000
Accounts receivable, net of allowance for doubtful accounts of
$40,000 at December 31, 1999; $43,000 at June 30, 1999 ............... 111,000 178,000
Inventory, net ........................................................... 146,000 215,000
Other current assets ..................................................... 58,000 14,000
Escrow held for payment of professional fees ............................. 45,000 112,000
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Total current assets ................................................. 474,000 944,000
Processing units - deployed ................................................... 52,000 408,000
Property and equipment, net ................................................... 374,000 405,000
Other assets .................................................................. 65,000 14,000
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Total assets .................................................................. $ 965,000 $ 1,771,000
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LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable ......................................................... $ 1,464,000 $ 1,198,000
Accrued liabilities ...................................................... 776,000 413,000
Borrowings, current portion .............................................. 2,662,000 2,272,000
Other current liabilities ................................................ 305,000 450,000
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Total current liabilities ............................................ 5,207,000 4,333,000
Borrowings, long-term portion ................................................. 25,000 25,000
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Total liabilities ............................................................. 5,232,000 4,358,000
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Redeemable preferred stock:
Series B 6% cumulative convertible redeemable preferred stock,
$1.00 stated value, 5,000,000 shares authorized, 1,954,705 shares
issued and outstanding. Redeemable at approximately
$2,520,000 at December 31, 1999 ..................................... 2,520,000 1,587,000
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Stockholders' deficit:
Preferred stock, at $1.00 stated value, 15,000,000 authorized,
752,000 Series A issued and outstanding at June 30, 1999 ............. -- 752,000
Common stock, at $1.00 stated value, 40,000,000 shares authorized;
22,142,977 and 17,816,075 shares issued and outstanding at
December 31, 1999 and June 30, 1999, respectively .................... 22,143,000 17,816,000
Common stock to be distributed ........................................... 200,000 243,000
Additional paid-in capital ............................................... 10,239,000 12,082,000
Accumulated deficit ...................................................... (39,369,000) (35,067,000)
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Total stockholders' deficit .......................................... (6,787,000) (4,174,000)
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Total liabilities and stockholders' deficit .......................... $ 965,000 $ 1,771,000
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</TABLE>
Accompanying notes are an integral part of the financial statements
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<TABLE>
<CAPTION>
U.S. WIRELESS DATA, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended For the six months ended
December 31, December 31,
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1999 1998 1999 1998
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As Restated As Restated
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Net revenues:
Product sales ...................................... $ 61,000 $ 343,000 $ 160,000 $ 509,000
Services ........................................... 63,000 177,000 108,000 372,000
------------ ------------ ------------ ------------
124,000 520,000 268,000 881,000
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Cost of revenues:
Product sales ...................................... 48,000 252,000 135,000 170,000
Services ........................................... 57,000 172,000 144,000 331,000
------------ ------------ ------------ ------------
105,000 424,000 279,000 501,000
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Gross profit (loss) .................................... 19,000 96,000 (11,000) 380,000
------------ ------------ ------------ ------------
Operating expenses:
Selling, general and administrative ................ 945,000 950,000 2,063,000 3,426,000
Research and development ........................... 277,000 178,000 468,000 258,000
------------ ------------ ------------ ------------
Total operating expenses ........................ 1,222,000 1,128,000 2,531,000 3,684,000
------------ ------------ ------------ ------------
Loss from operations ................................... (1,203,000) (1,032,000) (2,542,000) (3,304,000)
Interest expense ....................................... (711,000) (382,000) (932,000) (639,000)
Other income ........................................... -- 2,000 128,000 8,000
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Net loss ............................................... (1,914,000) (1,412,000) (3,346,000) (3,935,000)
------------ ------------ ------------ ------------
Preferred stock dividends .............................. (135,000) (378,000) (985,000) (546,000)
------------ ------------ ------------ ------------
Net loss available to common stockholders .............. $ (2,049,000) $ (1,790,000) $ (4,331,000) $ (4,481,000)
============ ============ ============ ============
Basic and diluted net loss per share, (after
provision for preferred stock dividends) ............ $ (0.10) $ (0.13) $ (0.22) $ (0.34)
============ ============ ============ ============
Weighted average common shares
outstanding - basic/diluted ............................ 20,828,000 13,582,000 19,860,000 13,037,000
============ ============ ============ ============
</TABLE>
Accompanying notes are an integral part of the financial statements
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<TABLE>
<CAPTION>
U.S. WIRELESS DATA, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
For the six months ended December 31,
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1999 1998
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As Restated
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................................... $(3,346,000) $(3,935,000)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization .......................................... 74,000 121,000
Non-cash consulting services and other ................................. 352,000 1,480,000
Non-cash compensation expense-variable stock option .................... -- (645,000)
Gain on sale of merchant portfolio ..................................... (124,000) --
Non-cash interest expense .............................................. 516,000 244,000
Changes in current assets and liabilities:
Accounts receivable ................................................. 67,000 (142,000)
Inventory ........................................................... 66,000 170,000
Other current assets ................................................ 59,000 (42,000)
Accounts payable .................................................... 262,000 (307,000)
Accrued liabilities ................................................. 613,000 150 ,000
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Net cash used in operating activities ............................... (1,461,000) (2,906,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant, and equipment ............................. (42,000) (45,000)
Proceeds from sale of merchant portfolio ............................... 450,000 --
Processing units - deployed ............................................ -- (81,000)
(Increase)decrease in other assets ..................................... (51,000) 10,000
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Net cash provided by (used in) investing activities ................. 357,000 (116,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock ................................. 630,000 26,000
Principal payment on borrowings ........................................ (32,000) (317,000)
Net proceeds from issuance of debt ..................................... 195,000 1,850,000
Net proceeds from issuance of convertible debenture .................... -- 2,532,000
Redemption of Series A preferred stock ................................. -- (1,000,000)
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Net cash provided by financing activities ........................... 793,000 3,091,000
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Net (decrease) increase in cash ................................................ (311,000) 69,000
Cash at beginning of period .................................................... 425,000 4,000
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Cash at end of period .......................................................... $ 114,000 $ 73,000
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Supplemental disclosure of non-cash financing and investing activities:
1. Conversion of $450,000 notes payable to 727,273 shares of common stock
2. Conversion of $200,000 6% convertible debenture into 313,419 shares of common stock.
3. Accretion on mandatory redeemable preferred stock of $933,000 including $59,000 accrued dividends.
4. Conversion of 751,610 shares of Series A preferred stock and accrued dividends to 1,177,113 shares of common stock.
5. Issuance of 443,077 shares of common stock to Liviakis Financial Communications.
</TABLE>
Accompanying notes are an integral part of the financial statements
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U.S. WIRELESS DATA, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1 - BASIS OF PRESENTATION
The accompanying financial statements included herein have been prepared by
U.S. Wireless Data, Inc. (The "Company" or "USWD"), without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
amounts in the financial statements of the prior period have been restated from
the originally reported Form 10-QSB of the prior period. A Form 8-K was filed
incorporating this restatement. The financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Rule 310 of Regulation
S-B. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included.
