SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 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 O-24742
U.S. Wireless Corporation
(Exact name of Company as specified in its charter)
Delaware 13-3704059
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
2303 Camino Ramon, Suite 200, San Ramon, California 94583
(Address of principal exe (Zip Code)
(925) 327-6200
(Company's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each className of each exchange on which registered
NONE
Securities registered pursuant to Section 12(g) of the
Act:
Common Stock, $.01 par value
(Title of Class)
Check whether the Issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that Company was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of Company's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [X].
The Company had, on a consolidated basis, $40,000 in revenues from
operations during the fiscal year ended March 31, 1999.
The aggregate market value of the voting stock (consisting of Common Stock,
par value $.01 per share) held by non-affiliates on June 17, 1999 was
approximately $34,858,426, based upon the average closing bid and asked prices
for such Common Stock on said date ($3.94), as reported by a market maker. On
such date, there were 14,110,613 shares of Company's Common Stock outstanding.
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
U.S. Wireless Corporation (the "Company"), headquartered in San Ramon, CA,
was organized in the State of Delaware in February 1993. In July 1996, the
Company changed its name to its present name, distributed to its stockholders
its prior business operations and began its current business operations. See
"-The Company" and "-History"
THE COMPANY
The Company has developed a network-based location systems designed to
enable wireless carriers and others to provide their customers with valued-added
location-based services and applications, including enhanced 911, live
navigation assistance, enhanced 411, asset and vehicle tracking, ITS systems and
network management systems.
The RadioCamera(TM) system, is a geographic location ("geo-location")
system that pinpoints the locations of mobile telephone subscribers within a
wireless network. Using location fingerprinting, ("Location Fingerprinting" or
"LF"), proprietary technology developed by the Company, the RadioCamera system
measures the radio frequency pattern or the phase (i.e., the timing and the
amplitude path) of all the radio frequency signals from a caller to a single
cell site. The Company believes that this technology has distinct advantages
over the competing technologies that use triangulation or the global positioning
system ("GPS").
CORPORATE STRATEGY
The Company intends to establish a leadership position within the industry
by leveraging the technical, market timing, and economic advantages of its
RadioCamera technology. The Company is developing a business plan and strategy
to establish an efficient means of deploying the RadioCamera system. Presently,
the Company is evaluating the possibility of designing, building and operating a
nationwide location network, through which it will develop and promote
location-based applications. This anticipated shared network would accommodate
all standards and provide an efficient and uniform networking platform for
delivering location information to multiple users.
The Company is working to quickly build upon the promising results of its
field trials and complete the development and refinement of the RadioCamera
systems that support all cellular/PCS protocols. The Company intends to work
with wireless carriers, information content providers, and equipment vendors on
a nationwide and international basis. In addition to the FCC-mandated E-911
service that requires precise location information, there are additional
applications that could provide considerable value in the private and public
sectors. See "-Wireless Location Based Services Overview -Value Added Services."
The Company will seek to establish its leadership position by contracting with
strong well-known suppliers and hiring an experienced operations management
team. Presently, the Company is assessing and evaluating the timing and resource
requirements necessary to implement this plan.
LOCATION FINGERPRINTING TECHNOLOGY
The RadioCamera system utilizes a network-based architecture to operate the
Company's Location Fingerprinting technology, which uses pattern recognition as
its fundamental principle to determine location. The RadioCamera system
identifies and "fingerprints" the RF (radio frequency) pattern (multipath phase
and amplitude characteristics) of an operating cellular telephone or other
wireless device. It then compares the RF pattern fingerprint to a database of
previously identified RF fingerprints and their corresponding geographic
locations within the calibrated network. By matching the fingerprint of the
caller's signal with the database of known fingerprints, the caller's geographic
location is identified.
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Since the Location Fingerprinting RadioCamera technology keys to radio wave
fronts, as opposed to the modulated content of the radio waves, the LF
technology is compatible with all leading analog and digital wireless standards.
See "-Research and Development Activities." The RadioCamera system uses the
existing cellular infrastructure, not requiring modifications to the antennae,
base station equipment or user handsets. The process is not computationally
burdened, and the database is sufficiently small to be encompassed on the
equivalent of a desktop PC running Windows NT.
Research and Development Activities
The Company has recently developed modifications to its RadioCamera system
for the CDMA and iDEN standards, in addition to the AMPS and TDMA systems. The
Company plans to design and develop a GSM version of the RadioCamera in the near
future. Currently, the Company is continuing the development and refinement of
the RadioCamera system for all the above standards.
The Company has developed an Internet services platform, including various
APIs (application programming interfaces) and web service components that
interface with the location "cache," enabling the Company and potentially other
service vendors to build applications using the Company's location information
database. The Company's customers would be able to visually monitor, locate and
track a group of subscribers, using accurate high-detail maps and exact street
address information; anticipated applications include personal safety, vehicle
tracking (stolen vehicles or commercial trucking), traffic information and
"yellow pages" informational services.
Testing and Evaluation
The Company is currently conducting field trials within the Western
Wireless network in Billings, Montana; within the Bell Atlantic Mobile wireless
network in Baltimore, Maryland; and in Company-operated test sites in Oakland,
California. In addition, the Company is scheduling a field trial of the iDEN
RadioCamera, within the Nextel network, to begin later this year.
In April 1999, the Billings, Montana trial extended to a State of Montana
sponsored "end to end" evaluation of the RadioCamera's functionality, from the
location of the caller, to the delivery of the location information at the
Public Safety Answering Points or "PSAPs" (regional emergency call centers). The
system identifies a caller's phone number, location coordinates and nearest
street address. The information is sent to the appropriate PSAP, where it is
displayed on an electronic map at an operator's workstation. The RadioCamera
continuously updates the location information, allowing the PSAP to monitor the
caller's location throughout the call. The trial does not monitor emergency
calls due to liability issues, and instead uses a substitute number to establish
the efficiency and reliability of the system.
The commencement of the system's operation capped a five-month cooperative
development effort involving the State of Montana, the local Billings 911 center
and seven telecommunications organizations. Participants in the field trial
include U.S. Wireless Corporation, US WEST Corporation, XYPOINT, Nortel
Networks, Western Wireless, Corp., Williams Communications Solutions, LLC., and
Combix Corporation.
RECENT DEVELOPMENTS
Private Placement
Between March 1999 and May 1999, the Company completed a private placement
aggregating $6,405,000. See "Certain Relationships and Related Transactions -
1999 Private Placement."
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Field Operations and Customer Trials
In April 1999, the Billings, Montana trial expanded to an "end to end"
evaluation of the RadioCamera system, complete with a backhaul network that
interconnects the RadioCameras distributed at base stations to central offices
by means of a web-like network, linked with the Billings, Montana PSAP. See
"Location Fingerprinting Technology - Testing and Evaluation."
In August 1998 and September 1998, the Company entered into agreements with
GTE Wireless and Nextel Communications, Inc., respectively, to commence joint
testing and evaluation of the RadioCamera system. The Company has developed an
iDEN interface for the RadioCamera system and is preparing to commence a trial
within the Nextel network later this year.
Joint Venture Agreements
Allen Telecom
In March 1999, the Company and Allen Telecom, Inc. ("Allen") executed a
memorandum of understanding to form a joint venture, enabling the companies to
offer an integrated line of geolocation equipment and solutions based on the
Company's RadioCamera and Allen's Geometrix(TM) Wireless Location systems. Allen
is a supplier of wireless equipment to the global telecommunications
infrastructure market.
Anam Instruments, Inc.
In July 1998, the Company formed a joint venture company, Wireless
Technologies, Inc. ("WTI") with Anam Instruments, Inc. ("Anam") to manufacture,
market and distribute the RadioCamera system and location-based services in
Asia. In June 1999, the Company formed a foreign subsidiary, U.S. Wireless
International, Inc., to undertake the Company's international operations. The
Company has transferred its ownership in WTI to this subsidiary.
Since its establishment in the 3rd quarter of 1998, WTI has focused its
efforts on the joint development of a commercial RadioCamera, which could handle
the AMPS, CDMA and TDMA standards. The CDMA version of this tri-mode commercial
prototype is on track to be available for field testing later this year, with
AMPS and TDMA standards to follow within this year. It is estimated that the
tri-mode commercial model of the RadioCamera will be commercially available in
the first quarter of 2000. WTI has also focused its efforts on the development
of market opportunities in Asia.
WTI has received a commitment for a $5,000,000 equity investment from the
HanKang Restructuring Fund, a Korean government-sponsored fund managed by
Scudder Kemper Investment, which WTI plans on consummation within the next few
weeks. The subscription agreement enables the fund to put the shares purchased
back to the two major stockholders of WTI, which are Anam and the Company's
international subsidiary, in the event certain circumstances are met.
Qualcomm Licensing
In May 1999, the Company extended its license agreement with Qualcomm
Incorporated to March 31, 2000. This agreement enables the Company to develop a
Code Division Multiple Access version of the RadioCamera System. In addition the
agreement provides for an additional extension of the license until March 31,
2001, if there are no other CDMA location systems deployed in the United States,
prior to March 31, 2000.
WIRELESS COMMUNICATIONS INDUSTRY OVERVIEW
There are approximately 75 million people using wireless telephones in the
United States today, and that number is expected to grow by the year 2000 to an
estimated 90 million, with some estimates reaching 120 million (Cellular
Telecommunications Industry Association, March 1999), with an estimated 200
million worldwide. To accommodate the increased consumer demand for wireless
services, the industry has aggressively continued its buildup of wireless
infrastructure, and has implemented more efficient standards and digital
technologies such as TDMA, CDMA, GSM and iDEN. The introduction of these
standards into the market has additionally served as a selling point for
manufacturers and service providers in the already extremely competitive arena
of telecommunications.
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In the increasingly competitive marketplace for wireless customers and
service, the emerging market for value-added services based on location
represents a considerable opportunity for wireless carriers to enhance current
and future revenue streams. The growth in the demand for wireless communications
services during the past decade has resulted in decreased pricing for wireless
service, a favorable regulatory environment, increasing competition among
service providers and a greater availability of wireless value-added services.
In addition, many developing countries are installing wireless telephone
networks as an alternative to installing, expanding or upgrading traditional
wireline networks.
Wireless Location-Based Services Overview
E-911
As the demand for wireless service increases, so will the need for
location-based safety services like wireless E-911. According to Yankee Group
(Boston), more than one quarter of all new wireless customers purchase their
phones for security reasons. In 1997, over 30 million cellular calls were placed
to 911 emergency call centers across the United States. Yet, unlike calls placed
from wire-line telephones, calls are not traceable when a caller uses a wireless
phone to call for emergency assistance (the emergency operator does not
automatically know the location of the caller). In response to this and other
safety concerns, the U.S. Federal Communications Commission issued a mandate
requiring wireless service providers to have the ability to locate wireless
calls for emergency assistance within certain parameters and time schedules. See
"- Government Regulations."
Government Regulations
As a result of these and other safety issues, the wireless industry, the
PSAPs and members of the E-911 community and the FCC began joint efforts in
mid-1994 to solve the technological and policy hurdles in providing location
information for wireless 911 calls. In June 1996, the FCC issued a Report and
Order in Docket 94-102, formalizing certain performance requirements, and
implementing a schedule for wireless service providers to establish geolocation
capabilities. In so doing, the FCC ordered that the deployment and integration
of wireless E-911 features and functions be accomplished in two: (i) the first
phase requires wireless service providers to report the callback number and
originating cell site and/or sector of a 911 call to PSAP operators. Pursuant to
the mandate, commencing in October 1997, the service provider must commence
providing such information to qualified requesting PSAPs within six months of
the PSAP's request. Service providers have commenced the implementation of
products in order to meet this requirement and (ii) the second phase requires
wireless service providers to pinpoint and report to the PSAPs the location of
all 911 callers with an accuracy of 125 meters in 67% of all cases, using root
mean square techniques. The FCC has mandated completion of Phase II by October
1, 2001. In December 1998, the FCC's Wireless Telecommunications Bureau released
a public notice outlining a filing schedule for requests for waivers of the
Phase II E-911 requirements. Various wireless carriers have submitted requests
for waivers, and various other parties have subsequently filed comments with the
FCC regarding the question of waivers. The issue of waivers and/or modifications
of the E-911 Phase II requirements is being reviewed by the FCC in an ongoing
public forum. To date, the FCC has not granted any waivers of the Phase II E-911
conditions, nor has it made any modifications to the mandate.
Value-Added Applications
To date, there are limited products and services offered which provide
location information. These existing systems are typically used for asset and
vehicle location and require bulky and costly equipment to be installed in each
vehicle being located. The architecture of the Company's RadioCamera System is
designed to eliminate the need for additional equipment purchases by the
consumer, enabling all wireless phone users the ability to access location
information in networks where the RadioCamera System i operating.
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Anticipated value-added applications include enhanced 411 (caller-location
based information services), asset tracking, vehicle location, personal safety,
roadway and highway management ("ITS"), data base management and network
management. Once deployed, the Company anticipates that value-added services
facilitated by location-sensitive applications have the potential to further
expand the market for wireless communications by allowing service providers to
increase revenue-generating traffic on their networks.
Intellectual Property
The Company believes its most significant asset is its intellectual
property. The Company has filed 14 patent applications and has received a
"notice of allowance" from the Patent and trademark office as to two of its
principal patents.
The Company relies on a registered common law trademark for use of
"RadioCamera". There can be no assurance that such trademark, as registered,
will adequately be protected against infringement. In the event the Company were
to become engaged in litigation, either as a result of a claimed infringement by
the Company or as a result of infringement by a third party on the Company's
technology or trademarks, there can be no assurance that the Company will be
able to fund such litigation or, if able to do so, that it will prevail.
Competition
Companies competing for market share in the wireless caller-location
industry are typically divided into two categories: those that employ
handset-based techniques, and those that employ network-based techniques.
Handset-based techniques rely on the integration of Global Positioning Satellite
("GPS") system receivers into the wireless handsets. Network-based techniques do
not rely on the addition of any dedicated equipment to the handset, but operate
entirely from the wireless network infrastructure. The Company's RadioCamera
system falls into the category of network-based solutions.
Competing network-based systems rely on triangulation techniques such as
Angle of Arrival ("AOA") and Time Difference of Arrival ("TDOA"). The Company's
RadioCamera system architecture does not rely on triangulation. Both AOA and
TDOA systems require multiple base stations or points of reference from which to
triangulate, and both systems are at a disadvantage in urban environments where
there are rarely direct lines of sight between a wireless caller and multiple
base stations. Due to the lack of line o sight, the subscribers' wireless
transmissions bounce off of buildings and other obstacles, reaching the base
station antennas via multiple paths.
Companies investigating the GPS handset-based method propose integrating
GPS receivers into wireless handsets. By receiving transmissions from multiple
orbiting satellites, GPS units also use triangulation techniques to establish
location, and are also challenged in environments such as "urban canyons," where
line of sight to the multiple satellites is blocked. Additionally, GPS
- -integrated handsets are not currently commercially available. Adding GPS to
handsets may create larger, heavier, more expensive phones with shorter battery
life. Additionally, GPS will require retrofitting or replacing the wireless
phones currently owned by over 75 million wireless subscribers makes GPS an
unlikely near-term solution to the FCC's E-911 Mandate.
History
Prior to July 1996, the Company was a holding company, owning a controlling
interest in a retailer of children's toys and hobby items. In October 1996, the
Company filed an amendment to its certificate of incorporation changing its name
from American Toys, Inc. to U.S. Wireless Corporation. With its name change, its
trading symbol was changed from "ATOY" to "USWC." In August 1996, pursuant to
the authorization of the Company's Board of Directors and the consent of its
then majority stockholder, the Compan distributed its ownership of the toy
company to its stockholders, thereby divesting itself entirely of its ownership
interest therein. In accordance with the change in operations of the Company, in
July 1996 the Company acquired a controlling interest in Labyrinth Communication
Technologies, Inc. ("Labyrinth") and Mantra Technologies, Inc. ("Mantra").
Labyrinth had originally been formed as the research and development arm for the
RadioCamera system.
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Consolidation of Labyrinth Communication Technologies Group, Inc.
In March 1998, the Company consummated the merger of Labyrinth with and
into the Company, pursuant to its December 1997 stockholders meeting, at which
time the stockholders approved a proposal to acquire the remaining 49% of
Labyrinth in exchange for an aggregate of 4,498,200 shares of the Company's
Common Stock. The issuance of the shares was, and still is subject to a vesting
schedule, as follows: (i) 20% of the shares issued vest one year from issuance;
(ii) an additional 40% vest upon the successful completion and operation of the
RadioCamera in its first major market; and (iii) the remaining 40% vest when the
Company reaches sales of $15,000,000. In addition to the above vesting schedule,
the former management of Labyrinth is subject to an additional vesting schedule,
in accordance with their employment contracts and restricted share agreements,
as amended, whereby the shares underlying (i)-(iii) above vest at the rate of
1/3 each year. To date the (i) and (ii) milestones have been met and all members
of management have vested 2/3 of the shares attributed to those milestones.
Restructuring of Mantra Technologies, Inc.
In February 1999, the Company's board of directors approved the
restructuring of Mantra Technologies, Inc. ("Mantra") to enable it to raise
capital for operations, to provide management incentives and gain its own
identity as a company. As described in the below business description, See
("Business of Mantra Technologies, Inc."), the management of Mantra has created
an innovative technology and business model, and has generated sales. The
restructuring was designed to separate Mantra from the Company to enable its
growth and to facilitate additional investment. In the restructuring the
management team of Mantra were issued 33% of Mantra's outstanding shares,
subject to a vesting schedule, whereby 1/3 were vested upon issuance and an
additional 1/3 vesting upon each of Mantra reaching $1,000,000 and $3,000,000 in
revenues.
