UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20659
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
-------------------------------------------------------------------
Commission File Number 0-24742
U.S. WIRELESS CORPORATION
(Exact name of registrant as specified in is charter)
Delaware 13-3704059
(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification No.)
2303 Camino Ramon, San Ramon, California 94583
(Address of principal executive offices) (Zip Code)
(510) 830-8801
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year if changed from last
report)
Check whether the issuer (1) has filed all documents and 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 [ ]
APPLICABLE TO CORPORATE ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan conformed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Common stock, par value $.01 per share: 7,325,151 shares outstanding as of
December 31, 1997.
<PAGE>
U.S. WIRELESS CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
PART 1. FINANCIAL INFORMATION
ITEM 1- FINANCIAL STATEMENTS
<S> <C>
Consolidated balance sheets as of December 31, 1997 (Unaudited)
and March 31, 1997 3
Consolidated statements of operations (Unaudited) for the nine and three
months ended December 31, 1997 and December 31, 1996 4
Consolidated statements of cash flows (Unaudited) for the nine months ended
December 31, 1997 and December 31, 1996 5
Notes to financial statements (Unaudited) 6
ITEM 2- MANAGEMENT'S DISCUSSION AND ANALYSES OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
PART II. OTHER INFORMATION
ITEM 4- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 9
Signatures 11
</TABLE>
<PAGE>
U.S. WIRELESS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31, March 31,
1997 1997
(Unaudited) (Note 1)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents ..................................................... $ 3,071,256 $ 5,328,781
Other current assets .......................................................... 3,500 3,500
------------ ------------
Total current assets .................................................. 3,074,756 5,332,281
Equipment, improvements and fixtures, net
of accumulated depreciation and amortization ................................. 440,063 281,211
Other assets ................................................................... 4,667 4,667
------------ ------------
Total assets .......................................................... $ 3,519,486 $ 5,618,159
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ......................................... $ 88,645 $ 140,550
Obligations under capital leases, current ..................................... 12,620 25,238
------------ ------------
Total current liabilities ............................................. 101,265 165,788
------------ ------------
Obligations under capital leases, non-current .................................. 39,118 45,427
------------ ------------
Total liabilities ..................................................... 140,383 211,215
------------ ------------
Minority interest in subsidiaries .............................................. 1,484,549 1,529,534
------------ ------------
Stockholders' equity:
Common stock, $.01 par value, 40,000,000 shares authorized; issued and
outstanding at Dec 31, 1997, 7,325,245 shares; at March 31, 1997, 10,031,250
shares ..................................................................... 73,252 100,312
Additional paid-in capital .................................................... 18,950,837 20,493,262
Unearned compensation ......................................................... (890,558) (1,277,918)
Stock subscription receivable ................................................. -- (1,569,483)
Accumulated deficit ........................................................... (16,238,979) (13,868,763)
------------ ------------
Total stockholders' equity ............................................ 1,894,554 3,877,410
------------ ------------
Total liabilities and stockholders' equity ............................ $ 3,519,486 $ 5,618,159
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
U.S. WIRELESS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
Dec 31, Dec 31, Dec 31, Dec, 31
1997 1996 1997 1996
----- ------ ------ -----
<S> <C> <C> <C> <C>
Net sales ............................... $ -- $ -- $ -- $ --
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Operating expenses ..................... 2,583,059 652,905 927,335 434,204
Interest expense, net of interest income (167,861) 122,107 (53,359) (43,258)
Common stock issued for services ....... -- 424,000 -- --
----------- ----------- ----------- -----------
Total costs and expenses ....... 2,415,198 1,199,012 873,976 390,946
----------- ----------- ----------- -----------
Loss before minority interest,
discontinued operations and
change in accounting principle ........ (2,415,198) (1,199,012) (873,976) (390,946)
Minority interest in net income
(loss) of subsidiaries ................ 44,985 (764,376) 18,438 (131,081)
----------- ----------- ----------- -----------
Net loss before discontinued operations
and change in accounting .............. (2,370,213) (1,963,388) (855,538) (522,027)
principle
Discontinued operations ................. -- 387,423 -- --
----------- ----------- ----------- -----------
Net loss before change
in accounting principle ............ (2,370,213) (1,575,965) (855,538) (522,027)
Change in accounting principle .......... -- (459,435) -- --
----------- ----------- ----------- -----------
Net loss ................................ $(2,370,213) $(2,035,400) $ (855,538) $ (522,027)
=========== =========== =========== ===========
Basic and Diluted loss per common share . $ (.32) $ (.31) $ (.12) $ (.06)
=========== =========== =========== ===========
Weighted average number of
