U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-30620
UNITY WIRELESS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 91-1940650
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10900 NE 4th Street, Suite 2300, Bellevue, Washington 98004
(Address of principal executive offices)
1 800 337-6642
(Issuer's Telephone Number)
Number of shares of common stock outstanding at May 1, 2001: 25,743,153
INDEX TO THE FORM 10-QSB
For the quarterly period ended March 31, 2001
Page
----
Part I - Financial Information ................................................1
ITEM 1. FINANCIAL STATEMENTS ...............................................1
Unaudited Consolidated Balance Sheets ...................................1
Unaudited Consolidated Statements of Operations and
Comprehensive Income (Loss) ...........................................2
Unaudited Consolidated Statements of Cash Flows .........................3
Notes to the Unaudited Consolidated Financial Statements ................4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION .........8
Part II - OTHER INFORMATION ..................................................11
ITEM 1. LEGAL PROCEEDINGS ..................................................11
ITEM 2. CHANGES IN SECURITIES ..............................................11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ...................................12
SIGNATURES ...................................................................14
i
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNITY WIRELESS CORPORATION
CONSOLIDATED BALANCE SHEETS
(expressed in U.S. dollars)
March 31 Dec. 31
2001 2000
------------------------------------------------------------------------------------------------------
(unaudited) (Note 1)
$ $
ASSETS
Current assets
Cash and cash equivalents 2,054,009 2,002,084
Restricted cash 100,000 100,000
Accounts receivable (less allowance for doubtful accounts
of $21,898 in 2001 and $4,245 in 2000) 131,313 232,591
Loan receivable from related party 107,833 204,434
Government grant receivable 3,285 13,905
Inventory (note 2) 416,429 463,412
Prepaid expenses 7,137 14,309
Other receivable 61,500 61,500
------------------------------------------------------------------------------------------------------
2,881,506 3,092,235
Equipment, net 199,437 221,651
Goodwill 880,645 926,995
------------------------------------------------------------------------------------------------------
3,961,588 4,240,881
------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness 51,357 276,811
Accounts payable and accrued liabilities (note 3) 635,596 728,807
Loans payable 143,985 42,312
Product warranty 542,871 623,497
------------------------------------------------------------------------------------------------------
1,373,809 1,671,427
Loans payable 0 115,781
------------------------------------------------------------------------------------------------------
Total liabilities 1,373,809 1,787,208
------------------------------------------------------------------------------------------------------
Stockholders' Equity
Common stock, $0.001 par value 100,000,000 authorized,
25,743,153 (2000 - 25,743,153) issued and outstanding 25,743 25,743
Additional paid-in capital 13,072,365 13,251,498
Deferred stock compensation 0 (89,719)
Accumulated deficit (10,621,635) (10,732,275)
Other accumulated comprehensive gain (loss) 111,306 (1,574)
------------------------------------------------------------------------------------------------------
2,587,779 2,453,673
------------------------------------------------------------------------------------------------------
3,961,588 4,240,881
------------------------------------------------------------------------------------------------------
Commitments and contingent liabilities (note 8)
Subsequent events (note 9)
See accompanying notes to consolidated financial statements
1
UNITY WIRELESS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(expressed in U.S. dollars)
(Unaudited)
Three months ended March 31
---------------------------
2001 2000
---- ----
Net sales $ 1,392,947 $ 54,678
Cost of goods sold (includes stock-based compensation (recovery)
expense ($ 350) in 2001 and nil in 2000) 996,462 74,232
-------------------------------------------------------------------------------------------------------------------------------
396,485 (19,554)
-------------------------------------------------------------------------------------------------------------------------------
Expenses:
Research and development (includes stock-based
compensation (recovery) expense ($ 24,636) in 2001 and $ 10,600 in 2000) 94,579 190,804
Sales and marketing (includes stock-based compensation (recovery)
expense($ 10,973) in 2001 and $ 84,800 in 2000) 40,685 203,657
Depreciation and amortization 68,233 14,982
Exchange (gain) loss (54,999) 6,778
Interest expense 1,068 7,452
General and administrative (includes stock-based
compensation (recovery) expense ($ 53,495) in 2001 and nil in 2000) 173,511 231,743
-------------------------------------------------------------------------------------------------------------------------------
323,077 655,416
-------------------------------------------------------------------------------------------------------------------------------
Operating income (loss) for the period 73,408 (674,970)
Interest income 28,570 4,232
Other income 8,662 57
-------------------------------------------------------------------------------------------------------------------------------