In accordance with the recapitalization of Mantra, Dr. Hilsenrath resigned
as president and David Huffman was elected president of Mantra and appointed to
the board of directors, with Dr. Hilsenrath remaining Chairman of the Board. The
Company's and Dr. Hilsenrath's, (as founder) ownership in Mantra decreased from
51% and 39%, respectively, to 34% and 26%, respectively. See "Certain
Relationships and Related Transactions - Mantra Technologies, Inc.,
Restructuring."
Employees
As of June 1, 1999, the Company employed 40 full-time employees.
Approximately seventeen of these employees are involved in engineering, ten are
lab technicians and field operations personnel, five in business development,
two are executive officers and six are in support functions. To date, the
Company believes it has been successful in attracting and retaining skilled and
motivated individuals. The Company's success will depend in large part upon its
ability to continue to attract and retain qualified employees. The Company has
never experienced a work stoppage and its employees are not covered by a
collective bargaining agreement. The Company believes that it has good relations
with its employees.
RISK FACTORS
Development Stage Company; No Revenues from Operations. The Company is a
development stage company with no revenues from operations. Its activities to
date have consisted of its formation, obtaining financing, and the research,
development, and testing of the Company's RadioCamera and Location
Fingerprinting technology. The Company's operations are subject to all of the
risks inherent in the establishment and development of a business enterprise,
including the absence of a substantial operating history. The likelihood of the
success of the Company must be considered in light of the problems, expenses,
difficulties, complications, and delays frequently encountered in connection
with a developing and expanding stage business and the competitive and
unexplored environment in which the Company anticipates operating. The Company
has not deployed a fully commercial system to date. There can be no assurances
that any of the Company's product lines will be profitably produced, marketed,
and/or operated, or that the Company will be able to attract and retain the
management and skilled employees needed. Further, there can be no assurances
that the Company's management will be able to successfully implement its
business plan.
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Emerging Market for Location Technologies: Market Uncertainty. Presently
there is a limited market for location-based technologies within the wireless
industry. With the FCC mandate requiring geolocation of cellular subscribers
dialing 911, there is the planned emergence of a market for location-based
technologies for wireless systems. There can be no assurances that the FCC
mandate will not be revised or amended, delaying or eliminating the necessity
for geolocation information. In addition, there can b no assurances that there
will develop additional applications and offerings of value-added services based
upon location-based information. Recently the FCC issued a notice for discussion
indicating that it was considering granting waivers to cellular carriers in
order to allow time for technologies to be implemented. The Company is therefore
developing a product and technology for which there is no clear market size and
no assurances as to when and if one will develop. The success of the Company's
produc lines, if any, shall be contingent on their acceptance in the market
place. Though the Company may be successful in developing its product lines,
there can be no assurances that competitors will not produce products which are
either technically superior, price cost-effective, or that which make the
Company's products obsolete. The lack of acceptance of the Company's product
lines in the marketplace would have an adverse effect on its operations.
Development of Business; Need for Additional Financing. The Company has not
generated any operating revenues to date and can not accurately predict when and
if substantial revenues will be generated, therefore, its cost of operations
shall continue to be borne solely from its financing activities. The Company
will require additional capital for operations to implement its business plan
and corporate strategy of deploying a nationwide system. The Company may also
seek additional funding if the operating timetable for the development,
manufacturing, marketing, and sales of its products are unable to meet the
Company's costs of operations. The primary expense of the Company is the
salaries of its employees. The Company's limited resources in addition to its
anticipated continuation of its research, development and testing operations,
may cause significant strain on the Company's management, technical, financial,
and other resources. To manage its development, the Company must continue to
improve and expand its existing resources and management information systems and
must attract, train, and motivate qualified technical, management and general
personnel. There can be no assurance, however, that the Company will
successfully be able to achieve these goals.
Rapid Technological Change. The wireless communications and informational
services industries are subject to rapid technological change. There can be no
assurances that the Company will be able to keep pace with the technological
developments in the telecommunication industry or to implement or change its
product lines to meet new demands within the industry. Competitors with greater
resources may develop products and/or technologies superior to or more cost
effective than those marketed by the Company.
Business of Mantra Technologies, Inc.
General
Mantra Technologies, Inc. was founded by Dr. Oliver Hilsenrath in July
1996, as an Internet services company dedicated to the improvement of the user's
Internet browsing experience. Mantra now provides advanced functionality to
major web services in the areas of:
Personalization - helping web services develop a one-to-one relationship
with their customers.
Automated categorization - helping directories and content sites improve
quality, efficiency and timeliness.
Advanced browsing - providing powerful next-generation forms of navigation
on our customers' websites.
User profiling for ad targeting, content targeting and community building.
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These services are enabled by a unique, patented technology that provides
industry-leading precision and recall in a small footprint, low resource
requirement package, with little or no training required.
Industry Overview
Traditional navigation capabilities such as keyword search, manually edited
page layouts and editorial webguides are increasingly insufficient as the size
and complexity of the web grows. Mantra is well-positioned with powerful
technology and focus in outsourcing innovative navigation services.We believe
this emerging niche will develop rapidly as three major trends continue to drive
demand for our services:
The growth in the size of the Internet will drive the need for better web
navigation. competition for users among web services will drive the need for
differentiation. the increasing sophistication of web services will drive the
propensity for outsourcing advanced service components such as Mantra's.
Context Synthesistm
Mantra's offerings are based upon Context Synthesistm, a patented text
analysis engine designed and developed by Mantra. The engine is able to extract
areas of interest from one or more web pages, web sites or set of web sites, and
compare these to extractions from other sources ranging from databases,
directories, the Internet or enterprise intranets. Applications can focus on
interactive or non-real time applications for end users or content management
applications for major destination, search and directory sites.
Context Synthesistm is remarkable in the area of text analysis because of
its very high precision and recall, extremely small footprint and ability to
perform with little or no pre-training on the body of source documents.
Current Activity
Mantra has agreements with two major web services for deployment of its
technology. Mantra is providing an automated categorization platform for
LookSmart, a leading web directory which provides its directory to MSN,
AltaVista, @Home and over 200 ISP's worldwide. Mantra is also deploying an end
user web monitoring for Portivity, a supplier of customer relationship
management services.
ITEM 2. DESCRIPTION OF PROPERTY
The Company entered in to a building lease agreement ("the Lease") with
Annabel Investment Company, a California partnership, for the lease of executive
office space at 2303 Camino Ramon, Suite 200, San Ramon, California 94583,
commencing December 1997. The Company maintains approximately 12,000 square feet
of executive office space at a total cost of approximately $250,000 per annum.
The Lease, effective for a term of five (5) years, continues through January
2002. The Company also leases six rooftop testing facilities, three in Oakland,
California, and three in Baltimore, Maryland, for each of which it pays $500 per
month. All six leases are terminable by either party at any time upon notice.
The Company also leases approximately 1,120 square feet of office space in
Jessup, Maryland at a total cost of approximately $14,000 per annum. The lease
commenced in September 1998 and is effective for a term of one year. The Company
believes these existing facilities are adequate to meet its current needs and
that suitable additional or alternative space will be available on commercially
reasonable terms as needed.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material litigation and is not aware of
any threatened litigation that would have a material adverse effect on its
business.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
January 22, 1999 Annual Meeting
On January 22, 1999, the Company held an annual meeting of its
stockholders, during which the stockholders elected four (4) persons nominated
by the Board of Directors to serve as Directors until the next annual meeting of
stockholders and until their respective successors shall have been elected and
shall have qualified. The voting tabulations regarding the election of Directors
were as follows:
<TABLE>
<CAPTION>
Votes Cast Withhold
Nominees For Authority to Vote
<S> <C> <C>
Dr. Oliver Hilsenrath 8,778,631 1,550
David Tamir 8,778,631 1,550
Barry West 8,778,631 1,550
Dennis Francis 8,778,631 1,550
</TABLE>
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. See
Item 5. Market for Common Equity and Related Stockholder Matters - 1999 Private
Placement." 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>
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is quoted on the SmallCap Market of the Nasdaq
Stock Market. The following table sets forth representative high and low closing
prices for the Common Stock as reported by the market makers for the Company's
Securities during the period from April 1, 1997 through June 15, 1999. Closing
prices reflect prices between dealers, do not include resale mark-ups,
mark-downs, or other fees or commissions, and do not necessarily represent
actual transactions. <TABLE> <CAPTION>
Common Stock
Calendar Period Low High
1997
<S> <C> <C>
03/31/97- 06/30/97 3 1/2 4 3/4
07/01/97 - 09/30/97 3 9/16 4 1/8
10/01/97 - 12/31/97 2 3/4 4 13/32
1998
----
01/01/98 - 03/31/98 2 1/2 3 7/8
04/01/98 - 06/30/98 2 11/32 3 5/8
07/01/97 - 09/30/97 1 1/2 2 31/32
10/01/97 - 12/31/97 31/32 1 7/16
1999
----
01/01/99 - 03/31/99 1 1/16 2 1/16
04/01/99 - 06/1/99 1 9/16 4 27/32
</TABLE>
As of June 15, 1999, there were 82 holders of record of the Company's
Common Stock, although the Company believes that there are approximately 1,500
additional beneficial owners of shares of Common Stock held in street name. As
of June 15, 1999, there were 14,110,613 shares of the Company's Common Stock
outstanding.
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 (See "Item 4. Submission
of Matters to a Vote of Security Holders") and completed the private offering of
its securities, in which the Company raised gross proceeds of $6,000,000 through
the sale of 60,000 shares of the Company's newly created Series B Preferred
Stock. In addition, the Company offered its officers, directors and employees
the right to purchase an aggregate of 405,000 shares of Common Stock at $1.00
per share. All shares were subscribed. Employees had the right to pay for the
shares through a two month salary deduction.
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.
9
<PAGE>
The Company agreed to file a registration statement to register the shares
of Common Stock underlying the Series B Preferred Stock within 90 days of the
Company's April 5, 1999 special meeting of stockholders. The proceeds of the
offering will be used for general working capital.
ITEM 6. PLAN OF OPERATION
Capital Resources
As of March 31, 1999, the Company had working capital of $7,779,210 and
cash and cash equivalents of $5,788,288. Such amounts resulted primarily from
sales of the Company's securities in its 1998 private placement offering and
$2,700,000 from its 1999 private placement. In its 1999 private placement, the
Company raised an aggregate of $6,405,000. During the year ended March 31, 1999,
the Company earned revenues of $40,000 in connection with the license of
software by its subsidiary Mantra Technologies, Inc.
During the year ended March 31, 1999, the Company raised approximately $7.8
million of cash in private placements of equity and debt securities. The Company
made investments of $400,000 in a joint venture and $242,000 in equipment.
Although the Company incurred a net loss of $7.2 million during the year ended
March 31, 1999, such amount includes non-cash charges of approximately $2.2
million related to the Labyrinth consolidation, $565,000 of stock based
compensation, $341,000 of equity losses related to a joint venture and $260,000
of depreciation expense. As result of the above, the Company experienced a net
increase in cash of approximately $3.5 million during the year ended March 31,
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 Compan 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.
10
<PAGE>
Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." This statement establishes standards for the reporting
and display of comprehensive income and its components (revenues, expenses,
gains and losses) in an entity's financial statements. This statement requires
and entity to classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in-capital in the
equity section of a statement of financial position. This statement is effective
for fiscal years beginning after December 15, 1997. In accordance with the
provisions of this statement, the Company did not adopt SFAS No. 130 in fiscal
year 1999, as the Company has no items of other comprehensive income. Management
does not expect this statement to significantly impact the Company's financial
statements
statement requires public enterprises to report financial and descriptive
information about its reportable operating segments and establishes standards
for related disclosures about product and services, geographic areas, and major
customers. This statement is effective for fiscal years beginning after December
15, 1997. At the present time, the Company's two operating segments, wireless
location-based services and software and internet development, are not monitored
separately for internal financial reporting purposes. Management does not expect
this statement to significantly impact the Company's financial statements.
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.
ITEM 7.
See attached financial statements.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT
Executive Officers and Directors
The Executive Officers and Directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Dr. Oliver Hilsenrath (1) (2) 42 President, Chief Executive
Officer and Director
David Klarman 34 Vice President, General
Counsel, Secretary, and Treasurer
Dennis Francis (2) 48 Director
David Tamir(1) 55 Director
Barry West(2) 54 Director
Irwin Gross (1) (3) 55 Director
</TABLE>
(1) Member of Audit Committee
(2) Member of Compensation Committee.
(3) On April 6, 1999, the holders of the Company's Series B Preferred
Stock, elected, via unanimous written consent, Irwin Gross to be the Series B
Preferred Stock elected director. See "Item 5. Market for Common Equity and
Related Stockholder Matters - 1999 Private Placement."
Dr. Oliver Hilsenrath has served as President, Chief Executive Officer and
Director of the Company since July 31, 1996. Since its inception, Dr. Hilsenrath
was a co-founder and served from 1992 through 1996 as Senior Vice President of
Technology of Geotek Communications, Inc. 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.
David S. Klarman has served as General Counsel and Secretary of the Company
since September 1996. He was elected Vice President in December 1997. In
September 1996, Mr. Klarman formed Klarman & Associates, a law firm specializing
in corporate and securities law. From July 1994 to August 1996, Mr. Klarman was
an associate with Lampert & Lampert, a law firm specializing in corporate and
securities law in New York, New York. From February 1991 to July 1994, Mr.
Klarman was an associate with Goldstein, Axelro & DiGioia, a law firm
specializing in corporate and securities law in New York, New York. Mr. Klarman
holds a Juris Doctorate from Yeshiva University, Benjamin N. Cardozo School of
Law and a B.S. in Finance from the University of Maryland.
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 thirty-five years, most recently as
Director of Value-Added Services and Corporate Marketing at Cellnet, a cellular
communications subsidiary of British Telecom.
11
<PAGE>
Dennis Francis was elected to the Company's Board in December 1997.
Previously, from December 1996, he served as a consultant to the Company,
providing technical support services. Mr. Francis has 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
Chief Technology Officers Council of the Cellular Telecommunications Industry
Association 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, Mr. Tamir 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 Ministry of
Defense), 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.
Irwin Gross was elected on April 6, 1999 by unanimous written consent of
the stockholders of the Company's Series B Preferred Stock to be the Company's
Series B Preferred Stock elected Director. Mr. Gross has served as Chief
Executive Officer and Chairman of the Board of Directors of Interactive Flight
Technologies, Inc. since September 1998. He was the founder and had been a
director of ICC Technologies, Inc, which designs innovative climate control
systems, from May 1984 until July 1998. In 1998 ICC Technologies merged with
Rare Medium Inc., an internet services company. Mr. Gross is currently the
Chairman of the Board of The Network Connection and a member of the Board of
Orbit R/F. In addition, Mr. Gross had served as the Chief Executive Officer of
an ICC from February 1994 to February 1998. Mr. Gross also serves on the board
of directors of several charitable organizations. Mr. Gross has a Bachelor of
Science degree in Accounting from Temple University and a Juris Doctorate from
Villanova University.
All Directors, with the exception of the Series B Preferred Stock elected
director, 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 stockholders for damages resulting from 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 stockholder litigation. In
addition, the Company has executed indemnification agreements with all officers
and directors providing indemnification to the fullest extent of the law.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's Officers, Directors, and persons who beneficially own more than
ten percent of a registered class of the Company's equity securities to file
reports of securities ownership and changes in such ownership with the
Securities and Exchange Commission ("SEC"). Officers, Directors, and greater
than ten percent beneficial owners also are required by rules promulgated by the
SEC to furnish the Company with copies of all Section 16(a) forms they file.
Based solely upon requests for information of the Company's Officers, Directors,
and greater than ten percent stockholders, during fiscal 1999, the Company has
been informed that all Officers, Directors, or greater than ten percent
stockholders have filed such reports as are required pursuant to Section 16(a).
The Company has no basis to believe that any required filing by any of the
above-indicated individuals has not been made. <PAGE> ITEM 10. 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 Company during the year ended March 31, 1999, 1998,
and 1997 to each of the named Executive Officers of the Company.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation
(a) (b) (c) (d) (e) (f)
Name and Principal Year (1) Salary ($) Bonus ($) Options/ SARS Other Annual
Position Compensation
<S> <C> <C> <C> <C> <C>
Dr. Oliver Hilsenrath 1999 160,000 - - $1,620(5)
President and 1998 160,000 - - $1,620(5)
Chief Executive Officer 1997 106,667(2) - 1,500,000(3) $5,572(4)
David Klarman 1999 120,000 - - -
Vice President, 1998 120,000 - 100,000 -
General Counsel and Secretary 1997 70,000(2) - 150,000 (6) -
Dr. Mati Wax 1999 100,000 - - 20,000(8)
Former Chief Technology Officer(7) 1998 100,000 - - 20,000(8)
1997 66,667(2) - 100,000 (6) -
Abraham Bar 1999 110,000 - - -
Vice President 1998 102,500 - - -
of Hardware 1997 60,000(2) - 100,000(6) -
Ravi Rajapakse 1999 110,000 - - -
Vice President 1998 100,000 - - -
of Software Design 1997 30,000 (2) - 100,000(6) -
</TABLE>
(1) No compensation was paid to any officer of the Company prior to July
31, 1996. Reflects the portion of the year worked.
