U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Act of 1934
Date of Report (Date of earliest event reported): September 27, 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:
Sierra Group Inc.
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
ROUTE1 ACQUISITION AGREEMENT
Pursuant to a voluntary Share Exchange Agreement (the "Agreement") dated
September 27, 2002, Koala International Wireless Inc. (the "Company"), a Nevada
corporation, acquired all of the outstanding shares of common stock of Route1
Corporation ("Route1"), an Ontario, Canada corporation, from the shareholders of
Route1 in exchange for an aggregate of 5,999,990 shares of its common stock (the
"Exchange").
The Exchange was approved by the unanimous consent of the Board of Directors of
Route1 on September 27, 2002 and by shareholders of Route1 holding a majority of
the issued and outstanding stock of Route1 on October 7, 2002.
The Exchange was also approved by unanimous consent of the Board of Directors of
the Company on September 27, 2002. No Company shareholder vote was required.
The Exchange was effective on October 8, 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.
At December 12, 2002 the Company had not yet issued the 5,999,990 shares. The
Company intends to issue the shares pending the outcome of the judgment issue
noted under Item 2 (g), Legal Proceedings.
CONTROL OF THE COMPANY
The Company had 13,696,000 shares of common stock, $0.001 par value per share,
issued and outstanding prior to the Exchange. Route1 had 1,287,976 shares of
common stock of no par value per share issued and outstanding prior to the
Exchange. As a result of the Exchange, the Company will have 19,695,990
shares of common stock issued and outstanding as of October 8, 2002,
approximately 30.5 per cent of which are held by the former shareholders of
Route1. (Note: at December 12, 2002 the Company had not issued the shares for
Route 1, pending resolution of the judgment issues also noted in Part 2, (g),
Legal Proceedings)
Effective October 8, 2002, one new director was elected to the Board of
Directors of the Company and new officers were appointed. Christine Cerisse
remains a Director and Chairman and Treasurer of the Company but has resigned as
President and Secretary. Larry Wintemute has resigned from his position on the
Board. Mr. White was elected a member of the Board of Directors of the Company.
The Board of Directors of the Company appointed K. Andrew White to serve as
President, Chief Executive Officer and Secretary.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Upon the effective date of the Exchange, October 8, 2002, Route1 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 Route1.
In exchange for all of the outstanding shares of common stock of Route1, being
1287,976 common shares, the Company issued from its treasury an aggregate of
5,999,990 shares of its common stock, having a par value of $0.001 per share to
the shareholders of Route1.
The consideration exchanged pursuant to the Exchange was negotiated between
Route1 and the Company. In evaluating the transaction, the Company used
criteria such as the value of the assets of Route1, Route1'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 Route1 was conducted
pursuant to an exemption from registration, namely Rule 506 of Regulation D
and/or Regulation S and/or Section 4(1) under the Securities Act of 1933, as
amended (the "Act"). As a result, the 5,999,990 shares of the Company's common
stock held by the shareholders of Route1 are "restricted securities" subject to
Rule 144 of the Act.
The acquisition of Route1 is the first of a series of acquisitions whereby the
Company will also acquire a 100% interest in each of NoWire Telecom, Inc.
('NoWire') for the issuance of approximately 6,000,000 shares of common stock of
the Company and 1547173 Ontario 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.
(A) DESCRIPTION OF BUSINESS
Description of the Business of the Company
CORPORATE BACKGROUND
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.
In June 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.
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 complete the MVNO
strategy.
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.
The Company's principal executive offices are located at #676, 141 - 757 West
Hastings Street, Vancouver, British Columbia, Canada, V6C 1A1.
PLANNED FUTURE OPERATIONS
The core business of Koala will be a virtual private cellular data network, the
"Koala Network", and the processing of debit and credit card transactions from
wireless terminals it provides merchants. As the company expands the
applications available to its subscribers, these two businesses overlap and
become complementary. In addition, each hardware and software component of the
Koala network 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. Furthermore, there will be an integration of the Koala Network
with the debit and credit processing whereby network subscribers will have
wireless access to that processing capability.
REGULATORY ENVIRONMENT
The manufacture and use of Route1 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 Route1 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
Route1's assets or concepts.