common shares outstanding ............ 7,325,245 6,601,940 7,325,245 9,037,931
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
U.S. WIRELESS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Nine Months Ended
December 31, December 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss .............................................................................. $(2,370,213) $(2,035,400)
----------- -----------
Adjustments to reconcile net loss to cash (used)
provided for operating activities:
Cumulative effect of a change in accounting principle ............................... -- 459,435
Depreciation and amortization ......................................................... 158,167 233,656
Amortization of excess of cost over net assets acquired ............................... -- 69,042
Amortization of unearned compensation ................................................. 387,360 --
Minority interest in net losses of subsidiaries ....................................... (44,985) (764,376)
Issuance of common stock for compensation
and financing costs ............................................................... -- 440,000
Increase (Decrease) from changes in assets and
liabilities, net of effect of spin-off of subsidiary:
Accounts receivable ................................................................... -- (165,207)
Merchandise inventories ............................................................... -- (1,743,239)
Other current assets .................................................................. -- 183,810
Deposits .............................................................................. -- 2,667
Accounts payable ...................................................................... (51,905) 1,945,363
Accrued expenses ...................................................................... -- (207,873)
Deferred rent liability ............................................................... -- (20,823)
----------- -----------
Total adjustments ............................................................ 448,637 432,455
----------- -----------
Net cash (used) by operating activities ...................................... (1,921,576) (1,602,945)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment, improvements and fixtures ................................. (317,022) (291,747)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock .............................................. -- 6,398,483
Payments on capital lease obligations ............................................... (18,927) --
Redemption of Series B redeemable preferred stock ................................... -- (87,680)
Repayments of stockholder advances .................................................. -- (494,248)
Proceeds from not payable ........................................................... -- 1,465,859
Proceeds from issuance of preferred stock ........................................... -- 584,000
----------- -----------
Net cash (used) provided by financing activities ........................... (18,927) 7,866,414
----------- -----------
NET INCREASE (DECREASE) IN CASH ....................................................... (2,257,525) 5,971,722
Cash, beginning of period ............................................................. 5,328,781 75,181
----------- -----------
Cash, end of period ................................................................... $ 3,071,256 $ 6,046,903
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid ......................................................................... $ -- $ 122,107
Taxes paid ............................................................................ $ 4,800 $ 800
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
U.S. WIRELESS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1- BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and the
instructions to Form 10-QSB. Accordingly, they do not include
all the information and footnotes required by generally accepted
accounting principles for more complete financial statements. In
the opinion of management, the interim financial statements
include all adjustments considered necessary for a fair
presentation of the Company's financial position and the results
of its operations for the nine months ended December 31, 1997,
and are not necessarily indicative of the results to be expected
for the full fiscal year. For further information, refer to the
Company's Annual report on Form 10-KSB for the fiscal year ended
March 31, 1997, and all amendments thereto, as filed with the
Securities and Exchange Commission.
Note 2- ORGANIZATION:
On July 31, 1996, the Company consummated a stock purchase
agreement and acquired 51% of the outstanding shares of common
stock of Labyrinth, whereby 20% of the shares were acquired
for $2,000,000 from Labyrinth and an additional 31% was
acquired from the principal stockholder of Labyrinth for
2,250,000 shares of the Company's common stock. Upon
consummation of this acquisition, the founding shareholder of
Labyrinth, Dr. Oliver Hilsenrath, was appointed the Company's
President and Chief Executive Officer. Labyrinth is a
development stage company engaged in the research and
development of wireless communications technology.
On July 31, 1996, the Company consummated an agreement and
acquired 51% of the outstanding common stock of Mantra
Technologies, Inc. and an option to acquire the remaining 49%
of the outstanding shares of common stock for an aggregate
purchase price of $500,000. Pursuant to the terms of the
agreement, the Company has the right to acquire the remaining
49% of the outstanding shares of common stock in exchange for
an aggregate 1,000, 000 shares of the Company's common stock.
In order for the Company to exercise its options, the closing
bid price of its common stock must have been at least $5.00
for the 30 trading days prior to the date of the exercise.
