-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VNekJEzMiRDCAUimwdKjfxMmtQOQZtofoYGSvBKpSbKJcdF2jVnuLI4E8Bxo1XKJ 7TqxSoOAU8/xf4UnPh7gNg== 0001125282-01-000323.txt : 20010206 0001125282-01-000323.hdr.sgml : 20010206 ACCESSION NUMBER: 0001125282-01-000323 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20001116 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010205 FILER: COMPANY DATA: COMPANY CONFORMED NAME: U S WIRELESS DATA INC CENTRAL INDEX KEY: 0000895716 STANDARD INDUSTRIAL CLASSIFICATION: CALCULATING & ACCOUNTING MACHINES (NO ELECTRONIC COMPUTERS) [3578] IRS NUMBER: 841178691 STATE OF INCORPORATION: CO FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-22848 FILM NUMBER: 1525151 BUSINESS ADDRESS: STREET 1: 750 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2127507766 MAIL ADDRESS: STREET 1: 750 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 8-K/A 1 0001.txt AMENDMENT NO. 3 TO CURRENT REPORT SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K/A CURRENT REPORT Amendment No. 3 PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) November 16, 2000 U.S. WIRELESS DATA, INC. (Exact name of registrant as specified in its charter) Delaware (State of Other Jurisdiction of Incorporation) 0-22848 (Commission File Number) 84-1178691 (I.R.S. Employer Identification No.) 750 Lexington Avenue New York, New York 10022 (Address of principal executive offices including zip code) (212) 750-7766 (Registrant's telephone number, including area code) (Former name or former address, if changed since last report) - ------------------------------------------------------------------------------- Item 2. Acquisition or Disposition of Assets. This Amendment No. 3 hereby amends information contained in Item 7 of Amendment No. 2 to the Current Report on Form 8-K filed by U.S. Wireless Data, Inc. with the Securities and Exchange Commission on November 30, 2000 relating to its acquisition of substantially all of the assets of CellGate Technologies LLC on November 16, 2000. On November 16, 2000, U.S. Wireless Data, Inc. (the "Company") acquired substantially all of the assets, subject to certain liabilities, of CellGate Technologies LLC, a Delaware limited liability company ("CellGate"), pursuant to that certain Asset Purchase Agreement dated October 30, 2000 by and between the Company and CellGate (the "Agreement"). CellGate is the leading manufacturer of integrated wireless IP (Internet Protocol) modem adapters and a provider of wireless IP services for transaction processing. The modem adapters offer a cost-efficient means for merchants to convert their credit card terminals from Page 1 landline to wireless data transmission and the contemplated acquisition is designed to accelerate the Company's expansion into the fixed wireless market. The assets that were acquired include an exclusive (except as to AT&T Wireless and its affiliates) license to the AT&T Wireless technology that makes the conversion from landline to wireless transaction possible for traditional dial-up point of sale terminals and other dial-up devices. The Company intends to use CellGate's assets for the same purposes as previously utilized. The acquisition was made for One Million Dollars ($1,000,000) and Five Hundred Sixty-Two Thousand Five Hundred (562,500) shares of the Company's Common Stock. The Company has agreed, subject to certain conditions, to pay additional consideration to CellGate, if the average Closing Price (as defined in the Agreement) of the Company's Common Stock for the Twenty (20) consecutive trading days ending with the trading day immediately preceding the one-year anniversary of the closing date is less than $16.00 per share as adjusted for any stock splits, stock dividends or similar events. Such additional consideration shall be an amount equal to: (i) the number of the shares which have not previously been sold or transferred, subject to certain exceptions, multiplied by (ii) the amount, if any, not to exceed $10.00, by which such average Closing Price (as defined in the "Agreement") is less than $16.00. No less than 50% of such amount shall be paid in cash, and the balance shall be paid, at the Company's option, in cash or shares of Common Stock having a value, based on such average Closing Price provided that such average Closing Price for such purposes shall not be less than $6.00 per share, the option, prior to the anniversary of the closing. The Company is not required to pay the additional consideration as to any shares remaining with CellGate and its members if, (i) for a period of at least Twenty (20) consecutive trading days the average price of the Common Stock is at least $16.00 per share, (ii) the average weekly trading volume for such period is at least 140,000 shares, and (iii) the shares issued to CellGate are registered for resale under the Securities Act of 1933 and are free of the lock-up (as described in Section 2.02 of the Agreement), to purchase all or a portion of the remaining shares at a price of $32.00 per share, payable in cash. The Company considered, among other things, the value of the above-mentioned exclusive license as well as the potential additional revenue generated from CellGate's customer contracts in determining the consideration furnished for CellGate's assets. Item 7. Financial Statements, Pro forma Financial Information and Exhibits. (a) Financial statements of business acquired. Included in this filing are the audited Balance Sheet as of September 30, 2000 and the Statement of Operations, Statement of Cash Flows and the Statement of Changes in Member's Capital for the acquired company, Cellgate Technologies LLC, for the 12 month period ended December 31, 1998 and December 31, 1999. In addition, included are the unaudited Balance Sheet as of September 30, 2000 and the Statement of Operations, Statement of Cash Flows and the Statement of Changes in Member's Capital for the nine (9) month period ended September 30, 2000 of Cellgate Technologies LLC. (b) Pro forma financial information. Included in this filing are the unaudited Pro Forma Condensed Financial Statements giving effect to the purchase of certain net assets of Cellgate Technologies LLC by U.S. Wireless Data, Inc. These pro forma condensed financial statements are presented for illustrative purposes only. The pro forma adjustments are based upon available information and certain assumptions that management believes are reasonable. The unaudited Pro Forma Financial Statements are represented by the Condensed Balance Sheet as of September 30, 2000 and for the nine (9) month period ended September 30, 2000 and the Statement of Operations for the twelve (12) month period ended June 30, 2000 and for the three (3) month period ended September 30, 2000. Page 2 (c) Exhibits *99.1 Press Release dated as of October 31, 2000. 