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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB/A
(Amendment No. 2)
(Mark One)
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended March 31, 1997
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OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ____________ to __________
Commission file number 333-8305
UTG COMMUNICATIONS INTERNATIONAL, INC.
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(Name of small business issuer in its charter)
DELAWARE 13-3895294
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
18 CATTANO AVENUE, MORRISTOWN, NEW JERSEY 07960 NOT APPLICABLE
- ----------------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
ISSUER'S TELEPHONE NUMBER: (201) 644-3161
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE EXCHANGE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE EXCHANGE ACT:
NONE
Check whether the issuer: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes /X/ No / /
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. /x/
The issuer's revenues for its most recent fiscal year (year ended March 31,
1997) were $1,743,377.
The aggregate market value on July 9, 1997 of the voting stock held by
non-affiliates computed by reference to the last sale price on that date was
approximately $30,876,000. As of July 14, 1997, 13,246,000 shares of Common
Stock, par value $.00001 per share, were outstanding.
Transitional Small Business Disclosure Format (check one) YES / / NO /X/
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS; PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The executive officers, directors and significant employees of the Company
are as follows:
Name Age Position
Fritz K. Wolff 62 President, Chief Executive
Officer and Director
Keith Rhea 36 Chief Operating Officer and
Director
Andreas Popovici(1) 43 Managing Director of UTG
Communications Holding AG
and UTG Communications
(Europe) AG
Ronald Kuzon 51 Treasurer, Secretary and
Director
David Schlecht 42 Director
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(1) Andreas Popovici is not an executive officer but is deemed a
"significant employee".
FRITZ K. WOLFF has served in various executive capacities and as a
director of the Company since January 15, 1997. On June 25, 1997, Mr. Wolff
was elected President and Chief Executive Officer of the Company. Prior to
January 1997, and since inception of the Company, Mr. Wolff served as a
business development consultant to the Company. From 1992 through 1996, Mr.
Wolff served as managing director of Telemarket Group, a company specializing
in direct marketing services targeting the tourism industry in Central and
Eastern Europe. Through FK Wolff Consulting (UK) Ltd., Mr. Wolff has
pioneered the development of telephone cards and related value added services
for tour operators, insurance companies and credit card companies throughout
Europe. Mr. Wolff formerly served as creative group head of Troost
Advertising, J. Walter Thompson and as managing and creative director of Ted
Bates Advertising.
KEITH RHEA has served as Chief Operating Officer and a director of the
Company since July 7, 1997. From July 1996 through June 1997 he served as
director of business development, New York for Tele Danmark, USA Inc., an
international telecom provider, in which capacity he was responsible for the
establishment and development of Tele Danmark's United States operations.
From August 1994 to July 1996, Mr. Rhea served as managing director of
Associated Press Telecommunications, New York, a telecom company, in which
capacity he was responsible for business activities with clients in more than
80 countries. From June 1993 through August 1994, Mr. Rhea served as market
director for AT&T's Global Information Solutions Division.
ANDREAS POPOVICI has served as Managing Director of the Company's
subsidiaries UTG Communications Holding ("UTG Holding") AG and UTG
Communications (Europe) AG ("UTG Europe") since March 1996. From October 1995 to
March 1996, Mr. Popovici served as general manager of Callcom, a Swiss telecom
service company. From 1991 through October 1995 Mr. Popovici served as director
of the systems department at Swissphone, a Swiss telecom company.
DAVID E. SCHLECHT has served as a director of the Company since the
Company's inception and as President and Chief Executive Officer from inception
until June 25, 1997. Until his resignation as an executive officer of the
Company, Mr. Schlecht had devoted approximately 50% of his time to the business
of the Company. Mr. Schlecht also serves as President of Product Development &
Packaging, Inc., a packaging brokerage firm, which position he has held since
1989.
RONALD W. KUZON has served as Treasurer and a director of the Company since
the Company's inception, and has served as Secretary of the Company since July
1, 1996. Mr. Kuzon also serves 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.
