<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 JUNE 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)
8055 W. MANCHESTER AVENUE, SUITE 730
PLAYA DEL REY, CALIFORNIA 90293
(Address of principal executive offices)
REGISTRANT'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 JULY 31, 1997, THERE WERE 13,576,970 SHARES OF COMMON STOCK ISSUED AND
OUTSTANDING.
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION PAGE
NO.
ITEM 1. Statement Regarding Financial Information i
Condensed Consolidated Balance Sheet at
June 30, 1997 (Unaudited) and
December 31, 1996 (Derived from audited
financial statements) 1
Condensed Consolidated Statements of Operations
for the three and six months ended June 30,
1997 and 1996 (Unaudited) 2
Condensed Consolidated Statements of Cash Flows
for the three and six months ended June 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 21
ITEM 5. Other Information 21
ITEM 6. Exhibits and Reports on Form 8-K 21
<PAGE>
PORTACOM WIRELESS, INC. AND SUBSIDIARIES
QUARTER ENDED JUNE 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 and in the Company's
Form 10-Q for the quarter ended March 31, 1997 as filed with the SEC (file
number 0-23228).
<PAGE>
PORTACOM WIRELESS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and expressed in U.S. dollars)
<TABLE>
<CAPTION>
June 30, 1997 and December 31, 1996
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
JUNE 30, 1997 DECEMBER 31, 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,063 $ 114,275
- ------------------------------------------------------------------------------------------
9,063 114,275
Equipment, net 64,558 12,427
Refundable deposits 200,000 --
Other assets (note 3) 99,500 --
Investments (note 3) 8,000,000 8,099,500
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TOTAL ASSETS $ 8,373,121 $ 8,226,202
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 2,344,452 $ 650,133
Notes payable 186,585 --
Convertible promissory notes payable (note 4) -- 150,000
- ------------------------------------------------------------------------------------------
Total liabilities 2,531,037 800,133
Stockholders' equity:
Share capital (note 5)
Issued:
Common stock (June 30, 1997 - 13,576,970;
December 31, 1996 - 13,118,181) 13,630 13,118
Other paid-in capital 18,426,845 17,193,178
Accumulated deficit (12,598,391) (9,780,227)
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Total stockholders' equity 5,842,084 7,426,069
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,373,121 $ 8,226,202
- ------------------------------------------------------------------------------------------
On behalf of the Board: /s/ Keith Hay Director /s/ Douglas Maclellan Director
----------------------- -----------------------
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. PAGE 1
</TABLE>
<PAGE>
PORTACOM WIRELESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and expressed in U.S. dollars)
<TABLE>
<CAPTION>
Three and six months ended June 30, 1997 and 1996
- ----------------------------------------------------------------------------------------------------------------
THREE MONTHS SIX MONTHS
--------------------------- --------------------------
1997 1996 1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME
Sales -- -- -- --
Cost of sales -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
-- -- -- --
- ----------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Advertising and promotion $ 2,599 $ 3,500 $ 2,599 $ 3,500
Bad debt -- -- --
Consulting fees 402,328 187,290 715,435 451,427
Depreciation and amortization 1,064 -- 1,250 --
General and administrative 125,462 92,382 255,890 133,413
Interest, bank and financing charges 812 41,871 170,893 42,061
Legal and accounting 601,349 273,517 893,545 317,281
Management fees 26,237 20,114 56,401 25,243
Placement fees -- 53,500 -- 53,500
Rent 20,518 11,247 41,406 25,673
Research and development -- -- -- --
Travel and entertainment 208,423 51,777 447,387 138,328
Wages and benefits 94,897 177,720 233,360 257,435
- ----------------------------------------------------------------------------------------------------------------
1,483,689 912,918 2,818,166 1,447,861
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Loss before debt settlement 1,483,689 912,918 2,818,166 1,447,861
- ----------------------------------------------------------------------------------------------------------------
Loss on settlement of debt -- 280,863 -- 370,878
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Net loss for the period $1,483,689 $ 1,193,781 $ 2,818,166 $ 1,818,739
- ----------------------------------------------------------------------------------------------------------------
Loss per share $0.12 $0.09 $0.20 $0.13
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Weighted average number of common