Net income (loss) for the period 110,640 (670,681)
-------------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss):
Income (loss) for the period 110,640 (670,681)
Currency translation adjustment 112,880 10,846
-------------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) 223,520 (659,835)
-------------------------------------------------------------------------------------------------------------------------------
Basic and diluted loss per common share (note 4): 0.004 (0.036)
See accompanying notes to consolidated financial statements
2
UNITY WIRELESS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(expressed in U.S. dollars)
(Unaudited)
Three months ended March 31
---------------------------
2001 2000
Operating activities:
Income (loss) from operations 110,640 (670,681)
Adjustments to reconcile net loss to net cash used in
operating activities:
Amortization of patents 0 12,202
Depreciation of equipment 21,883 2,780
Amortization of goodwill 46,350 0
Stock based compensation (89,454) 95,400
Changes in non-cash working capital relating to operations:
Accounts receivable 101,278 (15,168)
Government grant receivable 10,620 0
Investment tax credit receivable 0 123,245
Inventory 46,983 (11,725)
Prepaid expenses 7,172 (4,346)
Accounts payable and accrued liabilities (93,211) 270,128
Product warranty (80,626) 6,217
-------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 81,635 (191,948)
Investing activities:
Acquisition of equipment (9,832) (2,925)
Increase in patents 0 350
Related party advances 0 (83)
-------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (9,832) (2,658)
Financing activities:
Repayment of loan receivable 96,601 0
Bank overdraft (225,454) (18,220)
Repayment of loan payable (14,108) (362,192)
Proceeds from loan payable 0 499,533
Cash proceeds from issued and to be issued common shares 0 5,730,468
Share issue costs 0 (415,431)
-------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (142,961) 5,434,158
Effect of foreign exchange rate changes on cash and cash equivalents 123,083 10,846
Increase (decrease) in cash 51,925 5,250,398
Cash, beginning of period 2,002,084 32,970
Cash, end of period 2,054,009 5,283,368
See accompanying notes to consolidated financial statements
3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying interim unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB
and Regulation SB. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normally recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three-month period ending March 31, 2001 are not necessarily indicative
of the results that may be expected for the year ended December 31, 2001.
For further information, refer to the consolidated financial statements and
footnotes thereto included in Unity Wireless Corporation's annual report on
Form 10-KSB for the year ended December 31, 2000.
The Company has changed its name to Unity Wireless Corporation from Sonic
Systems Corporation. It began using the new name as a "dba" in March, 2000,
and formally changed its name by filing Articles of Amendment with the
State of Delaware Secretary of State effective July 20, 2000.
The Company's ability to realize the carrying value of its assets is
dependent on achieving profitable operations, and continuing development of
new technologies, the outcome of which cannot be predicted at this time.
Accordingly, the Company will require for the foreseeable future ongoing
capital infusions in order to continue its operations, fund its research
and development activities, and ensure orderly realization of its assets at
their carrying values.
2. Inventory:
The components of inventory consist of the following:
March 31 December 31
2001 2000
$ $
------------------------------------------------------------------------
Raw materials 325,477 248,863
Work in progress 1,274 195,504
Finished goods 89,678 19,045
------------------------------------------------------------------------
416,429 463,412
------------------------------------------------------------------------
3. Accounts payable and accrued liabilities:
March 31 December 31
2001 2000
$ $
------------------------------------------------------------------------
Trade accounts payable 428,522 468,866
Employee compensation payable 18,997 -
Accrued liabilities 188,077 259,941
------------------------------------------------------------------------
635,596 728,807
------------------------------------------------------------------------
4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. Earnings per share data:
The following table sets forth the computation of basic and diluted income
(loss) per share:
Three months ended March 31,
----------------------------
2001 2000
-----------------------------------------------------------------------------------------------
Numerator
Net income (loss) for the period ($) 110,640 (670,681)
Denominator
Weighted average number of common shares outstanding 25,743,153 20,616,582
Adjusted 0 1,740,440
----------- ---------
25,743,153 18,876,143
Basic and diluted income (loss) per common share ($) 0.004 (0.036)
-----------------------------------------------------------------------------------------------
For the 3-month period ended March 31, 2001, all of the Company's common
shares issuable upon the exercise of stock options and warrants were
excluded from the determination of diluted loss per share as their effect
would be anti-dilutive.