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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's equity securities are not registered pursuant to Section 12
of the Securities Exchange Act of 1934. As such, no person is required to
comply with the requirements of Section 16 of such Act.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the cash and other compensation awarded to,
earned by or paid to David Schlecht, who served as the Company's chief executive
officer during the fiscal year ended March 31, 1997, and each other executive
officer whose total annual salary and bonus exceeded $100,000 during the fiscal
year ended March 31, 1997. In certain cases dollar amounts are approximated
based on foreign currency translations.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
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RESTRICTED NUMBER OF SHARES
FISCAL YEAR STOCK OF COMMON STOCK
NAME AND PRINCIPAL POSITION ENDED MARCH 31, SALARY AWARDS UNDERLYING OPTIONS
- --------------------------- --------------- ------ ---------- ------------------
<S> <C> <C> <C> <C>
David Schlecht, 1997 $55,000(2) $200,000(3) 100,000
President and Chief Executive
Officer(1)
Fritz K. Wolff, 1997 $164,594(5) $100,000(3) 300,000
Executive Vice President and
Chief Operating Officer(4)
Thomas Combrinck, 1997 $173,000(7) -- --
Chairman of the Board of
Directors(6)
</TABLE>
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(1) Mr. Schlecht resigned as President and Chief Executive Officer on June 25,
1997. Prior to that time, he had been devoting 50% of his time to the
business of the Company in the indicated capacity.
(2) Does not include amounts paid as rent to a Company controlled by Mr.
Schlecht. See "Item 12. Certain Relationships and Related Transactions."
(3) Represents the deemed fair market value of an equal number of unregistered
shares of Common Stock on January 15, 1997, the date of grant.
(4) Mr. Wolff is currently President and Chief Executive Officer of the
Company. From January 15, 1997 through June 25, 1997, Mr. Wolff served in
the indicated capacities. Prior thereto he served as a business development
consultant to the Company.
(5) Reflects amounts paid or accrued to Birand Ltd., a company through which
Mr. Wolff provides services to the Company. See "--Employment Agreements"
and "Item 12 - Certain Relationships and Related Transactions."
(6) Mr. Combrinck resigned as an officer and director of Company on January 29,
1997.
(7) Includes amount paid as salary as well as amounts paid or accrued during
the fiscal year in respect of a six month consulting arrangement, effective
February 1, 1997, entered into with Mr. Combrinck in connection with his
resignation from the Company. Does not include the value of a car
transferred to another company controlled by Mr. Combrinck in
connection with his resignation. Also, does not include amounts advanced to
such other company and subsequently written off as bad debt. See "Item 12.
Certain Relationships and Related Transactions."
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The following table sets forth all grants of options to purchase Common
Stock to the executive officers named in the Summary Compensation Table for the
fiscal year ended March 31, 1997.
<TABLE>
<CAPTION>
OPTION GRANTS DURING LAST FISCAL YEAR
NUMBER OF
SHARES OF PERCENT OF TOTAL
COMMON STOCK OPTIONS GRANTED PER SHARE
UNDERLYING TO EMPLOYEES IN EXERCISE
NAME OPTIONS GRANTED FISCAL YEAR PRICE EXPIRATION DATE
- ---------------- ---------------- ----------------- ---------- ---------------
<S> <C> <C> <C> <C>
David Schlecht 100,000(1) 20% $1.00 3/25/02
Fritz K. Wolff 300,000(1) 60% $1.00 3/25/02
Thomas Combrinck -- -- -- --
</TABLE>
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(1) These options vest in equal installments on March 25, 1998, 1999 and 2000.
The following table sets forth information concerning outstanding options
to purchase Common Stock held by the executive officers named in the Summary
Compensation Table as of March 31, 1997. No options were exercised in fiscal
1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SHARES OF
COMMON STOCK UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
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SHARES ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David Schlecht -- -- 0 100,000 -- $125,000
Fritz K. Wolff -- -- 0 300,000 -- $375,000
Thomas Combrinck -- -- -- -- -- --
</TABLE>
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(1) Based upon an estimated fair market value of $2.25 per share of Common
Stock as of March 31, 1997 less the $1.00 per share exercise price of such
options.