EMPLOYEES
The Company and Route1 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
Route1, 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.
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 June 16, 1995 (date of incorporation) through September
30, 2002, Route1 engaged in no significant operations other than
organizational activities and research and development of its Route1 product.
Route1 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 Route1 software applications, the cost of conducting
marketing research and preparing a marketing campaign for Route1.
The Company's business plan with respect to its Route1 business is to
continue research and development of the Route1 product, add-ons to the Route1
applications, to commence production of the Hipster and to conduct marketing
research to determine the demand for its products in its target markets.
The Company is in the process of obtaining financing that will cover the
Company's operational costs for the next six months, and is also in the process
of looking for office space to lease.
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 Route1 product at
$250,000 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. Route1 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. Route1 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.
Route1's limited operating history make the prediction of future results
difficult or impossible. Furthermore, Route1'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 for the foreseeable future. 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 is no assurance 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 October 8, 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 3.53%
Capital Partners Fund I 2,991,364 15.19%
Michael McGrath 1,632,000 8.29%
Robert Vivacqua 2,208,000 11.21%
ALL EXECUTIVE OFFICERS AND
DIRECTORS AS A GROUP
(3 persons) 695,290 3.53%
* 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 President, CEO, Secretary and a Director
Lorne Catling 46 Director
Christine Cerisse 48 Chairman, Treasurer and a 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 as the Manager of Information Systems for
Delrina(Symantec) Corporation.
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 - Chairman, Treasurer and a Director
- -------------------------------------------------------------
Ms. Cerisse has spent over 20 years in the financial industry in the field
of financial planning and financial management. She is a Chartered and
Registered Financial Planner. From October, 1999 to October, 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 was a principal in Cerisse Capital Corporation (a.k.a. White
Hills Management Group) where she provided management and business consulting
for start-up project teams.
Ms. Cerisse has been a principal in various entrepreneurial businesses,
including real estate development and property management, financial investment
and broker-dealer security houses, product distribution networks, the restaurant
business, and environmental and Internet-related companies. She has over 20
years of sales and marketing experience, both of products and services in
various industries including nutrition and health, financial services, and
technology. Ms. Cerisse has been responsible for raising over 40 million
dollars of financing for various private and public companies. She has assisted
various companies in corporate management, preparation of contracts and
financial documentation.
(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 with the exception
of Route 1 judgment (see paragraph below). 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.
Route1 Corporation is subject to a judgment for $97,000, which amount has been
accrued as a liability in Route1's financial statements. The Company has not yet
issued as at Dec 11, 2002, the 6,000,000 shares to Route1's shareholders
pending resolution of this judgment, other issues relating to the judgment, and
the filing of an Information Statement.
(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
KOALA INTERNATIONAL WIRELESS INC.
(A Development Stage Company)
PRO FORMA Consolidated
Financial Statements
September 30, 2002
INDEX
- -----
Page
----
Financial Statements
PRO FORMA Consolidated Balance Sheet 2
PRO FORMA Consolidated Statement of Operations 3
Notes to PRO FORMA Consolidated Financial Statements 4
PREPARED BY MANAGEMENT
(2)
KOALA INTERNATIONAL WIRELESS INC.
(A Development Stage Company)
PRO FORMA Consolidated Balance Sheets
September 30, 2002
(U.S. Dollars)
Assets
Current
Cash $ 3,445
Accounts receivable 5,511
Miscellaneous receivable 28,313
------------
37,269
Fixed Assets 51,019
- ----------------------------------------------------------------------- ------------
Trademarks 8,445
- ----------------------------------------------------------------------- ------------
$ 96,733
Liabilities
Accounts payable and accrued liabilities $ 437,596
Loans payable 236,880
674,476
------------
Stockholders' Equity (Deficiency)
Common Stock
Authorized
20,000,000 Shares of preferred stock
with a par value of $0.001 each
100,000,000 Shares of common stock with a par value of $0.001 each
Issued and Outstanding
19,696,000 Shares of common stock 19,271
- ----------------------------------------------------------------------- ------------
Additional Paid-in Capital 2,079,068
- ----------------------------------------------------------------------- ------------
Deficit Accumulated During the Development
- -----------------------------------------------------------------------
Stage of Operations (2,676,082)
- ----------------------------------------------------------------------- ------------
(577,743)
------------
$ 96,733
------------
PREPARED BY MANAGEMENT
(3)
KOALA INTERNATIONAL WIRELESS INC.
