UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 20-F

[X]

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITEIS EXCHANGE ACT OF 1934

 

OR

[ ]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended _____________________________

 

OR

[ ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to ______________________

Commission file number _______________________________

TransAKT Corp.
(Exact name of Registrant as specified in its charter)

(Translation of Registrant's name into English)

Alberta, Canada
(Jurisdiction of incorporation or organization)

Suite 202, 1212 - 31 st Avenue NE, Calgary, Alberta, Canada, T2E 7S8
(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class

None

 

Name of each exchange on which registered

Not applicable

Securities registered or to be registered pursuant to Section 12(g) of the Act.

Common Stock

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

(Title of Class)

 

Indicate the number of outstanding shares of each of the issuer's capital or common stock as of the close period covered by the annual report.

As of August 31, 2003, there were a total of 27,123,134 common shares issued and outstanding.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[ ]Yes [X] No

Indicate by check mark which financial statement item the registrant has elected to follow.

[ ] Item 17 [X ] Item 18

_________________________________

 

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

[ ]Yes [ ] No

TABLE OF CONTENTS

 

PART I

2

Item 1. Identity of Directors, Senior Management and Advisors

2

Item 2. Offer Statistics and Expected Timetable

2

Item 3. Key Information

3

Item 4. Information on the Company

7

Item 5. Operating and Financial Review and Prospects

9

Item 6. Directors, Senior Management and Employees

11

Item 7. Major Shareholders and Related Party Transactions

14

Item 8. Financial Information

14

Item 9. The Offering and Listing

14

Item 10. Additional Information

15

Item 11. Quantitative and Qualitative Disclosures About Market Risk

19

Item 12. Description of Securities Other than Equity Securities

19

PART II

19

Item 13. Defaults, Dividend Arrearages and Delinquencies

19

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.

19

Item 15. Controls and Procedures

20

Item 16. Code of Ethics

20

PART III

20

Item 17. Financial Statements

20

Item 18. Financial Statements

20

Item 19. Exhibits

20

PART I

This Registration Statement on Form 20-F includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the "Exchange Act"). These statements are based on management's beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning our possible or assumed future results of operations set forth under the heading "Operating and Financial Review and Prospects". Forward-looking statements also include statements in which words such as "expect", "anticipate", "intend", "plan", "believe", "estimate", "consider" or similar expressions are used.

Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. Our future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements. 

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

DIRECTORS AND SENIOR MANAGEMENT

The following sets forth the names, business addresses, and functions of our directors and senior management:

Name

Functions

Address

Daniel Pomerleau

Chairman, President, CEO and Director

3958 Edenstone Road NW Calgary , AB, Canada T3A 3Z6

Roland Williams

Independent Director

162 Via Del Sol, Walnut Creek, California, 94596-1865

Michael Pierce

Independent Director

11 Scenic Glen Close NW, Calgary, AB Canada, T3L 1H5

Gordon Miller

Independent Director

11 Varmoor Place NW, Calgary AB, Canada T3A 0A1

Riaz Sumar

Chief Financial Officer and Director

Suite 1209, 1030 - 16 th Avenue SW, Calgary, AB, T2R 1N1

ADVISORS

The Company's principal advisors are:

Banking

Royal Bank of Canada
1333 - 32 nd Avenue NE, Calgary, Alberta, Canada, T2E 7Z5
(403) 292-2347

U.S. Legal Counsel

W. Scott Lawler, Esq.
1530-9 Avenue S.E., Calgary, Alberta, T2G 0T7, Canada
403-693-8014

AUDITORS

Daunheimer & Dow
6620 Crowchild Trail SW, Calgary, Alberta, T3E 5R8, Canada
(403) 240-7360

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

We are filing this Form 20-F as a registration statement under the Securities Exchange Act of 1934, and as such the information called for by Item 2 is not applicable.

2  

ITEM 3. KEY INFORMATION

SELECTED FINANCIAL DATA -

The tables below present selected financial information. Our financial statements are stated in Canadian Dollars and are prepared in accordance with Canadian Generally Accepted Accounting Principles ("GAAP"). Table 1 presents selected financial information under Canadian GAAP and Table 2 presents the same information assuming we had reported under US GAAP. These tables should be read in conjunction with the financial statements and notes thereto and Management Discussion and Analysis included elsewhere in this Registration Statement. All dollar amounts in this report are expressed in Canadian dollars unless otherwise stated.

Table No. 1
Selected Financial Data CDN GAAP
(CDN $)

 

For the fiscal year ending December 31,

June 30 2003 (Unaudited)

 

2000

2001

2002

Operating Revenues

Nil

Nil

6,309

68,422

Income (loss) from Operations

(1,109,365)

(1,258,495)

(1,332,899)

(316,304)

Net Income (loss)

(1,102,314)

(1,323,661)

(1,331,445)

(316,239)

Earnings (Loss) per share

(0.06)

(0.02)

(0.06)

(0.01)

Diluted Earnings (Loss) per share

-

-

-

-

Dividends per share

Nil

Nil

Nil

Nil

Working Capital

227,166

(404,532)

125,372

(31,746)

Long Terms Debt

Nil

Nil

394,400

461,582

Shareholders' Equity

457,096

(127,110)

296,194

21,670

Capital Stock

17,610,712

19,964,412

25,340,912

25,430,912

Total Assets

976,321

615,262

1,122,068

1,350,772

Table No. 2
Selected Financial Data US GAAP
(CDN $)

 

For the fiscal year ending December 31,

June 30, 2003 (Unaudited)

 

2000

2001

2002

Operating Revenues

Nil

Nil

6,309

68,422

Income (loss) from Operations

(1,109,365)

(1,258,495)

(1,332,889)

(316,304)

Net Income (loss)

(1,102,314)

(1,323,661)

(1,331,445)

(316,239)

Earnings (Loss) per share

(0.06)

(0.02)

(0.06)

(0.01)

Diluted Earnings (Loss) per share

-

-

-

-

Dividends per share

Nil

Nil

Nil

Nil

Working Capital

227,166

(404,532)

125,372

(31,746)

Long Terms Debt

Nil

Nil

394,400

461,582

Shareholders' Equite

457,096

(127,110)

296,194

21,670

Capital Stock

17,610,712

19,964,412

25,340,912

25,430,912

Total Assets

976,321

615,262

1,122,068

1,350,772

The Registration Statement contains financial statements that were prepared in Canadian Dollars with conversions of certain amounts United States dollars converted into Canadian dollars based upon the exchange rate in effect at the end of the calendar year to which the amount relates, or the exchange rate on the date specified. These translations should not be construed as representations that the Canadian dollar amounts actually represent such United States dollar amounts or that Canadian dollars could be converted into United States dollars at the rate indicated.

The first table below sets forth the rate of exchange for the Canadian Dollar at the end of each of the five most recent fiscal years ended December 31, the average rates for each year, and the range of high and low rates for each year. The second table below sets forth the high and low exchange rates for each month during the previous six months. For purposes of these tables, the rate of exchange means the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York. The table sets forth the number of Canadian Dollars required under that formula to buy one US Dollar. The average rate means the average of the exchange rates on the last day of each month during the year.

3

U.S. Dollar/Canadian Dollar

Currency Exchange Table
U.S. Dollar/Canadian Dollar

 

Average

High

Low

Close

Quarter Ended June 30, 2003

1.45

1.58

1.33

1.35

Fiscal Year Ended 12/31/02

1.57

1.62

1.51

1.58

Fiscal Year Ended 12/31/01

1.55

1.60

1.49

1.59

Fiscal Year Ended 12/31/00

1.49

1.56

1.44

1.50

Fiscal Year Ended 12/31/99

1.49

1.51

1.46

1.44

Fiscal Year Ended 12/31/98

1.48

1.58

1.41

1.54

The current rate of exchange was $1.3850 on August 29, 2003.

Table
U.S. Dollar/Canadian Dollar

03/03

04/03

05/03

06/03

07/03

08/03

High

$1.4905

$1.4843

$1.4221

$1.3768

$1.4114

$1.3836

Low

$1.4659

$1.4336

$1.3446

$1.3348

$1.3368

$1.4100

CAPITALIZATION AND INDEBTEDNESS

We are authorized to issue an unlimited number of common shares with no par value, an unlimited number of preferred shares with no par value. As of August 31, 2003, we have a total of 27,123,134 common shares issued and outstanding and 45 shareholders. Based on research done by us we believe that we have over 1,100 beneficial shareholders.

Other than expenses outlined below or expenses incurred in our normal day-to-day operations, we have no outstanding debts.

We have an outstanding promissory note of $40,000 due 180 days from April 25, 2003. The note bears a 10% simple interest rate.

In addition we have a US$350,000 inventory loan outstanding that is to be paid back from sales. This loan was obtained on December 12, 2002 and the funds were used to purchase 1,000 wireless terminals. For every terminal out of the 1,000 sold, the Company must payback $450 to the lenders, which payment is comprised of a) US$350 as principal and b) US$100 as a bonus. In the event that the loan was not paid back in six months from the date funds were advanced to us, a 10% per annum interest rate would become payable on any outstanding principal amount. To date the loan remains outstanding and interest commenced accruing on the balance in June 2003. In the event that the total principal and the bonus is not repaid within 12 months from the date that the funds were advanced, the outstanding amount can be converted into common shares at the 30 day average closing price of the common shares on the TSX Venture Exchange.

RISK FACTORS

INVESTMENT IN THE COMMON SHARES OFFERED HEREBY IS HIGHLY SPECULATIVE. A PROSPECTIVE INVESTOR SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS:

  Risks Relating to Our Stock

4

Limited Operating History

Since inception, we were primarily focused on research and development. It was only in April of this year that our products became commercial and as we are still in the process of proving the viability of our products and business model. No assurance can be given that we will be able to sustain operations from sales of our products or that our business model will be proven.

Competition

Communications-based businesses are intensely competitive and involve a high degree of risk. There can be no assurance that public acceptance of and business transacted by us will be of the magnitude required to be commercially profitable. .

Many of our existing competitors, as well as a number of potential new competitors, have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than us. These factors may allow them to respond more quickly than us to new or emerging technologies and changes in customer requirements. It may also allow them to devote greater resources than we can to the development, promotion and sale of their products and services. Such competitors may also engage in more extensive research and development, undertake more far-reaching marketing campaigns, adopt more aggressive pricing policies and make more attractive offers to existing and potential employees, strategic partners, advertisers and Internet publishers. In addition, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to increase the ability of their products or services.

Volatility of World Economic Factors

Our revenues, profitability and future growth and the carrying value of assets are substantially dependent on prevailing world economic conditions and fluctuations in influencing factors such as exchange rates, rates of inflation, governmental stability and natural disasters. Our ability to borrow and to obtain additional capital on attractive terms is also substantially dependent upon these factors. The negative impact of these factors on sales orders originating from an affected country would have an adverse effect on our borrowing capacity, revenues, profitability and cash flows from operations.

Dependence on Key Personnel

We are heavily dependent upon the expertise of certain of its key officers and directors, and the loss of one or more of these individuals could have a material adverse effect. We do not maintain key-person insurance policies on any of its executive officers. Our future success also depends on our ability to continue to attract, retain and motivate highly skilled employees. Competition for employees in our industry is intense. We may be unable to retain its key employees or attract, assimilate or retain other highly qualified employees in the future.

Dependence On Proprietary Rights And Risk Of Infringement

Our success and our ability to compete is substantially dependent on our internally developed technologies which we are currently in the process of trying to protect through a combination of patent, copyright, trade secret and trademark law. We cannot provide any assurance that any intellectual property applications will be approved. Even if they are approved, such patents, trademarks or other intellectual property registrations may be successfully challenged by others or invalidated.

We enter into confidentiality or license agreements with our employees, consultants and corporate partners, and generally control access to and distribution of our technologies, documentation and other proprietary information. Despite efforts by us to protect our proprietary rights from unauthorized use or disclosure, parties may attempt to disclose, obtain or use its solutions or technologies. There can be no assurance that the steps we have taken or will be taking will prevent misappropriation of its solutions or technologies, particularly in foreign countries where laws or law enforcement practices may not protect proprietary rights as fully as in the United States or Canada.

The trademark, copyright and trade secret positions of the point of sale businesses, are uncertain and involve complex and evolving legal and factual questions. In addition, there can be no assurance that competitors, many of which have substantial resources, will not seek to apply for and obtain trademarks, trade names and Internet domain names that will prevent, limit or interfere with our technology. Litigation or regulatory proceedings, which could result in substantial cost and uncertainty to us, may also be necessary to enforce our intellectual property rights or to determine the scope and validity of other parties' proprietary rights. There can be no assurance that we will have the financial resources to defend our trademarks, copyrights and domain names from infringement or claims of invalidity.

5

Rapid Technological Change and Risk of Technological Obsolescence

The communications industry is characterized by rapid and significant technological change. Many communication applications have a short cycle. Our future success will depend in large part on our ability to continue to respond to such changes. There can be no assurance that we will be able to respond to such changes or that new or improved competing technology will not be developed that renders our technology non-competitive.

Government Regulation And Legal Uncertainties

Laws and regulations directly applicable to communications, commerce and advertising are becoming more prevalent. The governments of one or more jurisdictions might attempt to regulate the our business or levy sales or other taxes relating to our activities. In addition, the growth and development of the market for communications industry may prompt calls for more stringent consumer protection laws, both in Canada and abroad, that may impose additional burdens on companies. Our business and results of operations and financial condition could be adversely affected by the adoption or modification of laws or regulations relating to communications.

We have a history of operating losses

We sustained operating losses for each of the fiscal years ended December 31, 2002, 2001 and 2000 and for the six month period ended June 30, 2003 of, respectively $1,332,889, $1,258,495, $1,109,365 and $316,304. We also anticipate sustaining a loss from operations for the fiscal year ended December 31, 2003.

We will need additional funds in order to implement our intended projects and there is no assurance that such funds will be available as, if and when, need.

Cash flow from operations for the fiscal years ended December 31, 2002, 2001, and 2000 and for the six month period ended June 30, 2003 were $(1,398,838), $(1,013,064), $(1,067,049), and $(172,499) respectively. We have been dependent upon the proceeds of equity and non-equity financing to fund operations. No assurances can be given that our actual cash requirements will not exceed our budget, that anticipated revenues will be realized, that, when needed, lines of credit will be available if necessary or that additional capital will be available to us

There is no assurance that we will be able to obtain such additional funds on terms and conditions we may deem acceptable. Failure to obtain such additional funds may materially and adversely affect our ability to effectively market and distribute our products.