shares outstanding 12,851,122 12,726,776 14,034,993 14,523,076
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SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. PAGE 2
</TABLE>
<PAGE>
PORTACOM WIRELESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and expressed in U.S. dollars)
<TABLE>
<CAPTION>
Three and six months ended June 30, 1997 and 1996
- ------------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS SIX MONTHS
--------------------------------------------------------------------
1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net loss for the period $(1,483,689) $(1,193,781) $ (2,818,166) $ (1,818,739)
Depreciation and amortization 1,064 -- 1,250 --
Net changes in working capital relating to operations:
Accounts receivable -- 10,010 -- 3,540
Notes receivable -- (1,358,366) -- (1,433,796)
Accounts payable 1,446,993 (337,806) 1,694,320 (208,400)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used by operating activities (35,632) (2,879,943) (1,122,596) (3,457,395)
FINANCING:
Issue of and subscription for common shares 29,999 561,747 1,234,180 697,526
Convertible promissory notes payable -- 1,025,000 -- 2,405,000
Loans payable -- -- -- (971,000)
Notes payable -- 798,000 36,585 1,229,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash generated by financing activities 29,999 2,384,747 1,270,765 3,360,526
INVESTING:
Acquisition of equipment, net (46,752) (6,825) (53,381) (13,527)
Other assets -- -- (200,000) --
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Net cash generated (used) by investing activities (46,752) (6,825) (253,381) (13,527)
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (52,385) (502,021) (105,212) (110,396)
Cash and cash equivalents, beginning of period 61,448 557,290 114,275 165,665
- ------------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 9,063 $ 55,269 $ 9,063 $ 55,269
- ------------------------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. PAGE 3
</TABLE>
<PAGE>
PORTACOM WIRELESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and expressed in U.S. dollars)
Three and six months ended June 30, 1997 and 1996
- --------------------------------------------------------------------------------
1. MANAGEMENT OPINION:
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 six months ended June 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. SIGNIFICANT ACCOUNTING POLICIES:
a. 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.
b. Loss per share:
Loss per share is computed based on the weighted average number of
shares outstanding during the period, which number of shares excludes
escrowed shares that are contingently returnable to the Company's
treasury. Fully diluted net loss per share has not been presented as
the effect is anti-dilutive.
-4-
<PAGE>
PORTACOM WIRELESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and expressed in U.S. dollars)
Three and six months ended June 30, 1997 and 1996
- --------------------------------------------------------------------------------
3. INVESTMENTS AND OTHER ASSETS:
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 issued to the Company 2,000,000
restricted common shares, and issued to the Company 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 paid no cash consideration for the shares or
warrants. The Company's investment is recorded at the estimated fair value
of the assets received in excess of the consideration payable to exercise
the warrants. This fair value was established by reference to capital
stock issuances made by AAT for cash consideration. In addition, AAT paid
the Company non-refundable 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 lien on the common shares against any
costs or losses arising to AAT, or specified related parties, arising from
certain claims or potential claims related to the original proposed
acquisition or the termination agreement. At the date of these condensed
consolidated financial statements, no claims under this indemnification
agreement have arisen.
On December 23, 1996, AAT entered into a business combination agreement
with MAC. In connection with the Agreement, MAC offered to exchange all
outstanding shares of AAT capital stock and all warrants to purchase shares
of AAT capital stock for shares and warrants of MAC. In February, 1997,
the Company agreed to exchange these shares and warrants of AAT for
equivalent shares and warrants of MAC immediately following the
consummation of the exchange offer.
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). In addition,
the Company was required 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.
Under the joint venture agreement, the company was required to contribute
capital to act of at least 50 million Cambodian riel (approximately
$20,000). In addition, the Company was required 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.