(2) Pursuant to his employment agreement, Dr. Hilsenrath received an option
to purchase 1,500,000 shares of Common Stock. See "Employment and Consulting
Agreements." Includes (i) the payment of $509 per month for automobile allowance
and (ii) the payment of approximately $1,500 for a life insurance and disability
policy for the benefit of Dr. Hilsenrath's beneficiaries. See "Employment and
Consulting Agreements."Represents the payment of $1,620 per annum for a life
insurance and disability policy for the benefit of Dr. Hilsenrath's
beneficiaries. See "Employment and Consulting Agreements." Pursuant to their
employment agreements, Dr. Wax, Mr. Klarman, Mr. Bar, and Mr. Rajapakse received
options to purchase 100,000, 150,000, 100,000 and 100,000, respectively, shares
of Common Stock, vesting over the term of their initial employment agreements,
1/3 each year. See "Employment and Consulting Agreements." In June 1999, Dr. Wax
relinquished his position as the Company's Chief Technology Officer. See
"Employment and Consulting Agreements." Dr. Wax received a travel allowance of
approximately $20,000 per annum.
<PAGE>
AGGREGATED OPTION/SAR EXERCISE IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Value of
Number of Unexercised
Unexercised Options/SARs In-The-Money)Options/SARs
Exercisable/ at FY-End ($)
Shares Acquired on Unexercisable Exercisable/
Exercise (#) Value Realized ($) Unexercisable (1)
Name
<S> <C> <C> <C> <C>
Dr. Oliver Hilsenrath - - 1,500,000/0 0/0
David Klarman - - 200,000/50,000 0/0
Dr. Mati Wax - - 66,666/33,334(2) 0/0
Abraham Bar - - 66,666/33,334 0/0
Ravi Rajapakse - - 66,666/33,334 0/0
============================== ==================== ====================== ======================= =============================
</TABLE>
Based upon the closing price for the Common Stock on March 31, 1999
($1.68), as reported by a market maker. Option ceased vesting in June 1999.
Employment and Consulting Agreements
Employment Agreements
In April 1997, the Company amended the five-year employment agreement it
entered into originally with Dr. Hilsenrath in July 1996. 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 Company granted Dr. Hilsenrath an option to purchase 1,500,000 shares of
Common Stock at an exercise price of $2.00 per share. The Company provides Dr.
Hilsenrath with an automobile allowance. In addition, the Company 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 also includes 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 Company 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 Company is terminated or if there is a
decrease in his responsibilities or duties following a change in control of the
Company. 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 Company wishes to obtain Key Man life
insurance on the life of Dr. Hilsenrath, he agrees to cooperate with the Company
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 Company 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 Company. The agreement also acknowledges that Mr.
Klarman shall have the right to represent non-competing companies during the
term of the agreement.
12
<PAGE>
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 Company, pursuant to
which the agreement was assigned to the Company and Mr. Rajapakse became Vice
President of Software Design. Mr. Rajapakse receives a salary of $130,000 per
annum, and was granted an option to purchase 100,000 shares of Common Stock at
an exercise price of $2.15 per share, as adjusted, 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 Company'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. See "Business - Consolidation of Labyrinth
Communication Technologies Group, Inc."
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 Company, pursuant to which the
agreement was assigned to the Company 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 his 25,000 restricted shares of
Labyrinth's common stock for 229,500 shares of the Company'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.
See "Business - Consolidation of Labyrinth Communication Technologies Group,
Inc."
Consulting Agreements
The Company has engaged various consultants to provide expertise in
specific areas of services required by the Company. Presently, the Company has
engaged consultants to provide services and expertise in various areas
including, investor relations, public relations, business development, and
marketing. Compensation for these services include retainer fees, with some
consultants receiving stock options, which vest according to time and/or the
attainment of certain goals.
Senior Management Incentive Plan
In December 1997, the Board of Directors and the stockholders of the
Company 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 Company.
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 Company will have at its disposal in rewarding Executive
Officers, key employees, and consultants who render significant services to the
Company. Pursuant to the Management Plan, the Board of Directors intends to
offer equity ownership in the Company to such persons through the grant of stock
options and other rights, to enable the Company to attract and retain qualified
personnel without unnecessarily depleting the Company's cash reserves. The
Management Plan is designed to augment the Company's existing compensation
programs and is intended to enable the Company to offer a personal interest in
the Company'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 Company's long-term profit and growth potential by encouraging and
assisting those persons to acquire equity in the Company. 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.
13
<PAGE>
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 Company
who is also a Director of the Company 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 Company 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 Company will not be
eligible for participation in the Management Plan. The Management Plan provides
for four types of awards: stock options, incentive stock rights, stock
appreciation rights (including limited stock appreciation rights) and restricted
stock purchase agreements.
14
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth information as of June 17, 1999 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. At that date,
14,110,613 shares of Common Stock were outstanding.
<TABLE>
<CAPTION>
Name and Address Amount and Nature of % of outstanding
Of Beneficial Owner Beneficial Ownership (1) shares owned (2)(3)
Dr. Oliver Hilsenrath (4)
<S> <C> <C>
c/o U.S. Wireless Corporation 5,752,880 36.9%
2303 Camino Ramon, Suite 200
San Ramon, CA 94583
David Tamir (5)
c/o U.S. Wireless Corporation 86,667 *
2303 Camino Ramon, Suite 200
San Ramon, CA 94583
Barry West (6)
c/o U.S. Wireless Corporation 53,333 *
2303 Camino Ramon, Suite 200
San Ramon, CA 94583
Irwin Gross(7)
c/o U.S. Wireless Corporation 136,333 *
2303 Camino Ramon, Suite 200
San Ramon, CA 94583
Dennis Francis (5)
c/o U.S. Wireless Corporation 86,667 *
2303 Camino Ramon, Suite 200
San Ramon, CA 94583
Janvrin Holdings Limited(8)
Jardine House 918,000 6.5%
1 Wesley Street
St. Helier, Jersey JE4 8UD
Officers and Directors as a group
(6 persons) (3)-(9) 7,007,980 44.3%
- -------------------------------------------- ------------------------------------ ---------------------------------
</TABLE>
Less then 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 Company, 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.
15
<PAGE>
(footnotes continued from previous page)
(3) Does not include (i) the shares of Common Stock issuable upon the
conversion of the shares of the 70,000 shares of Series A Preferred stock or the
shares of Series A Preferred Stock issuable in accordance with the dividend on
said shares or the shares of Common Stock into which those dividend shares may
be convertible, (ii) the shares of Common Stock issuable upon conversion of the
60,000 shares of the Series B Preferred Stock, (iii) additional shares of Common
Stock or shares of preferred stock which shares are convertible into shares of
Common Stock to be issued in the 1999 private offering in accordance with the
stockholders meeting held on April 5, 1999, or (iv) of any shares of Common
Stock or preferred stock issuable underlying any outstanding warrants or options
issued by the Company.
(4) All shares are held in the name of the Hilsenrath Family trust, of
which Dr. Hilsenrath is the trustee and his family members are the
beneficiaries.
(5) Includes 1,500,000 shares of Common Stock, issuable upon the exercise
of a vested option granted pursuant to Dr. Hilsenrath's employment agreement and
1,982,880 shares issued in connection with the Labyrinth merger, of which
793,152 are not vested and subject to a vesting schedule. See "Certain Relations
and Related Transactions - Merger of Labyrinth." Includes 66,667 shares issuable
upon the exercise of the portion of an option currently vested and exercisable,
equal to 2/3 of the shares underlying the option granted. The options vest at
1/3 intervals per year.
(6) Includes 33,333 shares issuable upon the exercise of the portion of an
options currently vested and exercisable, equal to 1/3 of the shares underlying
the option granted. The options vest at 1/3 intervals per year.
(7) Includes (i) 33,333 shares issuable upon the exercise of options
currently vested and exercisable, equal to 1/3 of the shares underlying the
option granted, which options vest at 1/3 intervals per year. Does not include
(i) 3,000,000 shares issuable upon the conversion of 30,000 shares of Series B
Preferred Stock purchased by Interactive Flight Technologies, Inc., a company of
which Mr. Gross is the Chief Executive Officer and Chairman of the Board, and
which Mr. Gross disclaims beneficial ownership and (ii) 32,000 shares held in
trust for the benefit of Mr. Gross' children, which Mr. Gross disclaims
beneficial ownership. See "Certain Relationships and Related Transactions."
(8) Includes 550,800 shares which have vested and 367,200 shares subject to
a vesting schedule in connection with the Labyrinth merger. See "Certain
Relations and Related Transactions - Merger of Labyrinth." Includes 348,857
shares which have vested and 523,243 shares subject to a vesting schedule in
connection with the Labyrinth merger. See "Certain Relations and Related
Transactions - Merger of Labyrinth."
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
1999 Private Placement
In April 1999, the Company commenced a private placement offering of its
securities, in which it sold 60,000 shares of the Company's Series B Preferred
Stock, of which 30,000 shares were sold to Interactive Flight Technologies,
Inc., a company in which Irwin Gross, is the Chief Executive Officer and
Chairman of the Board. The holders of the 60,000 shares of the Series B
Preferred Stock have the right to elect one member to the Company's board of
director. The Series B Preferred Stockholders elected Irwin Gross as their
appointee. See "Item 5. Market for Common Equity and Related Stockholder Matters
- - 1999 Private Placement."
16
<PAGE>
In addition, the Company sold an aggregate of 405,000 shares of Common
Stock at $1.00 per share to its officers, directors and employees, which is
equal to the conversion price of the shares of Series B Preferred Stock.
Mantra Technologies, Inc. Restructuring
In February 1999, the board of the Company approved the recapitalization
and restructuring of Mantra Technologies, Inc. including the issuance of an
aggregate of 33% of the outstanding shares of Mantra to its management team.
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. As of the date hereof the first two milestones have been met.
See "Executive Compensation-Employment and Consulting Agreements" for a
discussion of the compensation arrangements the Company has with its Executive
Officers and consultants.
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
All exhibits to this Form 10-KSB, except those designated with an asterisk
(*) which are filed herewith, have previously been filed with the Commission, as
referenced, and pursuant to 17 C.F.R. Section 230.411 are incorporated by
reference herein.
<TABLE>
<CAPTION>
<S> <C>
3.1 - Certificate of Incorporation of the Company filed February 12, 1993. (Incorporated by reference to the
indicated exhibit in the Company's SB-2 Registration Statement File No. 33-68306-NY)
3.2 - Amended and Restated Certificate of Incorporation of the Company filed on August 25, 1993. (Incorporated
by reference to the indicated exhibit in the Company's SB-2 Registration Statement File No. 33-68306-NY)
3.2.1* - Amended and Restated Certificate of Incorporation of the Company filed on March 5, 1999.
3.2.2* - Certificate of Amendment of the Certificate of Incorporation of the Company filed on March 29, 1999.
3.2.3* - Certificate of Amendment of the Certificate of Incorporation of the Company filed on May 14, 1999.
3.4 - By-Laws of the Company. (Incorporated by reference to the indicated exhibit in the Company's SB-2
Registration Statement File No. 33-68306-NY)
3.4.1* - Amendment to the By-laws dated November 25, 1997.
3.5 - Specimen Common Stock Certificate.
3.6 - Form of Series A Preferred Stock.
3.6.1* - Form of Series B Preferred Stock.
10.74 - Form of Employment Agreement with Dr. Oliver Hilsenrath (incorporated by reference to the indicated
exhibit in the Company's Form 8-K dated July 11, 1996).
10.77 - Amended Employment Agreement with Dr. Oliver Hilsenrath. (Incorporated by reference to the indicated
exhibit in the Company's Form 10-KSB filed for the year ended March 31, 1997).
10.78 - Employment Agreement with David Klarman (incorporated by reference to the indicated exhibit in the
Company's Form 10-KSB filed for the year ended March 31, 1997).
10.79 - Employment Agreement with Dr. Mati Wax. (Incorporated by reference to the indicated exhibit in the
Company's Form 10-KSB filed for the year ended March 31, 1997).
10.79.1 - Amended Employment Agreement with Dr. Mati Wax.
10.87 - Amended Employment Agreement with Ravi Rajapakse
10.88 - Amended Employment Agreement with Abraham Bar
27.01* - Financial Data Schedule.
</TABLE>
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Company has
duly caused this report to be signed on its behalf by the undersigned; thereunto
duly authorized this 25th day of June 1999.
U.S. WIRELESS CORPORATION
By: \s\ Dr. Oliver Hilsenrath
Dr. Oliver Hilsenrath
Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Company, in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
\s\ Dr. Oliver Hilsenrath Chief Executive Officer June 25, 1999
Dr. Oliver Hilsenrath President and Director Dated
\s\ David Tamir Director June 25, 1999
David Tamir Dated
\s\ Dennis Francis Director June 25, 1999
Dennis Francis Dated
\s\ Barry West Director June 25, 1999
Barry West Dated
\s\ Irwin Gross Director June 25, 1999
Irwin Gross Dated
</TABLE>
<PAGE>
U.S. WIRELESS CORPORATION
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Certified Public Accountants F - 2
Consolidated Financial Statements
Consolidated Balance Sheets F - 3
Consolidated Statements of Operations F - 5
Consolidated Statements of Stockholders' Equity F - 6
Consolidated Statements of Cash Flows F - 8
Notes to Consolidated Financial Statements F - 11
</TABLE>
F-1
<PAGE>
Haskell & White LLP
CERTIFIED PUBLIC ACCOUNTANTS
4901 Birch Street
Newport Beach, California 92660
Telephone (949) 833-8312
Fax (949) 833-9421
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
U.S. Wireless Corporation
We have audited the accompanying consolidated balance sheets of U.S.
Wireless Corporation (the "Company") as of March 31, 1999 and 1998, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the consolidated financial position of the Company as of March 31,
1999 and 1998, and the consolidated results of its operations and its cash flows
for each of the years then ended, in conformity with generally accepted
accounting principles.
