<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(MARK ONE)
{x} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transaction period from ______ to ________
COMMISSION FILE NUMBER 333-8305
UTG COMMUNICATIONS INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 13-3895294
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Baarerstrasse 75, 6300, Zug, Switzerland Not Applicable
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 011-4141-729-8282
Not Applicable
(Former Name, Former Address and Former Year, If Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
10,406,000 shares of Common Stock were outstanding on February 17, 1997.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE NINE MONTH PERIOD ENDED DECEMBER 31, 1996
INDEX
Consolidated Balance Sheet (Unaudited) 3
Consolidated Statement of Operations (Unaudited) 4
Consolidated Statement of Stockholders' Equity (Unaudited) 5
Consolidated Statement of Cash Flows (Unaudited) 6
Notes to Consolidated Financial Statements 7 - 10
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UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
December 31, September 30,
1996 1996
------------ ------------
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ - $ 147,902
Subscription Receivable 168,393 400,000
Accounts Receivable 224,564 62,972
Prepaid Expenses and Other Current Assets 122,694 157,045
Due from Affiliate 500,061 319,099
------------ -----------
Total Current Assets 1,015,712 1,087,018
Property and Equipment, at Cost,
Net of Accumulated Depreciation of $460,407
and $239,418 at December 31, 1996 and
September 30, 1996, respectively 1,927,412 1,824,172
Organization Costs, Net of Accumulated
Amortization of $3,220 and $2,684 at
December 31, 1996 and September 30, 1996,
respectively 30,966 24,821
Deferred Taxes - -
Other Assets
19,994 19,127
----------- -----------
Total Assets $ 2,994,084 $ 2,955,138
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $ 2,220,345 $ 1,186,516
Bank Overdraft 319,300 -
Notes Payable 149,620 -
----------- -----------
Total Current Liabilities 2,689,265 1,186,516
----------- -----------
Commitments and Contingencies - -
STOCKHOLDERS' EQUITY
Common Stock - $0.00001 Par Value
Authorized 20,000,000 shares;
10,531,000 Issued and Outstanding 105 104
Additional Paid-in-Capital 4,465,536 3,965,537
Accumulated Deficit (3,988,157) (2,238,772)
Foreign Currency Translation Adjustment (172,682) 41,736
Minority Interest 17 17
----------- -----------
Total Stockholders' Equity 304,819 1,768,622
----------- -----------
Total Liabilities and Stockholders' Equity $ 2,994,084 $ 2,955,138
----------- -----------
----------- -----------
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UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE
NINE MONTH
QUARTER ENDED PERIOD ENDED
------------- ------------
DECEMBER 31, 1996
-------------------------
NET SALES
$ 245,727 $ 339,289
COST OF SALES 432,671 648,942
------------ ------------
GROSS PROFIT (186,944) (309,653)
------------ ------------
SELLING AND TECHNICAL EXPENSES
Consulting Fees 153,672 335,063
Technical Fees 447,822 798,899
Sales Salaries 134,007 221,261
Other Selling Expenses 45,250 76,224
------------ ------------
Total Selling and Technical Expenses 780,751 1,431,447
------------ ------------
LOSS FROM OPERATIONS BEFORE
GENERAL AND ADMINISTRATIVE EXPENSES (967,695) (1,741,100)
------------ ------------
GENERAL AND ADMINISTRATIVE EXPENSES
Salaries 238,616 501,249
Travel Expenses 23,915 140,578
Management and Consulting Fees 118,057 423,217
Depreciation and Amortization 250,613 497,818
Professional Fees 91,481 206,960
Employment Agency Fees 16,248 83,991
Insurance Expense (222) 18,659
Rent Expense 47,045 67,800
Association Fees 13 24,425
Other Taxes (17,114) 18,259
Other Operating Expenses 107,064 210,964
------------ ------------
Total General and Administrative Expenses 875,716 2,193,920
------------ ------------
LOSS FROM OPERATIONS (1,843,411) (3,935,020)
OTHER (INCOME) EXPENSES
Interest Income (9,631) (26,406)
Interest Expense (43,982) 25,375
(Gain) Loss From Foreign Currency (40,413) 54,168
----------- ------------
Total Other (Income) Expenses (94,026) 53,137
------------ ------------
NET LOSS $ (1,749,385) $ (3,988,157)
------------ ------------
------------ ------------
LOSS PER COMMON SHARE $(.17) $(.39)
------------ ------------
------------ ------------
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<TABLE>
<CAPTION>
UTG COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE NINE MONTH ENDED DECEMBER 31, 1996
ADDITIONAL FOREIGN
COMMON STOCK PAID-IN ACCUMULATED CURRENCY MINORITY
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT INTEREST
--------------------------- ------------ -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1996 - $ - $ - $ - $ - $ -
Net Loss - April 1, 1996 to
December 31, 1996 - - - (3,988,157) - -
Issuance of Common Stock 10,531,000 105 4,588,469 - - -
Offering Costs - - (122,933) - - -
Foreign Currency Translation
Adjustment - - - - (172,682) -
Minority Interest - - - - - 17
---------- -------- ----------- ----------- ----------- -----------
Balance at December 31, 1996 10,531,000 $ 105 $ 4,465,536 $(3,988,157) $ (172,682) $ 17
---------- -------- ----------- ----------- ----------- -----------
---------- -------- ----------- ----------- ----------- -----------
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-----------
<S> <C>
Balance at March 31, 1996 $ -
Net Loss - April 1, 1996 to
December 31, 1996 (3,988,157)
Issuance of Common Stock 4,588,574
Offering Costs (122,933)
Foreign Currency Translation
Adjustment (172,682)
Minority Interest 17
----------
