U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A-3
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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)
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Delaware 13-3704059
(State of Incorporation) (I.R.S. Employer Identification No.)
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2303 Camino Ramon, Suite 200, San Ramon, California 94583
(Address of Principal Executive Offices)
(925) 830-8801
(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, 11,823,331 shares outstanding as of March 31, 1998.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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U.S. WIRELESS CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
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Page
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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Consolidated condensed balance sheets as of September 30, 1997
(unaudited) and March 31, 1997 (audited) 3
Consolidated condensed statements of operations (unaudited) for
the three and six months ended September 30, 1997 and 1996 4
Consolidated condensed statements of cash flows (unaudited) for
the six months ended September 30, 1997 and 1996 5
Notes to consolidated condensed financial statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSES OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9
PART II. OTHER INFORMATION 12
Signatures 13
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U.S. WIRELESS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of September 30, 1997 and March 31, 1997
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September 30, March 31,
1997 1997
(Unaudited) (Note )
ASSETS
Current Assets:
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Cash and cash equivalents ................................................ $ 3,757,815 $ 5,328,781
Other current assets .................................................... 3,500 3,500
------------ ------------
Total current assets ............................................. 3,761,315 5,332,281
------------ ------------
Equipment, improvements and fixtures, net
of accumulated depreciation and amortization ............................. 455,439 281,211
Other assets .............................................................. 4,667 4,667
------------ ------------
Total assets ..................................................... $ 4,221,421 $ 5,618,159
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses .................................... $ 39,412 $ 140,550
Obligations under capital leases, current ................................ 18,929 25,238
------------ ------------
Total current liabilities ........................................ 58,341 165,788
------------ ------------
Obligations under capital leases, noncurrent ............................. 39,118 45,427
------------ ------------
Total liabilities ................................................ 97,549 211,215
------------ ------------
Minority interest in subsidiaries ......................................... 1,502,987 1,529,534
------------ ------------
Stockholders' equity:
Common stock,$.01 par value, 40,000,000 shares
authorized; issued and outstanding at Sept 30, 1997,
7,325,245 shares; at March 31, 1997, 10,031,250 shares ................. 73,253 100,312
Additional paid-in capital ............................................... 18,950,838 20,493,262
Unearned compensation .................................................... (1,019,678) (1,277,918)
Stock subscription receivable ............................................ -- (1,569,483)
Accumulated deficit ...................................................... (15,383,438) (13,868,763)
------------ ------------
Total stockholders' equity ....................................... 2,620,975 3,877,410
------------ ------------
Total liabilities and stockholders' equity ....................... $ 4,221,421 $ 5,618,159
============ ============
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See accompanying notes to consolidated condensed financial statements
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U.S. WIRELESS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Six Months Ended Three Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
1997 1996 1997 1996
--------- --------- --------- ------
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Net sales ................................... $ -- $ -- $ -- $ --
----------- ----------- ----------- -----------
Costs and expenses:
Operating expenses .......................... 1,655,724 162,432 911,843 162,432
Interest income, net of interest expense .... (114,502) (28,699) (49,508) (28,699)
Common stock issued for services ............ -- 424,000 -- 424,000
Write-off of excess cost over basis of
net assets acquired ...................... -- 2,250,000 -- 2,250,000
----------- ----------- ----------- -----------
Total costs and expenses .................... 1,541,222 2,807,733 862,335 2,807,733
----------- ----------- ----------- -----------
Loss before minority interest, discontinued
operations and change in accounting
principle ................................. (1,541,222) (2,807,733) (862,335) (2,807,733)
Minority interest in net loss of subsidiaries 26,547 258,775 20,341 258,775
----------- ----------- ----------- -----------