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. At June 30, 1997, no such
impairments have been identified in the investments in MAC or ACT.
-5-
<PAGE>
PORTACOM WIRELESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and expressed in U.S. dollars)
Three and six months ended June 30, 1997 and 1996
- --------------------------------------------------------------------------------
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. Of
this amount $1,817,000 was received subsequent to, and $600,000 was
received prior to, December 31, 1995. The promissory notes were due and
payable after two years which ranged to December 1998, or after six months
upon demand of the holder, and bore interest at 10% per annum, with
interest payable upon maturity or conversion. The promissory notes were
convertible 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 also agreed to issue to the investors
non-transferable warrants to purchase an aggregate of up to 461,203 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 were based on the market price of the Company's common shares at the
date of their offering. On December 16, 1996, regulatory approval was
received for the issuance of convertible promissory notes aggregating
$2,417,000 and 461,203 warrants which were then issued by the Company.
As of December 31, 1996, convertible notes aggregating $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
June 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
-6-
<PAGE>
PORTACOM WIRELESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and expressed in U.S. dollars)
<TABLE>
<CAPTION>
Three and six months ended June 30, 1997 and 1996
- ---------------------------------------------------------------------------------------------------
(b) Issued Common Stock:
- ---------------------------------------------------------------------------------------------------
Number of Per share Total consideration
shares consideration
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, March 31, 1997 13,561,586 $ 18,303,127
Issued for cash on exercise of warrants 15,384 1.95 29,999
- ---------------------------------------------------------------------------------------------------
Balance, June 30, 1997 13,576,970 $ 18,333,126
To be issued on settlement of debt (f) 53,675 2.000 107,350
- ---------------------------------------------------------------------------------------------------
Balance issued and to be issued 13,630,645 $ 18,440,476
- ---------------------------------------------------------------------------------------------------
(c) Stock Options:
As at June 30, 1997, the Company had common shares of the Company reserved for
issuance on exercise of incentive stock options to 2002. Option changes for the period
March 31, 1997 to June 30, 1997 were as follows:
- ---------------------------------------------------------------------------------------------------
Outstanding and exercisable as at March 31, 1997 1,101,183
- ---------------------------------------------------------------------------------------------------
Granted ---
Canceled ---
- ---------------------------------------------------------------------------------------------------
Outstanding and exercisable as at June 30, 1997 1,101,183
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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. 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 June 30, 1997, none of these warrants has been exercised.
In addition, pursuant to a bridge financing completed in 1996, 166,667
share purchase warrants exercisable at $3.30 per share to May 31, 1998
are
-7-
<PAGE>
issuable. The warrants were recorded at their estimated fair
value of $250,000 in the year ended December 31, 1996. As of June 30,
1997, none of these warrants have been issued or 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 June 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.
During the nine months ended December 31, 1995, the Company, in
connection with private placements of common stock, issued warrants to
purchase up to 204,878 shares of common stock at prices of between
$1.28 and $1.47 per share if exercised by August, 1996 and $1.47 and
$1.69 per share if exercised thereafter to August 1997. Of these
warrants, 37,878 were exercised during 1996 and 17,000 were exercised
during the three months ended March 31, 1997. Of these warrants,
150,000 remain outstanding.
(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
-8-
<PAGE>
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:
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 March 31, 1997 53,675 shares continue to be reserved
for issuance when allowable. As of June 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) 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 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 June 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.
-9-
<PAGE>
In connection with the 1996 private placements of convertible
promissory notes, 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.
(h) List of Directors:
R. Keith Alexander, Howard Frantom, Keith Hay, Stephen Leahy, Douglas
MacLellan, Stephen Stephens.
6. CONTINGENT LIABILITY:
During the year ended December 31, 1996, the Company emigrated from Canada.
Subject to final determination by the income tax authorities in Canada,
management does not believe that any tax liability arose on the emigration,
and no income tax liability is currently outstanding in Canada.
