<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(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, 1997 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 Registrant as specified in its Charter)
Delaware 33-0650673
(State or other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
10061 Talbert Avenue, Suite 200
Fountain Valley, California 92708
(Address of principal executive offices)
Registrant's telephone number: (714) 593-3234
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 October 31, 1997, there were 13,576,970 shares of Common Stock issued and
outstanding.
<PAGE>
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
NO.
<S> <C>
ITEM 1. Statement Regarding Financial Information i
Condensed Consolidated Balance Sheet at
September 30, 1997 (Unaudited) and
December 31, 1996 (Derived from audited
financial statements) 1
Condensed Consolidated Statements of Operations
for the three and nine months ended September 30,
1997 and 1996 (Unaudited) 2
Condensed Consolidated Statements of Cash Flows
for the three and nine months ended September 30,
1997 and 1996 (Unaudited) 3
Notes to Condensed Consolidated Financial 4
Statements (Unaudited)
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 20
ITEM 2. Changes in Securities 20
ITEM 3. Defaults Upon Senior Securities 21
ITEM 4. Submission of Matters to a Vote of Security Holders 22
ITEM 5. Other Information 22
ITEM 6. Exhibits and Reports on Form 8-K 22
</TABLE>
<PAGE>
PORTACOM WIRELESS, INC. AND SUBSIDIARIES
Quarter Ended September 30, 1997
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"), 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 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-K for the year ended December 31,
1996, in the Company's Form 10-Q for the quarter ended March 31, 1997, and in
the Company's Form 10-Q for the quarter ended June 30, 1997 as filed with the
SEC (file number 0-23228).
-i-
<PAGE>
PORTACOM WIRELESS, INC.
Consolidated Balance Sheets
(Unaudited and expressed in U.S. dollars)
September 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
September 30, 1997 December 31, 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 3,227 $ 114,275
- ---------------------------------------------------------------------------------------------------
3,227 114,275
Equipment, net 72,053 12,427
Refundable deposits (note 3) 200,000 --
Other assets (note 3) 99,500 --
Investments (note 3) 8,000,000 8,099,500
- ---------------------------------------------------------------------------------------------------
Total Assets $ 8,374,780 $ 8,226,202
===================================================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued
liabilities $ 2,925,387 $ 650,133
Notes payable 276,585 --
Convertible promissory notes
payable (note 4) -- 150,000
- ---------------------------------------------------------------------------------------------------
Total liabilities 3,201,972 800,133
Stockholders' equity:
Share capital (note 5)
Issued:
Common stock (Sept. 30, 1997 - 13,576,970; 13,630 13,118
December 31, 1996 - 13,118,181)
Other paid-in capital 18,426,845 17,193,178
Accumulated deficit (13,267,667) (9,780,227)
- ---------------------------------------------------------------------------------------------------
Total stockholders' equity 5,172,808 7,426,069
- ---------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders'
Equity $ 8,374,780 $ 8,226,202
===================================================================================================
</TABLE>
On behalf of the Board: /s/ Stephen Leahy Director
----------------------------------
Stephen Leahy
/s/ Douglas MacLellan Director
----------------------------------
Douglas MacLellan
See accompanying notes to condensed consolidated financial statements. Page 1
<PAGE>
PORTACOM WIRELESS, INC.
Condensed Consolidated Statements of Operations
(Unaudited and expressed in U.S. dollars)
<TABLE>
<CAPTION>
Three and nine months ended September 30, 1997 and 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Nine Months
-------------------------------------------------------------
1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income:
Sales $ -- $ 10,000 $ -- $ 10,000
Cost of sales -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
-- 10,000 -- 10,000
Other income -- 9,000,179 -- 9,003,906
- -----------------------------------------------------------------------------------------------------------------------------------
-- 9,010,179 -- 9,013,906
Operating expenses:
Advertising and promotion $ -- $ -- $ 2,599 $ 3,500
Bad debt -- -- -- 2,513
Consulting fees 99,627 72,436 815,062 537,688
Depreciation and amortization 532 1,595 1,782 1,595
General and administrative 80,306 80,930 336,196 222,712
Interest, bank and financing charges 403 139,670 171,296 431,731
Legal and accounting 296,732 141,360 1,190,277 459,178
Management fees 20,467 22,633 76,868 62,876
Placement fees -- -- -- 106,000
Rent 23,698 9,232 65,104 34,904
Travel and entertainment 32,719 72,179 480,106 208,276
Wages and benefits 114,791 167,235 348,151 343,345
- -----------------------------------------------------------------------------------------------------------------------------------
669,275 707,270 3,487,441 2,414,318
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before debt settlement (669,275) 8,302,909 (3,487,441) 6,599,588
- -----------------------------------------------------------------------------------------------------------------------------------
Gain (loss) on settlement of debt -- 210,750 -- (163,856)
==================================================================================================================================
Net income (loss) for the period $ (669,275) $ 8,513,659 $(3,487,441) $ 6,435,732
==================================================================================================================================
Net income (loss) per share ($0.05) $0.72 $(0.23) $0.47
==================================================================================================================================
Weighted average number of common shares outstanding 12,976,970 11,903,947 15,480,402 13,642,462
==================================================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements. Page 2
<PAGE>
PORTACOM WIRELESS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited and expressed in U.S. dollars)
<TABLE>
<CAPTION>
Three and nine months ended September 30, 1997 and 1996
- -------------------------------------------------------------------------------------------------------------------------------
Three Months Nine Months
------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net income (loss) for the period $(669,275) $ 8,513,659 $(3,487,441) $ 6,435,732
