U.S. WIRELESS CORPORATION
2303 Camino Ramon
San Ramon CA 94583
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS To
Be Held on January 22, 1999
To the Shareholders of:
U.S. WIRELESS CORPORATION
NOTICE IS HEREBY GIVEN that an annual meeting of Shareholders of U.S.
WIRELESS CORPORATION (the "Corporation") will be held at the Corporation's
offices located at 2303 Camino Ramon, San Ramon, California, on January 22,
1999, at 10:00 a.m. Pacific time, for the following purposes:
1. To elect four (4) Directors to the Corporation's Board of Directors to
hold office for a period of one year or until their successors are duly elected
and qualified; and
2. To transact such other business as properly may be brought before the
meeting or an adjournment thereof.
The close of business on November 25, 1998 has been fixed as the record
date for the determination of shareholders entitled to notice of, and to vote
at, the meeting and any adjournment thereof.
You are cordially invited to attend the meeting. Whether or not you
plan to attend, please complete, date, and sign the accompanying proxy, and
return it promptly in the enclosed envelope to assure that your shares are
represented at the meeting. If you do attend, you may revoke any prior proxy and
vote your shares in person if you wish to do so. Any prior proxy automatically
will be revoked if you execute the accompanying proxy or if you notify the
Secretary of the Corporation, in writing, prior to the Annual Meeting of
Shareholders.
By order of the Board of Directors
David S. Klarman, Secretary
Dated: December 31, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, AND SIGN
THE ENCLOSED PROXY, AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO
ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF MAILED IN
THE UNITED STATES.
<PAGE>
U.S. WIRELESS CORPORATION
2303 Camino Ramon
San Ramon CA 94583
PROXY STATEMENT
FOR
Annual Meeting of Stockholders
To Be Held on January 22, 1999
This proxy statement and the accompanying form of proxy were mailed on
December 31, 1998 to the stockholders of record (as of November 25, 1998) of
U.S. Wireless Corporation, a Delaware corporation (the "Corporation"), in
connection with the solicitation of proxies by the Board of Directors of the
Corporation for use at the Annual Meeting to be held on January 22, 1999 and at
any adjournment thereof.
SOLICITATION, VOTING, AND REVOCABILITY OF PROXIES
Shares of the Corporation's common stock, par value $.001 per share
(the "Common Stock"), represented by an effective proxy in the accompanying form
will, unless contrary instructions are specified in the proxy, be voted FOR the
election of four (4) persons nominated by the Board of Directors as directors.
Any such proxy may be revoked at any time before it is voted. A
stockholder may revoke this proxy by notifying the Secretary of the Corporation,
either in writing prior to the Annual Meeting or in person at the Annual
Meeting, by submitting a proxy bearing a later date or by voting in person at
the Annual Meeting. An affirmative vote of a plurality of the shares of Common
Stock present, in person or represented by proxy at the Annual Meeting and
entitled to vote thereon is required to elect the Directors. A stockholder
voting through a proxy who abstains with respect to the election of Directors is
considered to be present and entitled to vote on the election of Directors at
the meeting, and his abstention is, in effect, a negative vote; however, a
stockholder (including a broker) who does not give authority to a proxy to vote
or who withholds authority to vote on the election of Directors shall not be
considered present and entitled to vote on the election of Directors. A
stockholder voting through a proxy who abstains with respect to approval of any
other matter to come before the meeting is considered to be present and entitled
to vote on that matter, and his abstention is, in effect, a negative vote;
however, a stockholder (including a broker) who does not give authority to a
proxy to vote or who withholds authority to vote on any such matter shall not be
considered present and entitled to vote thereon.
The Corporation will bear the cost of the solicitation of proxies by
the Board of Directors. The Board of Directors may use the services of its
Executive Officers and certain Directors to solicit proxies from stockholders in
person and by mail, telegram, and telephone. Arrangements may also be made with
brokers, fiduciaries, custodians, and nominees to send proxies, proxy
statements, and other material to the beneficial owners of the Common Stock held
of record by such persons, and the Corporation may reimburse them for reasonable
out-of-pocket expenses incurred by them in so doing.
The Company's Annual Report for the fiscal year ended March 31, 1998
including audited financial statements is annexed hereto. The Company's
quarterly report on form 10-QSB for the quarter ended September 30, 1998,
accompanies this proxy statement.
The principal executive offices of the Corporation are located at 2303
Camino Ramon, San Ramon CA 94583; the Corporation's telephone number is (925)
327-6200.
Independent Public Accountants
The Board of Directors of the Corporation has selected Haskell & White
LLP, Certified Public Accountants, as independent accountants of the Corporation
for the fiscal year ending March 31, 1999. Shareholders are not being asked to
approve such selection because such approval is not required. The audit services
provided by Haskell & White LLP consist of examination of financial statements,
services relative to filings with the Securities and Exchange Commission, and
consultation in regard to various accounting matters. Representatives of Haskell
& White LLP are expected to be present at the meeting and will have the
opportunity to make a statement if they so desire and answer appropriate
questions.
VOTING SECURITIES AND SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The securities entitled to vote at the meeting are the Common Stock,
par value $.01 per share. The presence, in person or by proxy, of a majority of
shares entitled to vote will constitute a quorum for the meeting. Each share of
Common Stock entitles its holder to one vote on each matter submitted to the
stockholders. The close of business on November 25, 1998 has been fixed as the
record date for the determination of stockholders entitled to notice of, and to
vote at, the meeting and any adjournment thereof. At that date, 13,556,188
shares of Common Stock were outstanding. Voting of the shares of Common Stock is
on a non-cumulative basis.
The following table sets forth information as of September 30, 1998
with respect to the beneficial ownership of shares of Common Stock by (i) each
person (including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended) known by the Corporation to be the
owner of more than 5% of the outstanding shares of Common Stock; (ii) each
Director; and (iii) all Officers and Directors as a group.
