<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO ______
0-23228
(COMMISSION FILE NO.)
PORTACOM WIRELESS, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
BRITISH COLUMBIA, CANADA N/A
(State or other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
8055 W. MANCHESTER AVENUE, SUITE 730
PLAYA DEL REY, CALIFORNIA 90293
(Address of principal executive offices)
ISSUER'S TELEPHONE NUMBER: (310) 448-4140
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 and (2) has been subject to such filing requirements for the past 90
days.
1.YES X NO
--- ---
2.YES X NO
--- ---
AS OF SEPTEMBER 30, 1996, THERE WERE 11,956,010 SHARES OF COMMON STOCK ISSUED
AND OUTSTANDING.
Transitional Small Business Disclosure Format (Check One):
1.YES NO X
--- ---
<PAGE>
<TABLE>
<CAPTION>
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
<S> <C>
ITEM 1. Statement Regarding Financial Information F-1
Report on Audit by Independent Chartered Accountants F-2
Condensed Consolidated Balance Sheet at
September 30, 1996 and December 31, 1995 F-3
Condensed Consolidated Statements of Operations
for the three months ended September 30,
1996 and 1995 (Unaudited) and for the nine months
ended September 30, 1996 and December 31, 1995 F-4
Condensed Consolidated Statements of Cash Flows
for the three months ended September 30,
1996 and 1995 (Unaudited) and for the nine months
ended September 30, 1996 and December 31, 1995 F-5
Notes to Condensed Consolidated Financial F-6
Statements (Unaudited)
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 1
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 8
ITEM 2. Changes in Securities 8
ITEM 3. Defaults Upon Senior Securities 8
ITEM 4. Submission of Matters to a Vote of Security Holders 8
ITEM 5. Other Information 8
ITEM 6. Exhibits and Reports on Form 8-K 8
</TABLE>
<PAGE>
PORTACOM WIRELESS, INC. AND SUBSIDIARIES
QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1996
PART I. FINANCIAL INFORMATION
The financial statements included herein have been prepared by PortaCom
Wireless, Inc. (formerly known as "Extreme Technologies, Inc." and defined
herein in the alternative as the "Company" or the "Registrant"), both without
audit, in the case of the results for the fiscal quarters ended September 30,
1996 and 1995, and audited, in the case of the results for the nine months ended
September 30, 1996 and December 31, 1995, pursuant to the rules and regulations
of the Securities and Exchange Commission (the "SEC"). As contemplated by the
SEC under Rule 10-01 of Regulation S-X (as amended by Regulation S-B), the
accompanying financial statements and footnotes have been condensed and
therefore do not contain all disclosures required by generally accepted
accounting principles. However, the Company believes that the disclosures are
adequate to make the information presented not misleading. Except where
otherwise specified, all dollar amounts referenced in this document are
denominated in United States dollars. It is suggested that the financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's Form 10-KSB for the nine month transition
period ended December 31, 1995 as filed with the SEC (file number 0-23228).
F-1
<PAGE>
[LETTERHEAD OF KPMG]
AUDITORS' REPORT
To the Board of Directors
Portacom Wireless, Inc.
We have audited the consolidated balance sheets of PortaCom Wireless, Inc. as at
September 30, 1996 and December 31, 1995 and the consolidated statements of
operations and deficit and cash flows for the nine month periods ended September
30, 1996 and December 31, 1995 and the year ended March 31, 1995. 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 an audit to obtain
reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at September 30,
1996 and December 31, 1995 and the results of its operations and the changes in
its financial position for the nine month periods ended September 30, 1996 and
December 31, 1995 and the year ended March 31, 1995 in accordance with generally
accepted accounting principles.
/s/ KPMG
Chartered Accountants
Vancouver, Canada
October 11, 1996
F-2
<PAGE>
PORTACOM WIRELESS, INC.
Consolidated Balance Sheets
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
September 30, December 31,
1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and short-term deposits $ 751,863 $ 165,665
Accounts receivable 10,000 7,093
------------------------------------------------------------------------------------
761,863 172,758
Promissory notes receivable (note 4) 436,411 815,400
Investments (note 5) 8,025,000 --
Equipment, net 12,959 --
- -------------------------------------------------------------------------------------
$ 9,236,233 $ 988,158
- -------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity (Deficiency)
Current liabilities:
Accounts payable and accrued liabilities (note 6) $ 404,994 $ 1,107,426
Loans payable (note 7) 2,405,000 971,000
----------------------------------------------------------------------------------
2,809,994 2,078,426
Shareholders' equity (deficiency):
Share capital (note 8) 14,910,396 13,829,621
Deficit (8,484,157) (14,919,889)
----------------------------------------------------------------------------------
6,426,239 (1,090,268)
Future operations (note 1)
Contingent liability (note 5(a))
- -------------------------------------------------------------------------------------
$ 9,236,233 $ 988,158
- -------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
On behalf of the Board:
/s/ Stephen Leahy Director
- ------------------------
/s/ Douglas MacLellan Director
- ------------------------
F-3
<PAGE>
WIRELESS, INCPORTACOM WIRELESS, INC.
Consolidated Statements of Operations and Deficit
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Three months ended Nine months ended Year ended
September 30, September 30, September 30, December 31, March 31,
1996 1995 1996 1995 1995
- ----------------------------------------------------------------------------------------------------------------------------------
UNAUDITED UNAUDITED
<S> <C> <C> <C> <C> <C>
Income:
Sales $ 10,000 $ 72,664 $ 10,000 $ 143,652 $ 780,839
Cost of sales - - - 87,391 992,807
- ----------------------------------------------------------------------------------------------------------------------------------
10,000 72,664 10,000 56,261 (211,968)
Other income 9,000,179 - 9,003,906 - -
- ----------------------------------------------------------------------------------------------------------------------------------
9,010,179 72,664 9,013,906 56,261 (211,968)
Expenses:
Advertising and promotion - 45,060 3,500 60,820 281,649
Bad debt - - 2,513 80,628 571,003
Consulting fees (note 10) 72,436 274,657 537,688 327,132 1,470,000
Depreciation 1,595 - 1,595 143,786 210,052
General and administrative 80,930 78,374 222,712 114,526 499,165
Interest and bank charges (note 7) 139,670 43,755 431,731 73,394 134,198
Legal and accounting 141,360 47,328 459,178 273,665 469,922
Management fees (note 10) 22,633 11,780 62,876 49,436 360,505
Placement fees - - 106,000 - -
Rent 9,232 14,526 34,904 141,568 267,165
Research and development - 10,050 - 60,437 570,441
Travel 72,179 47,479 208,276 97,948 439,748
Wages and benefits 167,235 47,957 343,345 513,325 1,658,765
- ----------------------------------------------------------------------------------------------------------------------------------
707,270 620,966 2,414,318 1,936,665 6,932,613
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before debt settlement 8,302,909 (548,302) 6,599,588 (1,880,404) (7,144,581)
Gain (loss) on settlement of debt (notes 8 and
10(f)) 210,750 - (163,856) 545,924 -
- ----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) for the period 8,513,659 (548,302) 6,435,732 (1,334,480) (7,144,581)
Deficit, beginning of period 16,738,628 14,448,461 14,919,889 13,585,409 6,440,828
- ----------------------------------------------------------------------------------------------------------------------------------
Deficit, end of period $ 8,224,969 $14,996,763 $ 8,484,157 $14,919,889 $13,585,409
==================================================================================================================================
Net income (loss) per share (note 3(f)) $0.72 $(0.03) $0.47 $(0.09) $(0.49)
==================================================================================================================================
Weighted average number of common shares
outstanding (note 3(f)) 11,903,947 16,229,963 13,642,462 15,549,863 14,524,845
==================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
PORTACOM WIRELESS, INC.