Depreciation and amortization 532 1,595 1,782 1,595
Fair value of investments received on settlement -- -- -- (8,000,000)
Income from AAT transaction -- (8,000,000) -- --
Net changes in working capital relating to operations:
Accounts and notes receivable -- 1,806,337 -- 376,082
Accounts payable and accrued liabilities 580,934 (503,355) 2,275,254 (702,432)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash used by operating activities (87,809) 1,818,236 (1,210,405) (1,889,023)
Financing:
Issue of and subscription for common shares for cash -- 133,250 1,234,180 553,145
Issue of and to be issued for common shares on -- -- -- 277,630
settlement of debt and as non-cash consideration
Value assigned to warrants -- -- -- 250,000
Loans payable -- (1,229,000) -- 1,434,000
Notes payable 90,000 -- 126,585 --
- -------------------------------------------------------------------------------------------------------------------------------
Net cash generated by financing activities 90,000 (1,095,750) 1,360,765 2,514,775
Investing:
Acquisition of equipment, net (8,027) (1,027) (61,408) (14,554)
Investment -- -- -- (25,000)
Other assets -- (25,000) (200,000)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash generated (used) by investing activities (8,027) (26,027) (261,408) (39,554)
- -------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (5,836) 696,459 (111,048) 586,198
Cash and cash equivalents, beginning of period 9,063 55,404 114,275 165,665
- -------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 3,227 $ 751,863 $ 3,227 $ 751,863
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements. Page 3
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited and expressed in U.S. dollars)
Three and nine months ended September 30, 1997
- ------------------------------------------------------------------------------
1. Basis of presentation:
The condensed consolidated financial statements include the accounts of
PortaCom Wireless, Inc. (the "Company") and its wholly owned and majority-
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, 1997.
The accompanying condensed 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. The
condensed consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
2. 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 to 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 on future events. Management has applied its judgment to the
information available to the date of the issuance of these condensed
consolidated financial statements in making such judgment. Actual results
could differ from estimates made in preparing these condensed consolidated
financial statements.
3. Investments and Other assets:
a. Metromedia Asia Corporation:
As previously reported in prior periods, the Company, in consideration
for agreeing to the termination of a proposed business combination with
Asian American Telecommunications Corporation ("AAT"), received 2,000,000
common shares of AAT (presently held in escrow), warrants to acquire
4,000,000 common shares of AAT for a period of three years at a price of
$4.00 per share, and cash consideration of
-4-
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited and expressed in U.S. dollars)
Three and nine months ended September 30, 1997
- ------------------------------------------------------------------------------
$1,000,000.
In February, 1997, the Company agreed to exchange its shares and
warrants of AAT for equivalent shares and warrants of Metromedia Asia
Corporation ("MAC") in connection with a business combination between
AAT and MAC and a related exchange offer by MAC.
On October 8, 1997, the Company signed a letter of intent with VDC
Corporation Ltd. ("VDC") to sell its interest in MAC to VDC for 5.3
million shares of VDC common stock and up to $700,000 in cash. The
letter of intent is subject to completion of definitive agreements
which will be subject to shareholder consent, the completion of due
diligence, regulatory approvals and filings and other necessary
conditions, including resolving a majority of the Company's current
debts and obligations. There is no assurance that definitive
agreements for either transaction will be reached or that either
transaction will be consummated in accordance with the terms set forth
in the letter of intent, or at all.
b. American Cambodian Telecom Ltd.:
On December 26, 1996, the Company acquired an 86% interest in American
Cambodian Telecom Ltd. ("ACT"), a newly formed Cambodian limited
liability company under the consent of the Ministry of Posts and
Telecommunications in Cambodia. ACT had been inactive to December 31,
1996.
Under the Joint Venture agreement, the Company was required to
contribute capital to ACT of at least 50 million Cambodian Riel
(approximately $20,000) and to provide a refundable deposit of
$200,000 within 45 business days of December 31, 1996. As of the date
of this report, the required capital had been contributed and the
refundable deposit had been made.
In addition, by December 26, 1997, the Company is required to purchase
the remaining 14% interest in ACT from Khmer Sameky Telecom Company,
Ltd. for the sum of $1,400,000, to subsequently grant a 25% interest
in ACT to the Ministry of Posts and Telecommunications of the Kingdom
of Cambodia, and to increase the share capital of ACT to $5,000,000.
As of the date of this report, the Company had not complied with these
requirements.
The Company reviews the underlying value of all investments on an ongoing
basis and provides for declines in value that are other than temporary as
they are identified. Any impairments are charged to earnings and a new
cost basis for the security is established.
4. Convertible promissory notes payable:
Between December 19, 1995 and December 11, 1996, the Company arranged,
subject to regulatory approval, private placements of convertible
promissory notes having an aggregate principal amount of $2,417,000. As of
December 31, 1996, convertible notes aggregating
-5-
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited and expressed in U.S. dollars)
Three and nine months ended September 30, 1997
- ------------------------------------------------------------------------------
$2,267,000 were converted to common stock. As of March 31, 1997, the
remaining convertible notes aggregating $150,000 had also been converted to
common stock. As of September 30, 1997, accrued interest on the
convertible promissory notes aggregating $182,753 was payable by the
Company. In addition, the Company has agreed to issue, subject to the
removal of the Company from the jurisdiction of both the Vancouver Stock
Exchange and the British Columbia Securities Commission, 115,296 "bonus"
warrants to purchase shares of the Company's common stock, exercisable at
$2.70, expiring between December 31, 1999 and February 14, 2000.
