U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Act of 1934
Date of Report (Date of earliest event reported): November 20, 2002
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KOALA INTERNATIONAL WIRELESS INC.
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(Exact name of registrant as specified in its charter)
NEVADA 0-32479 76-0616468
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(State or other
Jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
366 BAY STREET, SUITE 800
TORONTO, ONTARIO, CANADA M5H 4B2
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(Address of principal executive offices) (Zip Code)
Copies to:
141 - 757 West Hastings Street, Suite 676
Vancouver, British Columbia, Canada V6C 1A1
(604) 681-7806
Registrant's telephone number, including area code: (416) 596-8520 (281)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT
NOWIRE ACQUISITION AGREEMENT
Pursuant to a voluntary Share Exchange Agreement (the "Agreement") dated
November 20, 2002, Koala International Wireless Inc. (the "Company"), a Nevada
corporation, acquired all of the partnership interests from the partners of
NoWire Telecom, Inc. ("NoWire"), an Egyptian partnership company, based in
Cairo, from the partners of NoWire in exchange for an aggregate of 6,000,000
shares of its common stock (the "Exchange").
The Exchange was approved by the unanimous consent of the partners of NoWire
holding a majority of the partnership interests of NoWire on November 20, 2002.
The Exchange was also approved by unanimous consent of the Board of Directors of
the Company on November 20, 2002. No Company shareholder vote was required.
The Exchange was effective on November 20, 2002.
A copy of the Agreement and Plan of Exchange is filed as an exhibit to this Form
8-K and is incorporated in its entirety herein. The foregoing description is
modified by such reference.
CONTROL OF THE COMPANY
The Company had 19,695,990 shares of common stock, $0.001 par value per share,
issued and outstanding prior to the Exchange. NoWire had two partnership units
prior to the Exchange. As a result of the Exchange, the Company has 25,695,990
shares of common stock issued and outstanding as of November 20, 2002,
approximately 23.3 per cent of which are held by the former partners of NoWire.
Effective November 20, 2002, Miguel Caron was elected a member of the Board of
Directors of the Company. Miguel was appointed President of the Company and will
be responsible for global market development and sales generation.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Upon the effective date of the Exchange, November 20, 2002, NoWire became a
wholly-owned subsidiary of the Company. The Exchange has been accounted for as a
purchase. As a result of the Exchange, the Company has control over the assets
and business plan of NoWire.
In exchange for all of the outstanding partnership units of NoWire, being 2
partnership units, the Company issued from its treasury an aggregate of
6,000,000 shares of its common stock, having a par value of $0.001 per share to
the partners of NoWire.
The consideration exchanged pursuant to the Exchange was negotiated between
NoWire and the Company. In evaluating the transaction, the Company used
criteria such as the value of the assets of NoWire, NoWire's operations,
business name and reputation, and quality of management. The Company determined
that the consideration for the Exchange was reasonable.
The offering of the Company's shares to the shareholders of NoWire was conducted
pursuant to an exemption from registration, namely Rule 506 of Regulation D
and/or Regulation S under the Securities Act of 1933, as amended (the "Act").
As a result, the 6,000,000 shares of the Company's common stock held by the
partners of NoWire are "restricted securities" subject to Rule 144 of the Act.
The acquisition of NoWire is the second of a series of acquisitions whereby the
Company will also acquire a 100% interest in IP Co. Limited ('IP Co.') for the
issuance of 28,000,000 shares of the Company's common stock, thereby resulting
in a change in control of the Company whereby the Company will be effectively
controlled by the shareholders of Route1Corporation, NoWire Telecom and IP Co.
(A) DESCRIPTION OF BUSINESS
DESCRIPTION OF THE BUSINESS OF THE COMPANY
Koala International Wireless Inc. (formerly Kettle River Group Inc.) (the
"Company") is a developmental stage company that was incorporated in Nevada on
August 18, 1999. The Company activities have been organizational, directed at
acquiring its principal asset, raising its initial capital and developing its
business plan. On February 14, 2000, the Company acquired a license to
distribute Vitaminalherb.com products to health and fitness professionals
in Great Britain but has not yet commenced selling the products. In order to
better facilitate its business goals, the Company voluntarily filed with the SEC
a Form 10-SB on March 22, 2001 and became a "reporting issuer" under the
Exchange Act on May 21, 2001. From the time it became a reporting issuer until
September, 2001, the Company did not engage in any commercial business
activities. Further detailed information about the Company can be found in its
Form 10-SB, as amended, filed with the SEC on March 22, 2001.