The results of operations of any interim period are not necessarily
indicative of the results of operations to be expected for the fiscal year. For
further information, refer to the financial statements and accompanying
footnotes included in the Company's Form 10-KSB for the year ended June 30,
1999.
Note 2 - THE COMPANY
U.S. Wireless Data, Inc. was incorporated in the state of Colorado on July
30, 1991. The Company is in the business of providing products and services to
enable the use of wireless technology for electronic payment and other
transactions. USWD is a terminal-neutral, transport-neutral and
processor-neutral enabler of wireless transaction processing services through
the creation of what USWD calls Wireless Express Payment ServiceSM ("WEPS").
WEPS is a comprehensive and integrated suite of wireless transport services and
network technology designed to deliver payment transactions securely and
efficiently between a merchant's location and a payment processor.
Note 3 - INVENTORY
December 31,
1999 June 30, 1999
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Inventory consists of:
Raw material $ 139,000 $ 144,000
Finished goods 278,000 331,000
Lower of cost or market reserve (271,000) (260,000)
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$ 146,000 $ 215,000
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The Company has established a reserve against finished goods and raw
materials to reflect the estimated net realizable value of the inventory as of
December 31, 1999 and June 30, 1999.
Note 4 - FINANCIAL CONDITION AND LIQUIDITY
The Company continues to have difficulties due to its financial condition
and lack of liquidity. The Company has incurred recurring losses from
operations, has an accumulated deficit of approximately $39 million, a net
capital deficiency of $6,787,000 and negative working capital of $4,733,000 at
December 31, 1999, and has limited financial resources. The Company had
defaulted on certain obligations related to filing of a registration statement
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on its 6% Convertible Subordinated Debentures ("6% Debentures"), as of January
18, 1999, which caused the debt to become due on demand although this default
was waived by the 6% Debenture holders as of May 6, 1999. As of October 10,
1999, a registration statement covering the common stock underlying the
Company's Series B Preferred Stock ("Series B Preferred Stock"), 6% Debentures
and other unregistered securities had not been declared effective, thereby
entitling holders of the Series B Preferred Stock to redeem their shares at
$1.25 per share plus accrued penalties and dividends (approximately $2,700,000
as of December 31, 1999), and holders of the 6% Debentures to redeem the
$1,800,000 face amount at 120% of the face value (increased to 125% based on
pending redemption proposal submitted to the holders at 125% of face) plus
accrued penalties and interest (approximately $2,520,000 as of December 31,
1999). The accrued interest and penalties are recorded in accrued liabilities.
If the holders of the Series B Preferred Stock and/or the holders of the 6%
Debentures demand to redeem their securities, the Company would not currently be
able to fund such redemption.
In December 1999, the Company entered into an agreement with an investment
banking firm in connection with a proposed equity private placement. In
connection with the engagement of the firm, the Company entered into an
agreement with an entity affiliated with the firm under which it agreed to lend
the Company up to $1,000,000, subject to certain conditions. As part of the
agreement, Dean M. Leavitt, the Company's Chief Executive Officer, will lend the
Company up to $100,000. In connection with the commitments to lend up to
$1,100,000, the Company issued the lenders warrants to purchase an aggregate of
15,000,000 shares of common stock at an exercise price of $0.01 per share. The
notes issued in this financing contain negative covenants, including
restrictions on issuing additional securities. See Note 6 - Financing,
Borrowings and Stockholders' Deficit.
During the implementation of its new business plan as described in Item 2 -
Management Discussion and Analysis, the Company expects expenses to continue to
exceed revenues. The implementation of USWD's business plan is dependent on
obtaining a significant debt or equity financing in the immediate future. The
inability of the Company to secure such financing in the near term would
adversely impact the Company's financial position, including its ability to
continue as a going concern.
Note 5 - NET LOSS PER SHARE
Earnings (loss) per common share (EPS) is computed using Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." SFAS No.
128 establishes standards for the computation, presentation, and disclosure of
earnings per share. Basic per share amounts are computed by dividing the net
loss available to common stockholders by the weighted average number of common
shares outstanding during the year. Diluted per share amounts incorporate the
incremental shares issuable upon the assumed exercise of the Company's stock
options and warrants and assumed conversion of convertible securities. During
fiscal 1999 and 2000 such incremental amounts have been excluded from the
calculation since their effect would be anti-dilutive. Such stock options,
warrants and conversions could potentially dilute earnings per share in the
future.
Note 6 - FINANCINGS, BORROWINGS AND STOCKHOLDERS' DEFICIT
To fund operations during the first six months of fiscal 2000, the Company
raised $930,000 in a private offering of common stock and common stock purchase
warrants. The Company issued 976,020 shares of common stock and 195,294 warrants
and has 526,894 shares of common stock and 105,378 warrants issuable for the
investments made during the period. The warrants are exercisable at $1.50 per
share through July 6, 2004.
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On August 2, 1999, the Company entered into an exclusive financial advisory
agreement with an investment banking firm to assist the Company with a financing
on a "best-efforts" basis. This agreement was terminated in December 1999 in
conjunction with a new financing effort described below. The Company agreed to
pay out-of-pocket expenses incurred by the firm.
