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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) September 30, 1996
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PORTACOM WIRELESS, INC.
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(Exact name of registrant as specified in its charter)
British Columbia, Canada 0-23228 N/A
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(State or other jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
8055 W. Manchester Avenue, Suite 730, Playa del Rey, California 90293
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(Address of principal executive offices)
Registrant's telephone number, including area code: (310) 448-4140
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(Former name or former address, if changed since last report
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Item 5. Other Matters
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In order that the Registrant might file an application to have its common
stock listed on National Association of Securities Dealers Automated Quotation
System Small Cap Stock Market, and for the purpose of including this Current
Report on Form 8-K as an exhibit to such application, the Registrant hereby is
filing unaudited financial statements for the quarterly period ending September
30, 1996. Such financial statements will be re-filed on a timely basis as part
of the Registrant's Quarterly Report on Form 10-QSB for such period.
During a previous reporting period, the Registrant changed the date on
which its fiscal year ends from March 31 to December 31. Accordingly, results of
operations reported herein are as of and for the three months ended
September 30, 1996 and September 30, 1995 and for the nine months ended
September 30, 1996 and December 31, 1995.
The financial statements included herein have been prepared by the
Registrant, without audit, 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 Registrant 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.
INDEX
<TABLE>
<CAPTION>
Page
No.
<S> <C>
Condensed Consolidated Balance Sheet at
September 30, 1996 and December 31, 1995 (Unaudited) 3
Condensed Consolidated Statements of Operations
for the three and nine months ended September 30,
1996 and December 31, 1995 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows
for the three and nine months ended September 30,
1996 and December 31, 1995 (Unaudited) 5
Notes to Condensed Consolidated Financial
Statements (Unaudited) 6
</TABLE>
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PORTACOM WIRELESS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and expressed in U.S. dollars)
September 30, 1996 and December 31, 1995
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<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995
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<S> <C> <C>
ASSETS
Current assets:
Cash $ 751,729 $ 165,665
Accounts receivable, net of reserve 10,001 7,093
Notes receivable 436,411 815,400
Inventory -- --
Prepaid expenses -- --
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Total current assets 9,250,624 988,158
Investments (note 3) 8,025,000 --
Equipment, net 12,959 --
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$9 ,236,099 $ 988,158
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable (note 7) $ 262,939 $ 1,107,426
Accrued liabilities 132,732 --
Notes payable -- 971,000
Convertible promissory notes payable (note 4) 2,405,000 --
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Total current liabilities $ 2,800,671 $ 2,078,426
Shareholders' equity (deficiency):
Share capital (note 5) 14,660,397 13,829,621
Accumulated deficit (8,274,422) (14,919,889)
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6,385,975 (1,090,268)
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$ 9,236,099 $ 988,158
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</TABLE>
On behalf of the Board: /s/ Douglas MacLellan Director
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/s/ Stephen Leahy Director
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See accompanying notes to condensed consolidated financial statements.
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PORTACOM WIRELESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and expressed in U.S. dollars)
Three months ended September 30, 1996 and 1995
Nine months ended September 30, 1996 and December 31, 1995
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<TABLE>
<CAPTION>
Three Months Nine Months
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SEPTEMBER 1996 SEPTEMBER SEPTEMBER DECEMBER
1995 1996 1995
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<S> <C> <C> <C> <C>
INCOME
Sales, net $ 10,000 $ 72,664 $ 10,000 $ 56,261
Other income (note 3) 9,000,179 -- 9,003,907 --
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OPERATING EXPENSES:
Advertising and promotion -- 45,060 3,500 60,820
Bad debt -- -- -- 80,628
Consulting fees 72,436 274,657 552,688 327,132
Depreciation and amortization 1,595 -- 1,595 143,786
General and administrative 80,930 78,374 222,681 114,526
Interest and bank charges 139,670 43,755 181,731 73,394
Legal and accounting 141,360 47,328 458,640 273,665
Management fees 22,633 11,780 47,876 49,436
Placement fees -- -- 106,000 --
Rent 9,232 14,526 34,904 141,568