The Company has loss carry forwards in the United States of approximately
$9,000,000 expiring to 2011. The potential benefit of these losses of
approximately $3,600,000 has been fully offset by a valuation reserve.
Accordingly, the accompanying consolidated financial statements reflect no
provision for income taxes.
7. RELATED PARTY TRANSACTIONS:
Related party transactions not disclosed elsewhere in these condensed
consolidated financial statements include $205,932 in accounts payable
and accrued liabilities at June 30, 1997 which is owing to a related party.
In the period, approximately $123,523 of consulting fees were
charged by related parties, while approximately $56,401 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>
<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 financing
the build out of its joint venture in the Kingdom of Cambodia, assuming the
current political crisis can be resolved, and the active pursuit (subject to
financing) of similar opportunities in other emerging markets. Furthermore,
the Company is actively pursuing opportunities to merge with or acquire one
or more businesses with existing revenue-producing telecommunications
operations. 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 agreements have not been consummated and have,
accordingly, expired, the Company, as of the date of this report, is
negotiating an extension to the acquisition. There is no assurance at this
time that an extension will be granted. The Company also owns an interest in
a telecommunications business based in the Peoples Republic of China.
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, its principal efforts are presently focused
(as of the date of this report) upon certain Asian 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. 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 MCL, a paging telecommunications venture in the
Republic of India; however, as neither sufficient financing nor requisite
regulatory approvals had been obtained by July 15, 1997, the agreements
expired. As of the date of this report, the Company was in the process of
negotiating an extension, although no assurances can be made as to whether
such extension will be available to the Company on acceptable terms, or at
all. 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 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, 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 SIX MONTHS ENDED JUNE 30, 1997 AS COMPARED WITH QUARTER AND SIX
MONTHS ENDED JUNE 30, 1996.
For the quarter and six months ended June 30, 1997, the Company reported
net losses from operations of $1,483,689 and 2,818,166, respectively. This
compares to net losses from operations of $1,193,781 and $1,818,739 for the
respective comparable prior year periods. There were no sales in either
period due to the fact that the Company's revenue-producing subsidiaries
(which were also
-12-
<PAGE>
generating significant net losses) were discontinued in 1995 and remained
inactive throughout 1996 and the first two quarters of 1997. No sales are
expected for the current year and the Company's current operations are not
expected to generate revenues until 1998 unless the Company earlier concludes
the MCL Transactions or acquires one or more controlling interests in
businesses which produce ongoing revenue from operations. No assurances can
be given as to the conclusion of the MCL Transactions or any future
acquisitions of any such businesses.
The Company's losses for the quarter and six months ended June 30, 1997
represent losses of $0.12 and $0.20 per common share, respectively, as
compared to losses per common share of $0.09 and $0.13 for the respective
comparable prior year periods.
Operating expenses increased in the quarter and six months ended June 30,
1997 to $1,483,689 and $2,818,166, respectively from $912,918 and $1,447,861
in the respective comparable prior year periods. Of these increases, 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 the MCL Transactions, 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.
During the quarter and six months ended June 30, 1997, legal and
accounting expenses rose to $601,349 and $893,545, respectively, from
$273,517 and $317,281 recorded in the respective comparable prior year
periods. These increases were primarily related to the MCL Transactions and
related transactions, due diligence work performed with respect to
prospective transactions that were not consummated, and the activities of
ACT, as well as to the extensive preparation, review and revision of
disclosure incorporated into the Company's recent public filings and other
related disclosure documents.
During the quarter and six months ended June 30, 1997, consulting fees
rose to $402,328 and $715,435, respectively, from $187,290 and $451,427
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 MCL Transactions, were
increases in travel and entertainment, which increased in the quarter and six
months ended June 30, 1997 by $156,646 to $208,423, and by $309,059 to
$447,387, respectively, from the $51,777 and $138,328 recorded in the
respective comparable prior year periods.