In the fourth quarter of fiscal 1999, USWD entered into an agreement with
the purchasers of the Series B Preferred Stock and holders of the 6% Debentures
to file a registration statement with the SEC covering the common stock
underlying the Series B Preferred Stock, a common stock purchase warrant issued
at the same time as the Series B Preferred Stock, the 6% Debentures, and the
common stock purchase warrants issued to the 6% Debenture holders in July, 1998,
within 30 days of May 6, 1999, to be effective within 90 days of May 6, 1999.
This date was subsequently extended to May 11, 1999. USWD filed the required
registration statement on June 30, 1999. The Company thereby became subject to a
late filing penalty of $74,000 (following waiver of the "late filing" penalty by
the holder of 1,500,000 shares of Series B Preferred Stock). The registration
statement did not become effective by August 10, 1999, and the Company therefore
become subject to an initial "late effectiveness" penalty of 3% of the total
original purchase price of $1,800,000 of 6% Debentures and 1,954,705 shares of
Series B Preferred Stock ($1,954,705 purchase price), which were outstanding as
of August 10, 1999. Additional late effectiveness penalties accrue monthly (or
for any portion of any month) that the registration statement is not effective,
in amounts equal to 2% of the original purchase price of the outstanding Series
B Preferred Stock and 3% of the face amount of the outstanding 6% Debentures. In
the quarter ended September 30, 1999, $188,000 of penalties was accrued as a
charge to interest expense and $225,000 was accrued in the quarter ended
December 31, 1999. Offering costs, and valuation of related warrants and
incentive shares, were recorded against the aggregate preference value of the
preferred stock and will be accreted up to the full redemption value by the date
of mandatory redemption. Accretion and accrued dividends for the first and
second fiscal quarters was $807,000 and $126,000, respectively.
In December 1999, the Company entered into an agreement with an investment
banking firm in connection with a proposed equity private placement. In
connection with the engagement of the firm, the Company entered into an
agreement with an entity affiliated with the firm under which it agreed to lend
the Company up to $1,000,000, subject to certain conditions, including that Dean
M. Leavitt, the Company's Chief Executive Officer, make and honor a similar
commitment to lend the Company up to $100,000. The notes accrue 8% interest per
annum, are collateralized by substantially all of the Company's assets, and are
due the earlier of the date of a change in control of the Company, or the
Company concludes a debt or equity financing of at least $5 million, or December
30, 2000. In connection with the commitments to lend up to $1,100,000, the
Company issued the lenders warrants (the "Bridge Warrants") to purchase an
aggregate of 15,000,000 shares of common stock at an exercise price of $0.01 per
share. The warrants expire on December 30, 2006. The Company does not have
enough unreserved shares to cover the issuance of the common stock underlying
the warrants. The warrants may be exercised at any time, subject to certain
conditions, including the approval by the Company's shareholders of an amendment
to the Articles of Incorporation to increase the number of authorized shares of
common stock. The Company entered into Economic Participation Agreements with
the lenders which are intended to provide the lenders with the economic
equivalent of ownership of common stock in the event the Company is not able to
amend its Articles. In addition, the Company is obligated to pay liquidated
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damages if the Company is unable to provide the necessary amount of reserved
shares of common stock to honor exercise following 120 days of the agreement
date. As of December 31, 1999, the Company borrowed $195,000 of the loan
commitment. The Company established the value of the Bridge Warrants based upon
an assessment of the market rate of interest for debt securities with similar
attributes but without the stock purchase warrants feature. In December 1999,
the Company recorded a discount on the note via a charge of $34,000 against the
face value of the note for a proportionate amount of the warrant valuation. The
Company will accrete the carrying value of the note to its full face value by
the time of repayment. Details of the transaction were reported on a Current
Report on Form 8-K reporting an event of December 23, 1999, filed on January 12,
2000. See also Note 10 - Subsequent Events.
Note 7 - SALE OF CREDIT CARD PORTFOLIO
On July 7, 1999, USWD sold a portion of its merchant credit card portfolio
to PMT Services Inc., a wholly owned subsidiary of Nova Corporation. The
transaction resulted in a cash payment to USWD of $450,000. The sale included
approximately 450 installed USWD owned TRANZ Enabler point-of-sale devices
deployed with a portion of the respective merchants. A gain of $124,000 was
recorded on the sale as other income.
Note 8 - RELATED PARTY TRANSACTIONS
On July 1, 1999, USWD entered into an agreement with Liviakis Financial
Communications, Inc. (LFC), to provide the Company with public relations and
investor relations services through March 15, 2000. The Company issued 690,000
restricted shares of common stock to LFC for its services under this agreement.
LFC is entitled to receive a 2.5% cash finder's fee for financing located by LFC
and a 2% finder's fee based on the "total consideration provided" through any
acquisition located by LFC. The Company recorded a charge to consulting expense
of $352,000 for the valuation of the shares. LFC has agreed not to sell any USWD
common stock during the term of the consulting services agreement.
In December 1999, the Company issued 443,077 restricted shares of common
stock to John M. Liviakis, the principal owner of LFC, and a significant Company
shareholder, to replace shares transferred to a finder in conjunction with the
May 1999 Series B Preferred Stock financing.
In December 1999, Dean M. Leavitt, the Company's Chief Executive Officer,
agreed to lend the Company up to $100,000, as part of the $1,100,000 financing
described in Note 6, above. In conjunction therewith, the Company issued Mr.
Leavitt a total of 1,363,636 Common Stock purchase warrants exercisable at $.01
per share until December 30, 2006. The Company also agreed to reprice 2,687,5000
of the Common Stock purchase warrants issued to Mr. Leavitt in May, 1999, from
an exercise price of $3.00 per share to $1.465 per share, the fair market value
of the Common Stock as of January 4, 2000. Finally, the Company also agreed to
issue Mr. Leavitt additional options to purchase up to 2,500,000 shares of
Common Stock pursuant to a newly authorized stock option plan to be submitted to
shareholders for their approval at the next meeting of shareholders, which will
be scheduled as soon as practicable. The options to be issued to Mr. Leavitt are
contingent upon approval of the stock option plan by shareholders and the
exercise price of the options will be set at that date. See also Note 10 -
Subsequent Events.
