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 June 30, 1999
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) 327-6200
(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, 14,110,613 shares outstanding as of June 30, 1999.
<PAGE>
U.S. WIRELESS CORPORATION AND SUBSIDIARY
CONTENTS
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Page
Number
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Consolidated balance sheets as of June 30, 1999 (unaudited)
and March 31, 1999 3
Consolidated statements of operations (unaudited) for the three months
ended June 30, 1999 and June 30, 1998 4
Consolidated statements of cash flows (unaudited) for the three months
ended June 30, 1999 and June 30, 1998 5
Notes to financial statements 6-8
ITEM 2 - MANANGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9-10
PART II - OTHER INFORMATION 10
ITEM 2 - Changes in Securities and Use of Proceeds. 10
ITEM 4. Submission of Matters to a Vote of Security Holders. 11
ITEM 6. Exhibits and Reports on Form 8-K. 11
Signature 12
</TABLE>
<PAGE>
U.S. WIRELESS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
As of June 30, 1999 and March 31, 1999
<TABLE>
<CAPTION>
June 30, March 31,
1999 1999
(Unaudited) (Note 1)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents ................................................. $ 8,104,738 $ 5,788,288
Funds held in escrow ...................................................... 200,000 --
Stock subscription ........................................................ -- 2,300,000
Other receivables (Note 3) ................................................ 120,675 --
Investment in joint venture ............................................... 58,630 58,630
Investment in affiliate ................................................... 146,125 --
Other current assets ...................................................... -- 2,323
Total Current Assets ...................................................... 8,630,168 8,149,241
EQUIPMENT, IMPROVEMENTS AND FIXTURES, net of accumulated
depreciation and amortization (Note 4) ................................. 353,068 381,617
OTHER ASSETS
Security deposits ....................................................... 25,035 25,035
Total other assets .............................................. 25,035 25,035
Total assets .................................................... $ 9,008,271 $ 8,555,893
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses ..................................... $ 304,561 $ 335,543
Obligations under capital leases, current ................................. 34,486 34,486
Total current liabilities ....................................... 339,047 370,029
Obligations under capital leases, noncurrent .............................. 4,632 4,632
Total liabilities ............................................... 343,679 374,661
MINORITY INTEREST IN SUBSIDIARY ........................................... -- 76,434
STOCKHOLDERS' EQUITY: Series A preferred stock convertible,
$.01 par value, 300,000 shares authorized; 70,000 shares issued
and outstanding at June 30, 1999 and March 31, 1999 ....................... 700 700
Series B preferred stock, $.01 par value, 60,000 and 50,000
shares authorized and issued and outstanding respectively at June
30, 1999 and March 31, 1999 ............................................... 600 500
Common stock, $.01 par value, 40,000,000 shares
authorized; issued and outstanding at June 30, 1999
14,110,613 shares and at March 31, 1999, 13,556,188 shares
141,107 135,563
Additional paid-in capital ................................................ 33,608,798 32,504,598
Common stock subscribed ................................................... 200,000 --
Unearned compensation ..................................................... (115,838) (244,958)
ACCUMULATED DEFICIT ....................................................... (25,170,775) (24,291,605)
TOTAL STOCKHOLDERS' EQUITY ...................................... 8,664,592 8,104,798
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...................... $ 9,008,271 $ 8,555,893
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements
<PAGE>
U.S. WIRELESS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30, June 30,
1999 1998
<S> <C> <C>
Net sales ....................... $ -- $
Costs and expenses:
Operating expenses ........... 1,404,858 1,118,604
Loss before other income and
minority interest in net loss
of continuing subsidiaries (1,404,858) (1,118,604)
Other income:
Interest income .............. 117,126 34,405
Loss before minority interest
in net loss of Subsidiary ....... $ (1,287,732) (1,084,199)
Minority interest in net
income (loss) of subsidiaries ... -- 25,237
Net loss ........................ $ (1,287,732) $ (1,058,962)
============= =============
Basic and diluted loss per
common equivalent share:
Loss before minority interest
in net loss of Subsidiaries $ (.10) $ (.09)
Minority interest in net loss
of subsidiaries ............ -- --
Basic and diluted net loss ...... $ (.10) $ (.09)
============= =============
Weighted average number of common
shares outstanding ........... 14,010,966 12,401,063
============= ============
</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>
Three Months Ended
June 30, June 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss ................................................................. $(1,287,732) $(1,058,962)