The market price of our common shares has been and will in all likelihood, continue

to be volatile.

The market price of our common shares has fluctuated over a wide range and it is likely that the price of our Common Stock will fluctuate in the future. Announcements regarding acquisitions, the status of corporate collaborations, regulatory approvals or other developments by us or our competitors could have a significant impact on the market price of the common shares.

The value and transferability of our shares may be adversely impacted by the limited trading market for our shares and the penny stock rules.

There is only a limited trading market for our shares on the OTCBB. There can be no assurance that this market will be sustained or that we will be able to satisfy any future trading criteria that may be imposed by the NASD.

In addition, holders of our common stock may experience substantial difficulty in selling their securities as a result of the "penny stock rules." Our common stock is covered by the penny stock rules, a Securities and Exchange Commission rule that imposes additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors, generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and transaction prior to the sale. Consequently, the rule may affect the ability of broker-dealers to sell our securities and also may affect the ability of purchasers of our stock to sell their shares in the secondary market. It may also cause fewer broker dealers to make a market in our stock.

6

The large number of shares eligible for future sale by existing shareholders may adversely affect the market price for our common shares.

Future sales of substantial amounts of common shares in the public market, or the perception that such sales could occur, could adversely affect the market price of the common shares. At August 31, 2003, we had 27,123,134 common shares outstanding. On that date we also had reserved 3,335,000 common shares for issuance under our stock option plan at a per share exercise price of $0.50; and 2,327,485 common shares are reserved for issuance under the warrants issued pursuant to various private placements.

No prediction can be made as to the effect, if any, that sales of shares of common stock or the availability of such shares for sale will have on the market prices of our common stock prevailing from time to time.

We have limited sales of products to date .

Our future sales and therefore, cash flow and income, and our success, are highly dependent on success in marketing our products and consumer acceptance. We cannot assure shareholders that we will be able market our products effectively or that our products will be widely accepted by consumers.

There is no public market for the common shares at this time in the United States

Our common shares currently trade on the TSX Venture Exchange and we cannot give you any assurance that we will be able to attain a listing for our securities in the United States. We will attempt to have our stock authorized for quotation on the OTC-BB. This will be dependent upon the Company's ability to locate a market maker to submit an application for trading on the OTC-BB. The Company currently does not have a relationship with any market makers.

You should not expect to receive dividends

We have never paid any cash dividends on shares of our capital stock, and we do not anticipate that we will pay any dividends in the foreseeable future. Our current business plan is to retain any future earnings to finance the expansion of our business. Any future determination to pay cash dividends will be at the discretion of our board of directors, and will be dependent upon our consolidated financial condition, results of operations, capital requirements and other factors as our board of directors may deem relevant at that time.

ITEM 4. INFORMATION ON THE COMPANY

HISTORY AND DEVELOPMENT OF THE COMPANY

TransAKT was incorporated in the Province of British Columbia on December 10, 1996 as Green Point Resources Inc. On October 18, 2000, we changed our name to Wildcard Wireless Solutions Inc. On June 30, 2001, we filed Articles of Continuance in the Province of Alberta and became an Alberta corporation. On that same day, we conducted an amalgamation with Wildcard Communications Canada Inc., an Alberta corporation, our wholly-owned subsidiary, wherein Wildcard Communications Canada was merged into Wildcard Wireless Solutions Inc. On June 20, 2003, we changed our name to TransAKT Corp.

TransAKT has operated principally as a research and development company since its inception. Initial seed capital has been directed toward areas of product research and development, patent filings and administration. TransAKT has now completed development of its initial product and has entered into the sales and distribution phase. TransAKT's business is the design, development and manufacturing of next generation mobile wireless solutions for enterprise and consumer markets.

BUSINESS OVERVIEW

We began operations in 1997 and have just recently reached commercialization of our products. We design wireless point of sale systems that allow users to accept credit card payments anywhere anytime. Over the last 3 years we have spent the majority of our resources on research and development. In April 2003 we received our first commercial production run of products.

7

We have operated principally as a research and development company since its inception. Initial seed capital has been directed toward areas of product research and development, patent filings and administration. We have now completed development of our initial product and have entered into the sales and distribution phase. Our business is the design, development and manufacturing of mobile wireless solutions for enterprise and consumer markets

Our products are currently offered in Canada and the United States only. We have had no revenues in the last three fiscal years and have just begun commercially marketing our products in 2003.

Our products can be used all year round and are not affected by seasonal trends.

Our principal product is the TransAKT™ . The TransAKT™ is a wireless Point of Sale (WPOS) device that clips on to the back of a Motorola StarTAC , Motorola Timeport or Motorola iDen cellular phone providing the user with a mechanism for swiping cards with magnetic stripes (e.g., credit cards, debit cards, etc.) for conducting wireless commercial transactions. Once attached the phones are used to send transaction information over the cellular network to the processing center for credit approval. This application provides mobile merchants, business professionals and consumers with voice, data and transactional capability all in one handheld device. We anticipate adapting the TransAKT™ for use with other types of cellular phones.

 

It is not our intention to engage in the capital and management intensive industry of manufacturing our products. We intend to outsource our manufacturing, warehousing and distribution. Following this approach, we do not expect that we will experience volatility in our gross margins because all outsourcing will be undertaken on a fixed contract basis. We have spent considerable time identifying suitable international engineering and manufacturing firms.

We are not generally restricted to manufacturers for our products. To date, we have been able to select from a number of potential contractors and manufacturers and have been able to contract with well-organized firms that have a proven track record. Our first products are being manufactured in both South Africa and China.

With respect to the production of the TransAKT™ , we have a contractual arrangement with Sygade, a former subsidiary of Fujitsu. All work performed by Sygade will carry a "bring in" repair warranty against manufacturing faults and is valid for 12 months from time of purchase. The intellectual property rights to the TransAKT™ design belong to us.

All raw materials for our products are sourced from China and the United Kingdom. Due to the fact that our product uses computer components, the price of these components can be highly volatile and are subject to the risk of obsolescence. In order to control costs and the risk of obsolescence, we contract with a manufacturer at a set price for the building of our product over a number of terminals. The manufacturer becomes responsible for making sure enough inventory is in stock and if not available quickly implements minor product changes to allow for components to be replaced.

Marketing -

Our products are currently offered in Canada and the United States only. We have had no revenues in the last three fiscal years and have just begun commercially marketing our products in 2003.

It is not our intention to engage in the capital and management intensive industry of large-scale marketing of our products. In most cases, we will align ourselves with major distribution partners such as banks, ISO's (Independent Sales Organizations) and telephone companies for the sale of our products through their channels of distribution. These large established partners normally will fund and support extensive domestic and international marketing programs for our products. We do not plan to employ our own direct sales force initially, but rather employ regional managers, field service engineers and customer representatives to support our channel partners and work closely with sales forces.

8

While the initial marketing emphasis will be on North America, the Company plans to enter the European and Asian markets through the establishment of marketing partners. This strategy is increasingly important because the cellular market in Europe is almost three times the size of the North American market. 

In marketing the TransAKT™, we will target those businesses that conduct commercial transactions away from a central business location, including food delivery, utilities, government house cleaning, healthcare, financial services, delivery vans, landscaping, trades persons, and taxicabs, etc. Mobile wireless solutions are emerging technologies and applications where enterprises and consumers can use their mobile phones to carry out their business whenever and wherever they want .  

Patent rights, copyrights, trademarks, trade secrets and similar intellectual property are important to our success. We rely on patent, trademark and copyright law, trade secret protection and confidentiality or license agreements with our employees, customers, partners and others to protect their proprietary rights.

A patent application protecting the proprietary technology of the TransAKT™ was filed in the Canadian Patent Office on November 18, 1999. This application is "provisional" with the expectation that further refinements in the technology will follow and will be included in corresponding U.S. and P.C.T. applications.

We continue to make filings for the trademark(s) and patents in Canada and the U.S. We are also reviewing whether to register the industrial design of the technology. Our agents conduct a search every three months to keep us abreast of all filings in this area.

Competition 

The cellular communications industry is expanding at exceptional rates both in utilization and functionality demands. Companies such as Nokia, Ericcson, Qualcomm, Palm Pilot, ZiCorp and Motorola are rushing to expand the utility of their products in areas of data communication and entertainment. Some companies, for example, have incorporated video games into their cellular phones. We have identified certain areas of functionality that can be enhanced in cellular phones and have integrated this functionality by attaching our credit card reading devices to the phones. By externalizing this technology, we are able to develop products that have certain communication capabilities that cellular telephones alone cannot presently duplicate because of problems they face modifying the internal cellular telephone technology to meet the security demands of the sponsoring financial institutions.

ORGANIZATIONAL STRUCTURE

We have no subsidiaries.

PROPERTY, PLANTS AND EQUIPMENT

We have no material tangible fixed assets as we subcontract all manufacturing to third parties.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

OPERATING RESULTS

During the fiscal year ended December 31, 2002, we had $6,309 in sales with a cost of goods sold of $3,413, while during fiscal year 2001 we had no sales since we were still developing our first products. Our operating expenses in fiscal year 2002 increased slightly to $1,335,795 from $1,258,496 in fiscal year 2001. During fiscal year 2002, our management and consulting fees and office expenses significantly increased due to additional marketing staff, increased management fees and increased investor relations activities. Such increases were partially offset by decreases in rental expense, interest and bank charges, travel costs, professional fees and advertising and promotion.

During the three month period ended June 30, 2003 we had $68,422 in sales compared to no sales in the same period from the preceding year. Operating expenses over the comparative periods ended June 30, 2003 and 2002 were $210,655 and $444,903 respectively. The reduction in operating expenses over the comparative three month periods was primarily the result of the closing of our Vancouver office, which reduced costs associated with management fees, consulting fees, and investor relation fees. .

Our net loss for year 2002 was $1,331,445 compared to a net loss for year 2001 of $1,258,496. There was a net loss of $186,021 for the three months ended June 30, 2003 as compared to a net loss of $443,642 for the three months ended June 30, 2002.

9

TransAKT's financial condition can be impacted by the fluctuations in the exchange rate between the Canadian dollar and the US dollar due to the fact that some of the funds that we raise are in Canadian dollars, we report in Canadian dollars and all of our inventory is purchased in US dollars.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2002, we had total assets of $1,122,068 compared to total assets of $615,262 as of December 31, 2001. This increase in assets predominantly came from $250,000 in proceeds from an inventory loan we received in year 2002. As at June 30, 2003 we had total assets of $1,350,772. An additional $154,000 in proceeds from the inventory loan was received during the current fiscal year.

As of December 31, 2002, we had a working capital surplus of $125,372, compared to a working capital deficit at December 31, 2001 of $404,533. The increase in our working capital was mainly due to the receipt of proceeds from our inventory loan. As at June 30, 2003 we had a working capital deficit of $31,746 as compared to $574,241 as of June 30, 2002, which improvement was predominantly related to our inventory loan. As of December 31, 2002, our accumulated deficit was $4,376,624, compared to an accumulated deficit of $3,045,179 as of December 31, 2001. As of June 30, 2003 our accumulated deficit was $4,692,863 as compared to an accumulated deficit of $3,784,235 as at June 30, 2002.

We financed our operations during fiscal year 2002 through the issuance of common shares with proceeds of $1,754,750. We used cash in operations of $1,398,838 and used cash in investing activities of $305,177.

Operations for the six months ended June 30, 2003 continued to be financed through proceeds from our private placements, as well as net income from our producing oil and gas assets. We had net cash flows from operations of $3,291 and used cash in investing activities of $11,611 to March 31, 2003.

TREND INFORMATION

TransAKT participates in an industry with tremendous competition, scope, global opportunity and technological change. For example, the Cellular Telecommunications Industry Association (the "CTIA") estimates that by the year 2005, 50 per cent of all phone calls in the world will be wireless. According to Ericsson's projections the U.S. m-commerce market is expected to grow from $240 million today to $120 billion by 2008. TransAKT intends to compete as a multi-product company targeting a number of different telecommunications industry niches. This tremendous growth can be credited to advances in technology as well as increased competition. As the quality and functionality of cellular phones has advanced significantly, their affordability has also improved. As the cost-spread between fixed-line and mobile phones narrows, it is likely that people will use their convenient mobile phone more. It is estimated that, by the year 2005, wireless phone usage will exceed the number of wired phones.

The enormous acceptance of the cellular phone on a global scale has meant full capacity for the cellular phone manufacturers. As a result, cellular phone manufacturers have been unable to address the increasing need for cellular phone accessories. The market for wireless products is relatively young. Already the lines between voice and data communications are blurring as the demand for 24-hour access to people and information increases dramatically. Wireless data, from simple data transmissions to sophisticated messaging applications, will drive the next generation of growth in wireless.

Data requires a broad based digital network to be effective, so the market is just beginning in the U.S.

Currently, the wireless data market is comprised of mobile business professionals and workers in the field. Vertical markets across many industries - health care, finance and field service, to name a few - have a ready need for specialized wireless data applications. The real market potential, however, is the mass consumer.

Just as answering machines enhanced the traditional telephone as a method of communications, wireless data is expected to enhance the cellular phone as a communication device. Wireless data will exist alongside voice as a standard set of communication options, each with its own distinct advantages.

Wireless data represents the next logical step to applications that have already established a foothold in the consumer market.

10

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

DIRECTORS AND OFFICERS

Name

Age

Position

Daniel Pomerleau

48

Chairman, CEO, President, and Director

Michael Pierce

51

Director

Roland Williams

52

Director

Gordon Miller

46

Director

Riaz Sumar

33

CFO and Director

Jean Pomerleau

44

Chief Operating Officer

Other than Daniel Pomerleau and Jean Pomerleau, who are brothers, none of the above Directors or officers are related and no arrangements or understandings with major shareholders, customers, suppliers, or other persons resulted in their selections as a Director or Officer.

Daniel Pomerleau

Mr. Pomerleau founded TransAKT Corp in 1997 and has been President since inception. With over 17 products and patents developed, Mr. Pomerleau brings significant inventive and technical experience. Since attending University, Mr. Pomerleau has worked in the oil field industry as a technical director for a number of international drilling companies such as NL Baroid and International Drilling Fluids. From 1991 to 1994 Mr. Pomerleau founded as was President of Trident Systems. From 1994 to 1997 he founded LWT Instrument Inc. (oil field instrumentation), and Absolute Zero Emissions Technology Corporation ( variable cam timing system for internal combustion engines).