HASKELL & WHITE LLP
Newport Beach, California
May 13, 1999
F -
<PAGE>
U.S. WIRELESS CORPORATION
Consolidated Balance Sheets
<TABLE>
<CAPTION>
ASSETS
March 31,
1999 1998
------------- -----------
Current assets
<S> <C> <C>
Cash and cash equivalents ....................... $5,788,288 $2,285,750
Stock subscription (Note 7) ..................... 2,300,000 --
Investment in joint venture (Note 4) ............ 58,630 --
Other current assets ............................ 2,323 --
---------- ----------
Total current assets ........................ 8,149,241 2,285,750
Equipment, improvements and fixtures, net (Note 5) ... 381,617 399,896
Other assets ......................................... 25,035 25,035
---------- ----------
Total assets ................................ $8,555,893 $2,710,681
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F -
<PAGE>
U.S. WIRELESS CORPORATION
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31,
1999 1998
-------------------------------
Current liabilities
<S> <C> <C>
Accounts payable and accrued expenses .................... $ 335,543 $ 252,708
Obligations under capital leases, current (Note 9) ....... 34,486 15,192
------------ ------------
Total current liabilities ............................ 370,029 267,900
Obligations under capital leases, noncurrent (Note 9) ......... 4,632 39,118
------------ ------------
Total liabilities .................................... 374,661 307,018
------------ ------------
Minority interest in subsidiary ............................... 76,434 195,305
------------ ------------
Commitments and contingencies (Notes 8, 9, and 10)
Stockholders' equity (Notes 3, 4, 7, 8, and 10)
Series A preferred stock, convertible, 6% cumulative, $.01 par value,
100,000 shares authorized, 70,000 shares issued and outstanding
(liquidation preference
of $1,400,000) ....................................... 700 --
Series B preferred stock, convertible, $.01 par value, 50,000 shares
authorized, 50,000 shares issued
and outstanding (liquidation preference of $5,000,000) 500 --
Common stock, $.01 par value, 40,000,000 shares authorized, 13,556,188 and
11,823,444 shares issued and outstanding, respectively; 1,973,699 and
3,715,421 of which are subject to vesting,
respectively (Note 3) ................................ 135,563 118,234
Additional paid-in capital ............................... 32,504,598 19,912,890
Unearned compensation .................................... (244,958) (761,438)
Accumulated deficit ...................................... (24,291,605) (17,061,328)
------------ ------------
Total stockholders' equity ........................... 8,104,798 2,208,358
------------ ------------
Total liabilities and stockholders' equity ........... $ 8,555,893 $ 2,710,681
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F -
<PAGE>
U.S. WIRELESS CORPORATION
Consolidated Statements of Operations
For the Years Ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Net revenues ............................................ $ 40,000 $ --
------------ ------------
Cost and expenses
Research and development, including write-off of
excess of cost over net assets acquired (Note 3) 4,866,292 2,220,767
Operating expenses ................................. 1,922,779 1,372,315
Stock based compensation (Note 8) .................. 568,781 642,797
Equity in loss of joint venture (Note 4) ........... 341,370 --
Interest income .................................... (310,074) (199,222)
------------ ------------
Total costs and expenses ....................... 7,389,148 4,036,657
------------ ------------
Loss before minority interest and income tax
(expense) benefit .................................. (7,349,148) (4,036,657)
Minority interest in net losses ......................... 118,871 844,092
------------ ------------
Loss before income tax (expense) benefit ................ (7,230,277) (3,192,565)
Income tax (expense) benefit ............................ -- --
------------ ------------
Net loss ................................................ $ (7,230,277) $ (3,192,565)
============ ============
Basic and diluted loss per common equivalent share
Net loss per common equivalent share ............... $ (0.56) $ (0.37)
============ ============
Weighted average number of common shares outstanding 12,924,639 8,580,354
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F -
<PAGE>
U.S. WIRELESS CORPORATION
Consolidated Statements of Stockholders' Equity
For the Years Ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
Series A Series B
Preferred Preferred Additional
Stock Stock Common Stock Paid-in
Shares Amount Shares Amount Shares Amount Capital
------------- ------------- --------- ------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, April 1, 1997 ...... -- $ -- -- $-- 10,031,250 $ 100,312 $ 20,493,262
Reacquisition of common stock
upon return of investment ... -- -- -- -- (2,706,006) (27,060) (1,542,423)
Amortization of unearned
compensation ................ -- -- -- -- -- -- --
Issuance of common stock
options for compensation..... -- -- -- -- -- -- 126,316
Acquisition of minority
interest (Note 3) ........... -- -- -- -- 4,498,200 44,982 835,735
Net loss for the year ended
March 31, 1998 .............. -- -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------ -----------
Balances, March 31, 1998 .... -- -- 11,823,444 118,234 19,912,890
Conversion of debentures to
common stock ................ -- -- -- -- 961,538 9,615 2,490,385
Amortization of unearned
compensation ................ -- -- -- -- -- -- --
Issuance of common stock
options for compensation .... -- -- -- -- -- -- 703,859
Issuance of stock in connection
with private placements, net of
offering costs of $801,558 .... 70,000 700 50,000 500 668,206 6,684 7,013,842
Exercise of common stock options -- -- -- -- 103,000 1,030 206,470
Acquisition of minority interest
(Note 3) .................... -- -- -- -- -- -- 2,177,152
Net loss for the year ended
March 31, 1999 .............. -- -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------ -----------
Balances, March 31, 1999 ..... 70,000 $ 700 50,000 $ 500 13,556,188 $ 135,563 $ 32,504,598
============ ============ ============ ============ ============ ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F -
<PAGE>
U.S. WIRELESS CORPORATION
Consolidated Statements of Stockholders' Equity (continued)
For the Years Ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
Stock Total
Unearned Subscription Accumulated Stockholders'
Compensation Receivable Deficit Equity
<S> <C> <C> <C> <C> <C>
Balances, April 1, 1997 ......................... $ (1,277,918) $ (1,569,483) $(13,868,763) $ 3,877,410
Reacquisition of common stock
upon return of investment ....................... -- 1,569,483 -- --
Amortization of unearned compensation ........... 516,480 -- -- 516,480
Issuance of common stock options for compensation -- -- -- 126,316
Acquisition of minority interest (Note 3) ....... -- -- -- 880,717
Net loss for the year ended March 31, 1998 ...... -- -- (3,192,565) (3,192,565)
------------ ------------ ------------ ------------
Balances, March 31, 1998 ........................ (761,438) -- (17,061,328) 2,208,358
Conversion of debentures to common stock ........ -- -- -- 2,500,000
Amortization of unearned compensation ........... 516,480 -- -- 516,480
Issuance of common stock options for compensation -- -- -- 703,859
Issuance of stock in connection with private
placements, net of offering costs of $801,558 -- -- -- 7,021,726
Exercise of common stock options ................ -- -- -- 207,500
Acquisition of minority interest (Note 3) ....... -- -- -- 2,177,152
Net loss for the year ended March 31, 1999 ...... -- -- (7,230,277) (7,230,277)
------------ ------------ ------------ ------------
Balances, March 31, 1999 ........................ $ (244,958) $ -- $(24,291,605) $ 8,104,798
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F -
<PAGE>
U.S. WIRELESS CORPORATION
Consolidated Statements of Cash Flows
For the Years Ended March 31, 1999 and 1998
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
1999 1998
------------- ----------------
Cash flows from operating activities
<S> <C> <C>
Net loss ..................................................... $(7,230,277) $(3,192,565)
Adjustments to reconcile net loss to net cash used for operating
activities:
Equity in loss of joint venture .......................... 341,370 --
Write-off of excess of cost over net assets acquired ..... 2,177,152 476,552
Minority interest in net losses .......................... (118,871) (844,092)
Amortization of unearned compensation .................... 516,480 516,480
Depreciation expense ..................................... 260,000 231,150
Issuance of common stock options for compensation
and services ........................................... 48,234 126,316
Increase (decrease) from change in assets and liabilities:
Other current assets ................................... (2,323) 3,500
Deposits and other assets .............................. -- (20,368)
Accounts payable and accrued expenses .................. 82,835 112,158
Other .................................................. -- (85,972)
----------- -----------
Net cash used for operating activities .......... (3,925,400) (2,676,841)
----------- -----------
Cash flows from investing activities
Equipment, improvements and fixtures acquired ................ (241,721) (339,465)
Investment in joint venture .................................. (400,000) --
Net cash used for investing activities .......... (641,721) (339,465)
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F -
<PAGE>
U.S. WIRELESS CORPORATION
Consolidated Statements of Cash Flows
For the Years Ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
--------------- ----------------
Cash flows from financing activities
<S> <C> <C>
Proceeds from issuance of debentures ........................ 2,500,000 --
Proceeds from issuance of Series A preferred stock .......... 1,400,000 --
Proceeds from issuance of Series B preferred stock .......... 2,700,000 --
Proceeds from issuance of common stock ...................... 1,634,851 --
Payment of stock offering costs ............................. (150,000) --
Principal repayments on obligations under capital leases .... (15,192) (26,725)
----------- -----------
Net cash provided (used) by financing activities 8,069,659 (26,725)
----------- -----------
Net increase (decrease) in cash .................................. 3,502,538 (3,043,031)
Cash and cash equivalents at beginning of year ................... 2,285,750 5,328,781
----------- -----------
Cash and cash equivalents at end of year ......................... $ 5,788,288 $ 2,285,750
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid ............................................... $ -- $ --
Income taxes paid ........................................... $ -- $ --
</TABLE>
Schedule of non-cash investing and financing activities:
In July 1998, $2,500,000 of convertible debentures were converted into
961,538 shares of the Company's common stock.
As of March 31, 1999, the Company had $2,300,000 in stock subscription
receivables related to the sale of 23,000 shares of its Series B Preferred
Stock. Such receivables were collected in full in April 1999.
As discussed in Note 3, the Company acquired the 49% minority interest in
Labyrinth Communications Technology Group, Inc. during fiscal 1998. In
connection with the acquisition, the Company issued 1,741,722 and 782,779 vested
shares of common stock in fiscal 1999 and 1998, respectively.
See accompanying notes to consolidated financial statements.
F -
<PAGE>
U.S. WIRELESS CORPORATION
Consolidated Statements of Cash Flows
For the Years Ended March 31, 1999 and 1998
Schedule of non-cash investing and financing activities (continued):
During the years ended March 31, 1999 and 1998, the Company issued 379,500
and 594,000 stock options to employees and 103,000 and 200,000 stock options to
consultants, respectively. In connection with these issuance's, the Company
recorded compensation expense of $4,067 and $10,572 to employees and $48,234 and
$115,744, to consultants, respectively. In fiscal year 1999, the Company also
issued common stock options and warrants to purchase 370,000 shares of the
Company's common stock in connection with private placements (Note 7).
During the year ended March 31, 1998, the Company entered into capital
leases for equipment that totaled $10,370.
During the year ended March 31, 1997, the Company issued options to
purchase an aggregate of 2,641,500 shares of common stock to employees. In
connection with these issuance's, the Company amortized $516,480 of unearned
compensation during each of fiscal 1999 and 1998.
During fiscal year 1998, the Company negotiated the return of 2,706,006
shares of its common stock in exchange for the return of the 400,000 shares of
common stock of another entity.
See accompanying notes to consolidated financial statements.
F -
<PAGE>
U.S. WIRELESS CORPORATION
Notes to Consolidated Financial Statements
For the Years Ended March 31, 1999 and 1998
1. Organization and Business
U.S. Wireless Corporation (the "Company"), headquartered in San Ramon,
California, was incorporated in the State of Delaware in February 1993. In July
1996, the Company changed its name to its present name, distributed to its
stockholders its prior business operations, and began its current business
operations by acquiring 51% of each of Labyrinth Communications Technologies
Group, Inc. ("Labyrinth") and Mantra Technologies, Inc. ("Mantra"). In January
1998, the Company acquired the 49% minorit interest in Labyrinth (Note 3).
The Company develops high-performance, network-based location systems
designed to enable wireless carriers and others to provide their customers with
value-added, location-based services and applications, including enhanced 911,
live-navigation assistance, enhanced 411, asset and vehicle tracking, and
network-management systems.
In February 1999, the Company's board of directors approved the
recapitalization of Mantra, which provided for the issuance of 33% of Mantra's
outstanding common stock to its management. Such shares vest one-third upon
issuance, and additional vesting is dependent upon the achievement of defined
revenue targets. This recapitalization has reduced the Company's ownership of
Mantra to 44%, at March 31, 1999 and future reductions will occur if vesting
targets are achieved.
2. Summary of Accounting Policies
a) Principles of consolidation
The consolidated financial statements for the year ended March 31, 1999
include the accounts of the Company and Mantra. The consolidated financial
statements for the year ended March 31, 1998 include the accounts of the
Company, Labyrinth, and Mantra. All significant intercompany balances and
transactions have been eliminated in consolidation.
b) Cash and cash equivalents
The Company considers all highly liquid investments purchased with a
maturity of three months or less on the date of acquisition to be cash
equivalents.
F -
<PAGE>
U.S. WIRELESS CORPORATION
Notes to Consolidated Financial Statements
For the Years Ended March 31, 1999 and 1998
2. Summary of Accounting Policies (continued)
c) Equipment, improvements, and fixtures
Equipment, improvements, and fixtures are recorded at cost. Depreciation is
provided using the straight-line method over the estimated useful lives of the
related assets, which is two to five years. Maintenance and repairs are charged
to operations as incurred.
d) Income taxes
The Company uses the "liability method" of accounting for income taxes.
Accordingly, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets and
liabilities, using enacted tax rates in effect for the year in which the
differences are expected to reverse. Current income taxes are based on the
year's income taxable for federal and state income tax reporting purposes.
e) Accounting for employee stock options
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation." In conformity with the provisions of SFAS No. 123,
the Company has determined that it will not change to the fair value method
presented by SFAS No. 123 and will continue to follow Accounting Principle Board
Opinion No. 25 for measurement and recognition of employee stock-based
transactions. Pro forma disclosures, as required by SFAS No. 123, are presented
in Note 8.
F -
<PAGE>
U.S. WIRELESS CORPORATION
Notes to Consolidated Financial Statements
For the Years Ended March 31, 1999 and 1998
2. Summary of Accounting Policies (continued)
f) Software development costs
Costs incurred in the research and development of new software products are
expensed, as incurred, until technological feasibility has been established.
After technological feasibility is established, any additional costs are
capitalized in accordance with SFAS No. 86, "Accounting for the Cost of Computer
Software to Be Sold, Leased or Otherwise Marketed." The establishment of
technological feasibility and the ongoing assessment of recoverability of
capitalized software development costs require considerable judgment by
management with respect to certain external factors such as, anticipated future
revenues, estimated economic life, and changes in software and hardware
technologies. No software development costs have been capitalized during either
of the years ended March 31, 1999 and 1998.
g) Net loss per share
Basic earnings (loss) per share is computed by dividing net income (loss)
by the weighted average number of common shares outstanding during each period.
Diluted earning (loss) per share is similar to basic earnings (loss) per share,
except that the weighted average number of common shares outstanding is
increased to reflect the dilutive effect of potential common shares, such as
those issuable upon the exercise of stock or warrants, and the conversion of
preferred stock, as if they had been issued.
For both of the years ended March 31, 1999 and 1998, there is no difference
between basic and diluted loss per common share, as the effects of the exercise
of common stock options, the conversion of preferred stock, and the issuance of
any contingent shares related to the acquisition of the minority interest of
Labyrinth (Note 3) are anti-dilutive, given the net loss recorded for both
years.
h) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, revenues
and expenses, and disclosure of contingent assets and liabilities at the date of
the financial statements. Actual amounts could differ from those estimates.
F -
<PAGE>
U.S. WIRELESS CORPORATION
Notes to Consolidated Financial Statements
For the Years Ended March 31, 1999 and 1998
2. Summary of Accounting Policies (continued)
i) Concentration of credit risk
As of March 31, 1999 and 1998, the Company had amounts on deposit that
exceeded federally insured limits by $5,114,463 and $1,519,478, respectively.
j) Recent accounting standards
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This statement establishes standards for reporting and display of
comprehensive income, and its components (revenues, expenses, gains and losses),
in an entity's financial statements. This statement requires an entity to
classify items of other comprehensive income, by their nature, in a financial
statement and display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. In accordance with the provisions
of this statement, the Company did not adopt SFAS No. 130, as it had no items of
other comprehensive income during fiscal 1999 and 1998.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This statement requires public
enterprises to report financial and descriptive information about its reportable
operating segments and establishes standards for related disclosures about
products and services, geographic areas, and major customers. At the present
time, the Company's two operating segments, which are described in Note 1 as
wireless communications and internet applications, are not monitored separately
for internal financial reporting purposes.
Reclassifications
The 1998 consolidated financial statements have been reclassified to
conform to the 1999 presentation.
F -
<PAGE>
U.S. WIRELESS CORPORATION
Notes to Consolidated Financial Statements
For the Years Ended March 31, 1999 and 1998
3. Acquisition of Minority Interest
In January 1998, the Company submitted Exchange Offer Agreements (the
"Exchange Offer") to the stockholders representing the 49% minority interest in
Labyrinth. Pursuant to the terms of the Exchange Offer, the Company exchanged
4,498,200 shares of its common stock for 490,000 shares of common stock of
Labyrinth. The Exchange Offer provides that the shares of the Company's common
stock are subject to the following vesting schedule:
(i) 20% of shares vest one year from issuance.
(ii) 40% of shares shall vest upon successful completion and operation
of Labyrinth's primary product in a major market.
(iii) 40% of the shares shall vest when the Company achieves
cumulative sales of $15 million.
In accordance with the provisions of Accounting Principles Board ("APB")
Opinion No. 16, and interpretations thereof, this acquisition of minority
interest has been accounted for using the purchase method of accounting. As of
March 31, 1999, an aggregate of 2,524,517 shares of the Company's common stock
have vested, as defined by the Exchange Offer, and have been issued to the
former Labyrinth stockholders. The remaining 1,973,683 shares of the Company's
common stock provided for in the Exchang Offer have not yet vested and are
currently held in escrow until vested. 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.
In connection with the acquisition of the minority interest described
above, the Company expensed $2,177,152 and $476,552 during the years ended March
31, 1999 and 1998, respectively, as the cost over basis of net assets acquired.
Such amounts have been characterized as purchase research and development costs,
given the ongoing research and development activities of Labyrinth.
When and if event (iii), detailed in the vesting schedule above, occurs,
and additional shares of the Company's common stock become vested and are issued
to the former Labyrinth stockholders, the Company will record additional noncash
charges to earnings, which may have the effect of significantly increasing the
Company's net loss, or reducing or eliminating earnings, if any, at such time.
F -
<PAGE>
U.S. WIRELESS CORPORATION
Notes to Consolidated Financial Statements
For the Years Ended March 31, 1999 and 1998
3. Acquisition of Minority Interest (continued)
In June 1999, the holder of 50,000 shares of common stock of Labyrinth
relinquished his position with the Company. Accordingly, the vesting of shares
issued in connection with the Exchange Offer has ceased with respect to this
stockholder.
4. Investment in Joint Venture
The Company and Anam Instruments, Inc. ("Anam") entered into a Joint
Venture Agreement (the "Agreement") dated July 31, 1998, whereby Wireless
Technology, Inc. ("WTI") was formed to develop and manufacture a Code Division
Multiple Access interface ("CDMA") for the RadioCamera. WTI will also market and
distribute the RadioCamera in Korea and other Asian countries. In connection
with the formation of WTI, the Company sold 20,000 shares of Series A Preferred
Stock to Anam for $400,000. The cash proceeds from this sale were then
contributed by the Company to WTI while Anam contributed cash of $800,000.
Accordingly, the Company has a 33% ownership interest in WTI, and Anam has a 67%
ownership interest as of March 31, 1999. During the period from inception, July
31, 1998, through March 31, 1999, WTI incurred a net loss of $1,024,211. The
Company's equity in net losses of WTI aggregated $341,370 during the year ended
March 31, 1999.
The Company also has a Joint Development Agreement with Anam; whereby WTI
shall reimburse the Company up to $650,000 for expenditures made prior to the
formation of the joint venture, subject to defined financing and performance
objectives with the CDMA project. As of March 31, 1999, the Company has received
related reimbursements aggregating approximately $482,000, and such amounts are
included as reductions of research and development expenses in the accompanying
statement of operations for th year ended March 31, 1999.
5. Equipment, Improvements and Fixtures
Equipment, improvements, and fixtures, net comprise the following at
March 31:
Equipment, improvements, and fixtures
Less accumulated depreciation and amortization
F -
<PAGE>
U.S. WIRELESS CORPORATION
Notes to Consolidated Financial Statements
For the Years Ended March 31, 1999 and 1998
5. Equipment, Improvements and Fixtures (continued)
Equipment, improvements, and fixtures include equipment under capital
leases of $81,035 and $81,035, and accumulated amortization of $51,431 and
$24,419, as of March 31, 1999 and 1998, respectively.