In October 2001, the Company acquired Urbanesq.com, Inc. ("Urbanesq"), a
private Ontario corporation which owned the rights to a handheld
communications device, the "KIWI", for an aggregate of 6,500,000 shares of
common stock of the This was effectively a reverse takeover of the Company by
Urbanesq, in that the stockholders of Urbanesq became majority holders of
the Company's outstanding common stock.
In September 2002, the Company acquired Route1 Corporation. Route1 is involved
in the billing, tracking, settlement and data management for Mobile Virtual
Network Operators (MVNO's). Route1 has developed a number of proprietary
encryption and related software applications that enable the delivery of secure
data and short messaging transmissions over an MVNO. Route1's technology and
vision will allow the combined companies to pursue multiple business
opportunities.
The Company (Koala) is developing an International Mobile Virtual Network
Operator (IMVNO) platform to allow the delivery of voice, data and short
messaging over multiple networks. Concurrent with the IMVNO development, the
Company is pursuing the development of applicable devices to serve the network
subscribers. The IMVNO strategy will enable subscribers to access the Internet,
play and store MP3, utilize existing applications including calendaring, contact
management systems, email and short messaging and additional functionality, some
not currently available in the marketplace.
DESCRIPTION OF THE BUSINESS OF NOWIRE TELECOM ("NOWIRE")
CORPORATE BACKGROUND
NoWire is a wireless messaging company incorporated in Cairo, Egypt, with
corporate headquarters in Montreal, Quebec. The Company has secured virtual
carrier agreements with more than 125 international telephone and data carriers
to enable the delivery of premium data and Short Messaging content and services
to their customers. The principals of NoWire have successfully developed and
operated a number of International Short Messaging and data networks.
NoWire provides a turnkey technology platform that enables the delivery of Short
Messaging and/or voice and data services to telecom carriers that lack the
infrastructure necessary to provide these services on a local and international
basis. Short Messaging enables the transmission of small amounts of data to
(and from) PDA's and cell phones, such as text messaging and the delivery of
custom ring tones, graphics and compelling content. Short Messaging is
undergoing tremendous growth as an inexpensive and convenient form of
communication over wireless networks. NoWire has aggregated a substantial
amount of Short Messaging content and services that can be delivered to its
customers.
SERVICES
NoWire will offer four services:
1. Sale of SMS capacity to content providers and gaming companies:
- - NoWire provides a reliable, simple and efficient way to connect through one of
many different gateways: HTTP, SMTP or a direct connection VPN over IP using
SMPP as the SMS protocol.
2. Aggregate content for wireless carriers:
- - NoWire will buy content from content providers, make it available on the
NoWire gateway, and provide it to using a revenue share model with wireless
network operators
3. Provide reverse billing contract to content providers.
- - NoWire will offer a method for content to providers to share revenue with the
carriers.
4. Provide SMS-C features to small carriers with no SMS-C and MVNO.
- - For small carriers in South-America, middle-east and Africa NoWire will
provide a message services number that would be pre-programmed in their
customer's SIM card.
Future Services
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NoWire may expand into additional wireless technologies
MARKETING AND DISTRIBUTION
Marketing Strategy
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The SMS business will be built on the extension of existing relationships where
NoWire's capability is already recognized. This will be supplemented by
long-term efforts to develop recognition in professional forums and trade shows.
NoWire also intends to market its services to signature major clients in order
to grow the overall business.
In addition to NoWire's technology capability the company's objective is to
provide the easiest, most secure and well priced way of sending and receiving
SMS around the globe.
Value Proposition
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NoWire intends to provide their clients with the ability to terminate and
originate messages to over 500 wireless carriers world wide at the lowest
possible price with the highest service level. NoWire believes its customers
will be able to track statistics live with a confirmation that the message has
been received by the user.
Market Segmentation
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SMS traffic is split between user to user and content. NoWire has services for
both.
On the content side, 75% of the SMS power users (more than 100 SMS per month)
are between 15 and 25 years. NoWire intends to target this market with their
search for contents providers.
On the user to user side NoWire intends to provide SMS capability to small
carriers.
Target Market Segment Strategy
- ---------------------------------
NoWire has targeted high marketing companies, who are high traffic generators
and well funded, to promote their services using NoWire's gateway. On the
carrier side, NoWire is targeting small carriers with about 500K user each.
Market Growth
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The total SMS traffic is growing rapidly with more than 750million SMS messages
sent each day
Sales Forecast
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NoWire expects to become operational in the first half of 2003 utilizing a
scalable platform to facilitate rapid growth.