Note 9 - LITIGATION
In April 1998, USWD entered into an agreement with certain former
noteholders of its Demand Notes under which USWD issued 525,800 shares of common
stock in settlement of the dispute regarding conversion terms of their notes.
Terms of the settlement entitled the noteholders to certain guarantee and/or
"put" provisions related to the shares issued in conversion of the notes. The
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shares originally issued upon conversion of the notes and the additional shares
resulting from the settlement were reflected as redeemable common stock on the
balance sheet. The guarantee expired as to all shares no later than June 19,
1999. The "put" expired as to all shares no later than June 24, 1999. As of June
30, 1999, the "put" provisions related to the shares had expired or been
relinquished in return for the Company's agreement to issue up to 200,000 shares
of common stock to certain holders who had exercised their "put" rights. In the
fourth fiscal quarter of 1999, $49,000 was accrued to reflect the settlement,
which is subject to a final agreement prior to issuance of the shares. The
agreement has been executed and the settlement expense may be adjusted at the
date of share issuance.
Note 10 - SUBSEQUENT EVENTS
The Company has entered into agreements with the holders of 1,727,353
shares of the Company's Series B Preferred Stock, no par value per share, and
the holders of $1,000,000 of the Company's 6% Debentures, due July 21, 2000, to
repurchase such securities at the earlier of the closing of a financing in which
the Company raises no less than $5,000,000 or March 31, 2000. The outstanding
shares of Series B Preferred Stock and Debentures are convertible into shares of
Common Stock at the option of the holder at any time at 80% of the five day
average closing bid price of the Company's Common Stock. On February 7, 2000,
the holder of the remaining $800,000 of 6% Debentures, which had opted not to
participate in the repurchase transaction described above, elected to convert
its Debentures, including accrued interest, into 404,745 shares of Common Stock
at $2.05 per share.
During January and February 2000, the Company borrowed the $905,000 balance
under the December 1999 bridge loan commitment entered into with an affiliate of
an investment bank and Mr. Dean Leavitt. In February 2000, the Company agreed to
amend the Common Stock Purchase Warrants (entitling the lenders to purchase
15,000,000 shares of Common Stock at $0.01 per share). In consideration of the
lenders agreeing to make an additional $275,000 available under the lending
commitment, the amendment to the common stock purchase warrants eliminated the
provision that if the lenders were unable or unwilling to complete a proposed
private placement, then, subject to certain exceptions, the lenders would have
either paid a break-up fee of $5 million or agreed to the cancellation of 50% of
the warrants, at the lenders option.
On January 31 and February 14, 2000, the Company entered into employment
agreements with two executives that commit the Company to aggregate annual
salary compensation of $295,000, target incentive bonus of up to $275,000
subject to attainment of specific financial or operational objectives and
450,000 stock options, with exercise prices equal to fair market value of the
common stock as of the dates of issuance.
On January 4, 2000, the Board of Directors approved an amendment to the
Company's Articles of Incorporation to increase authorized capital from
55,000,000 shares to 225,000,000 shares. Of that number, 200,000,000 shares
would be designated as no par value Common Stock and 25,000,000 shares would be
designated as preferred stock, with the rights, designations and preferences of
any series of preferred stock to be fixed and determined by the Board of
Directors at the time of issuance, without further action by shareholders. The
amendment to the Articles of Incorporation is to be submitted to the Company's
shareholders as soon as practicable.
On January 4, 2000, the Board of Directors approved a new stock option
plan, subject to approval by the Company's shareholders at the next shareholder
meeting. Once approved by shareholders (and assuming an increase in authorized
common stock is also approved by shareholders) the option plan would reserve
15,000,000 shares of Common Stock for issuance pursuant to options that may be
granted under the plan. Dean Leavitt, the Company's Chief Executive Officer, was
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granted 2,500,000 options to be issued with the exercise price to be set as of
the date of shareholder approval of the plan. The plan is to be submitted to the
Company's shareholders as soon as practicable.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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 21E of the Securities Exchange 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 forward-looking statements include, but
are not limited to: the Company's requirement for additional capital; failure of
the Company to raise additional capital critical to continue ongoing operations;
the failure to execute definitive agreements with potential strategic alliance
partners; technological change; system capacity constraints or system failures;
the ability of the Company to develop new distribution channels; or the
intensification of competition. Additional factors may be described in other
reports filed by the Company under the Securities Exchange Act of 1934. A
detailed statement of risks and uncertainties relating to forward-looking
statements is set forth in the Company's Annual Report on Form 10-KSB for the
fiscal year ended June 30, 1999 filed on October 14, 1999, under the caption
"Risk Factors" in Item 6 of that Report, and is hereby incorporated by
reference.
OVERVIEW
The Company was incorporated in the State of Colorado in July 1991 for the
purposes of designing, manufacturing and marketing wireless and portable credit
card and check authorization terminals for use in the transaction processing
business. The Company completed an initial public offering in December 1993.
The Company has now repositioned itself as a device-neutral, wireless
carrier-neutral, merchant acquirer and front-end processor neutral enabler of
wireless transaction processing services through the creation of what USWD calls
Wireless Express Payment ServiceSM or WEPSSM ("WEPS").
USWD serves the transaction processing community by applying wireless
technology and value-added services to the transport and translation of
wirelessly generated electronic transactions. USWD's WEPS technology provides
the payment processor with fast and flexible transaction processing tools and
state-of-the-art on-line customer service capabilities. USWD provides merchant
acquirers, Independent Sales Organizations ("ISOs") and third party processors
with a wireless transaction management service that can be utilized at both
conventional and emerging merchant segments, permits the retrieval of
on-line/real-time transactional reports and diagnostics via the Internet and
simplifies the customer service and application development effort. Via WEPS,
merchants can process payments as fast as cash, without the cost and
inconvenience of being tethered to a telephone line.
Revision of Business Plan
In fiscal year 1998, USWD entered into agreements with large
telecommunications carriers for direct distribution of products and services to
merchants. USWD signed joint marketing and operating agreements with Bell
11
<PAGE>
Atlantic Mobile, Ameritech Mobile Communications, Inc., and GTE Wireless.