Balance at December 31, 1996 $ 304,819
----------
----------
</TABLE>
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<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTH PERIOD ENDED DECEMBER 31, 1996
CASH FLOW FROM OPERATING ACTIVITIES
Net Loss $(3,988,157)
Adjustments to Reconcile Net Loss to
Net Cash Used by Operating Activities
Depreciation and Amortization 497,818
Changes in Certain Assets and Liabilities:
Increase in Accounts Receivable (224,564)
Increase in Prepaid Expenses (122,694)
Increase in Organization Costs (32,580)
Increase in Other Assets (19,994)
Increase in Due From Affiliate (500,061)
Increase in Accounts Payable and Accrued Expenses (1,2850,587)
Increase in Bank Overdraft 319,300
-----------
Total Cash Used by Operating Activities (1,850,587)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets (2,387,819)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Notes Payable 149,620
Contribution to Capital 4,420,181
Offering Costs (122,933)
Minority Interest 17
-----------
Total Cash Provided By Financing Activities 4,446,885
-----------
EFFECTS OF EXCHANGE RATE
CHANGES ON CASH 208,479
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS -
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD -
-----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ -
-----------
-----------
CASH PAID DURING THE YEAR FOR:
Interest Expense $ -
-----------
-----------
Income Taxes $ -
-----------
-----------
NON-CASH FINANCING ACTIVITIES:
The Company issued common stock in exchange for a stock subscription
agreement. As of December 31, 1996, the receivable on the agreement totalled
$168,393.
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UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) BASIS OF PRESENTATION
The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles for
interim financial information and with the instructions to
Form 10-QSB and Regulation S-B. Accordingly, they do not
include all of the information and footnotes required by
generally accepted accounting principles for complete
financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring
adjustments) considered necessary for a fair presentation
have been included.
For further information refer to the financial statements
and footnotes included in the Registrant's Prospectus on
Form 10-KSB for the period ended April 30, 1996.
The results of Operations for any interim period are not
necessarily indicative of the results to be expected for the
full fiscal year ended March 31, 1997.
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 subsidiaries:
1) UTG Communications Holding AG,
("UTGH"),incorporated under the laws of
Switzerland on February 29, 1996 (owned 99.9%
by the Company);
2) UTG Communications Europe AG, ("UTGAG"),
incorporated under the laws of Switzerland on
March 28, 1996 (owned 100% by UTGH);
3) UTG Communications Belgium, ("UTGBG"),
incorporated under the laws of Belgium on
June 27, 1996 (owned 100% by UTGH); and
4) United Telecom GMBH, ("UTGmbH"), incorporated
under the laws of Switzerland on May 28, 1996
(owned 100% by UTGH).
5) UTG Communications Network, Ltd., ("UTGNET")
incorporated under the laws of The United
Kingdom on October 22, 1996 (owned 100% by
UTGH).
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 throughout Europe and North America.
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UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 declining balance 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 Swiss, Belgium and United Kingdom
subsidiaries, 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 the statement of operations.
g) USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
h) LOSS PER SHARE
Loss per share is based on the weighted average number of
shares of common stock outstanding during the period.
i) 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.
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UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUBSCRIPTION RECEIVABLE
On November 21, 1996, the Company entered into a
subscription agreement to sell 125,000 shares of its common
stock to Interfinance Inv. Co., Ltd. for an aggregate price
of $500,000. As of December 31, 1996, $331,607 was received
relating to the agreement.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 is summarized as
follows:
Telecommunications Equipment $ 2,113,988
Computer Equipment 173,359
Furniture and Fixtures 58,355
Auto 42,117
-----------
2,387,819
Less: Accumulated Depreciation 460,407
-----------
$ 1,927,412
-----------
-----------
NOTE 4 - MINORITY INTEREST
Minority interest represents less than a 1% share of the
common equity.
NOTE 5 - FOREIGN OPERATIONS
Substantially all of the Company's operations take place
throughout Europe.
Substantially all of the Company's identifiable assets are
located in Switzerland and the United Kingdom.
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UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - 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 $ 1,541,000
Less: Valuation Allowance (1,541,000)
-----------
Total Deferred Tax Assets $ -
-----------
-----------
At December 31, 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 7 - RELATED PARTY TRANSACTIONS
The Company has related party transactions with UTG
Communications Ltd. UK (UTK), a company they share common
directorship with. For a discussion of an arrangement
entered into with Mr. Thomas Combrinck, see "Note
9-Subsequent Events."
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Company has several employment agreements, the terms of
which expires at various times through April 1999.