6. Income Taxes
The reconciliation of income taxes computed at the federal statutory tax
rate to income tax expense at the effective income tax rate is as follows:
<TABLE>
<CAPTION>
1999 1998
--------------- ----------------
<S> <C> <C>
Federal statutory income tax (benefit) rate (34.0)% (34.0)%
Increases (decreases) resulting from:
Non-deductible expenses 8.9 5.4
Net change in valuation allowance 25.1 28.6
------------ --------------
Effective income tax benefit rate -% -%
The income tax effects of significant items comprising the Company's net
deferred income tax assets and liabilities as of March 31, 1999 and 1998 are as
follows:
1999 1998
--------------- ----------------
Depreciation and amortization $ 52,900 $ (12,990)
Net operating loss carryforwards 3,046,685 1,475,163
Unearned compensation 466,756 343,344
Valuation allowance (3,566,341) (1,805,517)
---------------- ---------------
Long-term portion of deferred tax assets (liabilities) $ - $ -
=============== ================
</TABLE>
At March 31, 1999 and 1998, the deferred tax assets and liabilities result
from the Company, Labyrinth and Mantra. The Company has federal and state NOLs
at March 31, 1999 approximating $8,303,000 and $3,836,000, respectively. The
federal NOL carryforwards expire between the years 2009 and 2012. The state NOL
carryforwards expire in the year 2002. Utilization of a portion of the NOLs may
be limited on Section 382 of the Internal Revenue Code due to ownership changes.
F -
<PAGE>
U.S. WIRELESS CORPORATION
Notes to Consolidated Financial Statements
For the Years Ended March 31, 1999 and 1998
6. Income Taxes (continued)
At March 31, 1999 and 1998, a 100% valuation allowance has been provided to
reduce the Company's net deferred tax assets for the amount by which the
deferred tax asset related to NOLs exceeded the net deferred tax liability
resulting from all other temporary differences. The Company has provided the
allowance since management could not determine that it was "more likely than
not" that the benefits of the deferred tax assets would be realized.
7. Stockholders' Equity
a) Series A Preferred Stock and Common Stock Private Placement
On June 24, 1998, the Company's stockholders approved an amendment to the
Company's articles of incorporation, authorizing 1,000,000 shares of Preferred
Stock, subject to the rights and preferences being determined by the Company's
board of directors. The board of directors authorized the issuance of up to
300,000 shares of the Series A Preferred Stock.
On June 25, 1998, the Company completed a private offering of its
securities, in which the Company raised gross proceeds of $5,134,849 through the
sale of 668,206 shares of common stock and 50,000 shares of the Company's Series
A Preferred Stock. Included in the private offering was the conversion by
debenture holders of the Company of $2,500,000 principal amount of secured
debentures in exchange for 961,538 shares of common stock. The debentures were
originally issued in May 1998.
The shares of Series A Preferred Stock carry a cumulative dividend at the
rate of 6% per annum, payable in cash or shares of Series A Preferred Stock, at
the Company's option (dividends in arrears aggregated approximately $56,000 at
March 31, 1999). Holders of the Series A stock have the right to convert each
share into shares of common stock at a conversion price of $2.95 per share, at
any time, commencing 90 days from issuance. The shares of Series A Preferred
Stock have no voting rights and carry a liquidation preference of $20.00 per
share. The Company may redeem the Series A Preferred Stock upon the earlier of
three years from issuance, or when the closing price for the Company's common
stock has been at least $8.00, for any consecutive 30-day period.
F -
<PAGE>
U.S. WIRELESS CORPORATION
Notes to Consolidated Financial Statements
For the Years Ended March 31, 1999 and 1998
Stockholders' Equity (continued)
a) Series A Preferred Stock and Common Stock Private Placement (continued)
In connection with the offering, the Company paid $150,000 as a commission
on the net proceeds of the offering and warrants to purchase 110,000 shares of
common stock at $4.00 per share, and 110,000 shares of common stock at $5.00 per
share, exercisable for three and five years, respectively. Additionally, the
Company issued options to purchase 150,000 shares of the Company's common stock
at $2.00 per share, exercisable for five years commencing one year from
issuance. The estimated fai value of these warrants and options was determined
in accordance with SFAS No. 123, and aggregated $651,558. Total offering costs
of $801,558 have been netted against gross proceeds received in the private
placement.
In addition, the Company sold 20,000 shares of Series A Preferred Stock to
Anam, as described in Note 4.
Series B Preferred Stock Private Placement
In March 1999, the Company entered into subscription agreements with three
private investors to sell an aggregate of 50,000 shares of Series B Preferred
Stock at $100 per share. As of March 31, 1999, 27,000 of the Series B shares
were issued, and the Company received gross proceeds of $2,700,000. The
remaining 23,000 shares of Series B Preferred Stock were in escrow at March 31,
1999. In April 1999, the Company's stockholders approved the issuance of the
Series B shares, and the share were issued upon receipt by the Company of
$2,300,000.
Each share of Series B Preferred Stock is convertible into 100 shares of
the Company's common stock, commencing 90 days after the offering's closing
date, provided, however, that if conversion is elected within 12 months of
issuance, each share of Series B Preferred Stock is convertible into 67 shares
of the Company's common stock. Further, the Series B shares shall automatically
convert into shares of common stock when the closing price for the shares of
common stock has been at least $5.00 for 30 consecutive days. Holders of the
Series B Preferred Stock shall vote as a separate voting group, and are entitled
to elect one member to the Company's Board of Directors, until the earlier of
such time as: (i) 50% of the shares of Series B Preferred Stock have been
voluntarily converted into common stock, and (ii) in the event of a mandatory
conversion of
F -
<PAGE>
U.S. WIRELESS CORPORATION
Notes to Consolidated Financial Statements
For the Years Ended March 31, 1999 and 1998
7 Stockholders' Equity (continued)
b) Series B Preferred Stock Private Placement (continued)
the Series B Preferred Stock, an aggregate of 50% of the total numbers of
shares of common stock issued upon conversion have been resold. Series B holders
shall also vote on the issuance of stock that ranks senior to, or on parity
with, the Series B Preferred Stock, and on any change in the terms of the Series
B Preferred Stock. The Series B Preferred Stock has a liquidation preference of
$100 per share.
8. Stock Options
The Company issues common stock options to its employees and to various
consultants performing services for the Company. Options granted to employees
generally vest over three years, expire five years from the date of grant and
have exercise prices ranging from $2 to $4 per share. Options granted to
consultants generally vest immediately, or over three years, expire
three-to-five years from the date of grant, and have exercise prices ranging
from $2 to $5 per share. The number of options issue and outstanding at March
31, 1999 are as follows:
Options outstanding, beginning of period 4,754,000
Granted 852,500
Canceled (553,000)
Exercised (103,000)
--------
Options outstanding, end of period 4,950,500
Options exercisable, end of period 3,758,317
The difference between the exercise price and the fair market value of the
options issued to employees on the dates of grant is accounted for as unearned
compensation and amortized to expense over the related vesting period. During
each of the years ended March 31, 1999 and 1998, amortization of unearned
compensation amounted to $516,480.
F -
<PAGE>
U.S. WIRELESS CORPORATION
Notes to Consolidated Financial Statements
For the Years Ended March 31, 1999 and 1998
8. Stock Options (continued)
Compensation expense associated with stock options issued to consultants is
measured based on the estimated fair value of services received by the Company,
or the fair value of the stock option issued by the Company, whichever is more
reliably measurable. During fiscal years 1999 and 1998, $48,234 and $115,744,
respectively, of compensation expense were recorded in connection with these
stock options. In addition, common stock purchase warrants and options were
issued in connection with a private placement (Note 7).
As discussed in Note 2.f), the Company follows Accounting Principle Board
Opinion No. 25 for measurement and recognition of employee stock-based
transactions. Had the Company elected to adopt the measurement and recognition
provisions of SFAS No. 123, the Company would have incurred an additional
$2,286,891 and $1,945,114 in related compensation expenses during the years
ended March 31, 1999 and 1998, respectively. The pro forma net loss under the
provisions of SFAS No. 123 is $(9,517,168) and $(5,137,679), and the pro forma
basic and diluted net loss per common share is $(0.74) and $(0.67) for the year
ended March 31, 1999 and 1998, respectively.
The pro-forma information provided above was estimated at the date of
grant, using the Black-Scholes option-pricing model, with the following weighted
average assumptions: <TABLE> <CAPTION>
1999 1998
--------------- ----------------
<S> <C> <C>
Expected life (in years) 5.00 5.00
Risk free interest rate 6.50% 6.50%
Volatility 120.00% 99.00%
Dividend yield 0.00% 0.00%
</TABLE>
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. Because the Company's options have characteristics
significantly different from those of trading options, management believes that
the existing pricing models do not necessarily provide a reliable single measure
of the fair value of its options.
F -
<PAGE>
U.S. WIRELESS CORPORATION
Notes to Consolidated Financial Statements
For the Years Ended March 31, 1999 and 1998
8. Stock Options (continued)
In December 1997, the Company adopted the Senior Management Incentive Plan
(the "Plan"). The Plan provides for the issuance of up to an aggregate of
500,000 shares of the Company's common stock upon exercise of stock options and
other rights to officers, key employees, and consultants. Awards made pursuant
to the Plan will generally vest over three-year periods. As of March 31, 1999,
no stock options, or other rights, have been issued under the Plan.
9. Commitments and Contingencies
a) Operating leases
The Company leases office facilities in San Ramon, California and Jessup,
Maryland under non-cancelable operating leases. The California lease requires
minimum monthly payments of $21,585 and expires in January 2003. The Maryland
lease requires minimum monthly payments of $1,167 and expires in September 1999.
At March 31, 1999, aggregate future minimum lease payments due under operating
leases are as follows:
Year ending
March 31,
2000 $ 266,018
2001 259,016
2002 259,016
2003 202,312
Total minimum lease payments $ 986,362
=========
The Company also leases six rooftop-testing facilities in Oakland,
California and Baltimore, Maryland under month-to-month leases. Minimum monthly
payments under these month-to-month leases are $500.
Rent expense was $273,964 and $153,393, respectively, for the years ended
March 31, 1999 and 1998.
F -
<PAGE>
U.S. WIRELESS CORPORATION
Notes to Consolidated Financial Statements
For the Years Ended March 31, 1999 and 1998
9. Commitments and Contingencies (continued)
b) Capital leases
The Company leases various equipment under non-cancelable capital leases.
Minimum monthly rental payments on capital leases range from $88 to $2,011, and
the related leases expire at various dates through August 2001. At March 31,
1999, aggregate future minimum lease payments due under capital leases are as
follows:
Year ending
March 31,
2000 $ 38,624
2001 5,188
--------
43,812
Less amounts representing interest (4,694)
Total future minimum lease payments, net 39,118
Less current portion due within one year (34,486)
----------
Noncurrent portion of obligation under capital leases $ 4,632
==========
c) 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 adverse impact on the
Company's operations. Furthermore, there can be no assurance that another
equity's failure to ensure year 2000 capability would not have an adverse effect
on the Company.
F -
<PAGE>
U.S. WIRELESS CORPORATION
Notes to Consolidated Financial Statements
For the Years Ended March 31, 1999 and 1998
9. Commitments and Contingencies (continued)
d) Employment agreements
The Company has a five-year employment agreement with its president that
provides for an annual salary of $160,000 and annual increases of 15% per annum.
Upon execution of this agreement, the president was granted an option to
purchase 1,500,000 shares of the Company's common stock for $2.00 per share. No
such options were exercised as of March 31, 1999. The agreement provides for a
two-year, non-compete period upon termination of the president's employment, and
provides for severance compensation in the amount of three times the aggregate
annual compensation paid to the president during the preceding calendar year.
The Company's president is also the President and sole director of Mantra.
The Company also has three-year employment agreements with its general
counsel, Vice President of Hardware Engineering, and Vice President of Software
Development. Such agreements provide for individual minimum annual salaries that
range between $100,000 and $120,000 and provide for an aggregate of 350,000
options to purchase shares of the Company's common stock at $2.00 to $2.50 per
share. The options vest over three-year periods and have five-year lives. As of
March 31, 1999, no options have been exercised.
Subsequent Events
In May 1999, the Company sold an additional 10,000 shares of Series B
Preferred Stock to private investors at $100 per share. In connection with the
sales of Series B Preferred Stock (Note 7), the Company issued an option to the
placement agent to purchase 150,000 shares of the Company's common stock at
$2.50 per share commencing one year from issuance. The option expires on April
30, 2004. The Company also sold 405,000 shares of its common stock to officers,
directors, and employees at $1 per share.
F -
Exhibit 3.2.1 - Amended and Restated Certificate of Incorporation of the Company
filed on March 5, 1999.
Amended and Restated
Certificate of Incorporation of
U.S. Wireless Corporation
Under Sections 242 and 245 of the Delaware Corporation Law, the undersigned
corporation adopts the following Amended and Restated Certificate of
Incorporation which shall supersede the existing Certificate of Incorporation
and all prior amendments thereto. The undersigned, U.S. Wireless Corporation,
does hereby certify and set forth:
FIRST: The name of the Corporation is: U.S. WIRELESS CORPORATION
SECOND: The Certificate of Incorporation was filed by the Department of
State on 12th day of February, 1993, originally filed under the name of American
Toys, Inc.
THIRD: The amendment to the Certificate of Incorporation of the Corporation
effected by this Amended and Restated Certificate of Incorporation is to amend
the provisions of "Article FOURTH," to designate the relative rights,
preferences and limitation of a series of preferred stock designated as the
"Series B Preferred Stock", as provided for in Article FOURTH Subarticle (D).
The Amended and Restated Certificate of Incorporation shall read as follows:
FIRST: The name of the Corporation is: U.S. WIRELESS CORPORATION.
SECOND: The name and address of the Corporation's registered agent and the
address of the Corporation's registered office in Delaware are as follows:
Incorporating Services, Ltd., 15 East North Street, Dover, Delaware 19901,
County of Kent.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
law of the State of Delaware.
FOURTH: Capital Stock
(A) Authorized Capital Stock. The total number of shares of all classes
of stock which this Corporation shall have authority to issue is FORTY-ONE
MILLION (41,000,000) shares, consisting of FORTY MILLION (40,000,000) shares of
Common Stock, par value $.01 per share (hereinafter, the "Common Stock" or
"Common Shares"), and ONE MILLION (1,000,000) shares of preferred stock, par
value $.01 per share (hereinafter, the "Preferred Stock"), of which THREE
HUNDRED THOUSAND (300,000) shares shall be designated as the "Series A Preferred
Stock", the relative rights, preferences, and limitations of which are as set
forth in Subarticle (C) of this Article FOURTH, and FIFTY THOUSAND (50,000)
shares shall be designated as the "Series B Preferred Stock", the relative
rights, preferences, and limitations of which are as set forth in Subarticle (D)
of this Article FOURTH.
(B) Preferred Stock - Undesignated.
(i) Shares of Preferred Stock may be issued from time to time in
one or more series and/or class as may from time to time be determined
by the Board of Directors. Each series and/or class shall be
distinctly designated. The relative rights, preferences and
limitations of shares of undesignated Preferred Stock shall be as
provided for in this Article FOURTH.
(ii) Undesignated Preferred Stock. Shares of Preferred Stock may
be issued from time to
1
<PAGE>
time in one or more series as may from time to time be determined by
the Board of Directors. Each series shall be distinctly designated. All
shares of any one series of the Preferred Stock shall be alike in every
particular event except that there may be different dates from which
dividends thereon, if any, shall be cumulative, if made cumulative. The
powers, preferences and relative, participating, optional and other
rights of each series, and the qualifications, limitations or
restrictions thereof, if any, may differ from those of any and all
other series at any time outstanding. Subject to the provisions of this
Article FOURTH, the Board of Directors of the Corporation is hereby
expressly granted authority to fix by resolution or resolutions adopted
prior to the issuance of any shares of each particular series of
Preferred Stock, the designation, powers, preferences and relative,
participating, optional and other rights, and the qualifications,
limitations and restrictions thereof if any, of such series, including,
but without limiting the generality of the foregoing, the following:
(a) the distinctive designation of and the number of shares
of Preferred Stock which shall constitute the series, which
number may be increased (except as otherwise fixed by the Board
of Directors) or decreased (but not below the number of shares
thereof then outstanding) from time to time by action of the
Board of Directors;
(b) the rate and times at which, and the terms and
conditions upon which, dividends, if any, on shares of the series
shall be paid, the extent of preferences or relation, if any, of
such dividends to the dividends payable on any other class or
classes of stock of this Corporation, or on any series of
Preferred Stock or of any other class or classes of stock of this
Corporation, and whether such dividends shall be cumulative or
non-cumulative;
(c) the right, if any, of the holders of shares of the
series to convert the same into, or exchange the same for, shares
of any other class or classes of stock of this corporation, or of
any series of Preferred Stock of this Corporation, and the terms
and conditions of such conversion or exchange;
(d) whether shares of the series shall be subject to
redemption, and the redemption price or prices including, without
limitation, a redemption price or prices payable in shares of the
Common Stock and the time or times at which, and the terms and
conditions upon which, shares of the series may be redeemed;
(e) the rights, if any, of the holders of shares of the
series upon voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or
winding up of this Corporation;
(f) the terms of the sinking fund or redemption or purchase
account, if any, to be provided for shares of the series; and
(g) the voting powers, if any, of the holders of shares of
the series which may, without limiting the generality of the
foregoing, include (1) the right to more or less than one vote
per share on any or all matters voted upon by the stockholders
and (2) the right to vote, as a series by itself or together with
other series of Preferred Stock or together with all series of
Preferred Stock as a class, upon such matters, under such
circumstances and upon such conditions as the Boar of Directors
may fix, including, without limitation, the right, voting as a
series by itself or together with other series of Preferred Stock
or together with all series of Preferred Stock as a class, to
elect one or more directors of this Corporation, or to elect a
majority of the members of the Board, under such circumstances
and upon such conditions as the Board may determine.
