UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 2002
--------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from n/a to n/a
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000-32749
Commission file number
KOALA INTERNATIONAL WIRELESS INC.
---------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada #76-0616468
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(State or other jurisdiction of organization) (I.R.S. Employer
Identification No.)
Suite #676, 141-757 West Hastings Street,
Vancouver, British Columbia,
Canada V6C 1A1
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(Address of principal executive offices)
(604) 681-7806
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
(1) Yes [X] No [ ] (2) Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the Issuer's classes of common
equity, as of the latest practicable date: As of July 31, 2002, the Issuer had
13,575,000 shares of common stock, par value $0.001, issued and outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS 3
Consolidated Balance Sheets 4
Consolidated Statements of Operations 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 8
Plan of Operations 8
Liquidity and Capital Resources 8
Special Note Regarding Forward Looking Statements 8
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 9
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 9
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 9
ITEM 5. OTHER INFORMATION 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 9
SIGNATURES
2
PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements.
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The accompanying consolidated balance sheets of Koala International Wireless
Inc. (a development stage company) at June 30, 2002 and September 30, 2001, and
the related consolidated statements of operations and the consolidated
statements of cash flows for the nine months ended June 30, 2002 and June 30,
2001 and for the period August 18, 1999 (date of inception) to June 30, 2002
have been prepared by Koala International Wireless Inc.'s management and they do
not include all information and notes to the consolidated financial statements
necessary for a complete presentation of the consolidated financial position,
results of operations and cash flows in conformity with accounting principles
generally accepted in the United States of America. In the opinion of
management, all adjustments considered necessary for a fair presentation of the
consolidated results of operations and consolidated financial position have been
included and all such adjustments are of a normal recurring nature.
Consolidated operating results for the period ended June 30, 2002 are not
necessarily indicative of the results that can be expected for the year ending
September 30, 2002.
3
Koala International Wireless Inc.
(a Development Stage Company)
Consolidated BALANCE SHEETS
(Unaudited)
As at June 30, 2002 and September 30, 2001
U.S. Dollars
June 30 September 30
2002 2001
---- ----
ASSETS
Current
Cash $ 10 $ 558
Accounts receivable - 2,992
Inventories 104,247 -
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104,257 3,550
Fixed assets - net of accumulated depreciation of $16,570
(September $9,469) 31,520 38,621
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Total Assets $135,777 $42,171
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LIABILITIES
Current
Accounts payable and accrued liabilities $181,400 $65,194
Loans payable 236,880 15,444
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Total Liabilities 418,280 80,638
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STOCKHOLDERS' EQUITY
Common Stock
Authorized
100,000,000 shares of common stock with a par value of $0.001 each
20,000,000 shares of preferred stock with a par value of $0.001 each
Issued and outstanding
13,575,000 shares of common stock 12,075 11,000
(12,500,000 at September 31, 2001)
Additional paid in capital 362,488 309,813
Deficit accumulated during development stage of operations (657,066) (359,280)
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Total Stockholders' Equity (Deficit) (282,503) (38,467)
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Total Liabilities and Stockholders' Equity $135,777 $42,171
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4
Koala International Wireless Inc.
(a Development Stage Company)
Consolidated STATEMENTS OF OPERATIONS
(Unaudited)
For the Three and Nine Months Ended June 30, 2002 and 2001 and
for the Period August 18, 1999 (Date of Inception) to June 30, 2002
U.S. Dollars
Nine Nine Three Three August 18, 1999
Months Months Months Months (Inception) to
2002 2001 2002 2001 June 30, 2002
------ ------ ------ ------ ---------------
Revenue $ - $ - $ - $ - $ -
----- ----- ----- ----- -----
Expenses
Services 53,750 - 53,750 - 53,750
Website 3,100 46,394 - - 95,266
Professional fees 85,715 30,586 53,829 2,000 130,418
Investor relations 38,412 - 38,412 - 38,412
Depreciation 7,101 - 2,367 - 16,570
Rent, office and administration 60,025 22,606 44,681 7,500 115,312
Consulting 12,836 - - - 12,836
Loan costs 12,000 - 12,000 - 12,000
Marketing 13,800 - 13,800 - 13,800
Transfer agent 1,804 - 495 - 1,804
License write off and fees - 500 - 500 1,000
Salaries - 31,500 - - 65,670
Events - 56,808 - - 67,344
Travel and business development 10,000 10,759 10,000 - 32,884
------- ------- ------ ------ -------
298,543 199,153 229,334 10,000 657,066
------- ------- ------- ------ -------
Net income (loss) for period $(298,543) $(199,153) $(229,334) $(10,000) $(657,066)
------- ------- ------- ------ -------
Net income (loss) per share $(0.03) $(0.03) $(0.02) $(0.00)
Weighted average number of shares outstanding 10,500,000 7,192,308 12,500,000 4,500,000
5
Koala International Wireless Inc.