Consolidated Statements of Cash Flows
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
=================================================================================================================================
Three months ended Nine months ended Year ended
September 30, September 30, September 30, December 31, March 31,
1996 1995 1996 1995 1995
- ---------------------------------------------------------------------------------------------------------------------------------
UNAUDITED UNAUDITED
<S>
Operations: <C> <C> <C> <C> <C>
Net income (loss) for the period $ 8,513,659 $ (548,302) $ 6,435,732 $(1,334,480) $(7,144,581)
Items not involving cash
Depreciation 1,595 - 1,595 143,786 210,052
Fair value of investments received on
settlement (note 5(a)) - - (8,000,000) - -
Income from AAT transaction (8,000,000)
Net changes in non-cash working capital
relating to operations:
Accounts and notes receivable 1,806,337 (197,855) 376,082 (782,060) 24,314
Inventory - - - 58,852 327,995
Prepaid expenses - - - 6,680 62,260
Employee loans (note 10(c)) - (2,636) - - 147,209
Accounts payable and accrued liabilities (503,355) 229,863 (702,432) (1,107,232) 1,657,069
--------------------------------------------------------------------------------------------------------------------------------
Net cash used by operating activities 1,818,236 (518,930) (1,889,023) (3,014,454) (4,715,682)
Financing:
Issue of and to be issued for common shares:
For cash 133,250 1,141,130 553,145 1,230,830 3,109,209
On settlement of debt and as non-cash
consideration - - 277,630 2,513,121 -
Value assigned to warrants - - 250,000 - -
Note payable - - - - (150,000)
Promissory note payable - - - (37,500) (50,000)
Loans payable (1,229,000) (177,008) 1,434,000 (613,508) 584,508
--------------------------------------------------------------------------------------------------------------------------------
Net cash generated by financing activities (1,095,750) 964,122 2,514,775 3,092,943 3,493,717
Investments:
Equipment, net (1,027) - (14,554) 13,792 (92,379)
Patents, trademarks and other assets - - - - (80,855)
Investment (note 5) - - (25,000) - -
Acquisition of additional shares in TAI
(note 3) (25,000) - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (26,027) - (39,554) 13,792 (173,234)
- ---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents 696,459 445,192 586,198 92,281 (1,395,199)
Cash and cash equivalents, beginning of period 55,404 79,055 165,665 73,384 1,468,583
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 751,863 $ 524,247 $ 751,863 $ 165,665 $ 73,384
=================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Consolidated Financial Statements
(expressed in U.S. dollars)
- --------------------------------------------------------------------------------
1. FUTURE OPERATIONS:
PortaCom Wireless Inc. (the "Company") was incorporated on July 7, 1989
under the Company Act (British Columbia) and was inactive until April 1990.
The Company is currently pursuing business ventures as a developer,
financier and operator of companies providing cellular, wireless and PSTN
telecommunications services in selected developing world markets. The
Company intends to make investments primarily in wireless, cellular, PSTN
and long distance networks in order to provide coverage and high-quality
service in selected emerging markets. The Company's principal interests are
focused on these technologies in Vietnam, Cambodia and other emerging
markets.
At September 30, 1996 the Company had a working capital deficiency of
$2,048,131. At the date of these financial statements, the Company has not
generated cash flow from recurring operating activities and it is uncertain
when it will commence to generate such a cash flow. In addition, the
Company's major recorded asset is restricted until January 1, 1999 (note
5(a)). Accordingly, there can be considered to be doubt as to the nature and
extent of the Company's future operations.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue to operate as a going concern which
requires the realization of assets and settlement of liabilities in the
ordinary course of business. The Company's viability as a going concern is
dependent upon the continued restructuring of its asset base, the financial
support of shareholders and creditors and, ultimately, the generation of
profitable operations. Although it is management's intention to pursue these
options, there can be no assurance that these events will or can occur.
2. CHANGE IN FISCAL YEAR:
In 1995, the Company changed the date on which its fiscal year ends from
March 31 to December 31, 1995. Accordingly, results of operations for the
transition period which ended December 31, 1995 cover a nine-month period.
3. SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of presentation:
These consolidated financial statements are prepared in accordance with
generally accepted accounting principles in Canada. Except as indicated
in Note 11, they also comply in all material respects with generally
accepted accounting principles in the United States.
(b) Basis of consolidation:
These consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, PortaCom International,
Ltd., PCBX Systems, Inc., Extreme Laboratories, Inc. and Extreme
TeleCom, Inc. All material intercompany accounts and transactions have
been eliminated. All subsidiaries other than PortaCom International,
Ltd. are inactive.
F-6
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Consolidated Financial Statements, page 2
(expressed in U.S. dollars)
- --------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(b) Basis of consolidation (continued):
Investments are accounted for at cost.
(c) 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
and disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. With respect to the Company's operations,
these estimates primarily relate to the underlying value of investments
which will only be determinable based upon future events. Management has
applied its judgment to the information available at the date of these
consolidated financial statements in making such judgment.
Actual results could differ from estimates made in preparing these
consolidated financial statements.
(d) Cash and cash equivalents:
Cash equivalents are highly liquid investments, such as term deposits,
having original maturities of three months or less, that are readily
convertible to contracted amounts of cash.
(e) Equipment:
Equipment is recorded at cost. Depreciation is provided at rates which
are calculated to amortize the cost of these assets over their estimated
useful lives.
(f) Net income (loss) per share:
Net income (loss) per share is computed based on the weighted average
number of shares outstanding during the year, which number of shares
includes performance shares that are contingently returnable to the
Company's treasury. Fully diluted net income (loss) per share has not
been presented as the effect of issued performance shares and
outstanding warrants and options are either not materially dilutive or
are anti-dilutive.
(g) Currency:
As the majority of the Company's activities are in U.S. dollars, these
consolidated financial statements are stated in U.S. dollars, except
where otherwise indicated. Translation of Canadian dollar transactions
has taken place at the exchange rate in effect at the transaction date.
There have been no material foreign exchange gains or losses through the
date of these consolidated financial statements.
F-7
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Consolidated Financial Statements, page 3
(expressed in U.S. dollars)
- --------------------------------------------------------------------------------
4. PROMISSORY NOTES RECEIVABLE:
(a) Promissory notes receivable bear interest at 10% per annum, are
unsecured and without specific dates of repayment. The promissory notes
receivable are due from entities which are related to the Company
through common directors and management.
(b) Interim financial statements:
The accompanying statements of operations and deficit and cash flows for
the three months ended September 30, 1996 and 1996 are unaudited;
however, in the opinion of management, these statements have been
prepared on the same basis as the audited financial statements and
include all adjustments, consisting solely of normal recurring
adjustments, necessary for the fair presentation of the results of the
periods presented.
5. INVESTMENTS:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
September 30, December 31,
1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
Asian American Telecommunications Corporation,
17% interest $ 8,000,000 $ -
Telecommunications American International,
41% interest 25,000 -
- ----------------------------------------------------------------------------------
$ 8,025,000 $ -
- ----------------------------------------------------------------------------------
</TABLE>
(a) On May 28, 1996, the Company announced that it had entered into a
contract to acquire all of the outstanding shares of Asian American
Telecommunications Corporation ("AAT"), an unrelated Los Angeles-
based telecommunications services developer. By an agreement made as
of September 11, 1996, AAT and the Company agreed to terminate all
rights and obligations of either party under the proposed business
combination. As consideration for this termination, AAT agreed to
issue to the Company 2,000,000 common shares and warrants to acquire
4,000,000 common shares of AAT for a period of three years at a
price of $4.00 per share. The Company's investment is recorded at
the estimated fair value of the consideration received. In addition,
AAT paid the Company cash consideration of $1,000,000 as part of
this termination agreement.
The 2,000,000 common shares have been pledged by the Company to AAT
until January 1, 1999 pursuant to the Company's indemnification
obligations under the termination agreement. These indemnification
obligations provide that the Company grants to AAT a first priority
lien on the common shares against any costs or losses arising to
AAT, or specified related parties, arising from claims or potential
claims related to the original proposed acquisition or the
termination agreement. At the date of these financial statements, no
claims under this indemnification agreement have arisen.
The receipt of cash and common stock pursuant to the termination
agreement has been recorded as income in the Statement of
Operations.
F-8
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Consolidated Financial Statements, page 4
(expressed in U.S. dollars)
- --------------------------------------------------------------------------------
5. INVESTMENTS (CONTINUED):
(b) On August 5, 1996, the Company agreed to purchase 250 shares of the
common stock of Telecommunications American International ("TAI") from a
shareholder for the sum of $25,000. Subsequent to September 30, 1996,
the Company's subsidiary, PortaCom International, Ltd., subscribed to a
shareholder rights offering in which it purchased 2,900 Units, each Unit
consisting of one promissory note of $49 and one share of common stock,
for $145,000.
6. ACCRUED LIABILITIES:
Management fees due to a director (formerly an officer) of the Company
previously included in accrued liabilities ceased to accrue as at
October 31, 1995. Liability settled for common shares in the nine month
period ended December 31, 1995.
7. LOANS PAYABLE:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
September 30, December 31,
1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Convertible promissory notes (a) $ 2,405,000 $ 600,000
Note payable to former officer due December 31, 1996 - 200,000
Note payable to former services vendor, due as to $100,000
on or before April 5, 1996 (paid) and $71,000 on or before
June 28, 1996 (paid) - 171,000
- ------------------------------------------------------------------------------------------------------
$ 2,405,000 $ 971,000
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a) Convertible promissory notes:
Between December 19, 1995 and May 7, 1996, the Company arranged, subject
to regulatory approval, private placements of convertible promissory
notes having an aggregate principal amount of $2,405,000. Of this
amount, $1,805,000 was received in the nine months ended September 30,
1996 and $600,000 was received in the period ended December 31, 1995.
