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, 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)
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DELAWARE 13-3704059
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
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2303 CAMINO RAMON, SUITE 200, SAN RAMON, CALIFORNIA 94583
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(925) 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, 14,175,481 SHARES OUTSTANDING AS OF SEPTEMBER 30, 1999.
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U.S. WIRELESS CORPORATION AND SUBSIDIARY
CONTENTS
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PAGE
NUMBER
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
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Consolidated balance sheets as of September 30, 1999 (unaudited)
and March 31, 1999 2
Consolidated statements of operations (unaudited) for the three and six months
ended September 30, 1999 and September 30, 1998 3
Consolidated statements of cash flows (unaudited) for the six months
ended September 30, 1999 and September 30, 1998 4
Notes to financial statements 5-7
ITEM II - MANANGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8-9
PART II - OTHER INFORMATION 10
SIGNATURE 11
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U.S. WIRELESS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
As of September 30, 1999 and March 31, 1999
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SEPT. 30, March 31,
1999 1999
(UNAUDITED) (NOTE 1)
ASSETS
CURRENT ASSETS:
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CASH AND CASH EQUIVALENTS ...................................................... $ 8,200,125 $ 5,788,288
STOCK SUBSCRIPTION ............................................................. -- 2,300,000
DUE FROM AFFILIATE ............................................................. 101,419 --
INVESTMENT IN JOINT VENTURE .................................................... 58,630 58,630
INVESTMENT IN AFFILIATE ........................................................ 146,125 --
OTHER CURRENT ASSETS ........................................................... 2,323 --
TOTAL CURRENT ASSETS ........................................................... 8,506,299 8,149,241
EQUIPMENT, IMPROVEMENTS AND FIXTURES, NET OF ACCUMULATED
DEPRECIATION AND AMORTIZATION (NOTE 3) ...................................... 368,754 381,617
OTHER ASSETS
SECURITY DEPOSITS ............................................................ 25,035 25,035
TOTAL OTHER ASSETS ................................................... 25,035 25,035
TOTAL ASSETS ......................................................... $ 8,900,088 $ 8,555,893
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE AND ACCRUED EXPENSES .......................................... $ 343,987 $ 335,543
OBLIGATIONS UNDER CAPITAL LEASES, CURRENT ...................................... 28,177 34,486
TOTAL CURRENT LIABILITIES ............................................ 372,164 370,029
OBLIGATIONS UNDER CAPITAL LEASES, NONCURRENT ................................... 4,632 4,632
TOTAL LIABILITIES .................................................... 376,796 374,661
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 September 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 September 30, 1999 and
March 31, 1999 ................................................................. 600 500
Common stock, $.01 par value, 40,000,000 shares authorized; issued and
outstanding at September 30, 1999 14,175,481 shares and at March 31, 1999
13,556,188 shares .............................................................. 141,756 135,563
ADDITIONAL PAID-IN CAPITAL ..................................................... 34,296,854 32,504,598
UNEARNED COMPENSATION .......................................................... -- (244,958)
ACCUMULATED DEFICIT ............................................................ (25,916,618) (24,291,605)
TOTAL STOCKHOLDERS' EQUITY ........................................... 8,523,292 8,104,798
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........................... $ 8,900,088 $ 8,555,893
============ ============
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SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
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U.S. WIRELESS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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Six Months Ended Three Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1999 1998 1999 1998
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NET SALES ................................................... $ -- $ -- $ -- $ --
COSTS AND EXPENSES:
Operating expenses ....................................... 2,346,306 2,346,069 941,448 1,227,456
LOSS BEFORE OTHER INCOME AND MINORITY INTEREST IN NET
LOSS OF CONTINUING SUBSIDIARIES ............................ (2,346,306) (2,346,069) (941,448) (1,227,465)
OTHER INCOME:
Interest income ............................................. 244,977 167,857 127,851 133,452
LOSS BEFORE MINORITY INTEREST IN NET LOSS OF
SUBSIDIARIES ........................................... (2,101,329) (2,178,212) (813,597) (1,094,013)
MINORITY INTEREST IN NET INCOME (LOSS) OF SUBSIDIARIES ...... -- 24,856 -- (381)