COMPETITION
Competition and Buying Patterns
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Contents providers and carriers are looking for a fast, affordable and reliable
way to have direct access to users and contents. Few of the wireless messaging
players are known for reliability, and NoWire believes that its technology and
the method it uses to deliver messages will make it as reliable as an e-mail
with a return receipt. With NoWire's contact network, its' gateway will be
interconnected to many carriers and third parties allowing it to create a LCR
(low cost routing) and thus proposing to its customers the lowest price
available in the.
Competitive Comparison
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Most of NoWire's competition right now comes from the internet world where
competitors do not have a carrier-grade infrastructure but compete aggressively
on price and services.
The Company's principal executive offices are located at 366 Bay Street,
Suite 800, Toronto, Ontario, Canada M5H 4B2.
PLANNED FUTURE OPERATIONS
The core business of Koala will be to provide carriers, businesses and
individuals with enhanced wireless mobility and connectivity. As the company
expands the applications available to its subscribers, the hardware and software
component of the Koala business will generate stand-alone revenues from their
respective third -party customers. These businesses include banking services,
hosting and data services, encryption and billing services, as well as PDA tools
and applications.
REGULATORY ENVIRONMENT
The manufacture and use of NoWire may be subject to regulation by one or more
federal agencies, including the Federal Trade Commission and the Canadian Radio
and Television Commission. These activities also may be regulated by various
agencies of the states, localities and foreign countries in which consumers
reside.
Numerous U.S. federal and state government agencies have demonstrated
significant activity in promoting consumer protection and enforcing other
regulatory and disclosure statutes. Additionally, it is possible that new laws
and regulations may be enacted with respect to Internet entertainment
dissemination. The adoption of such laws or regulations and the applicability
of existing laws and regulations may impair the growth of Internet media use and
result in a decline in the uses of the NoWire technology.
INTELLECTUAL PROPERTY
The nature of patent and trademark registration is very complex and requires
legal expertise. To date, no applications have been prepared to patent any of
NoWire's assets or concepts.
EMPLOYEES
The Company and NoWire are in the developmental stage and currently have no
employees. The Company looks to its directors and officers for their combined
entrepreneurial skills and talents. For a complete discussion of the directors
and officers and their experience, please see the section of this Form 8-K
entitled "Directors and Executive Officers." Management plans to use
consultants, attorneys and accountants as necessary. A portion of any employee
compensation package likely would include the right to acquire stock in the
Company, which would dilute the ownership interest of holders of existing shares
of the Company's common stock.
PRESS RELEASE ON EXCHANGE
The Company has issued a press release with respect to the Share Exchange with
NoWire, a copy of which is attached as Exhibit 99 to this Form 8-K.
(B) DESCRIPTION OF PROPERTY
Not applicable
(C) MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATIONS
Certain statements contained herein may constitute forward-looking statements.
Because such statements include risks and uncertainties, actual results may
differ materially from those expressed or implied by such forward-looking
statements. Factors that could cause or contribute to such differences
include those discussed in the "Outlook: Issues and Uncertainties" section of
this Form 8-K. The Company intends to file pro forma financial statements
within sixty days of filing this Form 8K and intends to expand its management
discussion within the context of those pro forma financial statements.
PLAN OF OPERATIONS
The Company's business is still in its development stage. The Company has not
generated any revenue to date. The Company plans to generate revenue by
assembling an International Mobile Virtual Network Operator platform to enable
the delivery of data, short messaging and voice services over multiple networks
and the subsequent offering of products and services it will enable.
During the period from July, 2002 through November 20, 2002, NoWire engaged
in no significant operations other than organizational activities and
research and development of its NoWire product. NoWire received minimal
revenues during this period.
Operation costs over the next year will depend on a number of factors, including
the cost of marketing the NoWire software applications, the cost of conducting
marketing research and preparing a marketing campaign for NoWire.
The Company's business plan with respect to its NoWire business is to
continue research and development of the NoWire product, add-ons to the NoWire
applications and to conduct marketing research to determine the demand
for its products in its target markets.
LIQUIDITY AND CAPITAL RESOURCES
No material commitments for capital expenditures were made during the years
ended September 30, 2002, 2001, 2000 or 1999.
The Company estimates the cost of producing and marketing the NoWire product at
$300,000 US. There can be no assurance that the Company will be able to
continue as a going concern or achieve material revenues or profitable
operations.
The Company plans to utilize a combination of internally generated funds from
operations over the next year, potential debt and/or equity financings to fund
its short-term and long-term growth. The availability of future financings will
depend on market conditions. A portion of the funds may be used to grow the
business through acquisitions of other businesses.