The promissory notes are due and payable after two years which ranges to
May 1998, or after six months upon demand of the holder, and bear
interest at 10% per annum, with interest payable upon maturity or
conversion. The promissory notes are convertible at the holders' option
into shares of common stock of the Company at conversion prices ranging
from $1.49 to $3.25 per share. Pursuant to the debt subscription
agreements, the Company has also agreed to issue to the investors non-
transferable warrants to purchase up to an aggregate of 459,021 shares
of common stock of the Company for a period of two years at a price
equal to the conversion price of the notes. The conversion and warrant
exercise prices are based on the market price of the Company's common
shares at the date of their offering.
F-9
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Consolidated Financial Statements, page 5
(expressed in U.S. dollars)
- --------------------------------------------------------------------------------
7. LOANS PAYABLE (CONTINUED):
(b) Bridge Financing:
During the year the Company completed a Bridge Financing to raise
$2,500,000 to provide interim financing pending the completion of a
private placement of the convertible promissory notes described in (a).
The Bridge Financing was due on demand after 30 days and bore interest
at 12% per annum. In addition, 166,667 warrants are issuable to the
lenders (note 8(e)).
For accounting purposes, the warrants have been recorded at their
estimated fair value of $250,000 with a corresponding reduction in the
recorded value of the Notes. This resulted in deemed interest expense of
$250,000 in the period. This deemed interest is included in interest
expense in the consolidated statement of operations. The Bridge
Financing notes were repaid prior to September 30, 1996.
8. SHARE CAPITAL:
(a) Authorized:
Authorized share capital is as follows:
94,050,000 common shares without par value
100,000,000 class "A" preference shares with a par value of C$10 each
100,000,000 class "B" preference shares with a par value of C$50 each
F-10
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Consolidated Financial Statements, page 6
(expressed in U.S. dollars)
- --------------------------------------------------------------------------------
8. SHARE CAPITAL (CONTINUED):
(b) Issued common shares:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Number Per share Total
of shares consideration consideration
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance issued, March 31, 1994 13,584,872 $ 5,737,665
Cash received in advance of issuance
of common shares 250,000 4.95 1,238,796
-------------------------------------------------------------------------------------------------------------
13,834,872 6,976,461
Issued for cash:
Free-trading shares, net of share
issuance costs of $354,047 (f) 656,457 3.38 2,220,353
On exercise of stock options 266,000 1.61 427,325
On exercise of warrants 373,747 1.23 461,531
Issued as a finders fee 83,742 - -
-------------------------------------------------------------------------------------------------------------
Balance issued and subscribed,
March 31, 1995 15,214,818 10,085,670
Issued for cash:
Free-trading shares 204,878 1.36 277,490
On exercise of stock options 820,267 1.16 953,340
-------------------------------------------------------------------------------------------------------------
Balance issued, December 31, 1995 16,239,963 11,316,500
To be issued on settlement of debt (g) 1,256,559 2.00 2,513,121
-------------------------------------------------------------------------------------------------------------
Balance issued and to be issued,
December 31, 1995 17,496,522 13,829,621
Cancelled (c) (5,950,000) -
Issued for cash:
Free-trading shares 97,500 1.11 108,225
On exercise of warrants 97,878 2.98 291,500
On exercise of stock options 103,050 1.49 153,420
Issued as consideration for:
Loans payable (h) 14,500 3.41 49,500
Settlement of debt 96,560 1.25 120,780
-------------------------------------------------------------------------------------------------------------
Balance issued, September 30, 1996 11,956,010 14,553,046
To be issued on settlement of debt (g) 53,675 2.00 107,350
-------------------------------------------------------------------------------------------------------------
12,009,685 14,660,396
Fair value of warrants issuable in consideration
for Bridge Financing (e) -- 250,000
-------------------------------------------------------------------------------------------------------------
Balance issued and to be issued,
September 30, 1996 12,009,685 $ 14,910,396
-------------------------------------------------------------------------------------------------------------
</TABLE>
F-11
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Consolidated Financial Statements, page 7
(expressed in U.S. dollars)
- --------------------------------------------------------------------------------
8. SHARE CAPITAL (CONTINUED):
(c) Performance shares:
Included in the issued and outstanding common shares are 600,000 common
performance shares which are subject to an escrow agreement. These
shares are releasable from escrow on satisfaction of certain
predetermined tests set out by regulatory authorities related to the
generation of positive cash flow from operations. Shares not released
from escrow by September 9, 2002 will be cancelled. Pursuant to the
escrow agreement, holders of the performance shares may exercise all
voting rights attached thereto except on a resolution to cancel any of
the shares, and have waived their rights to receive dividends or to
participate in the assets and property of the Company on a winding-up or
dissolution of the Company.
In October 1995, certain shareholders agreed to surrender their
5,950,000 performance shares which were then held under an escrow
arrangement. In consideration therefor, the Company agreed to issue
314,762 common shares at a deemed price of $2.00 per share. Although the
performance shares have been irreversibly cancelled by the Company in
the period ended September 30, 1996, as of September 30, 1996 the
issuance of the 314,762 shares continues to be subject to the removal of
the Company from the jurisdiction of both the Vancouver Stock Exchange
and the British Columbia Securities Commission.
(d) Stock options:
Option changes for the period April 1, 1993 to September 30, 1996 were
as follows:
<TABLE>
<CAPTION>
<S> <C>
Outstanding and exercisable as at March 31, 1994 1,235,200
Granted at C$5.68 per share 274,800
Exercised at C$4.45 per share (80,000)
Exercised at C$1.25 per share (186,000)
----------------------------------------------------------------
Outstanding and exercisable as at March 31, 1995 1,244,000
Granted at C$1.90 per share 75,000
Granted at C$2.09 per share 400,000
Granted at C$2.41 per share 150,000
Exercised at C$1.25 per share (461,767)
Exercised at C$2.09 per share (358,500)
Cancelled (431,300)
----------------------------------------------------------------
Outstanding and exercisable as at December 31,
1995 617,433
Granted at U$3.80 90,000
Granted at U$3.00 472,899
Exercised at C$1.25 (16,800)
Exercised at C$1.90 (75,000)
Exercised at U$3.00 (11,250)
Cancelled (133,200)
----------------------------------------------------------------
Outstanding and exercisable at September 30, 1996 944,082
----------------------------------------------------------------
</TABLE>
Stock options are issued at the average market price per share for the
ten trading days prior to the date of issuance.
F-12
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Consolidated Financial Statements, page 8
(expressed in U.S. dollars)
- --------------------------------------------------------------------------------
8. SHARE CAPITAL (CONTINUED):
(e) Warrants:
During the year ended March 31, 1995, the Company, in connection with
private placements of common shares, issued warrants to purchase 483,457
common shares at U$3.50 per share if exercised by October 1995 and at
U$4.03 per share if exercised thereafter to October 1996. Of these
warrants, 60,000 were exercised during the current period and the
balance expired.
During the nine months ended December 31, 1995, the Company, in
connection with a private placement, issued warrants to purchase 211,500
common shares at U$5.10 per share if exercised by June 1995 and U$5.87
if exercised thereafter to June 1996. These warrants expired during the
period. In addition, the Company, in connection with a number of private
placements of common shares, issued warrants to purchase up to 204,878
common shares at prices of between U$1.28 and U$1.47 per share if
exercised by August 1996 and U$1.47 and U$1.69 if exercised thereafter
to August 1997. 37,878 of these warrants have been exercised.
During the nine months ended September 30, 1996, the Company, issued
warrants to purchase 97,500 common shares at U$1.11 per share if
exercised by November 1996 and U$1.28 if exercised thereafter to
November 1997. None of these warrants have been exercised.
In addition, pursuant to the Bridge Financing (note 7), 166,667 share
purchase warrants exercisable at $3.30 per share to May 31, 1997 are
issuable. The warrants have been recorded at their estimated fair value
of $ 250,000.
(f) Issuance costs:
During the year ended March 31, 1995, the Company recorded $214,865 of
costs related to the settlement of a legal dispute arising from a prior
placement of common stock. Accordingly, these costs have been recorded
as a reduction in the equity previously raised.
(g) Shares to be issued on settlement of debt:
During the period ended December 31, 1995, the Company entered into
agreements to issue 1,256,561 common shares at their estimated fair
value of $2.00 per share to settle outstanding liabilities aggregating
$2,513,121. Filings to obtain regulatory approval were made prior to
December 31, 1995 and regulatory approval was received on May 16, 1996.
As the agreements were entered into prior to December 31, 1995, these
settlements have been recorded in that period.
The Company has further agreed to issue an additional 53,675 common
shares at their estimated fair value of $2.00 per share to settle
additional outstanding liabilities aggregating $107,349. These issuances
are subject to regulatory approval.
F-13
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Consolidated Financial Statements, page 9
(expressed in U.S. dollars)
- --------------------------------------------------------------------------------
8. SHARE CAPITAL (CONTINUED):
(h) Shares to be issued for loans:
In connection with the issuance of certain short-term debt by the
Company in January 1995 and May 1996, the Company agreed to issue,
subject to regulatory approval, 85,590 shares of common stock and
166,667 share purchase warrants, exercisable at $3.30 per share until
May 31, 1997. During the current period, regulatory approval was
received for the issuance of 14,500 of these shares which were then
issued by the Company. At September 30, 1996, the issuance of the
remaining 71,090 shares and 166,667 warrants continued to be subject to
regulatory approval.