Research and development -- 10,050 -- 60,437
Travel and entertainment 72,179 47,479 202,170 97,948
Wages and benefits 167,235 47,957 343,346 513,325
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Total operating expenses 707,268 620,965 2,155,130 1,936,665
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Income (loss) before debt settlement $ 8,302,911 (548,301) 6,858,777 (1,880,404)
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Gain (loss) on settlement of debt 210,750 -- (163,856) 545,924
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Net income (loss) for the period 8,513,661 (548,301) 6,694,921 (1,334,480)
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Deficit, beginning of period 16,738,628 14,448,461 14,919,889 13,585,409
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Deficit, end of period $ 8,224,968 $14,996,762 $ 8,224,968 $14,919,889
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Earnings (loss) per share $ 0.72 $ (0.03) $ 0.53 $ (0.09)
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Weighted average number of common 11,903,947 16,229,963 12,738,341 15,549,863
shares outstanding
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
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PORTACOM WIRELESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and expressed in U.S. dollars)
Three months ended September 30, 1996 and 1995
Nine months ended September 30, 1996 and December 31, 1995
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<TABLE>
<CAPTION>
Three Months Nine Months
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September September September December
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
OPERATIONS:
Net income (loss) for the period $ 8,302,911 $ (548,301) $ 6,694,921 $(1,334,480)
Depreciation and amortization 1,595 -- 1,595 143,786
Income from AAT transaction not involving cash (8,000,000) -- (8,000,000) --
Net changes in working capital relating to operations:
Accounts receivable (6,448) -- (2,908) (782,060)
Inventory -- -- -- 58,852
Prepaid expenses -- (2,636) -- 6,680
Notes receivable 1,812,785 (197,855) 378,989 --
Accounts payable and accrued liabilities (503,355) 311,344 (711,755) (1,107,232)
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Net cash provided by (used in) operating activities 1,818,238 (518,930) (1,639,158) (3,014,454)
FINANCING:
Issue of and subscription for common shares 133,250 1,141,130 830,776 3,743,951
Convertible promissory notes payable -- -- 1,805,000 --
Notes payable (1,229,000) (177,008) (371,000) (651,008)
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Net cash generated by (used in) financing activities (1,095,750) 964,122 2,264,776 3,092,943
INVESTING:
Acquisition of equipment, net (1,027) --- (14,554) 13,792
Acquisition of additional shares in TAI (note 3) (25,000) --- (25,000) ---
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Net cash generated (used) by investing activities (26,027) --- (39,554) 13,792
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 696,461 445,192 586,084 92,281
Cash and cash equivalents, beginning of period 55,269 79,055 165,665 73,384
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 751,729 $ 524,247 $ 751,729 $ 165,665
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
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PORTACOM WIRELESS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
(Unaudited and expressed in U.S. dollars)
As at and for the three and nine months ended September 30, 1996
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1. MANAGEMENT OPINION:
The condensed consolidated financial statements include the accounts of
PortaCom Wireless, Inc. (the "Company") and its wholly-owned subsidiaries
from the dates of acquisition or formation. All material intercompany
balances and intercompany transactions have been eliminated.
In the opinion of management, the accompanying condensed consolidated
financial statements reflect all adjustments (which include only normal
recurring adjustments) and reclassifications for comparability necessary to
present fairly the financial position and results of operations as of and
for the three and nine months ended September 30, 1996.
2. CHANGE IN FISCAL YEAR:
During a previous reporting period, the Company changed the date on which
its fiscal year ends from March 31, 1996 to December 31, 1995.
Accordingly, results of operations reported herein are as of and for the
three months ended September 30, 1996 and 1995 and for the nine months
ended September 30, 1996 and December 31, 1995.
3. INVESTMENTS IN ASIAN AMERICAN TELECOMMUNICATIONS CORPORATION AND
TELECOMMUNICATIONS AMERICAN INTERNATIONAL:
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"), a Los Angeles-based
telecommunications services developer. 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 potential
liabilities related to this transaction. The receipt of cash and common
stock pursuant to the transaction has been recorded in the Statement of
Operations as income in the current quarter. The common stock has been
recorded as a non-current asset on the Balance Sheet.
On August 5, 1996, the Company, through its subsidiary PortaCom
International, Ltd. ("PIL") 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 the end of the current
period, 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.