Michael Pierce

Mr. Pierce was Chief Financial Officer of the Company from October 2000 to October 2002. Currently Mr Pierce serves as President and a Director of Baltic Resources , a mineral exploration company. Mr. Pierce's tenure with Baltic Resources began in August 1996.

Roland Williams

Mr. Roland Williams brings a strong technical background to the Board of Directors. Since 1995, he has served as Senior Vice President, Technology Solutions for Zi Corp Inc., an embedded software technologies company.

Gordon Miller

Gordon Miller has been part owner and operator of Miller Excavating for the last 25 years. He serves as an independent Director for the Company.

Riaz Sumar

Mr. Riaz Sumar, became Chief Financial Officer of the Company in October 2002 and became a Director on July 14, 2003. Mr. Sumar has experience in public company governance and regulatory requirements both in Canada and the United States. Mr. Sumar's principal occupation from February 1996 to October 2002 was serving as Controller for Tracer Petroleum Corporation, an international oil and gas exploration company.

Jean Pomerleau

Mr. Jean Pomerleau became Chief Operating Officer in August 2003. From 1997 to present Mr. Pomerleau has been the Company's general manager of operations.

COMPENSATION

Compensation of Directors

The following table sets forth the compensation paid to our President and two other most highly compensated executive officer for the years indicated. No other executive officer of TransAKT earned a salary and bonus for such fiscal year in excess of CDN$100,000.

11

Name and Principal Position

Year Ended

Annual Compensation

Long Term Compensation

All Other Compen-sation
($)

Salary
($)

Bonus
($)

Other Annual Compen-sation
($)

Awards

Payouts

Securities Under Options/ SARs Granted
(#)

Restricted Shares or Restricted Share Units
($)

LTIP Payouts
($)

William Atkinson
Chief Executive Officer

2002/12/31

2001/12/31

2000/12/31

Nil
Nil
Nil

$9,346Nil
Nil

$60,000
$60,000
$75,000

600,000
500,000
400,000

$221,000(1)
$500,000(1)
$9,180,000

Nil
Nil
Nil

Nil
Nil
Nil

Daniel Pomerleau
President

2002/12/31
2001/12/31
2000/12/31

Nil
Nil
Nil

$10,000
Nil
Nil

$45,500
$60,000
$105,000

700,000
700,000
300,000

$1,398,897(2)
$1,045,094(2)
$19,187,916

Nil
Nil
Nil

Nil
Nil
Nil

Riaz Sumar
Chief Financial Officer

2002/12/31
2001/12/31
2000/12/31

Nil
Nil
Nil

$Nil
Nil
Nil

$80,803
$6,578
Nil

500,000
50,000
Nil

Nil
Nil
Nil

Nil
Nil
Nil

Nil
Nil
Nil

(1) On October 18, 2000 in connection with the closing of the reverse takeover transaction with Wildcard Communications Canada Inc., Mr. Atkinson acquired 2,000,000 performance escrow shares at a price of $0.01 per share. At the end of 2001, the value of these shares had decreased to $500,000. On April 24, 2002Mr. Atkinson sold 1,150,000 of these shares to another principal of the Company at a price of $0.01 per share.

(2) On October 18, 2000 in connection with the closing of the reverse takeover transaction with Wildcard Communications Canada Inc., Mr. Pomerleau acquired 4,180,374 performance escrow shares at a price of $0.01 per share. At the end of 2001, the value of these shares had decreased to $1,045,094. In 2001, Mr. Pomerleau entered into agreements to acquire an additional 1,396,061 performance escrow shares in aggregate from other principals of the Company, subject to the approval of the TSX Venture Exchange. The purchase of 1,200,000 of these shares was completed on April 24, 2002.

BOARD PRACTICES

Each Board member is elected at the Company's Annual General Meeting and holds office until the next Annual General Meeting or until his or her successor is duly elected or appointed, unless the office is earlier vacated in accordance with the Articles of the Company or the Company Act (Alberta) or he or she becomes disqualified as a Director.

Name

Position

Director or Officer Since

Daniel Pomerleau

Chairman, President, and CEO

2000/10/18

Michael Pierce

Director

2000/10/18

Roland Williams

Director

2000/10/18

Gordon Miller

Director

2003/06/13

Riaz Sumar

Director, CFO

CFO Since 2002/10/03

Director Since 2003/06/13

No Director or officer has a service contract with the Company.

Audit Committee . The audit committee oversees the retention, performance and compensation of our independent auditors, and the establishment and oversight of our systems of internal accounting and auditing control. Members of the audit committee are Michael Pierce, Roland Williams, and Daniel Pomerleau.

12

Compensation Committee . The compensation committee reviews and makes recommendations to our board concerning the terms of the compensation packages provided to our senior executive officers, including salary, bonus and awards under our stock option plan and any other compensation plans that we may adopt in the future. Members of the compensation committee are Michael Pierce, Gordon Miller, and Daniel Pomerleau.

Corporate Governance Committee The corporate governance committee meets with and discusses current disclosure issuances with our management personnel, directors, and with both our Canadian and United States counsel, in order to not only report to the Board of Directors any matters which should be the subject of either public disclosure or remedial action but also to assist the Board of Directors in establishing reporting and disclosure procedures to ensure that we are in compliance with our disclosure and compliance obligations under applicable laws, rules and obligations. Members of the corporate governance committee are Michael Pierce, Roland Williams, and Gordon Miller.

EMPLOYEES

We have no employees and use independent consultants for all corporate activities. We currently have 3 independent consultants in addition to the executive board members that carry out day to day operations. One consultant takes care of our sales efforts, the other takes care of overseeing day to day operations and the third takes care of investor relations activities.

SHARE OWNERSHIP

The following table sets forth information, as of August 31, 2003, with respect to the beneficial ownership of our common stock, by each person known to be the beneficial owner of more than 5% of the outstanding common stock, by each of the Company's officers and directors, and by the officers and directors of the Company as a group. Information is also provided regarding beneficial ownership of common stock if all outstanding options, warrants, rights and conversion privileges (to which the applicable officers and directors have the right to exercise in the next 60 days) are exercised and additional shares of common stock are issued.

Beneficial Owner

Common Shares

Options

Warrants

Total

Percent of Class

Gordon Miller

1,565,285

-

434,785

2,000,070

6.87%

367386 Alberta Ltd.(a)

724,694

-

265,219

989,913

3.52%

Gordon Miller Family Trust

56,400

-

-

56,400

0.21%

Michael Pierce

1,523,776

300,000

-

1,823,776

6.30%

Daniel Pomerleau

5,380,374

700,000

-

6,580,374

19.52%

Roland Williams

-

350,000

-

350,000

1.27%

Riaz Sumar

715,850

500,000

-

1,215,850

4.48%

Jean Pomerleau

-

-

-

-

All Officers and Directors as a group

9,766,379

1,850,000

700,004

12,316,383

31.23%

  1. Gordon Miller owns 50% of 367386 Alberta Ltd. Only his proportionate share is shown above.

Major Shareholders And Related Party Transactions

On March 11, 2002 we completed a private placement of 600,000 units at a price of $0.25 per unit with Bar HR Land & Cattle Ltd. Each unit consisted of one common share and one-half of one non-transferable share purchase warrant, where each warrant entitled the holder to purchase one additional common share for a period of one year at a price of $0.75 per share. Bar HR Land & Cattle Ltd. Is owned 50% by Daniel Pomerleau, Director and 50% by Jean Pomerleau, Chief Operating Officer.

On March 13, 2002 we completed a share for debt settlement of 1,000,000 shares for a total debt of $271,996.24 with Mr. Daniel Pomerleau

On May 1, 2003 we announced that it would conduct a private placement of 2,300,000 units at $0.23 per unit. Each unit was comprised of one common share and one non-transferrable share purchase warrant. Each full warrant would entitle the holder to purchase one additional common share for a period of two years at a price of $0.45 per share. The private placement closed on July 3, 2003 with 1,692,222 Units being issued for proceeds of $389,211.06. Gordon Miller, a new director of the company, purchased 965,222 of the Units.

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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

MAJOR SHAREHOLDERS

SHARE OWNERSHIP

The following table sets forth information, as of August 29, 2003, with respect to the beneficial ownership of TransAkt Corp.'s common shares by each person known to be the beneficial owner of more than 5% of the outstanding common shares, by each of the Company's officers and directors, and by the officers and directors of the Company as a group.

TITLE OF
CLASS

BENFICIAL OWNER

AMOUNT AND NATURE OF BENEFICIAL OWNER

PERCENT OF
CLASS (1)

Common

Daniel Pomerleau
Suite 202, 1212 - 31 st Ave., N.E.
Calgary, Alberta T2E 7S8

5,380,374 shares

19.8%

During the past three years, the only significant changes in the percentage ownership of shares held by TransAKT only major shareholder, Mr. Daniel Pomerleau, has been as follows: (a) On October 18, 2000 in connection with the closing of the reverse takeover transaction with Wildcard Communications Canada Inc., Mr. Pomerleau acquired 4,180,374 performance escrow shares at a price of $0.01 per share; and (b) In 2001, Mr. Pomerleau entered into agreements to acquire an additional 1,396,061 performance escrow shares in the aggregate from other principals of TransAKT, subject to the approval of the TSX Venture Exchange. The purchase of 1,200,000 of these shares was completed on April 24, 2002

TransAKT's major shareholder does not have any different voting rights than those held by any other shareholder.

TransAKT is not directly or indirectly owned or controlled by any other corporation(s), by an foreign government or by any other natural or legal person(s) severally or jointly, except as disclosed above. TransAKT is not aware of any arrangements the operation of which may at a subsequent date result in a change in control of TransAKT.

RELATED PARTY TRANSACTIONS

TransAKT has not entered into any related party transactions.

ITEM 8. FINANCIAL INFORMATION

The required financial statements are provided at the end of this Registration Statement starting on Page F-1

ITEM 9. THE OFFERING AND LISTING

OFFER AND LISTING DETAILS

(a) Set forth below is the annual high and low market prices for TransAKT's stock since it commenced trading on the Toronto Venture Exchange (TSX) on October 18, 2000.

2000 2001 2002
High $5.60 $3.60 0.88
Low 0.14 0.21 0.22

(b) Set forth below is the high and low market prices for each financial quarter during the two most recent full financial years and the subsequent quarters through June 30, 2003

Year 2001
Quarter March June Sept Dec
High $3.60 $1.50 0.65
Low $1.35 0.5 0.21

14

Year 2002
Quarter March June Sept Dec
High 0.53 $0.88 0.65 0.45
Low 0.22 0.4 0.38 0.25

Year 2003
Quarter March June
High $0.40 0.28
Low $0.18 0.18

(c) Set forth below is the high and low market prices for each month during the last six calendar months

Year 2003
Six Months March April May June July August
High 0.34 0.27 0.28 0.24 0.49 0.47
Low 0.21 0.2 0.2 0.18 0.2 0.32

MARKETS

Currently, there is no market in the United States for any of our classes of stock. There is no assurance that there will be liquidity in the any of our stock. Upon the receipt of confirmation by the United States Securities and Exchange Commission that this registration statement has been declared effective and without further comment, we intend to apply to have our Common stock traded on the Over The Counter Bulletin Board maintained by NASDAQ.

ITEM 10. ADDITIONAL INFORMATION

SHARE CAPITAL

We are authorized to issue an unlimited number of preferred shares without nominal or par value and an unlimited number of common shares without nominal or par value. As of the date of the filing of this registration statement, we have no preferred shares issued or outstanding and a total of 27,123,134 common shares issued and outstanding with 3,335,000 common shares reserved for issuance under our stock option plan at a per share exercise price of $0.35 and 2,327,485 common shares reserved for issuance under outstanding warrants.

As of January 1, 2002, we had a total of 19,964,412 common shares issued and outstanding. As of December 31, 2002, we had a total of 25,340,912 common shares issued and outstanding. Such increase was due to the following issuances:

Description

Shares

Amount ($)

Shares issued for cash in private placement (a)

1,210,000

266,200

Shares issued as repayment of shareholder loan (b)

1,000,000

271,966

Share issued for cash in private placement (c)

600,000

150,000

Shares issued for cash in private placement (d)

2,500,000

1,100,000

Shares issued on exercise of warrants (e)

65,000

49,875

 

5,375,000

1,838,041

(a) 1,200,000 units were issued for $0.22 per unit. Each unit consisted of one common share and one-half of one share purchase warrant. Each warrant entitles the holder to purchase one common share at a purchase price of $0.75 for a period of one year.

(b) 1,000,000 common shares were issued for $0.2719 per share to a shareholder and director as consideration and repayment of a loan the Company owed to the shareholder.

(c) 600,000 units were issued for $0.25 per unit. Each unit consisted of one common share and one-half of one share purchase warrant. Each warrant entitles the holder to purchase one common share at a purchase price of $0.75 for a period of one year.

15



(d) 2,500,000 shares were issued for $0.44 per share.

(e) 66,500 warrants were exercised to purchase one common share per warrant for $0.75 per share.

MEMORANDUM AND ARTICLES OF ASSOCIATION

TransAKT was formed on December 10, 1996, as a limited liability corporation under the laws of the Province of British Columbia. On October 18, 2000, we changed our name to Wildcard Wireless Solutions Inc. On June 30, 2001, we filed Articles of Continuance in the Province of Alberta and became an Alberta corporation, bearing corporate access number 209414556. On that same day, our wholly-owned subsidiary, Wildcard Communications Canada Inc., was merged into Wildcard Wireless Solutions Inc. On June 20, 2003, we changed our name to TransAKT Corp.

Section 120(1) of the Alberta Business Corporations Act provides that a director or officer of a corporation who is either a party to a material contract or proposed material contract or is a director of officer of or has a material interest in any person who is a party to a material contract or a proposed material contract with the corporation, shall disclose in writing to the corporation or request to have entered in the minutes of meetings of the directors the nature and extent of the director's or officer's interest.