9. INCOME TAXES:
As at September 30, 1996, the Company has income tax losses in Canada and
the United States in excess of $8,000,000 available to reduce future income
taxes payable the benefit of which has not been recorded in the accounts.
These loss carry forwards expire at various times through the year 2005.
10. RELATED PARTY TRANSACTIONS:
Related party transactions not disclosed elsewhere in these consolidated
financial statements include:
(a) Included in accounts payable at September 30, 1996 is approximately
$11,500 (December 31, 1995 - $25,000) owing to related parties.
(b) Management and consulting fees have predominantly been charged by
related parties.
(c) Included in bad debts expense for the nine months ended September 30,
1996 is $ nil (nine months ended December 31, 1995 - $21,386; year ended
March 31, 1995 - $227,000) recorded as provisions against employee
loans.
(d) The Company has reimbursed expenses incurred by directors and officers
on its behalf during the periods presented.
(e) In addition to amounts included in consulting paid to a director,
expenses of approximately $50,000 are included in various accounts for
the nine months ended September 30, 1996 (nine months ended December 31,
1995 - $ nil).
(f) Included in loss on settlement of debt for the nine months ended
September 30, 1996 is $465,000, representing a write-down of notes
receivable due from a related party.
F-14
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Consolidated Financial Statements, page 10
(expressed in U.S. dollars)
- --------------------------------------------------------------------------------
11. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES:
These consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in Canada and also comply, in
all material respects, with accounting principles generally accepted in the
United States and practices prescribed by the Securities and Exchange
Commission. Material differences to these statements are as follows:
(a) The gain ( loss ) on forgiveness of debt would be disclosed as an
extraordinary item on the consolidated statement of operations.
(b) Loss per share would be computed based on the weighted average number
of shares outstanding during the year, which number of shares excludes
performance shares that are contingently returnable to the Company's
treasury. The performance shares are excluded in this calculation as
the specified levels of cash flow for their release from escrow are not
currently being attained and failure to obtain their release will
result in the shares' cancellation. If these shares become issuable,
loss per share will be retroactively restated. Fully diluted loss per
share has not been presented as the effect of issued performance shares
and outstanding warrants and options are anti-dilutive.
The effect of these differences on reported net income ( loss ) per
share would be as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Three months ended Nine months ended Year ended
September 30, September 30, September 30, December 31, March 31,
1996 1995 1996 1995 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income (loss)
per share:
Before extraordinary item $ 0.72 $ (0.06) $ 0.51 $ (0.21) $ (0.90)
Gain on settlement of debt 0.02 - (0.01) 0.06 -
- ----------------------------------------------------------------------------------------------------------------------------
After extraordinary item $ 0.74 $ (0.06) $ 0.50 $ (0.15) $ (0.90)
- ----------------------------------------------------------------------------------------------------------------------------
Weighted average number of
shares outstanding 11,303,947 9,679,963 13,042,462 8,999,863 7,974,845
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(c) Taxes:
For U.S. accounting purposes the Company accounts for income taxes in
accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("Statement 109"). Statement 109,
deferred tax assets and liabilities are recognized based on the
estimated future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the year
in which those temporary differences are expected to be recovered or
settled. Under Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. The application of Statement
109 results in no material differences to these consolidated financial
statements as deferred tax assets are fully offset by a valuation
allowance on the realization of the benefits of the loss carryforward
can not be considered to be more likely then not.
F-15
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Consolidated Financial Statements, page 11
(expressed in U.S. dollars)
- --------------------------------------------------------------------------------
11. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED:
(d) Concentrations of credit risk:
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist primarily of cash
equivalents and accounts receivable.
The Company maintains cash equivalents with various financial
institutions. These financial institutions are located in Canada and
the United States. The Company's policy is to limit the exposure at any
one financial institution and to invest solely in highly liquid
investments that are readily convertible to contracted amounts of cash.
The Company sells its products to various customers primarily located
in the south-western United States. The Company performs ongoing credit
evaluations of its customers' financial condition, and generally
requires no collateral as security against accounts receivable. At
September 30, 1996 and December 31, 1995, no single customer accounts
for a significant portion of the accounts receivable balance.
F-16
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
BACKGROUND
The Company conducts business operations primarily through its wholly owned
U.S. subsidiary, PortaCom International, Ltd. ("PIL"). The Company also has four
inactive wholly owned U.S. subsidiaries; PCBX Systems, Inc. ("PCBX"), Extreme
Telecom, Inc. ("Telecom"), Extreme Laboratories, Inc. (formerly known as Spheric
Audio Laboratories, Inc.) ("Laboratories"), all of which ceased operations in
August 1995, and presently have no active business operations, and PortaCom
Wireless, Inc., a Delaware corporation, which is an inactive holding company for
the other subsidiaries.
Since 1994, through its PIL subsidiary, the Company has engaged in initial
stage efforts to evaluate the feasibility of, and attempt to secure, licensing
and joint venture arrangements for the operation of wireless telephone networks,
mobile radio communication systems and other telecommunications technologies. In
September 1995, the Company announced that it intended to focus all of its
future activities on the development of its prospective emerging market cellular
and wireless interests. Although the establishment and operation of wireless
telephone networks and other advanced communications systems will be
investigated by the Company wherever strategic opportunities arise, its
principal efforts are presently focused on Southeast Asia. The Company's
wireless telecommunications operations are in the development stage, have
produced no revenues to date and remain limited in scope.
On May 28, 1996, the Company announced an agreement to acquire all of the
outstanding shares of Asian American Telecommunications Corporation ("AAT"), a
Cayman Islands corporation and a Los Angeles-based telecommunications services
developer. AAT has focused its business activities on developing PSTN and
wireless telecommunications services in China. AAT is the managing joint venture
partner of China Huaneng American Telecom Co. Ltd. ("HAT"), which has entered
into a joint venture agreement with China Huaneng Technology Development
Corporation to develop wireless and wireline telecommunications services in
Sichuan Province, China, in partnership with China Unicom Corporation. On July
18, 1996, the Company announced that the terms of the acquisition had been
adjusted to take into account a $25,000,000 financing by AAT. The Company has
agreed, subject to certain approvals and conditions, to issue a total of 50.5
million common shares to the shareholders of AAT (including the new investors),
which would result in the Company having approximately 62.6 million primary
shares outstanding. On September 18, 1996, the Company announced that, due to
significant tax and regulatory considerations, it had elected to receive a
direct ownership position in AAT consisting of 2,000,000 common shares and
three-year warrants to acquire 4,000,000 common shares of AAT at a price of
$4.00 per share, plus an immediate payment of $1,000,000 in cash from AAT to the
Company. The 2,000,000 common shares of AAT will be held in escrow until January
1, 1999 to cover any claims or potential claims related to the original proposed
acquisition or the termination agreement.
-1-
<PAGE>
The Company is a 41% shareholder of Telecommunications American
International ("TAI"), which is currently seeking to complete a joint venture
agreement and the operating license issuance process for a telecommunications
venture in Vietnam. As of October 31, 1995, the Company entered into a stock
purchase agreement with certain minority stockholders of TAI which provided for
the acquisition of an additional 13.1% of the outstanding shares of TAI. This
acquisition, which was subject to the receipt of a professional valuation and
the approval of the Vancouver Stock Exchange ("VSE"), would have resulted result
in the Company owning a majority interest of 53.1% of TAI. On July 18, 1996, the
Company announced that it had terminated the acquisition as the transaction had
not yet received regulatory approval. On August 5, 1996, the Company, through
its subsidiary PIL, agreed to purchase 250 shares of the common stock TAI from a
shareholder for the sum of $25,000. Subsequent to September 30, 1996, PIL
subscribed to a shareholder rights offering in which it purchased 2,900 Units
consisting of one promissory note of $49.00 and one share of common stock for an
aggregate purchase price of $145,000.
The Company would require substantial additional capital investment should
an operating license be issued by any of the countries in which the Company is
presently pursuing approvals, such as Vietnam or Cambodia. Failure to generate
sufficient funds from the issuance of additional debt or equity on favorable
terms and conditions, would have a material adverse effect on the financial
condition of the Company.
As of November 3, 1995, the Company entered into a stock purchase agreement
to acquire PortaCom Wireless Communications, Inc., a Delaware corporation
("PWC"), which had been developing new business opportunities in wireless
telecommunications services in China, Burma, Laos, Cambodia, Bulgaria, Macedonia
and certain other countries. The acquisition was approved by the shareholders on
November 20, 1995 and remained subject to the approval of the VSE and the
receipt of an acceptable valuation of PWC. Upon closing, the Company was
obligated to issue a total of 1,568,600 shares of common stock to the PWC
shareholders. On July 18, 1996, the Company announced that it had terminated the
acquisition as the transaction had not yet received regulatory approval. In
connection with the termination of the acquisition, the Company forgave loans
aggregating $465,000 which had been made to PWC in exchange for the rights to
pursue wireless business opportunities in various countries where PWC had been
actively seeking acquisitions.
