As filed with the Securities and Exchange Commission on August [ ] 30, 1996
Registration No. 333-8305
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------
PRE-EFFECTIVE
AMENDMENT NO. [ ] 2
TO
Form SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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UTG COMMUNICATIONS INTERNATIONAL, INC.
(Name of Small Business Issuer in Its Charter)
Delaware 4813 13-3895294
(State or Other Jurisdiction of (Primary Standard (I.R.S. Employer
Incorporation or Organization) Industrial Classification Identification No.)
Code Number)
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Altsteinhauserstrasse 33
6330 Cham
Zug, Switzerland
011-041-729-8282
(Address and Telephone Number of Principal Executive Offices
and Principal Place of Business)
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DAVID SCHLECHT
18 Cattano Avenue
Morristown, NJ 07960
(201) 644-3161
(Name, Address and Telephone Number of Agent for Service)
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Copies of all communications, including all communications
sent to the agent for service, should be sent to:
WALTER M. EPSTEIN, ESQ.
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
29th Floor
New York, NY 10112
(212) 698-7758
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Approximate date of proposed sale to the public: As soon as practicable
after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
--------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================
Proposed
Title of Each Class Amount Maximum Proposed Maximum Amount of
of Securities to be to be Offering Price Aggregate Offering Registration
Registered Registered Per Security(1) Price(1) Fee
==================================================================================================
<S> <C> <C> <C> <C>
Common Stock, par value $.00001
per share....................... 3,156,000 $ 5.25 $16,569,000 [ ] $5,713.45(2)
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</TABLE>
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 under the Securities Act of 1933, as amended.
(2) [ ] $5,713.45 of this amount has been paid.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED AUGUST [ ] 30, 1996
PROSPECTUS
UTG COMMUNICATIONS INTERNATIONAL, INC.
3,156,000 Shares of Common Stock
This Prospectus relates to 3,156,000 shares (the "Shares") of common stock,
par value $.00001 per Share ("Common Stock"), of UTG Communications
International, Inc., a Delaware corporation formerly known as [ ] UTG
Communications, Inc. (the "Company") which are being offered for sale by certain
selling stockholders (the "Selling Stockholders"). See "Selling Stockholders."
The Company will not receive any of the proceeds from the sales of the
Shares by the Selling Stockholders. The Shares may be offered from time to time
by the Selling Stockholders through ordinary brokerage transactions in the
over-the-counter market, in negotiated transactions or otherwise, at market
prices prevailing at the time of sale or at negotiated prices.
The Selling Stockholders may be deemed to be "Underwriters" as defined in
the Securities Act of 1933, as amended (the "Act"). If any broker-dealers are
used by the Selling Stockholders, any commissions paid to broker-dealers and, if
broker-dealers purchase any Shares as principals, any profits received by such
broker-dealers on the resales of the Shares may be deemed to be underwriting
discounts or commissions under the Act. In addition, any profits realized by the
Selling Stockholders may be deemed to be underwriting commissions. All costs,
expenses and fees in connection with the registration of the Shares offered by
the Selling Stockholders will be borne by the Company. Brokerage commissions, if
any, attributable to the sale of the Shares will be borne by the Selling
Stockholders. The Company has agreed to indemnify the Selling Stockholders
against certain liabilities, including liabilities under the Act.
The Shares offered by this Prospectus may be sold from time to time by the
Selling Stockholders or by transferees, commencing on the date of this
Prospectus. No underwriting arrangements have been entered into by the Company
or, to the Company's knowledge, the Selling Stockholders. The distribution of
the Shares by the Selling Stockholders may be effected in one or more
transactions, privately-negotiated transactions or through sales to one or more
dealers for resale of such Shares as principals, at market prices prevailing at
the time of sale, at prices related to such prevailing market prices or
negotiated prices. Usual and customary or specifically negotiated brokerage fees
or commissions may be paid by the Selling Stockholders in connection with sales
of the Shares.
Unless otherwise specifically provided, all currency amounts in this
document are expressed in United States dollars and are preceded by "$". See
"Prospectus Summary-Exchange Rates."
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
The date of this Prospectus is __________, 1996
<PAGE>
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PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus. An investment in
the Shares offered hereby involves a high degree of risk. See "Risk Factors."
Each prospective investor is urged to read this Prospectus in its entirety. All
references to the Company include UTG Communications International, Inc., a
Delaware corporation ("UTG"), and its subsidiary UTG Communications Holding, AG,
a Swiss corporation ("UT Holding"), and UT Holding's wholly-owned subsidiary UTG
Communications AG, a Swiss corporation ("UT AG"). Certain terms relating to the
Company's business are defined in "Glossary."
The Company
General
The Company is a development stage company that provides quality private
voice, fax and data management telecommunication services in Switzerland,
primarily to businesses and business groups at prices which are generally below
those of major telecommunications carriers. As of August 9, 1996, the Company
has entered into contracts with 14 customers to provide customized
telecommunications service packages. These customized packages include
telecommunications minutes plus other services selected by customers. The
Company provides local support, round-the-clock customer service and full
network redundancy to all customers. Available services include system design
and installation as well as digital compression, fax transmission compression,
digital data services and wideband digital data services. Additional customers
are being solicited daily and it is anticipated that new customers will be added
on a regular basis. In the future, the Company intends to expand its operations
though local subsidiaries or joint ventures into other countries in the European
Union (the "EU") as such countries' telecommunications industries become
deregulated, which deregulation is, for the most part, expected to be completed
by early 1998, and as market conditions in such other EU countries warrant.
Both the competitive environment and the economic framework in which
international telecommunication companies operate are changing at a rapid pace.
Due to the liberalization of telecommunication markets and technical
improvements, the Company is able to utilize the infrastructure provided by
international telecommunication carriers in connection with the services it
offers. This allows the Company to offer its customers one of Europe's largest
meshed fiber optic networks, which will eventually include more than 90
international points of presence ("POPs"). In providing its services, the
Company connects a customer's telephone installation to the Company's POP in
Switzerland by means of dedicated lines, and such POP then routes such
customer's outgoing voice, fax and data transmissions though leased transmission
lines directly to the Company's switch in the United Kingdom. The communications
are then transferred directly from the Company's switch into the international
networks. All of this is achieved without loss in speech quality or speed during
connection and with the customer dialing his international destination directly,
as he had done prior to becoming a Company customer. The Company is able to
provide its services at attractive prices to its customers due to the large
potential purchasing power of the Company.
Services
The Company sells telecommunications minutes in connection with a broad
range of services which are customized to suit individual customer needs. The
Company does not anticipate that the sale of telecommunications minutes without
other services will be a significant portion of its business. The Company
designs, installs and commissions voice, fax and data transmission equipment
appropriate for each of its customers in a manner similar to that provided by
major telecommunications carriers but at a lower price.
The Company offers services including digital compression techniques, where
usage warrants, at 8, 16 or 64 kbps (which compression allows for substantial
overall cost savings because compression allows more information to be sent
through fewer lines which allows the Company to lease fewer lines and offer
reduced calling tariffs), fax transmission compression, and digital data
services in a full range of transmission support and interface types between 1.2
kbps and 2 mb (which can be point to point or point to multipoint). For
customers requiring additional network bandwidth, the Company is able to provide
wideband digital data services which provide increased capacity and which
support applications such as audio- and videoconferencing, high speed imaging,
and corporate communication networking requirements. With the growing
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2
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use of Local Area Networks ("LAN's"), customers will be able to directly connect
their LAN traffic to the Company's network, for access to remote locations and
for applications such as file transfer, remote data access and e-mail. The
Company offers a fully managed network service that includes, management,
control and configuration, remote access for diagnostic and maintenance
services, regular network status reports and controlled access security. The
Company is conducting feasibility studies to identify the market potential and
regulatory environment for offering additional services, including video
conferencing, paging, international call back, Internet access, facsimile and
frame relay services, and expects to introduce Internet access, enhanced travel
cards and video conferencing.
The Company provides all of its customers with a high level of quality
service, including local support, round-the-clock customer service and full
network redundancy. Additionally, the Company's customers receive comprehensive
billing packages. The Company's standard monthly statement will include a
management summary report, a call detail report recording every long distance
call and facsimile call, and a pricing breakdown by call destination. Optional
reports include call summaries by account code, area or city code, international
destination and time-of-day. This information is available to customers in the
form of hard copy, magnetic tape or disk.
Strategy
The Company's objective is to grow its long distance telecommunications
customer base in Switzerland and to establish itself in other deregulated
markets in the EU as they develop. With its communication network, the Company
is well positioned to take advantage of telecommunications deregulation in
Switzerland and will be well-prepared for the upcoming full deregulation of the
telecommunication markets in other countries of the EU which deregulation is,
for the most part, expected to be completed by early 1998. The network will
provide the Company with the tools to keep pace with the ongoing technological
development in the telecommunications industry. The Company has positioned
itself between the major full-service and high price telecommunications carriers
and the no service (or limited service) cut rate telecommunications minutes
resellers which it believes will eventually expand into its markets. The Company
offers substantially lower rates to customers compared to the major
telecommunications companies, but believes that it is not required to be the
lowest cost provided of minutes because it will be able to attract new business
and maintain its customers' business by offering broad based solutions to their
telecommunications business needs. The Company believes that by positioning
itself this way, it will retain and add customers who wish to save on their
telecommunications expenses yet who also demand a high level of service with the
availability of a wide array of service offerings.
The Company intends to expand its operations in Switzerland by focusing on
and marketing its principal competitive strengths which are: (1) the Company's
sales and marketing organization and the customized service the Company offers
to its customers; (2) the Company's offering of competitive prices which the
Company believes are generally lower than prices charged by the major carrier in
the Swiss market; (3) the Company's position as an early entrant in the Swiss
market as an alternative carrier; (4) the Company's focus on more profitable
international telecommunications traffic; and (5) the Company's switched-based
networking capabilities. The availability of existing transmission capacity in
the Swiss market makes the leasing of transmission lines attractive to the
Company and enables it to grow network usage without having to incur the
significant capital and operating costs associated with the development and
operation of a transmission line infrastructure. See "Business--Industry" and
"Business--Network."
In the future, as business and regulatory conditions warrant, the Company
hopes to utilize the foregoing competitive strengths to expand into other
countries of the EU. In connection with such expansion the Company may enter
into strategic alliances or make investments in companies that are complementary
to its current operations.
The Company primarily targets customers with between $5,000 and $50,000 of
monthly usage. The Company believes that, in addition to being price sensitive,
these customers tend to be focused on customer service and are more likely to
rely on one or two carriers for their telecommunications needs. The diversity of
the Company's targeted customer base enhances network utilization by combining
business-driven workday traffic with night and weekend off-peak traffic. The
Company strives to be more cost effective, flexible, innovative and responsive
to the needs of its customers than the major carriers, while providing more
service and service offerings than cut rate resellers.
The Company's belief that its prices will generally be lower than those of
the major carriers is based upon informal surveys of the pricing offered by the
major carriers. However, because prices and promotional programs change rapidly
and
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3
<PAGE>
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often in the telecommunications industry, the prices offered by the Company may
not always be as competitive as the prices charged by the major carriers.
Organization
UTG was incorporated in the State of Delaware on April 17, 1996. As of
April 30, 1996, in exchange for 7,250,000 shares of Common Stock, UTG acquired
all of the outstanding shares, other than qualifying shares, of UT Holding. As
of April 30, 1996, UTG also issued 2,750,000 shares of Common Stock to
Interfinance Inv. Co. Ltd., a Panamanian corporation ("Interfinance"), 183,333
of which were issued in exchange for $200,000 in cash and 2,566,667 of which
were issued in exchange for $26 in cash and a Promissory Note due on April 30,
1997 in the principal amount of $2,799,974 (the "Interfinance Note"). The
Interfinance Note was secured by 2,566,667 shares of Common Stock. As of June
28, 1996, Interfinance, which is a Selling Stockholder in this Prospectus,
satisfied the Interfinance Note in full from proceeds received from purchasers
of a portion of its Shares. As a condition to the sale of the shares to
Interfinance, the Company entered into a Registration Rights Agreement dated as
of April 30, 1996 pursuant to which the Company agreed to register such shares
for resale under the Act. On August 15, 1996 the Company sold an additional
400,000 shares of Common Stock to Interfinance for $1,000,000 consisting of
$10,000 in cash and a Promissory Note due on February 1, 1997 in the original
principal amount of $990,000 (the "Second Interfinance Note"). The Second
Interfinance Note is secured by 396,000 shares of Common Stock. As a condition
to such sale the Company agreed to register such 400,000 shares for resale in
this offering. See "Certain Transactions." The Company's mailing address and
telephone number are 18 Cattano Avenue, Morristown, New Jersey 07960; attention
David Schlecht; (201) 644-3161.
The Offering
Securities Offered.... 3,156,000 shares of Common Stock by the Selling
Stockholders. See "Selling Stockholders and Plan of
Distribution" and "Description of Securities."
Risk Factors.......... The Shares offered hereby involve a high degree of risk.
See "Risk Factors."
Summary Financial Information
February 29, 1996 (date of
inception) to April 30, 1996(1)
-------------------------------
Consolidated Statement of Operations Data:
Sales.......................................... $ --
Net Loss....................................... $ (317,754)
Loss per share................................. $ (.03)
Weighted average number of Shares outstanding.. 10,006,000
April 30, 1996
-------------------------------
Consolidated Balance Sheet Data:
Total Assets................................... $ 3,945,491
Liabilities (all current)..................... $ 1,171,915
Stockholders' equity.......................... $ 2,773,576
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4
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(1) UTG was incorporated on April 17, 1996, UT Holding was incorporated on
February 29, 1996 and UT AG was incorporated on March 28, 1996. The
consolidated results include UTG and its subsidiaries, UTG Holding and UTG
AG.
(2) The weighted average number of common shares and common equivalent shares
outstanding for purposes of the loss per share amounts are computed on the
basis of all stock being outstanding for all periods presented.
Exchange Rates
Exchange Rates of the Swiss Franc ("CHF"). The high and low exchange rates
(i.e., the highest and lowest rates at which the CHF closed), and the period end
exchange rate of the United States dollar in exchange for the CHF for the period
February 29, 1996 through April 30, 1996, as reported by the Federal Reserve
System, Washington, D.C. were as follows:
January 1 to
April 30, 1996
--------------
High $1.2445
Low $1.1867
March 1, 1996 $1.1945
April 1, 1996 $1.2035
April 30, 1996 $1.2142
Special Note Regarding forward-Looking Statements
Certain statements in the Prospectus Summary and under the captions "Risk
Factors," "Plan of Operation," "Business" and elsewhere in this Prospectus may
constitute "forward-looking statements." Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company, or industry results,
to be materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions; industry
capacity; industry trends; demographic changes; competition; material costs and
availability; the loss of any significant customers; changes in business
strategy or development plans; quality of management; availability, terms and
deployment of capital; business abilities and judgment of personnel;
availability of qualified personnel; changes in, or the failure to comply with,
government regulations; and other factors referenced in this Prospectus. See
"Risk Factors."