2
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Name and Address Amount and Nature of % of outstanding
of Beneficial Owner Beneficial Ownership (1) shares owned (2)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Dr. Oliver Hilsenrath (3)
c/o U.S. Wireless Corp. 5,732,880 43.0%
2303 Camino Ramon, Suite 213
San Ramon, CA 94583
- --------------------------------------------------------------------------------------------------------------------------
David Tamir (4)
c/o U.S. Wireless Corp. 66,667 *
2303 Camino Ramon, Suite 213
San Ramon, CA 94583
- --------------------------------------------------------------------------------------------------------------------------
Barry West (5)
c/o U.S. Wireless Corp. -- *
2303 Camino Ramon, Suite 213
San Ramon, CA 94583
- --------------------------------------------------------------------------------------------------------------------------
Dennis Francis (6)
c/o U.S. Wireless Corp. 50,000 *
2303 Camino Ramon, Suite 213
San Ramon, CA 94583
- --------------------------------------------------------------------------------------------------------------------------
Janvrin Holdings Limited(7)
Jardine House 918,000 7.8%
1 Wesley Street
St. Helier, Jersey JE4 8UD
- --------------------------------------------------------------------------------------------------------------------------
Officers and Directors as a group
(4 persons) (3)-(6)(8) 6,921,647 44.7%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------
*Less than 1%.
(1) Unless otherwise noted, all of the shares shown are held by individuals
or entities possessing sole voting and investment power with respect to such
shares. Shares not outstanding but deemed beneficially owned by virtue of the
right of a person to acquire them within 60 days, whether by the exercise of
options or warrants, are deemed outstanding in determining the number of shares
beneficially owned by such person or group
(2) The "Percentage Beneficially Owned" is calculated by dividing the
"Number of Shares Beneficially Owned" by the sum of (i) the total outstanding
shares of Common Stock of the Corporation, and (ii) the number of shares of
Common Stock that such person has the right to acquire within 60 days, whether
by exercise of options or warrants. The "Percentage Beneficially Owned" does not
reflect shares beneficially owned by virtue of the right of any person, other
than the person named and affiliates of the person, to acquire them within 60
days, whether by exercise of options or warrants.
(3) Includes 1,500,000 shares of Common Stock, issuable upon the exercise
of an option granted pursuant to Dr. Hilsenrath's employment agreement and
1,982,880 shares issued in connection with the Labyrinth merger, of which
1,586,304 are not vested and subject to a vesting schedule. See "Certain
Relations and Related Transactions - Merger of Labyrinth."
(4) Includes shares issuable upon the exercise of options currently vested
and exercisable, equal to 2/3 of the shares underlying the option granted. The
options vest at 1/3 intervals per year.
(5) Does not include 100,000 shares issuable upon the grant of an option
which option vests at the rate of 1/3 per annum, no portion of which has vested.
(6) Represents shares issuable upon the exercise of options currently
vested and exercisable.
(7) Includes 183,600 shares which have vested and 734,400 shares subject to
a vesting schedule in connection with the Labyrinth merger. See "Certain
Relations and Related Transactions - Merger of Labyrinth."
(8) Includes shares owned, including shares subject to vesting in
accordance with the Labyrinth merger and shares underlying vested options
granted to all officers and directors of the Company. Certain Reports
No person, who during the fiscal year ended March 31, 1998 was a Director,
Officer, or beneficial owner of more than ten percent of the Corporation's
Common Stock (which is the only class of securities of the Corporation
registered under Section 12 of the Securities Exchange Act of 1934 (the "Act")
(a "Reporting Person"), failed to file on a timely basis reports required by
Section 16 of the Act during the most recent fiscal year or prior years. The
foregoing is based solely upon a review by the Corporation of (i) Forms 3 and 4
during the most recent fiscal year as furnished to the Corporation under Rule
16a-3(d) under the Act; (ii) Forms 5 and amendments thereto furnished to the
Corporation with respect to its most recent fiscal year; and (iii) any
representation received by the Corporation from any reporting person that no
Form 5 is required, except as described herein.
It is expected that the following will be considered at the meeting and
that action will be taken thereon:
I. ELECTION OF DIRECTORS
The Board of Directors currently consists of four members elected for a
term of one year or until their successors are duly elected and qualified.
An affirmative vote of a plurality of the shares of Common Stock,
present in person or represented by proxy, at the Annual Meeting and entitled to
vote thereon is required to elect the Directors. All proxies received by the
Board of Directors will be voted for the election as Directors of the nominees
listed below if no direction to the contrary is given. In the event any nominee
is unable to serve, the proxy solicited hereby may be voted, in the discretion
of the proxies, for the election of another person in his stead. The Board of
Directors knows of no reason to anticipate this will occur.
The following table sets forth, as of September 30, 1998, the four
nominees for election as Directors of the Corporation:
<TABLE>
<CAPTION>
Position with Corporation; Director
Name Principal Occupation and Age Since
<S> <C> <C> <C>
Dr. Oliver Hilsenrath1,2 President, CEO and Director; 41 1996
Barry West1 Director; 53 1998
Dennis Francis1,2 Director, 47 1997
David Tamir2 Director, 54 1996
</TABLE>
- -----------------------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
5
<PAGE>
The Directors of the Corporation are elected annually by the stockholders,
and the Officers of the Corporation are appointed annually by the Board of
Directors. Vacancies on the Board of Directors may be filled by the remaining
Directors. Each current Director and Officer will hold office until the next
annual meeting of stockholders or until his successor is elected and qualified.
Dr. Oliver Hilsenrath has served as President, Chief Executive Officer and
Director of the Company since July 31, 1996. Since their inceptions, Dr.
Hilsenrath was a co-founder and served from 1992 through 1996 as Senior Vice
President of Technology of Geotek Communications, Inc., an international
wireless carrier with networks in the United States, United Kingdom and Germany.
Prior to that, Dr. Hilsenrath served as Chief Engineer of the secure
communications division of RAFAEL, Israel. Dr. Hilsenrath received his Ph.D. in
information theory from Technion - Polytechnical Institute of Israel and has
worked in the wireless communications industry for 20 years.
Barry West has served as a Director of the Company since May 1998. Since
March 1996 Mr. West has served as Vice President and Chief Technology Officer of
Nextel communications, Inc. Prior to that, Mr. West served in various senior
positions with British Telecom for more than five years, most recently as
Director of Value-Added Services and Corporate Marketing at Cellnet, a cellular
communications subsidiary of British Telecom.
Dennis Francis was elected to the Company's Board in December 1997.