The forecast of the period of time through which the Company's financial
resources will be adequate to support operations is a forward-looking statement
that involves risks and uncertainties. The actual funding requirements may
differ materially from this as a result of a number of factors including plans
to rapidly expand its new operations. There can be no guarantee that financing
adequate to carry out the Company's business plan will be available on terms
acceptable to the Company, or at all.
EFFECT OF FLUCTUATIONS IN FOREIGN EXCHANGE RATES
The Company's reporting and functional currency is the US dollar. Currently, all
of the Company's operations are located in Canada. Transactions in Canadian
dollars have been translated into U.S. dollars using the current rate method,
such that assets and liabilities are translated at the rates of exchange in
effect at the balance sheet date and revenue and expenses are translated at the
average rates of exchange during the appropriate fiscal period. As a result, the
carrying value of the Company's investments in Canada is subject to the risk of
foreign currency fluctuations. Additionally, any revenues received from the
Company's international operations in other than U.S. dollars will be subject to
foreign exchange risk.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS No. 133). SFAS No. 133 requires companies to
recognize all derivatives contracts as either assets or liabilities in the
balance sheet and to measure them at fair value. If certain conditions are met,
a derivative may be specifically designated as a hedge, the objective of which
is to match the timing of gain or loss recognition on the hedging derivative
with the recognition of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii) the earnings effect
of the hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized in income in the period of
change. SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000.
Historically, the Company has not entered into derivatives contracts either to
hedge existing risks or for speculative purposes. Accordingly, the Company does
not expect adoption of the new standard on January 1, 2001 to affect its
financial statements.
In December 1999, the SEC staff released Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 provides
interpretive guidance on the recognition, presentation and disclosure of revenue
in the financial statements. SAB 101 must be applied to the financial
statements no later than the quarter ending September 30, 2000. The Company
does not believe that the adoption of SAB 101 will have a material affect on the
Company's financial results.
In March 2000, the Financial Accounting Standards Board issued Interpretation
No. 44 ("FIN 44") Accounting for Certain Transactions Involving Stock
Compensation, an Interpretation of APB Opinion No. 25. FIN 44 clarifies the
application of APB No. 25 for (a) the definition of employee for purposes of
applying APB No. 25, (b) the criteria for determining whether a plan qualifies
as a non-compensatory plan, (c) the accounting consequences of various
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange of stock compensation awards in a business
combination. FIN 44 is effective July 2, 2000, but certain conclusions cover
specific events that occur after either December 15, 1998, or January 12, 2000.
The Company will adopt FIN 44 in accounting for the stock options granted.
In March 2000, EITF 00-2 "Accounting for Web Site Development Costs" was
released. EITF 00-2 provides guidance on how an entity should account for costs
involved in such areas as planning, developing software to operate the web site,
graphics, content, and operating expenses. EITF 00-2 is effective for web site
development costs incurred for fiscal quarters beginning after June 30, 2000.
OUTLOOK: ISSUES AND UNCERTAINTIES
Stockholders and prospective purchasers of the Company's common stock should
carefully consider the following risk factors in considering the future
of the Company.
RISK FACTORS ASSOCIATED WITH THE COMPANY AND ITS BUSINESS
The following risks relate specifically to the Company's business and should be
considered carefully. The Company's business, financial condition and results of
operations could be materially and adversely affected by any of the following
risks:
LIMITED OPERATING HISTORY.
The limited operating history of the Company and it's subsidiaries make
evaluation of their business and the forecasting of the Company's future results
difficult. NoWire has only a limited operating history upon which an evaluation
of their business and the Company's prospects can be based, each of which must
be considered in light of the risks, expenses and problems frequently
encountered by all companies in the early stages of development. NoWire has no
record of commercial production, earnings or sales. The Company, therefore,
continues to be in its development stage. There is no assurance that the
Company's products will achieve sales at a commercially viable level that will
generate a profit.
FUTURE GROWTH PREDICTIONS MAY BE INACCURATE.
NoWire's limited operating history make the prediction of future results
difficult. Furthermore, NoWire's limited operating history lead the Company to
believe that period-to-period comparisons of the Company's operating results may
not be meaningful and that the results for any particular period should not be
relied upon as an indication of future performance. To the extent that revenues
do not grow at anticipated rates, the Company's business, results of operations
and financial condition would be materially and adversely affected.
THE COMPANY ANTICIPATES INCURRING LOSSES INTO THE FUTURE.