NOTE 9 - SUBSEQUENT EVENTS
During January 1997, the Company received approximately
$159,000 relating to the subscription receivable as of
December 31, 1996.
Also during January 1997, the Company entered into
a subscription agreement with a subscriber for up to
2,000,000 shares of Common Stock at $1.00 per share. Under
the agreement, the subscriber purchased 500,000 shares and is
obligated to purchase the remaining 1,500,000 shares in
installments of at least 500,000 shares per month at the end
of February, March and April. As of the date hereof, $450,000
of the $500,000 purchase price for the initial shares
purchased has been received.
The Company entered into an agreement with Mr. Thomas
Combrinck on February 14, 1997 with an effective date of
February 1, 1997. Under the agreement the prior employment
was terminated effective February 1, 1997 and Mr. Combrinck
became a consultant to the Company for up to six months
commencing February 1, 1997 at a rate of approximately
$7,000 per month. While serving as a consultant Mr.
Combrinck may not compete with the Company. The consulting
services can be terminated by Mr. Combrinck at any time and
the services to be performed are at the discretion of the
Company.
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<PAGE>
Item 2. Plan of Operation
The Company is a development stage company that provides quality private
voice, fax and data management telecommunications services in Switzerland,
Belgium, Germany and France, primarily to business and business groups at
prices which are generally below those of major telecommunications carriers.
The Company has entered into international telecommunications service
agreements with various international telecommunications carriers for the
exchange of traffic. Pursuant to these agreements, the Company re-sells
telecommunication minutes on its bandwidth at a profit. In October 1996 the
Company commenced operations in the United Kingdom. During the 12 month
period following December 31, 1996, the Company intends to focus on expanding
its customer base in Switzerland, and also intends to expand its customer
base in Belgium, Germany and France. The Company will also explore expansion
possibilities in other countries of the European Union (the "EU") if business
and regulatory conditions warrant. The Company intends to upgrade its network
and information systems as required to remain competitive. The Company
believes that its current level of employees is sufficient for its current
operations. As the Company expands, it intends to hire additional employees
to meet its needs.
In December 1996 the Company sold 125,000 shares
of Common Stock to Interfinance Inv. Co. Ltd. ("Interfinance") for $4.00 per
share. In January 1997 Interfinance subscribed for up to an additional
2,000,000 shares of Common Stock at $1.00 per share. As of the date hereof,
Interfinance has purchased approximately 500,000 shares of Common Stock
pursuant to such subscription. Interfinance has the obligation to purchase
the remaining 1,500,000 shares in installments of at least 500,000 shares per
month at the end of February, March and April. In connection with such
purchases, Mr. Thomas Combrinck, the Company's former Chairman of the Board
and a former director, agreed to transfer, without receiving any additional
consideration, shares of Common Stock owned by him to Interfinance (one share
for each share purchased by Interfinance from the Company). The Company has
used the proceeds of such sale for the purchase of equipment, working capital
and general corporate purposes.
The Company's revenue increased significantly at the end of the fourth
quarter of 1996. December's revenue was approximately $180,000. Revenue for
January 1997 reached approximately $400,000, and monthly revenue for
Februaryy and March 1997 is expected to exceed that level.
The initial delays experienced in the first 8 months of operations have
been resolved to a significant level. The related cost overruns have been
contained, and the activities are slowly reaching their expected levels, as
is evident by the sharp increase in revenues. The Company's new switch became
fully operational in November, 1996. The Company believes that its network
will have adequate capacity through June 1997. Thereafter the Company
believes it will have to expand its switching facilities in order to maintain
the adequacy of its network at the projected higher level of operations.
There can be no assurance that the Company's business will expand or that if
such expansion occurs that the Company will have adequate capital resources.
On January 10, 1997, Fritz Wolff was elected a director and vice
president of the Company. Mr. Wolff has assumed the chief executive role with
respect to the Company's operating subsidiaries. Under his direction, the
company is undergoing a restructuring, including the elimination of one-time
and such start-up costs that had been generated by using freelance capacity.
Furthermore, the Company has begun discussions with one of the leading United
States telecommunications consultants regarding present commercial
opportunities available to the Company. On January 29, 1997, Thomas Combrinck,
the Company's former Chairman of the Board of Directors resigned from all of
his positions with the Company.
In mid-1996 the Company began discussions regarding business development
projects in Hungary, France and Belgium with strong local partners in each
country. Certain of these discussions have progressed and may result in
agreements to provide additional capital investment in the Company, although
there can be no assurance thereof
On October 22, 1996 UTG Communications (Network) Ltd., a United Kingdom
Company ("UTGNET") was incorporated as a 100% subsidiary of the Company and
operations were started on November 1, 1996. UTGNET is functioning as the
techhnical service center of the Company and its operating subsidiaries. It
is intended that UTGNET will complete the take over of the staff and
functions of the third party company UTK (see note 7 of the financial
statements) by the end of March 1997. This includes 7 highly qualified
telecommunications engineers and specialists, a carrier manager and 3 office
staff. This new structure helps to ensure that all essential areas of
operations are under full control of the Company and its operating
subsidiaries.