5. Stock Option Plan:
During the year ended December 31, 1998 the Company established a stock
option plan pursuant to which 3,000,000 common shares were reserved for
issuance. This plan was replaced on December 6, 1999, by a new stock option
plan pursuant to which 5,000,000 common shares were reserved for issuance.
On July 5, 2000 the shareholders approved a change in the maximum number of
options issuable under this plan to 20% of the number of common shares
outstanding including shares of common stock previously issued under the
plan. As of March 31, 2001 this maximum number was 6,435,788.
Stock option transactions for the respective periods and the number of
stock options outstanding are summarized as follows:
Outstanding options
---------------------------------------------------------------------------------------------------
Shares available No. of common Weighted average
under option shares issuable exercise price
---------------------------------------------------------------------------------------------------
Balance, December 31, 2000 1,981,123 4,454,666 0.77
Options granted (941,667) 941,667 0.50
Options expired 917,625 (917,625) 1.26
---------------------------------------------------------------------------------------------------
Balance, March 31, 2001 1,957,081 4,478,708 0.61
---------------------------------------------------------------------------------------------------
6. Segmented information:
a. Segment information:
During the quarter ended March 31, 2001 the Company is operating only in
the wireless product segment. During the quarter ended March 31, 2000, the
Company was operating only in the acoustic product segment.
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
b. Geographic information:
Substantially all assets and operations are in Canada. A summary of sales
by region is as follows:
Three months ended March 31,
------------------------------------------------------------------------
2001 2000
------------------------------------------------------------------------
Korea $ 1,377 $ -
Canada 10 26
United States 6 29
------------------------------------------------------------------------
Total sales $ 1,393 $ 55
------------------------------------------------------------------------
c. Major customers ($000):
The approximate sales to major customers is as follows:
Three months ended March 31,
---------------------------------------------------------------------
2001 2000
---------------------------------------------------------------------
Customer A $ 692 $ -
Customer B 588 -
---------------------------------------------------------------------
7. Warrants:
Under the consulting agreement between the Company and Mueller & Company, Inc.
and Ideas Inc. ("Mueller and Ideas") dated as of July 1, 2000, 500,000 shares of
common stock were issuable to Mueller and Ideas upon exercise of warrants at
$2.06 per share. On January 1, 2001, the Company and Mueller and Ideas agreed to
modify this agreement such that the number of warrants was reduced to 200,000
and the exercise price was reduced to $0.38. These warrants were valued using
fair market value under FAS 123.
8. Commitments and contingent liabilities:
a. Lease commitments
The Company has the following future minimum lease commitments for premises and
equipment:
$000
----
2001 64
2002 83
2003 81
2004 78
2005 52
----
358
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
b. Legal proceedings
The Company is currently a party to an action in the Supreme Court of British
Columbia, Vancouver Registry, brought by an optionholder seeking a declaration
that certain options to purchase shares in the common stock of the Company held
by it have a term of unlimited duration.
The Company provides for costs related to contingencies when a loss is probable
and the amount is reasonably determinable. It is the opinion of management,
based on advice of counsel, that the ultimate resolution of this contingency, to
the extent not previously provided for, will not have a material adverse effect
on the financial condition of the Company.
9. Subsequent events:
a. Further to Note 7 above, in April 2001 Mueller and Ideas agreed to provide
additional services under the consulting agreement. The Company agreed to
increase the number of warrants by 300,000, with the additional warrants
exercisable into shares of common stock at a price of $0.29.
b. The Company agreed, pursuant to a term sheet dated January 31, 2001, that
warranty obligations of its subsidiary Unity Wireless Systems Corporation ("UW
Systems") for Sonem products already installed will be assumed by Traffic
Systems, L.L.C. ("Traffic Systems"), the purchaser of the Company's Sonem
business, in consideration of UW System's transfer of its equity interest in
Traffic Systems and the Company's residual interest in the Sonem patents. The
term sheet is attached as an exhibit to the Company's Form 8-K filed with the
SEC on February 16, 2001. On April 30, 2001 UW Systems and Traffic Systems
entered into a definitive agreement consummating the term sheet. The definitive
agreement is attached as an exhibit to the Company's SB-2A which was filed on
May 3, 2001.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion of the financial condition, changes in financial
condition, and results of operations of Unity Wireless Corporation (the
"Company") should be read in conjunction with the Company's most recent
financial statements and notes appearing elsewhere in this Form 10-QSB; and in
the SB-2A filed May 3, 2001; the 8-K's filed January 9, 2001, January 16, 2001
and February 16, 2001 (see Item 6. Exhibits and Reports on Form 8-K); and the
10-KSB for Dec. 31, 2000 filed on April 2, 2001.