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5
<PAGE>
RISK FACTORS
Prospective purchasers of the Common Stock should consider carefully the
following risk factors before purchasing the Shares offered hereby.
No Operating History; Uncertainty of New Business. The Company is subject
to all of the risks inherent in the establishment of a new business enterprise,
including limited capital, possible delays, uncertain markets and competition.
The Company commenced operations in April 1996 in Switzerland. The initial
operations of the Company have produced development stage costs through April
30, 1996 which development stage costs will continue in the future. Currently,
the Company operates in Switzerland and as of August 9, 1996 has entered into
contracts with 14 customers. The likelihood that the Company will succeed in the
telecommunications business must be considered in light of general economic
conditions and the difficulties, expenses and delays frequently associated with
the development of new businesses. There can be no assurance that the Company
will succeed in its business or that a changing economic environment will not
adversely affect such business. There can be no assurance that the Company will
achieve profitability in the future. The Company will focus in the near term on
the expansion of its service offerings and geographic markets which may
adversely affect cash flow and operating performance. As each of the
telecommunications markets in Switzerland and in the other countries of the EU
continue to mature, the Company's possible revenues and customer base in each
such market is likely to decrease over time. The Company's operating results may
fluctuate significantly in the future as a result of a variety of factors, some
of which are outside of the Company's control, including general economic
conditions, specific economic conditions in the telecommunications industry, the
effects of governmental regulation and regulatory changes, user demand, capital
expenditures and other costs relating to the expansion of operations, the
introduction of new services by the Company or its competitors, the mix of
services sold and the mix of channels through which those services are sold,
pricing changes and new service introductions by the Company and its
competitors, and prices charged by suppliers. As a strategic response to a
changing competitive environment the Company may elect from time to time to make
certain pricing, service or marketing decisions or enter into strategic
alliances or investments that could have a material adverse effect on the
Company.
Need For Additional Capital. The Company needs to continue to enhance and
expand its operations in order to maintain its competitive position, expand its
service offerings and geographic markets and continue to meet the increasing
demands for providing quality service at competitive prices. The Company may
need to raise additional capital from public or private equity or debt sources
in order to finance its anticipated growth including local service expansion and
working capital needs. In addition, the Company may need to raise additional
funds in order to take advantage of unanticipated opportunities, including more
rapid international expansion or investments in, or strategic alliances with,
companies that are complementary to the Company's current operations, or to
develop new products or otherwise respond to unanticipated competitive
pressures. If additional funds are raised through the issuance of equity
securities, the percentage ownership of the Company's then current stockholders
would be reduced. There can be no assurance that the Company will be able to
raise such capital on satisfactory terms or at all. If the Company decides to
raise additional funds through the incurrence of debt, the Company would likely
become subject to restrictive financial covenants which could, among other
things, restrict the Company's ability to pay dividends, issue securities or
incur additional debt. In the event that the Company is unable to obtain such
additional capital or is unable to obtain such additional capital on acceptable
terms, the Company may be required to reduce the scope of its presently
anticipated expansion, which could materially adversely affect the Company's
business, results of operations and financial condition and its ability to
compete. See "Plan of Operation."
Dependence On Transmission Facilities-Based Carriers And Suppliers. The
Company owns a switch in the United Kingdom and a POP in Switzerland. Initially,
the Company is purchasing its telecommunications minutes from Telemedia
International and its subsidiaries ("TMI") pursuant to a five year contract with
TMI (the "TMI Contact"). The TMI Contract may be terminated by either party upon
thirty days written notice. If the TMI Contract is terminated by the Company the
Company must pay TMI certain installation charges to the extent that they have
not been recouped by TMI plus an additional months fee. The Company believes
that the costs associated with termination of the TMI Contract would not be
material to the Company. Due to the large excess capacity in the
telecommunications industry, should the TMI Contract be terminated, the Company
believes that it would be able to replace the services currently provided by TMI
upon substantially the same
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terms and without incurring material costs or a disruption of service, however
there can be no assurance that termination of the TMI Contract would not have a
material adverse affect on the Company. Resellers in this industry can own or
lease transmission lines. Telephone calls made by the Company's customers are
connected from the Company's POP to its switch through transmission lines that
the Company leases under a variety of arrangements with transmission
facilities-based long distance carriers, some of which are or may become
competitors of the Company. Most of these transmission lines are leased on a
monthly or longer-term basis at rates that are less than the rates the Company
charges its customers for connecting calls through these lines. Accordingly, the
Company is vulnerable to changes in its lease arrangements, such as price
increases and service cancellations. The Company's operations are highly
dependent upon many carriers' leased transmission lines. The Company's ability
to maintain and expand its business is dependent upon whether the Company
continues to maintain favorable relationships with the transmission
facilities-based carriers from which the Company leases transmission lines.
Although the Company believes that its relationship with its carriers is
generally satisfactory, the deterioration or termination of the Company's
relationship with such carriers could have a material adverse effect upon the
Company. Certain of the vendors from whom the Company leases transmission lines
may be subject to tariff controls and other price constraints which in the
future may be changed. The Company receives volume discounts when leasing its
transmission lines. If the Company's telecommunications volume is less than
anticipated, then the Company will lease less and not receive as great a
discount. The Company purchases or leases its transmission lines for its
convenience, and transmission lines of comparable quality may be obtained from
several alternative suppliers. However, a failure by a supplier to deliver
quality products on a timely basis, or the inability to develop alternative
sources if and as required, could result in delays which could have a material
adverse effect on the Company. See "Business--Network."
Potential Adverse Effects Of Regulation.
Currently, since no calls by Company customers originate in the United
States, the Company does not believe that it is subject to any
telecommunications laws or regulations in the United States. In the future, when
and if the Company's services expand, it is possible that the Company may become
subject to the telecommunications laws and regulations of the United States. If
this were to occur, compliance with such laws would involve certain costs, and,
while the Company would make every effort to comply with such laws and
regulations, failure to comply could have a material adverse effect on the
Company. See "Business--Regulation."
Due to its ownership of a switch in the United Kingdom, the
telecommunications services provided by the Company are indirectly affected by
regulations introduced by the United Kingdom telecommunications regulatory
authority, The Office of Telecommunications ("Oftel"). Since the break up of the
United Kingdom telecommunications duopoly consisting of British
Telecommunications PLC ("British Telecom") and Mercury Communications Ltd.
("Mercury") in 1991 it has been the stated goal of Oftel to create a competitive
marketplace. Oftel has imposed mandatory rate reductions on British Telecom in
the past, which are expected to continue for the foreseeable future. Although
the Company does not believe that any regulations introduced by Oftel will
interfere with or substantially affect its business, there can be no assurance
that future changes in regulation and government in the United Kingdom will not
have a material adverse effect on the Company. See "Business--Regulation."
In March 1992, the Swiss government, in a federal decree on
telecommunications services, introduced a complete liberalization of the
transmission of messages through leased lines. Pursuant to such decree, the
Swiss Federal Council also authorized subscribers of leased lines to transmit
voice messages as long as those messages are transmitted for their own purposes.
In order to conform to the evolution of legislation in other countries in the
EU, in July 1995, the Swiss government modified the decree to provide a new
definition of the term "a message transmitted for its own purposes" so as to
make it possible to offer telephone services through leased lines to "closed
user groups." The Swiss authorities have adopted an expansive notion of the
"closed user group" including not only a parent company and its subsidiaries,
but also separate companies which have a strong common economic interest, such
as a manufacturing company and its supplier or important clients. Additionally,
according to this new regulation on telephone services, the subscriber of the
leased line does not necessarily have to be a member of the "closed user group,"
but can also be, for instance, a foreign telephone company. The Company is
currently permitted to conduct its business as currently conducted and does not
have to obtain a license from the Swiss government in order to provide its
services. The Company believes that it is in compliance with all material Swiss
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laws and regulations. There can be no assurance that future changes in the
telecommunications laws of Switzerland will not adversely affect the Company.
See "Business--Regulation."
Currently, the Company is operating only in Switzerland, however, when and
if the Company expands into other countries in the EU it will become subject to
the laws and regulations of each such country. If and when the Company becomes
subject to such laws and regulations, compliance with such laws and regulations
will involve certain costs, and, while the Company will make every effort to
comply with such laws and regulations, failure to comply could have a material
adverse effect on the Company.
Increasing Competition. The telecommunications industry is highly
competitive and is significantly influenced by the marketing and pricing
decisions of the larger industry participants. The industry has relatively
insignificant barriers to entry, numerous entities competing for the same
customers and a high churn rates (customer turnover), as customers frequently
change long distance providers in response to the offering of lower rates or
promotional incentives by competitors. The Company competes on the basis of
price, customer service and its ability to provide a variety of
telecommunications services. The Company believes that while its customers may
be price sensitive they want quality and value added services and therefore,
will remain customers as long as prices are competitive and the quality of
service is high. The Company expects competition on the basis of price and
service offerings to increase.
Many of the Company's competitors are significantly larger, have
substantially greater financial technical and marketing resources and larger
networks than the Company, control transmission lines and have long-standing
relationships with the Company's target customers. Currently, the Company's main
competitor in Switzerland is Swiss Telecom PTT ("Swiss Telecom"), which controls
almost all of the Swiss telecommunications market and had approximately $5.6
billion in revenue in 1995. In the future, additional competitors may include,
among others, Deutsche Telecom AG ("Deutsche Telecom"), AT&T, MCI
Telecommunications Corporation ("MCI"), Sprint Corp. ("Sprint"), British Telecom
and Mercury. As the Company expands into other countries of the EU there will be
additional competition in each of those countries from telecommunications
companies within each of those countries. Other United States carriers are also
expected to enter the EU market. Furthermore, the recently announced proposed
merger of Bell Atlantic Corp. and Nynex Corp., the joint venture between MCI and
Microsoft Corporation ("Microsoft"), under which Microsoft will promote MCI's
services, the recently announced joint venture among Sprint, Deutsche Telecom
and France Telecom, and other mergers, acquisitions and strategic alliances,
could also increase competitive pressures upon the Company and have a material
adverse effect on the Company.
In addition to these competitive factors, recent and pending
telecommunications deregulation in Switzerland and other EU markets may
encourage new entrants. As the Company expands its geographic coverage, it will
encounter increased competition. Moreover, the Company believes that competition
in the EU markets is likely to increase and become more similar to competition
in the United States markets over time as such EU markets continue to experience
deregulatory influences. Prices in the long distance industry have declined from
time to time in recent years and, as competition increases in the EU, prices are
likely to continue to decrease. The Company's competitors may reduce rates or
offer incentives to existing and potential customers of the Company. To maintain
its competitive position, the Company believes that it must be able to reduce
its prices in order to meet reductions in rates, if any, by others. See "Plan of
Operation" and "Business--Competition."
Risks Of Growth And Expansion. The Company plans to expand its service
offerings in Switzerland, and, in addition, the Company also intends to
establish a presence in other deregulating EU markets that have high density
telecommunications traffic when the Company believes that business and
regulatory conditions in such EU countries warrant. There can be no assurance
that the Company will be able to add service or expand its markets at the rate
presently planned by the Company or that the existing regulatory barriers will
be reduced or eliminated. The Company's anticipated growth may place a
significant strain on the Company's administrative, operational and financial
resources and increase demands on its systems and controls. As the Company
increases its service offerings and expands its targeted markets, there will be
additional demands on the Company's customer support, sales and marketing and
administrative resources and network infrastructure. There can be no assurance
that the Company's operating and financial control systems and infrastructure
will be adequate to maintain and effectively monitor future growth. The failure
to continue to upgrade the administrative, operating and
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financial control systems or the emergence of unexpected expansion difficulties
could materially adversely affect the Company.
Risks Associated With International Operations. Currently the Company
operates in Switzerland. In the future the Company hopes to expand into other
countries in the EU as regulatory and business conditions in such EU countries
warrant. There are certain risks inherent to doing business on an international
level, such as unexpected changes in regulatory requirements, tariffs, customs,
duties and other trade barriers, difficulties in staffing and managing foreign
operations, longer payment cycles, problems in collecting accounts receivable,
political risks, fluctuations in currency exchange rates, foreign exchange
controls which restrict or prohibit repatriation of funds, technology export and
import restrictions or prohibitions, delays from customs brokers or government
agencies, seasonal reductions in business activity during the summer months in
Europe and certain other parts of the world and potentially adverse tax
consequences resulting from operating in multiple jurisdictions with different
tax laws, which could materially adversely impact the success of the Company's
international operations. In many countries, the Company may need to enter into
a joint venture or other strategic relationship with one or more third parties
in order to successfully conduct its operations. Additionally, the Company's
revenues and expenses are denominated in currencies other than United States
dollars, and changes in exchange rates may have a great effect on the Company's
results of operations. There can be no assurance that such factors will not have
a material adverse effect on the Company's future operations and, consequently,
on the Company's business, results of operations and financial condition. In
addition, there can be no assurance that laws or administrative practices
relating to taxation, foreign exchange or other matters of countries within
which the Company operates will not change. Any such change could have a
material adverse effect on the Company. Additionally, a component of the
Company's strategy is its planned expansion into additional international
markets. There can be no assurance that the Company will be able to obtain the
capital it requires to finance such expansion on satisfactory terms or at all.
In many international markets, protective regulations and long-standing
relationships between potential customers of the Company and their local
providers may create barriers to entry. Pursuit of additional international
growth opportunities may require significant investments for an extended period
before returns, if any, on such investments are realized. In addition, there can
be no assurance that the Company will be able to obtain the permits and
operating licenses required for it to operate, to hire and train employees or to
market, sell and deliver high quality services in these markets.
Dependence On Effective Information Systems. To complete its billing, the
Company will have to record and process massive amounts of data quickly and
accurately. While the Company believes its management information system is
currently adequate, the Company believes that the successful implementation and
integration of these information systems is important to its growth its ability
to monitor costs, to bill customers and to achieve operating efficiencies. There
can be no assurance that the Company will not encounter delays or cost-overruns
or suffer adverse consequences in implementing and upgrading these systems. In
addition, as the Company's suppliers revise and upgrade their hardware, software
and equipment technology, there can be no assurance that the Company will not
encounter difficulties in integrating the new technology into the Company's
business or that the new systems will be appropriate for the Company's business.
See "Business--Information Systems."
Dependence Upon Third Parties. The Company is dependent upon various third
party carriers and suppliers to provide a portion of its services and
maintenance in a timely and satisfactory manner. Failure by such third party
carriers and suppliers to provide such services or maintenance in a timely or
satisfactory manner, or any interruption in such services or maintenance, could
have a materially adverse effect on the Company. See "Business--Network."