The Company anticipates incurring losses until the full launch of it's product
range. The extent of future losses will depend, in part, on the amount of
growth in revenues from sales of the Company's products. The Company expects
that operating costs will increase during the next several years, especially in
the areas of sales and marketing, product development and general and
administrative expenses as it pursues its business strategy. Thus, the Company
will need to generate increased revenues faster than the rate of growth in costs
to achieve profitability. To the extent that increases in its operating
expenses precede or are not subsequently followed by corresponding increases in
revenues, or if it is unable to adjust operating expense levels accordingly, the
Company's business, results of operations and financial condition would be
materially and adversely affected. There can be no assurance that the Company
will sustain profitability or that its operating losses will not increase in the
future.
COMPETITION FROM LARGER COMPANIES IS EXPECTED.
The media and entertainment industries are intensely competitive and the Company
will compete with companies having greater financial and technical resources.
Therefore, to the extent that the Company is able to establish sales, revenues
and profits, there is no assurance that it would be able to sustain such sales,
revenues and profits. Moreover, although not a major factor today, if and when
the Company begins achieving its objectives, larger, better financed companies
in peripheral businesses may be attracted to the Company's markets. They may be
prepared to spend large sums quickly to develop competitive products and to
mount major marketing campaigns. The Company is aware of this possibility and
hopes to establish itself as an industry leader early on. Time is of the
essence and the Company's financing and marketing programs are essential to
minimize this risk.
THE COMPANY'S ABILITY TO ATTRACT ADDITIONAL FINANCING AS NEEDED MAY AFFECT ITS
FUTURE SUCCESS.
The Company will require additional financings as it expects negative operating
cash flow for the foreseeable future until income from its operations has grown
to cover the cost of its support and development. Such financing, if obtained
by the Company, may result in the issuance of additional securities and may not
be available on terms favorable to it. The Company expects that it will
continue to experience negative operating cash flow for the foreseeable future
as a result of significant spending on product development, marketing and
infrastructure. Accordingly, the Company may need to raise additional funds in
a timely manner in order to fund the continued development and production of its
products and eventually marketing and distribution of the products. Additional
funds will have to be raised through the issuance of equity or convertible debt
securities causing the percentage of ownership of the Company's current
stockholders to be reduced. Such securities may have rights, preferences or
privileges senior to those of the holders of its common stock. The Company does
not have any contractual restrictions on the Company's ability to incur debt
and, accordingly, the Company could incur significant amounts of indebtedness to
finance its operations. Any such indebtedness could contain covenants that
would restrict the Company's operations. There can be no assurance that
additional financing, if and when needed, will be available on terms favorable
to the Company or at all. If adequate funds are not available or are not
available on acceptable terms, it would have a material adverse effect on the
Company's ability to fund its expansion, take advantage of acquisition
opportunities, develop or enhance services or products or respond to competitive
pressures.
GOVERNMENT REGULATION OF THE INTERNET COULD ADVERSELY AFFECT THE COMPANY'S
PROFITABILITY
Existing or future legislation could limit growth in use of the Internet,
which would curtail the Company's revenue growth. Any new regulation of Internet
commerce could damage the Company's business, affect the profitability and
perhaps the viability of its business plan, and cause the price of its common
stock to decline. Regulation could prove to be burdensome, and impose
significant additional costs on the Company's business or subject it to
additional liabilities. Regulation is likely in the areas of user privacy,
pricing, content, taxation and quality of products and services. Laws and
regulations applying to the solicitation, collection, or processing of personal
or consumer information could limit the Company's activities. In addition, any
regulation imposing fees for Internet use could result in a decline in the use
of the Internet and the viability of Internet commerce, which would have a
material adverse effect on the Company's business, results of operations, and
financial condition.
ANY SIGNIFICANT DETERIORATION IN THE GENERAL ECONOMIC CONDITIONS WOULD HAVE AN
ADVERSE EFFECT ON THE COMPANY'S BUSINESS, RESULTS OF OPERATIONS, AND FINANCIAL
CONDITION.
The success of the Company's operations depends to a significant extent upon a
number of factors relating to discretionary consumer spending, including
economic conditions (and perceptions of such conditions by consumers) affecting
disposable consumer income such as employment, wages, salaries, business
conditions, interest rates, availability of credit and taxation for the economy
as a whole and in regional and local markets where the Company operates. There
can be no assurance that consumer spending will not be adversely affected by
general economic conditions, which could negatively impact the Company's results
of operations and financial conditions. Any significant deterioration in general
economic conditions or increases in interest rates may inhibit consumers' use of
credit and cause a material adverse effect on the Company's revenues and
profitability.