PCBX developed and was engaged in marketing a personal computer branch
exchange which permitted the operation of a full-featured telephone network
control system from a centrally-located personal computer. Telecom was engaged
in distributing a line of telecommunications products manufactured by Nitsuko
America Corporation. Laboratories developed and was engaged in marketing a line
of audio speakers, as well as a proprietary audio recording and playback
technology known as"SphericSound." PCBX, Telecom and Laboratories ceased
operations in August 1995 and presently have no active business operations.
-2-
<PAGE>
Since the commencement of operations, the Company's revenues were
principally derived from the sale of its PCBX systems and to a substantially
lesser degree from sales of Telecom and Laboratories products until the recent
transaction with AAT (described above). Due to significant ongoing losses and
the Company's inability to successfully develop and carry out marketing and
sales strategies, the operations of PCBX, Telecom and Laboratories were closed
in August 1995. The Company also attempted to secure licensing arrangements or
other means of commercial exploitation of its SphericSound technologies;
however, to date, only limited sales revenues were realized from these efforts.
Funding of the Company's operations since inception has been provided by:
(i) revenues from the sale of PCBX systems; (ii) proceeds from the sale of
securities undertaken in a series of private placement transactions; (iii)
completion of an initial public offering on the Vancouver Stock Exchange during
October 1992; and (iv) revenues generated as a result of the recent AAT
transaction.
RESULTS OF OPERATIONS
Quarter Ended September 30, 1996 and Nine Months Ended September 30, 1996 as
- ----------------------------------------------------------------------------
Compared with the Quarter Ended September 30, 1996 and Nine Months Ended
- ------------------------------------------------------------------------
December 31, 1995.
- ------------------
For the quarter and nine months ended September 30, 1996, the Company
reported net income of $8,513,659 and $6,435,732, respectively, with sales of
$10,000 occurring. This compares to losses of $548,301 and $1,330,480 on sales
of $72,664 and $56,261 for the respective comparable prior year periods. The
recent improvement in the Company's financial condition is directly and solely
attributable to an agreement between the Company and Asian American
Telecommunications Corporation ("AAT") pursuant to which the Company received
$1,000,000 in cash in addition to escrowed common stock valued at $8,000,000.
The reported decrease in net sales was due to the fact that the Company's
revenue-producing subsidiaries (which were also generating significant net
losses) remained closed throughout the current fiscal year. Additionally, the
Company's revenue-producing activities from ongoing operations throughout the
current fiscal year have been limited. Revenues are expected to be limited
throughout the remainder of the 1996 fiscal year. Virtually all of the Company's
sales in the 1995 period were attributable to the Company's PCBX systems and
related products, with a small percentage of such sales being attributable to
Laboratories and Telecom. No sales have been realized by PIL.
The Company's results for the quarter and nine months ended September 30,
1996 represent earnings of $0.72 and $0.47 per common share, respectively, as
compared to losses per common share of $0.03 and $0.09 for the respective
comparable prior year periods, again as a result of the AAT transaction.
Cost of sales in the quarter and nine months ended September 30, 1996 was
(nil), compared with $52,702 (or 42% of sales) and $87,391 (or 61% of sales) in
the respective prior year periods. The Company's cost of sales as a percentage
of sales in the quarter and nine months ended
-3-
<PAGE>
September 30, 1996 are not comparable to the prior periods due to (i) the
closure of the Company's revenue-producing subsidiaries in August 1995, and (ii)
the Company's current business development activities not generating significant
revenue.
Operating expenses rose in the quarter ended September 30, 1996 to $707,270
from $620,966 in the year-earlier quarter, an increase of $86,304, or 14%. Of
this increase, the most significant factors were increases in interest expense,
legal and accounting, wages combined with consulting fees, and travel expenses.
These increases were partially offset by decreases in rent, advertising and
promotion, and research and development expenses. The Company's operating
expenses as a percentage of sales in the nine months ended September 30, 1996
are not comparable to the prior period due to the closure of the Company's
revenue-producing subsidiaries in August 1995.
Operating expenses rose in the nine months ended September 30, 1996 to
$2,414,318 from $1,936,665 in the comparable year-earlier period, an increase of
$477,653. These increases were primarily related to the increase in activities
of the Company with respect to the proposed acquisition of wireless
telecommunications interests in China. The Company's operating expenses as a
percentage of sales in the nine months ended September 30, 1996 are not
comparable to the prior period due to the closure of the Company's revenue-
producing subsidiaries in August 1995.
During the quarter ended September 30, 1996, interest and bank charges rose
to $139,670 from $43,755. This increase was primarily related to interest
accrued but not paid on the $2,405,000 in convertible promissory notes. Legal
and accounting expenses increased to $141,360 in the current quarter from
$47,328 recorded in the comparable prior year quarter. Travel and entertainment
expenses increased to $72,179 from $47,479 recorded in the comparable prior year
quarter. These increases were primarily related to the increase in activities of
the Company with respect to the proposed acquisition of wireless
telecommunications interests in China and Southeast Asia.
During the nine months ended September 30, 1996, interest and bank charges
rose to $431,731 from $73,394. This increase was primarily related to interest
accrued but not paid on the $2,405,000 in convertible promissory notes. Legal
and accounting expenses increased to $459,178 in the current quarter from
$273.665 recorded in the comparable prior year quarter. Travel and
entertainment expenses increased to $208,276 from $97,958 recorded in the
comparable prior year quarter. These increases were primarily related to the
increase in activities of the Company with respect to the proposed acquisition
of wireless telecommunications interests in China and Southeast Asia.
The Company's operations have become dependent on its wireless
telecommunications business development activities. The Company expects that it
will continue to expend significant funds in order to obtain the licenses and
form the joint ventures necessary for the Company or PIL to provide wireless
communications services in developing international markets, although no revenue
will be generated until such licenses are obtained and such joint ventures are
operational. This may necessitate a material increase in general office overhead
and other general and administrative costs.
-4-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In the quarter ended September 30, 1996, the Company realized net proceeds
of $133,250 from the issuance of shares of common stock in consideration for
certain loans, and from the exercise of warrants and stock options. These
activities contributed to a net working capital (deficit) position as of
September 30, 1996 of ($2,048,131), which is a reduction of $1,641,131 in the
working capital deficit which was ($3,689,262) at September 30, 1995.
The Company has incurred cumulative losses from inception through September
30, 1996 of $8,484,157 and has not yet achieved revenues from ongoing operations
sufficient to offset direct expenses and corporate overhead.
Since inception, a substantial portion of the Company's operating capital
has been provided through financing activities. Operations have provided gross
revenues to the Company of $11,232,829 whereas financing has yielded the Company
net proceeds of $17,065,397. The Company's financing has been provided by an
initial public offering and a series of private placements of shares. The
Company anticipates that it may seek additional financing through the private
placement of equity or debt securities, although there can be no assurances as
to the success of such anticipated placement.
Between March 31 and May 7, 1996, the Company arranged, subject to
regulatory approval, private placements of convertible promissory notes having
an aggregate principal amount of $1,025,000 (for a total amount of $2,405,000 of
such securities placed between December 19,1995 and May 7, 1996). The promissory
notes are due and payable after two years, or after six months upon demand of
the holder. The promissory notes placed during the current period are
convertible into shares of common stock of the Company at conversion prices
ranging from $2.50 to $3.25 per share. The Company will also issue to the
investors non-transferable warrants to purchase an aggregate of up to 142,958
shares of common stock of the Company for a period of two years at a price equal
to the conversion price of the notes. As of September, 30 1996, the issuance of
such securities continued to be subject to regulatory approval.
As of September 30, 1996, the Company had 944,082 options and 890,188
warrants outstanding or issuable which, upon exercise, would yield to the
Company additional proceeds in excess of $2 million. The exercise of warrants is
impossible to predict with any certainty, accordingly, management can render no
assurances that any material funds will be realized upon the exercise of such
warrants, or whether such will be exercised at all.
The Company has been able to secure financing in the past through loans
from certain stockholders. Management has no reason to believe that similar
arrangements will be available in the future.
The Company's net working capital position increased approximately
$2,426,073 from June 30, 1996. Working capital levels have only been able to
increase by virtue of the Company's
-5-
<PAGE>
continued offerings of securities, its ability to secure short term loans, and
its receipt of cash and securities pursuant to its agreement with AAT.
With the exception of fixed rental and certain personnel expenses, the
Company anticipates no significant capital expenditures within the short term.