5. Share Capital:
(a) Authorized:
100,000,000 shares of common stock with a par value of $0.001 per
share
5,000,000 shares of preferred stock with a par value of $0.001 per
share
(b) Issued common stock:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Number of Per share Total consideration
shares consideration
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1996 13,064,506 $17,098,946
Issued for cash on private placement 190,388 3.035 577,750
Issued as consideration for loans (g) 42,757 3.960 169,301
Issued as consideration for conversion of
convertible promissory notes payable 55,862 2.690 150,000
Issued for cash on exercise of warrants 223,457 1.509 337,128
- ------------------------------------------------------------------------------------------------
Balance, September 30, 1997 13,576,970 -- $18,333,125
To be issued on settlement of debt (f) 53,675 2.000 107,350
- ------------------------------------------------------------------------------------------------
Balance issued and to be issued 13,630,645 $18,440,475
- ------------------------------------------------------------------------------------------------
</TABLE>
-6-
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited and expressed in U.S. dollars)
Three and nine months ended September 30, 1997
- ------------------------------------------------------------------------------
(c) Stock options:
As at December 31, 1996, the Company had common shares of the
Company reserved for issuance on exercise of incentive stock
options to 2002. Option changes for the period January 1, 1997 to
September 30, 1997 were as follows:
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------
Outstanding and exercisable as at December 31, 1996 1,136,183
- ------------------------------------------------------------------------------
Granted at $3.61 per share 90,000
Canceled (125,000)
Expired (296,183)
- -----------------------------------------------------------------------------
Outstanding and exercisable as at September 30, 1997 805,000
- -----------------------------------------------------------------------------
</TABLE>
Stock options are issued at the average market price per share for
the ten trading days prior to the date of issuance. The Company
applies APB No. 25 and related Interpretations in accounting for
its option grants. Accordingly, no compensation cost has been
recognized for options granted.
(d) Warrants:
During the three months ended March 31, 1997, the Company, in
connection with a private placement, issued warrants to purchase
72,993 shares of common stock at $2.74 per share if exercised by
January 28, 1998 and $3.15 if exercised thereafter to January 28,
1999. As of September 30, 1997, none of these warrants has been
exercised.
During the year ended December 31, 1996, the Company, in connection
with private placements of common stock, issued warrants to
purchase 97,500 shares of common stock at $1.11 per share if
exercised by November 1996, and $1.28 if exercised thereafter to
November 1997. Of these warrants, 30,000 were exercised during the
three months ended March 31, 1997 and 67,500 remain outstanding.
In addition, the Company issued 461,203 warrants attached to
convertible promissory notes at prices ranging from $1.49 to $3.25
per share if exercised by dates ranging from December 19, 1997 to
May 7, 1998. As of September 30, 1997, 161,073 of these warrants
had been exercised at $1.49 per share and 15,384 of these warrants
had been exercised at $1.95 per share. In addition, the Company has
agreed to issue, subject to the removal of the Company from the
jurisdiction of both the Vancouver Stock Exchange and the British
Columbia Securities Commission, 115,296 "bonus" warrants to
purchase shares of the Company's common stock, exercisable at
$2.70, expiring between December 31, 1999 and February 14, 2000.
The Company, has, in prior periods issued warrants to purchase up
to 204,878 shares
-7-
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited and expressed in U.S. dollars)
Three and nine months ended September 30, 1997
- ------------------------------------------------------------------------------
of common stock at prices of between $1.28 and $1.47 per share. Of
these warrants, 37,878 were exercised during 1996, 17,000 were
exercised during the three months ended March 31, 1997, and the
remaining 150,000 expired in the three months ended September 30,
1997.
(e) Performance shares:
Included in the issued and outstanding common stock are 600,000 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 canceled. Pursuant to the escrow agreement, holders of the
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. Upon
release of the shares from escrow, compensation expense will be
recorded.
In October 1995, certain shareholders agreed to surrender their
5,950,000 escrowed shares which were then held under the escrow
arrangement. In consideration therefor, the Company agreed to issue
314,762 shares of common stock at a deemed price of $2.00 per share.
Although the escrowed shares have been irrevocably canceled by the
Company during 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.
(f) Shares to be issued on settlement of debt:
As of September 30, 1997 53,675 shares of the Company's common stock
continue to be reserved for issuance, when allowable, related to prior
period debt settlements. As of September 30, 1997, the outstanding
accounts payable of the Company's closed subsidiaries accounts for
approximately $90,000 of total accounts payable. The Company intends
to continue attempting to settle the outstanding debt on terms
favorable to the Company, although no assurances about such settlement
terms can be given.
(g) Securities 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 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, expiring on
May 31, 1997. During 1996, regulatory approval was received for the
issuance of 25,833 of these shares which were then issued by the
Company. During the quarter ended March 31, 1997, regulatory approval
was received for the issuance of 42,757 of these shares which were
then issued by the
-8-
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited and expressed in U.S. dollars)
Three and nine months ended September 30, 1997
- ------------------------------------------------------------------------------
Company. Additionally, subject to the removal of the Company from
the jurisdiction of both the Vancouver Stock Exchange and the British
Columbia Securities Commission, the Company has agreed to extend the
expiry date of the 166,667 share purchase warrants to May 31, 1998
from May 31, 1997. As of September 30, 1997, the issuance of the
remaining 17,000 shares and 166,667 warrants continued to be subject
to regulatory approval.