(a Development Stage Company)
Consolidated STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three and Nine Months Ended June 30, 2002 and 2001 and
for the Period August 18, 1999 (Date of Inception) to June 30, 2002
U.S. Dollars
August 18, 1999
(Inception) to
Nine Months Three Months June 30
2002 2001 2002 2001 2002
---- ---- ---- ---- ----
Operating Activities
Net income (loss) $(298,543) $(199,153) $(229,334) $(10,000) $(657,066)
Adjustments to reconcile net income (loss) to net
cash used by operating activities 7,101 - 2,367 - 16,570
Services acquired for issuance of stock 53,750 - 53,750 - 53,750
Changes in operating assets and liabilities 237,144 197,463 173,072 10,000 314,033
------ ------- ------ ------ -------
Net cash provided by (used by) operating activities (548) (1,690) (145) - (272,713)
------ ------- ------ ------ -------
Investing Activities
Fixed assets - - - - (48,090)
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Financing Activities
Common stock issued for:
License - - - - 2,000
Organizational expense - - - - 2,500
Acquisition of Urbanesq.com - - - - 6,500
Additional paid in capital - cash - - - - 309,813
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- - - - 320,813
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Inflow (outflow) of cash (548) (1,690) (145) - 10
Cash, beginning of period 558 1,845 155 3,315 -
------ ------- ------ ------ -------
Cash, end of period $ 10 $ 155 $ 10 $ 3,315 $ 10
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Supplemental information
Interest paid $ 0 $ 0 $ 0 $ 0 $ 0
Shares issued for services 1,075,000 - 1,075,000 - 1,075,000
Corporate income taxes paid $0 $0 $0 $0 $0
6
Koala International Wireless Inc.
(a Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended June 30, 2002
1. ORGANIZATION AND BASIS OF PRESENTATION
Koala International Wireless Inc. (the "Company" or "Koala" and formerly Kettle
River Group Inc.) was incorporated August 18, 1999 in the State of Nevada and is
in the development stage. The balance sheets include the accounts of
Urbanesq.com, Inc., giving retroactive effect to its acquisition as a wholly
owned subsidiary.
2. DEVELOPMENT STAGE COMPANY
In a development stage company, management devotes most of its activities to
preparing the business for operations. Planned principal activities have not
yet begun. The ability of the Company to emerge from the development stage with
respect to any planned principal business activity is dependent upon its
successful efforts to raise additional equity financing and/or attain profitable
operations. There is no guarantee that the Company will be able to raise any
equity financing or sell any of its products at a profit. There is, therefore,
doubt regarding the Company's ability to continue as a going concern.
3. BASIS OF ACCOUNTING PRESENTATION
These unaudited financial statements have been prepared by management in
accordance with accounting principles generally accepted in the United States of
America for interim financial information, are condensed and do not include all
disclosures required for annual financial statements. The organization and
business of the Company, accounting policies followed by the Company and other
information are contained in the notes to the Company's audited financial
statements filed as part of the Company's Form 10-SB and Form 10K-SB for the
year ended September 30, 2001.
In the opinion of the Company's management, these financial statements reflect
all adjustments necessary to present fairly the Company's financial position at
June 30, 2002 and the results of its operations for the nine months then ended.
The results of operations for the nine months ended June 30, 2002 are not
necessarily indicative of the results to be expected for the entire fiscal year.
4. COMMON CAPITAL STOCK
During the three months ended June 30, 2002, the Company issued 75,000 shares to
Capital Partners, Inc. and 1,000,000 shares to Valhalla Equity Funds pursuant to
their respective management consulting contracts. The services so provided were
fairly valued at $53,750.
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Item 2. Management's Discussion and Analysis or Plan of Operation.
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The following discussion should be read in conjunction with the accompanying
unaudited interim consolidated financial statements prepared by management.