These expenses are expected to increase throughout the remainder of 1997
along with increased activities related to the deployment of ACT (if the
Cambodian political situation is resolved and if funding is obtained to pay
service providers and vendors), and with respect to any additional licences,
interests, or joint ventures which the Company may obtain or participate in
should sufficient financing become available on terms acceptable to the
Company.
-13-
<PAGE>
Wages and benefits decreased in the quarter and six months ended June 30,
1997 to $94,897 and $233,360, respectively, compared with $177,720 and
$257,435 recorded in the respective comparable prior year periods. This
decrease, combined with the increase in consulting fees, reflects the
Company's increased dependence upon consultants.
LIQUIDITY AND CAPITAL RESOURCES
In the six months ended June 30, 1997, the Company realized net proceeds
of $1,234,179 from the issuance of shares of common stock ($29,999 in the
quarter ended June 30, 1997) in a private placement and exercise of share
purchase warrants. The Company also issued a non convertible promissory note
for $186,585 These activities contributed to a net working capital (deficit)
position as of June 30, 1997 of ($2,521,974), which is up $(1,836,116) from
($685,858) at December 31, 1996.
The Company has incurred cumulative losses from inception through June
30, 1997 of $12,298,391 and has not yet achieved revenues sufficient to
offset direct expenses and corporate overhead. As of June 30, 1997,
management does not believe that revenues will likely be realized by the
Company for the near term; however, the Company expects that it will need to
expend significant funds in order to develop the Cambodian Licence (if the
Cambodian political situation is resolved and if funding is obtained to pay
service providers and vendors), to fund the MCL Transactions (if extensions
can be negotiated), 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. In addition, the Company will be required to make substantial
payments towards amounts owing to certain key vendors and service providers
before developing future projects. The Company would not generate any
revenues, however, until such licenses are obtained and such joint ventures
are operational. These continuing activities are likely to necessitate an
immediate and continuing material increase in general office overhead and
other costs such as general and administrative and travel and entertainment.
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 six months ended June 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. The promissory
notes were due and payable after two years which ranged to December 1998, or
after six months upon demand of the holder, and bore interest at 10% per
annum, with interest payable upon maturity or conversion. The promissory
notes were convertible 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 also agreed to issue to the
investors non-transferable warrants to purchase an aggregate of up to 461,203
shares of common stock of the Company for a period of two years at a price
equal to the conversion price of
-14-
<PAGE>
the notes. The conversion and warrant exercise prices were based on the
market price of the Company's common shares at the date of their offering.
On December 16, 1996, regulatory approval was received for the issuance of
convertible promissory notes aggregating $2,417,000 and 461,203 warrants
which were then issued by the Company. As of December 31, 1996, convertible
notes aggregating $2,267,000 were converted to common stock. As of June 30,
1997, the remaining convertible notes aggregating $150,000 had also been
converted to common stock. As of June 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.
As of June 30, 1997, the Company had 1,793,817 (1,101,183 options and
692,634 warrants) options and warrants outstanding which upon exercise would
yield to the Company additional proceeds in excess of $3.8 million. The
exercise of existing 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.
Rental expense accounts for approximately $3,000 of fixed expenses on a
monthly basis. Personnel costs, which are expected to increase somewhat
throughout the year, are likely to account for between $75,000 and $100,000
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 between approximately $75,000 and $100,000 per month.
In addition to fixed rental and certain personnel expenses, as of June
30, 1997, the Company anticipates capital expenditures of approximately $30
million during the remainder of 1997 and 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 during the
remainder of 1997, the purchase price for which would be $16 million assuming
the exercise of all of its warrants. In addition, the proposed MCL
Transaction, should an extension on terms favorable to the Company be
obtained, will require approximately $31 million. Accordingly, consistent
with the Company's objective of continuing 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
-15-
<PAGE>
(including legal and accounting and including costs associated with the
negotiations of the MCL Transactions), 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 $2.3 million in accounts payable and accrued liabilities, and
some vendors have threatened suit to collect. 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, and architectural and engineering design work. In
addition, should an extension be obtained, the Company will require
approximately $31 million in order to conclude the proposed MCL Transactions,
Although payments related to the MCL Transactions are subject to extension
under certain circumstances, there can be no assurances that the required
extensions can be obtained on terms favorable to the Company, or at all.