EMPLOYMENT AGREEMENTS
Effective January 1, 1997, Birand Ltd., a company through which Mr.
Wolff's services are provided, is paid at the rate of $10,000 per month in
respect of services performed by Mr. Wolff for the parent company, UTG
Communications International, Inc. On September 9, 1996, UTG Europe entered
into an agreement with Birand Ltd., for the consulting services of Mr. Wolff.
Under the agreement, Mr. Wolff is to devote at least 15 working days per
month to the performance of his duties under the agreement. The agreement is
effective from September 1, 1996 to August 31, 1997 and is deemed tacitly
extended for subsequent periods of 6 months if not terminated in writing at
least 3 months in advance. The agreement provides for a monthly consulting
fee of 15,000 CHF (approximately $10,000) per month, of which two-thirds is
payable monthly, and one-third is to be accrued, plus travel expenses. The
accrued portion is to be paid when the Company is cash positive or as of June
30, 1997 at the latest. The Company is currently in negotiations relating to
extending the payment term. In addition, effective May 1, 1997, the Company's
United Kingdom subsidiary, UTG Communications (Network) Ltd., began
reimbursing FK Wolff Consulting (UK) Ltd. in the amount of GBP 4,000
(approximately $6,600) plus 17.5% VAT per month for rent of an apartment in
London, car payments and other expenses on behalf of Mr. Wolff. The Company
and Mr. Wolff are in the process of renegotiating employment and compensation
arrangements with Mr. Wolff in light of his new role as President and Chief
Executive Officer of the Company.
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On June 30, 1997, the Company entered into an employment agreement with
Keith Rhea to serve as Chief Operating Officer of the Company and a member of
the Board of Directors. The term of the agreement is for three years beginning
on July 7, 1997. The agreement provides for an annual base salary of $100,000
and the grant of an option to purchase up to 200,000 shares of the Company's
Common Stock at an exercise price of $1.00 per share. The option vests in
installments during the 21/2 year period commencing July 7, 1997 and expires
in 2002. If Mr. Rhea is requested by the Company to work in a foreign country
more than 50% per year, the Company has agreed to pay for certain living
accommodations as well as to indemnify Mr. Rhea for tax liabilities, if any,
caused thereby. Mr. Rhea is to devote all of his business time to the
performance of his duties under the agreement, except that Mr. Rhea shall be
permitted to render services of up to 40% of his business time in connection
with activities of the Company's subsidiaries for additional compensation. In
the event that Mr. Rhea's employment is terminated by the Company without
cause, Mr. Rhea shall be entitled to receive a severance payment equal to the
amount of his then base salary prorated for six months plus options which
otherwise would have vested during the six months following termination. The
agreement includes covenants restricting competitive activities and
disclosure of confidential information and provisions requiring assignment of
intellectual property rights to the Company. Effective July 7, 1997, Mr. Rhea
has agreed, for a term consistent with the term of his employment and in
consideration of $80,000 per year, to devote up to 40% of his business time
to providing consulting services to UTG Europe and other non United States
subsidiaries of the Company. An agreement reflecting the consulting
arrangement has been agreed upon in principle subject to formal approval by
UTG Europe.
Mr. Andreas Popovici has entered into a three year Management Agreement
with the UTG Holding dated March 14, 1996, pursuant to which Mr. Popovici
serves as the Managing Director and a director of UTG Europe. Mr. Popovici
will devote 200 working days at an annual salary of 260,000 CHF
(approximately $179,000) and will receive an additional 1,000 CHF
(approximately $690) for each new customer which he introduces during the
first year and an additional 750 CHF (approximately $520) for each new
customer which he introduces during the second and third year of the
agreement. The agreement will automatically be renewed for successive one
year terms, unless terminated by either party at least six months prior to
the end of the term, and also provides for certain benefits including
insurance, business expense accounts and a company car. The agreement also
contains confidentiality provisions which require the 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.