OVERVIEW
The Company is in the business of designing, developing and manufacturing
high power linear RF amplifiers and specialized communications products that use
traditional wireless channels. Prior to the introduction of its RF
communications products, the Company had designed, manufactured, and sold an
acoustic-based traffic signal preemption system under the trade name "Sonem".
The Sonem product accounted for all revenues earned in the fiscal years ended
December 31, 1998 and 1999, and the quarter ending March 31, 2000. In view of
the Company's strategic repositioning toward RF wireless products during 2000,
the Company, through its subsidiary Unity Wireless Systems Corporation, sold its
Sonem business to Traffic Systems, L.L.C. on October 6, 2000. Accordingly,
revenue from acoustic products ended in the third quarter of 2000.
Also in late 1999, the Company increased its marketing efforts in Asia,
resulting in a contract in the first quarter of 2000 with the Transportation
Management Systems division of Orbital Sciences ("Orbital"). Under the Orbital
contract, UW Integration, through its wholly owned subsidiary, UW Singapore,
provided systems integration support, warranty and maintenance services for the
Automatic Vehicle Management System ("AVMS") to be delivered by Orbital and
Sanyo Trading Company to Singapore Bus Services Ltd. Revenue from this contract
started in the quarter ended June 30, 2000, and continued for the rest of the
year. As the Company continued to refocus upon RF communication products, the
Orbital contract was assigned to Lyma Sales & Management Corp. on December 30,
2000, and therefore the Company has no further interest in any revenue resulting
from the contract.
In 1999 and 2000, the Company designed a specialized RF communication
product with the trade mark "UniLinx", which it introduced commercially in the
later part of 2000. This wireless IP (Internet Protocol) gateway was deployed in
the traffic control market and the remote POS market during 2000. Sales from
UniLinx commenced in the quarter ended June 30, 2000 and continued for the rest
of the year and into the first quarter of 2001.
On November 16, 2000 the Company acquired Ultratech Linear Solutions Inc.
("Ultratech"), a designer, developer and manufacturer of linear power amplifiers
for the wireless network infrastructure industry. Its operations have been
consolidated from the date of acquisition. The revenues from sales of Ultratech
amplifiers from the company's inception on April 22, 1999 to December 31, 2000
were approximately $3,200,000. The Company received revenue from the sale of RF
power amplifiers starting in the quarter ended December 31, 2000. Management
expects that the Ultratech acquisition will have a significant positive impact
on Company revenues in the current year and beyond.
The Company has incurred net losses since it became active in July 1995.
Losses resulted from low sales of the Company's Sonem traffic signal preemption
system, combined with startup manufacturing activity and engineering and
research and development costs relating to product improvement and new
technologies.
Losses continued into 2000 as the Company's revenue from Sonem sales, and
the later revenue from UniLinx and the Orbital contract, did not exceed
expenditures for research and development, marketing, and general and
administrative activities. In the first half of 2000 the Company became a
reporting issuer, requiring additional expenditures on legal and accounting
services. Also, up to the time of the sale of the Sonem product, the Company
made further development expenditures on this product to improve performance and
to reduce unit costs. Marketing and additional development costs were also
incurred on the UniLinx product.
8
With the completion of the Ultratech purchase, the discontinuance of the
contract services (Singapore) business segment, and the ending of active
participation in the Sonem product, the Company restructured its operations and
staff complement to adjust for the needs of higher manufacturing volumes and
development activities for its RF power amplifier products. The Company also
reviewed other costs and eliminated expenditures not directly required to
implement its RF wireless focus. Given the effectiveness of Ultratech's existing
distribution channels and the potential for increased amplifier sales as the
Company introduces these products in U.S., European, and additional Asian
markets, management believes that losses from operations will diminish and be
eliminated as the Company advances its business plan into the current year and
beyond.
Results of Operations
(All amounts are in US dollars unless otherwise stated)
Quarters Ended March 31, 2001 and 2000
Net Sales in the first quarter of 2001 increased by 2,448%, or $1,338,269,
to $1,392,947 from $54,678 in the first quarter of 2000. This increase was due
to net sales of $1,387,000 from RF amplifiers, and net sales of $5,947 from the
UniLinx product. In the first quarter of 2000 net sales were derived entirely
from the Sonem product.