Our bylaws provide that our Board of Directors may fix their own remuneration without the approval of an independent quorum of members of the Board of Directors. The Board of Directors may also be reimbursed for traveling and other expenses incurred by them in attending meetings of the Board of Directors or any committee thereof. The Board of Directors may also take the following actions without the authorization with our shareholders: (a) borrow money; (b) issue, sell, or pledge bonds or other evidence of indebtedness or guarantees of the company; or (c) mortgage, hypothecate, or otherwise create an interest or charge on any or all corporate assets.

There are no provisions in our Articles of Incorporation or bylaws relating to (a) retirement or non-retirement of directors under any age limit requirement; or (b) the number of shares required for director's qualification.

 

The members of our Board of Directors are all elected at the annual meeting of shareholders and are not elected at staggered intervals. No class of capital stock is subject to any sinking fund provisions, liability to further capital calls by the company, or any provision discriminating against any existing or prospective holder of such class as a result of such shareholder owning a substantial number of shares.

Common Shares

Holders of Common shares are entitled to:

(a)

the right to vote at any meeting of the shareholders of the Corporation

(b)

the right, subject to any preferential rights attaching to any other class or series of shares of the Corporation, to receive dividends as, when, and if declared on the common shares by the Corporation.

(c)

notwithstanding (b), no dividend may be declared or paid on the common shares if payment of the dividend would cause the realizable value of the Corporation's assets to be less that the aggregate of its liabilities and the amount required to redeem all shares of the Corporation then outstanding having attached thereto a redemption or retraction right.

(d)

subject to any preferential rights attaching to any other class or series of shares of the Corporation, to share in the remaining property of the Corporation upon dissolution.

16

Preferred Shares

No preferred shares have been issued to date. The preferred shares may be issued from time to time in one or more series with each series to consist of such number of preferred shares as may, before the issue thereof, be determined by the directors of the Corporation. Before the first issue of preferred shares of a particular series the directors of the Corporation shall by resolution determine the designation, rights, privileges, restrictions, and conditions attaching to that series of Preferred shares, which rights are completely in the discretion of the directors of the Corporation subject to the requirements of the Business Corporations Act.

Any changes required to be made to the rights of holders of our stock would have to be made by filing Articles of Amendment. Special resolutions approving changes to the Articles would require the consent of a majority of the shares voted at any meeting of the shareholders called to approve such action.

National Policy 41

National Policy 41 pertaining to the rights of non-registered shareholders to have the same access to corporate information as registered shareholders supersedes the by-laws of the Corporation governing the holding of Annual or Special Meetings of Shareholders. Notice of the meeting must be filed with the securities administrators having jurisdiction, stock exchanges and clearing agencies at least 25 days before the record date of the meeting. Proxy related material must be delivered directly or, in the case of non-registered shareholders, through an intermediary to the shareholder a minimum of 25 days before the meeting.

General Matters

All registered shareholders may attend the meeting in person or by proxy and cast their vote on each item of business properly brought before the meeting.

Shareholders who are not shareholders of record due to the fact that their shares are held in brokerage accounts or in other third party names, may attend the meeting, however, they may only vote on each item of business by submitting their proxy, in advance of the meeting, to the intermediary who will provide an omnibus proxy for each vote received.

There are no limitations on the rights to own securities.

There are no provisions that would have the effect of delaying, deferring or preventing a change in the control of the Corporation.

There are no conditions imposed by the Articles of Incorporation governing changes in the capital of the Corporation.

MATERIAL CONTRACTS

Each of our material contracts has been described within this Form 20-F and attached.

EXCHANGE CONTROLS

There are no governmental laws, decrees, regulations or other legislation of Canada that may affect the import or export of capital for use.

Other than the withholding of any taxes due under the terms of specific treaties between countries on dividends paid to shareholders of the Corporation there are no restrictions on the remittance of dividends, interests or other payments.

TAXATION

The discussions below summarize the material tax considerations relevant to an investment in common shares by individuals and corporations who, for income tax purposes, are resident in the U.S. for purposes of the Convention (as hereinafter defined) and are not resident in Canada, who hold common shares as a capital asset, and who do not hold the common shares in carrying on a business through a permanent establishment in Canada or in connection with a fixed base in Canada (collectively, "Unconnected U. S. Shareholders" or "Holders"). The tax consequences of an investment in common shares by investors who are not Unconnected U.S. Shareholders may differ substantially from the tax consequences discussed herein. The discussion of U.S. tax consideration is addressed only to Unconnected U. S. Shareholders whose "functional currency" within the meaning of Section 985 of the Internal Revenue Code of 1986, as amended (the "Code"), is the U. S. dollar, and to U. S. citizens who are not residents in the U.S. for the purpose of the Convention, but who otherwise meet the definition of Unconnected U.S. Shareholders. Furthermore, the discussion of U.S. tax consideration does not address the tax treatment of Unconnected U. S. Shareholders that own, or are deemed for U.S. federal income tax purposes to own, 10% or more of the total combined voting power of all classes of voting stock of TransAKT Corp. The discussion of Canadian tax considerations does not address the tax treatment of a trust, company, organization or other arrangement that is a resident of the U.S. and that is generally exempt from U. S. tax.

17

This discussion does not address all of the income tax consequences that may be applicable to any Holder subject to special treatment under the U.S. federal income tax law or to any particular Holder in light of such Holder's particular facts and circumstances. Some Holders, including tax exempt entities, banks, insurance companies and persons who hold common shares as part of a hedging transaction may be subject to special or different rules not discussed below. The discussion of U.S. tax considerations is based on the provisions of the Code.

The discussion of Canadian tax consideration is based upon the provisions of the Income Tax Act (Canada) (the "Tax Act"), the Convention between Canada and the U.S. with Respect to Taxes on Income and Capital, as amended from time to time (the "Convention"), and the Company's understanding of published administrative practices of Canadian Customs and Revenue Agency and judicial decision, all of which are subject to change. The discussion does not take into account the tax laws of the various provinces or territories of Canada or the tax laws of the various state and local jurisdictions in the U. S.

U.S. Federal Income Tax Considerations

Unconnected U.S. Shareholders generally will treat the gross amount of the distributions paid by the Company, including the amount of any Canadian tax withheld, as foreign source dividend income for U.S. federal income tax purposes to the extent of the Company's current or accumulated earnings and profits, as computed for U.S. federal income tax purposes. Distribution in excess of that amount will reduce an Unconnected U.S. Shareholder's tax basis in the common shares, but not below zero, and the remainder, if any, will be treated as taxable capital gains. In general, in computing its U.S. federal income tax liability, an Unconnected U.S. Shareholder may elect for each taxable year whether to claim a deduction or, subject to the limitations described below, a credit for Canadian taxes withheld from dividends paid on its common shares. If the Unconnected U.S. Shareholder elects to claim a credit for such Canadian taxes, the election will be binding for all foreign taxes paid or accrued by the Shareholder for such taxable year. The Code applies various limitations on the amount of foreign tax credit that may be available to a U.S. taxpayer based upon the segregation of foreign source income into separate categories of income. The amount of credit which may be claimed with respect to the category of income to which the dividend is allocated, and to which the foreign taxes are attributable generally may not exceed the same portion of the U.S. tax on worldwide taxable income, before applying the foreign tax credit as the U.S. holder's foreign source taxable income allocation to such category bears to such U.S. holder's entire taxable income. The foreign tax credit is disallowed for dividends on stock unless a minimum holding period is satisfied and additional limitations may restrict the ability of some individuals to claim the foreign tax credit. Accordingly, we urge investors to consult their own tax advisors with respect to the potential consequences to them of the foreign tax credit limitations.

For U. S. federal income tax purposes, the amount of any distributions made on a common share to an Unconnected U.S. Shareholder in Canadian dollars will equal the U.S. dollar value of the Canadian dollars calculated by reference to the appropriate exchange rate in effect on the date of receipt of the distribution, regardless of whether the Canadian dollars are actually converted into U.S. dollars upon receipt. Unconnected U.S. Shareholders are urged to consult their own tax advisors regarding the treatment of foreign currency gain or loss, if any, on any Canadian dollars which are converted into U.S. dollars subsequent to receipt by the shareholder.

The sale of common shares generally will result in a gain or loss to the Holder in an amount equal to the difference between the amount realized and the Holder's adjusted cost basis in the shares. Provided that the Holder is not considered a "dealer' in the shares sold, gain or loss on the sale of the common shares will generally be capital gain or loss.

18

Capital losses are deductible to the extent of capital gains. Individual taxpayers may deduct excess capital losses of up to US$3,000 a year, US$1,500 in the case of a married individual filing separately, from ordinary income. Non-corporate taxpayers may carry forward unused capital losses indefinitely. Unused capital losses of a corporation may be carried back three years and carried forward five years.

Canadian Tax Considerations

Dividends paid or credited, or that the Company deems to pay or credit, on the common shares to Unconnected U.S. Shareholders will be subject to Canadian withholding tax. Under the Convention, the maximum rate of withholding tax on dividends paid or credited on the common shares is 15% if the beneficial owner of such dividends is an Unconnected U.S. Shareholder. However, that rate is reduced to 5% under the Convention if the beneficial owner of such dividends is an Unconnected U.S. Shareholder that is a corporation that owns at least 10% of the voting stock of TransAKT Corp.

An Unconnected U.S. Shareholder will not be subject to tax in Canada on any capital gain realized upon the disposition or deemed disposition of the common shares, provided that the common shares do not constitute "taxable Canadian property" of the shareholder within the meaning of the Tax Act.

Canada does not currently impose any estate taxes or succession duties.

DIVIDENDS AND PAYING AGENTS

Not applicable.

STATEMENTS BY EXPERTS

The consolidated financial statements of TransAKT Corp. for the periods ending December 31, 2001 and 2002, included in this registration statement have been audited by Daunheimer & Dow, LLP, chartered accountants, as stated in their report herein and elsewhere in the registration statement, and is included in reliance upon such reports of such firm given upon the authority as experts in accounting and auditing.

DOCUMENTS ON DISPLAY

All documents filed in connection with this registration statement have been filed with the Securities and Exchange Commission using the EDGAR (Electronic Data Gathering, Analysis and Retrieval) system. The Securities and Exchange Commission maintains a Web site on the Internet at the address http://www.sec.gov that contains reports, proxy information statements and other information regarding registrants that file electronically with the Securities and Exchange Commission.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.

19

Not applicable.

ITEM 15. CONTROLS AND PROCEDURES

Not applicable.

ITEM 16. CODE OF ETHICS

Not applicable.

PART III

ITEM 17. FINANCIAL STATEMENTS

The required financial statements are provided herein starting on page F-1.

INDEX TO FINANCIAL STATEMENTS 

Page

 

 

Report of Independent Certified Public Accountants

F-3

Financial Statements:

 

Balance Sheet

F-5

Statement of Loss and Deficit

F-6

Statement of Cash Flows

F-7

Notes to Financial Statements

F-8 to F-16

  ITEM 18. FINANCIAL STATEMENTS

The required financial statements are provided herein starting on page F-1.

ITEM 19. EXHIBITS

Exhibit No.

Exhibit

1.1

Articles of Amalgamation

1.2

Bylaws

2(a)

See Exhibit 1.1 and 1.2

2(b)

Form of Loan Agreement and Promissory Note

20

SIGNATURES

 

The registrant hereby certifies that it meets all the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this registration statement on its behalf.  

 

 

TransAKT Corp.

 Date: September 15, 2003

By: /s/ Daniel Pomerleau
Name: Daniel Pomerleau
Title: President and CEO

21

 

FINANCIAL STATEMENTS

AS AT THE FISCAL YEARS ENDED DECEMBER 31, 2002 AND 2001

with

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

  

TRANSAKT CORP.

Financial Statements

Years ended December 31, 2002 and December 31, 2001

F-1

TRANSAKT CORP.

Index to Financial Statements

December 31, 2002  

AUDITOR'S REPORT

F-3

MANAGEMENT'S RESPONSIBILITY FOR THE CONSOLIDATED

F-4

FINANCIAL STATEMENTS

 

Balance Sheet

F-5

Statement of Loss and Deficit

F-6

Statement of Cash Flows

F-7

Notes to Financial Statements

F-8 to F-16

F-2

AUDITORS' REPORT

 

To the Shareholders of TRANSAKT CORP.

We have audited the balance sheet of TRANSAKT CORP. as at December 31, 2002 and December 31, 2001, and the statements of loss and deficit and cash flows for the years then ended. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these financial statements present fairly, in all material respects, the financial position of the company as at December 31, 2002 and December 31, 2001, and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.

 

 

Calgary, Alberta
May 15, 2003

"Daunheimer & Dow LLP"
Chartered Accountants

F-3  

MANAGEMENT'S RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

 

The accompanying consolidated financial statements and all information in the annual report are the responsibility of management. The consolidated financial statements have been prepared by management in accordance with the accounting policies outlined in the notes to the consolidated financial statements. When alternative accounting methods exist, management has chosen those that seem most appropriate in the circumstances. Where necessary, management has made informed judgments and estimates in accounting for transactions which were not complete at the balance sheet date. In the opinion of management, the consolidated financial statements have been prepared within acceptable limits of materiality and are in accordance with accounting principles and practices generally accepted in Canada.

Management maintains appropriate systems of internal accounting and administrative controls. Policies and procedures are designed to provide reasonable assurance that transactions are appropriately authorized, assets are safeguarded and financial records are properly maintained to provide reasonable assurance that the financial information is relevant, reliable and accurate.

Daunheimer & Dow LLP, an independent firm of chartered accountants, has been engaged, as approved by a vote of the shareholders at the Corporation's most recent annual general meeting, to examine the consolidated financial statements in accordance with auditing standards generally accepted in Canada and the United States and provide an independent audit opinion.

The Board of Directors annually appoints an audit committee consisting of a majority of non-management directors. The committee meets with the Corporation's independent auditors to review any significant accounting and auditing matters and to discuss the results of the annual audit examination. Daunheimer & Dow LLP has full and free access to the audit committee. The audit committee also reviews the consolidated financial statements and auditors' report and submits its findings to the Board of Directors. The audit committee has reported its findings to the Board of Directors who have approved the consolidated financial statements. 