SALES AND DISTRIBUTION.
The Company has yet to establish a significant distribution and support network.
Failure on the part of the Company to put into place an effective marketing
infrastructure in a timely manner could act to delay or eliminate the generation
of anticipated revenues.
MARKET ACCEPTANCE.
The viability of the Company is dependent upon the market acceptance of its
current and future products. There are no assurances that the products will
attain a level of market acceptance that will allow for continuation and growth
of its business operations. In addition, the Company will need to develop new
processes and products to maintain its operations in the longer term. The
development and launching of such processes and products can involve significant
expenditure. There can be no assurance that the Company will have sufficient
financial resources to fund such programs and whether such undertaking will be
commercially successful.
THE COMPANY'S OFFICERS, DIRECTORS AND ENTITIES AFFILIATED WITH THEM CONTROL THE
COMPANY.
In the aggregate, ownership of the Company's shares by significant shareholders
and management represents a large proportion of the Company's issued and
outstanding shares of common stock. These stockholders, if acting together,
will be able to significantly influence all matters requiring approval by the
Company's stockholders, including the election of directors and the approval of
mergers or other business combination transactions.
CONFLICTS OF INTEREST OF CERTAIN DIRECTORS AND OFFICERS OF THE COMPANY.
From time to time certain of the directors and executive officers of the Company
may serve as directors or executive officers of other companies and, to the
extent that such other companies may participate in the industries in which the
Company may participate, the directors of the Company may have a conflict of
interest. In addition, the Company's dependence on directors and officers who
devote time to other business interests may create conflicts of interest, i.e.
that the fiduciary obligations of an individual to the other company conflicts
with the individual fiduciary obligations of the Company and vice versa.
Directors and officers must exercise their judgment to resolve all conflicts of
interest in a manner consistent with their fiduciary duties to the Company. In
the event that such a conflict of interest arises at a meeting of the directors
of the Company, a director who has such a conflict will abstain from voting for
or against the approval of such participation or such terms. In appropriate
cases, the Company will establish a special committee of independent directors
to review a matter in which several directors, or management, may have a
conflict. The Company is not aware of the existence of any conflict of interest
as described herein.
LIMITED LIABILITY OF THE COMPANY'S EXECUTIVE OFFICERS AND DIRECTORS MAY
DISCOURAGE STOCKHOLDERS FROM BRINGING A LAWSUIT AGAINST THEM.
The Company's amended and restated articles of incorporation and bylaws contain
provisions that limit the liability of directors for monetary damages and
provide for indemnification of officers and directors. These provisions may
discourage shareholders from bringing a lawsuit against officers and directors
for breaches of fiduciary duty and may also reduce the likelihood of derivative
litigation against officers and directors even though such action, if
successful, might otherwise have benefited the stockholders. In addition, a
shareholder's investment in the Company may be adversely affected to the extent
that costs of settlement and damage awards against officers or directors are
paid by the Company pursuant to the indemnification provisions of the amended
and restated articles of incorporation and by-laws. The impact on a
shareholder's investment in terms of the cost of defending a lawsuit may deter
the shareholder from bringing suit against one of the Company's officers or
directors. The Company has been advised that the SEC takes the position that
this provision does not affect the liability of any director under applicable
federal and state securities laws.
CONCENTRATION OF OWNERSHIP OF DIRECTORS, OFFICERS AND SIGNIFICANT EMPLOYEES MAY
REDUCE THE CONTROL BY OTHER STOCKHOLDERS OVER THE COMPANY.
The Company's directors, officers and other control persons own or exercise full
or partial control over more than 30.72% of the Company's outstanding common
stock. As a result, other investors in the Company's common stock may not have
much influence on corporate decision-making. In addition, the concentration of
control over the Company's common stock among the insiders could prevent a
change in control of the Company.
THE COMPANY'S COMMON STOCK IS CONSIDERED A "PENNY STOCK", WHICH MAKES IT MORE
DIFFICULT TO SELL THAN AN EXCHANGE-TRADED STOCK.
The Company's securities are subject to the Securities and Exchange Commission
rule that imposes special sales practice requirements upon broker-dealers that
sell such securities to other than established customers or accredited
investors. For purposes of the rule, the phrase "accredited investor" means, in
general terms, institutions with assets exceeding $5,000,000 or individuals
having net worth in excess of $1,000,000 or having an annual income that exceeds
$200,000 (or that, combined with a spouse's income, exceeds $300,000). For
transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Consequently, the rule may
affect the ability of purchasers of the Company's securities to buy or sell in
any market that may develop.