NET LOSS .................................................... $ (2,101,329) $ (2,153,356) $ (813,597) $ (1,094,394)
============ ============ ============ ==========
BASIC AND DILUTED LOSS PER COMMON EQUIVALENT SHARE:
Loss before minority interest in net loss of subsidiaries $ (.15) $ (.17) $ (.06) $ (.08)
Minority interest in net loss of subsidiaries ............ -- -- -- --
BASIC AND DILUTED NET LOSS .................................. $ (.15) $ (.17) $ (.06) $ (.08)
============ ============ ============ ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING ....... 14,079,945 12,978,682 14,188,731 13,556,301
============ ============ ============ ==========
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SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
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U.S. WIRELESS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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Increase (Decrease) in Cash
SIX MONTHS ENDED
SEPT. 30, Sept. 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
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NET LOSS ................................................................. $(2,101,329) $(2,153,356)
ADJUSTMENTS TO RECONCILE NET LOSS TO CASH (USED) FOR OPERATING ACTIVITIES:
DEPRECIATION .......................................................... 91,000 125,000
MINORITY INTEREST IN NET LOSSES OF SUBSIDIARIES ....................... -- (24,856)
AMORTIZATION OF UNEARNED COMPENSATION ................................. 244,958 258,240
INCREASE (DECREASE) FROM CHANGES IN ASSETS AND LIABILITIES:
(INCREASE) IN INVENTORY ................................................ -- (29,285)
DECREASE IN OTHER CURRENT ASSETS ....................................... 2,323 --
(INCREASE) IN DUE FROM AFFILIATE ....................................... (101,419) --
ACCOUNTS PAYABLE AND ACCRUED EXPENSES .................................. 19,785 (25,787)
DECREASE IN MINORITY INTEREST .......................................... 76,434 --
NET CASH (USED) FOR OPERATING ACTIVITIES ....................... (1,768,248) (1,850,044)
CASH FLOWS FROM INVESTING ACTIVITIES:
ACQUISITION OF EQUIPMENT, IMPROVEMENTS AND FIXTURES ................... (61,186) (257,006)
NET CASH PROVIDED BY INVESTING ACTIVITIES ...................... (61,186) (257,006)
CASH FLOWS FROM FINANCING ACTIVITIES:
PAYMENTS ON CAPITAL LEASE OBLIGATIONS ................................. (6,309) (12,618)
RECEIPT OF STOCK SUBSCRIPTION ......................................... 2,300,000 --
PROCEEDS FROM ISSUANCE OF PREFERRED STOCK ............................. 1,000,000 5,389,312
NET PROCEEDS FROM ISSUANCE OF COMMON SHARES ........................... 1,093,705 25,359
(INCREASE) IN INVESTMENT IN AFFILIATE .................................. (146,125) --
NET CASH PROVIDED BY FINANCING ACTIVITIES ................................ 4,241,271 5,402,053
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ..................... 2,411,837 3,295,003
CASH, BEGINNING OF PERIOD ................................................ 5,788,288 2,285,750
CASH, END OF PERIOD ...................................................... $ 8,200,125 $ 5,580,753
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
INTEREST PAID ......................................................... -- --
TAXES PAID ............................................................ -- 1,248
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SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
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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 six months
ended September 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 January 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 six months ended
September 30, 1999 include the accounts of the Company as well as the Company's
wholly owned subsidiary US Wireless International, Inc. (USWI). 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.
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. to USWI. 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.
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U.S. WIRELESS CORPORATION AND SUBSIDARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - EQUIPMENT, IMPROVEMENTS AND FIXTURES:
Equipment, improvements and fixtures, net at September 30,
1999 and March 31, 1999 consisted of the following:
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SEPT. 30, March 31,
1999 1999
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FURNITURE, FIXTURES AND EQUIPMENT $ 895,959 $ 817,822
LESS: ACCUMULATED DEPRECIATION AND AMORTIZATION (527,205) (436,205)
$ 368,754 $ 381,617
============== ===============
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NOTE 4 - STOCK OPTIONS:
As of September 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 September 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 September 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 September 30, 1999 and 1998, $115,538 and $129,120 of
unearned compensation were amortized to expense respectively. For the six months
ended September 30, 1999, $244,958 of unearned compensation was amortized to
expense. The balance of unearned compensation at September 30, 1999 was reduced
to zero as reflected in the accompanying balance sheet.