Adjustments to reconcile net loss to cash (used) for operating activities:
Depreciation and Amortization ......................................... 45,500 60,000
Minority interest in net losses of subsidiaries ....................... -- (25,237)
Amortization of unearned compensation ................................. 129,120 129,120
Increase (Decrease) from changes in assets and liabilities:
Increase in other receivables ......................................... (120,675) --
Accounts payable and accrued expenses ................................. (16,418) (37,391)
Net cash (used) for operating activities ....................... (1,250,205) (932,470)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment, improvements and fixtures ................... (16,950) (121,450)
Net cash used for investing activities ......................... (16,950) (121,450)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligations ................................. -- (6,309)
Receipt of stock subscription ......................................... 2,300,000 --
Proceeds from issuance of preferred stock ............................. 1,000,000 4,989,312
Proceeds from issuance of common shares ............................... 283,605 25,359
Net cash (used) for financing activities ................................. 3,583,605 5,008,362
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ..................... 2,316,450 3,954,442
Cash, beginning of period ................................................ 5,788,288 2,285,750
Cash, end of period ...................................................... $ 8,104,738 $ 6,240,192
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid ......................................................... -- --
Taxes paid ............................................................ -- 1,248
</TABLE>
See accompanying notes to consolidated condensed financial statements
<PAGE>
U.S. WIRELESS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for the interim financial information
and the instructions to Form 10-QSB. Accordingly, they do not
include all the information and footnotes required by
generally accepted accounting principles for complete
financial statements. In the opinion of management, the
interim financial statements include all adjustments
considered necessary for a fair presentation of the Company's
financial position, results of operations and cash flows for
the three months ended June 30, 1999. 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, 1999 as filed with the Securities
and Exchange Commission.
NOTE 2 - ORGANIZATION:
Consolidation of Labyrinth Communication Technologies
Group, Inc.
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 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 a vesting schedule.
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.
Principles of Consolidation
The consolidated financial statements for the year
ended June 30, 1999 include the accounts of the Company. The
consolidated financial statements for the year ended March
31, 1999 include the accounts of the Company and Mantra. All
significant intercompany balances and transactions have been
eliminated in consolidation.
NOTE 3 - OTHER RECEIVABLES:
During the quarter ended June 30, 1999 the Company
issued 405,000 shares of its common stock to its officers,
directors and employees in accordance with its private
placement. Payment of these shares were made to the Company
through direct payments and payroll deductions. The amount
due the Company for this issuance was $120,675 at June 30,
1999.
<PAGE>
U.S. WIRELESS CORPORATION AND SUBSIDARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - EQUIPMENT, IMPROVEMENTS AND FIXTURES:
Equipment, improvements and fixtures, net at June 30, 1999 and March 31,
1999 consisted of the following :
<TABLE>
<CAPTION>
June 30, March 31,
1999 1999
<S> <C> <C>
Furniture, fixtures and equipment $ 834,773 $ 817,822
Less: accumulated depreciation and amortization (481,705) (436,205)
$ 353,068 $ 381,617
============== ===============
</TABLE>
NOTE 5 - STOCK OPTIONS:
As of June 30, 1999 the Company has granted options to
purchase shares of Common Stock to officers, directors,
employees and consultants. The options granted to officers,
directors and employees for the most part vest over three
years, expire five years from the date of the grant and have
exercise prices ranging from $2 to $5 per share. Options
granted to consultants have varied vesting provisions,
including deliverables and time. Some do not have any vesting
provisions. As of June 30, 1999, there were options to
purchase up to an aggregate of approximately 5,000,000 shares
of Common Stock granted to executive officers, directors,
employees and consultants, subject to various vesting
schedules of which the right to purchase 3,900,000 shares were
vested and exercisable. Options to purchase 203,000 shares
have been exercised as of June 30, 1999.
The value of the options granted was established by the
difference between the exercise price and the fair market
value of the options issued on the dates of grant, were
accounted for as unearned compensation and amortized and
expensed over the related vesting periods. During each of the
three month periods ended June 30, 1999 and 1998, $129,120 of
unearned compensation was amortized to expense. The remaining
unamortized balance of unearned compensation at June 30, 1999
was $115,838 as reflected in the accompanying balance sheet.