F-4

TRANSAKT CORP.
Balance Sheet
December 31, 2002 and December 31, 2001

 

2002

2001

ASSETS

 

 

CURRENT

 

 

Cash

$ 274,377

$ 183,208

Accounts receivable

46,973

23,831

Advances to shareholders (Note 3)

24,851

92,851

Inventory

29,698

18,458

Prepaid expenses

180,947

19,492

 

556,846

337,840

CAPITAL ASSETS (Note 4)

337,821

151,020

PATENTS AND TRADEMARKS

227,401

126,401

LONG TERM INVESTMENTS (Note 5)

-

1

 

$ 1,122,068

$ 615,262

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

CURRENT

 

 

Accounts payable and accrued liabilities

$ 431,474

$ 320,407

Promissory notes (Note 6)

-

150,000

Advances from shareholders (Note 3)

-

271,966

 

431,474

742,373

LONG TERM DEBT (Note 7)

394,400

-

 

825,874

742,373

COMMITMENTS (Note 13)

 

 

SHAREHOLDERS' EQUITY

 

 

Share capital (Note 8)

4,672,818

2,918,068

Deficit

(4,376,624)

(3,045,179)

 

296,194

(127,111)

 

$ 1,122,068

$ 615,262

  

ON BEHALF OF THE BOARD:

/s/ Daniel Pomerleau Director

/s/ Michael Pierce Director

F-5

TRANSKT CORP.
Statement of Loss and Deficit

Years Ended December 31, 2002 and December 31, 2001

2002

2001

SALES

$ 6,309

$ -

COST OF SALES

3,413

-

GROSS PROFIT

2,896

-

EXPENSES

 

 

Management and consulting fees

$ 406,592

$ 245,083

Office

318,681

188,732

Rental

289,035

420,717

Research and development (Note 10)

114,253

115,874

Rental

90,873

72,443

Travel

57,666

105,758

Professional Fees

24,400

28,599

Advertising and promotion

13,051

18,116

Interest and bank charges

3,869

44625

Amortization

17,375

18,549

 

1,335,795

1,258,496

LOSS FROM OPERATIONS

(1,332,899)

(1,258,496)

  OTHER INCOME (EXPENSES)

 

 

Interest income

1,454

9,593

Write-down of long-term investments

-

(74,759)

 

1,454

(65,166)

 NET LOSS

(1,331,445)

(1,323,662)

  DEFICIT - Beginning of year

(3,045,179)

(1,721,517)

  DEFICIT- End of year

$ (4,376,624)

$ (3,045,179)

 

 

 

 

 

 

Weighted average number of shares

 

 

outstanding ( See Note 2 )

24,195,893

18,045,828

 

 

 

Loss per share ( See Note 2 )

$ (0.06)

$ (0.02)

F-6

TRANSAKT CORP.
Statement of Cash Flows

Years Ended December 31, 2002 and December 31, 2001

2002

2001

OPERATING ACTIVITIES

Net loss

$(1,331,445)

$(1,323,662)

Items not affecting cash:

 

 

 

Amortization

17,375

18,549

 

Write-down of long-term investment

-

74,759

 

 

(1,314,070)

(1,230,354)

Changes in non-cash working capital:

 

 

 

Accounts receivable

(23,143)

12,000

 

Inventory

(11,240)

(18,458)

 

Prepaid expenses and deposits

(161,455)

-

 

Research and development tax credits refundable

-

72,566

 

Accounts payable and accrued liabilities

111,070

151,182

 

 

(84,768)

217,290

Cash flow used by operating activities

(1,398,838)

(1,013,064)

INVESTING ACTIVITIES

 

Patents and trademarks

(101,000)

(28,196)

 

Additions to capital assets

(204,177)

(112,604)

 

Cash flow from (used by) investing activities

(305,177)

(140,800)

FINANCING ACTIVITIES

 

Advances from related companies

-

271,966

 

Due to (from) shareholders - current

(203,966)

48,000

 

(Repayment) / Issuance of promissory note

( 150,000)

(200,000)

 

Proceeds from long term financing

394,400

-

 

Issuance of common shares

1,754,750

739,455

 

Cash flow from financing activities

1,795,184

859,421

INCREASE(DECREASE) IN CASH FLOW

91,169

(294,443)

CASH-Beginning of year

183,208

477,651

CASH - end of year

$274,377

$183,208

   

Weighted average number of shares outstanding

 

 

 

(see Note 2)

24,195,893

18,045,828

 

Cash flow per share (See Note 2)

$0.00

$(0.02)

F-7

TRANSAKT CORP.
Notes to Financial Statements
Years Ended December 31, 2002 and December 31, 2001

1. DESCRIPTION OF OPERATIONS

The Company was incorporated under the laws of the Province of Alberta on June 3, 1997. The Company completed the acquisition of Green Point Resources Inc. on October 18, 2000 (Note 2) whereby it became a publicly listed traded company listed on the Canadian Venture Exchange.

The Company is in the development stage of designing for production wireless modular cellular phone technologies for the consumer electronics industry. The Company has not reached a stage of commercial production on any of its development projects. Funding for activities is raised primarily through private and public share offerings and from financial support of related parties.

The ability of the Company to continue research and development projects and realize the capitalized value of proprietary technologies and related capital assets is dependent upon future commercial success of the technologies and raising sufficient funds to complete research and development.

The Company will require additional capital to complete current research and development projects and fund operations. If sufficient capital is not raised, the ability of the Company to continue operations and bring projects to market may be impaired.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements of the Company have been prepared by management in accordance with generally accepted accounting principles in Canada, applied on a consistent basis. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The financial statements have, in management's opinion, been properly prepared using careful judgement within reasonable limits of materiality and within the framework of the significant accounting policies summarized below.

Canadian and United States Generally Accepted Accounting Principles

The generally accepted accounting principles in the United States may require financial statement reporting and disclosure that differs from those in Canada. There are no differences in the reporting requirements for Canada and the United States that would materially affect these financial statements.

Management does not believe that any recently issued but not yet effective FASB account pronouncements, if currently adapted, would have a material effect in the accompanying financial statements.

Foreign currency translation

All assets and liabilities of operations denominated in currencies other than Canadian dollars have been translated into Canadian dollars at the rate of exchange in effect at the balance sheet date. Gains and losses resulting from the translation of assets and liabilities are reflected in net income of the period except for unrealized foreign currency gains and losses on long-term monetary assets and liabilities which are deferred and amortized over the remaining lives of the related items on a straight-line basis.

Revenue and expense accounts are translated at the average rates of exchange prevailing during the period.

(continues)

F-8

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Patents and trademarks

Costs incurred to secure patents and trademarks, including patent application costs, have been deferred and will be amortized to operations on a straight-line basis over five years once commercial production has commenced. As commercial production has not commenced, no amortization has been provided for.

Research costs are expensed as incurred. Development costs are expensed unless they meet specific criteria related to technical, market and financial feasibility, in which case they are deferred and amortized to operations over the estimated market life of the product developed. No amounts for development expenses have been deferred.

The unamortized balance of deferred costs recorded in the balance sheet represents a carrying value which will be charged to income through amortization on a systematic basis. It does not necessarily represent, nor is it intended to represent net realizable value of the deferred costs, as realization is dependent on completion of the development process and the ability of the company to market the products developed. In addition, the Company anticipates significant further costs will be incurred prior to technologies being ready for market. As the Company does not currently have significant revenue from sales to fund these costs, completion of the development process and delivery of the technology to market will be dependent on the Company's ability to raise additional equity financing.

If it is determined by management that the carrying value of the development costs will not be realizable by reference to the present value of future expected cash flows for the projects, related costs will be written down to recoverable value.

Future income taxes

The Company follows the liability method of tax allocation to account for income taxes. Under this method, future tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities, and measured using the substantially enacted tax rates and laws that will be in effect when the differences are expected to reverse. Prior to the adoption of the new recommendations, income tax expense was determined using the deferral method of tax allocation. Future tax expense was based on items of income and expense that were reported in different years in the financial statements and tax returns and measured at the tax rate in effect in the year the difference originated. Future income tax assets are evaluated and if realization is considered "more likely than not" a valuation is provided.

(continues)

F-9

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Capital assets

Capital assets are stated at cost less accumulated amortization. Amortization is provided at various rates designed to amortize the assets over their estimated useful lives. The amortization rates are as follows:

Lab equipment

30%

declining balance method

Computer equipment

30%

declining balance method

Telephone system

20%

declining balance method

Computer software

50%

straight-line method

Furniture and fixtures

20%

declining balance method

Tools and dies

20%

declining balance method

Amortization of tools and dies will commence when production begins. Amortization of software acquired at the end of the year will be amortized when it is put in place and ready for use. No amortization is taken during the year of capital assets that were disposed.

Loss per share

Loss per share is computed using the weighted average number of common shares outstanding during the period. Fully diluted loss per share has not been presented as the effect on basic loss per share would be anti-dilutive.

Stock-based compensation

Effective January 1, 2002, the Company adopted the recommendations of the Canadian Institute of Chartered Accountants Handbook Section 3870, Stock-based Compensation and Other Stock-based Payments. The new recommendations are applied prospectively to all stock-based payments to non-employees and to employee awards that are direct awards of stock, call for settlement in cash or other assets, or are stock appreciation rights that call for settlement be the issuance of equity instruments, granted on or after January 1, 2002.

The recommendations encourage, but do not require the use of the fair value method of accounting for all stock-based employee compensation plans. The Company has chosen not to use the fair value method to account for stock-based employee compensation plans and therefore, the Company records no compensation expense when options are issued to employees. Any consideration paid by employees on the exercise of options is credited to share capital. The Company discloses the pro-forma effect of accounting for these awards under the fair value method (see Note 9).

Measurement uncertainty

The financial statements have been prepared in accordance with generally accepted accounting principles. The precise value of many assets and liabilities is dependent on future events. As a result, the preparation of financial statements for a period involves the use of approximations which have been made using careful judgment. Actual results could differ from those approximations.

F-10

3. ADVANCES TO / FROM SHAREHOLDERS

The advances to or from shareholders are non-interest bearing and without fixed terms of repayment. 

4. CAPITAL ASSETS

 

 

Cost

Accumulated
amortization

2002
Net book
value

2001
Net book
value

Lab equipment

$ 146,084

$ 22,578

$ 123,506

$ 128,667

Computer equipment

45,702

27,340

18,362

16,493

Telephone system

6,594

3,218

3,376

4,220

Computer software

199,724

8,459

191,265

-

Furniture and fixtures

2,563

1,251

1,312

1,640

$ 400,667

$ 62,846

$ 337,821

$ 151,020

 

5. LONG TERM INVESTMENTS

The investment in Simplicia Technologies Inc., a private corporation represents a holding of 12.3% of the issued share capital. The investment was written down in the prior year to management's estimate of its net realizable value and written-off in the current year.

 

6. PROMISSORY NOTE

The promissory note was a convertible debenture bearing interest at 1% per month, compounded monthly and not in advance. The interest and principal were payable in full on November 30, 2001 and were paid in the year.

 

7. LONG TERM DEBT

On December 12, 2002 the Company received $U.S. 250,00 as partial proceeds of a series of promissory notes that will total $U.S. 350,000. The funds will be used to finance the production and sale of up to 1,000 TransAKT 1 units. The promissory notes are unsecured and bear interest at 10% per annum commencing six months after their issuance. A bonus amount of $U.S. 100 per TransAKT 1 unit sold, not exceeding $U.S. 100,000 in aggregate is added to the principal as the units are sold. The principal, interest and bonus amounts are repayable at the rate of $U.S. 350 for each TransAKT 1 sold.

The unpaid portion of the principal, interest and bonus amount not paid within one year may be converted into common shares at the average common share closing price for the thirty consecutive trading days immediately preceding the notice to convert. The conversion feature expires on May 24, 2004.

F-11

8. SHARE CAPITAL

 

 

Authorized:

125,000,000 common shares
125,000,000 preferred shares

 

 

 

 

 

Issued:

Shares

$

Balance, December 31, 2000

17,610,712

$ 2,178,613

Shares issued on exercise of warrants (a)

155,437

116,578

Shares issued on exercise of options (b)

200,000

100,000

Shares issued for cash in private placement (c)

635,263

299,860

Shared issued for cash in private placement (d)

1,363,000

299,860

Share issue costs

-

(31,088)

Balance, December 31, 2001

19,964,412

$ 2,918,068

Shares issued for cash in private placement (e)

1,210,000

266,200

Shares issued as repayment of shareholder loan (f)

1,000,000

271,966

Share issued for cash in private placement (g)

600,000

150,000

Shares issued for cash in private placement (h)

2,500,000

1,100,000

Shares issued on exercise of warrants (i)

65,000

49,875

Share issue costs

-

(83,291)

Balance, December 31, 2002

25,340,912

$ 4,672,818

No preferred shares have been issued.

Notes:
(a) Prior to 2001, TRANSAKT CORP. issued 1,000,000 units (pre-consolidation) which comprised of one pre-consolidation share and one-half of one share purchase warrant. On a post-consolidations basis, each warrant entitles the holder to purchase one common share at a purchase price of $0.75 for a period of one year. 137,937 of these warrants were exercised during the 2001 and the remaining 137,938 warrants expired.

(b) 200,000 stock options to acquire 100,000 common shares at $0.50 per share were exercised during 2001.

(c) 635,263 units were issued for $0.40 per unit. Each unit consisted of one common share and one share purchase warrant. Each warrant entitles the holder to purchase one common share at a purchase price of $0.75 for a period of one year.

(d) 1,363,000 units were issued for $0.22 per unit. Each unit consisted of one common share and one-half of one share purchase warrant. Each warrant entitles the holder to purchase one common share at a purchase price of $0.75 for a period of one year.

(e) 1,200,000 units were issued for $0.22 per unit. Each unit consisted of one common share and one-half of one share purchase warrant. Each warrant entitles the holder to purchase one common share at a purchase price of $0.75 for a period of one year.

(f) 1,000,000 common shares were issued for $0.2719 per share to a shareholder and director as consideration and repayment of a loan the Company owed to the shareholder.

(continues)

F-12

 

8. SHARE CAPITAL 8 (continued)

(g) 600,000 units were issued for $0.25 per unit. Each unit consisted of one common share and one-half of one share purchase warrant. Each warrant entitles the holder to purchase one common share at a purchase price of $0.75 for a period of one year.

(h) 2,500,000 shares were issued for $0.44 per share.

(i) 66,500 warrants were exercised to purchase one common share per warrant for $0.75 per share.

Warrants:


As at December 31, 2002 there were 1,540,253 warrants to purchase 1 common share for $0.75 per warrant that will expire at various dates from January 17, 2003 to October 18, 2003.