99.2 Financial Statements listed in Item 7(a) above. 99.3 Pro forma Financial Statements listed in Item 7(b) above. ------------------ *previously filed SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this amendment to be signed on its behalf by the undersigned hereunto duly authorized. U.S. WIRELESS DATA, INC. (Registrant) Dated February 1, 2001 By: /s/ Dean M. Leavitt ---------------- ------------------------------------------ Name: Dean M. Leavitt Title: Chairman & Chief Executive Officer EX-99.2 2 0002.txt FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. CELLGATE TECHNOLOGIES LLC FINANCIAL STATEMENTS DECEMBER 31, 1999 AND 1998 (AUDITED) NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED) TABLE OF CONTENTS INDEPENDENT ACCOUNTANTS' REPORT FINANCIAL STATEMENTS BALANCE SHEETS 1 STATEMENTS OF OPERATIONS 2 STATEMENTS OF CHANGES IN MEMBERS' CAPITAL (DEFICIT) 3 STATEMENTS OF CASH FLOWS 4 NOTES TO FINANCIAL STATEMENTS 5 - 13 INDEPENDENT ACCOUNTANTS' REPORT The Board of Directors CellGate Technologies LLC Boca Raton, Florida We have audited the accompanying balance sheets of CellGate Technologies LLC as of December 31, 1999 and 1998, and the related statements of operations, changes in members' capital (deficit) and cash flows for 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, the financial statements referred to above present fairly, in all material respects, the financial position of CellGate Technologies LLC as of December 31, 1999 and 1998, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. As discussed in Note 8 to the financial statements, on November 16, 2000, the Company executed an agreement to sell substantially all of its assets and assign certain of its liabilities. /s/ SCHMIDT, RAINES, TRIESTE, DICKENSON & ADAMS, P.L. December 11, 2000 Boca Raton, Florida CELLGATE TECHNOLOGIES LLC BALANCE SHEETS
December 31 December 31, September 30, 1999 1998 2000 ---------------- ----------------- ---------------- (Unaudited) ASSETS ------ Current assets: Cash $ 748,298 $ 569,992 $ 151,516 Accounts receivable 27,311 467 9,200 Deposits 303,146 - 14,234 Investments - 2,002,567 - Inventory 63,225 - - ---------------- ----------------- ---------------- 1,141,980 2,573,026 174,950 ---------------- ----------------- ---------------- Furniture, fixtures and leasehold improvements, net 8,384 - 15,886 ---------------- ----------------- ---------------- $ 1,150,364 $ 2,573,026 $ 190,836 ================ ================= ================ LIABILITIES AND MEMBERS' CAPITAL (DEFICIT) ------------------------------------------ Current liabilities: Accounts payable $ 1,359 $ - $ 567,121 Accrued expenses 349,159 194,766 298,841 Notes payable - - 350,000 ---------------- ----------------- ---------------- 350,518 194,766 1,215,962 ---------------- ----------------- ---------------- Members' capital (deficit) 968,992 2,378,260 (1,005,126) Notes receivable from members (169,146) - (20,000) ---------------- ----------------- ---------------- 799,846 2,378,260 (1,025,126) ---------------- ----------------- ---------------- $ 1,150,364 $ 2,573,026 $ 190,836 ================ ================= ================
The accompanying notes are an integral part of these financial statements. - 1 - CELLGATE TECHNOLOGIES LLC STATEMENTS OF OPERATIONS
For the years ended For the nine months ended December 31, September 30, -------------------------------- -------------------------------- 1999 1998 2000 1999 --------------- --------------- --------------- --------------- (Unaudited) Sales revenue $ 31,709 $ - $ 42,696 $ - Cost of sales 47,447 - 480,638 - --------------- --------------- --------------- --------------- Gross margin (15,738) - (437,942) - --------------- --------------- --------------- --------------- General and administrative expenses: Product development 373,112 180,000 - 361,355 Service development 857,461 332,427 391,283 650,485 Salaries and employee benefits 538,365 21,837 945,933 366,761 Consulting 172,348 2,709 110,118 141,849 Sales and support services 124,138 - 19,250 91,639 Communications links and software 99,166 - 171,650 42,040 Legal and accounting 26,043 72,179 42,296 12,275 Travel and entertainment 59,280 2,958 110,978 45,428 Marketing 26,343 - 90,959 21,091 Repairs and maintenance 24,370 - 13,307 - Office rent 34,541 - 39,726 26,237 Other expenses 115,866 11,112 169,675 95,882 --------------- --------------- --------------- --------------- 2,451,033 623,222 2,105,175 1,855,042 --------------- --------------- --------------- --------------- Operating loss (2,466,771) (623,222) (2,543,117) (1,855,042) Other income (expenses): Interest income 60,194 2,715 12,026 52,197 Interest expense - (2,111) (12,226) - Depreciation (3,941) - (8,461) (2,652) --------------- --------------- --------------- --------------- 56,253 604 (8,661) 49,545 --------------- --------------- --------------- --------------- Net loss $ (2,410,518) $ (622,618) $ (2,551,778) $ (1,805,497) =============== =============== =============== ===============
The accompanying notes are an integral part of these financial statements. - 2 - CELLGATE TECHNOLOGIES LLC STATEMENTS OF CHANGES IN MEMBERS' CAPITAL (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 AND THE NINE MONTHS ENDED SEPTEMBER 30, 2000
Balance at January 1, 1998 $ - Capital contributions 3,000,878 Net loss (622,618) ------------------- Balance at December 31, 1998 2,378,260 Capital contributions 1,001,250 Notes receivable from members (169,146) Net loss (2,410,518) ------------------- Balance at December 31, 1999 799,846 Capital contributions (unaudited) 746,806 Note receivable from members (unaudited) (20,000) Net loss (unaudited) (2,551,778) ------------------- Balance at September 30, 2000 (unaudited) $ (1,025,126) ===================
The accompanying notes are an integral part of these financial statements. - 3 - CELLGATE TECHNOLOGIES LLC STATEMENTS OF CASH FLOWS