Rental expense accounts for approximately $3,750 of fixed expenses on a monthly
basis. Personnel costs, which are expected to remain relatively stable within
the short term, are likely to account for approximately $45,000 of fixed
expenses on a monthly basis. Additional variable expenses, such as consulting
fees, legal and accounting, travel and entertainment, utilities and
miscellaneous equipment purchases (or rentals) are expected to account for
approximately $100,000 per month.
Management does not believe that in the near term the Company's operations
will generate revenue or cash flow to finance its working capital or any capital
expenditure requirements and the Company's operations will remain dependent on
the Company's ability to obtain additional debt and equity financing (including
from the exercise of existing warrants), as to which no assurance can be given.
In the past, the Company has been able to secure financing through loans from
certain stockholders. While the Company will continue to seek both debt and
equity financing, there can be no assurance that any such financing will be
available on terms acceptable to the Company or at all. Without such additional
sources of financing, the Company will not be able to continue as a going
concern.
Debt Settlements
- ----------------
In October 1995, the Company began to enter into written agreements to
settle indebtedness in the aggregate amount of approximately $2,809,000 for cash
or share consideration. These agreements were subject to regulatory approval. In
May 1996, the Company received regulatory approval and completed the settlement
of $2,513,121 of such debt through the issuance of a total of 1,256,561 shares
of Common Stock. As of September 30, 1996, an aggregate of 53,675 shares
continue to be reserved for issuance when permissible.
In December 1995, the Company agreed to the restructuring and settlement of
claims of two parties related to each other. The amount of the settlement was
subsequently reduced and fully paid by the Company as of September 30, 1996.
As of September 30, 1996, the outstanding accounts payable of the Company's
closed subsidiaries accounts for approximately $90,000 of total accounts
payable. The Company is continuing to attempt to settle the outstanding debt on
terms favorable to the Company, although no assurances about such settlement
terms can be given.
Cancellation of Performance Shares
- ----------------------------------
In October 1995, certain shareholders agreed to surrender their 5,950,000
performance shares which were then held under an escrow arrangement. In
consideration therefor, the Company agreed
-6-
<PAGE>
to issue 314,762 common shares at a deemed price of $2.00 per share. Although
the performance shares have been irreversably canceled by the Company, as of
September 30, 1996, the issuance of the 314,762 shares continues to be subject
to the removal of the Company from the jurisdiction of both the Vancouver Stock
Exchange and the British Columbia Securities Commission.
Bonus Shares and Warrants
- -------------------------
In connection with the issuance of certain short-term debt by the Company
in January 1995 and May 1996, the Company has agreed to issue, subject to
regulatory approval, 85,590 "bonus" shares of common stock and 166,667 share
purchase warrants, exercisable at $3.30 per share, expiring on May 31, 1997.
During the current period, regulatory approval was received for the issuance of
14,500 of these shares which were then issued by the Company. As of September
30, 1996, the issuance of the remaining 71,090 shares and 166,667 warrants
continued to be subject to regulatory approval.
EFFECTS OF INFLATION
The Company does not expect inflation to materially affect its results of
operations, however, it is expected that operating cost and the cost of capital
equipment to be acquired in the future may be subject to general economic and
inflationary pressures.
-7-
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
None
ITEM 2. CHANGES IN SECURITIES
---------------------
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None.
ITEM 5. OTHER EVENTS
------------
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
10.01 Form of Second Amendment to Acquisition Agreement and
Plan of Reorganization between the Registrant and Asian
American Telecommunications Corporation. *
10.02 Form of Termination Agreement between the Registrant and
Asian American Telecommunications Corporation. *
10.03 Employment Agreement between the Registrant and Douglas
C. MacLellan. A verbal agreement was entered into in
November 1995 between the Registrant and Douglas C.
MacLellan whereby the Registrant agreed to pay Mr.
MacLellan a salary of $14,000 per month on a month-to-
month basis, plus reimbursement of reasonable expenses,
terminable mutually at will, to serve as the
Registrant's Chief Executive Officer.
27 Financial Data Schedule. *
-8-
<PAGE>
(b) Reports on Form 8-K
None
* Filed herewith
-9-
<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
PORTACOM WIRELESS, INC.
Date: November 19, 1996
By: /s/ Douglas C. MacLellan
-----------------------------
Douglas C. MacLellan
President and Chief Executive Officer
By: /s/ Michael A. Richard
-----------------------------
Michael A. Richard
Vice President, Accounting
(principal financial officer)
-10-
<PAGE>
EXHIBIT 10.01
SECOND AMENDMENT TO
ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN PORTACOM WIRELESS, INC. AND
ASIAN AMERICAN TELECOMMUNICATIONS CORPORATION
AND ITS SHAREHOLDERS
That certain Acquisition Agreement and Plan of Reorganization (the
"Agreement") dated as of April 26, 1996, as amended on May 20, 1996 ("First
Amendment"), between PortaCom Wireless, Inc. ("Company"), Asian American
Telecommunications Corporation ("AAT") and each of the holders of shares or
rights to receive shares in the capital of AAT (collectively, the "AAT
Shareholders") as reflected in Exhibit "1" attached thereto is hereby amended
this _____ day of July, 1996 by making the following changes:
1. Section 1.1 of the Agreement is hereby amended to read as follows:
1.1 Shares Being Exchanged. Subject to the terms and conditions
----------------------
of this Agreement, at the closing provided for in Section 2 hereof
(the "Closing") each of the AAT Shareholders as reflected on Amended
Exhibit "1" attached hereto who join in this Agreement shall sell,
assign, transfer and deliver to the Company all of the AAT shares or
warrants to receive AAT shares which each of them respectively own,
hold in trust, have a right to receive or will have a right to
receive.
2. Section 1.2 of the Agreement is hereby amended to read as follows:
1.2 Consideration. Subject to the terms and conditions of this
-------------
Agreement and in consideration of the sale, assignment, transfer and
delivery of the AAT shares and warrants to purchase shares in AAT to
the Company, at the Closing the Company shall issue and deliver to the
AAT Shareholders a total of two shares of Common Stock of the Company
for each share of AAT that is issued and outstanding, and warrants
that entitle each holder of warrants to purchase AAT shares to
thereafter purchase, for the same total consideration, two shares of
Common Stock of the Company for each share in AAT the holder was
entitled to purchase. The purchase price of each share of the
Company's Common Stock purchased under the warrants shall be one-half
of the purchase price of each AAT share that could have been purchased
under the AAT warrants.
3. Section 1.3 is hereby deleted from the Agreement.
4. Section 2.1 of the Agreement is hereby amended to read as follows:
2.1 Time and Place. The closing of the transactions
--------------
contemplated by this Agreement (the "Closing") shall be held at the
offices of Day, Campbell & McGill,
<PAGE>
3070 Bristol Street, Suite 650, Costa Mesa, California 92626, at 10:00
a.m. on the earliest practicable date following satisfaction of all
conditions to Closing stated herein (the "Closing Date"), or at such
other time and place as the parties may agree upon in writing.
5. Section 2.2 of the Agreement is hereby amended to read as follows:
2.2 Deliveries by the AAT Shareholders. At the Closing, each
----------------------------------
AAT Shareholder shall deliver to the Company the following: (a) share
certificates or warrants representing the number of AAT shares set
forth opposite the name of such AAT Shareholder on Exhibit "1" hereto,
duly endorsed or accompanied by transfer powers duly executed in blank
and otherwise in form acceptable for transfer; (b) a letter in the
form attached hereto as Exhibit "2" executed by such AAT Shareholders
or other appropriate letter and (c) such other written statements or
forms as the Company deems necessary or desirable to perfect the
transfers.
6. Section 2.4 of the Agreement is hereby amended to read as follows:
2.4 Deliveries by the Company. At the Closing, in addition to
-------------------------
the documents referred to in Section 9.3 hereof, the Company shall
deliver to the AAT Shareholders the following: (a) a stock
certificate (and warrant for those AAT Shareholders holding warrants
to purchase AAT Shares) issued in the name of each AAT Shareholder
representing the number of Company Shares each such AAT Shareholder is
entitled to receive; (b) certified resolutions of the Company's Board
of Directors authorizing the execution and delivery of this Agreement
and the performance by the Company of its obligations hereunder; and
(c) a certificate of good standing of the Company from the Registrar
of Companies of British Columbia dated as of the most recent
practicable date.
7. Section 3.1 of the Agreement is hereby amended to read as follows:
3.1 Title. Such AAT Shareholder owns, has the right to receive
-----
or on the Closing Date will have the right to receive the number of
AAT shares or warrants set forth opposite such AAT Shareholder's name
on Exhibit "1" hereto, or any amendment to Exhibit "1" hereto approved
by the Company, and shall transfer to the Company at Closing good and
valid title to said number of AAT shares or warrants, free and clear
of all liens, claims, options, charges, and encumbrances of every
kind, character or description.