<PAGE>
U.S. WIRELESS CORPORATION AND SUBSIDIAIRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3- EQUIPMENT, IMPROVEMENTS AND FIXTURES:
December 31, March 31,
1997 1997
Equipment .................... $ 544,524 $ 256,050
---------
Furniture and fixtures ....... 72,187 43,642
--------- ---------
616,711 299,692
Less: accumulated depreciation
and amortization ............. (176,648) (18,481)
--------- ---------
$ 440,063 $ 281,211
========= =========
Note 4- STOCK OPTIONS:
During the year ended March 31, 1997, the Company issued
common stock options to its employees and to various
consultants performing services for the Company. The options
granted to employees vest over three years, expire five years
from the date of the grant and have exercise prices ranging
from $2 to $5 per share. Substantially all of the options
granted to consultants vest immediately, expire five years
from the date of the grant and have exercise prices ranging
from $2 to $4 per share. At December 31, 1997, there remained
4,752,500 options outstanding of which 579,000 options were
exercisable.
The difference between the exercise price and the fair market
value of the options issued to employees on the dates of the
grant were accounted for as unearned compensation and
amortized to expense over the related vesting period. During
the fiscal year ended March 31, 1997, $1,549,453 of unearned
compensation was recorded, of which $271,535 was amortized to
expense. During the nine months ended December 31, 1997,
$387,360 of unearned compensation was amortized to expense.
The remaining unamortized balance of unearned compensation at
December 31, 1997 was $890,558 as reflected in the
accompanying balance sheet.
Note 5- STOCKHOLDERS' EQUITY:
At the Company's annual meeting in December 1997, the
Company's stockholders voted to merge Labyrinth into the
Company, whereby the Company would be the surviving company.
The Company proposed to offer to issue an aggregate of
4,498,200 shares of Common Stock to Labyrinth stockholders,
pro-rata, for the remaining 490,00 or 49% of shares of
Labyrinth, the exchange rate being 9.18 shares of the
Company's Common Stock for each share of the outstanding
shares of Labyrinth's common stock. The shares of the
Company's Common Stock to the Labyrinth stockholders is
subject to a vesting schedule, subject to the Company meeting
certain quantitative goals. On January 12, 1998 Labyrinth
submitted an exchange offer to its stockholders, and has
received confirmation that stockholders
<PAGE>
U.S. WIRELESS CORPORATION AND SUBSIDIAIRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
have agreed to the exchange. The Company estimates that the
transaction shall be consummated within the next 30 days.
Note 6- NEW ACCOUNTING PRONOUNCEMENT:
For the quarter ended December 31, 1997, the Company adopted
the provisions of Statement of Financial Accounting Standards
No. 128, "Earnings per Share". Under this standard, the
Company is required to report basic and diluted earnings
(loss) per share. Basis earnings (loss) per share is
calculated by dividing the net income (loss) for each period
by the weighted average number of common shares outstanding.
Diluted earnings (loss) per share is similar in calculation
except that the weighted average number of common shares is
increased to reflect the effects of potential additional
shares that would result from the exercise of stock options or
other convertible instruments. For the three and nine month
periods ended December 31, 1997 and 1996, there is no
difference between basic and diluted earnings (loss) per share
as the inclusion of additional potential shares is
anti-dilutive due to the net loss presented in each period.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS
AND RESULTS OF OPERATIONS
GENERAL:
The Company was originally organized in February 1993.
Historically, through August 15, 1996, the Company's results
of operations related primarily to the business operations of
a former subsidiary, which ownership was distributed to the
Company's shareholders on August 15, 1996. With the
acquisition of 51% of the common stock of Labyrinth
Communications Technologies Group, Inc. ("Labyrinth") and
Mantra Technologies, Inc. ("Mantra") as of July 31, 1996, the
Company changed its business focus to its current focus.
RESULTS OF OPERATIONS:
Nine months ended December 31, 1997 compared to the nine
months ended December 31, 1996:
The Company had no reportable sales during the nine months
ended December 31, 1997 as the Company is currently in
continuing its research, development and testing of its
products. The Company did report consolidated operating
expenses of $2,583,059 during the nine months ended December
31, 1997 which consisted primarily of compensation and
administrative expenses inherent in the start up of operations
in its new operating venue. Also included in operating
expenses for the nine months ended December 31, 1997 is
$387,360 of amortization of unearned
<PAGE>
compensation resulting from the issuance of stock options and
$158,167 of depreciation and amortization on the Company's
fixed assets.
Three months ended December 31, 1997 compared to the three
months ended December 31, 1996:
The Company had no reportable sales during the three months
ended December 31, 1997. The Company did report consolidated
operating expenses of $929,335 which consisted primarily of
compensation and administrative expenses inherent in the start
up of operations in its new operating venue. Also included in
operating expenses for the three months ended December 31,
1997 is $129,120 of amortization of unearned compensation
resulting from the issuance of stock options and $ 45,000 of
depreciation and amortization on the Company's fixed assets.