Plan of Operations.
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The Company has not generated any revenues from operations since inception.
Effective October 18, 2001 the Company issued 6,500,000 shares of common stock
to acquire 100% of the outstanding share capital of Urbanesq.com, Inc. The
shareholders of Urbanesq.com, Inc. were parties to the voluntary share exchange
agreement. Certain shareholders of the Company in turn surrendered 7,500,000
shares of the Company's common stock to the Company, resulting in 12,500,000
shares of common stock of the Company issued and outstanding as of October 18,
2001.
Urbanesq.com, Inc. was incorporated in 2000. Urbanesq.com, Inc. is developing a
portable communication's device called The Hipster, which will be designed to
quickly source information from the Internet. On October 18, 2001, Urbanesq.com,
Inc. became a wholly-owned subsidiary of the Company.
7
The Company continues to evaluate the market potential of the vitamineralherb
license but is aware that the market potential is limited and competitive.
No revenue was recorded for the nine month period ended June 30, 2002 and no
revenue has been generated since inception.
Net loss for the three month period ended June 30, 2002 was $(229,334) compared
to a loss of $(10,000) for the three months ended June 30, 2001. The
expenditures reflected in the loss represent the Company's administrative
expenses, including maintenance of an office, expenses to take the Company
public, costs of maintaining the Company's website and expenses associated with
pursuing its business. To June 30, 2002, the Company has advanced $104,247 to
Bolton Pass Electronics Inc. of Montreal, Quebec, for the design and manufacture
of its "Hipster" device. The Company has committed to expend a further $70,000
for the completion of a prototype and manufacturing specifications for a
"Hipster" unit. The Company is actively seeking sources of financing for its
"Hipster" development program. The Company has fallen into default under its
agreement with Bolton Pass and is attempting to renegotiate the agreement terms.
Recent Developments and Discussions
- --------------------------------------
Michael McGrath resigned as President. On March 13, 2002 the Board of Directors
announced that Michael Johnston was appointed to the positions of President,
Chief Marketing Officer, and Director. Mr. Johnston is recognized as one of
North America's leading technology, entertainment, and telecommunications
integrators. Subsequently, Mr. Johnston resigned as a director and president of
the Company and Michael Vivacqua resigned as a director of the Company.
On April 3, 2002 the Company announced that Bolton Pass had produced and
successfully tested the developer's prototype version of the KIWI handheld,
wireless communication device. The prototype successfully confirmed its
capability to transmit and receive email/data through the internet. It was also
able to receive and play audio files in MP3 format as provided for in the KIWI
development initiative. Subsequently, the Company was notified that Bolton Pass
would not continue under the terms of their agreement and development of the
device has been halted. The Company is attempting to renegotiate the terms of
the agreement with Bolton Pass.
On March 18, 2002 the Company announced their intention to acquire Routel(TM)
Corporation. Routel is a next-generation financial transaction processing
company. The Company has committed to issue 750,000 common shares to acquire all
of the outstanding shares of Route1, however Route 1 has notified the Company
that it will not proceed with the transaction.
On March 22, 2002 the Company announced their intention to acquire Transcard
Canada, Limited. The Company has committed to issue 750,000 common shares to
acquire all of the outstanding shares of Transcard plus up to an additional
750,000 common shares to be issued on a performance basis and has committed to
fund Transcard with up to $500,000 for working capital. Subsequently, the
Company has received a notice of termination from Transcard and is not pursuing
the acquisition.
On March 26, 2002 the Company announced their intention to acquire Esemde, Inc.
Esemde has created a North America-wide virtual wireless network to provide SMS
and GPRS delivery services. SMS and GPRS are data transmission formats used by
wireless carriers such as AT&T Wireless, Cingular and Voicestream. This
capability enables providers with SMS and GPRS applications for the Vertical and
Enterprise markets, access to nationwide wireless coverage, from digital PCS
carriers but served by Esemde, Inc. The Esemde technology and service will
capitalizes on the growing need for low-cost, reliable, bi-directional wireless
data transmission, delivered nationwide to any SMS or GPRS application. The
Company has committed to issue 650,000 common shares to acquire all of the
outstanding shares of Esemde and has committed to fund Esemde with up to
$1,280,000 for working capital.