Risks Associated With Investments And Strategic Alliances. As part of its
business strategy, as regulatory and business conditions warrant, the Company
expects to seek to develop strategic alliances in the EU and to make investments
in companies that are complementary to its current operations. Any such future
strategic alliances or investments would be accompanied by the risks commonly
encountered in strategic alliances with, or investments in, companies. Such
risks include, among other things, the difficulty of assimilating the operations
and personnel of the companies, the potential disruption of the Company's
ongoing business, the inability of management to maximize the financial and
strategic position of the Company by the successful incorporation of licensed or
acquired technology and rights into the Company's service offerings,
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the maintenance of uniform standards, controls, procedures and policies and the
impairment of relationships with employees and customers as a result of changes
in management. Moreover, any such investment or alliance would involve a
business located outside the United States and therefore, the transaction would
involve the risks associated with international expansion. See "-Risks
Associated with International Operations." There can be no assurance that the
Company would be successful in overcoming these risks or any other problems
encountered with such strategic alliances or investments. In addition, if the
Company were to consummate one or more significant strategic alliances or
investments in which the consideration consisted of stock, stockholders of the
Company could suffer a significant dilution of their interests in the Company.
The financial impact of investments and strategic alliances could have a
material adverse effect on the Company. See "Business--Investments and Strategic
Alliances."
Technological Changes May Adversely Affect Competitiveness And Financial
Results. The telecommunications industry is characterized by rapid and
significant technological advancements and introductions of new products and
services utilizing new technologies. There can be no assurance that the Company
will maintain competitive services or that the Company will obtain appropriate
new technologies on a timely basis or on satisfactory terms.
Dependence On Key Personnel. The Company's success depends to a significant
degree upon the continued contributions of its management team, including Thomas
Combrinck, Andreas Popovici and Franco Reinschmidt, and technical, marketing and
sales personnel. The Company does not have key-person life insurance policies on
the lives of any of its employees. The Company has no employment agreement with
Mr. Combrinck but it has entered into management agreements with Mr. Popovici
and Mr. Reinschmidt. Competition for qualified employees and personnel in the
telecommunications industry is intense and, from time to time, there are a
limited number of persons with knowledge of and experience in particular sectors
of the telecommunications industry. The Company's success also will depend on
its ability to attract and retain qualified management, marketing, technical and
sales executives and personnel. The process of locating such personnel with the
combination of skills and attributes required to carry out the Company's
strategies is often lengthy. The loss of the services of key personnel,
including Thomas Combrinck, Andreas Popovici and Franco Reinschmidt, or the
inability to attract additional qualified personnel, could have a material
adverse effect on the Company's results of operations, development efforts and
ability to expand. There can be no assurance that the Company will be successful
in attracting and retaining such executives and personnel. Any such event could
have a material adverse effect on the Company. See "Management."
Voting Control. Mr. Thomas Combrinck beneficially owns approximately 65.5%
of the outstanding shares of Common Stock. See "Certain Transactions." This
gives Mr. Combrinck the ability to control the outcome of substantially all
issues submitted to the Company's Board of Directors or stockholders and an
investor will be dependent upon his capabilities and judgment. Moreover,
concentration of effective voting control could serve to perpetuate current
management and could make the Company less attractive to potential acquirors.
This concentration of ownership could also make it very difficult, if not
impossible, for a third-party to effect a non-negotiated change in control of
the Company. See "Management" and "Principal Stockholders."
Holding Company Structure; Reliance On Subsidiaries For Dividends. UTG is a
holding company, the principal assets of which are its current operating
subsidiaries in Switzerland. As the Company expands, it anticipates that it will
operate through new subsidiaries located in other countries in the EU. While
there are no restrictions under Swiss law, operating subsidiaries set up in the
future in other countries of the EU may be subject to corporate law restrictions
on their ability to pay dividends to UTG. There can be no assurance that UTG
will be able to cause its operating subsidiaries to declare and pay dividends or
make other payments to UTG when requested by UTG. The failure to pay any such
dividends or make any such other payments could have a material adverse effect
upon the Company.
Potential Volatility Of Stock Price. The market price of the Common Stock
following this offering may be highly volatile. Factors such as variations in
the Company's revenue, earnings and cash flow, the difference between the
Company's actual results and the results expected by investors and analysts and
announcements of new service offerings, marketing plans or price reductions by
the Company or its competitors could cause the market price of the Common Stock
to fluctuate
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substantially. In addition, the stock markets recently have experienced
significant price and volume fluctuations that particularly have affected
telecommunications companies and resulted in changes in the market prices of the
stocks of many companies that have not been directly related to the operating
performance of those companies. Such market fluctuations may materially
adversely affect the market price of the Common Stock.
Trading in the Common Stock will be conducted on the NASD Bulletin Board or
in the over-the-counter market in what is commonly referred to as the "pink
sheets." An investor will find it difficult to dispose of their Common Stock or
to obtain accurate quotations as to the price of the Common Stock and there will
most likely be limited coverage of news concerning the Company. In addition, the
Common Stock will be subject to a rule that imposes additional sales practice
requirements on broker-dealers who sell such Common Stock to persons other than
established customers and accredited investors (accredited investors are
generally persons having net worth in excess of $1,000,000 or annual income
exceeding $200,000 or $300,000 together with a spouse). For transactions covered
by this rule, the broker-dealer must make a special suitability determination
for the purchaser and must have received the purchaser's written consent to the
transaction prior to sale, as well as disclosing certain information concerning
the risks of purchasing low-priced securities on the market for such securities.
Consequently the non-listing will adversely affect the ability of broker-dealers
to sell the Common Stock and the ability of purchasers in this offering to sell
their Common Stock in the secondary market and will make subsequent financing
difficult.
As of the date of this Prospectus, several brokerage firms have indicated
their interest to engage in market making activities with respect to the Common
Stock. In the event that these market makers and specialists do not function as
such, public trading in the Common Stock will be adversely affected or may cease
entirely.
No Public Market for Common Stock. Prior to this offering, there has been
no public market for the Common Stock. There can be no assurance that an active
market will develop for the Common Stock, or that if it should develop that it
will continue.
Shares Eligible for Future Sale. Of the Company's 10,406,000 shares of
Common Stock currently outstanding on the date of this Prospectus, 7,250,000
shares are "restricted securities," as defined in Rule 144 of the Securities
Act, and under certain circumstances may be sold without registration pursuant
to Rule 144. The 7,250,000 shares of Common Stock which are "restricted
securities" will become eligible for sale in May 1998. Any substantial sale of
restricted securities pursuant to Rule 144 could have an adverse effect on the
market price of the Common Stock. The Company cannot predict the effect, if any,
that market sales of Common Stock or the availability of such Common Stock for
sale will have on the market price prevailing from time to time, however, sales
of the Shares by the Selling Stockholders, or even the potential of such sales,
could have an adverse effect on the market price of the Common Stock. See
"Selling Stockholders and Plan of Distribution" and "Shares Eligible for Future
Sale."
No Dividends. Since its inception, the Company has not paid any dividends
on the Common Stock. The Company intends to retain future earnings, if any, to
provide funds for the operation of its business and, accordingly, does not
anticipate paying any cash dividends on the Common Stock in the reasonably
foreseeable future. See "Dividend Policy."
Delaware Anti-Takeover Law. The Company is governed by the provisions of
Section 203 of the General Corporation law of the State of Delaware. In general,
this law prohibits a public Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which such person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A "business combination" is defined to include mergers, asset sales and other
transactions resulting in a financial benefit to the stockholder. An "interested
stockholder" is defined as a person who, together with affiliates and
associates, owns (or, within the prior three years, did own) 15 percent or more
of the corporation's voting stock.
These provisions could have the effect of delaying, deferring or preventing
a change of control of the Company which could prevent the Company's
stockholders from realizing a premium through a non-negotiated change in
control. The Company's stockholders, by adopting an amendment to the Certificate
of Incorporation or By-Laws of the Company, may
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elect not to be governed by Section 203, effective twelve months after adoption.
Neither the Certificate of Incorporation nor the By-Laws of the Company
currently excludes the Company from the restrictions imposed by Section 203.
THE COMPANY
The Company is a development stage company that provides quality private
voice, fax and data management telecommunication services in Switzerland,
primarily to businesses and business groups at prices which are generally below
those of major telecommunications carriers. As of August 9, 1996, the Company
has entered into contracts with 14 customers to provide customized
telecommunications service packages. These customized packages include
telecommunications minutes plus other services selected by customers. The
Company provides local support, round-the-clock customer service and full
network redundancy to all customers. Available services include system design
and installation as well as digital compression, fax transmission compression,
digital data services and wideband digital data services. Additional customers
are being solicited daily and it is anticipated that new customers will be added
on a regular basis. In the future, the Company intends to expand its operations
though local subsidiaries or joint ventures into other countries in the EU as
such countries' telecommunications industries become deregulated, which
deregulation is, for the most part, expected to be completed by early 1998, and
as market conditions in such other EU countries warrant.
Both the competitive environment and the economic framework in which
international telecommunication companies operate are changing at a rapid pace.
Due to the liberalization of telecommunication markets and technical
improvements, the Company is able to utilize the infrastructure provided by
international telecommunication carriers in connection with the services it
offers. This allows the Company to offer its customers one of Europe's largest
meshed fiber optic networks, which will eventually include more than 90
international POPs. In providing its services, the Company connects a customer's
telephone installation to the Company's POP in Switzerland by means of dedicated
lines, and such POP then routes such customer's outgoing voice, fax and data
transmissions though leased transmission lines directly to the Company's switch
in the United Kingdom. The communications are then transferred directly from the
Company's switch into the international networks. All of this is achieved
without loss in speech quality or speed during connection and with the customer
dialing his international destination directly, as he had done prior to becoming
a Company customer. The Company is able to provide its services at attractive
prices to its customers due to the large potential purchasing power of the
Company.
DIVIDEND POLICY
Since its inception, the Company has not paid any dividends on the Common
Stock. The Company intends to retain future earnings, if any, that may be
generated from the Company's operations to help finance the operations and
expansion of the Company and, accordingly, does not plan, for the reasonably
foreseeable future, to pay dividends to holders of the Common Stock. Any
decision as to the future payment of dividends will depend on the results of
operations and financial position of the Company and such other factors as the
Company's Board of Directors, in its discretion, deems relevant.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by
the Selling Stockholders.
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CAPITALIZATION
The following table sets forth the capitalization of the Company at April
30, 1996. All information set forth below should be read in conjunction with the
balance sheet of the Company and related notes that appear elsewhere in this
Prospectus.
Stockholders' Equity
Common Stock--$0.00001 Par Value
Authorized 20,000,000 shares;
10,006,000 Issued and Outstanding(1) $ 100
Additional paid-in capital $3,088,474
Retained Deficit $ (317,754)
Foreign Currency Translation Adjustment $ 2,739
Minority Interest $ 17
Total Stockholders' Equity $2,773,576
==========
- ----------
(1) Does not include 400,000 shares of Common Stock subsequently issued to
Interfinance. See "Certain Transactions."
SELECTED FINANCIAL DATA
The following selected consolidated financial data of The Company with
respect to the period from February 29, 1996 (inception) to April 30, 1996 is
derived from the Company's consolidated financial statements. The consolidated
financial statements of the Company for the period from February 29, 1996
(inception) to April 30, 1996 are included elsewhere in this Prospectus. Such
consolidated financial statements have been audited by Merdinger, Fruchter,
Rosen & Corso, P.C. independent certified accountants. The selected consolidated
financial information provided below should be read in conjunction with "Plan of
Operation" and the consolidated financial statements of the Company and the
notes thereto included elsewhere in this Prospectus. See "Index to Consolidated
Financial Statements."
Period from February 29,
1996 (inception) to
April 30, 1996(1)
-------------------------
Consolidated Statement of Operations Data:
Sales................................................ $ --
Net Loss(1).......................................... $ (317,754)
Loss per share(2).................................... $ (.03)
Weighted average number of Shares outstanding........ 10,006,000
April 30, 1996
-------------------------
Consolidated Balance Sheet Data:
Total Assets......................................... $ 3,945,491
Liabilities (all current)........................... $ 1,171,915
Stockholders' equity................................ $ 2,773,576
- ----------
(1) UTG was incorporated on April 17, 1996, UT Holding was incorporated on
February 29, 1996 and UT AG was incorporated on March 28, 1996. The
consolidated results include UTG and its subsidiaries, UT Holding and UT
AG.
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(2) The weighted average number of common shares and common equivalent shares
outstanding for purposes of the loss per share amounts are computed on the
basis of all stock being outstanding for all periods presented.
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PLAN OF OPERATION
During the 12-month period following the date of this Prospectus the
Company intends to focus on expanding its customer base in Switzerland, and
intends to explore the possibility of expanding into other countries of the EU
where business and regulatory conditions warrant. Additionally, the Company
intends, to the extent necessary, to continue to upgrade its network and
information systems so that they remain adequate for its business needs.
The Company believes that its current level of employees is sufficient, and
currently has no plans to significantly change the number of its employees.
However, as the Company expands, it intends to hire additional employees to meet
its needs.
The Company will not receive any of the proceeds from the sale of Shares by
the Selling Shareholders. The Company raised approximately $4 million from
recent private placements, of which $3,010,000 has been paid to the Company in
cash and the remaining $990,000 is represented by a promissory note which is
payable to the Company on or before February 1, 1997. The Company has begun to
generate limited revenues from operations. With a portion of funds raised in
private placements, the Company has repaid a $1,000,000 loan from Heddag AG (the
"Heddag Loan") together with $19,444 in interest and has purchased approximately
$700,000 in equipment.
Although the Company believes that the Company's current cash and revenue
from operations will be sufficient to fund the Company's anticipated capital
needs for the 12 month period following the date of this Prospectus, there can
be no assurance that it will be sufficient to fund operations during such
period. The Company may be required to seek additional financing during such
period in the event of delays, cost overruns or unanticipated expenses
associated with a company in an early stage of development.
Upon the completion of its new switch by the end of August, the Company
believes that it will have the equipment it needs to provide its services for
the next 12 months at a level necessary to produce an operating profit. There
can be no assurance that the Company will ever generate sufficient revenue to
produce an operating profit. Depending on the success of the Company's sales
efforts and the amount of revenue it generates over the next 12 month period,
the Company may decide to purchase additional equipment to upgrade its network
or enhance its informational systems. However, the purchase of additional
equipment is not required and will done during such period only if such purchase
can be justified by the Company's customer base and operating revenue.
Additionally, if the Company decides to expand into other countries of the EU or
pursue any strategic investments or joint ventures during the next 12 months, it
might require additional financing to commence such operations or consummate
such investments or joint ventures.
If the Company requires additional financing following the date of this
Prospectus there can be no assurance that the Company will be able to obtain
such additional financing or that such financing, if available, will be on
acceptable terms. If the Company were to require additional financing but were
unable to arrange for such financing on acceptable terms, the Company would be
materially and adversely affected and could have to cease or substantially
reduce operations. The need for additional financing will depend on the
Company's operating revenue and expansion plans at such time. See "Risk
Factors--No Operating History, Uncertainty of New Business, --Need For
Additional Capital, --Risks Associated With International Operations, and
- --Risks Associated with Investments and Strategic Alliances."