<PAGE>
(C) Series A Preferred Stock.
(i) Designation. The designation of this series of Preferred Stock,
par value $0.01 per share, shall be the "Series A Preferred Stock." The
number of shares of Series A Preferred Stock authorized hereby shall be
300,000 shares.
(ii) Rank. The Series A Preferred Stock shall, with respect to rights
on liquidation, winding up, and dissolution, rank (a) junior to any other
senior securities established by the Board of Directors and, if required by
Subarticle (vii), approved by the affirmative vote of the holders of a
majority of the shares of the Series A Preferred Stock, the terms of which
shall specifically provide that such series shall rank prior to the Series
A Preferred Stock; (b) on a parity with any other parity securities
established by the Board of Directors, the terms of which shall
specifically provide that such series shall rank on a parity with the
Series A Preferred Stock; and (c) prior to any other junior securities of
the Corporation.
(iii) Dividends.
(a) The holders of the shares of the Series A
Preferred Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of funds legally
available for the payment of dividends, cumulative dividends
at $1.20 per share per annum. Cumulative dividends are payable
upon the earlier of conversion or redemption of the shares of
Series A Preferred Stock (the "Series A Dividend Payment
Dates"), in preference to dividends on junior securities. Such
dividend shall be paid to the holder of record by the close of
business on the date thirty (30) business days after the
Series A Dividend Payment Dates, which dividend may be paid in
cash or in kind, in shares of Series A Preferred Stock, at the
discretion of the Corporation. If paid in kind, the number of
shares issuable shall be rounded to the nearest share, there
being no obligation of the Corporation to make any cash
payments. Each of such dividends shall be fully cumulative and
shall accrue (whether or not declared), without interest, from
the date such dividends are payable as herein provided.
(b) If at any time the Corporation shall have failed
to pay full dividends which have accrued (whether or not
declared) on any senior securities, no dividend shall be
declared by the Board of Directors or paid or set apart for
payment by the Corporation on the shares of the Series A
Preferred Stock or any other parity securities unless, prior
to or concurrently with such declaration, payment, or setting
apart for payment, all accrued and unpaid dividends on all
outstanding shares of senior securities shall have been or are
declared and paid or set apart for payment, without interest.
No dividends shall be declared or paid or set apart for
payment on any parity or junior securities for any period
unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment
on the Series A Preferred Stock for all dividend payment
periods terminating on or prior to th date of payment of such
full cumulative dividends. If any dividends are not paid in
full, as aforesaid, upon the shares of the Series A Preferred
Stock and any other parity securities, the Corporation shall
distribute the dividend pro rata so that the amount of
dividends declared per share on the Series A Preferred Stock
and such other parity securities shall in all cases bear to
each other the same ratio that accrued dividends per share on
the Series A Preferred Stock and such other parity securities
bear to each other. No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment
or payments on the Series A Preferred Stock or any other
parity securities which may be in arrears.
<PAGE>
(c) Holders of the shares of the Series A Preferred
Stock shall be entitled to receive the dividends provided
for in Subarticle (iii)(a) hereof in preference to and in
priority over any dividends of other parity securities and
any other junior securities.
(d) Subject to the foregoing provisions of this
Subarticle (iii) the Board of Directors may declare, and the
Corporation may pay or set apart for payment, dividends and
other distributions on any of junior securities and may
purchase or otherwise redeem any of junior securities or any
warrants, rights, or options exercisable for or convertible
into any junior securities, and the holders of shares of the
Series A Preferred Stock shall not be entitled to share
therein.
(iv) Liquidation Preference.
(a) In the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the affairs of
the Corporation, the holders of the shares of Series A
Preferred Stock then outstanding shall be entitled to be
paid out of the assets of the Corporation available for
distribution to its stockholders an amount in cash equal to
$20.00 per share for each share outstanding, before any
payment shall be made or any assets distributed to the
holders of any junior securities provided, however, that the
holders of the outstanding shares of the Series A Preferred
Stock shall not be entitled to receive such liquidation
payment until the liquidation payments on all outstanding
shares of senior securities, if any, shall have been paid in
full; and, provided, further, that the Series B Preferred
Stock shall be deemed a "parity security" with respect to
the Liquidation Preference. If the assets of the Corporation
are not sufficient to pay in full the liquidation payments
payable to the holders of the outstanding shares of the
Series A Preferred Stock or any other parity securities,
then the holders of all such shares shall share ratably in
such distribution of assets in accordance with the amount
which would be payable on such distribution if the amounts
to which the holders of the outstanding shares of Series A
Preferred Stock and the holders of outstanding shares of
such other parity securities are entitled were paid in full.
(b) For the purposes of this Article FOURTH, neither
the voluntary sale, conveyance, lease, exchange, nor
transfer (for cash, shares of stock, securities, or their
consideration) of all or substantially all of the property
or assets of the Corporation or the consolidation or merger
of the Corporation with one or more other corporations shall
be deemed to be a liquidation, dissolution, or winding up,
voluntary or involuntary, unless such voluntary sale,
conveyance, lease, exchange, or transfer shall be in
connection with a dissolution or winding up of the business
of the Corporation.
<PAGE>
(v) Redemption.
(a) Notice. The Corporation may, at any time, upon the
earlier of (i) three years from issuance and (ii) the period
after the closing price for the Corporation's Common Stock
has been $8.00 for any consecutive thirty (30) day period,
redeem all of the issued and outstanding shares of the
Series A Preferred Stock for a per share price of $20.00
(the "Redemption Price"), plus accrued but unpaid dividends,
upon the terms set forth below. If the Corporation desires
to redeem the Series A Preferred Stock, it shall deliver
twenty (20) days notice (the "Redemption Notice") by regular
mail to each holder of record of the Series A Preferred
Stock at the address of each holder as it appears on the
books of the Corporation and will additionally publish a
Notice of Redemption in the Wall Street Journal. Dividends
shall cease accruing on the date of the Redemption Notice.
(b) Delivery of Certificates and Payment. On or before
the twentieth day after the date of the Redemption Notice
(the "Period"), each holder of the Series A Preferred Stock
shall deliver to the secretary of the Corporation at its
principal office his certificate for the Series A Preferred
Stock, duly endorsed in blank (or accompanied by proper
instruments of transfer). Upon such surrender the holder
thereof shall be entitled to receive payment of the
Redemption Price for each share of the Series A Preferred
Stock so surrendered. The Corporation shall make such
payment within five (5) days after the later of (i) the date
on which the holder delivered such certificates and (ii) the
last day of the Period.
(vi) Conversion.
(a) Subject to, and upon compliance with, the
provisions of this Subarticle (vi), the holder of a share of
Series A Preferred Stock designated shall have the right, at
such holder's option, at any time commencing 90 days from
issuance, to convert such share in to fully paid and
non-assessable shares of Common Stock of the Corporation, at
a conversion price of $2.95 per share of Common Stock. The
number of shares issuable shall be rounded to the nearest
whole share, there being no obligation of the Corporation to
make any cash payments.
(b) (1) In order to exercise the conversion privilege,
the holders of each share of Series A Preferred Stock to be
converted shall surrender the certificates representing such
shares at the office of the Corporation or its transfer
agent for the Series A Preferred Stock, as may be appointed
for such purpose by the Corporation, with the Notice of
Election to Convert on the back of said certificate
completed and signed. Unless the shares of Common Stock
issuable on conversion are to be issued in the same name in
which such share of Series A Preferred Stock is registered,
each share surrendered for conversion shall be accompanied
by instruments of transfer, in form satisfactory to the
Corporation, duly executed by the holder of such holder's
duly authorized attorney and an amount sufficient to pay any
transfer or similar tax.
(2) As promptly as practicable after the surrender of
the certificates for shares of Series A Preferred Stock as
aforesaid, the Corporation shall issue and shall deliver at
such office to such holder, or on his written order, a
certificate or certificates for the number of full shares of
Common Stock issuable upon the conversion of such shares in
accordance with the provisions of this Subarticle (vi).
<PAGE>
(3) Each conversion shall be deemed to have been
effected immediately prior to the close of business on the
date on which the certificates for shares of Series A
Preferred Stock shall have been surrendered and such notice
shall have been received by the Corporation as aforesaid,
and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the shares
represented thereby at such time on such date, unless the
stock transfer books of the Corporation shall be closed on
that date, in which event such person or persons shall be
deemed to have become such holder or holders of record at
the close of business on the next succeeding day on which
such stock transfer books are open and such notice is
received by the Corporation. All shares of Common Stock
delivered upon conversion of the Series A Preferred Stock
will upon delivery be duly and validly issued and fully paid
and non-assessable, free of all liens and charges and not
subject to any preemptive rights.
(c) The Corporation covenants that it will at all times
reserve and keep available, free from preemptive rights, out
of the aggregate of its authorized but unissued shares of
Common Stock or its issued shares of Common Stock held in
its treasury, or both, for the purposes of effecting
conversions of the Series A Preferred Stock, the full number
of shares of Common Stock deliverable upon the conversion of
all outstanding shares of Series A Preferred Stock not
theretofore converted. For purposes of this Subarticle (c),
the number of shares of Common Stock which shall be
deliverable upon the conversion of all outstanding shares of
Series A Preferred Stock shall be computed as if at the time
of computation all such outstanding shares were held by a
single holder.
(d) The shares of Common Stock into which each share of
Series A Preferred Stock is convertible shall be subject to
adjustment from time to time in a similar manner as the
shares of Series B Preferred Stock as described in
Subarticle (D)(vi)(d) below.
(vii) Voting Rights. The holders of record of shares of the Series A
Preferred Stock shall not be entitled to any voting rights except as hereinafter
provided in this Subarticle (vii)(a) or as otherwise provided by law.
(a) As long as any shares of the Series A Preferred
Stock are outstanding, the Corporation will not, without the
affirmative vote or consent of the holders of at least a
majority of the outstanding shares of the Series A Preferred
Stock, voting as a class, vote to amend the Corporation's
Certificate of Incorporation to (i) increase or decrease the
aggregate number of authorized shares of the Series A
Preferred Stock; (ii) increase or decrease the par value of
the Series A Preferred Stock; or (iii) alter the
preferences, powers, or rights of the Series A Preferred
Stock so as to affect them adversely, except that the
Corporation may issue a senior security.
(b) In exercising the voting rights set forth in this
Subarticle (vii), each share of Series A Preferred Stock
shall have one vote per share.
(D) Series B Preferred Stock.
<PAGE>
(i) Designation. The designation of this series of
Preferred Stock, par value $0.01 per share, shall be the
"Series B Preferred Stock." The number of shares of Series B
Preferred Stock authorized hereby shall be 50,000 shares.
(ii) Rank. The Series B Preferred Stock shall, with
respect to rights on liquidation, winding up, and
dissolution, rank (a) junior to any senior securities
established by the Board of Directors with the prior
approval by the affirmative vote of the holders of a
majority of the shares of the Series B Preferred Stock as
required under Subarticle (vii)(b) below, the terms of which
shall specifically provide that such series shall rank prior
to the Series B Preferred Stock; (b) on a parity with the
shares of Series A Preferred Stock and any other parity
securities established by the Board of Directors with the
prior approval by the affirmative vote of the holders of a
majority of the shares of the Series B Preferred Stock as
required under Subarticle (vii)(b) below, the terms of which
shall specifically provide that such series shall rank on a
parity with the Series B Preferred Stock; and (c) senior to
all other shares of capital stock of the Corporation,
including, without limitation, the Common Stock.
(iii) Dividends. The holders of the shares of the
Series B Preferred Stock shall not be entitled to receive
any dividends.
(iv) Liquidation Preference.
(a) In the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the affairs of
the Corporation, the holders of the shares of Series B
Preferred Stock then outstanding shall be entitled to be
paid out of the assets of the Corporation available for
distribution to its stockholders an amount in cash equal to
$100.00 per share for each share of Series B Preferred Stock
outstanding (the "Liquidation Preference"), before any
payment shall be made or an assets distributed to the
holders of any junior securities; provided, that the holders
of the outstanding shares of Series B Preferred Stock shall
receive such liquidation payment, on a pro rata basis, on an
equal priority, pari passu basis, with the holders of the
then outstanding shares of Series A Preferred Stock; and,
provided, further, that such holders shall not be entitled
to receive such liquidation payment until the liquidation
payments on any other senior securities approved by the
holders of Series B Preferred Stock, if any, shall have been
paid in full. If the assets of the Corporation are not
sufficient to pay in full the liquidation payments payable
to the holders of the outstanding shares of Series B
Preferred Stock, Series A Preferred Stock and any other
parity securities approved by the holders of Series B
Preferred Stock, if any, then the holders of all such shares
shall share ratably in such distribution of assets in
accordance with the amount which would be payable on such
distribution if the amounts to which the holders of the
outstanding shares of Series B Preferred Stock are entitled
were paid in full.
(b) For the purposes of this Article FOURTH, neither
the voluntary sale, conveyance, lease, exchange, nor
transfer (for cash, shares of stock, securities, or their
consideration) of all or substantially all of the property
or assets of the Corporation or the consolidation or merger
of the Corporation with one or more other corporations shall
be deemed to be a liquidation, dissolution, or winding up,
voluntary or involuntary, unless such voluntary sale,
conveyance, lease, exchange, or transfer shall be in
connection with a dissolution or winding up of the business
of the Corporation.
<PAGE>
(v) Redemption. The shares of Series B Preferred Stock are not
redeemable by the Corporation.
(vi) Conversion. The shares of Series B Preferred Stock are
subject to optional and mandatory conversion provisions, as set forth in this
Subarticle (vi).
(a) Subject to, and upon compliance with, the
provisions of this Subarticle (vi) (including, without
limitation, the mandatory conversion provision of Subarticle
(e) of this Subarticle (vi)), the holder of a share of Series
B Preferred Stock designated shall have the right, at such
holder's option, at any time commencing ninety (90) days from
issuance, to convert each share of Series B Preferred Stock
into one hundred (100) validly issued, fully paid and
non-assessable shares of Common Stock of the Corporation which
is based on a stated value of $100 per share of Series B
Preferred Stock divided by a conversion rate equal to $1.00
per share of Common Stock (the "Series B Conversion Price").
(b) (1) In order to exercise the conversion
privilege, the holders of each share of Series B Preferred
Stock to be converted shall surrender the certificates
representing such shares at the office of the Corporation or
its transfer agent for the Series B Preferred Stock, as may be
appointed for such purpose by the Corporation, with the Notice
of Election to Convert on the back of said certificate
completed and signed. Unless the shares of Common Stock
issuable on conversion are to be issued in the same name in
which such share of Series B Preferred Stock is registered,
each share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the
Corporation, duly executed by the holder or such holder's duly
authorized attorney and an amount sufficient to pay any
transfer or similar tax.
(2) As promptly as practicable after the surrender of the certificates for
shares of Series B Preferred Stock as aforesaid, the Corporation shall issue and
shall deliver to such holder at his registered address as it appears in the
Company's records, or on his written order, a certificate or certificates for
the number of full shares of Common Stock issuable upon the conversion of such
shares in accordance with the provisions of this Subarticle (vi).
(3) Each conversion shall be deemed to have been effected immediately prior
to the close of business on the date on which the certificates for shares of
Series B Preferred Stock shall have been surrendered and such notice shall have
been received by the Corporation as aforesaid, and the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have become the holder
or holders of record of the shares represented thereby at such time on such
date, unless the stock transfer books of the Corporation shall be closed on that
date, in which event such person or persons shall be deemed to have become such
holder or holders of record at the close of business on the next succeeding day
on which such stock transfer books are open and such notice is received by the
Corporation. All shares of Common Stock delivered upon conversion of the Series
B Preferred Stock will upon delivery be duly and validly issued and fully paid
and non-assessable, free of all liens and charges and not subject to any
preemptive rights.
(c) The Corporation covenants that it will at all times
reserve and keep available, free from preemptive rights, out
of the aggregate of its authorized but unissued shares of
Common Stock or its issued shares of Common Stock held in
its treasury, or both, for the purposes of effecting
conversions of the Series B Preferred Stock, the full number
of shares of Common Stock deliverable upon the conversion of
all outstanding shares of Series B Preferred Stock not
theretofore converted. For purposes of this Subarticle (c),
the number of shares of Common Stock which shall be
deliverable upon the conversion of all outstanding shares of
Series B Preferred Stock shall be computed as if at the time
of computation all such outstanding shares were held by a
single holder.
<PAGE>
(d) The Series B Conversion Price and number of shares
of Common Stock into which each share of Series B Preferred
Stock is convertible shall be subject to adjustment from
time to time as follows:
(1) If, at any time after the issuance of
the Series B Preferred Stock, the number of Common
Shares outstanding is increased by a stock dividend
payable in Common Shares or by a subdivision or
split-up of Common Shares, then, following the
payment date fixed for the determination of holders
of Common Shares entitled to receive such stock
dividend, subdivision or split-up, the Series B
Conversion Price shall be appropriately decreased so
that the number of Common Shares issuable on
conversion of each share of Series B Preferred Stock
shall be increased in proportion to such increase in
outstanding shares.
(2) If, at any time after the issuance of
the Series B Preferred Stock, the number of Common
Shares outstanding is decreased by a combination of
the outstanding Common Shares or reverse stock split,
then, following the record date for such combination
or reverse stock split, the Series B Conversion Price
shall be appropriately increased so that the number
of Common Shares issuable on conversion of each share
of Series B Preferred Stock shall be decreased in
proportion t such decrease in outstanding shares.