RESEARCH AND DEVELOPEMNT-FUTURE OPERATIONS
Labyrinth anticipates that the research, development and
testing of products will continue for approximately six to
twelve more months, though the Company is currently marketing
its products to the wireless community. Labyrinth does not
anticipate generating revenues from operations until the end
of calendar 1998 or beginning of calendar 1999. The Company's
funding has been and shall continue to be used for general
corporate purposes including salaries, fees and expenses, as
well as for developing prototypes and producing a limited
quantity of RadioCameras for testing, evaluations with
potential clients and for marketing operations. Mantra has
completed the development of its technology and is currently
engaging in the process of marketing its technology to the
Internet community and providing demonstrations and
distributing prototypes for testing and evaluation by
potential customers.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company reported working capital of
$2,973,491. As of this date, the Company had $3,071, 256 in
business checking , certificates of deposit and money market
accounts. The Company believes that its available cash as of
December 31, 1997 will be sufficient to fund its operating
needs through the balance of the 1999 fiscal year.
Trends Affecting Liquidity, Capital Resources and Operations:
As the nature of the Company's operations have shifted to the
development stage operations, management is currently not
aware of any trends that may affect its liquidity, capital
resources and operations. The Company's future operations
however, could be adversely affected if the Company's
timetable for the development, marketing and manufacturing of
its products exceeds the available capital; resources. The
primary initial expenses of the new operations will include
the salaries of some of its officers, who comprise the
research and development
<PAGE>
team. The Company may need additional financing in order to
complete its product development and testing for marketing and
sales. The Company's limited resources, in addition to its
anticipated continued research, development and testing for
approximately 6 -12 months, may cause significant strain on
the Company's management, technical, financial and other
resources.
Item 4. Submission of Matters to a Vote of Security Holders:
On December 5, 1998, the Company held an annual meeting of its
stockholders, during which it proposed to (i) election of four (4) persons
nominated by the Board of Directors as directors (ii) the ratification of the
proposal to approve the Corporation's Senior Management Incentive Plan (iii) the
ratification of the proposal to approve amendments to the Corporation's
Certificate of Incorporation and By-Laws regarding the indemnification rights of
the Corporation's Directors and Executive Officers and (iv) to ratify a proposal
to merge Labyrinth Communication Technologies Group, Inc., with and into the
Corporation.
The voting tabulations regarding the proposals before the stockholders
were as follows:
1. Election of the Board of directors
Votes Cast Withhold
Nominees For Authority to Vote
Dr. Oliver Hilsenrath 5,512,306 6,125
David Tamir .......... 5,512,381 6,050
Regina Gindin ........ 5,512,381 6,050
Dennis Francis ....... 5,512,381 6,050
2. Ratification of the Company's Senior Management Incentive Plan:
Votes Cast Votes Cast
For Against Abstain
---------- ---------- -------
5,500,438 13,893 4,100
3. Amendments to the Company's Certificate of Incorporation and By-Laws
regarding the indemnification rights of the Company's Directors and Executive
Officers:
Votes Cast Votes Cast
For .. Against Abstain
- ---------- ---------- ---
5,506,124 11,707 600
4. Proposal to merge Labyrinth Communication Technologies Group, Inc.,
into the Company:
Votes Cast Votes Cast
For .. Against Abstain
- ---------- ---------- -----
5,515,556 950 1,925
<PAGE>
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 Corporation
(Registrant)
February 18, 1998 By: \s\ Dr. Oliver Hilsenrath
Date Dr. Oliver Hilsenrath
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27.01
FINANCIAL DATA SCHEDULE
This schedule contains summary information extracted from the Balance
Sheet, Statement of Operations, Statement of Cash Flows and Notes thereto
incorporated and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Mar-31-1998
<PERIOD-END> Dec-31-1997
<CASH> 3,071,256
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,074,756
<PP&E> 616,711
<DEPRECIATION> (176,648)
<TOTAL-ASSETS> 3,519,486
<CURRENT-LIABILITIES> 101,265
<BONDS> 0
0
0
<COMMON> 73,253
<OTHER-SE> 1,821,301
<TOTAL-LIABILITY-AND-EQUITY> 3,519,486
<SALES> 0
<TOTAL-REVENUES> 167,861
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,583,059
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,370,213)
<INCOME-TAX> (2,370,213)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,370,213)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> (.32)
</TABLE>