Previously, he served as a consultant to the Company since December 1996,
providing technical support services. Mr. Francis also served for over five
years as Executive Vice President and Chief Technology Officer of Vanguard
Cellular Systems, Inc., a cellular communications service provider. Mr. Francis
is the current chairman of the Nortel Technology Officers Council and has served
on the CTIA Chief Technology Officers Council for four years. Mr. Francis
graduated from the University of Texas at Arlington, Texas with a B.S. in
Industrial Engineering.
David Tamir has served as a Director of the Company since August 1996.
Since April, 1996 he has been the President and CEO of Nanomotion, an
Israeli-based company that has developed piezo ceramic, ultra-sonic motors. From
July 1992 to January, 1996, Mr. Tamir was General Manager of Power Spectrum
Technologies Limited, a subsidiary of Geotek Communications, Inc. From 1990 to
1992, Mr. Tamir was a representative of RAFAEL (the Israeli Ministery of
Defence), in Washington D. C. Mr. Tamir holds BS and MS degrees in Electrical
Engineering from Technion - Polytechnical Institute of Israel and an MBA degree
from The Hebrew University, in Jerusalem.
All Directors hold office until the next annual meeting of stockholders or
until their successors are duly elected and qualified. Vacancies on the Board of
Directors may be filled by the remaining Directors. Officers are elected
annually by, and serve at the discretion of, the Board of Directors. As
permitted under Delaware Corporation Law, the Company's certificate of
incorporation eliminates the personal liability of the Directors to the Company
or any of its shareholders for damages for breaches of their fiduciary duty as
Directors. As a result of the inclusion of such provision, stockholders may be
unable to recover damages against Directors for actions taken by them which
constitute negligence or gross negligence or that are in violation of their
fiduciary duties. The inclusion of this provision in the Company's certificate
of incorporation may reduce the likelihood of derivative litigation against
Directors and other types of shareholder litigation. In addition, the Company
has executed indemnification agreements with all officers and directors
providing indemnification to the fullest extent of the law.
Board Meetings, Committees, and Compensation
During the fiscal year ended March 31, 1998, there were 2 meetings of the
Board of Directors was held by telephonic conference. Action was taken on ten
(10) occasions by unanimous written consents of the Board of Directors which
consents were obtained in lieu of meetings. The Corporation does not pay its
Directors for attendance at meetings of the Board of Directors.
The Board of Directors recommends that you vote "FOR" the nominees for
Directors.
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following provides certain information concerning all Plan and
Non-Plan (as defined in Item 402 (a)(ii) of Regulation S-B) compensation awarded
to, earned by, or paid by the Corporation during the years ended March 31, 1997
and 1998 to each of the named executive officers of the Corporation.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation
(a) (b) (c) (d) (e) (f)
Name and Principal Options/ Other Annual
Position Year(1) Salary($) Bonus($) SARS Compensation
<S> <C> <C> <C> <C> <C>
Dr. Oliver Hilsenrath 1998 160,000 - - $7,600(4)
President and 1997 106,667(2) - 1,500,000(3) $5,572(4)
Chief Executive Officer
David Klarman 1998 120,000 - - -
Vice President, 1997 70,000(2) - 150,000(3) -
General Counsel and Secretary
Dr. Mati Wax 1998 100,000 - - -
Chief Technology Officer 1997 66,667(2) - 100,000(3) -
Abraham Bar 1998 100,000 (5) - 100,000(3) -
Vice President 1997 100,000 - - -
of Hardware
Ravi Rajapakse 1998 100,000 - 100,000(3) -
Vice President 1997 90,000(6) - - -
of Software Design
- ------------------------------------------------
</TABLE>
(footnotes from previous page)
(1) No compensation was paid to any officer of the Company prior to July
31, 1996.
(2) Reflects the portion of the year worked based on salaries of $160,000,
$120,000, and $100,000 for Dr. Hilsenrath, Mr. Klarman, and Dr. Wax,
respectively.
(3) Pursuant to their employment agreements, Dr. Hilsenrath, Dr. Wax . Mr.
Klarman, Mr. Bar and Mr. Rajapakse received options to purchase 1,500,000,
100,000, 150,000, 100,000 and 100,000, respectively, shares of Common Stock. See
"Employment and Consulting Agreements."
(4) Includes (i) the payment of $509 per month for automobile allowance,
and (ii) the payment of approximately $1,500 per annum for a life insurance and
disability policy for the benefit of Dr. Hilsenrath's beneficiaries. See
"Employment and Consulting Agreements."
(5) Base Salary was increased to $110,000 as of January 1, 1998
(6) Reflects the portion of the year worked for Labyrinth, based on a
salary of $100,000.
AGGREGATED OPTION/SAR EXERCISE IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
====================================================================================================================================
(a) (b) (c) (d) (e)
- ------------------------------------------------------------------------------------------------------------------------------------
Value of
Number of Unexercised
Unexercised Options/SAR's In-The-MoneyOptions/SAR's
Exercisable/ at FY-End ($)
Shares Acquired on Unexercisable Exercisable/
Exercise (#) Value Realized ($) Unexercisable (1)
------------ ------------ -----------------
Name
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dr. Oliver Hilsenrath - - 1,500,000/0 1,215,000/0
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
David Klarman - - 50,000/100,000 40,500/81,000
====================================================================================================================================
Dr. Mati Wax - - 50,000/50,000 40,500/40,500
- ------------------------------------------------------------------------------------------------------------------------------------
Abraham Bar - - 33,333/66,667 10,333/20,667
- ------------------------------------------------------------------------------------------------------------------------------------
Ravi Rajapakse - - 33,333/66,667 0/0
====================================================================================================================================
</TABLE>
(1) Based upon the closing price for the Common Stock on March 31, 1998
($2.81), as reported by a market maker.