As of December 31, 1996, the Company had a bank overdraft of approximately
$319,000 bearing interest at an annual rate of 7% per annum. Since then the
Company has received approximately $450,000 from an equity investment and
minimal cash from operations. Additional equity investment of ADP 1,500,000
are anticipated through April 30, 1997. The Company believes such
additional capital plus anticipated operating revenues will enable it to meet
short term cash requirements. If all such equity is not received, the Company
will have to scale back its expansion plans until additional financing can be
arranged. If the equity financing is completed, the Company believes that its
cash and revenues from operations, together with funds expected to be received
either from leasing its newly purchased equipment and/or from project
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<PAGE>
financing, will be sufficient to maintain the Company's operations at their
current level for the 12-month period following the date of this Report. In
order to finance its projected expansion during such 12-month period, the
Company will need additional financing. In this regard the Company has been
exploring various options including, the issuance of equity and/or debt and
various asset based financing and lease financing options. The need for
additional financing and the timing of such financing will depend on the
Company's future operating revenues and future expansion plans, which are
subject to change over time. Additionally, the Company may require additional
financing during such period in the event of delays, costs overruns or
unanticipated expenses. There can be no assurance that the Company will ever
generate sufficient revenues to produce an operating profit. While the Company
believes that it will be able to raise the capital it will require to fund its
current operations and its projected expansion plans, 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 is unable
to arrange for such financing the Company would be materially and adversely
affected and would have to substantially reduce operations.
Certain statements in this Report under the caption "Plan of Operation"
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, including, without limitation,
statements regarding future cash requirements. 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: delays in expanding the Company's
network; failure to receive or delays in receiving regulatory approval; 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 comply with, government regulations; and other
factors referenced in this Report.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is currently in discussions with respect to certain
claims by creditors and/or former employees. At this time there
is no outstanding litigation and the Company will attempt to
resolve all such claims in a commercially reasonable manner.
Item 2. Recent Sales of Unregistered Securities.
In December, 1996, the Company sold 125,000 shares of its Common
Stock to an entity in a private placement at a price of $4.00 per share. No
underwriter was involved. The Company claimed an exemption from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), by relying on Section 4(2) of the Securities Act, which
allows for an exemption for transactions by an issuer not involving a public
offering, and the rules and regulations thereunder.
Items 3 - 5. Not applicable
Item 6. Exhibits and Report on Form 8-K
(a) Exhibits
10.15 Subscription Agreement dated as of January 15, 1997
between the Company and Interfinance Inv. Co. Ltd.
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<PAGE>
10.16 Subscription Agreement dated as of November 21, 1996
between the Company and Interfinance Inv. Co. Ltd.
27 Financial data schedule
(b) Reports on Form 8-K
There were no reports on form 8-K filed during the quarter
ended December 31, 1997.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act
of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UTG COMMUNICATIONS INTERNATIONAL, INC.
By:
--------------------------------------
David Schlecht
President
By:
--------------------------------------
Ronald Kuzan
Principal Financial Officer
February 18, 1997
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<PAGE>
EXHIBIT 10.15
UTG COMMUNICATIONS INTERNATIONAL, INC.
SUBSCRIPTION AGREEMENT
UTG Communications International, Inc.
c/o Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Gentlemen:
I. SUBSCRIPTION. The undersigned, intending to be legally bound, hereby
irrevocably agrees to purchase from UTG Communications International, Inc. a
Delaware corporation (the "Company"), 2,000,000 shares of the Company's Common
Stock, par value $.00001 ("Shares") set forth on the signature page hereof, at a
purchase price of $1.00 per Share. This subscription is submitted to the Company
in accordance with and subject to the terms and conditions described in this
Subscription Agreement relating to the offering by the Company of 2,000,000
Shares.
II. PAYMENT. The undersigned will pay for the subscription by check payable in
U.S. dollars or by wire transfer in U.S. dollars to the Company's designated
account payable $500,000 on or before January 31, 1997 and the balance in at
least equal monthly installments on the last day of each following month with
the final installment to be paid no later than April 30, 1996. With each
payment a portion of the Shares shall be issued.
III. ACCEPTANCE OF SUBSCRIPTION. The undersigned understands and agrees that the
Company in its sole discretion reserve the right to accept or reject this or any
other subscription for Shares, in whole or in part, notwithstanding prior
receipt by the undersigned of notice of acceptance of this subscription. The
Company shall have no obligation hereunder until the Company shall execute and
deliver to the undersigned an executed copy of this Subscription Agreement. If
this subscription is rejected in whole, this Subscription Agreement and all
funds received from the undersigned will be returned without interest or
deduction, and this Subscription Agreement shall thereafter be of no further
force or effect. If this subscription is rejected in part, the funds for such
rejected portion of this subscription will be returned without interest or
deduction, and this Subscription Agreement shall continue in force and effect to
the extent this subscription was accepted.