In addition, the Securities and Exchange Commission has adopted a number of
rules to regulate "penny stocks." (A "penny stock" is any equity security that
has a market price of less than $5.00 per share or with an exercise price of
less than $5.00 per share, subject to certain exceptions). Such rules include
Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, and 15g-7 under the
Securities and Exchange Act of 1934, as amended. The rules may further affect
the ability of owners of the Company's shares to sell their securities in any
market that may develop for them. Stockholders should be aware that, according
to the Securities and Exchange Commission Release No. 34-29093, the market for
penny stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns include:
- - control of the market for the security by one or a few broker-dealers that
are often related to the promoter or issuer;
- - manipulation of prices through prearranged matching of purchases and sales
and false and misleading press releases;
- - "boiler room" practices involving high pressure sales tactics and
unrealistic price projections by inexperienced sales persons;
- - excessive and undisclosed bid-ask differentials and markups by selling
broker-dealers; and
- - the wholesale dumping of the same securities by promoters and
broker-dealers after prices have been manipulated to a desired level,
along with the inevitable collapse of those prices with consequent
investor losses.
BOARD OF DIRECTORS' AUTHORITY TO SET RIGHTS AND PREFERENCES OF PREFERRED STOCK
MAY PREVENT A CHANGE IN CONTROL BY STOCKHOLDERS OF COMMON STOCK.
Preferred shares may be issued in series from time to time with such
designation, rights, preferences and limitations as the Company's Board of
Directors determines by resolution and without stockholder approval. This is an
anti-takeover measure. The Board of Directors has exclusive discretion to issue
preferred stock with rights that may trump those of common stock. The Board of
Directors could use an issuance of Preferred Stock with dilutive or voting
preferences to delay, defer or prevent common stockholders from initiating a
change in control of the Company or reduce the rights of common stockholders to
the net assets upon dissolution. Preferred stock issuances may also discourage
takeover attempts that may offer premiums to holders of the Company's common
stock.
STOCKHOLDERS DO NOT HAVE THE AUTHORITY TO CALL A SPECIAL MEETING
THEREBY DISCOURAGING TAKEOVER ATTEMPTS.
Pursuant to the Company's articles of incorporation, only the Company's Board of
Directors has the power to call a special meeting of the stockholders, thereby
limiting the ability of stockholders to effect a change in control of the
Company.
THE COMPANY DOES NOT ANTICIPATTE PAYING DIVIDENDS TO ITS SECURITY HOLDERS IN THE
FORESEEABLE FUTURE WHICH MAKES INVESTMENT IN ITS STOCK SPECULATIVE OR RISKY.
The Company has not paid dividends on its common stock and does not anticipate
paying dividends on its common stock in the foreseeable future. The Board of
Directors has sole authority to declare dividends payable to the Company's
stockholders. The fact that the Company has not and does not plan to pay
dividends indicates that the Company must use all of its funds generated by
operations for reinvestment in its operating activities and also emphasizes that
the Company may not continue as a going concern. Investors also must evaluate an
investment in the Company solely on the basis of anticipated capital gains.
LIMITED LIABILITY OF THE COMPANY'S EXECUTIVE OFFICERS AND DIRECTORS MAY
DISCOURAGE STOCKHOLDERS FROM BRINGING A LAWSUIT AGAINST THEM.
The Company's articles of incorporation and bylaws contain provisions that limit
the liability of directors for monetary damages and provide for indemnification
of officers and directors. These provisions may discourage stockholders from
bringing a lawsuit against officers and directors for breaches of fiduciary duty
and may also reduce the likelihood of derivative litigation against officers and
directors even though such action, if successful, might otherwise have benefited
the stockholders. In addition, a stockholder's investment in the Company may be
adversely affected to the extent that costs of settlement and damage awards
against officers or directors are paid by the Company pursuant to the
indemnification provisions of the articles of incorporation and by-laws. The
impact on a stockholder's investment in terms of the cost of defending a lawsuit
may deter the stockholder from bringing suit against one of the Company's
officers or directors. The Company has been advised that the SEC takes the
position that this provision does not affect the liability of any director under
applicable federal and state securities laws.
(D) SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of November 20, 2002, the Company's
outstanding common stock owned of record or beneficially by each Executive
Officer and Director and by each person who owned of record, or was known by the
Company to own beneficially, more than 5% of its common stock, and the
shareholdings of all Executive Officers and Directors as a group. Each person
has sole voting and investment power with respect to the shares shown.