On April 4, 2002 the Company announced their intention to acquire INTERcard
Group Inc. INTERcard provides wireless debit and credit terminals, along with
related transaction clearing, to the hospitality industry. INTERcard has
accumulated substantial transaction and revenue data regarding payment through
POS terminals from a number of Canadian pilot locations. INTERcard and Koala
have held advanced contract discussions with a number of additional settlement
and certification organizations, which, if completed, will enable Koala and
INTERcard to immediately generate revenues as devices are deployed in the field.
The Company has committed to issue 112,902 common shares to acquire all of the
outstanding shares of INTERcard, subject to INTERcard selling 450 Ingenico
transaction automation 770 'units' and has committed to issue an additional
112,902 common shares each time an additional 450 'units' are delivered up to a
maximum aggregate of 451,608 common shares. The Company has agreed to issue
114,516 common shares as a finder's fee pursuant to the INTERcard acquisition.
8
Liquidity and Capital Resources
- ----------------------------------
The Company has been able to pay its expenses and costs through the increase in
its accounts and loans payable. As of June 30, 2002, the Company had a working
capital deficiency of $314,023. The Company needs to raise additional funds
through the sale of stock or borrowing just to maintain the corporate existence
of the Company and to maintain the listing of the Company's common stock on the
OTC Bulletin Board. The Company may not be successful in its efforts to raise
equity financing and /or attain profitable operations. There is doubt regarding
the Company's ability to continue as a going concern.
Special Note Regarding Forward Looking Statements
- ------------------------------------------------------
Certain statements in this report and elsewhere (such as in other filings by the
company with the Securities and Exchange Commission ("SEC"), press releases,
presentations by the Company of its management and oral statements) may
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates," and
"should," and variations of these words and similar expressions, are intended to
identify these forward-looking statements. Actual results may materially differ
from any forward-looking statements. Factors that might cause or contribute to
such differences include, among others, competitive pressures and constantly
changing technology and market acceptance of the Company's products and
services. The Company undertakes no obligation to publicly release the result of
any revisions to these forward-looking statements, which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
PART II - OTHER INFORMATION
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Item 1. Legal Proceedings.
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To the Company's knowledge, there are no lawsuits nor were any lawsuits
commenced against the Company during the quarter ended June 30, 2002, nor did
the Company commence any lawsuits during the same period.
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Item 2. Changes in Securities and Use of Proceeds.
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Changes in Securities
- -----------------------
Options: 600,000 options to acquire one share each exercisable at $1.00 per
share. The options have subsequently been repriced. The effect of
these options will be reflected in the fourth quarter.
Warrants: 50,000 warrants to acquire one share each at $4.00 per share, expiring
March 15, 2007
50,000 warrants to acquire one share each at $5.00 per share, expiring
March 15, 2007
Shares issued:
1,000,000 common shares for services rendered pursuant to a contract
75,000 common shares for services rendered pursuant to a contract
Use of Proceeds
- -----------------
Not applicable
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Item 3. Defaults Upon Senior Securities.
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Not applicable.
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Item 4. Submission of Matters to a Vote of Security Holders.
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No matters were put forward to a vote of the security holders of the Company
this quarter.
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Item 5. Other Information.
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None
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Item 6. Exhibits and Reports on form 8-K.
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9
Exhibits
- --------
None
Reports on Form 8-K
- ----------------------
None
SIGNATURES
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.
Koala International Wireless Inc.
Date: August 15, 2002 By: /s/ Christine Cerisse
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Name: Christine Cerisse
Title: Chairman, Treasurer and Director
10
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL
OFFICER
PURSUANT NTO
18 W.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Larry Wintemute, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report on Form 10-QSB of Koala International Wireless Inc. for the quarterly
period ended June 30, 2002 fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 and that the information
contained in the Quarterly Report on Form 10-QSB fairly presents in all material
respects the financial condition and results of operations of Koala
International Wireless Inc.
By: /s/ Larry Wintemute
---------------------
Name: Larry Wintemute
Title: Chief Executive Officer
Date: August 15, 2002
I, Christine M. Cerisse, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report on Form 10-QSB of Koala International Wireless Inc. for the quarterly
period ended June 30, 2002 fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 and that the information
contained in the Quarterly Report on Form 10-QSB fairly presents in all material
respects the financial condition and results of operations of Koala
International Wireless Inc.
By: /s/ Christine M. Cerisse
-----------------------------
Name: Christine M. Cerisse
Title: Chief Financial Officer
Date: August 15, 2002