In connection with the issuance of certain short term debt by the
Company in February, 1997, the Company has agreed to issue, subject to
the removal of the Company from the jurisdiction of both the
Vancouver Stock Exchange and the British Columbia Securities
Commission, 120,000 "bonus" warrants to purchase shares of the
Company's common stock, exercisable at $2.75, expiring on February 19,
1999.
(h) List of Directors:
Howard Frantom, Keith Hay, Stephen Leahy, Douglas MacLellan.
6. Contingent liabilities:
In the current period, one of the Company's vendors, JMS North America,
Inc. ("JMS")filed a Motion for Judgment with the Circuit Court of the
County of Fairfax, Commonwealth of Virginia, seeking $836,614 in allegedly
due consulting fees, finance charges and travel expenses. JMS further
seeks $2,250,000 for alleged breach of contract and $1,500,000 for alleged
fraud. The Company has disputed and intends to dispute in trial a material
portion of the amounts billed and or claimed by JMS for consulting fees,
finance charges and travel expenses. Additionally, the Company believes
that the claims of JMS with respect to alleged fraud and alleged breach of
contract are without merit and will vigorously contest them. Any such
dispute, contest or pursuit of defenses by the Company to the allegations
set forth by JMS will be subject to receipt of sufficient financing.
Subsequent to the end of the quarter ended September 30, 1997, J. Michael
Christiansen ("Christiansen"), filed a Complaint with the Superior Court of
the State of California, seeking in excess of $350,000 plus interest, costs
and undetermined exemplary and punitive damages in connection with the
alleged breach by the Company of a Release and Settlement Agreement dated
October 2, 1996, pursuant to which the Company was to have issued
Christiansen 75,000 shares of the common stock of the Company. The Company
believes that the issuance of such shares to Christiansen has been
necessarily delayed pursuant to certain regulatory constraints, the removal
of which the Company has continued to seek without success. The Company is
presently attempting to engage legal counsel to review and opine on the
merit of Christiansen's claims and to vigorously pursue any and all
defenses and counterclaims determined to be available to the Company with
respect to certain of the allegations set forth by Christiansen and to
certain past actions of Christiansen. Any such dispute, contest or pursuit
of defenses or counterclaims by the Company to the allegations set forth by
Christiansen will be subject to receipt of sufficient financing.
-9-
<PAGE>
PORTACOM WIRELESS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited and expressed in U.S. dollars)
Three and nine months ended September 30, 1997
- ------------------------------------------------------------------------------
While the results of litigation and claims cannot be predicted with
certainty, management believes that the final outcome of such matters, or
the cost of pursuing a defense in such matters, could have a material
adverse effect on the Company's ability to continue as a going concern.
7. Related party transactions:
Related party transactions not disclosed elsewhere in these condensed
consolidated financial statements include $287,462 in accounts payable and
accrued liabilities at September 30, 1997 which is owing to related
parties. In the three months ended September 30, 1997, approximately
$54,480 of consulting fees were charged by related parties, while
approximately $20,470 of management fees were charged by related parties
The Company has reimbursed expenses incurred by directors and officers on
its behalf during the periods presented.
-10-
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
Background
The corporate objective of the Company is to become a leading independent
provider of wireless and wireline telecommunications services in selected
developing world markets. Subject to receipt of sufficient financing on terms
acceptable to the Company, it intends to pursue opportunities to build, operate
and actively participate in cellular, wireless, paging, PSTN and long-distance
networks in order to provide coverage and high-quality service in these markets.
The Company's current business is focused on concluding the previously disclosed
asset sale transaction with VDC Corporation for the sale of the Company's
interest in a telecommunications business based in the Peoples Republic of China
(the "VDC Transaction"), the informal composition of its outstanding
indebtedness, and upon the pursuit of opportunities to either finance or dispose
of its interest in its joint venture in the Kingdom of Cambodia. Due to the
lack of sufficient financial resources, the Company has elected to temporarily
suspend its activities related to the pursuit of opportunities to develop new
telecommunications operations. However, the Company is actively pursuing
opportunities to merge with or acquire one or more businesses with existing
revenue-producing telecommunications operations.
The Company was formed as a British Columbia, Canada corporation in 1989.
On December 23, 1996, the Company reincorporated from British Columbia to
Wyoming pursuant to a procedure known as a "continuance", and on December 24,
1996, the Company merged with its wholly owned Delaware subsidiary and thereby
reincorporated into Delaware. The Delaware subsidiary had been formed in 1994
for the purpose of the merger, which had been postponed for business reasons.
The Company presently conducts business operations both directly and through one
wholly owned U.S. subsidiary, PortaCom International, Ltd. ("PIL"). The Company
also has three other wholly owned U.S. subsidiaries which are not presently
operating: Extreme Telecom, Inc. ("Telecom"), PCBX Systems, Inc. ("PCBX"), and
Extreme Laboratories, Inc., formerly known as Spheric Audio Laboratories, Inc.
("Laboratories").
Since 1994, both directly and through its PIL subsidiary, the Company has
engaged in initial stage efforts to evaluate the feasibility of, and attempt to
secure, licensing opportunities and joint venture arrangements for the operation
of wireless telephone networks as well as other state-of-the-art mobile radio
communication systems and new telephone technologies. Although the
establishment and operation of wireless telephone networks and other advanced
communications systems will be investigated by the Company wherever strategic
opportunities arise, upon resumption of its activities related to the pursuit of
telecommunications opportunities (subject to financing), its principal efforts
are expected to be focused upon certain Asia Pacific emerging markets,
including Cambodia, India, China, Bangladesh and Vietnam.