NUMBER OF PERCENTAGE OF
NAME SHARES HELD SHARES OWNED
- ---- ------------ -------------
Christine Cerisse* 0 0.0%
Lorne Catling* 0 0.0%
Larry Wintemute** 0 0.0%
K. Andrew White 695,290 2.71%
Capital Partners Fund I 2,991,364 11.64%
Michael McGrath 1,632,000 6.35%
Robert Vivacqua 2,208,000 8.59%
Miguel Caron 5,550,000 21.60%
ALL EXECUTIVE OFFICERS AND
DIRECTORS AS A GROUP
(3 persons) 6,245,290 24.3%
* Each of these Directors have options to purchase 100,000 shares of common
stock of the Company at $0.50 per share.
** This former Director has the option to purchase 100,000 shares of common
stock of the Company at $0.50 per share.
(E) DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS
This table sets forth the name, age and position of each director and executive
officer of the Company following the Exchange:
Name Age Position
- ---- --- --------
K. Andrew White 38 CEO, Secretary and a Director
Miguel Caron 29 President, and a Director
Lorne Catling 46 Director
Christine Cerisse 48 Director
Andrew White - President, Chief Executive Officer, Secretary
- -------------------------------------------------------------------
Mr. White is the founder of Route1 Corporation. He has significant experience in
product architecture, operations, marketing, sales, and equity financing. Prior
to founding Route1, he was the Manager of Information Systems for Delrina
(Symantec) Corporation.
Miguel Caron - President, and a Director
- ----------------------------------------------
Miguel Caron, the founder of NoWire Telecom, has extensive experience in sales,
marketing and management in the electronics industry. In the recent past he has
been COO for Atlas Telecom Mobile, and Director of Sales in Eastern Canada for
Wysdom inc. His expertise is identifying, developing and closing direct sales
business with companies focused on providing wireless services and mobility
solutions to their end users, customers, partners and employees. In 1994 Miguel
graduated from the Royal Military College in St-Jean, Quebec with a Degree in
Polemologie with specialization (Social Studies of War).
Lorne Catling - Director
- ---------------------------
Mr. Catling has 25 years of direct sales and sales management experience in
various wholesale and retail fields. This includes and is not limited to real
estate, automotive, home renovation, and the carpet industry. He has held
managerial positions with a major Ford Dealership and offered sales and
motivational training to the staff. After 8 years in the auto industry
Lorne was Western Regional Sales Manager for a Northwestern U.S. pay-phone
provider. He managed and trained a successful sales force that gained a
substantial foothold in the Western Canadian market. Most recently Lorne has
been raising capital for small start-up companies involved in the wireless
remote surveillance and non-institutional ATM industry.
Christine Cerisse - Director
- -------------------------------
Ms. Cerisse is the former Chairman, President and Secretary-Treasurer of Koala
from February 1, 2001 to September, 2002. Ms. Cerisse is a former Chartered and
Registered Financial Planner, with over 20 years experience in the in the
financial industry in the field of financial planning and financial management.
From October, 1999 to November, 2002, Ms. Cerisse has been the Managing Director
of Sierra Group, Inc., which advises private companies on becoming public on the
Over-the-Counter Bulletin Board. Prior to that, Ms. Cerisse provided management
and business consulting for start-up project teams. Ms. Cerisse has been a
principal in various entrepreneurial businesses and has over 20 years of sales
and marketing experience, both of products and services in industries including
nutrition and health, financial and real estate services, and technology. Ms.
Cerisse has been responsible for financial and corporate management and the
preparation of contracts and financial documentation for the companies she has
worked with.
(G) LEGAL PROCEEDINGS
Koala is not a party to any pending legal proceeding or litigation and none of
its property is the subject of any pending legal proceeding. Further, the
former directors and executive officers of Koala know of no legal proceedings
against Koala or its property contemplated by any governmental authority.
No former director, officer, affiliate or shareholder of Koala, or any associate
of any such director, officer or security holder, is a party adverse to Koala or
has a material interest adverse to Koala in reference to pending litigation.
(H) CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCCOUNTANT
None
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA INFORMATION AND EXHIBITS
Registrant intends to file the financial statements conforming to this Section
within sixty days of this filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KOALA INTERNATIONAL WIRELESS INC.
December 5, 2002 By: /s/ Miguel Caron
- ------------------ -------------------------
(Date) Name: Miguel Caron
-------------------
Its: President
-------------------
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2 Agreement and Plan of Exchange By and Between Koala International
Wireless Inc. and NoWire Telecom dated November 20, 2002
99 News Release - Koala International Wireless Inc. announces
acquisition of NoWire Telecom