Cost of goods sold in the first quarter of 2001 increased by 1,242%, or
$922,230, to $996,462 from $74,232 in the first quarter of 2000. The increase
was due to cost of goods sold of $990,299 from sales of RF amplifiers, and
$6,163 from sales of the UniLinx product. The gross margin for RF amplifiers was
positive, which reflected the Company's acquisition of a going concern business.
The gross margin for the UniLinx product was affected by introductory pricing
and higher initial unit manufacturing resulting from low unit volumes. Stock
compensation recovery was insignificant at $350.
Research and development expenses in the first quarter of 2001 decreased by
50%, or $96,225, to $94,579 from $190,804 in the first quarter of 2000. This
decrease was primarily due to R&D activities in the first quarter of 2001
comprising ongoing development of amplifier and UniLinx products. In the first
quarter of 2000, the Company continued to invest in the development of the
UniLinx-TM- wireless communications product, and started a project to improve
the functionality and to reduce the unit cost of its Sonem product. $35,236 of
the decrease was attributable to recovery of stock compensation expense
resulting primarily from the effect of a lower stock price on variable plan
stock options.
Sales and marketing expenses in the first quarter of 2001 decreased by 80%,
or $162,972, to $40,685 from $203,657 in the first quarter of 2000. The decrease
was primarily attributable to the restructuring of sales and marketing staff to
eliminate the Sonem product and Unity Wireless Integration marketing functions,
to reduce UniLinx marketing staff including the project manager, and to provide
an ongoing level of sales and marketing support for amplifier products. Also,
$95,773 of the decrease was attributable recovery of stock compensation expense
resulting from the effect of a lower stock price on variable plan stock options
in 2001, and the award of below market options in 2000 to consummate previous
commitments.
Exchange loss (gain) in the first quarter of 2001 increased by $61,777 to
($54,999) from $6,778 the first quarter of 2000 due to fluctuations in the
currency exchange rate between the U.S. and Canada. The Company's revenues are
received mostly in U.S. dollars, while the majority of expenses are incurred in
Canadian dollars.
General and administrative expenses in the first quarter of 2001 decreased
by 25%, or $58,232, to $173,511 from $231,743 in the first quarter of 2000.
There was a stock compensation recovery of $53,495 resulting from the effect of
a lower stock price on variable plan stock options during the first quarter of
2001. Other net decreases occurred due to staff and investor relations
restructuring and reductions in legal, accounting, and audit expenses.
9
Interest income in the first quarter of 2001 increased by 575%, or $24,338,
to $28,570 from $4,232 in the first quarter of 2000. This increase results
primarily from interest earned on the proceeds from the April, 2000 financing.
Liquidity and Capital Resources
Since its inception, the Company has been dependent on investment capital
as its primary source of liquidity. Prior to December 31, 2000, sales of the
Company's Sonem traffic signal priority product, and sales of its UniLinx
product, have provided insufficient cash flow to sustain operations. The Company
had an accumulated deficit at March 31, 2001 of $10,621,635. During the quarter
ended March 31, 2001 the Company focused entirely on the wireless product
segment, primarily its amplifier products, and achieved a net income of $110,640
(2000 - loss of $670,681). The Company also generated cash from operations of
$81,635 (2000 - $191,948 in cash used). Operations to date have been primarily
financed by equity.
The financial statements have been prepared on the going concern basis
under which an entity is considered to be able to realize its assets and satisfy
its liabilities in the ordinary course of business. Operations to date have been
primarily financed by long-term debt and equity transactions. The Company's
future operations are dependent upon the identification and successful
completion of additional long-term or permanent equity financing, the continued
support of creditors and shareholders, and, ultimately, the achievement of
profitable operations. There can be no assurances that the Company will be
successful. If it is not, the Company will be required to reduce operations or
liquidate assets. The Company will continue to evaluate its projected
expenditures relative to its available cash and to seek additional means of
financing in order to satisfy its working capital and other cash requirements.
The auditor's report on the December 31, 2000 consolidated financial statements
includes an explanatory paragraph that states that as the Company has suffered
recurring losses from operations, substantial doubt exists about its ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments relating to the recoverability of assets and
classification of assets and liabilities that might be necessary should the
Company be unable to continue as a going concern.