The Company, in December 1996, entered into a joint venture agreement
through which it controls a limited liability company which holds a twenty-five
(25) year renewable licence to
-11-
<PAGE>
develop a digital mobile wireless system in the Kingdom of Cambodia. The
Company has an interest through a shareholding in Metromedia Asia Corporation
("MAC") in a fixed line basic services license and a cellular service license in
the People's Republic of China. The activities of the Company's PIL subsidiary
to date have produced no licences or joint venture opportunities, and management
does not believe that revenues will be realized by PIL in 1997.
The Company formerly pursued a number of ventures in the consumer
electronics and customer premise equipment sectors. PCBX developed and marketed
a personal computer branch exchange which permitted the operation of a full-
featured telephone network control system from a centrally located personal
computer. Telecom entered into an agreement with Nitsuko America Corporation
("Nitsuko America") to distribute telecommunications products manufactured by
Nitsuko America which were not then being distributed otherwise in the United
States. Laboratories developed and marketed a line of audio speakers, as well
as a proprietary audio recording and playback technology known as
"SphericSound".(TM) Because of substantial losses, the associated costs of
continued development, the lack of profitability by competitors and the
uncertainty of marketing costs associated with commercializing both proprietary
technologies and other manufacturers' products, management decided in 1995 to
discontinue the development and marketing activities of PCBX, Telecom and
Laboratories.
Funding of the Company's operations since inception has been provided by:
(i) revenues from the sale of PCBX products, and, to a significantly lesser
extent, the products of Telecom and Laboratories; (ii) proceeds from the sale of
equity and debt 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 receipt of cash and securities of Asian American Telecommunications
Corporation ("AAT"), the securities of which were comprised of common shares
(currently held in escrow) and warrants to purchase shares of AAT's common stock
and which were subsequently exchanged for an equal number of common shares
(currently held in escrow) and common share purchase warrants of MAC.
Results of Operations
Quarter and Nine Months ended September 30, 1997 as Compared with Quarter and
- -----------------------------------------------------------------------------
Nine Months Ended September 30, 1996.
- -------------------------------------
For the quarter and nine months ended September 30, 1997, the Company had
no revenues and reported net losses from operations of $669,275 and $3,487,441,
respectively. This compares to net income from operations of $8,513,659 and
$6,435,732 for the respective comparable prior year periods. Net income in the
prior year periods was solely and directly attributable to an agreement between
the Company and AAT pursuant to which the Company received $1,000,000 in cash in
addition to common stock (presently held in escrow) and warrants to purchase
common stock at $4.00 per share valued at $8,000,000. There were no sales in
either period due to the fact that the Company's revenue-producing subsidiaries
(which were also generating significant net losses) were discontinued in 1995
and have remained inactive through the first three quarters of 1997. No sales
are expected for the current year and the Company's current operations are not
expected to generate revenues in the foreseeable future unless the Company
earlier acquires one or more controlling interests in businesses which produce
ongoing revenue from operations. No assurances can be given as to the conclusion
of any future acquisitions of any such businesses.
-12-
<PAGE>
The Company's losses for the quarter and nine months ended September 30,
1997 represent losses of $0.05 and $0.23 per common share, respectively, as
compared to earnings per common share of $0.72 and $0.47 for the respective
comparable prior year periods.
Operating expenses decreased in the quarter ended September 30, 1997 to
$669,275 from $707,270 in the quarter ended September 30, 1997. However,
operating expenses increased in the nine months ended September 30, 1997 to
$3,487,411 from $2,414,318 in the respective comparable prior year period. Of
the increase in the comparable nine month periods, the most significant factor
was an increase in legal and accounting expenses (discussed below).
The increases in operating expenses were primarily related to the increase
in activities of the Company with respect to investigating and negotiating
agreements in principle (which have now been terminated due to the Company's
inability to secure sufficient financing) to acquire a controlling interest in
Microwave Communications, Ltd. ("MCL"), a paging telecommunications venture in
the Republic of India (the "MCL Transactions"), the VDC Transaction, and related
efforts to obtain financing, as well as expenses incurred related to the
deployment by ACT of a digital wireless telecommunications system in Cambodia as
compared with the increases in the comparable quarter in the prior year related
to the activities of the Company with respect to the proposed acquisition of
wireless interests in China, and to the other expenses discussed below. The
overall decrease in operating expenses in the comparable quarters ended
September 30, 1997 and 1996 resulted from a significant decrease in Interest,
bank and financing charges to $403 in the current quarter from $139,670 reported
in the comparable prior year quarter and a decrease in Wages and benefits to
$114,791 (1996: $167,235) which decreases were partially offset by increases in
Legal and accounting to $296,732 (1996: $141,360) and in Consulting fees to
$99,627 (1996: $72,436).
During the quarter and nine months ended September 30, 1997, legal and
accounting expenses rose to $296,732 and $1,190,277, respectively, from $141,360
and $459,178 recorded in the respective comparable prior year periods. These
increases were primarily related to the terminated MCL Transactions, the VDC
Transaction and related transactions, due diligence work performed with respect
to prospective transactions that were not consummated, the activities of ACT, as
well as to the extensive preparation, review and revision of disclosure
incorporated into the Company's public filings and other related disclosure
documents.