For the years ended For the nine months ended December 31, September 30, --------------------------------- ----------------------------------- 1999 1998 2000 1999 --------------- --------------- --------------- ----------------- (Unaudited) OPERATING ACTIVITIES - -------------------- Net loss $ (2,410,518) $ (622,618) $ (2,551,778) $ (1,805,497) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 3,941 - 8,461 2,652 (Increase) decrease in: Accounts receivable (26,844) (467) 18,111 (1,701) Inventory (63,225) - 63,225 (323,846) Increase (decrease) in: Accounts payable 1,359 - 565,762 4,059 Accrued expenses 154,393 194,766 (50,318) 111,632 --------------- --------------- --------------- ----------------- Net cash used in operating activities (2,340,894) (428,319) (1,946,537) (2,012,701) --------------- --------------- --------------- ----------------- INVESTING ACTIVITIES - -------------------- Purchase of equipment (12,325) - (15,963) (12,325) Proceeds from sale of investments 2,002,567 - - 1,703,372 Purchase of investments - (2,002,567) - - Deposits on equipment purchases (303,146) - 288,912 (411) --------------- --------------- --------------- ----------------- Net cash provided by (used in) investing activities 1,687,096 (2,002,567) 272,949 1,690,636 --------------- --------------- --------------- ----------------- FINANCING ACTIVITIES - -------------------- Capital contributions 832,104 3,000,878 726,806 - Proceeds from issuance of notes payable - - 350,000 - --------------- --------------- --------------- ----------------- Net cash provided by financing activities 832,104 3,000,878 1,076,806 - --------------- --------------- --------------- ----------------- Net increase (decrease) in cash 178,306 569,992 (596,782) (322,065) Cash, begining of period 569,992 - 748,298 569,992 --------------- --------------- --------------- ----------------- Cash, end of period $ 748,298 $ 569,992 $ 151,516 $ 247,927 =============== =============== =============== =================
The accompanying notes are an integral part of these financial statements. - 4 - CELLGATE TECHNOLOGIES LLC NOTES TO FINANCIAL STATEMENTS (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 IS UNAUDITED) NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - --------------------------------------------------------------- Nature of Business ------------------ CellGate Technologies LLC (the Company), a Delaware limited liability company, was formed on September 18, 1997. The Company is engaged in providing wireless internet protocol ("IP") services for transaction processing in the financial services industry through a proprietary wireless IP adapter. Since commencement of operations through November 1999, the Company had been engaged in product development and market testing of its services. Sales began in December 1999. Therefore, the accompanying statement of operations for the year ended December 31, 1999 reflects only one month of sales revenue. On November 16, 2000, the Company sold substantially all of its assets and assigned certain of its liabilities to U.S. Wireless Data, Inc. ("U.S. Wireless"), a publicly traded entity. The total purchase price included $1,000,000 in cash and 562,500 shares of the common stock of U.S. Wireless (see Note 8). As a result of this transaction, the Company now operates as an investment company and consulting firm. Significant Accounting Policies ------------------------------- Estimates --------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Cash ---- Cash includes amounts held in escrow relating to certain lease agreements. At September 30, 2000, total cash held in escrow totaled $143,667 (unaudited). Accounts receivable ------------------- No allowance for doubtful accounts is provided, as all receivables are considered collectible. Investments ----------- The Company invests in short-term commercial paper with maturities ranging from six to twelve months. Inventory --------- Inventory is stated at the lower of cost (first-in, first-out method) or market. -5- CELLGATE TECHNOLOGIES LLC NOTES TO FINANCIAL STATEMENTS (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 IS UNAUDITED) NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) - --------------------------------------------------------------------------- Furniture, fixtures and leasehold improvements ---------------------------------------------- Furniture, fixtures and leasehold improvements are recorded at cost. Depreciation is provided by the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized on a straight-line basis over the useful life of the improvements or the term of the lease, whichever is less. Revenue Recognition ------------------- Revenue is recognized when earned. For service and transaction fees, customers are billed under specific contract provisions and revenue is recognized in accordance with such provisions. Revenue from sales of products is generally recognized upon shipment of the units. Income Taxes ------------ The Company, with the consent of its members, has elected under the Internal Revenue Code to be treated as a partnership. In lieu of corporation income taxes, the members of a limited liability company (partnership election) are taxed on their pro rata share of the Company's income, expenses, gains, and losses on their individual income tax returns. Therefore, no provision or liability for Federal or state income taxes has been included in the accompanying financial statements. Advertising Costs ----------------- Advertising costs are charged to operations when incurred. Advertising expense for the years ended December 31, 1999 and 1998 amounted to $9,038, and $0, respectively. Advertising expense for the nine months ended September 30, 2000 totaled $32,050 (unaudited). NOTE 2- FURNITURE, FIXTURES AND LEASEHOLD IMPROVEMENTS - ------------------------------------------------------ The following is a summary of the Company's furniture, fixtures and leasehold improvements:
September 30, Useful Life/ December 31 December 31 2000 Lease Term 1999 1998 (unaudited) (in years) ---------------- ---------------- ------------------ -------------- Furniture and fixtures $ 8,400 - 22,005 3 Leasehold improvements 3,925 - 6,283 2 ---------------- ---------------- ------------------ 12,325 - 28,288 Less: accumulated depreciation (3,941) - (12,402) ---------------- ---------------- ------------------ $ 8,384 - 15,886 ================ ================ ==================