8. The following Section 4.3(c) is hereby added to the Agreement:
(c) Notwithstanding the foregoing, AAT has or will perfect an
amendment to its Memorandum of Association that authorizes the
issuance of up to 40,000,000
2
<PAGE>
shares, which amendment will enable it to issue additional shares and
grant warrants entitling the holders to purchase additional shares in
the total amounts reflected on Exhibit "1",
9. Section 4.5 of the Agreement is hereby amended to change the date of
the AAT Financial Statements from March 31, 1996 to June 30, 1996.
10. Section 4.7(f) of the Agreement is hereby amended to delete
subsections (4) and (5) and to renumber subsection (6) as subsection (4).
11. Section 4.7(g) of the Agreement is hereby amended to read as follows:
(g) AAT has not effected or committed itself to effect any
amendment or modification to its Memorandum of Association or Articles
of Association except as stated in Section 4.3(c).
12. Section 4.12 of the Agreement is hereby amended to read as follows:
4.12 Contracts and Undertakings. Section 4.7(f), as amended,
--------------------------
contains a complete list of all contracts, instruments, leases,
licenses, agreements, commitments and other undertakings to which AAT
is or contemplates being a party or by which it or its properties or
assets are or will be bound, copies of which have been furnished to
the Company or will be furnished to the Company when available, the
receipt of which is hereby acknowledged. AAT is not in default, or
alleged to be in default, under any of the contracts, instruments,
leases, licenses, agreements, commitments or undertakings listed in
Section 4.7(f) and, to the knowledge of AAT, no other party to any of
said contracts, instruments, leases, licenses, agreements, commitments
or undertakings is in default thereunder nor, to the knowledge of AAT,
does there exist any condition or event which, after notice or lapse
of time or both, would constitute a default by any party to any of
said contracts, instruments, leases, licenses, agreements, commitments
or undertakings. AAT has not entered into and is not subject to any
contract or agreement containing covenants limiting the right of AAT
to compete in any business or with any person. Notwithstanding the
above, each of the contracts referenced above in Section 4.7(f) are
subject to approval by the Sichuan Commission of Foreign Trade and
Economic Cooperation ("COFTEC") and HAT receiving a Business License
from the State Administration of Industry and Commerce of PRC.
13. Section 5.3 of the Agreement is hereby amended to read as follows:
3
<PAGE>
5.3 Capitalization.
--------------
(a) The authorized capital stock of the Company consists
of: (i) 100,000,000 shares of Common Stock, no par value, of which
approximately 12,096,154 shares were issued and outstanding on the
date hereof, and (ii) 100,000,000 Class "A" Preference shares and
100,000,000 Class "B" Preference shares, none of which are
outstanding. All of the issued and outstanding shares of Common Stock
of the Company were issued in compliance with applicable state and
federal securities laws, are duly authorized, validly issued, fully
paid and non-assessable, and are not subject to preemptive rights
created by statute, the Company's Articles of Incorporation or Bylaws
or any agreement to which the Company is a party or is bound.
(b) Except as set forth on Amended Schedule 5.3(b),
attached hereto, there are no options, warrants, calls, rights,
commitments or agreements of any character to which the Company is a
party or by which it is bound obligating the Company to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares
of capital stock or any bond, note, or other security of the Company
or obligating the Company to grant, extend or enter into any such
option, warrant, call, right, commitment or agreement.
14. Section 5.5 of the Agreement is hereby amended to include within the
definition of the Company Financial Statements delivered to AAT the Company's
balance sheets and statements of operations, stockholders equity and cash flows
for the periods ended December 31, 1995 (audited) and June 30, 1996 (unaudited).
15. The first sentence of Section 5.12 of the Agreement is hereby amended
to limit its application to contracts having an annual dollar value of
$25,000.00 or more.
16. Section 6.3 of the Agreement is hereby amended to read as follows:
6.3 Governing Documents. AAT shall not amend its Memorandum of
-------------------
Association except as disclosed elsewhere in this Agreement.
17. The following Section 6.8 is hereby made a part of this Agreement:
6.8 Private Placement. As of the date of this Agreement AAT is
-----------------
offering for sale through a private placement ("Private Placement") up
to 7,500,000 shares at a purchase price of $4.00 per share plus
accompanying warrants that allow the subscribers to purchase up to
3,750,000 shares at a purchase price of $6.00 per share within three
years of the date of purchase of Private Placement shares. At the
time of sale of Private Placement shares each purchaser will be
requested to become a party to this Agreement and upon doing so shall
become an AAT Shareholder
4
<PAGE>
owning the number of Private Placement shares and warrants subscribed
for and shall be entitled to all obligations and benefits of AAT
Shareholders under this Agreement, all as if such AAT Shareholder were
listed on Exhibit "1" as of the date hereof.
18. Section 9.1(f) of the Agreement is hereby amended to read as follows:
(f) NASDAQ Listing. The Company shall have taken all steps
--------------
necessary and received all authorizations necessary for the Company's
Common Stock to become listed for trading on the NASDAQ System by no
later than immediately after the Closing.
19. The following Section 9.1(g) is hereby made a part of the Agreement:
(g) Vancouver Stock Exchange. The Company's Common Stock shall
------------------------
have been withdrawn from listing and shall no longer be listed or
traded on the Vancouver Stock Exchange.
20. Sections 9.2(h) and (i) of the Agreement are hereby amended to read as
follows:
(h) Sichuan Province Public Switched Telephone Network ("PSTN")
-----------------------------------------------------------
Project. AAT and the other parties referenced above in Sections
-------
4.7(f)(1), (2), and (3) shall have entered into the contracts
specified therein. Such contracts shall have become binding and
effective and shall have received the approval of COFTEC. HAT shall
have received a Business License from the State Administration of
Industry and Commerce of PRC.
(i) Legal Opinion Regarding Sichuan Province PSTN Project. The
-----------------------------------------------------
Company shall have obtained a satisfactory legal opinion from Cha &
Pan satisfactory to the Company to the effect that (i) the contracts
described above in Sections 4.7(f)(1), (2), and (3) are legally
binding contracts enforceable in accordance with their terms, (ii)
that the contracts have been approved by all governmental agencies
whose approval is required for such contracts to become effective and
(iii) HAT has received from the State Administration of Industry and
Commerce of PRC such business license as is required for HAT to
fulfill its obligations under the contracts.
21. Section 11 of the Agreement is hereby deleted from the Agreement
effective as of the date hereof.
22. The following Section 12.1(h) is hereby added to the Agreement.
(h) by AAT if current negotiations with Metromedia International
Telecommunications, Inc. ("MIT") that would provide, subsequent to or
concurrently with the Closing under this Agreement, for the merger or
acquisition of the Company
5
<PAGE>
with or by MIT do not result in terms satisfactory to the Company and
the Company elects not to proceed with the merger or acquisition.
23. The Interim Operating Agreement, Exhibit "5" to the Agreement, is
hereby terminated and superseded by this Second Amendment and all obligations of
either party thereunder are terminated as of the date hereof.
IN WITNESS WHEREOF, this Second Amendment has been duly executed and
delivered by the parties hereto as of the date first above written. Except as
amended herein the Agreement and First Amendment remain in full force and
effect. By executing this Second Amendment each AAT Shareholder who was not
previously a party to the Agreement shall become a party to the Agreement and be
entitled to all benefits and subject to all obligations hereof as if such AAT
Shareholder had been a party to the Agreement on the date it was first executed.
ASIAN AMERICAN TELECOMMUNICATIONS CORPORATION
a Cayman Islands corporation
By: _______________________________________
Max E. Bobbitt, President and
Chief Executive Officer
PORTACOM WIRELESS, INC.
A British Columbia corporation
By: ____________________________________
Douglas C. MacLellan, President and
Chief Executive Officer
Address: 8055 West Manchester Avenue
Suite 730
Playa del Rey, California 90293
6
<PAGE>
EXHIBIT 10.02
TERMINATION AGREEMENT
---------------------
This Termination Agreement (the "Termination Agreement") is made and
entered into this 11th day of September, 1996 by and among PortaCom Wireless,
Inc., a British Columbia corporation ("PWI"), Asian American Telecommunications
Corporation, a Cayman Islands corporation ("AAT") and Max E. Bobbitt, as Agent
of and on behalf of the holders of shares in the capital of AAT who are parties
to the Acquisition Agreement (as defined below) (the "AAT Shareholders").
RECITAL
-------
WHEREAS, the parties have concluded that it is in their mutual best
interests and the best interests of their respective shareholders to terminate
on the terms provided herein that certain Acquisition Agreement and Plan of
Reorganization dated April 29, 1996, as amended by the First and Second
Amendments dated May 20, 1996 and July 18, 1996, respectively, by and among PWI,
AAT and the AAT Shareholders ("the Acquisition Agreement").
Now, therefore, the parties hereto agree as follows:
AGREEMENT
---------
1. Termination. The Acquisition Agreement and all rights and
-----------
obligations arising thereunder are hereby terminated, released and shall be of
no further force and effect.