The following is a summary of warrants issued and outstanding at December 31, 2002:

 

2002

2001

 

 Number of
warrants

Weighted
Average
Exercise price

 Number of warrants

Weighted average exercise price

Balance, beginning of year

1,437,201

$ 0.50

840,875

$ 0.58

Cancelled during the year

(735,438)

$ 0.75

(565,000)

$ 0.50

Exercised during the year

(66,500)

$ 0.75

(155,437)

$ 0.75

Granted during the year

905,000

$ 0.75

1,316,763

$ 0.63

Balance, end of year

1,540,263

$ 0.62

1,437,201

$ 0.64

Exercisable, end of year

1,540,263

$ 0.65

1,437,201

$ 0.64

Options:

On October 18, 2000 the Company granted 1,600,000 stock options at an exercise price of $0.50 per share with an expiry date of October 18, 2005. 200,000 options were exercised in 2001. In 2000 the Company also granted 600,000 stock options with an expiry date of October 20, 2005 at an exercise price of $4.75 per share that was subsequently amended to $0.50 per share. In 2001, the Company granted 1,000,000 stock options at an exercise price of $0.50 that will expire on December 11, 2006. In 2002, the Company granted 2,155,000 stock options at an exercise price of $0.50 that will expire on October 2, 2007. 5,155,000 stock options were outstanding at December 31, 2001.

(continues)

F-13

8. SHARE CAPITAL 8 (continued)

The following is a summary of options issued and outstanding at December 31, 2002:

 

2002

 

2001

 

 

 Number of
options

Weighted
Average
Exercise price

 Number of options

Weighted average exercise price

Balance, beginning of year

3,000,00

$ 0.50

2,200,000

$ 0.50

Cancelled during the year

-

$ -

-

$ -

Exercised during the year

-

$ -

(200,000)

$ 0.50

Granted during the year

2,155,000

$ 0.50

1,000,000

$ 0.50

Balance, end of year

5,155,000

$ 0.50

3,000,000

$ 0.50

Exercisable, end of year

5,155,000

$ 0.50

3,000,000

$ 0.50

 9. STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation using the intrinsic value method. Under this method, no costs are recognized in the financial statements for share options granted to employees or directors when the options are issued at market value. Effective January 1, 2002, Canadian Generally Accepted Accounting Principles require disclosure of the net earnings using the fair value method for stock options issued on or after January 1, 2002. Had the fair value method been used, the Company's net earnings and net earnings per share would have been as follows for the year ended December 31, 2002:

 

December 31, 2002 As Reported

December 31, 2002 Pro-forma

Net Loss

$ (1,331,445)

$ (1,577,115)

Loss per share

$ (0.06)

$ (0.07)

The fair value of options granted during the year was estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions:

Expected life (years)

1.0

Risk-free interest rate (%)

4.0

Volatility

88.9

F-14

10. RESEARCH AND DEVELOPMENT

 

2002

2001

In-house consultants

$ 55,000

$ 170,000

Outside consultants

131,235

228,297

Materials and supplies

97,815

17,977

Travel and incidental expenses

4,985

4,443

 

$ 289,035

$ 420,171

The Company is developing devices that will enhance the capabilities of wireless modular cellular telephones ("cell phones") to allow for the transmission of electronic data.

 11. RELATED PARTY TRANSACTIONS

During the year the Company had the following transactions with related parties:

a) Individuals that were directors and shareholders or corporations controlled by them received $290,000 (2001 - $300,000) for management and consulting services.

b) Accounts payable includes $102,458 (2001 - $59,344) that are due to directors and shareholders.

c) During the year, the Company issued 2,155,000 options directors and officers to acquire shares of the Company at $0.50 per share for a period of five years from the date of issue.

d) An officer of the Company has repaid advances net of advances of $68,000 (net advances made to officer: 2001 - $62,851).

Related party transactions have been recorded at their dollar exchange amounts.

12. NON-CAPITAL TAX LOSSES CARRIED FORWARD

The Company has available losses of $4,322,000, the benefit of which has not been reflected in these financial statements. Such benefits will be recorded as an adjustment to the tax provision in the year realized. The losses may be carried forward against future income for tax purposes. The losses will expire as follows:

2005

$ 107,000

2006

561,000

2007

1,122,000

2008

1,221,000

2009

1,311,000


The Company also has undeducted research and development expenses of approximately $362,000 which may be claimed against future taxable income. These deductions have no expiry date.

F-15

13. COMMITMENTS

The Company has entered into a lease agreement for office space expiring April 30, 2005. The minimum lease payments over the next five years are:

2003

$33,443

2004

34,152

2005

11,384

 

$78,979

14. FINANCIAL INSTRUMENTS

The Company's financial instruments consist of cash, term deposits, goods and services tax refundable, due from shareholder, long-term investment and accounts payable and accrued liabilities. Unless otherwise noted, 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 approximate their carrying values, unless otherwise noted. 

15. SUBSEQUENT EVENTS

Subsequent to the year-end the Company issued the following common shares or common share units:

- 90,000 common shares were issued for $45,000 upon the exercise of stock options. 

16. COMPARATIVE FIGURES

Some of the comparative figures have been reclassified to conform to the current year's presentation.

F-16

ARTICLES OF AMALGAMATION

Business Corporations Act
(Alberta)

Section 179

1. Name of Corporation:
WILDCARD WIRELESS SOLUTIONS INC.

2. Corporate Access Number:

3. The Classes of Shares and any Maximum Number of Shares the Corporation is authorized to issue (within each class):

See attached Schedule A

4. Restriction on Share Transfers, if any:

None

5. Number of Directors (or minimum and maximum number):

Minimum of three (3); Maximum of fifteen (15)

6. Restrictions on Businesses the Corporation may carry on, if any:

None

7. Other Provisions, if any:

See attached Schedule B

8.

Name of Amalgamating Corporations:

Corporate Access Number:

WILDCARD WIRELESS SOLUTIONS INC.

209414556

WILDCARD COMMUNICATIONS CANADA INC.

207425026

9. Date

Signature

Title

" Mike Pierce"

Chief Financial Officer

Telephone Number

(403) 290 - 1744

This information is being collected for purposes of corporate registry records in accordance with the Business Corporations Act. Questions about the collection of this information can be directed to the Freedom of Information and Protection of Privacy Co-coordinator for Alberta Registries. Research and Program Support, 3 rd Floor, Commerce Place, 10155 - 102 Street, Edmonton, Alberta T5J 4L4 (780) 422-7330

SCHEDULE A ARTICLES OF AMALGAMATION
WILDCARD WIRELESS SOLUTIONS INC.

The Corporation is authorized to issue an unlimited number of Preferred Shares without nominal or par value and an unlimited number of Common Shares without nominal or par value. The Preferred Shares and the Common Shares shall have attached thereto the following rights, privileges, restrictions and conditions:

A. PROVISIONS ATTACHING TO THE PREFERRED SHARES

The Preferred Shares, as a class, shall have attached thereto the following rights, privileges, restrictions and conditions:

(1) Directors' Authority to Issue in One or More Series

The board of directors of the Corporation may issue the Preferred Shares at any time and from time to time in one or more series. Before the first shares of a particular series are issued, the board of directors of the Corporation shall fix the number of shares in such series and shall determine, subject to the limitations set out in the Articles, the designation, rights, privileges, restrictions and conditions to be attached to the shares of such series including, without limitation, the rate or rates, amount or method or methods of calculation of dividends thereon, the time and place of payment of dividends, whether cumulative or non-cumulative or partially cumulative and whether such rate, amount or method of calculation shall be subject to change or adjustment in the future, the currency or currencies of payment of dividends, the consideration and the terms and conditions of any purchase for cancellation, retraction or redemption rights (if any), the conversion or exchange rights attached thereto (if any), the voting rights attached thereto (if any), and the terms and conditions of any share purchase plan or sinking fund with respect thereto. Before the issue of the first shares of a series, the board of directors of the Corporation shall send to the Registrar (as defined in the Business Corporations Act of Alberta) Articles of Amendment containing a description of such series including the designation, rights, privileges, restrictions and conditions determined by the board of directors of the Corporation.

(2) Ranking of Preferred Shares

No rights, privileges, restrictions or conditions attached to a series of Preferred Shares shall confer upon shares of a series a priority in respect of dividends or return of capital over shares of any other series of Preferred Shares then outstanding. The Preferred Shares shall be entitled to priority over the Common Shares of the Corporation and over any other shares of the Corporation ranking junior to the Preferred Shares with respect to priority in the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding-up its affairs. If any cumulative dividends or amounts payable on a return of capital in respect of a series of Preferred Shares are not paid in full, the Preferred Shares of all series shall participate rateably in respect of such dividends, including accumulations, if any, in accordance with the sums that would be payable on such shares if all such dividends were declared and paid in full, and in respect of any repayment of capital in accordance with the sums that would be payable on such repayment of capital if all sums so payable were paid in full; provided, however, that in the event of there being insufficient assets to satisfy in full all such claims to dividends and return of capital, the claims of the holders of the Preferred Shares with respect to repayment of capital shall first be paid and satisfied and any assets remaining thereafter shall be applied towards the payment and satisfaction of claims in respect of dividends. The Preferred Shares of any series may also be given such other preferences, not inconsistent with sections A. (1) to (4) hereof, over the Common Shares and over any other shares ranking junior to the Preferred Shares as may be determined in the case of such series of Preferred Shares.   

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(3) Voting Rights

Except as hereinafter referred to or as otherwise required by law or in accordance with any voting

rights which may from time to time be attached to any series of Preferred Shares, the holders of the Preferred Shares as a class shall not be entitled as such to receive notice of, to attend or to vote at any meeting of the shareholders of the Corporation.

(4) Approval of Holders of Preferred Shares

The rights, privileges, restrictions and conditions attaching to the Preferred Shares as a class may be added to, changed or removed but only with the approval of the holders of the Preferred Shares given as hereinafter specified.

The approval of the holders of Preferred Shares to add to, change or remove any right, privilege, restriction or condition attaching to the Preferred Shares as a class or to any other matter requiring the consent of the holders of the Preferred Shares as a class may be given in such manner as may then be required by law, subject to a minimum requirement that such approval shall be given by resolution passed by the affirmative vote of at least two-thirds of the votes cast at a meeting of the holders of Preferred Shares duly called for that purpose. The formalities to be observed in respect of the giving of notice of any such meeting or any adjourned meeting and the conduct thereof shall be those from time to time required by the Business Corporations Act of Alberta (as from time to time amended, varied or replaced) and prescribed in the by-laws of the Corporation with respect to meetings of shareholders. On every poll taken at a meeting of holders of Preferred Shares as a class, each holder entitled to vote thereat shall have one vote in respect of each Preferred Share held by him.

3. PROVISIONS ATTACHING TO THE COMMON SHARES

The Common Shares of the Corporation shall have attached thereto the following rights, privileges, restrictions and conditions:

(1) Dividends

Subject to the prior rights of the holders of the Preferred Shares and any other shares ranking senior to the Common Shares with respect to priority in the payment of dividends, the holders of Common Shares shall be entitled to receive dividends and the Corporation shall pay dividends thereon, as and when declared by the board of directors of the Corporation out of moneys properly applicable to the payment of dividends, in such amount and in such form as the board of directors of the Corporation may from time to time determine and all dividends which the board of directors of the Corporation may declare on the Common Shares shall be declared and paid in equal amounts per share on all Common Shares at the time outstanding.

(2) Dissolution

In the event of the dissolution, liquidation or winding-up of the Corporation, whether voluntary or involuntary, or any other distribution of assets of the Corporation among its shareholders for the purpose of winding-up its affairs, subject to the prior rights of the holders of the Preferred Shares and any other shares ranking senior to the Common Shares with respect to priority in the distribution of assets upon dissolution, liquidation. winding-up or distribution for the purpose of winding-up, the holders of the Common Shares shall be entitled to receive the remaining property and assets of the Corporation.  

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(3) Voting Rights

The holders of the Common Shares shall be entitled to receive notice of and to attend all meetings

of the shareholders of the Corporation and shall have one (1) vote for each Common Share held at all meetings of the shareholders of the Corporation, except meetings at which only holders of another specified "class or series of shares of the Corporation are entitled to vote separately as a class or series.  

SCHEDULE B
ARTICLES OF AMALGAMATION
WILDCARD WIRELESS SOLUTIONS INC.

 

A. The board of directors of the Corporation may, between annual general meetings, appoint one or more additional directors of the Corporation to serve until the next annual general meeting, but the number of additional directors shall not at any time exceed 1/3 of the number of directors who held office at the expiration of the last annual meeting of the Corporation.

B. Meetings of shareholders of the Corporation may be held outside Alberta at any place within Canada or the United States of America as the board of directors of the Corporation may determine.

BY-LAW NO. 1

A BY-LAW RELATING GENERALLY TO THE CONDUCT OF THE AFFAIRS OF

WILDCARD WIRELESS SOLUTIONS INC.
(hereinafter called the "Corporation")

1. INTERPRETATION

1.1 In this By-law and all other By-laws of the Corporation, unless the context otherwise specifies or requires:

"Act" means the Business Corporations Act (Alberta), as from time to time amended, and every statute in substitution thereof;

"Articles" means, as the case may require, the original or restated articles of incorporation, articles of amendment, articles of amalgamation, articles of continuance, articles of reorganization, articles of arrangement, articles of dissolution and articles of revival of the Corporation, and includes an amendment to any of them;

"Board" means the board of Directors, as such board may be constituted from time to time;

"By-law" means this by-law and all other by-laws of the Corporation from time to time in force and effect;

"Directors" means the directors of the Corporation;

"Meeting of Shareholders" includes an annual or other general meeting of Shareholders and a meeting of any class or classes of Shareholders;

"Shareholder" means a shareholder of the Corporation;

"Chief Executive Officer" means, if the Corporation does not have a named Chief Executive Officer; the President or, if the Corporation does not have a President or if the office of President is vacant, the officer of the Corporation holding the paramount office.

2. DIRECTORS

2.1 Borrowing Powers of Directors: Without limiting the powers of the Directors as set forth in the Act, but subject to the Articles, the Directors may from time to time on behalf of the Corporation, without authorization of the Shareholders:

(a) borrow money upon the credit of the Corporation;

(b) issue, reissue, sell or pledge bonds, debentures, notes or other evidences of indebtedness or guarantee of the Corporation, whether secured or unsecured;

(c) to the extent permitted by the Act, give a guarantee on behalf of the Corporation to secure performance of an obligation of any person; and  

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(d) mortgage, hypothecate, pledge or otherwise create an interest in or charge on all or any currently owned or subsequently acquired property of the Corporation to secure payment of a debt or performance of any other obligation of the Corporation.