IV. REPRESENTATIONS AND WARRANTIES. The undersigned hereby acknowledges,
represents, warrants to and agrees with each of the Company as follows:
(a) None of the Shares are registered under the Securities Act of
1933 (the "Securities Act") or any state securities laws. The
undersigned understands that the offering and sale of the Shares is
intended to be exempt from registration under the Securities Act of
1933 (the "Securities Act"), by virtue of Section 4(2) and the
provisions of Regulation D promulgated thereunder, based, in part,
upon the representations, warranties and agreements contained in this
Subscription Agreement;
(b) The undersigned has access to the same kind of information which
would be available in registration statements filed by the Company
under the Securities Act;
(c) The undersigned is aware that an investment in the Shares
involves a number of very significant risks and the undersigned is
able to bear the loss of the entire investment in the Shares;
(d) Neither the Securities and Exchange Commission nor any state
securities commission has approved any of the securities included in
the Shares offered or passed upon or endorsed the merits of the
offering;
(e) The undersigned acknowledges that all documents, records, and
books pertaining to the investment in the Shares have been made
available for inspection by him, his attorney, accountant, purchaser
representative or tax advisor (collectively, the "Advisors");
(f) The undersigned and the Advisors have had a reasonable
opportunity to ask questions of and receive answers from a person or
persons acting on behalf of the Company concerning the offering of the
Shares and all such questions have been answered to the full
satisfaction of the undersigned and his Advisors;
(g) In evaluating the suitability of an investment in the Company,
the undersigned has not relied upon any representation or other
information (oral or written) other than as contained in documents or
answers to questions so furnished to the undersigned or his Advisors
by the Company;
<PAGE>
(h) The undersigned is unaware of, and in no way relying on, any form
of general solicitation or general advertising in connection with the
offer and sale of the Shares;
(i) The undersigned has such knowledge and experience in financial,
tax, and business matters so as to enable him to utilize the
information made available to him in connection with the offering of
the Shares to evaluate the merits and risks of an investment in the
Shares and to make an informed investment decision with respect
thereto;
(j) The undersigned is not relying on the Company respecting the tax
and other economic considerations of an investment in the Shares, and
the undersigned has relied on the advice of, or has consulted with,
only his own Advisors;
(k) The undersigned is acquiring the Shares solely for his own
account for investment and not with a view to resale or distribution
and the Subscriber will not sell or transfer the Shares until they are
registered for resale under the Securities Act;
(l) The undersigned must bear the economic risk of the investment
indefinitely because none of the Shares may be sold, hypothecated or
otherwise disposed of unless subsequently registered under the Act and
applicable state securities laws or an exemption from registration is
available. Legends shall be placed on the Shares to the effect that
they have not been registered under the Securities Act or applicable
state securities laws and appropriate notations thereof will be made
in each of the Company' stock books;
(m) The undersigned has adequate means of providing for the
undersigned's current needs and foreseeable personal contingencies and
has no need for the undersigned's investment in the Shares to be
liquid;
(n) The undersigned has completed accurately the Subscriber
Questionnaire attached hereto as Annex A and meets the requirements of
at least one of the suitability standards for an "accredited
investor;"
(o) The undersigned:1. if a natural person represents that the
undersigned has reached the age of 21 and has full power and authority
to execute and deliver this Subscription Agreement and all other
related agreements or certificates and to carry out the provisions
hereof and thereof;2. if a corporation, partnership, association,
joint stock company, trust, unincorporated organization or other
entity represents that such entity was not formed for the specific
purpose of acquiring the Shares, such entity is validly existing under
the laws of the state of its organization, the consummation of the
transactions contemplated hereby is authorized by, and will not result
in a violation of state law or its charter or other organizational
documents, such entity has full power and authority to execute and
deliver this Subscription Agreement and all other related agreements
or certificates and to carry out the provisions hereof and thereof,
this Subscription Agreement has been duly authorized by all necessary
action, this Subscription Agreement has been duly executed and
delivered on behalf of such entity and is a legal, valid and binding
obligation of such entity; and 3. if executing this Subscription
Agreement in a representative or fiduciary capacity, represents that
it has full power and authority to execute and deliver this
Subscription Agreement in such capacity and on behalf of the
subscribing individual, ward, partnership, trust, estate, corporation,
or other entity for whom the undersigned is executing this
Subscription Agreement, and such individual, ward, partnership, trust,
estate, corporation, or other entity has full right and power to
perform pursuant to this Subscription Agreement and make an investment
in the Company, and that this Subscription Agreement constitutes a
legal, valid and binding obligation of such entity; and
V. INDEMNIFICATION. The undersigned agrees to indemnify and hold harmless
each of the Company, their respective officers, directors, employees, agents,
and affiliates against all losses, liabilities, claims, damages, and expenses
(including, but not limited to, any and all expenses incurred in investigating,
preparing, or defending against any litigation commenced or threatened) arising
out of any false representation or warranty or breach by the undersigned of any
agreement herein or in any other document delivered in connection with this
Subscription Agreement.
VI. IRREVOCABILITY; BINDING EFFECT. The undersigned hereby acknowledges and
agrees that the subscription hereunder is irrevocable by the undersigned, except
as required by applicable law, and that this Subscription Agreement shall
survive the death or disability of the undersigned and shall be binding upon and
inure to the benefit of the parties and their heirs, executors, administrators,
successors, legal representatives, and permitted assigns. If the undersigned is
more than one person, the obligations of the undersigned hereunder shall be
joint and several and the agreements, representations, warranties, and
acknowledgments herein shall be deemed to be made by and be binding upon each
such person and his heirs, executors, administrators, successors, legal
representatives, and permitted assigns.