-6- CELLGATE TECHNOLOGIES LLC NOTES TO FINANCIAL STATEMENTS (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 IS UNAUDITED) NOTE 3- AGREEMENTS - ------------------ The Company has an exclusive contract with Tellus Technology Inc. ("Tellus") for the development and manufacture of wireless IP modem adapters. The agreement calls for the Company to pay Tellus non-recurring development fees, software development fees and to reimburse Tellus for certain development personnel expenses incurred. The agreement also describes pricing terms and conditions for the sale of the wireless IP modem adapters to the Company. Pricing is dependent upon quantities purchased and delivery periods as described in Note 5. The term of the contract is through February 2002, unless terminated earlier in accordance with the provisions of Article 10 of the agreement. The Company has contracted with Williams Technology Solutions ("Williams") to develop and manage the Company's network and server systems. The Company owns all equipment and software and contracts directly with the various communication carriers for communication links. Williams provides the personnel to develop server software and to operate the Company's systems on a 24 hours a day, 7-days per week basis. The Company's servers reside in the Williams facility in Earth City, Missouri. This facility is a communications center with full diversity for all communications connections and generator back up for power. The term of this contract is three years with a 30-day cancellation option. The Company has the option to hire the Williams staff if the Company desires to assume operational responsibility for the network and servers. The Company has three agreements with AT&T Wireless Data, Inc. ("AT&T Wireless"). The Intellectual Property License Agreement grants the Company a non-exclusive license to the proprietary technology of AT&T Wireless. Subject to the terms of this agreement, the Company will own the rights to any developed or enhanced technology that takes place during the four-year term of the contract. In addition, AT&T Wireless cannot license the patents to a third party for four years from commercial launch of the wireless IP modem adapters. The contract calls for the Company to maintain a comprehensive general liability insurance policy of at least $2 million during the term of the contract. The CDPD Value Added Reseller Agreement sets forth the pricing of AT&T Wireless services to the Company such as line access fees, usage charges, and volume discounts. The term of this agreement is through 2001 and is renewable thereafter on a month-to-month basis. The Data Marketing Agreement designates the Company as a reseller of AT&T Wireless Data services. Refer to Note 8 for discussion on the assignment by the Company and assumption of the above-mentioned contracts by U.S. Wireless in connection with its purchase of the Company's business. NOTE 4- ALLOCATION OF PROFITS AND LOSSES - ---------------------------------------- In accordance with section 6.01(a) of the Amended and Restated Limited Liability Company Agreement (the Agreement), profits and losses shall be allocated each fiscal year according to the number of membership units owned as reflected in the books and records of the Company; provided, however, that no loss will be allocated to any member for any fiscal year to the extent that such a loss would create or increase a deficit in such member's "adjusted capital account" (as this term is defined in the Agreement), and such loss will instead be allocated to other members according to the number of -7- CELLGATE TECHNOLOGIES LLC NOTES TO FINANCIAL STATEMENTS (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 IS UNAUDITED) NOTE 4- ALLOCATION OF PROFITS AND LOSSES (CONTINUED) - ---------------------------------------------------- membership units owned by such other members to the extent that such allocation will not create or increase a deficit in such other members' adjusted capital accounts. There are other provisions under section 6.01 applicable to profit and loss allocations as more fully described in the Agreement and the amendments thereto. In accordance with section 14.02 of the Agreement, in the event of dissolution or discontinuance of the core business of the Company, the assets and funds of the Company available for distribution to members after payment of/provision for all debts and liabilities of the Company and the allocation of all gains and losses on the disposition of assets or the settlement of liabilities, including debts and liabilities to members, will, to the extent that the same are sufficient therefor, be paid and applied in payment of the respective capital accounts of the members, without preference as to class, pro rata as to such capital accounts if the funds available are not sufficient to discharge the capital accounts of all members. No member may receive any portion of the capital account of another member. In accordance with section 6.03 of the Agreement, interim distributions, if made, will be allocated according to the number of membership units owned, as reflected in the books and records of the Company. NOTE 5- NOTES PAYABLE (UNAUDITED) - --------------------------------- The following is a summary of notes payable (unaudited) as of September 30, 2000: Unsecured note payable to a member of the Company, due on demand. The applicable rate of interest is 12% per annum. $250,000 Note payable to a member of the Company, with principal and interest payments due on the earlier of October 1, 2000 or the date upon which the Company secures additional funding. Interest is payable at 12% per annum. The note is collateralized by the Company's accounts receivable. 