During the first quarter of 2001, the Company's cash position increased by
$51,925 to $2,054,009 on March 31, 2001 from $2,002,084 on December 31, 2000.
The $81,635 provided by operations was comprised of an income $110,640, non-cash
charges including $21,883 in depreciation and $46,350 in goodwill amortization.
Stock-based compensation was a negative $89,454 during the quarter, primarily
caused by the effect of a lower stock price on variable plan stock options.
Other non-cash working capital changes included accounts receivable, which
decreased by $101,278 primarily due to collections on letters of credit in
payment of late December Ultratech sales, which had not cleared on December 31,
2000. Ongoing operations during the quarter resulted in an inventory decrease of
$46,983 and a decrease in accounts payable and accrued liabilities of $93,211.
The product warranty accrual decreased by $80,626 as the Company contributed to
the replacement of previously installed Sonem systems.
The Company's investing activities during the first quarter of 2001
amounted to $9,832, which was attributable to increased purchases of computing
hardware and software.
10
Financing activities include a repayment in the Cobratech loan receivable
of $100,000, and the bank overdraft decreased by $225,454 due to a lower level
of cheques outstanding at March 31, 2001 than at December 31, 2000. This
operating loan was replaced in April, 2001 by a US $76,000 (Cdn $120,000)
operating line of credit from HSBC Bank Canada, at an interest rate of HSBC
prime, and secured by an $80,000 guaranteed investment certificate.
Other than operating loan commitments, the Company has no material
commitments, including capital commitments, outstanding at March 31, 2001.
INFLATION
The Company does not believe that inflation has had a significant impact on
its consolidated results of operations or financial condition. However, the
Company has recently experienced some significant price increases for certain
components that are used in the wireless industry.
FORWARD LOOKING STATEMENTS
This Form 10-QSB contains forward-looking statements. The words anticipate,
believe, expect, plan, intend, estimate, project, could, may, foresee, and
similar expressions are intended to identify forward-looking statements. These
statements include information regarding expected development of the Company's
business, lending activities, relationships with customers, and development of
the industry in which the Company will focus its marketing efforts. Such
statements reflect the Company's current views with respect to future events and
financial performance and involve risks and uncertainties. Should one or more of
these risks or uncertainties occur, or should underlying assumptions prove
incorrect, actual results may vary materially and adversely from those
anticipated, believed, estimated or otherwise indicated.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company, along with Sonic Systems Corporation and M&M Realty
Incorporated, has been sued in the Supreme Court of British Columbia, Canada, by
Integrated Global Financial Corporation ("IGF"). The action is dated January 5,
2001. The Plaintiff alleges it has options to purchase 500,000 shares at an
alleged exercise price of $1.00 per share, plus unspecified damages. The Company
disputes the allegations and is defending the claim vigorously.
No trial date has been set. No Examinations for Discovery have been
conducted or are even set down. The matter is at a very preliminary stage.
It is the Company's view that the claim has little, if any, merit and does
not expect the proceeding to have any material adverse effect on the Company.
ITEM 2. CHANGES IN SECURITIES
Under the consulting agreement between the Company and Mueller & Company,
Inc. and Ideas Inc. ("Mueller and Ideas") dated as of July 1, 2000, 500,000
shares of common stock were issuable to Mueller and Ideas upon exercise of
warrants at $2.06 per share. On January 1, 2001, the Company and Mueller and
Ideas agreed to modify this agreement such that the number of warrants was
reduced to 200,000 and the exercise price was reduced to $0.38.
11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Pursuant to Rule 601 of Regulation SB, the following exhibits are included
herein or incorporated by reference.
Exhibit
Number Description
------ -----------
3.1 Amended and Restated Certificate of Incorporation of Unity
Wireless Corporation (incorporated by reference to Exhibit
3.1 to the Company's Form SB-2 filed on October 4, 2000)
3.2 Amended and Restated Bylaws of Unity Wireless Corporation
(incorporated by reference to Exhibit 3.2 to the Company's
Form SB-2 filed on October 4, 2000)
4.1 Form of warrant agreement re: private offering investors
(incorporated by reference to Exhibit 4.1 to the Company's
Form SB-2 filed on October 4, 2000)
4.2 Consulting agreement among Mueller & Company, Inc., Ideas,
Inc., Mark Mueller, Aaron Fertig and Unity Wireless
Corporation dated January 1, 2001 (incorporated by reference
to Exhibit 4.2 to the Company's Form 10-KSB filed on April
2, 2001)
4.3 Warrant from Unity Wireless Corporation to Crescent
Communications Inc. dated June 26, 2000 (incorporated by
reference to Exhibit 4.3 to the Company's Form SB-2 filed on
October 4, 2000)
10.1 Term Sheet dated January 31, 2001 between Unity Wireless
Systems Corporation, a British Columbia, Canada corporation
and Traffic Systems, L.L.C., an Arizona limited liability
company (incorporated by reference to Exhibit 2.1 to the
Company's Form 8-K filed on February 16, 2001).