Net loss before discontinued operations
and change in accounting principle ........ (1,514,675) (2,548,958) (841,994) (2,548,958)
Discontinued operations ..................... -- (1,010,312) -- (284,932)
----------- ----------- ----------- -----------
Net loss before change in accounting
principle ................................. (1,514,675) (3,559,270) (841,994) (2,833,890)
Change in accounting principle .............. -- (459,435) -- --
----------- ----------- ----------- -----------
Net loss .................................... $(1,514,675) $(4,018,705) $ (841,994) $(2,833,890)
=========== =========== =========== ===========
Net loss per common share ................... $ (.21) $ (.75) $ (.11) $ (.42)
=========== =========== =========== ===========
Weighted average number of common
shares outstanding ........................ 7,325,245 5,377,289 7,325,245 6,739,608
=========== =========== =========== ===========
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See accompanying notes to consolidated condensed financial statements
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U.S WIRELESS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Six Months Ended
Sept 30, Sept 30,
1997 1996
------------ --------
CASH FLOWS FROM OPERATING ACTIVITIES:
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Net loss ................................................. $(1,514,675) $(4,018,705)
Adjustments to reconcile net loss to cash used
for operating activities:
Cumulative effect of a change in accounting
principle .............................................. -- 459,435
Loss on discontinued operations ........................... -- 1,010,312
Depreciation .............................................. 113,167 9,240
Write-off of excess cost over basis of net assets acquired -- 2,250,000
Minority interest in net losses of subsidiaries ........... (26,547) (258,775)
Amortization of unearned compensation ..................... 258,240 --
Issuance of common stock for compensation and
financing costs ........................................ -- 440,000
Increase (Decrease) from changes in assets and
liabilities:
Deposits ......................................... -- (2,000)
Due from Stockholder ............................. -- 104,905
Accounts payable and accrued expenses ............ (101,138) (157,815)
Decrease in net assets of discontinued operations -- (1,329,318)
----------- -----------
Net cash used for operating activities ........... (1,270,953) (1,492,721)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment, improvements and fixtures ..... (287,395) --
Acquisition of equipment, discontinued operations ....... -- (159,193)
----------- -----------
Net cash used for investing activities ........... (287,395) (159,193)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligations ................... (12,618) --
Repayments of stockholder advances ...................... -- (494,248)
Proceeds from issuance of Common Stock .................. -- 4,406,000
Net cash provided by financing activities of discontinued
operations ............................................ -- 1,962,179
----------- -----------
Net cash (used) provided by financing activities . (12,618) 5,873,931
----------- -----------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS .................................... (1,570,966) 4,222,017
Cash, beginning of period ............................... 5,328,781 75,181
----------- -----------
Cash, end of period ..................................... $ 3,757,815 $ 4,297,198
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid .......................................... $ -- $ 91,838
Taxes paid ............................................. $ 4,800 $ 800
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See accompanying notes to consolidated condensed financial statements
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U.S. WIRELESS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED 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 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 and the results of its operations for the six months ended
September 30, 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, and amendments thereto, for the fiscal
year ended March 31, 1997, as filed with the Securities and Exchange Commission.
The accompanying unaudited consolidated condensed financial statements
for the three and six months ended September 30, 1996 have been restated to
reflect a write off of excess cost over basis of net assets acquired in the
amount of $2,250,000 that resulted from the July 1996 acquisition of 51% of
Labyrinth (Note 2) and to correct amounts previously presented as loss from
discontinued operations.
NOTE 2. ORGANIZATION
Labyrinth Communication Technologies Group, Inc.
On July 31,1996, the Company consummated a stock purchase agreement and
acquired 51% of the outstanding shares of common stock of Labyrinth
Communication Technologies Group, Inc. ("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.
Mantra Technologies, Inc.
On July 31, 1996, the Company consummated an agreement and acquired 51%
of the outstanding common stock of Mantra Technologies, Inc. ("Mantra") 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 exercise. Mantra is a development stage
company which is engaged in the development of an advanced user interface for
the internet and other data bases.