Commencing in the second quarter of fiscal 1998 and continuing into the first
quarter of fiscal 1999, USWD made significant investments to support a
nationwide deployment of TRANZ Enablers to merchants through GTE's and other
telecommunications carriers' national sales forces. Under these deployment
programs, the carrier's sales representative introduced USWD's credit card
processing solution and TRANZ Enabler to the end user merchant. Upon execution
of a credit card processing agreement, a TRANZ Enabler unit(s) was provided to
the merchant by USWD. Under this program, USWD retained a portion of the monthly
credit card fees based on the dollar volume and number of transactions processed
through the TRANZ Enabler.
Placements of TRANZ Enabler units pursuant to USWD's agreements with
telecommunications carriers did not develop as rapidly as anticipated and did
not reach anticipated (and necessary) levels to pay for the infrastructure to
support the programs. Costs to USWD of implementing the joint marketing and
distribution agreements with GTE Wireless, Bell Atlantic Mobile and Ameritech
exceeded revenue generated by the programs since they began.
USWD's continued focus on direct sales to the merchant community had
inadvertently positioned it in direct competition with the industry's largest
acquirers, a competitive stance that resulted in disappointing sales. As the
Company entered fiscal 1999, it was clear that the Company did not have the
requisite expertise as a merchant acquirer and that it should not be in direct
competition with firms that would better be its customers. USWD hired Roger
Pierce, former President of First Data Corporation and Chief Operating Officer
of Visa International, as Chief Executive Officer in August 1998. It was during
this period that the Company began the development of WEPS. Mr. Pierce retired
in March 1999.
In May 1999, Dean M. Leavitt, former President and Chief Executive Officer
of U.S. Data Capture, a credit card processing company serving a broad spectrum
of conventional card acceptors and emerging markets, was hired as Chairman and
Chief Executive Officer of USWD. Mr. Leavitt has refined the Company's mission
to become a device neutral, wireless carrier-neutral and merchant
acquirer-neutral provider of wireless processing services. The Company also has
developed a complimentary suite of Internet browser-based tools to simplify the
activation, troubleshooting and deployment of wireless terminal devices. As part
of USWD's new strategy, it has phased out the sale of products and services
directly to merchants, thereby positioning itself as a neutral enabler to the
acquirer marketplace. The Company now has significant efforts underway to
broaden the use of WEPS through the expansion of its sales channels via
contracts with merchant acquirers and independent sales organizations. The
Company is also in the process of expanding its WEPS offerings by certifying
additional WEPS enabled point-of-sale devices.
WEPS Operational Overview
WEPS is a comprehensive and integrated suite of wireless transport services
and network technology designed to deliver payment transactions securely and
efficiently between a merchant's location and a payment processor. WEPS
technology includes the following key features:
o Internet-based account set-up with automated IP / Radio ID
provisioning and terminal activation / deactivation services;
o High-speed wireless packet data transport;
o Real-time authorization and capture;
o Message formatting and protocol conversion;
o Real-time remote terminal diagnostics;
o Ability to use WEPS certified wireless devices from various terminal
manufacturers;
o Second level customer support services;
o A customer attrition prevention program;
o WEPS certification lab for new terminals; and,
o WEPS training center for clients' customer service departments.
12
<PAGE>
USWD is targeting large merchant acquirers and card processors for this
service. The initial response for WEPS from the targeted prospects has been
positive.
USWD has entered into more than thirty WEPS agreements with various
merchant acquirers, including Card Service International (CSI), Paymentech
Network Services, Westamerica Bank, Certified Merchant Services (CMS), and
anticipates adding additional agreements in the near future. The WEPS agreement
allows the merchant acquirer to offer WEPS as a wireless transaction processing
solution to a merchant. The WEPS agreement defines the services and billing
terms between the Company and merchant acquirer if and when the merchant
acquirer utilizes WEPS. A WEPS agreement is not a firm commitment by the
merchant acquirer to purchase any goods or service from USWD.
USWD continues to establish connectivity between the wireless networks,
WEPS server and various front-end processors. Commercial transactions running
through the WEPS platform began in the second quarter of fiscal 2000. The
Company is also working with several point-of-sale terminal manufacturers and
front-end processors as part of the ongoing process of adding additional devices
to the WEPS menu of offerings.
Implementation of USWD's business plan is dependent upon the Company's
ability to obtain adequate financing. See "Liquidity and Capital Resources" in
this section below.
Year 2000 Issues
While the Company believes the greatest risks associated with the Year 2000
issue have passed, the Company cannot be certain that the Year 2000 issues with
respect to the electronic payments infrastructure utilized by credit card
processors, banks and financial institutions within the United States and on
which USWD is reliant will not emerge over the coming months. USWD could be
adversely, materially affected, both operationally and financially, to the
extent third parties with which it interfaces, either directly or indirectly,
have not properly addressed their Year 2000 issues. The Company does not have an
available contingency plan that would alleviate a disruption of service in the
electronic transaction sector.
RESULTS OF OPERATION - FISCAL 2000 COMPARED TO FISCAL 1999
Net Revenue
Revenue of $124,000 for the second quarter of fiscal 2000 decreased 76%
from revenue of $520,000 generated during the second quarter of fiscal 1999 as
the Company continued the implementation of its new business model. As noted in
the overview section above, the Company has phased out its direct offering of
wireless credit card processing services and terminals to merchants and is now
marketing WEPS to merchant acquirers and payment processors. The Company
currently has over 30 merchant acquirers or payment processors under contract
for WEPS. Billing for the new WEPS service accounted for $46,000 of the services
revenue during the second quarter and should increase as the Company completes
installation of the communications connectivity and integration of WEPS to the
respective payment processors designated under the recent WEPS agreements with
merchant acquirers. In addition, the Company sold one of its two existing
merchant credit card portfolios at the beginning of July 1999 (see Other Income,
below). The lost revenue from this portfolio accounted for approximately $85,000
of the decrease in services revenue between the two periods. Product revenues
decreased to $61,000 in the current quarter from $343,000 in the prior period as
the Company completed the transition from one-time product sales to a recurring
revenue model based on WEPS sales. For the six months ended December 31, 1999,
total revenues decreased to $268,000 from $881,000 in the prior year, again due
to transition from the old to the new business model.