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BUSINESS
General
The Company is a development stage company that provides quality private
voice, fax and data management telecommunication services in Switzerland,
primarily to businesses and business groups at prices which are generally below
those of major telecommunications carriers. As of August 9, 1996, the Company
has entered into contracts with 14 customers to provide customized
telecommunications service packages. These customized packages include
telecommunications minutes plus other services selected by customers. The
Company provides local support, round-the-clock customer service and full
network redundancy to all customers. Available services include system design
and installation as well as digital compression, fax transmission compression,
digital data services and wideband digital data services. Additional customers
are being solicited daily and it is anticipated that new customers will be added
on a regular basis. In the future, the Company intends to expand its operations
though local subsidiaries or joint ventures into other countries in the EU as
such countries' telecommunications industries become deregulated, which
deregulation is, for the most part, expected to be completed by early 1998, and
as market conditions in such other EU countries warrant.
Both the competitive environment and the economic framework in which
international telecommunication companies operate are changing at a rapid pace.
Due to the liberalization of telecommunication markets and technical
improvements, the Company is able to utilize the infrastructure provided by
international telecommunication carriers in connection with the services it
offers. This allows the Company to offer its customers one of Europe's largest
meshed fiber optic networks, which will eventually include more than 90
international POPs. In providing its services, the Company connects a customer's
telephone installation to the Company's POP in Switzerland by means of dedicated
lines, and such POP then routes such customer's outgoing voice, fax and data
transmissions though leased transmission lines directly to the Company's switch
in the United Kingdom. The communications are then transferred directly from the
Company's switch into the international networks. All of this is achieved
without loss in speech quality or speed during connection and with the customer
dialing his international destination directly, as he had done prior to becoming
a Company customer. The Company is able to provide its services at attractive
prices to its customers due to the large potential purchasing power of the
Company.
Industry
The global telecommunications industry has dramatically changed in the
United States commencing with AT&T's divestiture of its 22 regional operating
companies ("RBOCs") in 1984 and continuing through the recently enacted
amendments to the United States Communications Act. Significant regulatory
changes have also occurred and are occurring in Switzerland and in other
countries in the EU. Prior to these changes, the long distance
telecommunications markets in the United States, Switzerland and other countries
in the EU consisted of one provider. As a result of fundamental regulatory
changes in the United States, Switzerland and other countries in the EU, coupled
with technological and network infrastructure developments which increased
significantly the voice and data telecommunications transmission capacity of
dominant carriers, the long distance industry in the United States has
developed, and in the EU is developing, into a highly competitive one consisting
of numerous alternative long distance carriers. The Company anticipates that the
further deregulation in the United States and the EU will promote the continued
development of competitive telecommunications markets in the United States and
the EU.
Long distance telecommunications carriers can be differentiated by several
defining operational characteristics. One such defining characteristic is
between transmission facilities-based companies and non-transmission
facilities-based companies (resellers). Transmission facilities-based carriers,
such as AT&T and British Telecom, own their own long distance interexchange or
transmission facilities and originate and terminate calls through local exchange
systems. Profitability for transmission facilities-based carriers is dependent
not only upon their ability to generate revenues but also upon their ability to
manage complex networking and transmission costs. All of the first- and most of
the second-tier long distance companies are transmission facilities-based
carriers and generally offer service over broad geographic areas. Most
transmission facilities-based carriers in the third tier of the market offer
their service only in a limited geographic area. Some transmission facilities
based carriers contract with other transmission facilities-based carriers to
provide transmission where they have geographic gaps in their facilities.
Resellers, such as the Company, carry their long distance traffic over
transmission lines
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leased from transmission facilities-based carriers, originate and terminate
calls through local exchange systems or "competitive access providers" ("CAPs")
and contract with transmission facilities-based carriers to provide transmission
of long distance traffic either on a fixed rate lease basis or a call volume
basis. Profitability for resellers is dependent largely on their ability to
generate on a continuing basis sufficient revenue volume which is sufficient in
size to permit them to negotiate attractive pricing with one or more
transmission facilities-based carriers.
A second operating characteristic differentiating telecommunications
companies is between switch-based and switchless telecommunications companies.
Switch-based telecommunications companies, such as the Company, own or lease one
or more switches, which are computers that direct telecommunications traffic to
form a transmission path between a caller and the recipient of a call. All
transmission facilities-based carriers are switch-based, as are many resellers,
including the Company. Switchless resellers depend on one or more transmission
facilities-based carriers or switch-based resellers for transmission and
switching facilities. The Company believes that owning its switches reduces its
reliance on other carriers and enables it to efficiently route
telecommunications traffic over multiple leased transmission lines and to
control costs and record data and customer information. The availability of
existing transmission capacity in the Company's markets makes leasing of
transmission lines attractive to the Company and enables it to grow network
usage without having to incur the significant capital and operating costs
associated with the development and operation of a transmission line
infrastructure.
The international, national and local markets for voice telephone services
in Switzerland has grown to approximately $5.6 billion in annual revenue during
1995. In Switzerland, Swiss Telecom historically has dominated the
telecommunications market and was the largest carrier in Switzerland during
1995, with approximately $5.6 billion of revenues from international, national
and local voice telephone services.
The international, national and local markets for voice telephone services
in the EU, other than in Switzerland, has grown to approximately $210 billion in
annual revenue during 1995. In each country in the EU there has historically
been one telephone company which has dominated the telecommunications market. As
a result of deregulatory trends this situation is slowly changing and these
markets are beginning to open up for competition from other telecommunications
providers.
Services
The Company sells telecommunications minutes in connection with a broad
range of services which are customized to suit individual customer needs. The
Company does not anticipate that the sale of telecommunications minutes without
other services will be a significant portion of its business.
The Company designs, installs and commissions voice, fax and data
transmission equipment appropriate for each of its customers in a manner similar
to that provided by major telecommunications carriers but at a lower price.
The Company offers services including digital compression techniques, where
usage warrants, at 8, 16 or 64 kbps (which compression allows for substantial
overall cost savings because compression allows more information to be sent
through fewer lines which allows the Company to lease fewer lines and offer
reduced calling tariffs), fax transmission compression, and digital data
services in a full range of transmission support and interface types between 1.2
kbps and 2 mb (which can be point to point or point to multipoint). For
customers requiring additional network bandwidth, the Company is able to provide
wideband digital data services which provide increased capacity and which
support applications such as audio- and videoconferencing, high speed imaging,
and corporate communication networking requirements. With the growing use of
LAN's, customers will be able to directly connect their LAN traffic to the
Company's network, for access to remote locations and for applications such as
file transfer, remote data access and e-mail. The Company offers a fully managed
network service that includes, management, control and configuration, remote
access for diagnostic and maintenance services, regular network status reports
and controlled access security. The Company is conducting feasibility studies to
identify the market potential and regulatory environment for offering additional
services, including video conferencing, paging, international call back,
Internet access, facsimile and frame relay services, and expects to introduce
Internet access, enhanced travel cards and video conferencing.
The Company provides all of its customers with a high level of quality
service, including local support, round-the-clock customer service and full
network redundancy. Additionally, the Company's customers receive comprehensive
billing packages. The Company's standard monthly statement will include a
management summary report, a call detail report
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recording every long distance call and facsimile call, and a pricing breakdown
by call destination. Optional reports include call summaries by account code,
area or city code, international destination and time-of-day. This information
is available to customers in the form of hard copy, magnetic tape or disk.
Business Strategy
The Company's objective is to grow its long distance telecommunications
customer base in Switzerland and to establish itself in other deregulated
markets in the EU as they develop. With its communication network, the Company
is well positioned to take advantage of telecommunications deregulation in
Switzerland and will be well-prepared for the upcoming full deregulation of the
telecommunication markets in other countries of the EU, which deregulation is,
for the most part, expected to be completed by early 1998. The network will
provide the Company with the tools to keep pace with the ongoing technological
development in the telecommunications industry. The Company has positioned
itself between the major full-service and high price telecommunications carriers
and the no service (or limited service) cut rate telecommunications minutes
resellers which it believes will eventually expand into its markets. The Company
offers substantially lower rates to customers compared to the major
telecommunications companies, but believes that it is not required to be the
lowest cost provided of minutes because it will be able to attract new business
and maintain its customers' business by offering broad based solutions to their
telecommunications business needs. The Company believes that by positioning
itself this way, it will retain and add customers who wish to save on their
telecommunications expenses yet who also demand a high level of service with the
availability of a wide array of service offerings.
The Company intends to expand its operations in Switzerland by focusing on
and marketing its principal competitive strengths which are: (1) the Company's
sales and marketing organization and the customized service the Company offers
to its customers; (2) the Company's offering of competitive prices which the
Company believes are generally lower than prices charged by the major carrier in
the Swiss market; (3) the Company's position as an early entrant in the Swiss
market as an alternative carrier; (4) the Company's focus on more profitable
international telecommunications traffic; and (5) the Company's switched-based
networking capabilities. The availability of existing transmission capacity in
the Swiss market makes the leasing of transmission lines attractive to the
Company and enables it to grow network usage without having to incur the
significant capital and operating costs associated with the development and
operation of a transmission line infrastructure. See "Business--Industry" and
"Business--Network."
In the future, as business and regulatory conditions warrant, the Company
hopes to utilize the foregoing competitive strengths to expand into other
countries of the EU. In connection with such expansion the Company may enter
into strategic alliances or make investments in companies that are complementary
to its current operations.
The Company's belief that its prices will generally be lower than those of
the major carriers is based upon informal surveys of the pricing offered by the
major carriers. However, because prices and promotional programs change rapidly
and often in the telecommunications industry, the prices offered by the Company
may not always be as competitive as the prices charged by the major carriers.
Sales And Marketing
The Company markets its services through a variety of channels, including
the Company's internal sales forces and independent sales agents. The Company
has a total of approximately 5 internal sales personnel and approximately 8
independent sales agents and partnerships serving its markets. Although it has
not experienced significant turnover, a loss of a significant number of
independent sales agents and partnerships could have a significant adverse
effect on the Company's ability to generate additional revenue. The Company
maintains sales offices in Switzerland.
Currently, no customer accounts for 10% or more of the Company's projected
total revenue.
The Company generally utilizes its internal sales force to target medium
and large business customers. The Company markets its services to small and
medium-sized businesses through independent sales agents. Telemarketers also are
used to market services to small business customers and residential customers
and to generate leads for the other members of the Company's internal sales
force and independent sales agents.
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The Company primarily targets customers with between $5,000 and $50,000 of
monthly usage. The Company believes that, in addition to being price sensitive,
these customers tend to be focused on customer service and are more likely to
rely on one or two carriers for their telecommunications needs. The diversity of
the Company's targeted customer base enhances network utilization by combining
business-driven workday traffic with night and weekend off-peak traffic. The
Company strives to be more cost effective, flexible, innovative and responsive
to the needs of its customers than the major carriers, while providing more
service and service offerings than cut rate resellers.
Network
The Company has established its own POP in Switzerland and owns a switch in
the United Kingdom. The Company is currently completing another switch in the
U.K. which will be able to handle a higher volume of telecommunications traffic
than the Company's existing switch. The Company anticipates this new switch will
be operational by September 1996. Lines leased from transmission
facilities-based carriers link the Company's POP to its switch. Customers access
the Company's network through direct access lines or by dial-up access using
auto dialing equipment, indirect access code dialing or least cost routing
software integrated in the customer's telephone equipment. The Company gains a
competitive advantage from operating with owned switches because this allows the
Company to route its calls more effectively. Also, having its switches located
in London, one of the most competitive telecommunications sites in Europe,
assures that a large supply of cheap bandwidth from numerous carriers is readily
available. This large supply allows the Company to maintain a network which
offers competitive rates to a large number of destinations.
The Company utilizes a network of lines leased under volume discount
contracts with transmission facilities-based carriers, much of which are fiber
optic cable. The selection of any particular circuit for the transmission of a
call is controlled by routing software, located in the Company's switch, that is
designed to cause the most efficient use of the Company's network. In the
future, the Company will evaluate opportunities to install POPs in selected
markets where the volume of its customer traffic makes such an investment
economically viable. Utilization of the Company's switch allows the Company to
route customer calls over multiple networks to reduce costs.
The Company has entered into the TMI Contact, pursuant to which the Company
purchases telecommunication minutes from TMI. The TMI Contract contains
under-utilization provisions. These provisions which require the Company to pay
fees to TMI if the Company does not meet minimum periodic usage requirements.
There can be no assurance that such charges would not be assessed in the future.
The TMI Contract may be terminated by either party upon thirty days written
notice. If the TMI Contract is terminated by the Company the Company must pay
TMI certain installation charges to the extent that they have not been recouped
by TMI plus an additional months fee. The Company believes that the costs
associated with termination of the TMI Contract would not be material to the
Company. Due to the large excess capacity in the telecommunications industry,
should the TMI Contract be terminated, the Company believes that it would be
able to replace the services currently provided by TMI upon substantially the
same terms and without incurring material costs or a disruption of service,
however, there can be no assurance that termination of the TMI Contract would
not cause a material adverse affect on the Company.
The Company generally utilizes redundant, highly automated advanced
telecommunications equipment in its network and has diverse alternate routes
available in cases of component or facility failure. Automatic traffic rerouting
enables the Company to provide a high level of reliability for its customers.
Computerized automatic network monitoring equipment facilitates fast and
accurate analysis and resolution of network problems. The Company provides
customer service and support, 24-hour network monitoring, trouble reporting and
response, service implementation coordination, billing assistance and problem
resolution. The Company controls all of its billing services through its switch
in the United Kingdom.
Network costs are the single largest expense incurred by the Company. The
Company strives to control its network costs and its dependence on other
carriers by leasing transmission lines on an economical basis. The Company may
also negotiate leases of private line circuits with carriers that operate fiber
optic transmission systems at rates independent of usage, particularly on routes
over which the Company carries high volumes of calls. The Company also has
various third party carriers and suppliers provide some of its services and
maintenance, which saves an estimated 25% of costs. The Company attempts to
maximize the efficient utilization of its network by marketing to a mix of
customers, including internet,
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most of whom tend to use its services most frequently on weekdays during normal
business hours, and some of whom use its services most often during night and
weekend off-peak hours.
Information Systems
The Company believes that maintaining sophisticated and reliable billing
and customer services information systems that integrate billing, accounts
receivables and customer support is a core capability necessary to record and
process the data generated by a telecommunications service provider. The Company
believes its management information system is currently adequate for its needs.
In the future the Company will strive to enhance and grow such system so that it
continues to be adequate. There can be no assurance that the Company will not
suffer adverse consequences or cost over-runs in implementing new information
systems. See "Risk Factors--Dependence on Effective Information Systems."