Employment and Consulting Agreements
In April 1997, the Company amended the five year employment agreement
it entered into originally with Dr. Hilsenrath in July 1996. Pursuant to the
terms of the agreement as amended, Dr. Hilsenrath is Chief Executive Officer and
President of the Company and was the President and sole Director of both
Labyrinth prior to its consolidation with the Corporation. Dr. Hilsenrath
remains the President and sole director of Mantra. The agreement, as amended,
provides for an annual salary of $160,000 and increases of 15% per annum for
each year remaining in the original five-year term. Upon execution, the
Corporation granted Dr. Hilsenrath an option to purchase 1,500,000 shares of
Common Stock at an exercise price of $2.00 per share. The Corporation provides
Dr. Hilsenrath with an automobile allowance. In addition, the Corporation shall
maintain during the full term hereof and at its sole cost and expense, a life
insurance policy on Dr. Hilsenrath in the face amount of $1,000,000 payable to
his designee. This policy shall include provisions for the payment of up to 18
months of salary to Dr. Hilsenrath in the event that he is disabled. Upon the
conclusion of this agreement, all right, title and interest in the policy shall
be transferred to Dr. Hilsenrath, and he shall be responsible for any premiums
due after such transfer. The agreement restricts Dr. Hilsenrath from competing
with the Corporation for a period of two years after the termination of his
employment. The agreement provides for severance compensation to be paid to Dr.
Hilsenrath if his employment with the Corporation is terminated or if there is a
decrease in his responsibilities or duties following a change in control of the
Corporation. The severance compensation shall be made in one payment equal to
three times the aggregate annual compensation paid to Dr. Hilsenrath during the
preceding calendar year. In the event the Corporation wishes to obtain Key Man
life insurance on the life of Dr. Hilsenrath, he agrees to cooperate with the
Corporation in completing any applications necessary to obtain such insurance
and in promptly submitting to such physical examinations and furnishing such
information as any proposed insurance carrier may request.
In August 1996, the Corporation entered into a three year employment
agreement with Mr. Klarman, pursuant to which Mr. Klarman receives a salary of
$120,000 per annum and was granted an option to purchase 150,000 shares of
Common Stock at an exercise price of $2.00 per share, subject to a three year
vesting schedule. The employment agreement provides that Mr. Klarman will be
General Counsel and Secretary of the Corporation. The agreement also
acknowledges that Mr. Klarman shall have the right to represent non-competing
companies during the term of the agreement.
In July 1996, Dr. Mati Wax entered into a three-year employment
agreement with the Corporation, pursuant to which Dr. Wax serves as Chief
Technology Officer and receives a salary of $100,000 per annum, the option to
purchase 100,000 shares of Common Stock at an exercise price of $2.00 per share,
subject to a three year vesting schedule. As of January 1998 the Corporation and
Dr. Wax amended the employment agreement in accordance with the Corporation's
merger with Labyrinth. The amended employment agreement provides for the
exchange of his 50,000 restricted shares of Labyrinth's common stock for 459,000
shares of the Corporation's Common Stock, subject to a vesting schedule.
Additionally, the amended agreement provides for the extension of the agreement
on a yearly basis until the shares have vested.
In July 1996, the Corporation entered into three-year consulting
agreements with Ryburn Limited and Crossgar Limited, wherein said companies
agreed to render services in introducing the Corporation to potential customers
and facilitating relationships with such companies in the United States and the
Middle East, initiating strategic alliances and joint ventures, and providing
investment and business consulting and advisory services to the Corporation,
including the location, evaluation, structuring and financing of business
activities. The only compensation given for the services rendered by the
consultants is the five-year options to purchase 1,000,000 and 200,000 shares of
Common Stock at $2.00 per share, granted by the Corporation to Ryburn Limited
and Crossgar Limited, respectively.
In December 1996, the Corporation entered into a three-year consulting
agreement with Dennis Francis, Vice President of Vanguard Cellular Financial
Corp., to provide technical assistance in the development of the Corporation's
products. Mr. Francis received a five-year option to purchase 50,000 shares of
Common Stock at $4.00 per share.
In January 1997, Ravi Rajapaske entered into a three-year employment
agreement with Labyrinth. The agreement was amended in January 1998, in
accordance with the merger of Labyrinth with and into the Corporation, pursuant
to which the agreement was transferred to the Corporation and Mr. Rajapakse
became Vice President of Software Design. Mr. Rajapakse receives a salary of
$100,000 per annum, and was granted an option to purchase 100,000 shares of
Common Stock at an exercise price of $4.00 per share, subject to a three-year
vesting schedule. The amended employment agreement provides for the exchange of
his 20,000 restricted shares of Labyrinth's common stock for 183,600 shares of
the Corporation's Common Stock, subject to a vesting schedule. Additionally, the
amended agreement provides for the extension of the agreement on a yearly basis
until the shares have vested.
In October 1996, Abraham Bar entered into a three-year employment
agreement with Labyrinth. The agreement was amended in January 1998, in
accordance with the merger of Labyrinth with and into the Corporation, pursuant
to which the agreement was transferred to the Corporation and Mr. Bar became
Vice President of Hardware Design. Mr. Bar receives a salary of $110,000 per
annum, and was granted an option to purchase 100,000 shares of Common Stock at
an exercise price of $2.50 per share, subject to a three-year vesting schedule.
The amended employment agreement provides for the exchange of his 25,000
restricted shares of Labyrinth's common stock for 229,500 shares of the
Corporation's Common Stock, subject to a vesting schedule. Additionally, the
amended agreement provides for the extension of the agreement on a yearly basis
until the shares have vested.
In January 1997, the Corporation entered into a three-year consulting
agreement with Spencer Corporation, wherein said Corporation agreed to render
services in Europe to facilitate relationships with potential customers and
initiate strategic alliances and to provide investment and business consulting
and advisory services to the Corporation, including the location, evaluation,
structuring and financing of business activities. The only compensation given
for the services rendered by the consultant is a five-year option to purchase
100,000 shares of Common Stock at $2.50 per share.
On August 12, 1997, the Corporation entered into a two year consulting
agreement with DAEHO Merchandising Inc., Seoul, Korea, whereby DAEHO was
retained to perform consulting services including (i) introducing, initiating,
and engaging in the process of facilitating relationships with potential
customers and strategic partners and (ii) initiating and coordinating a
manufacturing effort for the RadioCamera in Asia. As compensation for the
services rendered, DAEHO will receive a commission, in cash or in kind, based on
any consummated transactions as referred to in (i) above, and 3% of the actual
price paid by the Corporation for the manufacture of each RadioCamera purchased
by the Corporation in accordance with (ii) above.