VII. MODIFICATION. This Subscription Agreement shall not be modified or
waived except by an instrument in writing signed by the party against whom any
such modification or waiver is sought.
VIII. NOTICES. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt to the party to whom it
is to be given (a) if to either of the Company, at the address set forth above,
or (b) if to the undersigned, at the address set forth on the signature page
hereof
<PAGE>
(or, in either case, to such other address as the party shall have furnished in
writing in accordance with the provisions of this Section IX). Any notice or
other communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party's address which
shall be deemed given at the time of receipt thereof.
IX. ASSIGNABILITY. This Subscription Agreement and the rights and
obligations hereunder are not transferable or assignable by the undersigned.
X. APPLICABLE LAW. This Subscription Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York
without regard to its conflicts of laws principles.
XI. BLUE SKY QUALIFICATION. My right to purchase Shares under this
Subscription Agreement are expressly conditioned upon the exemption from
qualification of the offer and sale of the Shares from applicable Federal and
state securities laws. The Company shall not be required to qualify this
transaction under the securities laws of any jurisdiction and, should
qualification be necessary, the Company shall be released from any and all
obligations to maintain its offer, and may rescind any sale contracted, in
the jurisdiction.
XII. REGISTRATION OF THE SHARES.
(a) The Company hereby agrees that within thirty days from the last
date of purchase, it will file a registration statement (the "REGISTRATION
STATEMENT") under the Securities Act with the SEC, naming the Subscriber as a
selling stockholder. The Subscriber is referred to herein as the "HOLDER."
(b) Once filed, the Company will use its best efforts to cause the
Registration Statement to become effective as promptly as possible and, if any
stop order shall be issued by the SEC in connection therewith, to use its
reasonable efforts to obtain the removal of such order. Following the effective
date of the Registration Statement, the Company shall, upon the request of the
Holder, forthwith supply such reasonable number of copies of the Registration
Statement, prospectus and other documents necessary or incidental to the
registration as shall be reasonably requested by the Holder to permit the Holder
to make a public distribution of such Holder's Shares. The Company will use its
reasonable efforts to qualify the Shares for sale in such states as the Holder
shall reasonably request, provided that no such qualification will be required
in any jurisdiction where, solely as a result thereof, the Company would be
subject to general service of process or to taxation or qualification as a
foreign corporation doing business in such jurisdiction. The obligations of the
Company hereunder with respect to the Shares of the Holder are expressly
conditioned on the Holder furnishing to the Company such appropriate information
concerning the Holder, the Holder's Shares and the terms of the Holder's
offering of such Shares as the Company may reasonably request.
(c) The Company shall bear the entire cost and expense of the
registration of the Shares; provided, however, that the Holder shall be solely
responsible for the fees of any counsel retained by the Holder in connection
with such registration and any transfer taxes or underwriting discounts,
commissions or fees applicable to the Shares sold by the Holder pursuant
thereto.
(d) Neither the filing of the Registration Statement by the Company
pursuant to this Subscription Agreement nor the making of any request for
prospectuses by any Holder shall impose upon any Holder any obligation to sell
the Holder's Shares.
(e) The Holder, upon receipt of notice from the Company that an event
has occurred which requires a post-effective amendment to the Registration
Statement or a supplement to the prospectus included therein, shall promptly
discontinue the sale of Shares until the Holder receives a copy of a
supplemented or amended prospectus from the Company, which the Company shall
provide as soon as practicable after such notice.
(f) The Company shall indemnify and hold harmless the Holder from and
against any and all losses, claims, damages and liabilities caused by any untrue
statement of a material fact contained in the Registration Statement, any other
registration statement filed by the Company under the Securities Act, any post-
effective amendment to such registration statements, or any prospectus included
therein required to be filed or furnished by reason of this Subscription
Agreement or caused by any omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except, with respect to the Holder, insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission based upon
information furnished or required to be furnished in writing to the Company by
the Holder expressly for use therein, which indemnification shall include each
person, if any, who controls the Holder within the meaning of the Securities Act
and each officer, director, employee and agent of the Holder; provided, however,
that the indemnification in this paragraph (c) with respect to any prospectus
shall not inure to the benefit of the Holder (or to the benefit of any person
controlling the Holder) on account of any such loss, claim, damage or liability
arising from the sale of Shares by the Holder, if a copy of a subsequent
prospectus correcting the untrue statement or omission in such earlier
prospectus was provided to the Holder by the Company prior to the subject sale
and the subsequent prospectus was not delivered or sent by the Holder to the
purchaser prior to such sale; and provided further, that the Company shall not
be obligated to so indemnify the Holder or other person referred to above unless
the Holder or other person, as the case may be, shall at the same time indemnify
the Company, its directors, each officer signing the Regis-
<PAGE>
tration Statement and each person, if any, who controls the Company within the
meaning of the Securities Act, from and against any and all losses, claims,
damages and liabilities caused by any untrue statement of a material fact
contained in the Registration Statement, any registration statement or any
prospectus required to be filed or furnished by reason of this Subscription
Agreement or caused by any omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
insofar as such losses, claims, damages or liabilities are caused by any untrue
statement or omission based upon information furnished in writing to the Company
by the Holder expressly for use therein.