During the quarter and nine months ended September 30, 1997, consulting
fees rose to $99,627 and $815,062, respectively, from $72,436 and $537,688
recorded in the respective comparable prior year periods. These increases were
primarily related to engineering consulting services incurred with respect to
the deployment by ACT of a digital wireless telecommunications system in
Cambodia
Also related to the deployment by ACT of a digital wireless
telecommunications system in Cambodia, and to the terminated MCL Transactions,
were increases in travel and entertainment, which increased in the nine months
ended September 30, 1997 to $480,106 from the $208,276 recorded in the
comparable prior year period.
These expenses are expected to decrease significantly throughout the
remainder of 1997.
-13-
<PAGE>
Liquidity and Capital Resources
In the nine months ended September 30, 1997, the Company realized net
proceeds of $1,234,179 from the issuance of shares of common stock ($nil in the
quarter ended September 30, 1997) in a private placement and exercise of share
purchase warrants. The Company also issued a non convertible promissory notes
for $276,585 These activities contributed to a net working capital (deficit)
position as of September 30, 1997 of ($3,198,745), which is up $(2,512,887) from
($685,858) at December 31, 1996.
The Company has incurred cumulative losses from inception through September
30, 1997 of $12,967,666 and has not yet achieved revenues sufficient to offset
direct expenses and corporate overhead. As of September 30, 1997, management
does not believe that revenues will likely be realized by the Company for the
near term or in the foreseeable future; however, the Company expects that it
will need to expend significant funds in order to conclude an informal
composition of its outstanding indebtedness, develop the Cambodian Licence
(which may be sold at the best terms available to the Company should management
determine that substantially no prospects exist for obtaining financing in
sufficient time, and in amounts sufficient, to meet the contractual financial
obligations necessary for ACT to maintain the Cambodian Licence), to fund the
VDC Transaction, and to obtain additional licenses and to form additional joint
ventures necessary for the Company or PIL to provide wireless communications
services in other markets where such opportunities are being sought. The
Company would not generate any revenues, however, until such licenses are
obtained and such joint ventures are operational. Furthermore, the continuing
activities associated with pursuing new opportunities would necessitate an
immediate and continuing material increase in general office overhead and other
costs such as general and administrative and travel and entertainment.
Additionally, the Company will be required to conclude an informal composition
of its outstanding indebtedness before developing future projects.
Since inception, a substantial portion of the Company's operating capital
has been provided through financing activities which have included an initial
public offering and a series of private placements of common shares and
convertible promissory notes. During the nine months ended September 30, 1997,
the Company sold 413,845 shares of common stock and 190,388 common stock
purchase warrants in private placement transactions and upon the exercise of
outstanding stock options and warrants. The Company, as of the date of this
report, is actively seeking additional financing through the private placement
of equity or debt securities Although no assurances can be given as to the
success of any financing through future offerings of securities, such financing
will be necessary for the Company to continue as a going concern.
Between December 19, 1995 and December 11, 1996, the Company arranged,
subject to regulatory approval, private placements of convertible promissory
notes having an aggregate principal amount of $2,417,000. As of December 31,
1996, convertible notes aggregating $2,267,000 were converted to common stock.
As of September 30, 1997, the remaining convertible notes aggregating $150,000
had also been converted to common stock. As of September 30, 1997 accrued
interest on the convertible promissory notes aggregating $182,753 was payable by
the Company. In addition, the Company has agreed to issue, subject to the
removal of the Company from the jurisdiction of both the Vancouver Stock
Exchange and the British Columbia Securities
-14-
<PAGE>
Commission, 115,296 "bonus" warrants to purchase shares of the Company's common
stock, exercisable at $2.70, expiring between December 31, 1999 and February 14,
2000.
As of September 30, 1997, the Company had 1,347,634 (805,000 options and
542,634 warrants) options and warrants outstanding which upon exercise would
yield to the Company additional proceeds in excess of $3.5 million. The
exercise of existing options or 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 options or warrants, or whether
such will be exercised at all.
Rental expense accounts for approximately $530 of fixed expenses on a
monthly basis. Personnel costs presently account for approximately $35,000 of
fixed expenses on a monthly basis, although a substantial portion of such costs
have been accrued and not paid since April 1, 1997. 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 between approximately $30,000 and $50,000 per month.
In addition to fixed rental and certain personnel expenses, as of September
30, 1997, the Company (subject to financing) anticipates capital expenditures of
approximately $6 million during the remainder of 1997 and approximately $25
million in 1998 in connection with the establishment and expansion of ACT's
operations. The Company may also elect to exercise some or all of its MAC share
purchase warrants (in the unlikely event of non-completion of the VDC
Transaction) during the first six months of 1998, the purchase price for which
would be $16 million assuming the exercise of all of its warrants.
Accordingly, consistent with the Company's objective of continuing as a going
concern able to develop opportunities to build, operate and actively participate
in cellular, wireless, paging, PSTN and long distance networks, the Company has
significant additional capital requirements. There can be no assurance that the
Company will be able to obtain financing in order to satisfy its present
obligations and future requirements. Failure to obtain financing sufficient to
fund current liabilities and short-term fixed expenses will have a material
adverse effect upon the Company and its operations.
Management does not believe that in the foreseeable future, and in any
event not within the next 12 months, the Company's operations will generate
sufficient cash flow to finance its working capital and capital expenditure
requirements. 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). In particular, since the Company does not
currently have any sources of revenues from operations, and as a result of
continuing general and administrative expenses (including legal and accounting
and including costs associated with the general administration and regulatory
compliance), and ongoing funding requirements of the build out of ACT's
operations, the Company is unable to meet any of its obligations to creditors at
this time. At present, the Company has approximately $2.9 million in accounts
payable and accrued liabilities, is a defendant in two litigation matters (See
"Part II, Item 1. Legal Proceedings"), and certain other vendors have threatened
suit to collect claims asserted against the Company. The Company is also
presently unable to fund certain short term obligations of ACT, including
required deposits for frequency allocations, prefix assignments, site leases,
legal and accounting services, architectural and
-15-
<PAGE>
engineering design work, the required purchase of the remaining 14% interest in
ACT, and the required capital infusion of $5,000,000.