2.2 Delegation: Subject to the Articles, the Directors may from time to time, by resolution, delegate to a committee of Directors, a single Director or an officer or officers of the Corporation, all or any of the powers conferred on the Directors by the preceding section of this By-law or by the Act.

2.3 Power to Adopt Seal and Authorize Use: The Directors may, by resolution, adopt a seal for the Corporation, and authorize persons to affix the seal and to attest by their signatures that the seal was duly affixed.

2.4 Directors' Power to Issue Shares: Subject to the Articles, the Directors may, by resolution, issue shares of the Corporation at such time, to such persons and, subject to the Act, for such consideration as the Directors may from time to time determine.

2.5 Directors' Power to Make. Amend or Repeal By-Laws: Subject to the Articles and the Act, the Directors may, by resolution, make, amend or repeal any By-laws that regulate the business or affairs of the Corporation.

2.6 Director Power to Appoint Officers: Subject to the Articles:

(a) the Directors may designate the officers of the Corporation, appoint as officers individuals of full capacity who may, but need not, be Directors of the Corporation, specify their duties and, except where delegation is prohibited by the Act, delegate to them powers to manage the business and affairs of the Corporation;

(b) a Director may be appointed to any office of the Corporation; and

(c) two (2) or more offices of the Corporation may be held by the same person .

2.7 Directors' Power to Fix Remuneration of Directors and Officers: Subject to the Articles, the Directors may fix the remuneration of the Directors and of the officers of the Corporation.

2.8 Financial Disclosure: Subject to the Articles, the Directors shall not be required to place before the annual meeting of Shareholders any information respecting the financial position of the Corporation or the results of its operations except that information required by the Act.

2.9 Remuneration and Expenses: The Directors shall be paid such remuneration for their services as the Board may from time to time determine. The Directors shall also be entitled to be reimbursed for traveling and other expenses properly incurred by them in attending meetings of the Board or any committee thereof. Nothing contained herein shall preclude any Director from serving the Corporation in any other capacity and receiving remuneration there for.

2.10 Directors' Meetings:

(a) Convening Meetings: Any Director may call a meeting of Directors.

(b) Notice of Meeting of Directors: At least forty-eight (48) hours' notice (inclusive of the day on which the notice is communicated, or deemed to be communicated, and the day of the meeting) shall be given of a meeting of the Directors, and the notice shall specify the place, the day and the \

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hour of the meeting. Except where required by the Act, the notice need not specify the purpose of the meeting or the business to be transacted there at.

(c) Notice of Adjourned Meeting of Directors: If a meeting of the Directors is adjourned by one or moreadjournments, it is not necessary to give notice of the adjourned meeting, other than by announcement at the time of the adjournment, if:

(i) all of the Directors are present at the time of the announcement; or

(ii) those Directors who were not present at the time of the announcement attend the adjourned meeting and participate in the meeting;

but in all other cases, notice of the adjourned meeting shall be given as if it were a new meeting, provided that if the adjournment is for a period of time which makes it impossible or impracticable to give forty-eight (48) hours' notice, the notice shall be deemed to have been properly given if transmitted on the next business day following the adjournment.

(d) Manner of Transmitting Notices: Notice of a meeting of the Directors, or any other communication required to be made, may be given or made to a Director either:

(i) in writing:

(A) by first class mail, postage prepaid, addressed to the Director at the Director's latest address as shown in the records of the Corporation;

(B) by delivery to the Director's latest address as shown in the records of the Corporation and leaving the notice in the custody of an adult person found there, placing it in a mail receptacle at that address or affixing it to a door or placing in some other place at that address where the notice or communication is likely to be found;

(C) by personally serving it upon the Director; or

(D) by any electronic device capable of transmitting a printed message directed to the Director at a place where the Director has access to a device capable of receiving the message; or

(ii) verbally, whether by means of a telephone or otherwise.

All notices or other communication given or made in writing in accordance with the foregoing shall be deemed to have been communicated:

(iii) if given or made by mail, at the time it would be delivered in the ordinary course of mail unless there are reasonable grounds for believing that the Director did not receive the notice or communication at that time, or at all;

(iv) if delivered or personally served, on the day that it was delivered or served; and

(v) if by electronic device, one (1) hour following transmission.

(e) Waiver of Notice: Notice of any meeting of Directors or of any committee of Directors or the time for the giving of any such notice or any irregularity in any meeting or in the notice thereof

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may be waived by any Director in writing or by telecopy, telegram, cable or telex addressed to the Corporation or in any other manner, and any such waiver may be validly given either before or after the meeting to which such waiver relates. Attendance of a Director at any meeting of Directors or of any committee of Directors is a waiver of notice of such meeting, except when a Director attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called.

(f) Omission of Notice: The accidental omission to give notice of any meeting of Directors, or of any committee of Directors, or the non-receipt of any notice by any person shall not invalidate any resolution passed or any proceeding taken at such meeting.

(g) Place of Meetings of Directors: Subject to the Articles, meetings of the Directors may be held at any place in Alberta, or at any place outside of Alberta if all Directors entitled to attend and vote at the meeting either participate in the meeting or consent, verbally or otherwise, to the meeting being held at that place.

(h) Chairman of Meetings of Directors or Committee of Directors: Unless and until the Directors have elected a Chairman of the Board, the Chief Executive Officer shall act as chairman of all meetings of the Directors but if the Chairman of the Board or the Chief Executive Officer, as the case may be, is absent or refuses to act as chairman, the Directors in attendance shall by a vote of the majority of them elect some other Director present at the meeting to act as chairman of the meeting.

(i) Secretary of Meetings of Directors: The chairman of a meeting of Directors may appoint a Director to act as secretary of a meeting of Directors, and in the absence of such appointment, the chairman of the meeting shall also act as secretary of the meeting.

(j) Quorum of Directors: Subject to the Articles, a majority of Directors shall constitute a quorum at any meeting of Directors.

(k) Participation by Telephone: A Director may participate in a meeting of Directors by means of telephone or other communication facilities that permit all persons participating in the meeting to hear each other.

(1) Resolution by Majority: Subject to the Articles, every resolution submitted to a meeting of Directors shall be decided by a vote of a majority of the Directors participating in. the meeting, and the declaration of the chairman of the meeting on the result of the vote shall be final. In case of an equality of votes, the chairman of the meeting shall not have a casting vote.

2.11 Meetings of Committees of Directors: The provisions of Section 2.10 of this By-law shall apply

equally to meetings of committees of Directors, but when applying those provisions to a meeting of a committee of Directors, the phrase "meeting of Directors" shall mean "meeting of a committee of Directors" and the word "Director" shall mean "member of a committee of Directors".

2.12 Written Resolution in Lieu of Meeting: Subject to the Articles, a resolution in writing signed by

all the Directors entitled to vote on that resolution at a meeting of Directors or committee of Directors is as valid as if it had been passed at a meeting of Directors or a committee of Directors. A resolution in writing may be signed in any number of counterparts which together shall be construed as a single instrument. A resolution in writing shall take effect on the date when it is expressed to be effective notwithstanding that the effective date is before or after the date on which it was signed by the Directors or any of them. A resolution in writing transmitted by telegraph, telex or other device capable of  

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, transmitting a printed message and purporting to be sent by a Director shall be valid as a counterpart of a resolution in writing of the Directors or committee of Directors.

3. SHAREHOLDERS' MEETINGS

3.1 Chairman of Meeting of Shareholders: The Chairman of the Board, or failing him the President of the Corporation or failing him the Chief Executive Officer, shall act as chairman at all Meetings of Shareholders. If the Chairman of the Board, the President and the Chief Executive Officer are all absent or refuse to act as chairman of the meeting, the directors present shall choose one of their number or the solicitor of the corporation to be chairman or, if all the directors present and the solicitor of the corporation decline to take the chair or the directors fail to so choose or if no director be present, the persons present and entitled to vote shall choose one of their number to be chairman. Notwithstanding the foregoing, with the consent of the meeting, which consent may be expressed by the failure of any person present and entitled to vote to object, the solicitor of the corporation may act as chairman of the meeting.

3.2 Place of Shareholders' Meetings: Subject to the Articles and the provisions of the Act permitting a Meeting of Shareholders to be held outside of Alberta, a Meeting of Shareholders shall be held at the place in Alberta determined by the Directors.

3.3 Participation in Meeting by Telephone: A Shareholder or any other person entitled to attend a Meeting of Shareholders may participate in the meeting by means of telephone or other communication facilities that permit all persons participating in the meeting to hear each other, and a person participating in such a meeting by those means is deemed for the purposes of the Act to be present at the meeting.

3.4 Notice of Adjourned Meeting: If a Meeting of Shareholders is adjourned by one or more adjournments for an aggregate of less than thirty (30) days, it is not necessary to give notice of the adjourned meeting, other than by announcement at the time of the adjournment.

3.5 Quorum of Shareholders: A quorum of Shareholders is present at a Meeting of Shareholders, irrespective of the number of persons actually present at the meeting, if the holder or holders of five (5%) percent of the Shares entitled to vote at the meeting are present in person or represented by proxy.

3.6 Loss of Quorum During Meeting: If a quorum is present at the opening of a Meeting of Shareholders, the Shareholders present may proceed with the business of the meeting notwithstanding that a quorum is not present throughout the meeting.

3.7 Voting Jointly Held Shares: If two (2) or more persons hold shares of the Corporation jointly, one of those holders present at a Meeting of Shareholders may, in the absence of the others, vote the shares, but if two (2) or more of those persons who are present, in person or by proxy, the joint holder present whose name stands first on the register in respect of the shares shall alone be entitled to vote in respect of the shares. Several executors or administrators of a deceased shareholder in whose sole name any share stands shall, for the purpose of this section be deemed joint shareholders.

3.8 Voting: Voting at a Meeting of Shareholders shall be by show of hands except when a vote by ballot is demanded by a Shareholder or a proxyholder entitled to vote at the meeting. If a vote by ballot is demanded at a meeting in which a Shareholder, or other person entitled to attend and vote at the meeting, is participating by telephone or other communication facilities, such Shareholder or other person may verbally appoint some person present at the meeting to cast a ballot on his behalf and a ballot so cast shall be valid as if it were personally cast by the Shareholder or other person so participating.

 

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3.9 Validity of Proxies: The chairman of the meeting shall determine whether or not a proxy, deposited for use at such meeting, shall be valid for use at such meeting and any such determination made in good faith shall be final and conclusive.

3.10 Written Resolution in Lieu of Meeting: Subject to the Articles, a resolution in writing signed by all the Shareholders entitled to vote on that resolution at a Meeting of Shareholders is as valid as if it had been passed at a Meeting of Shareholders. A resolution in writing may be signed in any number of

counterparts which together shall be construed as a single instrument. A resolution in writing shall take effect on the date when it is expressed to be effective notwithstanding that the effective date is before or after the date on which it was signed by the Shareholders or any of them. A resolution in writing transmitted by telegraph, telex or other device capable of transmitting a printed message and purporting to be sent by a Shareholder shall be valid as a counterpart of a resolution in writing of the Shareholders.

3.11 Class and Series Meetings: In the event of a meeting of the holders of any class or series of shares of the corporation, the provisions of these by-laws relating to the call and conduct of and voting at general meetings shall apply to the extent applicable; provided however that the quorum for a class or series meeting, unless otherwise specified in the special rights or restrictions attached to the shares of the class or series, shall be one person holding or representing by proxy at least one-third of the issued shares of that class or series.

4. LIEN ON SHARES

4.1 If the Articles provide that the Corporation has a lien on shares registered in the name of a Shareholder or his legal representative for a debt of that Shareholder to the Corporation, such lien may be enforced, subject to the Act and to any other provision of the Articles, by the sale of shares thereby affected or by any other action, suit, remedy or proceedings authorized or permitted by law or by equity and, pending such enforcement, the Corporation may refuse to register a transfer of the whole or any part of such shares.

5. VOTING RIGHTS IN OTHER BODIES CORPORATE

5.1 The signing officers of the Corporation may execute and deliver instruments of proxy and arrange for the issuance of voting certificates or other evidence of the right to exercise the voting rights attaching to any securities held by the Corporation. Such instruments, certificates or other evidence shall be in favour of such person or persons as may be determined by the person signing or arranging for them. In addition, the Board may direct the manner in which, and the person or persons by whom, any particular voting rights or class of voting rights mayor shall be exercised.

6. SHARES AND SHARE CERTIFICATES

6.1 Allotment: Subject to the Articles, the Board may from time to time allot, or grant options to purchase, and issue the whole or any part of the authorized and unissued shares of the Corporation at such times and to such persons and for such consideration as the Board shall determine, provided that no share shall be issued until the consideration for the share is fully paid as provided for in the Act.

6.2 Commissions: The Board may from time to time authorize the Corporation to pay a reasonable commission to any person in consideration of his purchasing or agreeing to purchase shares of the  

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Corporation from the Corporation or from any other person, or procuring or agreeing to procure purchasers for shares of the Corporation.

6.3 Non-Recognition of Trusts: Subject to the provisions of the Act, the Corporation may treat the person in whose name a share is registered in the securities register as the absolute owner of the share as if that person had full legal capacity and authority to exercise all rights of ownership, irrespective of any indication to the contrary through knowledge or notice or description in the Corporation's records or on the share certificate.

6.4 Share Certificates: Every holder of one or more shares of the Corporation shall be entitled, at his option, to a share certificate, or to a non-transferable written acknowledgement of his right to obtain a share certificate, stating the name of the person to whom the certificate or acknowledgement was issued, and the number and class or series of shares held by him as shown on the securities -register. Share certificates and acknowledgements of a Shareholder's right to a share certificate, shall, subject to the Act, be in such form as the Board shall from time to time approve. Any share certificate shall be signed by any number of signing officers as the Board may determine and need not be under the corporate seal, provided that, unless the Board otherwise determines, certificates representing shares in respect of which a transfer agent and/or registrar has been appointed shall not be valid unless countersigned by or on behalf of such transfer agent and/or registrar. The signature of a sole signing officer or two signing officers, as the case may be, may be printed or mechanically reproduced in facsimile upon share certificates and every such facsimile signature shall for all purposes be deemed to be the signature of the officer whose signature it reproduces and shall be binding upon the Corporation. A share certificate executed as aforesaid shall be valid notwithstanding that one or both of the officers whose facsimile signature appears thereon no longer holds office at the date of issue of the certificate.