(g) If for any reason the indemnification provided for in the
preceding subparagraph is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss, claim, damage,
liability or expense referred to therein, then the indemnifying party, in lieu
of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by the indemnified party as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnified party and the indemnifying party,
but also the relative fault of the indemnified party and the indemnifying party,
as well as any other relevant equitable considerations.
XIII. FURTHER CONDITION. This Subscription Agreement shall only be
enforceable against the Subscriber when, and if, the obligations of Tom
Combrinck to transfer to the Subscriber without further consideration, an
additional 2,000,000 shares of the Common Stock owned by Tom Combrinck. Such
shares shall be delivered on a pro rata basis one share for each share
purchased. Until such transfer has been effected, any amounts paid by the
Subscriber to the Company shall be held in escrow.
XIV. COUNTERPARTS. This Subscription Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this subscription by
signing any of such counterpart and delivering the same by telex, telecopy,
telegraph, cable or otherwise in writing (each delivery by any of such means to
be deemed to be "in writing" for purposes of this Subscription Agreement).
XV. USE OF PRONOUNS. All pronouns and any variations thereof used herein
shall be deemed to refer to the masculine, feminine, neuter, singular or plural
as the identity of the person or persons referred to may require.
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this 15th day of January, 1997.
Number of Shares Subscribed 2,000,000
---------
Total Subscription Amount 2,000,000
---------
If the purchaser is a PARTNERSHIP, CORPORATION, or TRUST:
Interfinance Inv. Co. Ltd
------------------------------------------
Name of Partnership, Corporation or Trust
By: /s/ Ulrich Ernst
--------------------------------------
Name:
Title:
------------------------------------------
Taxpayer Identification Number
Interfinance Inv. Co. Ltd. - Attn: Ulrich Ernst
---------------------------------------------------------------
Postbox 14, Steinhaldenring 8, Ch-8954, Geroldswil, Switzerland
---------------------------------------------------------------
Address
If the purchaser is an individual:
<PAGE>
------------------------------------------
Name (Print Below)
------------------------------------------
------------------------------------------
Taxpayer Identification Number
------------------------------------------
------------------------------------------
Address
ACCEPTED AND AGREED
UTG Communications International, Inc.
By: /s/ Tom Combrinck/David E. Schlecht
--------------------------------------
Name:
Title:
Date: January 15, 1997
<PAGE>
EXHIBIT 10.16
UTG COMMUNICATIONS INTERNATIONAL, INC.
SUBSCRIPTION AGREEMENT
UTG Communications International, Inc.
c/o Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Gentlemen:
I. SUBSCRIPTION. The undersigned, intending to be legally bound, hereby
irrevocably agrees to purchase from UTG Communications International, Inc. a
Delaware corporation (the "Company"), the number of shares of the Company's
Common Stock, par value $.00001 ("Shares") set forth on the signature page
hereof, at a purchase price of $4.00 per Share. This subscription is submitted
to the Company in accordance with and subject to the terms and conditions
described in this Subscription Agreement and the Confidential Private Placement
Memorandum of the Company dated November 21, 1996, as amended or supplemented
from time to time, including all exhibits thereto (the "Memorandum"), relating
to the offering by the Company of up to 250,000 Shares.
II. PAYMENT. The undersigned will pay for the subscription by check payable in
U.S. dollars or by wire transfer in U.S. dollars to the Company's designated
account.
III. ACCEPTANCE OF SUBSCRIPTION. The undersigned understands and agrees that the
Company in its sole discretion reserve the right to accept or reject this or any
other subscription for Shares, in whole or in part, notwithstanding prior
receipt by the undersigned of notice of acceptance of this subscription. The
Company shall have no obligation hereunder until the Company shall execute and
deliver to the undersigned an executed copy of this Subscription Agreement. If
this subscription is rejected in whole, this Subscription Agreement and all
funds received from the undersigned will be returned without interest or
deduction, and this Subscription Agreement shall thereafter be of no further
force or effect. If this subscription is rejected in part, the funds for such
rejected portion of this subscription will be returned without interest or
deduction, and this Subscription Agreement shall continue in force and effect to
the extent this subscription was accepted.