NOTE 6 - PRIVATE PLACEMENT
In March 1999, the Company commenced an undertaking to raise
additional capital in a private placement offering of its
securities. In April 1999, the Company received stockholders
approval for the offering. As of June 30, 1999 the Company
raised proceeds of $6,405,000 through the sale of 60,000
shares of the Company's newly created Series B Preferred Stock
to certain investors and 405,000 shares of Common Stock to the
Company's officers, directors and employees. In July the
Company consummated a placement of an additional $500,000
through the sales of shares of Common Stock.
<PAGE>
U.S. WIRELESS CORPORATION AND SUBSIDARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - YEAR 2000 COMPUTER ISSUE:
The Company does not believe that the impact of the year 2000
computer issued will have a significant impact on its
operations of 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.
NOTE 8 - SUBSEQUENT EVENTS:
In July 1999, the Company formed U.S. Wireless International,
Inc.("USWI"), a foreign corporation to develop and operate its
overseas operations. Upon the formation of USWI, the Company
transferred its ownership interest in the joint venture
company, Wireless Technologies, Inc. ("WTI") formed with Anam
Instruments, Inc. On July 19, 1999, the joint venture
consummated a $5 million investment from HanKang Restructuring
Fund, a Korean government-sponsored fund managed by Scudder
Kemper Investments. The WTI investment will be used to
complete the development and speed the U.S. deployment of
RadioCamera(TM), the Company's wireless caller location
system. WTI is a joint venture between U.S. Wireless and Anam
Instruments, Inc.
On July 19, 1999 the Company sold an additional 149,254
shares of Common Stock for net proceeds of $500,000 in
accordance with its private placement.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
Statements contained 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.
Capital Resources
At June 30, 1999, the Company reported working capital of $8,291,121. The
Company had $8,104,738 in cash and cash equivalents. Such amounts resulted
primarily from sales of the Company's securities in its 1999 private placement
offering in which the Company raised an aggregate of $6,405,000. During the
three months ended June 30, 1999, the Company earned no revenues from
operations.
Although the Company incurred a net loss of $1,287,732 during the quarter
ended June 30, 1999, such amount includes $45,500 of depreciation expense. As
result of the above, the Company experienced a net increase in cash of
approximately $2,316,450 during the quarter ended June 30, 1999.
Based on management's estimates, the Company's capital resources are
expected to meet cash requirements through at least March 31, 2000 for the
continuation of the Company's research, development and field trial operations.
The Company will require additional capital in order to implement its business
strategy of rolling out a nationwide network of the RadioCamera system. The
Company is assessing and evaluating the timing and resource requirements
necessary to implement this plan. Additionally, the Company continues the
development of an internet services platform that will interface with the
nationwide location "caches" enabling the Company and other vendors to build and
offer applications based on location sensitive applications.
The Company is presently engaged in the testing of its AMPS, TDMA CDMA and
iDEN RadioCamera systems. Further, the Company is conducting field trials in
several major cities for its RadioCamera System and the Company is scheduled to
build additional field trial operations during the balance of this year. In
addition, the Company is developing an internet services platform that would
allow potential customers to visually monitor, locate and track a group of
subscribers.
Notwithstanding the Company's strategy of building a nationwide network,
which will require financing, management does not expect that the Company will
be required to purchase significant equipment or expect significant changes in
the number of Company employees during the next twelve months. In the event the
Company undertakes the deployment of a nationwide network, it will require a
significant number of new employees as well as consulting, manufacturing, and
other services.
If the Company's timetable for developing, marketing, and manufacturing the
RadioCamera exceeds current estimates, the Company may require additional
capital resources. The primary continuing expenses associated with the testing
and development of the RadioCamera are expected to include officer, key employee
and consultant salaries.
<PAGE>
Year 2000
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 an 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.
PART II. Other Information
ITEM 1. Legal Proceeding: None
ITEM 2. Changes in Securities and Use of Proceeds:
1999 Private Placement
In March 1999, the Company commenced an undertaking to raise additional
capital in a private placement offering of its securities. In April 1999, the
Company received stockholders approval for the offering. As of June 30, 1999 the
Company raised proceeds of $6,405,000 through the sale of 60,000 shares of the
Company's newly created Series B Preferred Stock and 405,000 shares of Common
Stock to the Company's Employees. In July the Company consummated a placement of
an additional $500,000 through the sales of shares of Common Stock. The proceeds
of the offering are being used for general working capital purposes.