NOTE 3. EQUIPMENT, IMPROVEMENTS AND FIXTURES
Equipment, improvements and fixtures at September 30, 1997 and
March 31, 1997 consisted of the following:
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September 30, March 31,
1997 1997
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Equipment $496,516 $ 256,050
Furniture and fixtures 72,090 43,642
---------- ----------
568,606 299,692
Less: accumulated
depreciation and amortization (113,167) ( 18,481)
--------- ---------
$455,439 $281,211
========= ========
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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 or pursuant to vesting schedules, expire five years from the date of
grant, and have exercise prices ranging from $2 to $4 per share.
At September 30, 1997, there remained approximately 4,191,500 options
outstanding, all but 1,550,000 of which are subject to vesting schedules.
The difference between the exercise price and the fair market value of the
options issued to employees on the dates of 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, $271,535 of which was amortized to expense. During the six months
ended September 30, 1997, $258,240 of unearned compensation was amortized to
expense. The remaining unamortized balance of unearned compensation at September
30, 1997 was $1,019,678 as reflected in the accompanying balance sheet.
NOTE 5. STOCKHOLDERS' EQUITY
At the Company's annual meeting scheduled for November 25, 1997, the
Company's stockholders shall vote on a proposal approved by the Corporation's
Board of Directors to merge Labyrinth into the Company, whereby the Company will
be the surviving company. The Company is presently the parent company (owning
51% of the outstanding shares) of Labyrinth. Labyrinth is a private company
which is the developer of the RadioCamera and the Company's geo-location
technology. The Company proposes to issue an aggregate of 4,500,000 shares of
Common Stock to the Labyrinth stockholders, pro rata, for the remaining 49% of
shares of Labyrinth. The Company shall effect this transaction by offering
approximately 9.18 shares of the Company's Common Stock for each share of
Labyrinth's common stock outstanding. If approved, the 4,500,000 shares shall be
issued in accordance with restricted share agreements which shall include
vesting schedules based on time and the Company's performance.
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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 Company's former majority owned subsidiary, Play Co. Toys & Entertainment
Corp. ("PCT"). With the acquisition of 51% of the common stock of each of
Labyrinth and Mantra, as of July 31, 1996, the Company changed its business
focus from that of a holding company for retail operations to that of a holding
company for research and development in the technology industry, in particular,
that related to wireless communication and Internet and data base interface
technology. Accordingly, the results of operations for the three and six month
periods ending September 30, 1996, during which the Company maintained its
investment in PCT, until its spin-off effective August 15, 1996, are not
directly comparable to the three and six month periods ended September 30, 1997.
RESULTS OF OPERATIONS
Six months ended September 30, 1997 compared to the six months ended
September 30, 1996
The Company had no reportable sales during the six months ended September
30, 1997 and September 30, 1996, as a result of the aforesaid change in its
business focus.
The Company reported consolidated operating expenses of $1,655,724 during
the six months ended September 30, 1997: these expenses consisted primarily of
compensation and other administrative expenses and the costs of purchasing
materials and building prototypes of the RadioCamera for testing and
demonstration. Additionally, expenditures were incurred in the development and
building of the rev. B RadioCamera prototype with enhanced functions which the
Company estimates shall be ready for testing and demonstration within the next
few months. Operating expenses for the six months ended September 30, 1996 were
$162,432 and reflect the limited operations of Labyrinth and Mantra since their
acquisitions by the Company in July 1996.
In July 1997, the Company, with the Western Wireless Corp. network,
commenced the testing and demonstration of the RadioCamera in Billings, Montana.
This testing and demonstration shall continue, and the Company plans to expand
the testing in the coming months to include the rev. B model of the RadioCamera.
Additional costs included the costs of the Company's October 1997
attendance and set-up of a booth at the Cellular Technology Industry Association
("CTIA") conference in Seattle, Washington. The Company used the CTIA conference
as a forum to unveil the RadioCamera and its test results to the cellular
industry. Dr. Hilsenrath, the Company's Chief Executive Officer, spoke on two
panels regarding the cellular industry and the advantages offered by
geographical location information.
