U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
OR
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 0-24742
U.S. WIRELESS CORPORATION
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3704059
(State of Incorporation) (I.R.S. Employer Identification No.)
2303 Camino Ramon, Suite 200, San Ramon, California 94583
(Address of Principal Executive Offices)
(925) 327-6202
(Issuer's Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report)
Check whether the issuer (1) 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 ONLY TO 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
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: Common Stock, par value $.01
per share, 13,556,301 shares outstanding as of March 31, 1998.
<PAGE>
U.S. WIRELESS CORPORATION AND SUBSIDIARIES
Table of Contents
<TABLE>
<CAPTION>
Page
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Part 1 Financial Information
Item 1. Financial Statements
Consolidated balance sheets as of June 30, 1998 (unaudited)
and March 31, 1998 3
Consolidated statements of operations (unaudited) for the three
months and three months ended June 30, 1998 and
June 30, 1997 4
Consolidated statements of cash flows (unaudited) for the three
months ended June 30, 1998 and June 30, 1997 5
Notes to financial statements 6-8
Item 2. Management's Discussion and Analysis of Financial 9
Condition and Results of Operations
Part II. 0ther Information 11
Item 4. Submission of Matters to a Vote of Security Holders: 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
</TABLE>
<PAGE>
Part I
Item 1. Financial Statements
U.S. WIRELESS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
As of June 30, 1998 and March 31, 1998
<TABLE>
<CAPTION>
June 30, March 31,
1998 1998
(Unaudited) Note 1
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents ..................................................... $ 6,240,192 $ 2,285,750
current assets ....................................................... 3,500 3,500
------------ ------------
Equipment,improvements and fixtures, net
of accumulated depreciation and amortization .................................. 461,346 399,896
Other assets ................................................................... 25,035 25,035
------------ ------------
Total assets .......................................................... $ 6,726,573 $ 2,710,681
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ........................................ $ 215,317 $ 252,708
Obligations under capital leases, current ..................................... 8,883 15,192
------------ ------------
Total current liabilities ............................................. 224,200 267,900
------------ ------------
Obligations under capital leases, noncurrent .................................. 39,118 39,118
------------ ------------
Total liabilities ..................................................... 263,318 307,018
------------ ------------
Minority interest in subsidiaries .............................................. 170,068 195,305
------------ ------------
Stockholders' equity:
Series A Preferred stock, $.01 par value, 300,000 shares authorized; issued and
outstanding at June 30, 1998
50,000 shares Common stock,$.01 par value, ................................. 500 --
40,000,000 shares authorized; issued and outstanding
at June 30, 1998 13,556,301 shares; at March 31, 1998,
11,823,444 shares .............................................................. 135,563 118,234
Additional paid-in capital .................................................... 24,909,732 19,912,890
Unearned compensation .......................................................... (632,318) (761,438)
Accumulated deficit ............................................................ (18,120,290) (17,061,328)
------------ ------------
Total stockholders' equity ............................................ 6,293,187 2,208,358
------------ ------------
Total liabilities and stockholders'equity ............................ $6,726, 573 $ 2,710,681
============ ============
See accompanying notes to consolidated condensed financial statements
</TABLE>
<PAGE>
U.S. WIRELESS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30, June 30,
1998 1997
---- ----
<S> <C> <C>
Net sales ............................................... $ -- $ --
------------ ------------
Costs and expenses:
Operating expenses .................................... 1,118,604 743,881
------------ ------------
Loss before other income and minority interest in
net losses of continuing subsidiaries ................. (1,118,604) (743,881)
Other income:
Interest income ....................................... 34,405 64,994
------------ ------------
Loss before minority interest in net loss of subsidiaries (1,084,199) (678,887)
Minority interest in net loss of subsidiaries ........... 25,237 12,825
------------ ------------
Net loss ................................................ $ (1,058,962) $ 666,062
============ ============
Basic and diluted loss per common equivalent share:
Loss before minority interest in net loss of subsidiaries $ (.09) $ (.09)
Minority interest in net loss of subsidiaries ........... -- --
------------ ------------
Basic and diluted net loss per share .................... $ (.09) $ (.09)
============ ============
Weighted average number of common shares outstanding .... 12,401,063 7,325,245
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements
<PAGE>
U.S WIRELESS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Three Months Ended
June 30, June 30,
1998 1997
----------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss ................................................... $(1,058,962) $ (666,062)
Adjustments to reconcile net loss to cash used
for operating activities:
Depreciation ............................................. 60,000 36,205
Minority interest in net losses of subsidiaries .......... (25,237) (12,828)
Amortization of unearned compensation .................... 129,120 129,120
Increase (Decrease) from changes in assets and liabilities:
Accounts payable and accrued expenses .................... (37,391) (100,388)
----------- -----------
Net cash used for operating activities ... (932,470) (613,953)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment, improvements and fixtures ...... (121,450) (186,891)
----------- -----------
Net cash used for investing activities ............ (121,450) (186,891)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligations .................... (6,309) (6,309)
Proceeds from issuance of preferred stock,
Net of commissions ....................................... 4,989,312 --
Issuance of common shares ................................ 25,359 --
----------- -----------
Net cash provided (used) for financing activities . 5,008,362 (6,309)
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ..................................... 3,954,442 (807,153)
Cash, beginning of period ................................. 2,285,750 5,328,781
----------- -----------
Cash, end of period ...................................... $ 6,240,192 $ 4,521,628
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid ........................................... $ -- $ --
Income Taxes paid ....................................... $ 1,248 $ 4,800
</TABLE>
See accompanying notes to consolidated condensed financial statements
<PAGE>
U.S. WIRELESS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1- BASIS OF PRESENTATION:
The accompanying unaudited consolidated condensed 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 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, results of operations and cash flows for the three months
ended June 30, 1998. These statements are not necessarily indicative of
the results to be expected for the full fiscal year. These statements
should be read in conjunction with the financial statements and notes
thereto included in the Company's annual report Form 10-KSB for the
fiscal year ended March 31, 1998 as filed with the Securities and
Exchange Commission.
NOTE 2- ORGANIZATION: Consolidation of Labyrinth Communication
Technologies Group, Inc.
In January 1998, the Company submitted exchange offer
agreements (the "Exchange Offer") to the stockholders of Labyrinth
owning the 49% minority interest in Labyrinth. Pursuant to the Exchange
Offers, in March 1998 the Company exchanged 4,498,200 shares of its
Common Stock for 490,000 shares of Common Stock of Labyrinth. The terms
of the Exchange Offers provide for the vesting of the shares of the
Company's Common Stock, pursuant to restricted share agreements, in
accordance with the following vesting schedule:
20% of shares vest one year from issuance; 40% of shares vest
upon the successful completion and operation of the RadioCamera in its
first major market; 40% of the shares shall vest when the Company
achieves cumulative sales of $15 million.
In addition to the above vesting schedule, the former management
of Labyrinth is subject to an additional vesting schedule, in
accordance with their employment contracts and restricted share
agreements, which were simultaneously amended in accordance with the
Exchange Offer, whereby the shares underlying (i)-(iii) above vest at
the rate of 1/3 each year.
In accordance with the provisions of Accounting Principles Board
("APB") Opinion No. 16, and interoperations thereof, this acquisition
of minority interest was accounted for using the purchase method of
accounting. As of March 31, 1998, 782,779 shares of the Company's
Common Stock have vested in accordance with restricted share
agreements executed in accordance with the Exchange Offer, and have
been issued to
<PAGE>
U.S. WIRELESS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2- ORGANIZATION: Consolidation of Labyrinth Communication
Technologies Group, Inc. Cont'd
former Labyrinth stockholders. The remaining 3,715,421 shares of
the Company's Common Stock provided for in the Exchange Offer have not
yet vested and are currently held in escrow by the Company pending
vesting. Shares of the Company's Common Stock that does not vest shall
be cancelled and returned to the Company's treasury as unissued shares
of Common Stock.
NOTE 3- EQUIPMENT, IMPROVEMENTS AND FIXTURES:
Equipment, improvements and fixtures, net consisted of the
following:
June 30, March 31,
1998 1998
Furniture, fixtures and equipment ............. $ 770,994 $ 649,544
Less: accumulated depreciation and amortization (309,648) (249,648)
--------- ---------
$ 461,346 $ 399,896
NOTE 4- STOCK OPTIONS:
During the year ended March 31, 1998, the Company granted options
to purchase shares of Common Stock 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 immediatley, expire five years from the date of grant
and have exercise prices ranging from $2 to $4.25 per share. On June
30, 1998, there were option to purchase up to an aggregate of
approximately 4,754,000 shares of Common Stock granted to executive
officers, director, employees and consultants, subject to various
vesting schedules.
The value of the options granted was established by the
difference between the exercise price and the fair market value of the
options issued on the dates of grant, were accounted for as unearned
compensation and amortized and expensed over the related vesting
periods. During each of the three month periods ended June 30, 1998 and
1997, $129,120 of unearned compensation was amortized to expense. The
remaining unamortized balance of unearned compensation at June 30, 1998
was $632,318 as reflected in the accompanying balance sheet.