2. Consideration. As consideration for this termination and the
-------------
release set forth below, AAT shall, subject to the conditions provided below,
issue to PWI two million (2,000,000) shares in the capital of AAT (the "Shares")
and warrants to acquire four million (4,000,000) shares
<PAGE>
2
in the capital of AAT exercisable for a period of three years from the date
hereof at an exercise price of four dollars ($4.00) per share (the "Warrants")
in the form of the Warrant attached hereto as Exhibit A. The Shares and the
Warrants shall be issued to PWI upon execution of this Termination Agreement;
provided, that, the Shares shall not be delivered to PWI upon issuance but shall
- -------- ----
instead be pledged by PWI to AAT as collateral security for PWI's
indemnification obligations pursuant to Section 3 below, to be held on the terms
described below. Additionally, AAT shall pay to PWI One Million Dollars
($1,000,000.00) cash upon execution of this Termination Agreement. The Shares
and Warrants issued to PWI upon execution of this Termination Agreement and
shares issued upon exercise of any of the Warrants shall be restricted and shall
bear the restrictive legend contained in Exhibit A hereto. The Shares, the
Warrants and any shares issuable upon exercise of the Warrants shall be entitled
to such demand or piggyback registration rights as may be provided to any AAT
shareholders from time to time.
3. Indemnification. PWI hereby agrees to indemnify and hold
---------------
harmless AAT and its successors and assigns and any affiliate, officer,
director, shareholder or agent of AAT and its successors and assigns and their
affiliates, officers, directors, shareholders and agents (the "Indemnified
Parties") against any claims, accounts, damages, losses, expenses, liabilities,
actions, causes of action, demands, suits and proceedings of any nature
whatsoever, known or unknown, that may be awarded, assessed or incurred as a
result of any litigation, claims or threats of litigation that arise from or in
any way relate to the (i) Acquisition Agreement, (ii) this Termination
Agreement, (iii) actions of any party or any affiliate, officer, director,
shareholder or agent of any party to the Acquisition Agreement or this
Termination Agreement, or (iv) that arise from the relationship between AAT and
PWI, including without limitation, reasonable attorneys fees and costs of
<PAGE>
3
settlement of any such asserted claim or litigation. PWI hereby appoints AAT as
its true and lawful attorney in fact and agent to enter into on behalf of or to
vote with respect to and in the name of PWI any agreement or amendment to any
agreement by and among AAT and any corporation whereby AAT enters into a
business combination agreement or other similar agreement that provides for
another corporation to acquire all or a majority of the shares of AAT and assume
the obligations of AAT under its outstanding warrants, provided that such
agreement to be executed on behalf of PWI provides for the exchange of the
Shares and the Warrants for securities of another corporation on the same basis
as all other AAT Shareholders and warrant holders. This Section 3 shall survive
any termination of this Termination Agreement.
4. Third Party Beneficiaries. The Indemnified Parties shall be and
-------------------------
are express third party beneficiaries of the Termination Agreement and shall be
entitled to enforce in their own names all rights granted to them hereunder.
5. Release and Settlement. All parties hereto hereby forever
----------------------
release and discharge all other parties and any affiliate, officer, director,
shareholder or agent of any party to the Acquisition Agreement from any claims,
accounts, liabilities, losses, damages, actions, causes of action, demands,
suits and proceedings of any nature whatsoever, known or unknown, arising from
or related in any manner to (i) the Acquisition Agreement, (ii) this Termination
Agreement, (iii) the actions of any party or any affiliate, officer, director,
shareholder or agent of any party to the Acquisition Agreement or this
Termination Agreement or (iv) the relationship between AAT and PWI.
6. Disposition of Pledged Shares. PWI hereby pledges, assigns,
-----------------------------
transfers and delivers unto AAT and grants a first priority lien and security
interest to AAT in (i) the Shares and
<PAGE>
4
(ii) all proceeds of the Shares, all securities entitlements and all other
securities or other property at any time and from time to time receivable or
otherwise distributed in respect of or in exchange for any or all of the Shares
referred to in clause (i) of this Section 6 (the "Collateral"), as collateral
security for the prompt and complete payment of the indemnification obligations
described in Section 3 above. PWI shall be entitled to exercise any and all
voting and/or consensual rights and powers accruing to the owner of the
Collateral or any part thereof for any purpose not inconsistent with the terms
hereof. Any dividends or distributions of any kind whatsoever received or
receivable by PWI, whether resulting from a subdivision, combination, or
reclassification of the outstanding capital shares of AAT or received in
exchange for the Collateral or any part thereof or as a result of any merger,
consolidation, acquisition, or other exchange of assets involving or related to
the Collateral, or otherwise, shall be and become part of the Collateral pledged
hereunder and shall immediately be delivered to AAT to be held subject to the
terms of this Termination Agreement. PWI hereby appoints AAT or its successor
and assigns as its true and lawful attorney in fact and agent and hereby grants
such agent the right and power to sell or otherwise dispose of with all rights
as a secured party under the Delaware Uniform Commercial Code (the "Delaware-
UCC") in any commercially reasonable manner permitted under the Delaware-UCC the
Collateral to the extent such sale or other disposition is necessary to satisfy
an Indemnified Party's right to indemnification hereunder. The determination as
to the validity of any claim for indemnification shall be made by the agent
appointed under this Section in said agent's sole discretion. In addition to the
delivery of Stock Powers pursuant to Section 8 hereof, PWI agrees, upon the
request of AAT, to promptly execute and deliver to AAT any and all additional
documents, notices, or other written instruments which AAT deems in its sole
discretion to be necessary to maintain or obtain a first priority perfected
<PAGE>
5
security interest in the Collateral including, but not limited to,
financing statements, instructions to issuers of the Collateral, brokers or
other financial intermediaries, or agreements between AAT, PWI, and any broker
or financial intermediary involved in a transfer of the Collateral.
7. Delivery of Pledged Shares. The Collateral shall be delivered to
--------------------------
PWI by January 1, 1999 and shall thereupon be released from the terms of the
security interest provided herein; provided, however, that if any asserted claim
or litigation for which any Indemnified Party is entitled to indemnification
hereunder has not been finally resolved and terminated on such date, then the
Collateral shall not be released from the terms of the security interest
provided herein and shall not be delivered until all such litigation has been
finally resolved and all statutes of limitations relevant to any claim asserted
or threatened have expired.
8. Stock Power. Upon execution of this Termination Agreement and
-----------
upon further request of AAT or any successor corporation, PWI shall provide such
stock powers or assignments executed in blank that pertain to the Collateral as
are requested. Such stock powers or assignments may be utilized in conjunction
with any disposition of the Collateral pursuant to Section 6.
9. Board Approvals. The Boards of Directors of AAT and PWI have
---------------
approved this Termination Agreement and authorized its execution by their
respective officers.
10. Assignment. This Termination Agreement shall inure to the
----------
benefit of the successors and assigns of the parties hereto.
11. Transfers. PWI may not transfer, sell, assign or otherwise
---------
dispose of any of the Collateral while it is subject to the terms of this
Termination Agreement. Any attempted transfer,
<PAGE>
6
sale, assignment or other disposition shall be invalid and unenforceable and
shall not be recognized by AAT or its successors and assigns.
12. Governing Law. This Termination Agreement shall be governed by
-------------
the laws of the State of Delaware, without regard to conflict of law principles.
IN WITNESS WHEREOF, this Termination Agreement has been entered into as of
the date first written above.
Asian American Telecommunication Shareholders of Asian American
Corporation, Telecommunications Corporation
a Cayman Islands corporation
By: * By: *
------------------------------- ---------------------------------
Max E. Bobbitt, President and Max E. Bobbitt, Agent
Chief Executive Officer
* By: Hermann Ivester, Attorney in Fact
PortaCom Wireless, Inc.,
a British Columbia Corporation
By:
_______________________________
Douglas C. MacLellan, President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JUL-01-1996 JAN-01-1996
<PERIOD-END> SEP-30-1996 SEP-30-1996
<CASH> 751,863 751,863
<SECURITIES> 0 0
<RECEIVABLES> 10,000 10,000
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 761,863 761,863
<PP&E> 14,554 14,554
<DEPRECIATION> 1,595 1,595
<TOTAL-ASSETS> 9,236,233 9,236,233
<CURRENT-LIABILITIES> 2,809,994 2,809,994
<BONDS> 0 0
0 0
0 0
<COMMON> 14,910,396 14,910,396
<OTHER-SE> (8,484,157) (8,484,157)
<TOTAL-LIABILITY-AND-EQUITY> 9,236,233 9,236,233
<SALES> 10,000 10,000
<TOTAL-REVENUES> 9,010,179 9,013,906
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 707,270 2,414,318
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 139,670 431,731
<INCOME-PRETAX> 8,513,659 8,435,732
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 8,302,909 8,599,588
<DISCONTINUED> 210,750 (163,856)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 8,513,659 8,435,732
<EPS-PRIMARY> .72 .47
<EPS-DILUTED> 0 0
</TABLE>