(3) In the event, at any time after the
issuance of the Series B Preferred Stock, of any
reclassification of the stock of the Corporation
(other than a change in par value or from par value
to no par value or from no par value to par value or
as a result of a stock dividend or subdivision,
split-up or combination of shares), or the merger,
consolidation or sale of substantially all of the
assets of the Corporation (other than a consolidation
or merger in which the Corporation is the continuing
corporation and which does not result in any change
in the Common Shares), each share of Series B
Preferred Stock shall, after such reorganization,
reclassification, merger, consolidation or sale of
assets, be convertible into the kind and number of
shares of stock or other securities or property of
the Corporation or of the corporation resulting from
such merger, consolidation or sale of assets to which
the holder of the number of Common Shares deliverable
(immediately prior to the time of such
reorganization, reclassification, merger,
consolidation or sale of assets) upon conversion of
such shares would have been entitled upon such
reorganization, reclassification, merger,
consolidation or sale of assets.
(4) In the event the Corporation shall
propose to take any action of the types described in
Subarticle (d)(1), (2) or (3) hereof, the Corporation
shall give notice to each holder of shares of Series
B Preferred Stock, which notice shall specify the
record date, if any, with respect to any such action
and the date on which such action is to take place.
Such notice shall also set forth such facts with
respect thereto as shall be reasonably necessary to
indicate the effect of such action (to the extent
such effect may be known at the date of such notice),
the Series B Conversion Price, and the number, kind
or series of shares or other securities or property
which shall be deliverable or purchasable upon the
occurrence of such action or deliverable upon
conversion of shares of Series B Preferred Stock. In
the case of any action which would require the fixing
<PAGE>
of a record date, such notice shall be given at least
twenty (20) days prior to the date so fixed, and in
case of all other action, such notice shall be given
at least thirty (30) days prior to the taking of such
proposed action. Failure to give such notice, or any
defect therein, shall not affect the legality or
validity of any such action.
(e) Mandatory Conversion. Upon the occurrence of an
Event of Conversion (as defined below), each share of Series B
Preferred Stock then outstanding shall, by virtue of, and
simultaneously with, the occurrence of the Event of Conversion
and without any action on the part of the holder thereof, be
automatically converted into one hundred (100) validly issued,
fully paid and nonassessable Common Shares (subject to any
prior adjustments as provided in Subarticle (vi)(d) above) for
the shares of Series B Preferred Stock being converted. The
term "Event of Conversion" shall mean the occurrence of the
closing price per share for the Corporation's common stock
having been at least $5.00 for a consecutive 30 trading day
period.
(vii) Voting Rights.
(a) (1) The holders of the Series B Preferred Stock,
voting as a separate voting group, shall be entitled to vote
to elect one (1) member to the Board of Directors of the
Corporation and one (1) additional individual as an observer
to such Board, until the earlier of such time as (i) 50% of
the shares of Series B Preferred Stock have been voluntarily
converted into shares of Common Stock, and (ii) in the event
of a mandatory conversion of the Series B Preferred Stock,
an aggregate of 50% of the total number of shares of Common
Stock issued upon conversion of the Series B Preferred
Stock, whether through voluntary or mandatory conversion,
have been resold.
(2) The special and exclusive voting rights of the
holders of the Series B Preferred Stock contained in this
Subarticle (2) may be exercised either at a special meeting
of the holders of Series B Preferred Stock, called as
provided below, or at any annual or special meeting of the
stockholders of the Corporation, or by written consent of
such holders in lieu of a meeting. The directors to be
elected by the holders of the Series B Preferred Stock shall
each serve for a term extending from the date of election
and qualification until the time of the next succeeding
annual meeting of stockholders and until their successors
have been elected and qualified.
(3) Any director elected under Subarticle (2) hereof
shall not be subject to removal unless such removal is
approved by a majority of all the votes entitled to be cast
by the holders of the Series B Preferred Stock or otherwise
may be removed for fraud or conviction of a felony which
materially and adversely affects the Company by the vote of
no less than 2/3 of the other Board members.
(4) If at any time a directorship to be filled by the
holders of the Series B Preferred Stock shall be vacant, the
President (or any other officer) of the Corporation shall,
upon the written request of the holders of record of shares
representing at least twenty-five percent (25%) of the
voting power of the shares of Series B Preferred Stock, call
a special meeting of the holders of the shares of Series B
Preferred Stock for the purpose of electing a director to
<PAGE>
fill such vacancy. Such meeting shall be held at the
earliest practicable date at such place as is specified in
or determined in accordance with the Bylaws of the
Corporation. If such meeting is not called by the President
(or any other officer) of the Corporation within ten (10)
days after delivery of said written request, then the
holders of record of shares representing at least
twenty-five percent (25%) of the voting power of the shares
of Series B Preferred Stock may designate i writing one of
such holders to call such meeting at the expense of the
Corporation, and such meeting may be called by such persons
so designated upon the notice required for annual meetings
of stockholders and shall be held at such place as specified
or determined above. Any holder of record of shares of
Series B Preferred Stock shall have access to the stock
books of the Corporation for the purpose of calling a
meeting of stockholders pursuant to these provisions.
(b) (1) As long as any shares of the Series B
Preferred Stock are outstanding, the Corporation will not,
without the affirmative vote or consent of the holders of at
least a majority of the outstanding shares of the Series B
Preferred Stock, voting as a class, vote to amend the
Corporation's Certificate of Incorporation or Bylaws to (i)
increase or decrease the aggregate number of authorized shares
of the Series B Preferred Stock; (ii) increase or decrease the
par value of the Series B Preferred Stock; (iii) in any manner
authorize, create or issue any class or series of capital
stock ranking, as to the Liquidity Preference, prior to or on
parity with the Series B Preferred Stock, or authorize, create
or issue any shares of any class or series of any bonds,
debentures, notes or other obligations convertible into or
exchangeable for, or having optional rights to purchase, any
shares having any such priority or on parity with the Series B
Preferred Stock; (iv) in any manner alter or change the
designation or the powers, preferences or rights, or the
qualifications, limitations or restrictions of, the Series B
Preferred Stock; (v) reclassify Common Shares, or any other
shares of any class or series of capital stock hereinafter
created junior to the Series B Preferred Stock into shares of
any class or series of capital stock ranking, as to the
Liquidity Preference, prior to or on a parity with the Series
B Preferred Stock; or (vi) increase or decrease the authorized
number of shares of Series B Preferred Stock.
(2) If at any time any action is proposed by the
Corporation which requires the affirmative vote of a
majority of the outstanding shares of Series B Preferred
Stock pursuant to this Subarticle (b), the President (or any
other officer) of the Corporation shall call a special
meeting of the holders of Series B Preferred Stock for the
purpose of voting on such proposed action. Such meeting
shall be held at the earliest practicable date at such place
as is specified in or determined in accordance with the
Bylaws of the Corporation.
(3) Action by Written Consent. Any action to be taken
by the holders of Series B Preferred Stock may be taken
without a meeting if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding
shares of Series B Preferred Stock having not less than the
minimum number of votes that would be necessary to take such
action at a meeting at which all shares of Series B
Preferred Stock entitled to vote thereon were present and
voted.
<PAGE>
(c) In exercising the voting rights set forth in this Subarticle
(vii), each share of Series B Preferred Stock shall have one vote per
share.
(D) Common Stock.
(i) After the requirements with respect to voting rights on
Preferred Stock (fixed in accordance with provisions of this
Article FOURTH), if any, shall have been met and after this
Corporation shall have complied with all the requirements, if
any, with respect to the setting aside of sums as sinking funds
or redemption or purchase accounts (fixed in accordance with the
provisions of Subarticle (C) of this Article FOURTH) and subject
further to any other conditions which may be fixed in accordance
with the provisions of this Article FOURTH, then but not
otherwise, the holders of Common Stock shall be entitled to
receive such dividends, if any, as may be declared from time to
time by the Board of Directors.
(ii) In the event of voluntary or involuntary liquidation,
distribution or sale of assets, dissolution or winding-up of this
Corporation, the holders of the Common Stock shall be entitled to
receive all the assets of this Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders following priority distributions to be made to
holders of Preferred Stock of the Company, ratably in proportion
to the number of shares of the Common Stock hel by each.
(iii) Except as otherwise required by law, this Certificate
of Incorporation or the provisions of the resolution or
resolutions as may be adopted by the Board of Directors pursuant
to this Article FOURTH, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held by such
holder on each matter voted upon by the stockholders.
FIFTH: A director of the Corporation shall not be liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exemption from liability or limitation
thereof is not permitted under Delaware General Corporation Law as the same
exists or may hereinafter be amended. Any repeal or modification of this Article
FIFTH shall not adversely affect any right or protection of a director of the
Corporation existing hereunder with respect to any act or omission occurring
prior to such repeal or modification.
FOURTH: The amendment to the Certificate of Incorporation of the
Corporation set forth above was adopted at a Special Meeting of the
Corporation's stockholders on the 24th day of June, 1998.
IN WITNESS WHEROF, the undersigned President of this Corporation has
executed this Amended and Restated Certificate of Incorporation on this 5th day
of March, 1999.
U.S. WIRELESS CORPORATION
By: \s\ Dr. Oliver Hilsenrath
Dr. Oliver Hilsenrath, President
2
Exhibit 3.2.2 - Certificate of Amendment of the Certificate of Incorporation of
the Company filed on March 29, 1999.
Certificate of Amendment of
Certificate of Incorporation of
U.S. Wireless Corporation
Under Section 242 of the Delaware Corporation Law:
The Undersigned, for the purpose of amending the Certificate of
Incorporation of U.S. Wireless Corporation, does hereby certify and set forth:
FIRST: The name of the Corporation is: U.S. WIRELESS CORPORATION
SECOND: The Certificate of Incorporation was filed by the Department of
State on 12th day of February, 1993.
THIRD: The amendment to the Certificate of Incorporation of the Corporation
effected by this Certificate of Amendment is to amend the provisions of "Article
Fourth, Subarticle (D)" to amend certain rights and preferences of the Series B
Preferred Stock so that, as amended, said Subarticle shall read as follows:
(D) Series B Preferred Stock.
(i) Designation. The designation of this series of Preferred Stock, par
value $0.01 per share, shall be the "Series B Preferred Stock." The number of
shares of Series B Preferred Stock authorized hereby shall be 50,000 shares.
(ii) Rank. The Series B Preferred Stock shall, with respect to rights on
liquidation, winding up, and dissolution, rank (a) junior to any senior
securities established by the Board of Directors with the prior approval by the
affirmative vote of the holders of a majority of the shares of the Series B
Preferred Stock as required under Subarticle (vii)(b) below, the terms of which
shall specifically provide that such series shall rank prior to the Series B
Preferred Stock; (b) on a parity with the shares of Series A Preferred Stock and
any other parity securities established by the Board of Directors with the prior
approval by the affirmative vote of the holders of a majority of the shares of
the Series B Preferred Stock as required under Subarticle (vii)(b) below, the
terms of which shall specifically provide that such series shall rank on a
parity with the Series B Preferred Stock; and (c) senior to all other shares of
capital stock of the Corporation, including, without limitation, the Common
Stock.
(iii) Dividends. The holders of the shares of the Series B Preferred Stock
shall not be entitled to receive any dividends.
(iv) Liquidation Preference.
(a) In the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the affairs of the
Corporation, the holders of the shares of Series B Preferred
Stock then outstanding shall be entitled to be paid out of the
assets of the Corporation available for distribution to its
stockholders an amount in cash equal to $100.00 per share for
each share of Series B Preferred Stock outstanding (the
"Liquidation Preference"), before any payment shall be made or
an assets distributed to the holders of any junior securities;
provided, that the holders of the outstanding shares of Series
B Preferred Stock shall receive such liquidation payment, on a
pro rata basis, on an equal priority, pari passu basis, with
the holders of the then outstanding shares of Series A
Preferred Stock; and, provided, further, that such holders
shall not be entitled to receive such liquidation payment
<PAGE>
until the liquidation payments on any other senior securities
approved by the holders of Series B Preferred Stock, if any,
shall have been paid in full. If the assets of the Corporation
are not sufficient to pay in full the liquidation payments
payable to the holders of the outstanding shares of Series B
Preferred Stock, Series A Preferred Stock and any other parity
securities approved by the holders of Series B Preferred
Stock, if any, then the holders of all such shares shall share
ratably in such distribution of assets in accordance with the
amount which would be payable on such distribution if the
amounts to which the holders of the outstanding shares of
Series B Preferred Stock are entitled were paid in full.
(b) For the purposes of this Article FOURTH, neither
the voluntary sale, conveyance, lease, exchange, nor transfer
(for cash, shares of stock, securities, or their
consideration) of all or substantially all of the property or
assets of the Corporation or the consolidation or merger of
the Corporation with one or more other corporations shall be
deemed to be a liquidation, dissolution, or winding up,
voluntary or involuntary, unless such voluntary sale,
conveyance, lease, exchange, or transfer shall be in
connection with a dissolution or winding up of the business of
the Corporation.
(v) Redemption. The shares of Series B Preferred Stock are not redeemable
by the Corporation.
(vi) Conversion. The shares of Series B Preferred Stock are subject to
optional and mandatory conversion provisions, as set forth in this Subarticle
(vi).
(a) Subject to, and upon compliance with, the
provisions of this Subarticle (vi) (including, without
limitation, the mandatory conversion provision of Subarticle
(e) of this Subarticle (vi)), the holder of a share of Series
B Preferred Stock designated shall have the right, at such
holder's option, at any time commencing ninety (90) days from
issuance, to convert each share of Series B Preferred Stock
into one hundred (100) validly issued, fully paid and
non-assessable shares of Common Stock of the Corporation which
is based on a stated value of $100 per share of Series B
Preferred Stock divided by a conversion rate equal to $1.00
per share of Common Stock. Notwithstanding the provisions of
this Subarticle, each share of Series B Preferred Stock
voluntarily converted pursuant to the terms of this
Subarticle, within 12 months of issuance shall be converted
into sixty-seven (67) validly issued, fully paid and
non-assessable shares of Common Stock of the Corporation,
which is based on a stated value of $100 per share of Series B
Preferred Stock divided by a conversion rate equal to $1.50
per share of Common Stock. The stated value of the shares of
Series B Preferred Stock divided by the conversion rate, as
applicable, shall be referenced herein as the "Series B
Conversion Price".
(b) (1) In order to exercise the conversion
privilege, the holders of each share of Series B Preferred
Stock to be converted shall surrender the certificates
representing such shares at the office of the Corporation or
its transfer agent for the Series B Preferred Stock, as may be
appointed for such purpose by the Corporation, with the Notice
of Election to Convert on the back of said certificate
completed and signed. Unless the shares of Common Stock
issuable on conversion are to be issued in the same name in
which such share of Series B Preferred Stock is registered,
each share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the
Corporation, duly executed by the holder or such holder's duly
authorized attorney and an amount sufficient to pay any
transfer or similar tax.
<PAGE>
(2) As promptly as practicable after the surrender of the certificates for
shares of Series B Preferred Stock as aforesaid, the Corporation shall issue and
shall deliver to such holder at his registered address as it appears in the
Company's records, or on his written order, a certificate or certificates for
the number of full shares of Common Stock issuable upon the conversion of such
shares in accordance with the provisions of this Subarticle (vi).
(3) Each conversion shall be deemed to have been effected immediately prior
to the close of business on the date on which the certificates for shares of
Series B Preferred Stock shall have been surrendered and such notice shall have
been received by the Corporation as aforesaid, and the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have become the holder
or holders of record of the shares represented thereby at such time on such
date, unless the stock transfer books of the Corporation shall be closed on that
date, in which event such person or persons shall be deemed to have become such
holder or holders of record at the close of business on the next succeeding day
on which such stock transfer books are open and such notice is received by the
Corporation. All shares of Common Stock delivered upon conversion of the Series
B Preferred Stock will upon delivery be duly and validly issued and fully paid
and non-assessable, free of all liens and charges and not subject to any
preemptive rights.
(c) The Corporation covenants that it will at all
times reserve and keep available, free from preemptive rights,
out of the aggregate of its authorized but unissued shares of
Common Stock or its issued shares of Common Stock held in its
treasury, or both, for the purposes of effecting conversions
of the Series B Preferred Stock, the full number of shares of
Common Stock deliverable upon the conversion of all
outstanding shares of Series B Preferred Stock not theretofore
converted. For purposes of this Subarticle (c), the number of
shares of Common Stock which shall be deliverable upon the
conversion of all outstanding shares of Series B Preferred
Stock shall be computed as if at the time of computation all
such outstanding shares were held by a single holder.
(d) The Series B Conversion Price and number of shares
of Common Stock into which each share of Series B Preferred
Stock is convertible shall be subject to adjustment from
time to time as follows:
(1) If, at any time after the issuance of
the Series B Preferred Stock, the number of Common
Shares outstanding is increased by a stock dividend
payable in Common Shares or by a subdivision or
split-up of Common Shares, then, following the
payment date fixed for the determination of holders
of Common Shares entitled to receive such stock
dividend, subdivision or split-up, the Series B
Conversion Price shall be appropriately decreased so
that the number of Common Shares issuable on
conversion of each share of Series B Preferred Stock
shall be increased in proportion to such increase in
outstanding shares.
(2) If, at any time after the issuance of
the Series B Preferred Stock, the number of Common
Shares outstanding is decreased by a combination of
the outstanding Common Shares or reverse stock split,
then, following the record date for such combination
or reverse stock split, the Series B Conversion Price
shall be appropriately increased so that the number
of Common Shares issuable on conversion of each share
of Series B Preferred Stock shall be decreased in
proportion t such decrease in outstanding shares.