13
<PAGE>
Gross Profit (Loss)
The Company recorded a gross profit of $19,000 in the second fiscal quarter
of 2000 compared to a gross profit of $96,000 in the second quarter of fiscal
1999. The second quarter product margin of 21% versus 27% in the prior period,
reflects the move to a wholesale versus retail price structure. The prior year
six-month product cost included a $240,000 one-time gain resulting from the
successful restructuring of a note payable to a former terminal equipment
supplier. The services costs include ongoing communications costs associated
with the terminals connected through WEPS or terminals deployed via the previous
credit-card portfolios. The services margin was $6,000 for the quarter ended
December 31, 1999 versus a loss of $36,000 in the first six months of fiscal
2000. The current imbalance in the services revenue and cost structure is
impacted by initialization and transaction costs for new or existing terminals
that are not yet processing through WEPS, and pending transaction billing. The
Company is working on these two issues and expects to resolve the problems in
the near term. Efforts have been underway to eliminate excess CDPD addresses
from the CDPD carrying cost associated with the previous credit-card portfolios.
The Company expects the service margins to improve as WEPS billing becomes a
more predominant component of the services offering in the future.
Operating Expenses
Selling, general and administrative expense was $945,000 in the current
quarter, versus $950,000 in the second quarter of fiscal 1999. For the current
six-month period, selling, general and administrative expense was $2,063,000
versus $3,426,000 in the prior year. The prior quarter and prior six-month
period included a $379,000 and $645,000 non-cash credit related to a variable
stock option which expired unexercised as of November 1999. A significant
decrease in total headcount, related to the change in the business model, from
53 in September 1998 and 35 in December 1998, to 21 as of September 30, 1999 and
21 as of December 31, 1999, resulted in decreased salary expense of $184,000 and
$601,000 in the three and six-month periods, respectively. Commission expense in
the current quarter increased to $112,000 versus $42,000 in the prior period due
to the signing of WEPS merchant acquirer agreements by the sales organization.
For the six month period, non-cash G&A consulting expense decreased by
$1,032,000 primarily due to a $732,000 decrease from $1,083,000 in the first
quarter of fiscal 1999 to $351,000 in the first quarter of fiscal 2000 for the
valuation of stock issued to the Company's investor relations under the terms of
the consulting agreements,
Research and development expenses increased from $178,000 in the second
fiscal quarter of 1999 to $277,000 in the first quarter of 2000. This increase
was due to an increase in headcount and full time consultants focused on the
implementation of WEPS. For the six-month period, research and development
increased by $210,000 to $468,000 in the current fiscal year, also due to the
increased staffing.
Interest Expense, Other Income and Preferred Stock Dividends
Interest expense of $711,000 in the quarter ended December 31, 1999,
includes interest on the 6% Debentures, a $225,000 note payable, $225,000
accrued for late effective registration penalties on the 6% Debentures and
Series B Preferred Stock and a $450,000 accrual for the redemption right of the
holders of the 6% Debentures to 120% of face value, adjusted to 125% of face
based on the Company's current redemption offer. The prior period interest
expense of $382,000 includes $292,000 for interest and accretion of the
"in-the-money" conversion feature of the 6% Debenture, and a $52,000 valuation
on warrants issued in conjunction with a $500,000 bridge loan.
The six-month interest expense for the period ended December 31, 1999,
includes the current period amount described above plus the previous fiscal
quarter's expense of $221,000, including $187,000 accrued for late effective
14
<PAGE>
registration penalties on the 6% Debentures and Series B Preferred Stock. The
prior six month period ended December 31, 1998, includes the prior period amount
described above plus the prior year's first quarter expense of $257,000,
including a $117,000 non-cash charge to accrete a portion of the "in-the-money"
conversion feature 6% Debenture financing and a $53,000 charge for the value of
a warrant issued in conjunction with a bridge financing from RBB Bank. The
balance of the interest expense was related to interest on the 6% Debentures and
other notes payable.
Other income of $128,000 for the six-month period ended December 30, 1999
included a $124,000 gain on the July 1999 sale of a portion of USWD's merchant
credit card portfolio to PMT Services Inc., a wholly owned subsidiary of Nova
Corporation. The transaction resulted in a cash payment to USWD of $450,000. The
sale included approximately 450 installed USWD owned TRANZ Enabler point-of-sale
devices deployed with a portion of the respective merchants.
The $135,000 preferred stock dividend for the second fiscal quarter of 2000
includes $96,000 to accrete the value of the preferred stock up to its
redemption value by the date at which mandatory redemption is available to the
holders. The balance of the preferred stock dividend amount represents Series A
Preferred Stock dividends and Series B Preferred Stock dividends that were
accrued but not paid in the second fiscal quarter of 2000. The prior period
includes $351,000 related to the partial redemption of Series A Preferred Stock
plus accrued dividends. Preferred Stock dividends of $985,000 for the six month
period ended December 31, 1999, include $874,000 to accrete the value of the
Series B preferred stock up to its redemption value by the date at which
mandatory redemption is available to the holders. For the prior six-month
period, $546,000 includes $464,000 related to the partial redemption of Series A
Preferred Stock plus accrued dividends.
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
USWD continues to face significant challenges due to its financial
condition and lack of liquidity. While management is optimistic with its medium
and long term opportunities, USWD is constrained by its immediate financial
condition and requirement for increased liquidity. USWD has an accumulated
deficit of approximately $39 million since inception to December 31, 1999, with
a working capital deficit of approximately $4,733,000, versus a deficit of
$3,389,000 at year-end June 30, 1999. The December 31, 1999 working capital
deficit includes $1,800,000 of 6% Debentures classified as short-term
borrowings. The Company's current operating commitments require expenditures of
approximately $350,00 per month. The Company has continued to operate at a loss
subsequent to December 31, 1999.
The Company has defaulted on certain obligations which, among other things,
as of October 10, 1999 entitled the holders of the Company's Series B Preferred
Stock and 6% Debentures to redeem those securities for cash plus applicable
penalties, interest and dividends. The holders of the Series B Preferred Stock
may require USWD to redeem the shares of the Series B Preferred Stock for $1.25
per share plus accrued penalties and dividends (approximately $2,700,000 as of
December 31, 1999). The holders of the 6% Debentures may require the Company to
redeem the $1,800,000 face amount at 120% of the face value (increased to 125%
based on pending redemption proposal) plus accrued penalties and interest
(approximately $2,520,000 as of December 31, 1999).