Senior Management Incentive Plan
In December 1997, the Board of Directors and the stockholders of the
Corporation adopted the Senior Management Incentive Plan (the "Management
Plan"). The Management Plan provides for the issuance of up to an aggregate of
500,000 shares of Common Stock upon exercise of stock options and other rights
to executive officers, key employees and consultants to the Corporation.
The adoption of the Management Plan was prompted by the desire to
provide the Board with sufficient flexibility regarding the forms of incentive
compensation which the Corporation will have at its disposal in rewarding
Executive Officers, key employees and consultants who render significant
services to the Corporation. Pursuant to the Management Plan, the Board of
Directors intends to offer to such persons equity ownership in the Corporation
through the grant of stock options and other rights, to enable the Corporation
to attract and retain qualified personnel without unnecessarily depleting the
Corporation's cash reserves. The Management Plan is designed to augment the
Corporation's existing compensation programs and is intended to enable the
Corporation to offer a personal interest in the Corporation's growth and success
through awards of either shares of Common Stock or rights to acquire shares of
Common Stock.
The Management Plan is intended to attract and retain key executive
management personnel whose performance is expected to have a substantial impact
on the Corporation's long-term profit and growth potential by encouraging and
assisting those persons to acquire equity in the Corporation. A total of 500,000
shares of Common Stock will be reserved for issuance under the Management Plan.
It is anticipated that awards made under the Management Plan will be subject to
three-year vesting periods, although the vesting periods are subject to the
discretion of the Administrator.
Unless otherwise indicated, the Management Plan is administered by the
compensation committee of the Board of Directors. (The Board or such committee
shall be referred to in the following description as the "Administrator."). In
accordance therewith, all issuance under the Management Plan will be approved by
such committee. Subject to the specific provisions of the Management Plan, the
Administrator will have the discretion to determine the recipients of the
awards, the nature of the awards to be granted, the dates such awards will be
granted, the terms and conditions of awards and the interpretation of the
Management Plan, except that any award granted to any employee of the
Corporation who is also a Director of the Corporation shall also be subject, in
the event the persons serving as members of the Administrator of the Management
Plan at the time such award is proposed to be granted do not satisfy the
requirements regarding the participation of "disinterested persons" set forth in
Rule 16b-3 (" Rule 16b-3") promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), to the approval of an auxiliary committee
consisting of not less than two individuals who are considered "disinterested
persons" as defined under Rule 16b-3. As of the date hereof, the Corporation has
not yet determined who will serve on such auxiliary committee, if one is
required. The Management Plan generally provides that, unless the Administrator
determines otherwise, each option or right granted under a plan shall become
exercisable in full upon certain "change of control" events as described in the
Management Plan, or subject to any right or option granted under the Management
Plan (through merger, consolidation, reorganization, recapitalization, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure, or otherwise), the Administrator will make appropriate adjustments to
such plans and the classes, number of shares and price per share of stock
subject to outstanding rights or options. The Management Plan may be amended by
action of the Board of Directors, except that any amendment which would increase
the total number of shares subject to such plan, extend the duration of such
plan, materially increase the benefits accruing to participants under such plan,
or would change the category of persons who can be eligible for awards under
such plan, must be approved by the affirmative vote of a majority of
stockholders entitled to vote. The Management Plan permits awards to be made
thereunder until November 2004.
Directors who are not otherwise employed by the Corporation will not be
eligible for participation in the Management Plan. The Management Plan provides
for four types of awards: stocks options, incentive stock rights, stock
appreciation rights (including limited stock appreciation rights) and restricted
stock purchase agreements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
General
In June 1996, the Corporation's Board of Directors, pursuant to the
consent of the then majority stockholder of the Corporation, distributed the
shares of common stock of Playco held by the Corporation ("the spin-off
distribution"). In addition, the Corporation, as majority stockholder of Playco,
prior to, but in contemplation of the spin-off distribution, authorized the
conversion of Playco's Series D Preferred Stock owned by the Corporation into
1,157,028 shares of Playco's common stock. This conversion was based on the
average closing bid price ($1.21) of Playco's shares for the 90-day period from
March 1, 1996 to May 31, 1996.
Merger of Labyrinth
In March 1998 the Corporation consummated the merger of its 51% owned
subsidiary, Labyrinth Communication Technologies Group, Inc. ("Labyrinth"), into
the Corporation. In December 1997, the stockholders of the Corporation approved
a proposal to acquire the remaining 49% of Labyrinth in exchange for an
aggregate of 4,498,200 shares of the Corporation's Common Stock, subject to a
vesting schedule, as follows: (i) 20% of the shares issued shall vest one year
from issuance; (ii) an additional 40% shall vest upon the successful completion
and operation of the RadioCamera in its first major market; and (iii) the
remaining 40% shall vest when the Corporation reaches sales of $15,000,000. In
addition to the above vesting schedule, the management of Labyrinth is subject
to an additional vesting schedule, in accordance with their employment
contracts, whereby the shares underlying (i)-(iii) above vest at the rate of 1/3
each year.
See "Executive Compensation - Employment and Consulting Agreements" for
a discussion of the compensation arrangements the Corporation has with its
executive officers, directors, and consultants.
FINANCIAL INFORMATION
A COPY OF THE CORPORATION'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL
YEAR ENDED MARCH 31, 1998 WAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
AND WILL BE FURNISHED WITHOUT THE ACCOMPANYING EXHIBITS TO STOCKHOLDERS, WITHOUT
CHARGE, UPON WRITTEN REQUEST THEREFOR SENT TO DAVID S. KLARMAN, SECRETARY, U.S.
WIRELESS CORPORATION, 2303 CAMINO RAMON, SAN RAMON CA 94583. EACH SUCH REQUEST
MUST SET FORTH A GOOD FAITH REPRESENTATION THAT AS OF NOVEMBER 25, 1998, THE
PERSON MAKING THE REQUEST WAS THE BENEFICIAL OWNER OF SHARES OF THE
CORPORATION'S COMMON STOCK ENTITLED TO VOTE AT THE ANNUAL MEETING OF
STOCKHOLDERS.
II. OTHER BUSINESS
As of the date of this proxy statement, the only business which the Board
of Directors intends to present, and knows that others will present, at the
Annual Meeting is that herein set forth. If any other matter is properly brought
before the Annual Meeting or any adjournments thereof, it is the intention of
the persons named in the accompanying form of proxy to vote the proxy on such
matters in accordance with their judgment.