(A Development Stage Company)
PRO FORMA Consolidated Statement of Operations
Year Ended September 30, 2002
(U.S. Dollars)
Pro Forma
--------------------------------------------
KIWI RTE1 Combined
--------------------------------------------
Interest earned $ 0 (13,186) $(13,186)
- ----------------------------- --------------------------------------------
Expenses
Salaries and wages 65,050 74,262 139,312
Professional fees 114,182 39,002 153,184
Contractors 66,586 105,280 171,866
Investor relations 38,412 0 38,412
Marketing and promotion 34,334 326 34,660
Administration and general 71,391 (7,674) 63,717
Loan costs 12,000 0 12,000
Write down of inventory 104,247 0 104,247
Write down of capital asset 0 26,113 26,113
Transfer agent fees 1,804 0 1,804
Web site 3,100 0 3,100
Amortization 7,101 28,602 35,703
Net Loss (518,207) $(252,725) $(770,932)
Basic and diluted
Net loss per share $ (0.039)
Shares Used in Basic
and Diluted Per Share
Computation 19,696,000
PREPARED BY MANAGEMENT
(4)
KIWI INTERNATIONAL WIRELESS INC.
(A Development Stage Company)
Notes to PRO FORMA Consolidated Financial Statements
September 30, 2002
(U.S. Dollars)
1. ORGANIZATION AND BASIS OF PRESENTATION
These PRO FORMA consolidated financial statements include the accounts of Koala
International Wireless Inc. ("the Company") and Route 1 Corporation. The Company
is located in Canada with all figures translated into United States dollars. The
acquisition by the Company of Route 1 Corporation is recorded as a purchase.
These PRO FORMA consolidated financial statements are intended to reflect the
continuing impact on the books and records of the Company as those records would
be expected to look on the completion of all of the transactions contemplated
and disclosed elsewhere in the PRO FORMA consolidated financial statements by
showing how these specific transactions might have affected the Company's
historical financial statements. These PRO FORMA consolidated financial
statements should be read in conjunction with the Company's year end audited
September 30, 2002 (non-consolidated) financial statements and with the July 31,
2002 year end audited financial statements of Route 1 Corporation.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Foreign currency translation
The Company's operations and activities are conducted principally in Canada,
hence the Canadian dollar is the functional currency, which is translated into
U.S. dollars as follows:
(i) Monetary assets and liabilities at the rate of exchange in
effect as at the balance sheet date;
(ii) Non-monetary assets and liabilities at the exchange rates
prevailing at the time of the acquisition of the assets or assumptions of the
liabilities; and
(iii) Revenues and expenditures at the average rate of exchange for
the year. Gains and losses arising from this translation of foreign currency
will be accounted for as other comprehensive income (loss).
(b) Net loss per share
Net loss per share calculations are based on the weighted average number of
common shares outstanding during the period, assuming that the acquisition of
Route 1 Corporation occurred at the beginning of the period.
(c) Use of estimates
The preparation of PRO FORMA, consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amount of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, and the amounts of revenues and expenses during the period. Actual
results could differ from those estimates and would impact future results of
operations and cash flows.
(d) Financial instruments
The Company's financial instruments consist of current assets and current
liabilities. It is management's opinion that the Company is not exposed to
significant interest, currency or credit risks arising from these financial
instruments. The fair value of these financial instruments approximates their
carrying value.
3. ACQUISITION
The company acquired Route l Corporation as a next-generation financial
transaction processing company.
As consideration for the purchase, the vendor was issued common shares of the
company. There were 6,000,000 shares of the company issued and valued at $6,000
USD, which represents 30.65% of the issued and outstanding shares.
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.
October 11, 2002 By: /s/ K. Andrew White
- ------------------ -----------------------------
(Date) Name: K. Andrew White
-----------------------
Its: President
--------------
December 13, 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 Route1 Corporation dated
September 27, 2002
99* News Release - Koala International Wireless Inc. announces
acquisition of Route1 Corporation
*Previously filed with the SEC.