During the past two fiscal years, the Company has financed its operations
through borrowings and private sales of securities. In fiscal 2000, USWD's cash
flows from financing activities were $793,000 as compared to $3,091,000 during
the first six months of fiscal 1999. Most recently, the Company has financed its
operations through the private sale of units consisting of restricted common
stock and common stock purchase warrants. The Company received proceeds from the
15
<PAGE>
sale of these securities of $450,000 in the fourth quarter of fiscal 1999 and
$930,000 through December 31, 1999 of the second quarter. Through January 2000,
the Company issued or had issuable approximately 1,703,000 shares of common
stock and 341,000 common stock purchase warrants exercisable at $1.50 per share
through July 6, 2004, in this financing.
In December 1999, The Company entered into an agreement with an investment
banking firm in connection with a proposed equity private placement. In
connection with the engagement of this firm, the Company entered into an
agreement with an entity affiliated with the firm under which it agreed to lend
the Company up to $1,000,000, subject to certain conditions, including that Dean
M. Leavitt, the Company's Chief Executive Officer, make and honor a similar
commitment to lend the Company up to $100,000. The 8% notes are collateralized
by substantially all of the Company's assets pursuant to a General Security
Agreement. As of December 31, 1999, the Company had borrowed $195,000 of the
loan commitment. During January and February 2000, the Company borrowed the
$905,000 balance of the December 1999 bridge loan entered into with an affiliate
of an investment bank. In consideration of the lenders agreeing to make an
additional $275,000 available under the lending commitment, the amendment to the
common stock purchase warrants eliminated the provision that if the lenders were
unable or unwilling to complete a proposed private placement, then, subject to
certain exceptions, the lenders would have either paid a break-up fee of $5
million or agreed to the cancellation of 50% of the warrants, at the lenders
option. This amount has been funded in February 2000.
USWD is continuing to work with key vendors on payables and the Company
believes that it will be able to restructure commitments as necessary while it
completes an anticipated financing event designed to satisfy its obligations and
fund the business plan, although no assurance can be given that this will be the
case. The failure of the Company to obtain needed financing in the near term
would have an adverse effect on the Company, including its ability to continue
as a going concern.
PART II OTHER INFORMATION
ITEM 1 - LITIGATION
Settlement of Claims of Certain Noteholders
In April 1998, USWD entered into an agreement with certain former
noteholders of its Demand Notes under which USWD issued 525,800 shares of common
stock in settlement of the dispute regarding conversion terms of their notes.
Terms of the settlement entitled the noteholders to certain guarantee and/or
"put" provisions related to the shares issued in conversion of the notes. The
shares originally issued upon conversion of the notes and the additional shares
resulting from the settlement were reflected as redeemable common stock on the
balance sheet. The guarantee expired as to all shares no later than June 19,
1999. The "put" expired as to all shares no later than June 24, 1999. As of June
30, 1999, the "put" provisions related to the shares had expired or been
relinquished in return for the Company's agreement to issue up to 200,000 shares
of common stock to certain holders who had exercised their "put" rights. In the
fourth fiscal quarter of 1999, $49,000 was accrued to reflect the settlement,
which is subject to a final agreement prior to issuance of the shares. The
agreement has been executed and the settlement expense may be adjusted at the
date of share issuance.
ITEM 2 - CHANGES IN SECURITIES
Recent Sales of Unregistered Securities
During the fiscal quarter ended December 31, 1999, the Company sold or
issued the following equity securities without registering the securities under
the Securities Act of 1933, as amended (the "Act").
16
<PAGE>
Between October 21 and December 11, 1999, the Company issued 856,566
restricted shares of common stock and 171,313 common stock purchase warrants to
ten investors in consideration of $530,000. The warrants are exercisable over a
5- year period at $1.50 per share.
Between October 11 and December 29, 1999, the Company issued 1,013,808
shares of common stock to two investors pursuant to the conversion of 680,895
shares of Series A Preferred Stock plus accrued dividends.
On December 29,1999, the Company issued 443,077 restricted shares of common
stock to John M. Liviakis (see Note 8 Related Party Transactions in the
Financial Statements).
As to each of the foregoing transactions, the Company relied upon the
registration exemption contained in Section 4(2) of the Securities Act of 1933,
as amended (the "Act"). The transactions did not involve a public offering of
securities; the Company received investment representations from each purchaser
to the effect that such purchaser was taking for investment only and not with a
view to distribution of the securities; the Company had reason to believe that
each purchaser had such knowledge and experience, either alone or through a
purchaser representative not affiliated with the Company, that such purchaser
was capable of evaluating the merits and risks of an investment in the Company;
each purchaser, either in his or her capacity as an investor or an employee or
consultant to the Company, had access to adequate information concerning the
Company and its business; all certificates representing the securities were
appropriately imprinted with customary "restricted securities" legends, and
instructions were lodged with the Company's transfer agent with respect to all
shares of common stock issued in the transactions as "restricted securities."
ITEM 3 - DEFAULT ON SENIOR SECURITIES
In the fourth quarter of fiscal 1999, USWD entered into an agreement with
the purchasers of its Series B Preferred Stock and holders of its 6% Debentures
to file a registration statement with the SEC covering the common stock
underlying the Series B Preferred Stock, a common stock purchase warrant issued
at the same time as the Series B Preferred Stock, the 6% Debentures, and the
common stock purchase warrants issued to the 6% Debenture holders in July 1998,
within 30 days of May 6, 1999, to be effective within 90 days of May 6, 1999.
This date was subsequently extended to May 11, 1999. USWD filed the required
registration statement on June 30, 1999. The Company thereby became subject to a
late filing penalty of $74,000 (following waiver of the "late filing" penalty by
the holder of 1,500,000 shares of Series B Preferred Stock). The registration
statement did not become effective by August 10, 1999. The Company therefore
become subject to an initial "late effectiveness" penalty of 3% of the total
original purchase price of $1,800,000 of 6% Debentures and 1,954,705 shares of
Series B Preferred Stock, which were outstanding as of August 10, 1999.