Regulation
United States
Currently, since no calls by Company customers originate in the United
States, the Company does not believe that it is subject to any
telecommunications laws or regulations in the United States. In the future, when
and if the Company's services expand, it is possible that the Company may become
subject to the telecommunications laws and regulations of the United States. If
this were to occur, compliance with such laws would involve certain costs, and,
while the Company would make every effort to comply with such laws and
regulations, failure to comply could have a material adverse effect on the
Company.
United Kingdom
Due to its ownership of a switch in the United Kingdom, the
telecommunications services provided by the Company are indirectly affected by
regulations introduced by Oftel. Since the break up of the United Kingdom
telecommunications duopoly consisting of British Telecom and Mercury in 1991 it
has been the stated goal of Oftel to create a competitive marketplace. Oftel has
imposed mandatory rate reductions on British Telecom in the past, which are
expected to continue for the foreseeable future. Although the Company does not
believe that any regulations introduced by Oftel will interfere with or
substantially affect its business, there can be no assurance that future changes
in regulation and government in the U.K will not have a material adverse effect
on the Company.
Switzerland
In March 1992, the Swiss government, in a federal decree on
telecommunications services, introduced a complete liberalization of the
transmission of messages through leased lines. Pursuant to such decree, the
Swiss Federal Council also authorized subscribers of leased lines to transmit
voice messages as long as those messages are transmitted for their own purposes.
In order to conform to the evolution of legislation in other EU countries, in
July 1995, the Swiss government modified the decree to provide a new definition
of the term "a message transmitted for its own purposes" so as to make it
possible to offer telephone services through leased lines to "closed user
groups." The Swiss authorities have adopted an expansive notion of the "closed
user group" including not only a parent company and its subsidiaries, but also
separate companies which have a strong common economic interest, such as a
manufacturing company and its suppliers or important clients. Additionally,
according to this new regulation on telephone services, the subscriber of the
leased line does not necessarily have to be a member of the "closed user group,"
but can also be, for instance, a foreign telephone company. The Company is
currently permitted to conduct its business as currently conducted and does not
have to obtain a license from the Swiss government in order to provide its
services. The Company believes that it is in compliance with all material Swiss
laws and regulations. There can be no assurance that future changes in the
telecommunications laws of Switzerland will not adversely affect the Company.
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The EU
Currently, the Company is operating only in Switzerland, however, when and
if the Company expands into other countries in the EU it will become subject to
the laws and regulations of each such country. If and when the Company becomes
subject to such laws and regulations, compliance with such laws and regulations
will involve certain costs, and, while the Company will make every effort to
comply with such laws and regulations, failure to comply could have a material
adverse effect on the Company.
Competition
The telecommunications industry is highly competitive and is significantly
influenced by the marketing and pricing decisions of the larger industry
participants. In each of its markets, the Company will compete on the basis of
price and customer service and its ability to provide a broad array of
telecommunications services. The industry has relatively insignificant barriers
to entry, numerous entities competing for the same customers and a high average
churn rate, as customers frequently change long distance providers in response
to the offering of lower rates or promotional incentives by competitors. The
Company believes that while its customers are price sensitive they want quality
and value added services and therefore, will remain customers as long as the
Company's prices are competitive, the quality of the Company's service is high
and the Company continues to offer a wide array of service offerings. The
industry has experienced and will continue to experience rapid regulatory and
technological change. Many competitors in each of the Company's current and
proposed markets are significantly larger than the Company, have substantially
greater resources than the Company, control transmission lines and larger
networks than the Company and have long-standing relationships with the
Company's target customers. There can be no assurance that the Company will
remain competitive in this environment. Regulatory trends have had, and may have
in the future, significant effects on competition in the industry. As the
Company expands its geographic coverage, it will encounter increased
competition. See "Risk Factors--Potential Adverse Effects of Regulation," "Risk
Factors--Increasing Domestic and International Competition" and "--Regulation."
Competition in the long distance industry is based upon pricing, customer
service, network quality, value-added services and customer relationships. The
success of a non-transmission facilities-based carrier, such as the Company,
depends largely upon the amount of traffic that it can commit to the
transmission facilities-based carrier and the resulting volume discount it can
obtain. Subject to contract restrictions and customer brand loyalty, resellers
like the Company may competitively bid their traffic among other national long
distance carriers to gain improvement in the cost of service. The relationship
between resellers and the larger transmission facilities-based carriers is
twofold. First, a reseller is a customer of the services provided by the
transmission facilities-based carriers, and that customer relationship is
predicated primarily upon the pricing strategies of the first tier companies.
The reseller and the transmission facilities-based carriers are also
competitors. The reseller will attract customers to the extent that its pricing
for customers is generally more favorable than the pricing offered the same size
customers by larger transmission facilities-based carriers. However,
transmission facilities-based carriers have been aggressive in developing
discount plans which have had the effect of reducing the rates they charge to
customers whose business is sought by the reseller. Thus the business success of
a reseller is significantly tied to the pricing policies established by the
larger transmission facilities-based carriers.
Many of the Company's competitors are significantly larger, have
substantially greater financial technical and marketing resources and larger
networks than the Company, control transmission lines and have long-standing
relationships with the Company's target customers. Currently, the Company's main
competitor in Switzerland is Swiss Telecom, which controls almost all of the
Swiss telecommunications market and had approximately $5.6 billion in revenue in
1995. In the future, additional competitors may include, among others, Deutsche
Telecom, AT&T, MCI, Sprint, British Telecom and Mercury. As the Company expands
into other countries of the EU there will be additional competition in each of
those countries from telecommunications companies within each of those
countries. Other United States carriers are also expected to enter the EU
market. Furthermore, the recently announced proposed merger of Bell Atlantic
Corp. and Nynex Corp., the joint venture between MCI and Microsoft, under which
Microsoft will promote MCI's services, the recently announced joint venture
among Sprint, Deutsche Telecom and France Telecom, and other mergers,
acquisitions and strategic alliances, could also increase competitive pressures
upon the Company and have a material adverse effect on the Company.
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The Company believes its services will be competitive, in terms of price
and quality with the service offerings of Swiss Telecom primarily because of the
Company's advanced network-related hardware and software systems and the network
configuration and traffic management expertise employed by it in Switzerland.
In addition to these competitive factors, recent and pending
telecommunications deregulation in Switzerland and other EU markets may
encourage new entrants. As the Company expands its geographic coverage, it will
encounter increased competition. Moreover, the Company believes that competition
in the EU markets is likely to increase and become more similar to competition
in the United States markets over time as such EU markets continue to experience
deregulatory influences. Prices in the long distance industry have declined from
time to time in recent years and, as competition increases in the EU, prices are
likely to continue to decrease. The Company's competitors may reduce rates or
offer incentives to existing and potential customers of the Company. To maintain
its competitive position, the Company believes that it must be able to reduce
its prices in order to meet reductions in rates, if any, by others.
Investments And Strategic Alliances
As the Company expands its service offerings, geographic focus and its
network, the Company anticipates that it will seek to make investments in or
enter into strategic alliances with, companies providing services complementary
to the Company's existing business. The Company believes that, as the global
telecommunications marketplace becomes increasingly competitive, expands and
matures, such transactions will be critical to maintaining a competitive
position in the industry.
The Company's ability to effect strategic alliances and make investments
may be dependent upon its ability to obtain additional financing. While the
Company may in the future pursue an active strategic alliance or investment
policy, no specific strategic alliances, or investments are currently in
negotiation and the Company has no immediate plans to commence such
negotiations. If the Company were to proceed with one or more significant
strategic alliances or investments in which the consideration consists of cash,
a substantial portion of the Company's available cash could be used to
consummate investments. If the Company were to consummate one or more
significant strategic alliances or investments in which the consideration
consists of stock, stockholders of the Company could suffer a significant
dilution of their interests in the Company.
In connection with investments or strategic alliances, the Company could
incur substantial expenses, including the fees of financial advisors, attorneys
and accountants, and any expenses associated with registering shares of the
Company's capital stock, if such shares are issued. The financial impact of such
investments or strategic alliances could have a material adverse effect on the
Company's business, financial condition and results of operations and could
cause substantial fluctuations in the Company's quarterly and yearly operating
results. See "Risk Factors--Need for Additional Capital," "--Risks Associated
with Investment and Strategic Alliances" and "Plan of Operation."
Facilities
The Company currently leases approximately 3,000 square feet in Zug,
Switzerland for approximately 3,900 CHF (approximately $3,260) per month. Such
lease expires on June 30, 1997. The Company believes that its facilities are
adequate for its current administration and business needs.
Employees
As of the date of this Prospectus, the Company had 7 full-time employees in
Switzerland. The Company has never experienced a work stoppage and its employees
are not represented by a labor union or covered by a collective bargaining
agreement. The Company considers its employee relations to be good.
Legal Proceedings
As of the date of this prospectus the Company is not a party to any material
legal proceedings.
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MANAGEMENT
The executive officers and directors of the Company are as follows:
Name Age Position
- ---- --- --------
Thomas Combrinck 38 Chairman of the Board and Director of
the Company and Director of UT Holding
and UT AG
David Schlecht 42 President, Chief Executive Officer and
Director
Ronald Kuzon 51 Treasurer, Secretary and Director
Andreas Popovici 42 Managing Director and Director of UT AG
Franco Reinschmidt 35 Chief Financial Officer and Director of
UT AG
Thomas Combrinck has served as Chairman of the Board and as a director of
the Company since July 1, 1996. Mr. Combrinck also serves as a director of UT
Holding and UT AG, which positions he has held since February 1996 and March
1996, respectively. Mr. Combrinck also serves as Chief Executive of United
Telegroup Ltd. UK, a telecommunications company located in the United Kingdom,
which position he has held since March 1994. From March 1993 through March 1994
Mr. Combrinck was an independent consultant to a number of large
telecommunications companies in various countries of the EU. From 1990 to March
1993 Mr. Combrinck was a Manager at Swiftcall, one of the largest
telecommunications resellers in the United Kingdom. Mr. Combrinck will devote
approximately 90% of his time to the business of the Company. See "Certain
Transactions."
David E. Schlecht has served as President, Chief Executive Officer and as a
director of the Company since its inception. Mr. Schlecht also serves as
President of Product Development & Packaging, Inc., a packaging brokerage firm,
which position he has held since 1989. Mr. Schlecht will devote approximately
50% of his time to the business of the Company. See "Executive Compensation."
Ronald W. Kuzon has served as Treasurer and a director of the Company since
its inception, and has served as the Company's Secretary since July 1, 1996. Mr.
Kuzon also served as President of Needham Capital Group, Inc., a venture capital
company, which position he has held since 1993. From 1990 to 1993 Mr. Kuzon was
self employed as a private investor.
Andreas Popovici has served as Managing Director and a director of UT AG
since March 1996. Mr. Popovici also served as General Manager of Callcom, a
Swiss telecommunications service company, from October 1995 to March 1996. Prior
to that time, Mr. Popovici served as Director of the systems department at
Swissphone, a Swiss telecommunications company ("Swissphone"), from 1991 through
October 1995. See "Executive Compensation."
Franco Reinschmidt has served as Chief Financial Officer and a director of
UT AG since March 1996. Mr. Reinschmidt has served as head of strategic planning
at Zurich Insurance of Switzerland since 1995 and will continue in such position
through September 1996. From March 1996 through September 1996 he has been and
will be devoting less time to Zurich Insurance of Switzerland and has, and will,
receive only half of his salary from such company. During 1995 Mr. Reinschmidt
worked as a consultant and helped with the start up activities of Alpage, an
Austrian pager company. From 1992 to 1995 Mr. Reinschmidt was the head of
corporate development at Swissphone and from 1989 to 1992 he worked as project
manager of mergers and acquisitions for Vontebel Bank. See "Executive
Compensation."
Directors of the Company hold office until the next annual meeting of
stockholders of the Company and until their successors are duly elected and
qualified, or until their earlier death, resignation or removal. No family
relationships exist among any of the directors or executive officers of the
Company.
The Company pays its non-employee directors a fee of $500 for each meeting
of the Board of Directors attended in person and $200 for each telephonic board
meeting or committee meeting, in cash, plus reasonable out-of-pocket expenses.
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Pursuant to Section 145 of the Delaware General Corporation Law, the
Company's Certificate of Incorporation provides that the Company shall, to the
fullest extent permitted by law, indemnify all directors, officers,
incorporators, employees and agents of the Company against liability for certain
of their acts. The Company's Certificate of Incorporation also provides that,
with certain exceptions, no director of the Company will be liable to the
Company for monetary damages as a result of certain breaches of fiduciary duties
as a director. Exceptions to this include a breach of the director's duty of
loyalty, acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of law, improper declaration of dividends and
transactions from which the director derived an improper personal benefit.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to any arrangement, provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
PRINCIPAL STOCKHOLDERS
The following table sets forth information as to the number of shares of
Common Stock beneficially owned as of the date of this Prospectus by (i) each
beneficial owner of more than five percent of the outstanding Common Stock, (ii)
each current executive officer and director and (iii) all current executive
officers and directors of the Company as a group. All shares are owned both of
record and beneficially unless otherwise indicated.
Number and Percentage of Shares of Common Stock Owned
- --------------------------------------------------------------------------------
Name and Address Shares Owned Percentage Owned
- ---------------- ------------ ----------------
Thomas Combrinck(1)(2) 6,550,000 62.9%
Baarerstrasse 75
6302 Zug, Switzerland
Interfinance Inc. Co. Ltd [ ] 2,122,500 20.4%
Steinhaldenring 8, CH-8954
Geroldswil, Switzerland
Ronald W. Kuzon 2,000 *
300 Park Avenue, Suite 1940
New York, NY 10022
David E. Schlecht 4,000 *
17 Cattano Avenue
Morristown, NJ 07960
Andreas Popovici(1) 400,000 3.8%
Baarerstrasse 75
6302 Zug, Switzerland
Franco Reinschmidt(1) 300,000 2.9%
Baarerstrasse 75
6302 Zug, Switzerland
All directors and executive 7,256,000 69.7%
officers as a group (three
persons)
- ------------
* Less than 1%
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(1) Thomas Combrinck has entered into agreements with each of Andreas Popovici
and Franco Reinschmidt pursuant to which Mr. Combrinck has transferred,
subject to certain restrictions, 400,000 and 300,000 shares of Common Stock
owned by him to Mr. Popovici and Mr. Reinschmidt, respectively. Such shares
will be held in escrow and will vest over a two year period with the
unvested portion reverting to Mr. Combrinck if either of Mr. Popovici or
Mr. Reinschmidt leaves the Company for any reason within such two year
period. During such two year period, Mr. Popovici and Mr. Reinschmidt will
have voting power with respect to all transferred shares.
(2) Does not include 700,000 shares transferred to Mr. Popovici and Mr.
Reinschmidt portions of which will revert to Mr. Combrinck if either Mr.
Popovici or Mr. Reinschmidt leave the Company within two years.