COMPENSATION OF DIRECTORS
The Company reimburses directors for reasonable out-of-pocket expenses
incurred in connection with attendance at board and committee meetings. See
"--Option Grants During Last Fiscal Year" and "--Employment Agreements" for a
description of stock options granted to Messrs. Schlecht, Wolff and Rhea. On
March 25, 1997, the Company also granted an option to purchase up to 100,000
shares to Mr. Ronald Kuzon, which option vests in equal installments on March
25, 1998, 1999 and 2000 and expires in 2002. In addition, effective January
1, 1997, the Company began compensating Mr. Ronald Kuzon $3,541.67 per month
for his services as Secretary, Treasurer and a director of the Company.
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 violations of law, improper
declaration of dividends and transactions from which the director derived an
improper personal benefit.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of July 25, 1997, certain information
concerning beneficial ownership of the Company's Common Stock by (i) each
beneficial owner of more than five percent of the outstanding Common Stock,
(ii) each director of the Company, (iii) each executive officer named in the
Summary Compensation Table under Item 10 above and (iv) all current executive
officers and directors of the Company as a group.
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Number of Shares Percentage of
Name and Address Beneficially Owned Common Stock(1)
---------------- ------------------ -------------
Thomas Combrinck 2,341,690 17.7%
c/o D.L.P. Salamans
82-86 Seymour Place
London, England W1H 5BD
Interfinance Inv. Co. Ltd 3,220,000(2) 24.2%
Steinhaldering 8, Ch-8954
Geroldswil, Switzerland
Fritz Wolff 500,000(3) 3.8%
UTG Communications (Europe) AG
Baarerstrasse 75
6302 Zug, Switzerland
Keith Rhea 0(4) 0%
UTG Communications International, Inc.
18 Cattano Avenue
Morristown, New Jersey 07460
Ronald W. Kuzon 180,000(5) 1.4%
300 Park Avenue, Suite 1940
New York, NY 10022
David E. Schlecht 204,000(6) 1.5%
17 Cattano Avenue
Morristown, NJ 07960
All directors and executive 884,000 6.7%
officers as a group (four
persons)
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* Denotes less than 1%.
(1) Based on 13,246,000 shares of Common Stock issued and outstanding.
(2) Includes 90,000 of Common Stock, 45,000 shares of which are presently
issuable from the Company and 45,000 shares of which are transferable from
shares formerly held by Mr. Thomas Combrinck, the issuance and transfer
of which had been pending subcription payments and resolution of credits.
See "Item 12. Certain Relationships and Related Transactions."
(3) Includes 400,000 shares of Common Stock held in the name of Tele Invest
Ltd., and with respect to which shares Mr. Wolff has voting and
investment power. Does not include an option to purchase up to 300,000
shares of Common Stock at $1.00 per share, which option vests in equal
installments on March 25, 1998, 1999 and 2000.
(4) Does not include an option to purchase up to 200,000 shares of Common Stock
at $1.00 per share, which option vests in installments of 50,000 shares
each on January 7, 1998 and July 7, 1998, in installments of 25,000 shares
each on January 7, 1999 and July 7, 1999 and the balance on January 7,
2000.
(5) Does not include an option to purchase up to 100,000 shares of Common Stock
at $1.00 per share, which option vests in equal installments on March 25,
1998, 1999 and 2000.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED 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 UTG Holding from Thomas Combrinck. At such time Thomas Combrinck,
who subsequently became a Chairman of the Board of Directors of the Company,
was not a director of the Company but was a director of UTG 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 the
transaction were the Company's only stockholders. On January 29, 1997, Mr.