<PAGE>
(3) In the event, at any time after the
issuance of the Series B Preferred Stock, of any
reclassification of the stock of the Corporation
(other than a change in par value or from par value
to no par value or from no par value to par value or
as a result of a stock dividend or subdivision,
split-up or combination of shares), or the merger,
consolidation or sale of substantially all of the
assets of the Corporation (other than a consolidation
or merger in which the Corporation is the continuing
corporation and which does not result in any change
in the Common Shares), each share of Series B
Preferred Stock shall, after such reorganization,
reclassification, merger, consolidation or sale of
assets, be convertible into the kind and number of
shares of stock or other securities or property of
the Corporation or of the corporation resulting from
such merger, consolidation or sale of assets to which
the holder of the number of Common Shares deliverable
(immediately prior to the time of such
reorganization, reclassification, merger,
consolidation or sale of assets) upon conversion of
such shares would have been entitled upon such
reorganization, reclassification, merger,
consolidation or sale of assets.
(4) In the event the Corporation shall
propose to take any action of the types described in
Subarticle (d)(1), (2) or (3) hereof, the Corporation
shall give notice to each holder of shares of Series
B Preferred Stock, which notice shall specify the
record date, if any, with respect to any such action
and the date on which such action is to take place.
Such notice shall also set forth such facts with
respect thereto as shall be reasonably necessary to
indicate the effect of such action (to the extent
such effect may be known at the date of such notice),
the Series B Conversion Price, and the number, kind
or series of shares or other securities or property
which shall be deliverable or purchasable upon the
occurrence of such action or deliverable upon
conversion of shares of Series B Preferred Stock. In
the case of any action which would require the fixing
of a record date, such notice shall be given at least
twenty (20) days prior to the date so fixed, and in
case of all other action, such notice shall be given
at least thirty (30) days prior to the taking of such
proposed action. Failure to give such notice, or any
defect therein, shall not affect the legality or
validity of any such action.
(e) Mandatory Conversion. Commencing 12 months from
issuance, upon the occurrence of an Event of Conversion (as
defined below), each share of Series B Preferred Stock then
outstanding shall, by virtue of, and simultaneously with, the
occurrence of the Event of Conversion and without any action
on the part of the holder thereof, be automatically converted
into one hundred (100) validly issued, fully paid and
nonassessable Common Shares (subject to any prior adjustments
as provided in Subarticle (vi)(d) above) for the shares of
Series B Preferred Stock being converted. The term "Event of
Conversion" shall mean the occurrence of the closing price per
share for the Corporation's common stock having been at least
$5.00 for a consecutive 30 trading day period.
<PAGE>
(vii) Voting Rights.
(a) (1) The holders of the Series B Preferred Stock,
voting as a separate voting group, shall be entitled to vote
to elect one (1) member to the Board of Directors of the
Corporation and one (1) additional individual as an observer
to such Board, until the earlier of such time as (i) 50% of
the shares of Series B Preferred Stock have been voluntarily
converted into shares of Common Stock, and (ii) in the event
of a mandatory conversion of the Series B Preferred Stock, an
aggregate of 50% of the total number of shares of Common Stock
issued upon conversion of the Series B Preferred Stock,
whether through voluntary or mandatory conversion, have been
resold.
(2) The special and exclusive voting rights of the
holders of the Series B Preferred Stock contained in this
Subarticle (2) may be exercised either at a special meeting
of the holders of Series B Preferred Stock, called as
provided below, or at any annual or special meeting of the
stockholders of the Corporation, or by written consent of
such holders in lieu of a meeting. The directors to be
elected by the holders of the Series B Preferred Stock shall
each serve for a term extending from the date of election
and qualification until the time of the next succeeding
annual meeting of stockholders and until their successors
have been elected and qualified.
(3) Any director elected under Subarticle (2) hereof
shall not be subject to removal unless such removal is
approved by a majority of all the votes entitled to be cast
by the holders of the Series B Preferred Stock or otherwise
may be removed for fraud or conviction of a felony which
materially and adversely affects the Company by the vote of
no less than 2/3 of the other Board members.
(4) If at any time a directorship to be filled by the
holders of the Series B Preferred Stock shall be vacant, the
President (or any other officer) of the Corporation shall,
upon the written request of the holders of record of shares
representing at least twenty-five percent (25%) of the
voting power of the shares of Series B Preferred Stock, call
a special meeting of the holders of the shares of Series B
Preferred Stock for the purpose of electing a director to
fill such vacancy. Such meeting shall be held at the
earliest practicable date at such place as is specified in
or determined in accordance with the Bylaws of the
Corporation. If such meeting is not called by the President
(or any other officer) of the Corporation within ten (10)
days after delivery of said written request, then the
holders of record of shares representing at least
twenty-five percent (25%) of the voting power of the shares
of Series B Preferred Stock may designate i writing one of
such holders to call such meeting at the expense of the
Corporation, and such meeting may be called by such persons
so designated upon the notice required for annual meetings
of stockholders and shall be held at such place as specified
or determined above. Any holder of record of shares of
Series B Preferred Stock shall have access to the stock
books of the Corporation for the purpose of calling a
meeting of stockholders pursuant to these provisions.
<PAGE>
(b) (1) As long as any shares of the Series B
Preferred Stock are outstanding, the Corporation will not,
without the affirmative vote or consent of the holders of at
least a majority of the outstanding shares of the Series B
Preferred Stock, voting as a class, vote to amend the
Corporation's Certificate of Incorporation or Bylaws to (i)
increase or decrease the aggregate number of authorized shares
of the Series B Preferred Stock; (ii) increase or decrease the
par value of the Series B Preferred Stock; (iii) in any manner
authorize, create or issue any class or series of capital
stock ranking, as to the Liquidity Preference, prior to or on
parity with the Series B Preferred Stock, or authorize, create
or issue any shares of any class or series of any bonds,
debentures, notes or other obligations convertible into or
exchangeable for, or having optional rights to purchase, any
shares having any such priority or on parity with the Series B
Preferred Stock; (iv) in any manner alter or change the
designation or the powers, preferences or rights, or the
qualifications, limitations or restrictions of, the Series B
Preferred Stock; (v) reclassify Common Shares, or any other
shares of any class or series of capital stock hereinafter
created junior to the Series B Preferred Stock into shares of
any class or series of capital stock ranking, as to the
Liquidity Preference, prior to or on a parity with the Series
B Preferred Stock; or (vi) increase or decrease the authorized
number of shares of Series B Preferred Stock.
(2) If at any time any action is proposed by the
Corporation which requires the affirmative vote of a
majority of the outstanding shares of Series B Preferred
Stock pursuant to this Subarticle (b), the President (or any
other officer) of the Corporation shall call a special
meeting of the holders of Series B Preferred Stock for the
purpose of voting on such proposed action. Such meeting
shall be held at the earliest practicable date at such place
as is specified in or determined in accordance with the
Bylaws of the Corporation.
(3) Action by Written Consent. Any action to be taken
by the holders of Series B Preferred Stock may be taken
without a meeting if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding
shares of Series B Preferred Stock having not less than the
minimum number of votes that would be necessary to take such
action at a meeting at which all shares of Series B
Preferred Stock entitled to vote thereon were present and
voted.
(c) In exercising the voting rights set forth in this Subarticle (vii),
each share of Series B Preferred Stock shall have one vote per share.
FOURTH: The amendment to the Articles of Incorporation of the Corporation
set forth above was approved by vote of all the Corporation's Series B Preferred
Stockholders on the 23rd day of March, 1999.
IN WITNESS WHEROF, the undersigned President of this Corporation has
executed this Certificate of Amendment on this 25th day of March, 1999.
U.S. WIRELESS CORPORATION
By: s\s Dr. Oliver Hilsenrath
Dr. Oliver Hilsenrath, President
3
3.2.3 - Certificate of Amendment of the Certificate of Incorporation of the
Company filed on May 14, 1999.
Certificate of Amendment of
Certificate of Incorporation of
U.S. Wireless Corporation
Under Section 242 of the Delaware Corporation Law:
The Undersigned, for the purpose of amending the Certificate of
Incorporation of U.S. Wireless Corporation, does hereby certify and set forth:
FIRST: The name of the Corporation is: U.S. WIRELESS CORPORATION
SECOND: The Certificate of Incorporation was filed by the Department of
State on 12th day of February, 1993.
THIRD: The amendment to the Certificate of Incorporation of the Corporation
effected by this Certificate of Amendment is to increase the number of
authorized shares of the Company's Series B Preferred Stock, amending "Article
Fourth, Subarticle (D)(i)" so that, as amended, said Subarticle shall read as
follows:
(D) Series B Preferred Stock.
(i) Designation. The designation of this series of Preferred Stock, par
value $0.01 per share, shall be the "Series B Preferred Stock." The number of
shares of Series B Preferred Stock authorized hereby shall be 60,000 shares.
FOURTH: The amendment to the Articles of Incorporation of the Corporation
set forth above was approved by vote of all the Corporation's Series B Preferred
Stockholders on the 6th day of April, 1999.
IN WITNESS WHEROF, the undersigned President of this Corporation has
executed this Certificate of Amendment on this 11th day of May, 1999.
U.S. WIRELESS CORPORATION
By: s\s Dr. Oliver Hilsenrath
Dr. Oliver Hilsenrath, President
4
Exhibit 3.4.1 - Amendment to the By-laws dated November 25, 1997.
Amendment to By-Laws
ARTICLE XII - INDEMNIFICATION OF DIRECTORS,
OFFICERS AND EMPLOYEES
Except to the extent expressly prohibited by the Delaware Corporation Law, the
corporation shall indemnify each person made or threatened to be made a party to
any action or proceeding, whether civil or criminal, by reason of the fact that
such person or such person's testator or intestate is or was a director, officer
or employee of the corporation, or serves or served at the request of the
corporation, any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise in any capacity, against judgment, fines,
penalties, amounts paid in settlement and reasonable expenses, including
attorneys' fees, incurred in connection with such action or proceeding, or any
appeal therein, provided that no such indemnification shall be made if a
judgment or other final adjudication adverse to such person establishes that his
or her acts were committed in bad faith or were the result of active and
deliberate dishonesty and were material to the cause of action so adjudicated,
or that he or she personally gained in fact a financial profit or other
advantage to which he or she was not legally entitled, and provided further that
no such indemnification shall be required with respect to any settlement or
other non-adjudicated disposition of any threatened or pending action or
proceeding unless the corporation has given its prior consent to such settlement
or other disposition.
The corporation may advance or promptly reimburse upon request any person
entitled to indemnification hereunder for all expenses, including attorneys'
fees, reasonably incurred in defending any action or proceeding in advance of
the final disposition thereof upon receipt of an undertaking by or on behalf of
such person to repay such amount if such person is ultimately found not to be
entitled to indemnification or, where indemnification is granted, to the extent
the expenses so advanced or reimbursed exceed the amount to which such person is
entitled, provided, however, that such person shall cooperate in good faith with
any request by the corporation that common counsel be utilized by the parties to
an action or proceeding who are similarly situated unless to do so would be
inappropriate due to actual or potential differing interests between or among
such parties.
Nothing herein shall limit or affect any right of any person otherwise than
hereunder to indemnification or expenses, including attorneys' fees, under any
statute, rule, regulation, certificate of incorporation, by-law, insurance
policy, contract or otherwise.
Anything in these by-laws to the contrary notwithstanding, no elimination of
this by-law, and no amendment of this by-law adversely affecting the right of
any person to indemnification or advancement of expenses hereunder shall be
effective until the 60th day following notice to such person or such action, and
no elimination of or amendment to this by-law shall deprive any person of his or
her rights hereunder arising out of alleged or actual occurrences, acts or
failures to act prior to such 60th day.
The corporation shall not, except by elimination or amendment of this by-law in
a manner consistent with the preceding paragraph, take any corporate action or
enter into any agreement which prohibits, or otherwise limits the rights of any
person to, indemnification in accordance with the provisions of this by-law. The
indemnification of any person provided by this by-law shall continue after such
person has ceased to be a director, officer or employee of the corporation and
shall inure to the benefit of such person's heirs, executors, administrators and
legal representatives.
The corporation is authorized to enter into agreements with any of its
directors, officers or employees extending rights to indemnification and
advancement of expenses to such person to the fullest extent permitted by
applicable law, but the failure to enter into any such agreement shall not
affect or limit the rights of such person pursuant to this by-law, it being
expressly recognized hereby that all directors, officers and employees of the
corporation, by serving as such after the adoption hereof, are acting in
reliance hereon and that the corporation is estopped to contend otherwise.
<PAGE>
In case any provision in this by-law shall be determined at any time to be
unenforceable in any respect, the other provisions shall not in any way be
affected or impaired thereby, and the affected provision shall be given the
fullest possible enforcement in the circumstances, it being the intention of the
corporation to afford indemnification and advancement of expenses to its
directors, officers and employees, acting in such capacities or in the other
capacities mentioned herein, to the fullest extent permitted by law.
For purposes of this by-law, the corporation shall be deemed to have requested a
person to serve an employee benefit plan where the performance by such person of
his or her duties to the corporation also imposes duties on, or otherwise
involves services by, such person to the plan or participants or beneficiaries
of the plan, and excise taxes assessed on a person with respect to an employee
benefit plan pursuant to applicable law shall be considered indemnifiable
expenses. For purposes of this by-law, th term "corporation" shall include any
legal successor to the corporation, including any corporation which acquires all
or substantially all of the assets of the corporation in one or more
transactions.
5
Exhibit 3.6.1 - Form of Series B Preferred Stock.
See Restrictive Legends on Reverse Side
SERIES B PREFERRED STOCK
$.001 PAR VALUE
CERTIFICATE FOR SHARES
U.S. WIRELESS CORPORATION
(A Delaware Corporation)
Number: PB__________ Shares:________
WHEREAS, U.S. Wireless Corporation (the "Company"), is authorized to issue
an aggregate of One million (1,000,000) shares of Preferred Stock, par value
$.01 per share, which may be issued in classes or in series, and whose
respective rights, designations and preferences may be designated from time to
time by a Certificate of Designation by the Board of Directors of U.S. Wireless
Corporation; and
WHEREAS, the Board of Directors of U.S. Wireless Corporation have
designated 60,000 shares of Preferred Stock as the "Series B Preferred Stock,"
pursuant to an Certificate of Restated and Amended Certificate of Incorporation
as filed by the Company and which Amendment sets forth the rights, preferences
and limitations of such Series B Preferred Stock.
NOW, THEREFORE, this certifies that ___________________ the owner of
____________ (_________) Shares of the Series B Preferred Stock of U.S. Wireless
Corporation, which Preferred Shares are fully paid and non-assessable.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this __th day of __________, 1999.
------------------------- ------------------------------
David Klarman Dr. Oliver Hilsenrath
Secretary President
U.S. WIRELESS CORPORATION
1993
Delaware
6
<PAGE>
The following abbreviation, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations: <TABLE> <CAPTION>
<S> <C> <C>
TEN COM- as tenants in common UNIF GIFT ACT -.......Custodian.........
TEN ENT- as tenants by the entireties (Cust.) (Minor)
JT TEN- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act......................................
in common (State)
</TABLE>
Additional abbreviation may also be used though not in above list.
For value received,..............................hereby sell, assign and
transfer unto
Please Insert Social Security or Other
Identifying Number of Assignee : ____________________
Please print or typewrite name and address including postal zip code of
assignee
Shares of the stock represented by the attached Certificate, and do hereby
irrevocably constitute and appoint
Attorney to transfer the said Limited Partnership Interests on the books of
the within-named Limited Partnership with full power of substitution in the
premises.
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the Certificate, in every particular, without
alteration or enlargement, or any change whatever.
Dated:
SIGNATURE
SIGNATURE GUARANTEED
ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right to convert
shares of Series B Preferred Stock into shares of Common Stock, and herewith
tenders said shares of Series B Preferred Stock in accordance with the issuers
Certificate of Incorporation. The undersigned requests that a certificates for
such securities be registered in the name and address of and that such
Certificate be delivered to -------------------------
- ------------------------------------------------------ ----------- whose address
is . ------------------
- ------------------------------------------------------------
Dated:
Signature (Signature must conform in all respects to name of holder)
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE FURTHER RESTRICTED FROM
BEING SOLD OR TRANSFERRED PURSUANT TO CERTAIN HOLDBACK RESTRICTIONS SET FORTH IN
A SUBSCRIPTION AGREEMENT BETWEEN THE HOLDER AND THE CORPORATION.
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FINANCIAL DATA SCHEDULE
This schedule contains summary information extracted from the Balance
Sheet, Statement of Operations, Statement of Cash Flows and Notes thereto
incorporated in Part I, Item 7, of this Form 10 - KSB and is qualified in its
entirety by reference to such financial statements. </LEGEND>
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Mar-31-2000
<PERIOD-END> Mar-31-2000
<CASH> 5,788,288
<SECURITIES> 0
<RECEIVABLES> 2,300,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,149,239
<PP&E> 817,822
<DEPRECIATION> (436,205)
<TOTAL-ASSETS> 8,555,891
<CURRENT-LIABILITIES> 370,029
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,104,798
<TOTAL-LIABILITY-AND-EQUITY> 8,555,891
<SALES> 40,000
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 7,389,148
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,230,277)
<EPS-BASIC> (0.56)
<EPS-DILUTED> (0.56)
</TABLE>