100,000 ---------- $350,000 ========== Total interest accrued on the above notes as of September 30, 2000 was $12,226 (unaudited). The Company repaid these borrowings in October 2000 and November 2000. NOTE 6- COMMITMENTS - ------------------- The Company leases its office space in Boca Raton, Florida under a non-cancelable sublease agreement, which expires on January 28, 2001. The agreement calls for a minimum monthly rental payment of $2,192 including sales taxes. Rental expense for the year ended December 31, 1999 and the nine months ended September 30, 2000 amounted to $29,898 and $33,144 (unaudited), respectively. -8- CELLGATE TECHNOLOGIES LLC NOTES TO FINANCIAL STATEMENTS (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 IS UNAUDITED) NOTE 6-COMMITMENTS (CONTINUED) - ------------------------------ Minimum future lease payments under this sublease for each of the next two years and in the aggregate are as follows: For the year ending December 31, -------------------------------- 2000 $ 44,658 2001 3,904 ------------------ $ 48,562 ================== On July 29, 1999, the Company entered into a Master Purchase and Lease Agreement with Tellus Technology Inc. (Tellus) and Varilease Corporation (Varilease) in which Tellus agrees to sell to Varilease and Varilease agrees to lease to the Company wireless IP modem adapters (the Equipment Units). In connection therewith, the Company entered into a separate Master Lease Agreement with Varilease to lease Equipment Units. On December 7, 1999, the Company leased 849 Equipment Units from Varilease at a total cost of $191,025. The terms of the lease agreement call for monthly lease rental payments of $6,269 for a period of 30 months. At the end of the period, and under the terms specified in the agreement, the Company may either purchase the Equipment Units (at prices to be determined by the parties), extend the lease for an additional twelve months (at specified rates), or return the Equipment Units. While in its possession, the Company bears the risk of loss for any damaged Equipment Units. The Company leases equipment under various other non-cancelable operating leases with terms that expire through December 2002. The leases call for minimum monthly rent payments plus sales and use taxes. The leased equipment includes personal computers, computer servers, telephone systems, and photocopiers. Total rental expense, in the aggregate, for the year ended December 31, 1999 and for the nine months ended September 30, 2000 amounted to $23,497 and $40,474 (unaudited), respectively. Minimum future lease payments at December 31, 1999 under these leases for each of the next three years and in the aggregate are as follows: For the year ending December 31, -------------------------------- 2000 $ 118,582 2001 110,701 2002 52,782 ------------------ $ 282,065 ================== -9- CELLGATE TECHNOLOGIES LLC NOTES TO FINANCIAL STATEMENTS (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 IS UNAUDITED) NOTE 6-COMMITMENTS (CONTINUED) - ------------------------------ In connection with the agreement with Tellus described in Note 3, the Company has, through the issuance and acceptance of purchase orders committed to purchase 19,000 wireless IP modem adapters at $195 per modem. These modems are deliverable within eighteen months of successful completion of the "critical design review", as that term is defined in the Tellus agreement. This commitment is backed by an irrevocable standby letter of credit for $3,700,000, which the Company obtained in February 2000. As of the nine months ended September 30, 2000, the Company had leased from Varilease 9,800 of the 19,000 Equipment Units at a total cost of $2,115,000 (unaudited). The terms of the lease call for monthly lease rental payments of $73,053 (unaudited) for a period of 30 months. The Company is committed to lease the remaining 9,200 Equipment Units before December 31, 2000. The $3,700,000 letter of credit expired on September 30, 2000. In the event the Company does not take delivery of at least 100,001 modems within the initial thirty-six months, pricing of the modems will be adjusted up to a maximum of $225 per modem and an appropriate adjustment charge for the actual number of modems delivered will be charged to the Company. Refer to Note 8 for discussion on the assignment by the Company and assumption of the above commitments by U.S. Wireless in connection with its purchase of the Company's business. NOTE 7- CONTINGENCIES - --------------------- In connection with the Company's Data Marketing Agreement with AT&T Wireless, the Company is required to pay a marketing and support services fee in the amount of $500,000 on the last day of the 36th month following "commercial launch", as defined in the CDPD Value Added Reseller Agreement ("VAR Agreement"), in the event that the Company has not achieved at least 40,000 active "end users", as defined in the VAR Agreement, as of such date. Moreover, the Company, within one year of the date of the VAR Agreement, shall maintain a minimum of 500 active numbers. Within eighteen months of the date of the VAR Agreement, the Company shall maintain a minimum of 10,000 active numbers. Within two years of the date of the VAR Agreement, the Company shall maintain a minimum of 20,000 active numbers. If such minimums are not met, the Company will not be eligible for the Customer Rate Plan and will receive service on the Standard VAR Rate Plan, as defined in the VAR Agreement. If the Company fails to meet a minimum number requirement on a date as set forth in the VAR Agreement, but does meet a subsequent minimum number requirement, the Company will become eligible for the Customer Rate Plan following its satisfaction of the subsequent minimum number requirement. In addition, failure to meet minimum number requirements shall give rise to AT&T Wireless' right to terminate under section 7.2 of the VAR Agreement. The Company and Heartland Card Services LLC ("Heartland") are parties to a Member Service Agreement ("MS Agreement") in which the Company provides to Heartland wireless modem adapters, access to the AT&T Wireless technology, and access to other merchant wireless data services through intercarrier agreements. In connection with this agreement, Heartland is required to maintain active a certain number of wireless modem adapters during certain periods after commercial launch. If Heartland does not meet those minimums, the Company may, at its option, each month charge Heartland an amount equal to the difference in number in such month between actual active wireless -10- CELLGATE TECHNOLOGIES LLC NOTES TO FINANCIAL STATEMENTS (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 IS UNAUDITED) NOTE 7- CONTINGENCIES (CONTINUED) - --------------------------------- modem adapters and the required minimum, times an amount equal to the Company's cost of acquiring or leasing such wireless modem adapters. Refer to Note 8 for discussion on the assignment by the Company and assumption of the above contingencies by U.S. Wireless in