Shareholder Proposals
Proposals of shareholders intended to be presented at the Corporation's
1998 Annual Meeting of Shareholders must be received by the Corporation on or
prior to September 15, 1999 to be eligible for inclusion in the Corporation's
proxy statement and form of proxy to be used in connection with the 1999 Annual
Meeting of Shareholders.
By Order of the Board of Directors,
David S. Klarman
Secretary
December 31, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE AND RETURN YOUR
PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF IT IS MAILED
IN THE UNITED STATES OF AMERICA.
6
<PAGE>
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 September 30, 1998
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)
<TABLE>
<CAPTION>
<S> <C>
Delaware 13-3704059
(State of Incorporation) (I.R.S. Employer Identification No.)
</TABLE>
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 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, 13,556,188 shares outstanding as of September 30, 1998.
<PAGE>
U.S. WIRELESS CORPORATION AND SUBSIDIARY
<TABLE>
<CAPTION>
CONTENTS
Page
PART I. FINANCIAL INFORMATION
<S> <C>
ITEM 1. Financial Statements
Consolidated balance sheets as of September 30, 1998 (unaudited)
and March 31, 1998 3
Consolidated statements of operations (unaudited) for the three
months and six months ended September 30, 1998 and
September 30, 1997 4
Consolidated statements of cash flows (unaudited) for the six
months ended September 30, 1998 and September 30, 1997 5
Notes to financial statements 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION 14
ITEM 5. Other Information 14
Signatures 15
</TABLE>
<PAGE>
Part I, Item 1. Financial Statements.
U.S. WIRELESS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
As of September 30, 1998 and March 31, 1998
<TABLE>
<CAPTION>
September 30, March 31,
1998 1998
--------------- ---------
(Unaudited) (Note 1)
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents ....................................................... $ 5,580,753 $ 2,285,750
current assets 3,500 3,500
------------ ------------
Inventory ...................................................................... 29,285 --
------------ ------------
Total Current Assets ............................................................. 5,610,038 2,285,750
Equipment, improvements and fixtures, net
of accumulated depreciation and amortization .................................... 531,902 399,896
Other assets ..................................................................... 25,035 25,035
------------ ------------
Total assets ............................................................ $ 6,166,975 $ 2,710,681
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses .......................................... $ 226,921 $ 252,708
Obligations under capital leases, current ....................................... 15,192 15,192
------------ ------------
Total current liabilities ............................................... 242,213 267,900
------------ ------------
Obligations under capital leases, noncurrent .................................... 26,500 39,118
------------ ------------
Total liabilities ....................................................... 268,613 307,018
------------ ------------
Minority interest in subsidiary .................................................. 170,449 195,305
----------- ------------
Stockholders' equity:
Series A Preferred stock, $.01 par value, 300,000 shares authorized; issued and
outstanding at September 30, 1998
70,000 shares ................................................................. 700 --
Common stock,$.01 par value, 40,000,000 shares
authorized; issued and outstanding at September 30, 1998
13,556,301 shares; at March 31, 1998, 11,823,444 shares ....................... 135,563 118,234
Additional paid-in capital ...................................................... 25,309,532 19,912,890
Unearned compensation ........................................................... (503,198) (761,438)
Accumulated deficit ............................................................. (19,214,684) (17,061,328)
------------ ------------
Total stockholders' equity .............................................. 5,727,913 2,208,358
------------ ------------
Total liabilities and stockholders' equity .............................. $ 6,166,975 $ 2,710,681
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements
<PAGE>
U.S. WIRELESS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
1998 1997 1998 1997
---- ----- ---- ----
<S> <C> <C> <C> <C>
Net sales .................................... $ -- $ -- $ -- $ --
------------ ------------ ------------ ------------
Costs and expenses:
Operating expenses ......................... 2,346,069 1,655,724 1,227,465 911,843
------------ ------------ ------------ ------------
Loss before other income and minority interest
in net losses of continuing subsidiary ..... (2,346,069) (1,655,724) (1,227,465) (911,843)
Other income:
Interest income ............................ 167,857 114,502 133,452 49,508
------------ ------------ ------------ ------------
Loss before minority interest in
net loss of subsidiary ................... (2,178,212) (1,541,222) (1,094,013) (862,335)
Minority interest in net loss of subsidiary .. 24,856 26,547 (381) 20,341
------------ ------------ ------------ ------------
Net loss ..................................... $ (2,153,356) $ (1,514,675) $ (1,094,394) $ (841,994)
============ ============ ============
Basic and diluted loss per
common equivalent share: .............. $ (.17) $ (.21) $ (.08) $ (.11)
Loss before minority interest
in net loss of subsidiaries
Minority interest in net loss of subsidiary .. -- .- -- --
------------ ------------ ------------ ------------
Basic and diluted net loss
Per Common Equivalent Share ................. $ (.17) $ (.21) $ (.08) $ (.11)
============ ============ ============ ============
Weighted average number of
common shares outstanding .................. 12,978,682 7,325,245 13,556,301 7,325,245
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements
<PAGE>
U.S WIRELESS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Six Months Ended
Sept 30, Sept 30,
1998 1997
----------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss ................................................ $(2,153,356) $(1,514,675)
Adjustments to reconcile net loss to cash (used)
for operating activities:
Depreciation ........................................... 125,000 113,167
Minority interest in net losses of subsidiary .......... (24,856) (26,547)
Amortization of unearned compensation .................. 258,240 258,240
Increase (Decrease) from changes in assets and
liabilities:
Increase in inventory ................................. (29,285) --
Accounts payable and accrued expenses .................. (25,787) (101,138)
----------- -----------
Net cash (used) for operating activities (1,850,044) (1,270,953)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment, improvements and fixtures .... (257,006) (287,395)
----------- -----------
Net cash used for investing activities .......... (257,006) (287,395)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligations .................. (12,618) (12,618)
Proceeds from issuance of preferred stock .............. 5,389,312 --
Issuance of common shares .............................. 25,359 --
----------- -----------
Net cash (used) for financing activities ................. 5,402,053 (12,618)
- ---------------------------------------------------------- ----------- -----------
NET INCREASE(DECREASE) IN CASH
AND CASH EQUIVALENTS ................................... 3,295,003 (1,570,966)
Cash, beginning of period ............................... 2,285,750 5,328,781
----------- -----------
Cash, end of period .................................... $ 5,580,753 $ 3,757,815
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid ......................................... $ -- $ --
Taxes paid ............................................ $ 1,248 $ 4,800
</TABLE>
See accompanying notes to consolidated condensed financial statements
<PAGE>
U.S. WIRELESS CORPORATION AND SUBSIDIARY
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 dot
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 six months ended September 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.