EXECUTIVE COMPENSATION
UT Holding was incorporated in February 1996, UT AG was incorporated in
March 1996 and UTG was incorporated in April 1996. UT AG has entered into
Management Agreements with several individuals, however, only two of these
individuals make significant contributions to the Company and have contracts
which provide for salaries in 1996 in excess of $100,000. Mr. Andreas Popovici
has entered into a three year Management Agreement with UT AG dated March 14,
1996 (the "Popovici Agreement"), pursuant to which he serves as the Managing
Director and a director of UT AG. Pursuant to the Popovici Agreement Mr.
Popovici will devote 200 working days to the Company at an annual salary of
260,000 CHF (approximately $208,000) and will receive an additional 1,000 CHF
(approximately $800) for each new Company customer which he introduces to the
Company during the first year and an additional 750 CHF (approximately $600) for
each new Company customer which he introduces to the Company during the second
and third year of the Popovici Agreement. Mr. Franco Reinschmidt has entered
into a three year Management Agreement with UT AG dated April 4, 1996 (the
"Reinschmidt Agreement") pursuant to which Mr. Reinschmidt will devote 200
working days to the Company at an annual salary of 195,000 CHF (approximately
$156,000) and will receive an additional 1,000 CHF (approximately $800) for each
new Company customer which he introduces to the Company during the first year
and an additional 750 CHF (approximately $600) for each new Company customer
which he introduces to the Company during the second and third year of the
Reinschmidt Agreement. Mr. Reinschmidt is currently receiving only one half of
his salary and will begin to receive his full salary commencing in October 1996.
Both the Popovici Agreement and the Reinschmidt Agreement will automatically be
renewed for successive one year terms, unless terminated by either party at
least six months prior to the end of their terms, and each also provides for
certain benefits including insurance, business expense accounts and a company
car. Both agreements also contain confidentiality provisions which require each
employee to maintain secrecy, both during and after the term of employment, with
respect to the business, transactions, know-how and other relevant information
of the Company.
Since May 1, 1996 David Schlecht has been compensated at a rate of $60,000
per annum. Mr. Schlecht devotes approximately 50% of his time to the business of
the Company. It is anticipated that certain other executives of the Company,
including Mr. Thomas Combrinck, may enter into employment agreements with the
Company in the future. See "Management."
As of the date of this Prospectus, the Company has not issued any options.
The Company pays its non-employee directors a fee of $500 for each meeting
of the Board of Directors attended in person and $200 for each telephonic board
meeting or committee meeting attended, in cash, plus reasonable out-of-pocket
expenses.
Pursuant to Section 145 of the Delaware General Corporation Law, the
Company's Certificate of Incorporation provides that the Company shall, to the
fullest extent permitted by law, indemnify all directors, officers,
incorporators, employees and agents of the Company against liability for certain
of their acts. The Company's Certificate of Incorporation also provides that,
with certain exceptions, no director of the Company will be liable to the
Company for monetary damages as a result of certain breaches of fiduciary duties
as a director. Exceptions to this include a breach of the director's duty of
loyalty, acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of law, improper declaration of dividends and
transactions from which the director derived an improper personal benefit.
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<PAGE>
CERTAIN TRANSACTIONS
As of April 30, 1996, in exchange for 7,250,000 shares of Common Stock, the
Company acquired all of the outstanding shares, other than qualifying shares, of
UT Holding from Thomas Combrinck. At such time Thomas Combrinck, who is
currently a director of the Company, was not a director of the Company but was,
and currently still is, a director of UT Holding. The Company did not engage a
third-party to independently review the fairness of this transaction because the
cost of such review would have been high; however, the Company believes that
this transaction was fair from a financial point of view. This belief is based
on the fact that this transaction was analyzed by the Company's Board of
Directors and was negotiated by the Company with a then-unaffiliated third party
at arm's length. At the time such transaction was consummated the two directors,
who voted in favor of such transaction, were the Company's only stockholders.
On August 15, 1996 the Company sold an additional 400,000 shares of Common
Stock to Interfinance for $1,000,000 consisting of $10,000 in cash and the
Second Interfinance Note. The Second Interfinance Note is secured by 396,000
shares of Common Stock. As a condition to such sale the Company agreed to
register such 400,000 shares for resale in this offering. This transaction was
negotiated at arms-length, and the Company believes that the terms were as fair
to the Company from a financial point of view as could have been obtained from
an unaffiliated third party.
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
The Selling Stockholders have advised the Company that sales of the Shares
may be effected from time to time in transactions (which may include block
transactions) in the over-the-counter market, in negotiated transactions,
through the writing of options on the Shares or a combination of such methods of
sale, at fixed prices that may be changed, at market prices prevailing at the
time of sale, or at negotiated prices. The Selling Stockholders may effect such
transactions by selling the Shares directly to purchasers or through
broker-dealers that may act as agents or principals. Such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the Selling Stockholders and/or the purchasers of Shares for whom such
broker-dealers may act as agents or to whom they sell as principals, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions). David E. Schlecht and Ronald Kuzon, director of the
Company, have advised the Company that they have not entered into any agreement
with respect to the sale of their Shares.
The Selling Stockholders and any broker-dealers that act in connection with
the sale of the Shares as principals may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Act and any commission received by them and
any profit on the resale of the Shares and/or as principals might be deemed to
be underwriting discounts and commissions under the Act. The Selling
Stockholders may agree to indemnify any agent, dealer or broker-dealer that
participates in transactions involving sales of the Shares against certain
liabilities, including liabilities arising under the Act. The Company will not
receive any proceeds from sales of the Shares by the Selling Stockholders. Sales
of the Shares by the Selling Stockholders, or even the potential of such sales,
could have an adverse effect on the market price of the Common Stock.
There can be no assurance that Selling Stockholders will be able to sell
some or all of the Shares listed for sale herein. There is no established public
trading market for the Common Stock as of the date of this Prospectus. See "Risk
Factors--Marketability of Securities."
The following table sets forth certain information with respect to the
Selling Stockholders for whom the Company is registering the Shares for resale
to the public. The Company will not receive any of the proceeds from the sale of
the Shares. There are no material relationships between any of the Selling
Stockholders and the Company except as otherwise indicated. Beneficial ownership
of the Shares by each Selling Stockholder after the sale will depend on the
number of Shares sold by each Selling Stockholder. The Shares offered by the
Selling Stockholders are not being underwritten.
26
<PAGE>
<TABLE>
<CAPTION>
Beneficial Ownership
After Offering
Beneficial Ownership Prior to Offering Maximum if Maximum is Sold
Name of -------------------------------------- Amount to ---------------------
Selling Stockholder Amount Percent be Sold Amount Percent
------------------- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Interfinance Inv. Co. Ltd [ ] 2,122,500 20.4% 2,122,500 0 0%
[ ] Private Trust Bank Corporation 10,000 * 10,000 0 0%
[ ] AMPLI 10,000 * 10,000 0 0%
[ ] Beat Scheibli 1,000 * 1,000 0 0%
ATAG AG 7,000 * 7,000 0 0%
Yvon Mauron 1,000 * 1,000 0 0%
Beat Ruegsegger 1,000 * 1,000 0 0%
Alain Ballmer 10,000 * 10,000 0 0%
Banque Scandinave 25,000 * 25,000 0 0%
en Suisse SA
Albert Botta 10,500 * 10,500 0 0%
Bank Leu Ltd. 18,000 * 18,000 0 0%
Swiss Bank Corporation 12,000 * 12,000 0 0%
Bank Leu Ltd. 20,000 * 20,000 0 0%
Credit Suisse 135,000 1.3% 135,000 0 0%
Credit Suisse 5,000 * 5,000 0 0%
Alain Dettling 10,000 * 10,000 0 0%
BSI 5,000 * 5,000 0 0%
Euromateco Establ 20,000 * 20,000 0 0%
Dataconsult SA 15,000 * 15,000 0 0%
Union Bank of Switzerland 10,000 * 10,000 0 0%
Bank J. Vontobel 5,000 * 5,000 0 0%
Credit Suisse 5,000 * 5,000 0 0%
Bank J. Bar & Co. AG 40,000 * 40,000 0 0%
Gemarfin SA 50,000 * 50,000 0 0%
BNP 25,000 * 25,000 0 0%
Hanspeter Iselin 2,000 * 2,000 0 0%
Bernard Jacquet 10,000 * 10,000 0 0%
Josef Laupper 2,000 * 2,000 0 0%
Martin Laupper 2,000 * 2,000 0 0%
Ueli Laupper 2,000 * 2,000 0 0%
Banca Della Stato Del Cantone Ticino 20,000 * 20,000 0 0%
Noris Investment Inc. 20,000 * 20,000 0 0%
Carlos Perez 1,000 * 1,000 0 0%
Mario Reinschmidt [ ] 4,000 * 4,000 0 0%
Romofin AG 30,000 * 30,000 0 0%
Dr. Pablo Scala 10,000 * 10,000 0 0%
Horst Schoening 20,000 * 20,000 0 0%
Josef A. Schwyter 10,000 * 10,000 0 0%
[ ] Martin Sieber 2,000 * 2,000 0 0%
[ ] Kebaili Slim 40,000 * 40,000 0 0%
Sok Chung Long 1,000 * 1,000 0 0%
[ ] Speculative Fund Ltd 25,000 * 25,000 0 0%
[ ] Roberto Speri 20,000 * 20,000 0 0%
[ ] Triaxis Trust AG 200,000 1.9% 200,000 0 0%
[ ] Joseph Ulrich 1,000 * 1,000 0 0%
Union Bancaire Privee 135,000 * 135,000 0 0%
VPM Verwaltungs AG 10,000 * 10,000 0 0%
[ ] Andreas Weinberg 10,000 * 10,000 0 0%
David Schlecht(1) 4,000 * 4,000 0 0%
Ronald Kuzon(1) 2,000 * 2,000 0 0%
</TABLE>
- ----------
*Less then 1%.
27
<PAGE>
(1) Is a director of the Company.
All expenses of this registration will be borne by the Company.
Previous sales of shares of Common Stock were made pursuant to private
placements which the Company believes were exempt from registration under the
Act. As of April 30, 1996, in exchange for 7,250,000 shares of Common Stock, the
Company acquired all of outstanding shares, other than qualifying shares, of UT
Holding. As of April 30, 1996, the Company also issued 2,750,000 shares of
Common Stock to Interfinance, 183,333 of which were issued in exchange for
$200,000 in cash and 2,566,667 of which were issued in exchange for $26 in cash
and the Interfinance Note, which was repaid as of June 28, 1996. As a condition
to the sale of the shares to Interfinance, the Company entered into a
Registration Rights Agreement dated as of April 30, 1996 pursuant to which the
Company agreed to register such shares for resale under the Act. On August 15,
1996 the Company sold an additional 400,000 shares of Common Stock to
Interfinance for $1,000,000 consisting of $10,000 in cash and the Second
Interfinance Note. The Second Interfinance Note is secured by 396,000 shares of
Common Stock. As a condition to such sale the Company agreed to register such
400,000 shares for resale in this offering.
The Company has been informed that, other than David Schlecht and Ronald
Kuzon, the Selling Stockholders reside outside of the United States.
DESCRIPTION OF SECURITIES
Authorized Stock
The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock, par value $.00001 per share.
Common Stock
Subject to the prior rights of the holders of any shares of any Preferred
Stock which may be authorized and issued in the future, the holders of the
Common Stock are entitled to receive dividends from funds of the Company legally
available therefor when, as and if declared by the Board of Directors of the
Company, and are entitled to share ratably in all of the assets of the Company
available for distribution to holders of Common Stock upon the liquidation,
dissolution or winding-up of the affairs of the Company. Holders of the Common
Stock do not have any preemptive, subscription, redemption or conversion rights.
Holders of the Common Stock are entitled to one vote per share on all matters
which they are entitled to vote upon at meetings of stockholders or upon actions
taken by written consent pursuant to Delaware corporate law. The holders of
Common Stock do not have cumulative voting rights, which means that a plurality
of such outstanding shares can elect all of the directors of the Company. All of
the shares of the Common Stock currently issued and outstanding are, fully-paid
and nonassessable. There are currently [ ] 53 holders of the Common Stock. No
dividends have been paid to holders of the Common Stock since the inception of
the Company, and no dividends are anticipated to be declared or paid in the
reasonably foreseeable future. See "Dividend Policy." There is no established
public trading market for the Common Stock as of the date of this Prospectus.
See "Risk Factors--Marketability of Securities."
Delaware Anti-Takeover Law
The Company is governed by the provisions of Section 203 of the General
Corporation law of the State of Delaware. In general, this law prohibits a
public Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which such person became an interested stockholder, unless the
business combination is approved in a prescribed manner. A "business
combination" is defined to include mergers, asset sales and other transactions
resulting in a financial benefit to the stockholder. An "interested stockholder"
is defined as a person who, together with affiliates and associates, owns (or,
within the prior three years, did own) 15% or more of the corporation's voting
stock.
28
<PAGE>
These provisions could have the effect of delaying, deferring or preventing
a change of control of the Company which could prevent the Company's
stockholders from realizing a premium through a non-negotiated change in
control. The Company's stockholders, by adopting an amendment to the Certificate
of Incorporation or By-Laws of the Company, may elect not to be governed by
Section 203, effective twelve months after adoption. Neither the Certificate of
Incorporation nor the By-Laws of the Company currently excludes the Company from
the restrictions imposed by Section 203.
Transfer Agent and Warrant Agent
American Stock Transfer & Trust Company will serve as the transfer agent
and registrar for the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
On the date of this Prospectus, the Company has outstanding 10,406,000
shares of Common Stock. Of such 10,406,000 shares of Common Stock, 3,156,000
shares (of which 396,000 shares are held by the Company as collateral for a
loan, see "Certain Transactions") are freely tradable without restriction as
long as a current registration statement covering such shares is in effect under
the Securities Act except for any shares purchased by any person who is or
thereby becomes an affiliate of the Company, which shares will be subject to the
resale limitations contained in Rule 144 promulgated under the Securities Act.
All of the 7,250,000 currently outstanding shares of Common Stock not being
registered hereby are restricted securities within the meaning of Rule 144 under
the Securities Act and, in general, if held for at least two years, will be
eligible for sale in the public market in reliance upon and subject to the
limitations of Rule 144.
In general under Rule 144, as currently in effect, a person (or persons
whose shares are aggregated), including a person who may be deemed to be an
affiliate of the Company as that term is defined under the Securities Act, is
entitled to sell, within any three month period, a number of shares beneficially
owned for at least two years that does not exceed the greater of (i) one percent
of the number of the then outstanding shares of Common Stock or (ii) the average
weekly trading volume in the Common Stock during the four calendar weeks
preceding such sale. Sales under Rule 144 are also subject to certain
requirements as to the manner of sale, notice and the availability of current
public information about the Company. Furthermore, a person who is not deemed to
have been an affiliate of the Company during the ninety days preceding a sale by
such person and who has beneficially owned such shares for at least three years
is entitled to sell such shares without regard to the volume, manner of sale or
notice requirements. All 7,250,000 shares of restricted Common Stock outstanding
on the date of this Prospectus are held by affiliates of the Company. All
7,250,000 restricted shares of Common Stock will become eligible for sale under
Rule 144 in May 1998.