connection with its purchase of the Company's business. NOTE 8 - SUBSEQUENT EVENT--SALE OF COMPANY'S BUSINESS (UNAUDITED) - ----------------------------------------------------------------- On November 16, 2000, the Company sold substantially all of its assets and assigned certain of its liabilities to U.S. Wireless Data, Inc. ("U.S. Wireless"), a publicly-traded entity primarily engaged in providing wireless payment processing solutions to businesses. The total purchase price included $1,000,000 in cash and 562,500 shares of the common stock of U.S. Wireless. The sale generally included all the assets and substantially all liabilities of the Company as of September 30, 2000. The liabilities retained by the Company include a certain promissory note for $250,000 to a member (see Note 5), and any other loans or payables to affiliates of the Company or their related parties, other than those pursuant to the AT&T license agreements and that certain promissory note for $100,000 to a member (see Note 5). With respect to those liabilities that remain with U.S. Wireless, all contracts, commitments, and contingencies associated with such liabilities have been assumed by and proper consents granted to U.S. Wireless, except for the Heartland MS Agreement described in Note 7. U.S. Wireless has assumed the MS Agreement but consent has not been granted. The Company has been relieved of this contract liability as part of the asset purchase agreement. U.S. Wireless assumed employment obligations of the Company's employees for a period of ten business days following the closing date of the asset purchase agreement. After such period, individuals to whom U.S. Wireless has not extended employment offers will be considered terminated, and U.S. Wireless will have ten business days to pay to the Company any amounts required to satisfy all severance obligations listed under section 6.03 of the asset purchase agreement. The total purchase price of $1,000,000 and 562,500 shares of U.S. Wireless common stock is subject to a "price adjustment", defined as follows: if the average closing price of the common stock for the 20 consecutive trading days ending with the trading day immediately preceding the date one year from the closing date is less than $16 per share as adjusted for any stock splits, stock dividends or similar events, then U.S. Wireless will pay an additional amount equal to the number of "remaining shares" (as this term is defined in the asset purchase agreement) multiplied by the amount, if any, not to exceed $10.00, by which such average closing price is less than $16.00. No less than 50 percent of the adjustment amount shall be paid in cash, and the balance shall be paid either in cash or in shares of U.S. Wireless common stock having a value, based on such average closing price (provided that such average closing price for such purposes shall not be less than $6 per share), equal to the amount of such balance not paid in cash. U.S. Wireless has the option, exercisable at any time and from time to time by two business days prior written notice, to purchase all or a portion of the remaining shares at a price of $32 per share (subject to adjustment for stock splits, stock dividends, and similar events), payable in cash. -11- CELLGATE TECHNOLOGIES LLC NOTES TO FINANCIAL STATEMENTS (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 IS UNAUDITED) NOTE 8 - SUBSEQUENT EVENT--SALE OF COMPANY'S BUSINESS (UNAUDITED) (CONTINUED) - ----------------------------------------------------------------------------- Article III of the asset purchase agreement between the Company and U.S. Wireless details all representations and warranties of the Company in connection with the sale transaction. Provisions under Article III include a statement that there are no actions or proceedings pending or threatened against, relating to or affecting the Company with respect to its business or any of its assets and properties. Article V of the asset purchase agreement addresses certain covenants of the Company. Provisions under Article V include statements whereby the Company (a) for a period of at least thirteen months from and after the closing date, shall not wind up, liquidate or dissolve; and (b) shall change its name to one that does not include the name "Cellgate" or any similar name. Refer to Articles III and V of the asset purchase agreement for a complete description of all representations, warranties, and covenants of the Company. NOTE 9- RELATED PARTY TRANSACTIONS - ---------------------------------- The Company has contracted with Noblett & Associates, Inc. ("Noblett"), a member of the Company, for consulting services involving sales support, product development, contract negotiation, and other services. For the year ended December 31, 1999 and the nine months ended September 30, 2000, total consulting fees paid to Noblett were $196,908 and $103,148 (unaudited), respectively. The consulting services contract with Noblett expired on December 4, 2000. In connection with the various agreements with AT&T Wireless, a member of the Company, payments to AT&T Wireless for license, marketing, and technology access fees for the year ended December 31, 1999 and the nine months ended September 30, 2000 amounted to $2,937 and $40,801 (unaudited), respectively. NOTE 10- NOTES RECEIVABLE FROM MEMBERS - -------------------------------------- At December 31, 1999, the Company held six promissory notes with balances totaling $169,146 from members of the Company. Of these six members, five are also employees of the Company. The notes, which were a result of the capital notice that raised $1,001,250, do not bear interest and are payable in installments all of which are due through February 2000. At September 30, 2000, the Company held one promissory note for $20,000 (unaudited) from a member of the Company. NOTE 11- MEMBERS' CAPITAL - ------------------------- At December 31, 1999 and September 30, 2000, total units authorized and issued totaled 111,350 and 121,113 (unaudited), respectively. At December 31, 1999, total units authorized but not issued amounted to 9,033. For the nine months ended September 30, 2000, 2,866 options (unaudited) to purchase Company units at $100 per unit were exercised by a member of the Company; 4,000 units with no value (unaudited) were granted to new employees; 2,897 units (unaudited) at $100 per unit were