6.5 Replacement of Share Certificate: The Board or any officer or agent designated by the Board may in its or his discretion direct the issue of a new share certificate in lieu of and upon cancellation of a share certificate that has been mutilated or in substitution for a share certificate claimed to have been lost, destroyed or wrongfully taken, on payment of such fee not exceeding such amount as may be allowed by the Act, and on such terms as to indemnity, reimbursement of expenses and evidence of loss and of title as the Board may from time to time prescribe, whether generally or in any particular case.

6.6 Joint Shareholders: If two or more persons are registered as joint holders of any share, the Corporation shall not be bound to issue more than one certificate in respect thereof, and delivery of such certificate to one of such persons shall be sufficient delivery to all of them. Anyone of such persons may give effectual receipts for the certificate issued in respect thereof or for any dividend, bonus, return of capital or other money payable or warrant issuable in respect of such share.

6.7 Fractional Share: The Corporation may issue a certificate for a fractional share or may issue in its place, as may be determined by the Board, scrip certificates in a form that entitles the holder to receive a certificate for a full share by exchanging scrip certificates aggregating a full share. The Directors may attach conditions to any scrip certificates, including that the scrip certificates become void if they are not exchanged for a share certificate representing a full share by a specified date, and that any shares for which those scrip certificates are exchangeable may, notwithstanding any pre-emptive right, be issued by the Corporation to any person and the proceeds of those shares distributed rateably to the holders of the scrip certificates.

6.8 Transfer and Transmission of Shares: Shares of the Corporation may be transferred in the form of a transfer of endorsement endorsed on the certificates issued for the shares of the Corporation or in any form of transfer which may be approved by the Board.  

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6.9 Registration of Transfer: Subject to the provisions of the Act, no transfer of shares shall be registered in a securities register except upon presentation of the certificate representing such shares with a transfer endorsed thereon or delivered therewith duly executed by the registered holder or by his attorney or successor duly appointed, together with such reasonable assurance or evidence of signature, identification and authority to transfer as the Board may from time to time prescribe, upon payment of all applicable taxes and any fees prescribed by the Board.

6.10 Rights of Representatives: The Corporation may treat a person as a registered Shareholder entitled to exercise all rights of the Shareholder he represents if that person produces to the Board such evidence as may be reasonably required that he is the executor, administrator, heir or legal representative of the heirs of the estate of a deceased Shareholder, or a guardian, committee or trustee representing a registered Shareholder.

6.11 No Duty to Third Person: The Corporation is not required to enquire into the existence of, or see to the performance or observance of, any duty owed to a third person by a registered holder of any of its shares, or by anyone whom it treats, subject to the Act, as the owner or registered holder of its shares.

6.12 Transfer Agents and Registrars: The Board may from time to time appoint one or more trust companies as its agent or agents to maintain the central securities register or registers, and an agent or agents to maintain branch securities registers. Such a person may be designated as transfer agent or registrar according to his functions and one person may be appointed both registrar and transfer agent. The Board may at any time terminate any such appointment.

7. INFORMATION AVAILABLE TO SHAREHOLDERS

7 .1 Available Information: Except as provided by the Act, no Shareholder shall be entitled to obtain information respecting any details or conduct of the Corporation's business which in the opinion of the Directors would not be in the interest of the Corporation to communicate to the public.

7.2 Inspection of Information: The Directors may from time to time, subject to those rights conferred by the Act, determine whether, to what extent, at what time and place and under what conditions or regulations the documents, books, registers and accounting records of the Corporation or any of them shall be open to the inspection of Shareholders, and no Shareholder shall have any right to inspect any document, book, register or accounting record of the Corporation except as conferred by statute or authorized by the Board or by a resolution of the Shareholders.

8. INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE CORPORATION

8.1 In all circumstances permitted by the Act, the Corporation shall indemnify a Director or officer of the Corporation, a former Director or officer of the Corporation, or a person who acts or acted at the Corporation's request as a director or officer of a body corporate of which the Corporation is or was a shareholder or a creditor, and his heirs and legal representatives, from and against:

(a) all costs, charges and expenses, including an amount to settle an action or satisfy a judgment reasonably incurred by him in respect of any civil, criminal or administrative action or proceeding to which he is made a party by reason of being or having been a Director or officer of the Corporation or such body corporate; and

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(b) all other costs, charges and expenses reasonably incurred in connection with the defense of any civil, criminal or administrative action or proceeding to which he is made a party by reason of being or having been a Director or officer of the Corporation or such body corporate.

Enacted by resolution of the Board of Directors on the 30th day of June, 2001.

/ s/ William Atkinson
William Atkinson

/s Michael Pierce
Michael Pierce

/s/ Daniel Pomerleau
Daniel Pomerleau

/s/ James R. Tuer
James R. Tuer

/s/ Roland Williams
Roland Williams

The following exhibit is the form of Loan Agreement and form of Promissory Note used by TRANSAKT Corp. to raise $340,500 from eight (8) different individuals, at varying dollar amounts. Other than the dollar amounts and names of the lender, each executed Loan Agreement and Promissory Note are identical.

 

LOAN AGREEMENT

BETWEEN:

_____________________________________ (the "Lender")

 

AND:

Wildcard Wireless Solutions Inc., a body corporate
incorporated pursuant to the laws of the Province of Alberta, Canada (the "Borrower")

 

WHEREAS the Borrower is seeking to raise an aggregate of Three Hundred and Fifty Thousand ($350,000.00) United States Dollars through loans from various lenders under the terms and conditions contained herein.

WHEREAS the Borrower has requested and the Lender has agreed to loan to the Borrower the sum of __________________________ ($____________) Dollars in accordance with the terms hereof;

NOW THEREFORE, in consideration of the covenants and agreements herein contained, the parties hereby agree as follows:

1. Loan: The Lender agrees to lend to the Borrower and the Borrower agrees to borrow from the Lender the sum of ____________________________ ($__________) of lawful money of the United States of America (the "Principal Sum").

2. Repayment: The Borrower agrees to repay to the Lender at its head office in the City of _______________ or at any other place the Lender may direct, the Principal Sum as follows:

    1. The Principal Sum, plus interest and bonus, shall be repaid, as follows:
        1. The Parties acknowledge and understand that the Principal Sum is being advanced to the Borrower to permit the Borrower to have manufactured one thousand (1,000) TransAKT 1 units, being the product sold by the Borrower (hereinafter referred to herein as the "Inventory").  
        2. The Borrower agrees that for each TransAKT 1 unit sold by the Borrower out of the 1,000 units manufactured as a direct result of this Loan Agreement, the Lender's pro-rata share of Three Hundred and Fifty ($350.00) Dollars (U.S.) shall be paid to the Lender, plus the Lender's pro-rata share of an additional Fifty ($50.00) Dollar (U.S.) bonus per unit shall be paid to the Lender (the "Unit Bonus"), thus entitling the Lender to a total pro-rata share per unit calculated using the following formula:
        3. Total pro rata share per unit sold =

          Principal Sum * US$400.00
          US$350,000  

        4. In the event that the Lender has not been repaid the Principal Sum plus the Lender's Total Unit Bonus of ($XXXXXX), within six months from the day the Principal Sum is advanced to the Borrower, then the Borrower shall pay interest, on any Principal Sum at the rate of Ten (10%) Percent, compounded annually, until payment of the Principal Sum, and the Lender's Total Unit Bonus plus any outstanding interest has been paid in full. The Lender's Total Unit Bonus shall be calculated as follows:

Lender's Total Unit Bonus =

Principal Sum * US$50,000
US$350,000 

3. Events of Default: On the happening of any of the following events of default the

Lender may, at its option, require the unpaid balance of the Principal Sum together with any Aggregate Bonus, or interest accrued to become immediately due and payable:

    1. In the event that the Borrower fails to make any of the payments in the amounts and at the times specified in this agreement;
    2. In the event that the Borrower should breach any agreement entered into between the Lender and the Borrower;
    3. In the event that the Borrower should become bankrupt or insolvent or should the Borrower be subject to the provisions of the Bankruptcy and Insolvency Act , R.S.C. 1985, c. B-3, or any other Act for the benefit of creditors or should the Borrower go into liquidation either voluntarily or under order of a Court of competent jurisdiction or make a general assignment for the benefit of its creditors or otherwise acknowledge its insolvency; or
    4. 2

    5. In the event that the Borrower should suspend or fail to carry on and continuously conduct its business. 

4. Security: Contemporaneous with the execution of this Agreement, the Borrower shall also execute:

    1. a Promissory Note, in favour of the Lender, in the from attached as Schedule "A" hereto; and
    2. in the event the Borrower fails to repay the Principal Sum and the Lender's Total Unit Bonus within 12 months following the date the Principal Sum is advanced by the Lender, the Borrower shall, subject to regulatory approval, execute the conversion option in the form set forth in Schedule "B".

5. Gender and Number: Words imploring the singular include the plural and vice

versa; and words imploring gender include all genders.

6. Entire Agreement: This Agreement, including the schedules hereto, together with

the Agreements and other documents to be delivered pursuant hereto, constitute the entire agreement between the parties pertaining to the subject matter hereof and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written of the parties and there are no representation, warranties or other agreement between the parties in connection with the subject matter hereof except as specifically set forth herein and therein. No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions (whether or not similar) nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

7. Headings: The article and section headings contained herein are included solely

for convenience and are not intended to full or accurate descriptions of the content thereof and shall not be considered part of this Agreement.

8. Schedules: Any schedules annexed hereto form an integral part hereof.

9. Applicable Law: This Agreement shall be construed in accordance with the laws

of the Province of Alberta and the laws of Canada applicable therein. The parties hereby irrevocably attorn to the jurisdiction of the court of the Province of Alberta for the determination of all matters arising hereunder and agree that any litigation relative hereto shall be commenced and heard by the Alberta Courts at Calgary, Alberta.

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10. Currency: Unless otherwise indicated, all dollar amounts referred to in this

Agreement, are in United States funds.

11. Expenses: Each party will be responsible for their own costs and expenses

(including without limitation the fees and disbursements of legal counsel) in connection with this Agreement and the transactions contemplated hereby.

12. Time: Time shall be of the essence hereof.

13. Notices : All notices and other communications required or permitted pursuant to or in relation to this Agreement shall be in writing and shall be:

(a) Personally served upon the addressee (if an individual) or an officer or director of the addressee (if a body corporate), in which case such notice or other communication shall be conclusively deemed to have been given to the addressee at the time of such service; or

(b) Sent by postage prepaid first class mail addressed to the addressee at the following respective addresses:

(i)To the Lender: 

 

Facsimile:

Attention:

 

(ii)To the Borrower:

Wildcard Wireless Solutions Inc.
202, 1212 - 31 st Avenue N.E.
Calgary, Alberta
T2E 7S8
Facsimile: (403) 266-5732
Attention : Ted Pomerleau

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with a copy to:

Scott Hall LLP
203, 200 Barclay Parade, S.W.
Calgary, Alberta T2P 4R5
Facsimile: (403) 265-4632
Attention: Dan Horner

in which case such notice or other communication shall conclusively be deemed to have been given to the addressee upon the expiration of the 5 th day (excluding Saturdays, Sundays and statutory holidays), free from interruption in the postal service, from the date of mailing. If the postal service is interrupted due to a strike, lockout or other cause, whether at the time of such mailing or during the said period of 5 days, service of such notice or other communication shall not be effective unless given in accordance with the provisions of paragraph (a). Any party may by notice in writing to the other parties change its address for service.

14. Assignment: Neither this Agreement nor any rights or obligations hereunder shall be assignable by either party without the prior written consent of the other party hereto. Subject thereto, this Agreement shall enure to the benefit of and be binding upon the parties and their respective heirs, executors, personal representatives, administrators, successors (including any successor by reason of amalgamation or wind-up of any party) and permitted assigns.

15. Further Assurances: The parties hereto shall, with reasonable diligence, do all such things and provide all such reasonable assurances as may be required to consummate the transactions contemplated hereby, and each party shall provide such further documents or instruments required by any other party as may be reasonably necessary or desirable to effect the purpose of this Agreement and carry out its provisions whether before or after the Closing.

IN WITNESS WHEREOF the parties have hereunto duly executed this Agreement this 5 th day of December, 2002

The Lender:

Per: ___________________________________

 

WILDCARD WIRELESS SOLUTIONS INC.

Per: /s/ Daniel Pomerleau

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SCHEDULE A

PROMISSORY NOTE

Principal Amount: $_______________________________ U.S.

For value received, WILDCARD WIRELESS SOLUTIONS INC. hereby promises to pay to ____________________________. , the sum of ____________________________________ ($____________) U.S., plus interest and bonus as set forth and earned pursuant to a Loan Agreement dated December 5, 2002, to be delivered to the Lender at __________________, not later than December 4, 2003.

The undersigned hereby waives notice of dishonour and presentment.

Dated at Calgary, Alberta this 5th day of December, 2002.

 

SIGNED, SEALED AND DELIVERED

by WILDCARD WIRELESS SOLUTIONS INC

/s/ Daniel Pomerleau
Per:

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SCHEDULE "B"

CONVERSION OPTION

In the event that any portion of the Principal Sum and Lender's Total Unit Bonus remains outstanding on the date twelve months following the initial advancement by the Lender of the Principal Sum, the outstanding amount, may, subject to regulatory approval, be converted by the Lender into common voting shares in the capital of the Borrower, at anytime prior to May 31, 2004 (the "Election Date"), upon the Lender providing written notice of such election, such notice to be received by the Borrower on or before the Election Date. The outstanding Principal Sum and Aggregate Bonus, as at the date of notice of election of conversion, shall be convertible at a price equal to the thirty (30)-day average closing price per share of the common shares of the Borrower traded on the TSX Venture Exchange for the thirty (30) consecutive trading days immediately preceding the date of notice of election.

Dated this ___ day of _____________, 2003.

 

WILDCARD WIRELESS SOLUTIONS INC.

 

/s/ Daniel Pomerleau
Per:

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