Prior to the date of this Prospectus, there has been no public market for
the Company's securities. Following the date of this Prospectus, the Company
cannot predict the effect, if any, that market sales of the Common Stock, or the
availability or such shares for sale, will have on the market price prevailing
from time to time. Nevertheless, sales by the existing stockholders of
substantial amounts of Common Stock in the public market could adversely affect
prevailing market prices for the Company's securities.
LEGAL MATTERS
The validity of the Shares offered by this Prospectus is being passed upon
for the Company and the Selling Stockholders by Rubin Baum Levin Constant &
Friedman, 30 Rockefeller Plaza, 29th Floor, New York, New York 10112.
EXPERTS
The consolidated financial statements of the Company for the period from
February 29, 1996 (Inception) to April 30, 1996, included herein and elsewhere
in the Registration Statement have been audited by Merdinger, Fruchter, Rosen &
Corso, P.C., independent public accountants, as indicated in their report with
respect thereto, and are included herein in reliance thereon and upon the
authority of said firm as experts in accounting and auditing.
29
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-B2 under the Act, covering the
Shares offered by this Prospectus. For further information with respect to the
Company and the Shares offered hereby, reference is made to the Registration
Statement and the exhibits filed as part of thereof, which may be examined at
the Public Reference Section maintained by the Commission at its principal
office in Washington, D.C. at 450 Fifth Street, N.W., Washington, D.C. 20549 and
copies of such material can be obtained from the Public Reference Section of the
Commission at prescribed rates. Statements contained in this Prospectus as to
the contents of any contract or other document referred to herein are not
necessarily complete. In each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement.
Information can also be obtained at the Northeast Regional Office of the
Commission at 7 World Trade Center, Suite 1300, New York, New York 10048 and at
the Midwest Regional Office of the Commission at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661.
Subsequent to this offering, the Company will be a reporting company under
the Exchange Act. The Company intends to distribute to its stockholders annual
reports containing audited financial statements with a report therein by
independent public accountants after the end of each fiscal year. In addition,
if the Company is required to prepare such reports, the Company will make
available to its stockholders, upon request, quarterly reports for the first
three quarters of each fiscal year containing unaudited financial statements and
other information after the end of each fiscal quarter, upon written request to
the Secretary of the Company or otherwise as required by law.
GLOSSARY
The terms defined in this glossary are used throughout this Prospectus.
MUX Multiplexer. Digital voice and data
telecommunication equipment that routes calls to
the POP.
POP Point of presence. Area network access interface
which gathers calls from the MUX and routes them
into the international network. POPs are located
in major cities and customers are connected to the
POP by local tail circuits.
Closed User Group A legally defined user group (e.g., a corporation)
using different carriers in not yet fully
deregulated markets (private phone networks).
Legislation regarding closed user groups differs
from country to country.
LAN Local Area Network.
Kbps Kilobytes per second (data transmission
speed).
Switch Computer, or voice switching matrix, that
directs telecommunications traffic to form a
transmission path between a caller and the
recipient of a call.
30
<PAGE>
Meshed Fiber Optic Network International Telecommunications network with
multiple fiber optic lines between POP locations
which provides a fully resilient service.
Digital Compression A process whereby either telephone or fax calls on
Techniques (same as Fax are comprised which allows the Company to transmit
Transmission Compression) more telephone/fax calls over the same bandwidth
as required by a normal telephone call. This is
achieved using the latest Low Delay CELP
compression technologies.
Digital Data Services Point to point or multipoint circuit for exchange
of data traffic.
Mb Data transmission speed in megabites per second.
Churn Rates Customer turnover.
Transmission Facilities Telecommunications Companies that own their own
-based Carriers long-distance interexchange or transmission
facilities and originate and terminate calls
through local exchange systems.
Caps Competitive Access Providers.
Switch-based Company that owns or leases one or more switches.
Telecommunications All transmission facilities-based carriers are
Company switch-based.
31
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Contents Page
Independent Auditors' Report F-2
Consolidated Balance Sheet F-3
Consolidated Statement of Operations F-4
Consolidated Statement of Stockholders' Equity F-5
Consolidated Statement of Cash Flows F-6
Notes to Consolidated Financial Statements F-7-10
Independent Auditors' Report on Consolidating Supplementary
Information F-11
Consolidating Balance Sheet F-12
Consolidating Statement of Operations F-13
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
UTG COMMUNICATIONS INTERNATIONAL, INC.
We have audited the accompanying consolidated balance sheet of UTG
Communications International, Inc. and Subsidiaries as of April 30, 1996, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the period from February 29, 1996 (inception) to April 30, 1996.
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 generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about 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.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of UTG Communications
International, Inc. and Subsidiaries as of April 30, 1996, and the results of
its operations and its cash flows for the period from February 29, 1996
(inception) to April 30, 1996 in conformity with generally accepted accounting
principles.
MERDINGER, FRUCHTER, ROSEN & CORSO, P.C.
Certified Public Accountants
New York, New York
July 12, 1996
F-2
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
APRIL 30, 1996
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 780,960
Subscription Receivable 3,000,000
Prepaid Expenses 10,203
-----------
Total Current Assets 3,791,163
Property and Equipment, at Cost,
Net of Accumulated Depreciation of
$2,337 at April 30, 1996 137,903
Organizational Costs, Net of Accumulated
Amortization of $169 at April 30, 1996 9,997
Deferred Taxes --
Other Assets 6,428
-----------
Total Assets $ 3,945,491
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $ 171,915
Loan Payable 1,000,000
-----------
Total Current Liabilities 1,171,915
-----------
Commitments and Contingencies --
STOCKHOLDERS' EQUITY
Common Stock - $0.00001 Par Value
Authorized; 20,000,000 shares;
10,006,000 Issued and Outstanding 100
Additional Paid-in-Capital 3,088,474
Retained Deficit (317,754)
Foreign Currency Translation Adjustment 2,739
Minority Interest 17
-----------
Total Stockholders' Equity 2,773,576
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,945,491
===========
The accompanying notes are an integral part of the financial statement.
F-3
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM FEBRUARY 29, 1996 (INCEPTION) TO APRIL 30, 1996
REVENUE
Sales $ --
---------
Total Revenue --
---------
EXPENSES
Salaries and Consulting Fees 171,932
Travel Expenses 65,776
Professional Fees 23,005
Rent 3,437
Telephone 3,159
Depreciation and Amortization 2,559
Office Expenses 2,517
Bank Fees 355
---------
Total Operating Expenses 272,740
---------
LOSS FROM OPERATIONS (272,740)
OTHER (INCOME) EXPENSES
Interest Income (449)
Interest Expense 4,804
Loss From Foreign Currency 40,659
---------
Total Other Expenses 45,014
---------
NET LOSS (317,754)
=========
LOSS PER COMMON SHARE
Primary $ (.03)
=========
Fully Diluted $ (.03)
=========
The accompanying notes are an integral part of the financial statement.
F-4
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM FEBRUARY 29, 1996 (INCEPTION) TO APRIL 30, 1996
<TABLE>
<CAPTION>
Common Stock Additional Foreign Total
------------------- Paid-In Accumulated Currency Minority Stockholders'
Shares Amount Capital Deficit Adjustment Interest Equity
----------- ------- ----------- ----------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at Inception (February 29, 1996) $ -- $ -- $ -- $ -- $ -- $ -- $ --
Net Loss -- -- -- (317,754) -- -- (317,754)
Issuance of Common Stock 10,006,000 100 3,088,474 -- -- -- 3,088,574
Foreign Currency Translation Adjustment -- -- -- -- 2,739 -- 2,739
Minority Interest -- -- -- -- -- 17 17
----------- ------- ----------- ----------- ----------- ------- -----------
Balance at April 30, 1996 $10,006,000 $ 100 $ 3,088,474 $ (317,754) $ 2,739 $ 17 $ 2,773,576
=========== ======= =========== =========== =========== ======= ===========
</TABLE>
The accompanying notes are integral part of the financial statement.
F-5
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM FEBRUARY 29, 1996 (INCEPTION) TO APRIL 30, 1996
CASH FLOW FROM OPERATING ACTIVITIES
Net Loss $ (317,754)
Adjustments to Reconcile Net Loss to
Net Cash Used by Operating Activities
Depreciation and Amortization 2,559
Changes in Certain Assets and Liabilities:
Increase in Prepaid Expenses (10,203)
Increase in Organization Costs (10,166)
Increase in Other Assets (6,428)
Increase in Accounts Payable and Accrued Expenses 171,915
-----------
Total Cash (Used) by Operating Activities (170,077)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets (140,240)
-----------
Total Cash (Used) By Investing Activities (140,240)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contribution to Capital 88,574
Proceeds From Loan 1,000,000
Minority Interest 17
-----------
Total Cash Provided By Financing Activities 1,088,591
-----------
EFFECTS OF EXCHANGE RATE
CHANGES ON CASH 2,686
-----------
2,686
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 780,960
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR --
-----------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 780,960
===========
CASH PAID DURING THE YEAR FOR:
Interest Expense $ --
===========
Income Taxes $ --
===========
NON CASH FINANCING ACTIVITIES:
The Company issued common stock in exchange for stock subscription
agreements. As of April 30, 1996, the receivable on the agreements totaled
$3,000,000.
The accompanying notes are an integral part of the financial statement.
F-6
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 29, 1996 (INCEPTION) TO APRIL 30, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presentation
The accompanying consolidated financial statements include the
accounts of UTG Communications International, Inc. ("The Company"),
a holding company organized under the laws of the state of Delaware
on April 17, 1996 and its 99.9% owned subsidiary; UTG Communications
Holding AG, ("UTH"),incorporated under the laws of Switzerland on
February 29, 1996, and its wholly-owned subsidiary UTG
Communications AG, ("UTAG"), incorporated under the laws of
Switzerland on March 28, 1996. All significant intercompany accounts
and transactions have been eliminated in consolidation.
b) Line of Business
The Company is a switch-based provider of private voice, fax and
data management telecommunication services in Switzerland.
c) Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
d) Organization Costs
Organization costs consist of legal and other administrative costs
incurred relating to the formation of the Company. These costs have
been capitalized and will be amortized over a period of five years.
e) Property and Equipment
Property and equipment is stated at cost. Depreciation is computed
using the straight-line method based upon the estimated useful lives
of the various classes of assets. Maintenance and repairs are
charged to expense as incurred.
f) Translation of Foreign Currency
The Company translates the foreign currency financial statements of
its Switzerland subsidiaries, UTH and UTAG, in accordance with the
requirements of Statement of Financial Accounting Standards No. 52,
"Foreign Currency Translation". Assets and liabilities are
translated at current exchange rates, and related revenues and
expenses are translated at average exchange rates in effect during
the period. Resulting translation adjustments are recorded as a
separate component in stockholders' equity. Foreign currency
transaction gains and losses are included in determining net income.
F-7
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 29, 1996 (INCEPTION) TO APRIL 30, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
g) Loss Per Share
Loss per share is based on the weighted average number of shares of
common stock outstanding during the period.
h) Income Taxes
Income taxes are provided for based on the liability method of
accounting pursuant to Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes". The liability method
requires the recognition of deferred tax assets and liabilities for
the expected future tax consequences of temporary differences
between the reported amount of assets and liabilities and their tax
basis.
NOTE 2 - LOAN PAYABLE
Financing for the start-up operations of UTH was provided by a loan
agreement between UTH and Hedag AG (HAG) dated March 27, 1996, for
$1,000,000 bearing interest at 7% per annum payable semi-annually on
September 30, 1996 and March 31, 1997.
The Company shall pay to HAG the entire principal balance of the
loan, plus any unpaid accrued interest by March 31, 1997.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment at April 30, 1996 is summarized as follows:
Computer Equipment $ 89,270
Telephone Equipment 18,809
Furniture and Fixtures 32,161
----------
140,240
Less: Accumulated Depreciation 2,337
----------
$ 137,903
==========
NOTE 4 - MINORITY INTEREST
Minority interest represents less than a 1% share of the common
equity and net loss of the Company's two subsidiaries UTH and UTAG.
F-8
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 29, 1996 (INCEPTION) TO APRIL 30, 1996
NOTE 5 - FOREIGN OPERATIONS
Substantially all of UTH's and UTAG's operations take place in the
country of Switzerland.
Substantially all of UTH's and UTAG's identifiable assets are
located in the country of Switzerland.
NOTE 6 - SUBSCRIPTION RECEIVABLE
As of April 30, 1996, the Company entered into two stock
subscription agreements with Interfinance Inv. Co., Ltd. (ITC) to
sell common stock of the Company as follows:
1) The sale of 183,333 shares of the Company's common stock for an
aggregate purchase price of $200,000. Payment for the shares was
subsequently received by the Company on May 21, 1996.
2) The sale of 2,566,667 shares of the Company's common stock in
exchange for $26 in cash and a promissory note due on April 30, 1997
in the principal amount of $2,799,974, bearing interest at 7% per
annum. The note is secured by the 2,566,667 shares of common stock.
NOTE 7 - INCOME TAXES
Deferred income taxes are determined based upon differences between
the tax basis of the Company's assets and liabilities and their
financial statement carrying amounts, multiplied by the applicable
statutory income tax rate.
Significant components of the Company's deferred tax liabilities and
assets are as follows:
Deferred Tax Assets
Net Operating Loss Carryforwards $ 106,166
Less: Valuation Allowance ( 106,166)
------------
Total Deferred Tax Assets $ --
============
F-9
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 29, 1996 (INCEPTION) TO APRIL 30, 1996
NOTE 7 - INCOME TAXES (Continued)
As April 30, 1996, the Company had a net operating loss which will
be available to reduce future taxable income. The full realization
of the tax benefit associated with the carryforward depends
predominantly upon the Company's ability to generate taxable income
during the carryforward period. Because of the current uncertainty
of realizing such tax asset in the future, a valuation allowance has
been recorded equal to the amount of the net deferred tax asset.
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company has related party transactions with United Telegroup
Ltd. UK (UTK), a company with which they share a common director.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The Company has several employment agreements, the terms of which
expires at various times through April 1999.
NOTE 10 - SUBSEQUENT EVENTS
1) On June 28, 1996, subsequent to the date of the balance sheet,
the Company received from ITC the sum of $2,799,974, relating to
their promissory note for the sale of stock. See also Note 6.
2) On July 4, 1996, subsequent to the date of the balance sheet, the
Company repaid the entire principal balance of $1,000,000 plus
accrued interest of $19,444, relating to their loan from HAG.
See also Note 2.
3) On August 15, 1996, subsequent to the date of the balance sheet,
the Company entered into a subscription agreement to sell 400,000
shares of its common stock to Interfinance Inv. Co., Ltd. for an
aggregate price of $1,000,000 consisting of $10,000 in cash and a
secured promissory note dated August 15, 1996 in the amount of
$990,000. The note provides for interest at the rate of 7% per
annum on the principal balance and matures on February 1, 1997.