10.2 1999 Stock Option Plan, as amended (incorporated by
reference to Exhibit 10.6 to the Company's Form 10-KSB filed
on April 2, 2001)
10.3 Recommended Stock Option Grant Policy for the Company
(incorporated by reference to Exhibit 10.7 to the Company's
Form 10-KSB filed on April 2, 2001)
(b) Reports on form 8-K
The Company filed a Current report on Form 8-K, on January 9, 2001,
reporting a change in the Company's certifying accountant.
The Company filed a Current report on Form 8-K, on January 16, 2001,
reporting the disposition by its subsidiary Unity Wireless Integration
Corporation of its assets and obligations The disposition was effected pursuant
to an Asset Purchase Agreement, dated for reference December 30, 2000 (the
"Asset Purchase Agreement"), among UWIC as vendor and Lyma Sales & Management
Corp., a British Columbia, Canada company ("Lyma") as purchaser. Unity was also
a party to the Asset Purchase Agreement.
The Company filed a Current report on Form 8-K, on January 24, 2001,
attaching a letter from Ernst & Young LLP commenting on the Form 8-K filed
January 9, 2001.
The Company filed a Current report on Form 8-K, on February 15, 2001,
attaching financial statements of Ultratech Linear Solutions Inc. ("Ultratech")
and proforma
12
financial statements giving effect to the combination of Unity Wireless and
Ultratech prior to its acquisition by the Company.
The Company filed a Current report on Form 8-K, on February 16, 2001,
announcing a Term Sheet dated January 31, 2001 between Unity Wireless Systems
Corporation, a British Columbia, Canada corporation and Traffic Systems, L.L.C.,
an Arizona limited liability company.
The Company filed a Current report on Form 8-K, on March 8, 2001, amending
the Form 8-K filed January 16, 2001 to provide comments on proforma information
in regard to the disposition of the assets and liabilities of Unity Wireless'
wholly-owned subsidiary, Unity Wireless Integration Corporation.
13
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
cause this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UNITY WIRELESS CORPORATION
(Registrant)
/s/ ROLAND SARTORIUS
---------------------------
Roland Sartorius, Secretary
(duly authorized Officer)
Date: May 10, 2001
14
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
3.1 Amended and Restated Certificate of Incorporation of Unity
Wireless Corporation (incorporated by reference to Exhibit
3.1 to the Company's Form SB-2 filed on October 4, 2000)
3.2 Amended and Restated Bylaws of Unity Wireless Corporation
(incorporated by reference to Exhibit 3.2 to the Company's
Form SB-2 filed on October 4, 2000)
4.1 Form of warrant agreement re: private offering investors
(incorporated by reference to Exhibit 4.1 to the Company's
Form SB-2 filed on October 4, 2000)
4.2 Consulting agreement among Mueller & Company, Inc., Ideas,
Inc., Mark Mueller, Aaron Fertig and Unity Wireless
Corporation dated January 1, 2001 (incorporated by reference
to Exhibit 4.2 to the Company's Form 10-KSB filed on April
2, 2001)
4.3 Warrant from Unity Wireless Corporation to Crescent
Communications Inc. dated June 26, 2000 (incorporated by
reference to Exhibit 4.3 to the Company's Form SB-2 filed on
October 4, 2000)
10.1 Term Sheet dated January 31, 2001 between Unity Wireless
Systems Corporation, a British Columbia, Canada corporation
and Traffic Systems, L.L.C., an Arizona limited liability
company (incorporated by reference to Exhibit 2.1 to the
Company's Form 8-K filed on February 16, 2001).
10.2 1999 Stock Option Plan, as amended (incorporated by
reference to Exhibit 10.6 to the Company's Form 10-KSB filed
on April 2, 2001)
10.3 Recommended Stock Option Grant Policy for the Company
(incorporated by reference to Exhibit 10.7 to the Company's
Form 10-KSB filed on April 2, 2001)