Combrinck resigned from all of his positions with the Company. For
compensation paid to or
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for the benefit of Mr. Combrinck during the Company's last fiscal year, see
"Item 10. Executive Compensation." In addition, as part of the severance
arrangement with Mr. Combrinck, the Company agreed to pay Mr. Combrinck
10,000 CHF (approximately $7,000) per month through July 31, 1997 in
consideration of consulting services, if any, to be provided by Mr.
Combrinck. Mr. Combrinck agreed not to compete with the Company during the
term of the consultancy. From time to time during the Company's last fiscal
year the Company advanced an aggregate of approximately $525,000 to UTG
Communications Ltd. UK ("UTK"), a company controlled by Mr. Combrinck, which
amounts were used to fund certain of UTK's working capital needs. UTK is no
longer active and the Company does not anticipate recuperating any of such
funds. As such, these amounts have been written off as a bad debt expense
for fiscal 1997. See also "Item 2. Properties" for a description of certain
properties and equipment formerly used by UTK and now used by the Company.
As of April 30, 1996, the Company issued 2,750,000 shares of Common Stock
to Interfinance Inv. Co. Ltd., a Panamanian company ("Interfinance"), 183,333
of which shares were issued in exchange for $200,000 in cash and 2,566,667 of
which shares were issued in exchange for $26 in cash and a 7% promissory
note. The promissory note was repaid as of June 28, 1996 from proceeds
received from purchasers of a portion of the shares resold by Interfinance.
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 7%
promissory note for $990,000. The note was repaid in full in November 1996.
Pursuant to a subscription agreement entered into in November 1996,
Interfinance subscribed for and the Company sold an additional 125,000 shares
of Common Stock at $4.00 per share. In connection with that agreement, Mr.
Combrinck transferred 75,000 shares to Interfinance for no additional
consideration. In January 1997, Interfinance subscribed for an additional
2,000,000 shares of Common Stock at a purchase price of $1.00 per share. In
connection with the agreement, Mr. Combrinck agreed to transfer, for no
additional consideration, one share of Common Stock owned by him for each
share purchased by Interfinance under the agreement. In addition, the
Company granted Interfinance an option to purchase up to an additional
2,000,000 shares of Common Stock at $2.00 per share for a two year period
commencing on completion of the purchase of the full 2,000,000 shares in
accordance with the terms of the agreement. As of the date hereof, all
amounts owing to the Company in respect of Interfinance's November 1996 and
January 1997 subscriptions have been paid (giving effect to approximately
$20,000 in credits for expenses incurred by Interfinance on behalf of the
Company). The Company has agreed to register the resale of the shares purchased
by Interfinance under the Securities Act of 1933. The Company believes that the
terms of all transactions with Interfinance were as fair to the Company from
a financial point of view as could have been obtained from an unaffiliated
third party.
In April, 1997, the Company's wholly-owned subsidiary, UTG Communications
Belgium N.V., acquired all of the equity of Multicom N.V., an Antwerp, Belgium
based company which offers direct and indirect dial services to more than 250
corporate customers. The purchase price was 11,101,043 BEF (approximately
$317,000), payable 50% on April 9, 1997, 25% on May 2, 1997 and 25% on June 2,
1997. Payment of the purchase price was secured by the pledge by Interfinance
of 100,000 shares of the Company's Common Stock owned by Interfinance.
The Company has a bank overdraft facility with Credit Suisse in Switzerland
in the amount of CHF 300,000 (approximately $207,000), which bears interest at
61/4% per annum plus 1% on average overdraft in excess of fixed limit. The
overdraft is personally guaranteed by Mr. Fritz Wolff.
The Company's principal executive offices utilize space provided by Mr.
David Schlecht, for which the Company pays a company controlled by Mr. Schlecht
approximately $1,000 per month.
See "Item 10.Executive Compensation" for a description of employment and
other compensation arrangements with the Company's executive officers and
directors.
7
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this Amendment to its report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UTG COMMUNICATIONS INTERNATIONAL, INC.
By: /s/ Fritz K. Wolff
----------------------------------------
Fritz K. Wolff, President, Chief Executive
Officer and Director
Date: July 28, 1997
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