Accordingly, management has determined that the Company will be required in
the near term to obtain debt or equity financing. The Company has been able to
secure financing in the past through loans from certain stockholders; however,
although management may endeavor to make similar arrangements, it has no reason
to believe that these will be available in the near term or in the future.
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. Failure to obtain such additional sources
of financing will have a material adverse impact on the operations of ACT.
Without significant positive business developments, such funding may be
difficult or impossible to obtain. Furthermore, without such additional sources
of financing in the near term, the Company will not be able to continue as a
going concern.
Many of the economies in which the Company expects to compete are weak,
volatile and reliant on foreign assistance. The uncertainty in these markets is
heightened because of the evolving political systems which are developing from
legacies of totalitarianism or civil unrest. In particular, the political and
socioeconomic systems of the Kingdom of Cambodia are presently in a state of
unrest as a result of ongoing military activity between the two ruling parties
of Cambodia's coalition government. As a result, there can be no assurance that
a market will develop for what the Company expects to be its primary products of
its joint ventures, cellular mobile communications systems and paging systems.
There can be no assurance that such telecommunications services will achieve
market acceptance similar to that which would be expected in similarly developed
countries elsewhere. Even if products such as the Company's are accepted, there
can be no assurance that any of the countries in which the Company is present
will not experience political or economic instability in the future.
The Company does not have political risk insurance in the countries in
which it currently conducts business.
The Company intends to acquire interests in wireless telephone licences
around the world, and will be subject to government regulation in each market it
enters. The governments of these countries differ widely with respect to
structure, constitution and stability and some of the countries may lack
developed legal and regulatory systems. To the extent the Company's operations
depend on governmental approval and regulatory decisions, the operations may be
adversely effected by changes in the political structure or government
representatives in each of the markets in which the Company will operate. No
assurance can be given that factors such as these will not have a material
adverse effect of the Company's operations in particular countries.
Government actions in the future could have a significant adverse effect on
economic conditions in a developing country or may otherwise have a material
adverse effect on the Company and its operating companies and developmental
stage projects. Expropriation, confiscatory taxation, nationalization,
political, economic or social instability or other developments could
materially adversely affect the value of the Company's interests in operating
companies and developmental stage projects in particular developing countries.
The Company may also be adversely affected by
-16-
<PAGE>
political or social unrest or instability in foreign countries. Such unrest or
instability resulting from political, economic, social or other conditions in
foreign countries could have a material adverse effect on the Company.
Moreover, applicable agreements relating to the Company's interests in its
operating companies are governed frequently by foreign law. As a result, in the
event of a dispute, it may be difficult for the Company to enforce its rights.
Accordingly, the Company may have little or no recourse upon the occurrence of
any of these developments or if any of its partners seek to re-negotiate
existing or future agreements. To the extent that any of the operating
companies seeks to make a dividend or other distribution to the Company, or to
the extent that the Company seeks to liquidate its investment in an operating
company or developmental stage project and repatriate monies from a relevant
country, local taxes, foreign exchange controls, or other restrictions may
effectively prevent the transfer of funds to the Company or exchange of local
currency for U.S. dollars.
The Company's joint venture operations are and are expected to be outside
the United States. Many developing countries have experienced substantial, and
in some periods, extremely high, rates of inflation and resulting high interest
rates for many years. Inflation and rapid fluctuations in inflation rates have
had and may continue to have negative effects on the economies and securities
markets of certain developing countries and could have an adverse effect on the
operating companies and developmental stage projects in those countries,
including an adverse effect on their ability to obtain financing. The value of
the Company's investment in an operating company or developmental stage project
will be affected by the currency exchange rate between the U.S. dollar and the
applicable local currency. As a result, such operations are exposed to currency
fluctuations and the need to comply with a variety of foreign laws, including
laws that control currency exchanges and currency repatriation. The Company
does not hedge its foreign currency risks as this is difficult or impossible in
the markets in which it operates, but may do so of possible and economically
justified. There can be no assurance that the Company's operations will not be
adversely affected by such factors.
In particular, as of the date of this report, the Kingdom of Cambodia is
experiencing ongoing civil unrest and political instability related to a seizure
of power by military police action by one of the political parties comprising
Cambodia's coalition government. The difficulties related to the events
unfolding in Cambodia have, in the opinion of management and as of the date of
this report, delayed several of the Company's deployment-related activities,
and have had and may continue to have a material adverse effect upon the
Company's ability to develop the license in Cambodia.
The preceding paragraphs contain certain forward looking statements that
are subject to inherent uncertainties.
Debt Settlements
Subject to consummation of the VDC Transaction or receipt of other debt or
equity financing, the Company intends to undertake an informal composition of
its outstanding
-17-
<PAGE>
indebtedness and intends to secure claim releases from creditors or other
claimants representing substantially all of the Company's outstanding
indebtedness. The Company intends to obtain settlements of the outstanding
indebtedness on terms favorable to the Company, although no assurances about
such settlements or about the final terms of such settlements can be given.