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 and the possibility of consummating the MCL
Transactions. 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
-16-
<PAGE>
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 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 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 may eventually have a material adverse effect upon the
Company's ability to develop the license in Cambodia.
-17-
<PAGE>
The preceding paragraphs contain certain forward looking statements that
are subject to inherent uncertainties.
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 June 30, 1997 53,675
shares continue to be reserved for issuance when allowable, and 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.
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 June 30, 1997, the issuance of the
remaining 17,757 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.
-18-
<PAGE>
TERMINATED ACQUISITION
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.
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
None.
ITEM 2. CHANGES IN SECURITIES
The Registrant has sold the following securities in the six
months ended June 30, 1997:
On January 27, 1997, the Company issued 25,862 shares of Common
Stock to an accredited individual in consideration for the conversion
of a convertible promissory note for $75,000.
On February 3, 1997, the Company issued 42,755 shares of Common
Stock to Morris Magid, an accredited individual, in consideration for
loans which had been made to the Company.
On February 7, 1997, the Company granted Options to acquire an
aggregate of 90,000 shares of Common Stock to certain employees.
On February 14, 1997, the Company issued 30,000 shares of Common
Stock to an accredited individual in consideration for the conversion
of a convertible promissory note for $75,000.
On February 25, 1997, the Company issued 72,993 Units, comprising
one share of Common Stock and one Warrant to purchase shares of the
Company's Common Stock, for cash in a private placement for
consideration of $200,000.
On May 20, 1997, the Company issued 15,384 shares of Common Stock
to an accredited individual for cash in consideration for the exercise
of a stock purchase warrant for 29,999 common shares.
On June 30, 1997, the Company issued 60,241 Units, comprising one
share of Common Stock and one Warrant to purchase shares of the
Company's Common Stock, to an accredited investor for cash in a
private placement for consideration of $200,000.
The issuance of all such securities was exempt from registration
under the Securities Act of 1933 pursuant to Section 4(2) thereof and
Regulation D promulgated thereunder.
-20-
<PAGE>
On June 12, 1997, the Company sold 57,154 Units, comprising one
share of Common Stock and one Warrant to purchase shares of the
Company's Common Stock. The Units were issued for cash aggregating
$177,749 to non-U.S. persons (as defined in Regulation S). The
Offering was made in reliance on Regulation S promulgated under the
Securities Act of 1933, based on the fact that the Company is a
reporting issuer pursuant to Section 3 of the Securities Exchange Act
of 1934, the offer and sale of the Units were made in an offshore
transaction (as defined in Regulation S), and no direct selling
efforts were made in the United States by the Company, a distributor,
any of their respective affiliates, or any person acting on behalf of
any of the foregoing.
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
27 Financial Data Schedule
(b) Reports on Form 8-K
Date of Report Subject Matter
-------------- --------------
6/25/97 Sale of 57,154 Units in reliance on Regulation S.
-21-
<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: August 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)
-22-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
CONDENSED CONSOLIDATED FINANCAIL STATEMENTS AS AT AND FOR THE THREE AND SIX
MONTHS ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 9,063
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,063
<PP&E> 8,364,058
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,373,121
<CURRENT-LIABILITIES> 2,531,037
<BONDS> 0
0
0
<COMMON> 13,630
<OTHER-SE> 5,828,454
<TOTAL-LIABILITY-AND-EQUITY> 8,373,121
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,647,273
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 170,893
<INCOME-PRETAX> (2,818,166)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,818,166)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,818,166)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
</TABLE>