issued as a result of a capital notice; and 5,000 options (unaudited) to purchase Company units at -12- CELLGATE TECHNOLOGIES LLC NOTES TO FINANCIAL STATEMENTS (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 IS UNAUDITED) NOTE 11- MEMBERS' CAPITAL (CONTINUED) - ------------------------------------- $100 per unit were issued to a third party in exchange for a service guarantee. These options expire in September 2001. Units authorized but not issued in connection with the Company's Membership Unit Incentive Plan totaling 1,667 at December 31, 1999 will be retired. NOTE 12- CONCENTRATIONS - ----------------------- The Company is indirectly reliant on one supplier, Tellus Technology, Inc. that develops and manufactures the wireless modem adapters. As provided for in the Company's agreement with Tellus, Tellus shall use its best efforts to secure an agreement with Universal Scientific Industry, Ltd. that should provide the Company a continuing source of wireless IP modem adapters in the event that Tellus is unable to meet its obligations under the agreement. -13- EX-99.3 3 0003.txt PRO FORMA FINANCIAL INFORMATION. U.S. WIRELESS DATA, INC. UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION The following Unaudited Pro Forma Condensed Financial Statements give effect to the purchase of certain net assets of Cellgate Technologies LLC ("Cellgate") by U.S. Wireless Data, Inc. ("USWD"). These pro forma condensed financial statements are presented for illustrative purposes only. The pro forma adjustments are based upon available information and certain assumptions that management believes are reasonable. The Unaudited Pro Forma Condensed Financial Information is prepared using the purchase method of accounting. For the purpose of the Unaudited Pro Forma Condensed Financial Information presented below, the purchase price has been calculated based upon the price of $3.50 per share of USWD Common Stock. Under the purchase method of accounting, tangible and identifiable intangible assets acquired and liabilities assumed are recorded at their estimated fair values. The excess of the purchase price, including estimated direct fees and expenses related to the merger, over the net assets acquired represents goodwill, and is classified as other assets, on the accompanying unaudited pro forma balance sheet. The estimated fair values and useful lives of assets acquired and liabilities assumed are based on an independent valuation. The Pro Forma Condensed Balance Sheet of USWD as at September 30, 2000 reflects the financial position of USWD after giving effect to the purchase of assets and assumption of certain liabilities of Cellgate and assumes the acquisition took place on September 30, 2000. The Pro Forma Condensed Statement of Operations for the fiscal year ended June 30, 2000 and the three months ended September 30, 2000 assumes the purchase occurred on July 1, 1999. The Unaudited Pro Forma Condensed Financial Information is provided for illustrative purposes only and does not purport to represent what the actual results of operations or financial position of USWD would have been had the merger occurred on the date assumed, nor is it necessarily indicative of future results of operation or financial position. The pro forma assumptions and adjustments are described in the accompany notes presented on the following pages. The Unaudited Pro Forma Condensed Financial Information should be read in conjunction with the audited financial statements of USWD in the USWD Annual Report on Form 10-KSB for the year ended June 30, 2000, and with the unaudited financial statements of USWD in the Quarterly Report on Form 10-QSB for the period ended September 30, 2000 and the audited financial statements of Cellgate for the year ended December 31, 1999 and the unaudited financial statements of Cellgate for September 30, 2000 included herein. U.S. Wireless Data, Inc. Pro Forma Condensed Balance Sheet (Unaudited)
September 30, 20000 ---------------------------------------------- U.S. Wireless Cellgate Pro Forma September 30, 2000 Data, Inc. Technologies, Inc. Adjustments Combined ------------------------------------------------------------------------------------ ASSETS Current assets: Cash $ 36,680,000 $ 151,516 (1,000,000)(b) $ 35,831,516 Accounts receivable, net 218,000 9,200 227,200 Notes receivable 82,000 - 82,000 Other receivable 176,000 - 176,000 Inventory, net 39,000 - 39,000 Other current assets 222,000 14,234 236,234 ------------------ ---------------- ----------------- ------------------- $37,417,000 $174,950 ($1,000,000) $36,591,950 ------------------ ---------------- ----------------- ------------------- Restricted cash 576,000 - 576,000 Property and equipment, net 2,116,000 15,886 2,131,886 Other assets 103,000 - 8,416,319 (f) 8,519,319 ------------------ ---------------- ----------------- ------------------- Total assets $40,212,000 $190,836 7,416,319 47,819,155 ================== ================ ================= =================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable 1,684,000 567,121 475,000 (e) 2,726,121 Accrued liabilities 1,073,000 298,841 1,371,841 Notes payable - 350,000 (250,000)(d) 100,000 ------------------ ---------------- ----------------- ------------------- $2,757,000 $1,215,962 $225,000 $4,197,962 ------------------ ---------------- ----------------- ------------------- Deferred rent 157,000 - 157,000 Deposit due to Sub Lessor 107,000 - 107,000 ------------------ ---------------- ----------------- ------------------- Total liabilities $3,021,000 $1,215,962 $225,000 $4,461,962 --------------------------------------------------------- ------------------- Members' deficit - (1,025,126) 1,025,126 (d) - ------------------ ---------------- ----------------- -------------------- Total stockholders' Equity 37,191,000 - 6,166,193 (d) 43,357,193 ------------------ ---------------- ----------------- ------------------- Total liabilities and stockholders' Equity $ 40,212,000 $ 190,836 7,416,319 47,819,155 ================== ================ ================= ===================
U.S. Wireless Data, Inc. Pro Forma Condensed Statement of Operations