Additional late effectiveness penalties accrue monthly (or for any portion of
any month) that the registration statement is not effective, in amounts equal to
2% of the original purchase price of the outstanding Series B Preferred Stock
and 3% of the face amount of the outstanding 6% Debentures. As of December 31,
1999, $413,000 of penalties was accrued as a charge to interest expense. The
registration statement has not become effective as of the date of filing this
report.
As of October 10, 1999, the Series B Registration Statement has not been
declared effective. The holders of the Series B Preferred Stock may require USWD
to redeem the shares of Series B Preferred Stock for $1.25 per share plus
accrued penalties and dividends (approximately $2,700,000 as of December 31,
1999), and holders of the 6% Debentures to redeem the $1,800,000 face amount at
120% of the face value (increased to 125% based on pending redemption proposal)
plus accrued penalties and interest (approximately 2,520,000 as of December 31,
1999).
17
<PAGE>
The Company has entered into agreements with the holders of 1,727,353
shares of the Company's Series B Preferred Stock, no par value per share (the
"Series B Preferred Stock"), and the holders of $1,000,000 of the Company's 6%
Debentures, due July 21, 2000 (the "Debentures"), to repurchase such securities
at the earlier of the closing of a financing in which the Company raises no less
than $5,000,000 or March 31, 2000. The outstanding shares of Series B Preferred
Stock and Debentures are convertible into shares of Common Stock at the option
of the holder at any time at 80% of the five day average closing bid price of
the Company's Common Stock. On February 7, 2000, the holder of the remaining
$800,000 6% Debentures, which had opted not to participate in the repurchase
transaction described above, elected to convert its Debentures, including
accrued interest, into 404,745 shares of Common Stock at $2.05 per share.
ITEM 5 - OTHER INFORMATION
On February 14, 2000, Charles I. Leone joined the Company as its Chief
Financial Officer and Chief Operating Officer. Prior to joining the Company, Mr.
Leone served as Senior Vice President, Systems and Finance, Retail Division for
Phoenix Investment Partners, Ltd., a leading U.S. investment management company.
He also served as Chief Financial Officer and a First Vice President of
Zweig/Glaser Advisors and Zweig Securities Corp. and as Treasurer and Assistant
Secretary of Euclid Advisors LLC.
On January 31, 2000, John H. (Jack) Perveiler joined the Company as it's
Vice President/National Sales Manager in February 2000. Mr. Perveiler will be
responsible for leading the Company's sales team in marketing the Company's
services to new processors, acquiring banks and ISOs as sales channels for WEPS.
Prior to joining the Company, Mr. Perveiler served as Director of Western
Regional Sales for Hypercom Corporation, a leading POS terminal manufacturer,
and has more than ten years of experience in selling and sales management to the
merchant acquiring industry.
The employment agreements with the above two executives commit the Company
to annual salary compensation of $295,000, target incentive bonus of up to
$275,000 subject to attainment of specific financial or operational objectives
and 450,000 stock options, with exercise prices equal to fair market value of
the common stock as of the dates of issuance.
On January 13, 2000, Marc R. Shultz was appointed as the Company's Vice
President of Business Development. Mr. Shultz had served as the Company's Senior
Account Executive since May 1999. Immediately prior to joining the Company, he
served as the Director of Sales for Intellect Electronics, the United States
division of an international manufacturer of wireless POS terminals.
The Company entered into a sublease for space located at 805 Third Avenue,
New York, New York, 10022. The sublease will commence upon approval by the
landlord which is expected to occur in February. The Company intends to move its
principal offices to this location as soon as practicable. In June 1999, the
Company entered into a lease with Palmer Lake Technology Center for space
located at 850 Commercial Lane, Palmer Lake, Colorado 80133. The Company moved
its product development group to this location in January 2000.
On January 4, 2000, the Board of Directors approved an amendment to the
Company's Articles of Incorporation to increase authorized capital from
55,000,000 shares to 225,000,000 shares. Of that number, 200,000,000 shares
would be designated as no par value Common Stock and 25,000,000 shares would be
designated as preferred stock, with the rights, designations and preferences of
any series of preferred stock to be fixed and determined by the Board of
Directors at the time of issuance, without further action by shareholders. The
amendment to the Articles of Incorporation is to be submitted to the Company's
shareholders as soon as practicable.
18
<PAGE>
On January 4, 2000, the Board of Directors approved a new stock option
plan, subject to approval by the Company's shareholders at the next shareholder
meeting. Once approved by shareholders (and assuming an increase in authorized
common stock is also approved by shareholders) the option plan would reserve
15,000,000 shares of Common Stock for issuance pursuant to options that may be
granted under the plan. Dean Leavitt, the Company's Chief Executive Officer, was
granted 2,500,000 options to be issued with the exercise price to be set as of
the date of shareholder approval of the plan. The plan is to be submitted to the
Company's shareholders as soon as practicable.
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits required by Item 601 of Regulation S-B
27 Financial Data Schedule
b) Reports on Form 8-K
On December 8, 1999, the Company filed a report on Form 8-K reporting an
event of December 6, 1999. The report contained disclosures under Item 5 - Other
Events, relating to the resignation of the Company's President and Director, Rod
L. Stambaugh.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S. WIRELESS DATA, INC.
Registrant
Date: February 17, 2000 By: \s\ Dean M. Leavitt
----------------- ------------------------------
Chief Executive Officer
February 17, 2000 By: \s\ Robert E. Robichaud
----------------- ------------------------------
Chief Financial Officer
19
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 114,000
<SECURITIES> 0
<RECEIVABLES> 151,000
<ALLOWANCES> 40,000
<INVENTORY> 146,000
<CURRENT-ASSETS> 474,000
<PP&E> 854,000
<DEPRECIATION> 428,000
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<CURRENT-LIABILITIES> 5,207,000
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<COMMON> 22,143,000
<OTHER-SE> (28,930,000)
<TOTAL-LIABILITY-AND-EQUITY> 965,000
<SALES> 0
<TOTAL-REVENUES> 124,000
<CGS> 105,000
<TOTAL-COSTS> 1,327,000
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<INCOME-PRETAX> (1,914,000)
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