Additionally, as of September 30, 1997, 53,675 shares continue to be
reserved for issuance when allowable, related to prior period settlements of the
outstanding indebtedness of the Company's inactive subsidiaries, the unresolved
portion of which, at September 30, 1997 accounted for approximately $90,000 of
total accounts payable. The Company intends to continue attempting 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 to issue 314,762 common shares at a
deemed price of $2.00 per share. Although the performance shares have been
irrevocably canceled by the Company, as of the date of this filing, 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, expiring on May 31, 1997. During 1996,
regulatory approval was received for the issuance of 25,833 of these shares
which were then issued by the Company. During the quarter ended March 31, 1997,
regulatory approval was received for the issuance of 42,757 of these shares
which were then issued by the Company. Additionally, subject to the removal of
the Company from the jurisdiction of both the Vancouver Stock Exchange and the
British Columbia Securities Commission, the Company has agreed to extend the
expiry date of the 166,667 share purchase warrants to May 31, 1998 from May 31,
1997. As of September 30, 1997, the issuance of the remaining 17,000 shares and
166,667 warrants continued to be subject to regulatory approval.
In connection with the issuance of certain short term debt by the Company
in February, 1997, the Company has agreed to issue, subject to the removal of
the Company from the jurisdiction of both the Vancouver Stock Exchange and the
British Columbia Securities Commission, 120,000 "bonus" warrants to purchase
shares of the Company's common stock, exercisable at $2.75, expiring on February
19, 1999.
Terminated Acquisitions
-18-
<PAGE>
On October 20, 1995, the Company announced that it had agreed 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, 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 Vancouver Stock Exchange ("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 it had not yet received regulatory approval. The Company has
determined, however, that it will issue shares of its common stock to Messrs.
MacLellan and Stephens and to PJL, in the same amounts as previously provided in
the PWC Agreement, in the event it is permissible to do so without receiving
approval of the VSE.
On May 9, 1997, the Company announced that it had signed, subject to
certain conditions including regulatory approval, agreements in principle to
acquire a controlling interest in Microwave Communications Limited ("MCL"), a
paging telecommunications venture in the Republic of India (the "MCL
Transactions"), which agreements were to have been consummated by July 15, 1997.
As the Company was unable to secure financing sufficient to complete the MCL
Transactions, the agreements were not consummated and have expired.
Additionally, the Company was unsuccessful in its attempts to negotiate an
extension to the acquisition agreements.
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.
-19-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
In the current period, one of the Company's vendors, JMS North
America, Inc. ("JMS")filed a Motion for Judgment with the Circuit
Court of the County of Fairfax, Commonwealth of Virginia, seeking
$836,614 in allegedly due consulting fees, finance charges and travel
expenses. JMS further seeks $2,250,000 for alleged breach of contract
and $1,500,000 for alleged fraud. The Company has disputed and
intends to dispute in trial a material portion of the amounts billed
and or claimed by JMS for consulting fees, finance charges and travel
expenses. Additionally, the Company believes that the claims of JMS
with respect to alleged fraud and alleged breach of contract are
without merit and will vigorously contest them. Any such dispute,
contest or pursuit of defenses by the Company to the allegations set
forth by JMS will be subject to receipt of sufficient financing.
Subsequent to the end of the quarter ended September 30, 1997, J.
Michael Christiansen ("Christiansen"), filed a Complaint with the
Superior Court of the State of California, seeking in excess of
$350,000 plus interest, costs and undetermined exemplary and punitive
damages in connection with the alleged breach by the Company of a
Release and Settlement Agreement dated October 2, 1996, pursuant to
which the Company was to have issued Christiansen 75,000 shares of the
common stock of the Company. The Company believes that the issuance
of such shares to Christiansen has been necessarily delayed pursuant
to certain regulatory constraints, the removal of which the Company
has continued to seek without success. The Company is presently
attempting to engage legal counsel to review and opine on the merit of
Christiansen's claims and to vigorously pursue any and all defenses
and counterclaims determined to be available to the Company with
respect to certain of the allegations set forth by Christiansen and to
certain past actions of Christiansen. Any such dispute, contest or
pursuit of defenses or counterclaims by the Company to the allegations
set forth by Christiansen will be subject to receipt of sufficient
financing.
While the results of litigation and claims cannot be predicted with
certainty, management believes that the final outcome of such matters,
or the cost of pursuing a defense in such matters, could have a
material adverse effect on the Company's ability to continue as a
going concern.
Item 2. Changes in Securities
---------------------
None.
-20-
<PAGE>
Item 3. Defaults Upon Senior Securities
-------------------------------
-21-
<PAGE>
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
27 Financial Data Schedule
(b) Reports on Form 8-K
Date of Report Subject Matter
-------------- --------------
October 14, 1997 Letter of Intent for
Asset Sale.
-22-
<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 14, 1997
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)
-23-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS, PREPARED BY MANAGEMENT, AS AT AND FOR THE THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JUL-01-1997 JAN-01-1997
<PERIOD-END> SEP-30-1997 SEP-30-1997
<CASH> 3,227 3,227
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 3,227 3,227
<PP&E> 8,371,553 8,371,553
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 8,374,780 8,374,780
<CURRENT-LIABILITIES> 3,201,972 3,201,972
<BONDS> 0 0
0 0
0 0
<COMMON> 13,630 13,630
<OTHER-SE> 5,159,178 5,159,178
<TOTAL-LIABILITY-AND-EQUITY> 8,374,780 8,374,780
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 669,275 3,487,441
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (669,275) (3,487,441)
<EPS-PRIMARY> (0.05) (0.23)
<EPS-DILUTED> 0 0
</TABLE>