NOTE 5 - 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
September 30, 1999 the Company raised proceeds of $6,905,000 through the sale of
60,000 shares of the Company's newly created Series B Preferred Stock and an
aggregate of 554,254 shares of Common Stock to certain investors, of which
405,000 shares were sold to the Company's officers, directors and employees.
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U.S. WIRELESS CORPORATION AND SUBSIDARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - 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.
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U.S. WIRELESS CORPORATION AND SUBSIDIARY
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.
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1998:
Consolidated operating expenses were $941,448 for the three months ended
September 30, 1999, compared to $1,227,465 for the three months ended September
30, 1998. Decreased operating expenses were primarily attributable to better
cost control by the Company and the costs of the development of the CDMA
RadioCamera being primarily borne by, WTI, the Company's international joint
venture.
SIX MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE SIX MONTHS ENDED SEPTEMBER
30, 1998:
Consolidated operating expenses were $2,346,306 during the six months ended
September 30, 1999, compared to $2,346,069 for the six months ended September
30, 1998. Operating expenses on a year to date basis were not significantly
different from the comparative period.
CAPITAL RESOURCES
At September 30, 1999, the Company reported working capital of $8,134,135. The
Company had $8,200,125 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 $6,905,000. During the
three months ended September 30, 1999, the Company earned no revenues from
operations.
Although the Company incurred a net loss of $2,101,329 during the six
months ended September 30, 1999, such amount includes $91,000 of depreciation
expense. As result of the above, the Company experienced a net increase in cash
of approximately $2,411,837 during the six months ended September 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.
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U.S. WIRELESS CORPORATION AND SUBSIDIARY
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
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.
The Company's strategy is to build a nationwide network, which will require
additional financing, capital expenditures, management and employees. The
Company expects that it will be required to purchase significant equipment and
have a significant increase in the number of Company employees during the next
twelve months.
If the Company's timetable for the continued develop, marketing, and building of
the Company's proposed nationwide location network exceeds current estimates,
the Company may require additional capital resources. The primary continuing
expenses associated with the testing and development of the RadioCamera and
Location Fingerprinting systems are expected to include officer, employee and
consultant salaries, the costs associated with manufacturing prototypes and the
costs of the Company's field operations.
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.
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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 1999, the Company consummated a placement of an
additional $500,000 through the sales of 149,254 shares of Common Stock,
increasing the offering proceeds to $6,905,000. The proceeds of the offering are
being used for general working capital purposes.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES: NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: NONE
ITEM 5. OTHER INFORMATION:
On October 20, 1999, the Company entered into an agreement with Lehman Brothers,
Inc., in which Lehman Brothers became the Company's investment banker. Under the
terms of the agreement, Lehman Brothers agreed to act as the Company's placement
agent to assist the company in financing the planned build-out of its nationwide
wireless location network, scheduled to commence early next year.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
Exhibit 27.01 - Financial Data Schedule
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S. Wireless Corporation
(Registrant)
NOVEMBER 10, 1999 BY: \S\ DR. OLIVER HILSENRATH
- ------------------ -------------------------
Date Dr. Oliver Hilsenrath
Chief Executive Office
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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 September 30, 1999 and is
qualified in its entirety by reference to such statements.
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<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> mar-31-2000
<PERIOD-END> sep-30-1999
<CASH> 8,200,125
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,200,125
<PP&E> 895,959
<DEPRECIATION> (527,205)
<TOTAL-ASSETS> 8,900,088
<CURRENT-LIABILITIES> 372,164
<BONDS> 0
0
0
<COMMON> 141,756
<OTHER-SE> 8,380,236
<TOTAL-LIABILITY-AND-EQUITY> 8,900,088
<SALES> 0
<TOTAL-REVENUES> 244,977
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,346,306
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,101,329)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,101,329)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,101,329)
<EPS-BASIC> (.15)
<EPS-DILUTED> (.15)
</TABLE>