<PAGE>
U.S. WIRELESS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5- YEAR 2000 COMPUTER ISSUE:
The Company does not believe that the impact of the year 2000
computer issue will have a significant impact on its operations or
financial position. Furthermore, the Company does not believe that it
will be required to significantly modify its internal computer systems
or products currently under development. However, if internal systems
do not correctly recognize date information when the year changes to
2000, there could be adverse impact on the Company's operations.
Furthermore, there can be no assurance that another entities failure to
ensure year 2000 capability would not have an adverse effect on the
Company.
NOTE 6- PRIVATE PLACEMENT:
On June 24, 1998, the Company's stockholders approved an
amendment to the Company's certificate of incorporation authorizing
1,000,000 shares of Preferred Stock, subject to the rights and
preferences being determined by the Company's board of directors. The
board of directors authorized the designation of 300,000 shares of
Preferred Stock as the "Series A Preferred Stock." The shares of Series
A Preferred Stock carry a cumulative dividend at the rate of 6% per
annum, payable in cash or shares of Series A Preferred Stock, at the
Company's option, payable upon the earlier of conversion and
redemption. Holders of the Series A Preferred Stock have the right to
convert each share into shares of Common Stock at a conversion price of
$2.95 per share, at any time, commencing 90 days from issuance. The
shares of Series A Preferred Stock have no voting rights and carry a
liquidation preference of $20.00 per share. The Company may redeem the
Series A Preferred Stock, upon the earlier of three years from issuance
or when the closing price for the Company's Common Stock has been at
least $8.00, for any 30 consecutive day period.
On June 25, 1998, the Company completed a private offering of
its securities, in which the Company raised gross $5,139,312 through
the sale of shares of common stock and shares of the Series A Preferred
Stock. Prior to but in accordance with the Company's private offering
in May 1998, the Company issued $2,500,000 in convertible secured
debentures, the terms of which provided for the conversion of the
debentures into either shares of the Company's Common Stock at $2.60
per share or into such other security as the Company issued in its
private offering, at the option of the holder. Simultaneous with and as
a part of the Company's consummation of it private offering the
debentures were converted into shares of Common Stock. The placement
agent received $150,000 as a commission on the net proceeds of the
offering and warrants to purchase 220,000 shares of the Company's
Common Stock, 110,000 shares at $4.00 per share and 110,000 at $5.00
per share, exercisable for three and five years respectively. The
commission was accounted for as a reduction of additional paid in
capital on the accompanying balance sheet.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
GENERAL
U.S. Wireless Corporation (the "Company") was incorporated in the
State of Delaware in February 1993. Until March 1998 the Company had
two subsidiaries Labyrinth Communication Technologies Group, Inc.
("Labyrinth") and Mantra Technologies, Inc., ("Mantra"). In January
1998 the Company submitted an exchange offer to the holders of the 49%
minority interest in Labyrinth, which exchange was effected in March
1998, upon which Labyrinth was consolidated with and into the Company.
Due to the consolidation of Labyrinth the results from operations
for the quarter ended June 10, 1998 has been adjusted to eliminate the
minority interest and increase stockholders equity by the amount of
the minority interest, which is not provide within the comparison
information with the quarter ended June 30, 1997. There is no change
in focus or operations of the Company as a result of the
consolidation.
The comparison information for the periods does continue to
reflect the Company's one subsidiary, Mantra.
RESULTS OF OPERATIONS:
Three months ended June 30, 1998 compared to the three months ended
June 30, 1997:
During the three months ended June 30, 1998 and the three months
ended June 30, 1997, the Company recorded no revenues from operations,
as the Company's products are still under development.
The Company reported consolidated operating expenses of
$1,118,604 during the three months ended June 30, 1998 as compared to
$743,881 for the three months ended June 30, 1997. The increase is
related to additional costs incurred relative to both the continuance
and expansion of operations as well as continued research and product
development. During this quarter the Company commenced the deployment
of the
RadioCamera in accordance with its Beta testing and evaluation
Agreement with Bell Atlantic Mobile in Baltimore, Maryland. In
addition, the Company expanded its operations in Billings, Montana
with Western Wireless as well as expanding its Company operated sites
in Oakland, California.