4. CONVERTIBLE PROMISSORY NOTES PAYABLE:
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 represents funds received in the current year. The promissory
notes are due and payable after two years, or after six months upon demand
of the holder. The promissory notes bear interest at an annual rate of
10%, payable upon maturity or conversion. The promissory notes are
convertible into shares of common stock of the Company at conversion prices
ranging from $1.49 to $3.25 per share. The Company will also issue to the
investors non-
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PORTACOM WIRELESS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and expressed in U.S. dollars)
As at and for the three and nine months ended September 30, 1996
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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.
5. SHARE CAPITAL:
(a) Authorized:
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
(b) Issued common shares:
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<TABLE>
<CAPTION>
Number of Per share Total consideration
shares consideration
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<S> <C> <C> <C>
Balance issued and subscribed, 11,892,382 $14,419,797
June 30, 1996
Issued in consideration for loans 14,500 3.41 49,500
Issued for cash on exercise of warrants 37,878 1.32 50,000
Issued for cash on exercise of stock options 11,250 3.00 33,750
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Balance issued, September 30, 1996 11,956,010 14,553,047
To be issued in settlement of debt (f) 53,675 2.00 107,350
To be issued in consideration for loans and for
cancellation of performance shares (e)(g) 385,852 -- --
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Balance issued and to be issued 12,395,537 14,660,397
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</TABLE>
(c) Stock options:
As at December 31, 1995, the Company had common shares of the Company
reserved for issuance on exercise of incentive stock options to 1999.
Option changes for the period July 1, 1996 to September 30, 1996 were
as follows:
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PORTACOM WIRELESS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and expressed in U.S. dollars)
As at and for the three and nine months ended September 30, 1996
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<TABLE>
<CAPTION>
<S> <C>
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Outstanding and exercisable as at June 30, 1996 1,055,332
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Granted --
Canceled 100,000
Exercised at $3.00 per share 11,250
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Outstanding and exercisable as at September 30, 1996 944,082
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</TABLE>
Stock options are issued at the average market price per share for the
ten trading days prior to the date of issuance.
(d) Warrants:
In the current quarter, the Company did not issue any new warrants to
purchase shares of its common stock. Warrants to purchase up to
625,688 shares of common stock at prices ranging from $1.49 to $3.30
will be issued subject to regulatory approval.
In the current quarter, warrants were executed for the purchase of
37,878 common shares for proceeds of $50,000, and warrants to purchase
up to 423,457 common shares at a price of $4.025 expired.
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.
(e) Performance shares:
Included in the issued and outstanding common shares are 600,000
common performance shares 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 canceled. 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.
(f) Shares to be issued on settlement of debt:
During the nine months ended December 31, 1995, the Company entered
into agreements to issue 1,256,561 common shares at their estimated
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, regulatory approval was received on May 16, 1996,
and 1,256,561 shares were issued in May and June, 1996. The Company
has further agreed to issue and additional 53,675 common shares at
their estimated value of $2.00 per share to settle additional
outstanding liabilities aggregating $107,349. These shares will be
issued
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when permitted by regulatory and governmental authorities having
jurisdiction over such proposed issuance.
(g) Loan bonus shares
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. At the end of the current period, the
issuance of the remaining 71,090 shares and 166,667 warrants continued
to be subject to regulatory approval.
(h) List of Directors:
Keith Alexander, Robert Flitton, Howard Frantom, Keith Hay, Stephen
Leahy, Douglas MacLellan, and Stephen Stephens.
6. INCOME TAXES:
As at December 31, 1995, the Company had carryforward income tax losses in
Canada and the United States in excess of $14,000,000 available to reduce
future income taxes payable, the benefit of which has not been recorded in
the accounts. These loss carryforwards expire at various times through the
year 2005.
7. RELATED PARTY TRANSACTIONS:
Related party transactions not disclosed elsewhere in these condensed
consolidated financial statements include $11,429 in accounts payable at
September 30, 1996 which is owing to related parties. Management and
consulting fees have predominantly been charged by related parties. The
Company has reimbursed expenses incurred by directors and officers on its
behalf during the periods presented.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: October 22, 1996 PORTACOM WIRELESS, INC.
By: /s/ Michael Richard
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Michael Richard,
Vice President - Accounting
06007\0020\8-k.1
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