The note is secured by the aforementioned 400,00 shares of common
stock being purchased through this subscription agreement.
It is agreed by the parties that the stock certificate
representing the shares shall be issued by the Company within 10
days of the effective date of registration statement covering the
shares.
F-10
<PAGE>
INDEPENDENT AUDITORS' REPORT ON CONSOLIDATING
SUPPLEMENTARY INFORMATION
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
UTG COMMUNICATIONS INTERNATIONAL, INC.
We have audited the accompanying consolidated financial statements of UTG
COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES as of April 30, 1996 and for
the period from February 29, 1996 (Inception) to April 30, 1996 and issued our
report then ended July 12, 1996. Our audit was conducted for the purpose of
forming an opinion on the basic financial statements taken as a whole.
The consolidating supplementary information is presented only for analysis
purposes and is not a required part of the basic financial statements. Such
information has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
MERDINGER, FRUCHTER, ROSEN, & CORSO, P.C.
Certified Public Accountants
New York, N.Y.
July 12, 1996
F-11
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
APRIL 30, 1996
<TABLE>
<CAPTION>
United Telegroup
International United Telegroup United Telegroup
ASSETS Inc. Holding AG AG Subtotal Elimination Total
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ -- $ 718,838 $ 62,122 $ 780,960 $ -- $ 780,960
Subscription Receivable 3,000,000 -- -- 3,000,000 -- 3,000,000
Prepaid Expenses -- -- 10,203 10,203 -- 10,203
Due from Affiliate -- 239,635 -- 239,635 (239,635) --
----------- ----------- ----------- ----------- ----------- -----------
Total Current Assets 3,000,000 958,473 72,325 4,030,798 (239,635) 3,791,163
Property and Equipment -- -- 137,903 137,903 -- 137,903
Organization Costs -- 4,501 5,496 9,997 -- 9,997
INVESTMENT IN SUBSIDIARIES 83,074 83,717 -- 166,791 (166,791) --
OTHER ASSETS -- -- 6,428 6,428 -- 6,428
----------- ----------- ----------- ----------- ----------- -----------
TOTAL ASSETS $ 3,083,074 $ 1,046,691 $ 222,152 $ 4,351,917 $ (406,426) $ 3,945,491
=========== =========== =========== =========== =========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and
Accrued Expenses $ -- $ 8,186 $ 163,729 $ 171,915 $ -- $ 171,915
Due to Affiliate -- -- 239,635 239,635 (239,635) --
Loan Payable -- 1,000,000 -- 1,000,000 -- 1,000,000
----------- ----------- ----------- ----------- ----------- -----------
Total Current Liabilities -- 1,008,186 403,364 1,411,550 (239,635) 1,171,915
----------- ----------- ----------- ----------- ----------- -----------
STOCKHOLDERS' EQUITY
Common Stock 100 83,091 83,717 166,908 (166,808) 100
Additional Paid-in Capital 3,088,474 -- -- 3,088,474 -- 3,088,474
Retained Deficit (5,500) (45,325) (266,929) (317,754) -- (317,754)
Foreign Currency Translation
Adjustment -- 739 2,000 2,739 -- 2,739
Minority Interest -- -- -- -- 17 17
----------- ----------- ----------- ----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY 3,083,074 38,505 (181,212) 2,940,367 (166,791) 2,773,576
----------- ----------- ----------- ----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,083,074 $ 1,046,691 $ 222,152 $ 4,351,917 $ (406,426) $ 3,945,491
=========== =========== =========== =========== =========== ===========
</TABLE>
F-12
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE PERIOD FROM FEBRUARY 29, 1996 (INCEPTION) TO APRIL 30, 1996
<TABLE>
<CAPTION>
United Telegroup
International United Telegroup United Telegroup
Inc. Holding AG AG Subtotal Elimination Total
--------- --------- --------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Sales $ -- $ -- $ -- $ -- $ -- $ --
--------- --------- --------- --------- ----------- ----------
Total Revenues -- -- -- -- -- --
--------- --------- --------- --------- ----------- ----------
OPERATING EXPENSES
Salaries and Consulting Fees 5,500 -- 166,432 171,932 -- 171,932
Travel Expenses -- -- 65,776 65,776 -- 65,776
Professional Fees -- -- 23,005 23,005 -- 23,005
Rent -- -- 3,437 3,437 -- 3,437
Telephone -- -- 3,159 3,159 -- 3,159
Depreciation and Amortization
Expense -- 78 2,481 2,559 -- 2,559
Office Expenses -- -- 2,517 2,517 -- 2,517
Bank Fees -- 233 122 355 -- 355
--------- --------- --------- --------- ----------- ----------
Total Operating Expenses 5,500 311 266,929 272,740 -- 272,740
--------- --------- --------- --------- ----------- ----------
LOSS FROM OPERATIONS (5,500) (311) (266,929) (272,740) -- (272,740)
--------- --------- --------- --------- ----------- ----------
OTHER (INCOME) EXPENSES
Interest Income -- (449) -- (449) -- (449)
Interest Expense -- 4,804 -- 4,804 -- 4,804
Loss From Foreign Currency -- 40,659 -- 40,659 -- 40,659
--------- --------- --------- --------- ----------- ----------
Total Other Expenses -- 45,014 -- 45,014 -- 45,014
--------- --------- --------- --------- ----------- ----------
NET LOSS $ (5,500) $ (45,325) $(266,929) $(317,754) $ -- $ (317,754)
========= ========= ========= ========= =========== ==========
</TABLE>
F-13
<PAGE>
================================================================================
No dealer, salesperson or other person has been authorized in connection
with the Offering to give any information or to make any representations other
than those contained in this Prospectus. This Prospectus does not constitute an
offer or a solicitation in any jurisdiction to any person to whom it is unlawful
to make such offer or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create an implication
that there has been no change in the circumstances of the Company or the facts
herein set forth since the date hereof.
TABLE OF CONTENTS
Page
----
Prospectus Summary........................................................... 2
Risk Factors................................................................. 6
The Company.................................................................. 12
Dividend Policy.............................................................. 12
Use of Proceeds.............................................................. 12
Capitalization............................................................... 13
Selected Financial Data...................................................... 13
Plan of Operation............................................................ 14
Business..................................................................... 15
Management................................................................... 22
Principal Stockholders....................................................... 23
Executive Compensation....................................................... 24
Certain Transactions......................................................... 25
Selling Stockholders & Plan of Distribution.................................. 25
Description of Securities.................................................... 27
Shares Eligible For Future Sale.......................................... [ ] 28
Legal Matters................................................................ 28
Experts...................................................................... 28
Additional Information................................................... [ ] 29
Glossary......................................................................29
Index to Consolidated Financial Statements.................................. F-1
Until _________, 1996, all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be
================================================================================
================================================================================
UTG COMMUNICATIONS
INTERNATIONAL, INC.
3,156,000
Shares-of-Common-Stock
----------
PROSPECTUS
----------
_______, 1996
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The estimated expenses payable by the Registrant in connection with the
issuance and distribution of the securities being registered are as follows:
Amount
------
SEC Registration Fee............................................ $5,713.45
Printing and Engraving Costs.................................... $20,000.00
Accounting Fees and Expenses................................... $10,000.00
Legal Fees and Expenses........................................ $75,000.00
Blue-Sky Fees and Expenses..................................... $5,000.00
Transfer Agent's Fees and Expenses............................. $3,500.00
Miscellaneous Expenses......................................... $5,786.55
Total........................................................ $125,000.00
Item 14. Indemnification of Directors and Officers.
The Certificate of Incorporation and the By-Laws of the Registrant provide
that the Registrant shall indemnify its officers, directors and certain others
to the fullest extent permitted by the Delaware General Corporation Law. Section
145 of the General Corporation Law of Delaware (the "GCL") provides in pertinent
part as follows:
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgements, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interest of he corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other Court
shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsection (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsection (a) and (b) of this section
(unless ordered by a court shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer,
II-1
<PAGE>
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by he board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable, a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer of director
in defending any civil, criminal, administrative or investigative action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the corporation as
authorized in this section. Such expenses (including attorneys' fees) incurred
by other employees and agents may be so paid upon such terms and conditions, if
any, as the board deems appropriate.
(f) The indemnification and advancement of expense provided by, or granted
pursuant to, the subsections of this section shall not be deemed exclusive of
any other right to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors of otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under his section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporations as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans' references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
reference to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation, which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a persons.
In accordance with Section 102(b)(7) of the GCL, Article Seven of the
Certificate of Incorporation of the Registrant eliminates the personal liability
of the Company's directors to the Company or its stockholders for monetary
damages for breach of their fiduciary duties as a director, with certain
exceptions set forth in said Section 102(b)(7).
Item 15. Recent Sales of Unregistered Securities.
Registrant has sold the following unregistered securities during the three
years preceding the filing of this Registration Statement:
As of April 30, 1996, in exchange for 7,250,000 shares of Common Stock, the
Company acquired all of outstanding shares of UT Holding. As of April 30, 1996,
the Company also issued 2,750,000 shares of Common Stock to Interfinance,
183,333 of which were issued in exchange for $200,000 in cash and 2,566,667 of
which were issued in exchange for $26 in cash and the Interfinance Note, which
was repaid as of June 28, 1996.
On August 15, 1996 the Company sold an additional 400,000 shares of Common
Stock to Interfinance for $1,000,000 consisting of $10,000 in cash and the
Second Interfinance Note. The Second Interfinance Note is secured by 396,000
shares of Common Stock.
II-2
<PAGE>
No underwriter was utilized in these transactions. The Company relied upon
Regulation S and/or Section 4(2) of the Act and the rules and regulations
promulgated thereunder, for its exemption the issuance of such shares from
registration under the Act.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits:
3.1 Certificate of Incorporation of the Company*
3.1(a) Amendment to Certificate of Incorporation of the Company*
3.1(b) Amendment to Certificate of Incorporation of the Company
3.2 By-laws of the Company*
4.1 Specimen Common Stock Certificate*
5.1 Opinion of Rubin Baum Levin Constant & Friedman*
10.1 Stock Purchase Agreement dated April 30, 1996 between Registrant and
Tom Combrinck*
10.2 Subscription Agreement dated April 30, 1996 between Registrant and
Interfinance for the purchase of 183,333 shares of Common Stock*
10.3 Subscription Agreement dated April 30, 1996 between Registrant and
Interfinance for the purchase of 2,566,667 shares of Common Stock*
10.4 Promissory Note in the principal amount of $2,799,974, dated April
30, 1996, by Interfinance in favor of Registrant*
10.5 Security and Pledge Agreement dated April 30, 1996 between
Registrant and Interfinance*
10.6 Registration Rights Agreement dated April 30, 1996 between
Registrant and Interfinance*
10.7 Agreement dated December 21, 1995 between Registrant and Telemedia
International, together with Assignment dated July 1, 1996*
10.8 Lease beginning April 1, 1996 between Registrant and Guido M.
Renggli*
10.9 Management Agreement dated March 14, 1996 between Registrant and
Andreas Popovici*
10.10 Management Agreement dated April 4, 1996 between Registrant and
Franco Reinschmidt*
10.11 Form of Customer Contract of Registrant*
10.12 Subscription Agreement dated August 15, 1996, between Registrant and
Interfinance for the purchase of 400,000 shares of Common Stock*
10.13 Promissory Note in the principal amount of $990,000 dated August 15,
1996, by Interfinance in favor of Registrant*
10.14 Security and Pledge Agreement dated August 15, 1996 between
Registrant and Interfinance*
21.1 List of Subsidiaries*
23.1 Consent of Merdinger, Fruchter Rosen & Corso, P.C.
23.2 Consent of Rubin Baum Levin Constant & Friedman (contained in
Exhibit 5.1)*
27.1 Financial Data Schedule*
- ----------
*Previously filed.
(b) Financial Statement Schedules of Registrant.
Financial statement schedules have been omitted because they are not
applicable or the required information is shown in the consolidated financial
statements or notes thereto.
Item 17. Undertakings.
Undertakings Required by Regulation S-B, Item 512(a).
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to:
(i) include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) reflect in the Prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume
II-3
<PAGE>
of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low
or high end of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement; and
(iii) Include any additional or changed material information on
the plan of distribution.
(2) To, for determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of this offering.
Undertakings Required by Regulation S-B, Item 512(e).
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
Undertakings Required by Regulation S-B, Item 512(f).
The undersigned registrant hereby undertakes that:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the small business issuer under Rule 424(b)(1), or
(4) or 497(h) under the Securities Act as part of this registration
statement as of the time the Commission declared it effective.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in New York, New York on August [ ] 29, 1996.
UTG COMMUNICATIONS INTERNATIONAL, INC.
By: /S/David /Schlecht
-------------------------------------
David Schlecht
President and Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints David Schlecht and Ronald Kuzon
and each of them, his true and lawful attorneys-in-fact and agents, each acting
alone, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and all
documents relating thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, each acting alone
full power and authority to do and perform each and every act and thing
necessary or advisable to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/S/Thomas Combrinck Chairman of the Board and August [ ] 29, 1996
- ---------------------------- Director
Thomas Combrinck
/S/David Schlecht President, Chief Executive August [ ] 29, 1996
- ---------------------------- Officer and Director
David Schlecht (Principal Executive
Officer)
/S/Ronald Kuzon Treasurer, Secretary August [ ] 29, 1996
- ---------------------------- (Principal Financial Officer)
Ronald Kuzon
II-5
<PAGE>
Exhibit Index
Exhibit No. Description
- ----------- -----------
3.1(a) Amendment to Certificate of Incorporation of the Company
[ ] 23.1 Consent of Merdinger, Fruchter Rosen & Corso, P.C.
[ ]
Exhibit 3.1(b)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
UTG COMMUNICATIONS, INC.
The undersigned corporation in order to amend its Certificate of
Incorporation, hereby certifies as follows:
FIRST: The name of the corporation is:
UTG COMMUNICATIONS, INC.
SECOND: The corporation hereby amends its Certificate
of Incorporation as follows:
Paragraph FIRST of the Certificate of Incorporation, relating to the
corporate title of the corporation, is hereby amended to read as follows:
FIRST: The name of the Corporation is:
UTG COMMUNICATIONS INTERNATIONAL, INC.
THIRD: The amendment herein was authorized by the Board of Directors
and the consent in writing, setting forth the action so taken, signed by the
holders of a majority of all the outstanding shares entitled to vote thereon,
pursuant to Sections 228 and 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the corporation has caused this Certificate to
be executed by its President, who affirms that the statements made herein are
true under the penalties of perjury, this 21st day of August, 1996.
/S/ David E. Schlecht
-----------------------------------
David E. Schlecht, President
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
UTG Communications International, Inc.
As independent public accountants, we hereby consent to the use of our report
(and to all references to our firm) included in this prospectus.
MERDINGER, FRUCHTER, ROSEN & CORSO, P.C.
August [ ] 30, 1996
New York, New York