RESEARCH AND DEVELOPMENT- FUTURE OPERATIONS
The Company continues to increase its research, development and
field testing operations, as well as its marketing operations. During
the quarter the Company commenced its joint beta field trials with Bell
Atlantic Mobile in Baltimore Maryland and commenced setting up a fully
operational E9-1-1 beta system in Billings Montana including the
Billings Montana public safety access point. Additionally, the Company
accelerated its development of a Code Division Multiple Access (CDMA)
and Time Division Multiple Access (TDMA) versions for the RadioCamera
and wireless caller-location system and to this end obtained a
development license from Qualcomm Incorporated for the CDMA
development. Under the agreement, Qualcomm will provide the CDMA
technology, technical assistance, and access to components and
equipment. The agreement also provides for a cross-license of each
parties technology, subject to terms and conditions to be negotiated by
the parties, whereby, the Company would obtain a commercial license for
wireless location systems and Qualcomm a commercial license for
integration within its CDMA infrastructure products.
<PAGE>
The Company will continue its research, development and field
testing operations in order to develop a fully operational location
system for deployment and to develop modifications for additional
standards during the next 12 months. Management estimates research and
development expenditures for the year ending March 31, 1999 will
approximate $3,500,000.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company reported working capital of
$6,015,992. The Company had $6,240,192 in business checking and money
market accounts. The Company believes that its available cash as of
June 30, 1998 will be sufficient to fund its operating needs for the
next 12 to 18 months.
Trends Affecting Liquidity, Capital Resources and Operations:
As the nature of the Company's operations are that of
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 its executive officers, management and employees who
comprise the research, development, field operations, marketing,
carrier relations, and corporate communications teams. Depending on the
demand for its products, the Company may need additional financing. The
Company's limited resources, in addition to its anticipated continued
research, development and testing may cause significant strain on the
Company's management, technical, financial and other resources.
Research and development activities, as well as operating and marketing
expenses, are expected to be financed with funds raised through the
Company's recent private offering.
Inflation and Seasonality
Inflation and seasonality are currently not expected to have a
material effect on the Company's liquidity, capital resources and
operating activities.
YEAR 2000 COMPUTER ISSUE
The Company does not believe that the impact of the year 2000
computer issue will have a significant impact on its operations or
financial position. Furthermore, the Company does not believe that it
will be required to significantly modify its internal computer systems
or products currently under development. However, if internal systems
do not correctly recognize date information when the year changes to
2000, there could be adverse impact on the Company's operations.
Furthermore, there can be no assurance that another entities failure to
ensure year 2000 capability would not have an adverse effect on the
Company.
<PAGE>
Part II Other Information
Item 1. Legal Proceedings: None
Item 2. Changes in Securities and Use of Proceeds: None
Item 3. Defaults Upon Senior Securities: None
Item 4. Submission of Matters to a Vote of Security Holders:
On June 24, 1998, the Company held a special meeting of its
stockholders, during which the stockholders authorized an amendment to the
Company's certificate of incorporation, authorizing 1,000,000 shares of
preferred stock, designated as the Series A preferred stock, with such rights
and preferences as to be determined by the corporation's board of directors. The
Company's board of directors and management sought stockholder approval at such
time, as its financing was imminent, and it was essential that management was
able to act in an expeditious manner. The following is a list of the votes cast
for and against the proposal to ratify the proposal to approve an amendment to
the Corporation's Certificate of Incorporation authorizing 1,000,000 shares of
Preferred Stock to be issued in classes and/or series with such rights and
preferences as shall be determined by the Corporation's Board of Directors.
<TABLE>
<CAPTION>
Votes Cast Votes Cast
For Against Abstain
<S> <C> <C> <C>
9,549,559 29,222 1,775
</TABLE>
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K:
Exhibit 27 - Financial Data Schedule
<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)
August 12, 1998 By: /s/ Oliver Hilsenrath
- --------------- ---------------------
Date Dr. Oliver Hilsenrath
Chief Executive Office
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
U.S. WIRELESS CORPORATION AND SUBSIDIARIES
EXHIBIT 27
FINANCIAL DATA SCHEDULE
ARTICLE 5 OF REGULATION S-X
This schedule contains summary financial information extracted from the
financial statements for the three months ended June 30, 1998 and is qualified
in its entirety by reference to such statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Mar-31-1999
<PERIOD-END> Jun-30-1998
<CASH> 6,240,192
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,240,192
<PP&E> 770,994
<DEPRECIATION> 309,648
<TOTAL-ASSETS> 6,726,573
<CURRENT-LIABILITIES> 224,200
<BONDS> 0
0
500
<COMMON> 135,563
<OTHER-SE> 6,166,740
<TOTAL-LIABILITY-AND-EQUITY> 6,726,573
<SALES> 0
<TOTAL-REVENUES> 34,405
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,118,604
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,058,962)
<INCOME-TAX> (1,058,962)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,058,962)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