("Labyrinth")
In March 1998, the Company consummated the consolidation of its subsidiary,
Labyrinth, with and into the Company. In accordance with exchange offers
submitted to the stockholders of Labyrinth representing the 49% minority
interest in Labyrinth, the Company exchanged 4,498,200 shares of its common
stock for 490,000 shares of common stock of Labyrinth. The shares of Common
Stock issued in accordance with the exchange, are subject to the following
vesting schedule:
20% of shares vest one year from issuance 40% of shares vest upon
successful completion and operation of Labyrinth's primary product in a major
market. 40% of the shares shall vest when the Company achieves cumulative sales
of $15million.
In addition to the above vesting schedule, the shares issued to 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, whereby the
shares underlying (i)-(iii) above vest at the rate of 1/3 each year, commencing
with each individuals employment.
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 September 30, 1998,
829,252 shares of the Company's Common Stock have vested as defined by the
Exchange Offer, and have been issued to former Labyrinth stockholders. The
remaining 3,668,948 shares of the Company's Common Stock provided for in the
exchange have not yet vested and are currently held in escrow pending vesting.
Shares of the Company's Common Stock that do not vest shall be cancelled and
returned to the Company's treasury as unissued Common Stock.
<PAGE>
U.S. WIRELESS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3- EQUIPMENT, IMPROVEMENTS AND FIXTURES:
Equipment, improvements and fixtures, net at September 30, 1998 and March 31,
1998 consisted of the following:
Sept 30, March 31,
1998 1998
Furniture, fixtures and equipment $906,550 $649,544
Less: accumulated depreciation and amortization (374,648) (249,648)
--------- ---------
$531,902 $399,896
NOTE 4- STOCK OPTIONS:
During the year ended March 31, 1998, 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 grant and have exercise prices ranging from $2 to
$4.25 per share. On September 30, 1998, there were options to purchase up to an
aggregate of approximately 5,130,000 shares of Common Stock granted to executive
officers, directors, 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 six month
periods ended September 30, 1998 and 1997, $258,240 of unearned compensation was
amortized to expense. The remaining unamortized balance of unearned compensation
at September 30, 1998 was $503,198 as reflected in the accompanying balance
sheet.
NOTE 5- PREFERRED STOCK:
The Company has authorized the issuance of 1,000,000 shares of Preferred Stock
of which 400,000 have been designated as Series A Preferred Stock. As of
September 30, 1998 70,000 shares of Series A Preferred Stock have been issued
and are currently outstanding. See Notes 7 and 8. The balance of the authorized
shares of Preferred Stock are subject to designation of their rights and
preferences to be determined by the Company's Board of Directors. The Series A
Preferred shares have a cumulative dividend of 6% per annum, payable in cash or
shares of Series A Preferred Stock, at the option of the Company. The shares are
convertible into shares of the Company's Common Stock, commencing 90 days from
issuance at a conversion rate of $2.95 per share. Each share of Series A
Preferred Stock has a liquidation preference of $20.00 per share, plus accrued
and unpaid dividends.
The Series A Preferred Stock is redeemable by the Company at any time, at a
redemption price of $20.00 per share, upon the earlier of (i) three years from
issuance and (ii) upon the closing price for the Common Stock being $8.00 for
any consecutive 30 day period ending on the date that the Company gives notice
of redemption to the holders. The Company shall give the holders, 20 days' prior
notice, during which time the shares of Series A Preferred Stock shall be
convertible into shares of Common Stock
<PAGE>
U.S. WIRELESS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6- 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 due to the year 2000 issue. 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 entity's failure to ensure year 2000 capability would not
have an adverse effect on the Company.
NOTE 7- PRIVATE PLACEMENT:
In June 1998 the Company consummated a private equity financing, aggregating in
excess of $5 million through Gerard Klauer Mattison & Co., Inc., New York, New
York, as its placement agent. The Company sold shares of its Series A Preferred
Stock and shares of Common Stock. The placement agent received a commission of
$150,000 and options to purchase 220,000 shares of Common Stock, one-half at an
exercise price of $4.00 per share and the balance at $5.00 per share.
NOTE 8- JOINT VENTURE AGREEMENT:
On July 31, 1998 the Company entered into a joint venture agreement with
Anam Instruments, Inc. a Korean corporation, ("ANAM") whereby the Company and
ANAM formed Wireless Technology, Inc. ("WTI"), a corporation duly organized and
having offices in the Republic of Korea. WTI was formed as a joint venture for
the purposes of developing a Code Division Multiple Access "CDMA" interface for
the RadioCamera, manufacturing and producing the RadioCamera and marketing and
distribution the RadioCamera in Korea and potentially other Asian countries.
The joint venture establishes a two phase initial funding for operations
totaling $3,500,000, with the initial phase having been completed to date and
the balance of the project's funding scheduled for the fourth quarter of this
year. The Company received an investment of $400,000 from ANAM, for 20,000
shares of Series A Preferred Stock. The proceeds of the investment were used by
the Company as a capital investment in WTI. In addition, ANAM invested $800,000
directly into WTI.
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
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 six months ended September 30, 1998 has been adjusted to
eliminate the minority interest, which is not provided within the comparison
information for the six months ended September 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.
Statements contain herein which are not historical facts may be considered
forward looking information with respect to plans, projections or future
performance of the Company as defined under the Private Securities Litigation
Reform Act of 1995. These forward looking statements are subject to risk and
uncertainties which could cause actual results to differ materially from those
projected.
Results Of Operations:
Three months ended September 30, 1998 compared to the three months ended
September 30, 1997:
During the three months ended September 30, 1998 and the three months ended
September 30, 1997, the Company recorded no revenues from operations, as the
Company's products are still under development.