Holders of the Series B Preferred Stock have the right to convert each
share into 100 shares of the Company's Common Stock, at any time, commencing 90
days from issuance. However, if conversion is elected within 12 months of
issuance, each share of Series B Preferred Stock is convertible into only 67
shares of Common Stock. Additionally, there is a mandatory conversion provision,
commencing 12 months from issuance if the closing price for a share of Common
Stock has been $5.00 or more for 30 consecutive trading days. Holders of the
Series B Preferred Stock have the right, as a separate voting group, to elect
one member to the Company's Board of Directors until such time as one of the
following events occurs: (i) when 50% of the shares of Series B Preferred Stock
have been voluntarily converted into Common Stock or (ii) if a mandatory
conversion of the shares of Series B Preferred Stock occurs, an aggregate of 50%
of the total number of shares of Common Stock issued upon conversion, whether
voluntary or mandatory, have been resold. The holders of Series B Preferred
Stock also have the right to vote on (i) the issuance of any stock that ranks
senior to or on parity with the Series B Preferred Stock and (ii) any change in
terms of the Series B Preferred Stock. The Series B Preferred Stock has a
liquidation preference of $100 per share.
The Company to filed a registration statement to register the shares of
Common Stock underlying the Series B Preferred Stock in June 1999, however, in
July 1999, the holders of the Series B Preferred Stock agreed to waive their
current right to register the shares of Common Stock underlying the Series B
Preferred Stock in exchange for a future demand registration right.
<PAGE>
In July 1999, the Company raised gross proceeds of $500,000 through the
sale of 149,254 shares of the Company's Common Stock. The proceeds of the
offering will be used for general working capital.
Deregistration of Forms S-3Registration Statements
The Company filed Registration Statements on Form S-3 dated September 26,
1997 and October 29, 1998 with respect to the resale of shares of Common Stock
sold or convertible or execisable into shares of Common Stock, sold in the
Company's prior private placement offerings. In an amendment to the Registration
Statements filed with the Securities and Exchange Commission on August 3, 1999,
the Company requested the deregisteration of the resale of the remaining shares
of Common Stock registered for resale but no previously sold pursuant to said
registrations.
ITEM 3. Defaults Upon Senior Securities: None
ITEM 4. Submission of Matters to a Vote of Security Holders:
April 5, 1999 Special Meeting
On April 5, 1999, the Company held a special meeting of its stockholders,
during which the stockholders approved the proposal authorizing the Company to
issue up to an aggregate of 10 million shares of the Company's Common Stock,
through either the sale of shares of Common Stock or shares of Preferred Stock,
which shares are convertible into shares of Common Stock at a fixed price.
The voting tabulations regarding the proposal were as follows:
<TABLE>
<CAPTION>
Votes Cast Votes Cast
For Against Abstain
<S> <C> <C> <C>
7,223,371 3,315,005 8,200
</TABLE>
ITEM 5. Other Information: None
ITEM 6. Exhibits and Reports on Form 8-K:
<PAGE>
Exhibit 27.01 - Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S. Wireless Corporation
(Registrant)
August 9 , 1999 By: \s\ Dr. Oliver Hilsenrath
- ---------------- -------------------------
Date Dr. Oliver Hilsenrath
Chief Executive Officer
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<ARTICLE> 5
<LEGEND>
EXHIBIT 27.01
FINANCIAL DATA SCHEDULE
ARTICLE 5 OF REGULATION S-X
This schedule contains summary financial information extracted from the
financial statements for the three months ended June 30, 1999 and is qualified
in its entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> mar-31-2000
<PERIOD-END> jun-30-1999
<CASH> 8,101,738
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,630,168
<PP&E> 834,773
<DEPRECIATION> (481,705)
<TOTAL-ASSETS> 9,008,271
<CURRENT-LIABILITIES> 339,047
<BONDS> 0
0
1,300
<COMMON> 141,107
<OTHER-SE> 8,522,185
<TOTAL-LIABILITY-AND-EQUITY> 9,008,271
<SALES> 0
<TOTAL-REVENUES> 117,126
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,404,858
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,829,372)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,287,732)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,287,732)
<EPS-BASIC> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