For the Twelve Months Ended June 30, 2000 (a) --------------------------------------------------------------------------- (Unaudited) Combined U.S. Wireless Cellgate Pro Forma Pro Forma Data, Inc. Technologies LLC Adjustments Results ----------------- ----------------- ---------------- --------------- Net revenues: $597,000 50,060 647,060 Cost of revenues: 896,000 292,910 1,188,910 ----------------- ----------------- ---------------- --------------- Gross Loss (299,000) (242,850) - (541,850) ----------------- ----------------- ---------------- --------------- Operating expenses: Selling, general and administrative 6,826,000 2,522,223 1,140,560 (c) 10,488,783 Research and development 1,330,000 36,727 1,366,727 ----------------- ----------------- ---------------- --------------- Total operating expense 8,156,000 2,558,950 1,140,560 11,855,510 ----------------- ----------------- ---------------- --------------- Loss from operations (8,455,000) (2,801,800) (1,140,560) (12,397,360) Interest income 644,000 28,600 672,600 Interest expense (797,000) (2,167) (799,167) Other income 84,000 - 84,000 ----------------- ----------------- ---------------- --------------- Net Loss (8,524,000) (2,775,367) (1,140,560) (12,439,927) ----------------- ----------------- ---------------- --------------- Preferred stock dividends (45,746,000) (45,746,000) ----------------- ----------------- ---------------- --------------- Net loss available to common stockholders' $ (54,270,000) (2,775,367) (1,140,560) (58,185,927) ================= ================= ================ =============== Basic and diluted net loss per share (after deduction of preferred stock dividends) Net loss available to common stockholders' $ (2.26) - - (2.33) ================= ================= ================ =============== Weighted average common shares outstanding basic and diluted 23,976,000 - 1,031,000 25,007,000 (g) ================= ================= ================ ===============
U.S. Wireless Data, Inc. Pro Forma Condensed Statement of Operations (Unaudited)
For the three months ended September 30, 2000 (a) ----------------------------------------------------------------------------- Combined U.S. Wireless Cellgate Pro Forma Pro Forma Data, Inc. Technologies LLC Adjustments Results ----------------------------------------------------------------------------- Net revenues: $151,000 $24,345 - $175,345 Cost of revenues: 106,000 235,175 - 341,175 ----------------- ----------------- -------------- --------------- Gross profit (loss) 45,000 (210,830) - (165,830) ----------------- ----------------- -------------- --------------- Operating expenses: Selling, general and administrative 3,260,000 701,715 285,140 (c) 4,246,855 Research and development 350,000 350,000 ----------------- ----------------- -------------- --------------- Total operating expense 3,610,000 701,715 285,140 4,596,855 ----------------- ----------------- -------------- --------------- ----------------- ----------------- -------------- --------------- Loss from operations (3,565,000) (912,545) (285,140) (4,762,685) ----------------- ----------------- -------------- --------------- Interest income 627,000 2,265 - 629,265 Interest expense (10,059) - (10,059) Other income 10,000 10,000 ----------------- ----------------- -------------- --------------- Net Loss ($2,928,000) ($920,339) (285,140) (4,133,479) ================= ================= ============== =============== Basic and diluted net loss per share (after deduction of preferred stock dividends) Net loss available to common stockholders' $ (0.35) $ - $ - (0.44) ================= ================= ============== =============== Weighted average common shares outstanding basic and diluted 8,335,000 - 1,031,000 9,366,000 (g) ================= ================= ============== ===============
Notes to the Pro Forma Condensed Financial Statements (a.) U.S. Wireless Data, Inc. ("U.S. Wireless") has acquired the assets and assumed certain liabilities of Cellgate Technologies LLC ("Cellgate"). For the purposes of these Pro Forma Condensed Financial Statements the information relating to Cellgate, which has a year-end of December 31, has been recast to conform to U.S. Wireless' year-end of June 30, 2000. Accordingly, the twelve months ended June 30, 2000 of Cellgate, includes Net revenues and Net loss of approximately $18,000 and $1,631,000 for the six month period June 30, 2000 and omits approximately $0 and $1,267,000 for the six months ended June 30, 1999, respectively. (b.) Represents the cash payment of $1,000,000 as part of the Purchase Agreement. (c.) Represents the applicable amortization expense for intangible assets. The intangible assets consist of work force acquired, intellectual property and goodwill, which are amortized over four (4) years, seven (7) years and ten (10) years, respectively. (d.) To reflect the issuance of 562,500 shares of U.S. Wireless common stock valued at $1,900,000 to members of Cellgate and contingently issuable consideration of approximately $4,200,000 to members of Cellgate, elimination of members equity of Cellgate, liabilities of Cellgate not assumed and cash payments to members of Cellgate. The contingently issuable consideration includes approximately $2,600,000 in cash and 468,000 shares of U.S. Wireless common stock valued at $1,600,000. (e.) Adjusted to reflect incurrence of an estimated $475,000 of non-recurring merger-related costs, which have been reflected in the purchase price. These costs include fees for financial advisors, legal advisors, accountants and other nominal costs. This amount does not include any costs incurred to integrate and restructure the operations of U.S. Wireless and Cellgate. These integration and restructure costs which consist of payments to Cellgate employees for wages, severance and benefits, and the cost of facility leases subsequent to the date of the acquisition are estimated to be $152,000 (f.) The purchase price of Cellgate, is approximately $8,416,000, which includes $965,000 of assumed liabilities. The purchase price is allocated to the following intangible assets; acquired workforce ($250,000), technology, patents and licenses ($6,100,000) and Goodwill ($2,066,000) (g.) Represents U.S. Wireless' weighted average number of shares of Common Stock outstanding for the period and approximately 1,031,000 shares to be issued as a result of the merger. This includes 562,500 shares to be issued at date of closing and 468,500 shares contingently issuable one year from date of closing depending on the average share price of U.S. Wireless common stock. -----END PRIVACY-ENHANCED MESSAGE-----