In August 1997, the Company commenced the marketing and joint development
of a manufacturing plan with Mirae Communications Co., Ltd., in Seoul, Korea.
During the six months ended September 30, 1996, the Company wrote off
$2,250,000 of excess cost over basis of net assets acquired in connection with
the July 1996 acquisitions of Labyrinth and Mantra.
Three months ended September 30, 1997 compared to the three months ended
September 30, 1996
The Company had no reportable sales during the three months ended September
30, 1997 and September 30,1996. The Company reported consolidated operating
expenses of $911,843 which consisted primarily of compensation and other
administrative expenses and the costs of purchasing materials and building
prototypes of the RadioCamera for testing and demonstration. Additionally,
expenditures were incurred in the development and building of the rev. B
RadioCamera prototype with enhanced functions which the Company estimates shall
be ready for testing and demonstration within the next few months. Operating
expenses for the three months ended September 30, 1996 were $162,432 and reflect
the limited operations of Labyrinth and Mantra since their acquisitions by the
Company in July 1996. During the three months ended September 30, 1996, the
Company wrote off $2,250,000 of excess cost over basis of net assets acquired in
connection with the July 1996 acquisitions of Labyrinth and Mantra.
RESEARCH AND DEVELOPMENT - FUTURE OPERATIONS
Labyrinth anticipates that the research, development, testing, and
demonstration stages of the RadioCamera will continue for approximately six to
twelve months. Accordingly, Labyrinth does not anticipate generating any
revenues from operations during such period. The funds raised by Labyrinth
through a private placement and its sale of 51% of its common stock to the
Company will be used for general corporate purposes including salaries, fees,
and expenses as well as for developing prototypes and, eventually, the initial
marketing of its planned products.
Mantra is also in the development stage. It is developing a software
package that operates in the background of the personal computer to access
Internet data which correlates to the users' personality/profile and business
objectives. This service shall be designed to optimize search time and use on
the Internet. Mantra is currently developing the technology and is testing and
demonstrating its initial prototype. In addition, Mantra is marketing its
technology to potential joint venture partners to enhance already marketed
products.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company reported working capital of $3,702,974.
As of such date, the Company had $3,757,815 in business checking and money
market accounts. The Company believes that its available cash as of September
30, 1997 will be sufficient to fund its operating needs through the balance of
the year.
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Trends Affecting Liquidity, Capital Resources and Operations
As the nature of the Company's operations has shifted to development stage
operations, management is 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 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
may cause significant strain on the Company's management, technical, financial,
and other resources.
Inflation and Seasonality
Inflation and seasonality are not expected to have a material effect on
the Company's liquidity, capital resources, and operating activities.
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PART II
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: None
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K: None
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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)
May 6, 1998 By: /s/ Oliver Hilsenrath
Date Dr. Oliver Hilsenrath
Chief Executive Office
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U.S. WIRELESS CORPORATION AND SUBSIDIARIES
EXHIBIT 27
FINANCIAL DATA SCHEDULE
ARTICLE 5 OF REGULATION S-X
The schedule contains summary financial information extracted from the financial
statements for the six months ended September 30, 1997 and is qualified in its
entirety by reference to such statements.
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<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> mar-31-1998
<PERIOD-END> sep-30-1997
<CASH> 3,757,815
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,761,315
<PP&E> 568,606
<DEPRECIATION> 113,167
<TOTAL-ASSETS> 4,221,421
<CURRENT-LIABILITIES> 58,341
<BONDS> 0
0
0
<COMMON> 73,253
<OTHER-SE> 2,547,722
<TOTAL-LIABILITY-AND-EQUITY> 4,221,421
<SALES> 0
<TOTAL-REVENUES> 114,502
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,655,724
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,514,675)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,514,675)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> (.21)
</TABLE>