The Company did report consolidated operating expenses of $1,227,465 during the
three months ended September 30, 1998 as compared to $911,843 for the three
months ended September 30, 1997. The increase is related additional costs
incurred relative to both the continuance of operations as well as continued
research, product development and refinement and field testing operations.
During this period, the Company commenced the deployment of the RadioCamera in
accordance with its Beta testing and evaluation agreement with Bell Atlantic
Mobile in Baltimore, Maryland and expanded its operations in Billings, Montana
with Western Wireless. In addition, the Company commence its development of CDMA
and Time Division Multiple Access "TDMA" interfaces for the RadioCamera.
Six months ended September 30, 1998 compared to the six months ended September
30, 1997:
During the six months ended September 30, 1998 and the six months ended
September 30, 1997, the Company recorded no revenues from operations, as the
Company's products are still under development.
The Company did report consolidated operating expenses of $2,346,070 during the
six months ended September 30, 1998 as compared to $1,655,724 for the six months
ended September 30, 1997. The increase is related additional costs incurred
relative to both the continuance of operations as well as continued research,
product development and refinement and field testing operations. During this
period, the Company commenced the deployment of the RadioCamera in accordance
with its Beta testing and evaluation agreement with Bell Atlantic Mobile in
Baltimore, Maryland and expanded its operations in Billings, Montana with
Western Wireless. In addition, the Company commenced its development of CDMA and
TDMA interfaces for the RadioCamera.
Research and Development-Future Operations
The Company continues to increase its research, development and field testing
and trial 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 set up an end to end fully operational live E9-1-1
demonstration in Billings, Montana, which linked the RadioCamera system within
the Western Wireless network to a Billings, Montana public safety access point.
In addition, during the quarter the Company entered into testing and evaluation
agreements for beta trials with GTE Mobile and Nextel Communications, Inc.
The Company has accelerated its development of CDMA and TDMA interfaces for the
RadioCamera and wireless caller location system. Regarding the CDMA interface,
during the quarter, the Company obtained a development license from Qualcomm
Incorporated for the CDMA development. Under this 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 party's
technology, subject to terms and conditions to be negotiated by the parties.
In July 1998 the Company entered into a joint venture agreement with Anam
Instruments, Inc. a Korean corporation, ("ANAM") whereby the Company and ANAM
have formed Wireless Technology, Inc. ("WTI"), a corporation duly organized and
having offices in the Republic of Korea. The joint venture establishes a two
phase initial funding for operations totaling $3,500,000, with the initial phase
having been completed to date and the balance of the project's funding scheduled
for the fourth quarter of this year. The Company received an investment of
$400,000 from ANAM, for 20,000 shares of Series A Preferred Stock. The proceeds
of the investment were used by the Company as a capital investment in WTI. In
addition, ANAM invested $800,000 directly into WTI.
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 $4,000,000.
Liquidity and Capital Resources
At September 30, 1998, the Company reported working capital of $5,367,825. The
Company had $5,580,753 in business checking and money market accounts. The
Company believes that its available cash as of September 30, 1998 will be
sufficient to fund its operating needs for the next 12 - 18 months. In June
1998, the Company consummated a private equity financing, aggregating $5.13
million of which a commission of $150,000 was paid to the placement agent.
In July 1998, the Company entered into a joint venture with ANAM. The joint
venture establishes a two phase initial funding for operations totaling
$3,500,000, with the initial phase of $1.2 million having been completed to date
and the balance of the project's funding scheduled for the fourth quarter of
this year.
In September 1998, the Company's subsidiary, Mantra, entered into a licensing
agreement with LookSmart Ltd. Mantra, using its Context Synthesistm technology,
developed a strategic application for LookSmart and its partners to enhance the
quality of text searches into LookSmart's web directories.
Trends Affecting Liquidity, Capital Resources and Operations:
As the nature of the Company's operations are currently development stage
operations, management is currently not aware of any trends that may affect its
liquidity, capital, resources and operations, other than the lack of additional
funding when necessary for operations and delays in the commercialization of the
Company's product in the marketplace. The Company's future operations 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 expenses of its 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 anticipates requiring
additional financing in the future. 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 marketing expenses,
are expected to be financed with funds raised through the Company's offerings of
its securities. There can be no assurances that additional funding will be
available to the Company when needed or if available on terms acceptable to the
Company.
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
entity's failure to ensure year 2000 capability would not have an adverse effect
on the Company.
<PAGE>
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:
Private Placement
In June 1998 the Company consummated a private equity
financing, aggregating in excess of $5 million through Gerard Klauer
Mattison & Co., Inc., New York, New York, as its placement agent. The
Company offered shares of a series of preferred stock, the Series A
Preferred Stock and shares of Common Stock. The placement agent
received a commission of $150,000 and options to purchase 220,000
shares of Common Stock, one-half at $4.00 per share and the balance at
$5.00 per share. The securities sold in this offering are a part of the
securities registered for resale in this offering. The proceeds of the
offering are being used to (i) commence the Bell Atlantic field trials
in Baltimore, Maryland (ii) commence the development of interfaces for
the RadioCamera for the CDMA and TDMA digital standards and (iii) for
general working capital.
Joint Venture with Anam Instruments, Inc.
The Company entered into a Joint Venture Agreement with Anam Instruments,
Inc. ("ANAM") and has consummated the formation of Wireless Technology, Inc.
("WTI") a Korean corporation, as a jointly owned company. The agreement provides
the Company with an Asian partner for the manufacture, marketing and
distribution of the RadioCameraTM and location based services in Asia. The joint
venture establishes a two phase initial funding for operations totaling
$3,500,000, with the initial phase having been completed to date and the balance
of the project's funding scheduled for the fourth quarter of this year.
Since August 1998, U.S. Wireless has been developing a Code Division
Multiple Access (CDMA) version of the Company's RadioCamera wireless
caller-location system. In addition to funding, ANAM provides WTI with
technical, manufacturing and marketing expertise. The Company and WTI plan to
commence outdoor field trials of the CDMA RadioCamera during the first quarter
of calendar 1999.
Item 6. Exhibits and Reports on Form 8-K: None
<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)
November 6, 1998 By: \s\ Dr. Oliver Hilsenrath
Date Dr. Oliver Hilsenrath
Chief Executive Office