IV. REPRESENTATIONS AND WARRANTIES. The undersigned hereby acknowledges,
represents, warrants to and agrees with each of the Company as follows:
(a) None of the Shares are registered under the Securities Act of
1933 (the "Securities Act") or any state securities laws. The
undersigned understands that the offering and sale of the Shares is
intended to be exempt from registration under the Securities Act of
1933 (the "Securities Act"), by virtue of Section 4(2) and the
provisions of Regulation D promulgated thereunder, based, in part,
upon the representations, warranties and agreements contained in this
Subscription Agreement;
(b) The undersigned has received the Memorandum, has carefully
reviewed it and understands the information contained therein, and the
undersigned has access to the same kind of information which would be
available in registration statements filed by the Company under the
Securities Act;
(c) Neither the Securities and Exchange Commission nor any state
securities commission has approved any of the securities included in
the Shares offered or passed upon or endorsed the merits of the
offering or confirmed the accuracy or determined the adequacy of the
Memorandum. The Memorandum has not been reviewed by any Federal, state
or other regulatory authority;
(d) The undersigned acknowledges that all documents, records, and
books pertaining to the investment in the Shares (including, without
limitation, the Memorandum) have been made available for inspection by
him, his attorney, accountant, purchaser representative or tax advisor
(collectively, the "Advisors");
(e) The undersigned and the Advisors have had a reasonable
opportunity to ask questions of and receive answers from a person or
persons acting on behalf of the Company concerning the offering of the
Shares and all such questions have been answered to the full
satisfaction of the undersigned and his Advisors;
<PAGE>
(f) In evaluating the suitability of an investment in the Company,
the undersigned has not relied upon any representation or other
information (oral or written) other than as stated in the Memorandum
or as contained in documents or answers to questions so furnished to
the undersigned or his Advisors by the Company;
(g) The undersigned is unaware of, and in no way relying on, any form
of general solicitation or general advertising in connection with the
offer and sale of the Shares;
(h) The undersigned has such knowledge and experience in financial,
tax, and business matters so as to enable him to utilize the
information made available to him in connection with the offering of
the Shares to evaluate the merits and risks of an investment in the
Shares and to make an informed investment decision with respect
thereto;
(i) The undersigned is not relying on the Company respecting the tax
and other economic considerations of an investment in the Shares, and
the undersigned has relied on the advice of, or has consulted with,
only his own Advisors;
(j) The undersigned is acquiring the Shares solely for his own
account for investment and not with a view to resale or distribution
and the Subscriber will not sell or transfer the Shares until they are
registered for resale under the Securities Act;
(k) The undersigned must bear the economic risk of the investment
indefinitely because none of the Shares may be sold, hypothecated or
otherwise disposed of unless subsequently registered under the Act and
applicable state securities laws or an exemption from registration is
available. Legends shall be placed on the Shares to the effect that
they have not been registered under the Securities Act or applicable
state securities laws and appropriate notations thereof will be made
in each of the Company' stock books;
(l) The undersigned has adequate means of providing for the
undersigned's current needs and foreseeable personal contingencies and
has no need for the undersigned's investment in the Shares to be
liquid;
(m) The undersigned is aware that an investment in the Shares
involves a number of very significant risks and has carefully read and
considered the matters set forth under the caption "Risk Factors" in
the Memorandum.
(n) The undersigned has completed accurately the Subscriber
Questionnaire attached hereto as Annex A and meets the requirements of
at least one of the suitability standards for an "accredited
investor;"
(o) The undersigned:1. if a natural person represents that the
undersigned has reached the age of 21 and has full power and authority
to execute and deliver this Subscription Agreement and all other
related agreements or certificates and to carry out the provisions
hereof and thereof;2. if a corporation, partnership, association,
joint stock company, trust, unincorporated organization or other
entity represents that such entity was not formed for the specific
purpose of acquiring the Shares, such entity is validly existing under
the laws of the state of its organization, the consummation of the
transactions contemplated hereby is authorized by, and will not result
in a violation of state law or its charter or other organizational
documents, such entity has full power and authority to execute and
deliver this Subscription Agreement and all other related agreements
or certificates and to carry out the provisions hereof and thereof,
this Subscription Agreement has been duly authorized by all necessary
action, this Subscription Agreement has been duly executed and
delivered on behalf of such entity and is a legal, valid and binding
obligation of such entity; and 3. if executing this Subscription
Agreement in a representative or fiduciary capacity, represents that
it has full power and authority to execute and deliver this
Subscription Agreement in such capacity and on behalf of the
subscribing individual, ward, partnership, trust, estate, corporation,
or other entity for whom the undersigned is executing this
Subscription Agreement, and such individual, ward, partnership, trust,
estate, corporation, or other entity has full right and power to
perform pursuant to this Subscription Agreement and make an investment
in the Company, and that this Subscription Agreement constitutes a
legal, valid and binding obligation of such entity; and
V. INDEMNIFICATION. The undersigned agrees to indemnify and hold harmless each
of the Company, their respective officers, directors, employees, agents, and
affiliates against all losses, liabilities, claims, damages, and expenses
(including, but not limited to, any and all expenses incurred in investigating,
preparing, or defending against any litigation commenced or threatened) arising
out of any false representation or warranty or breach by the undersigned of any
agreement herein or in any other document delivered in connection with this
Subscription Agreement.
VI. IRREVOCABILITY; BINDING EFFECT. The undersigned hereby acknowledges and
agrees that the subscription hereunder is irrevocable by the undersigned, except
as required by applicable law, and that this Subscription Agreement shall
survive the death or disability of the undersigned and shall be binding upon and
inure to the benefit of the parties and their heirs, executors, administrators,
successors, legal representatives, and permitted assigns. If the undersigned is
more than one person, the obligations of the undersigned hereunder shall be
joint and several and the agreements, representations, warranties, and
acknowledgments herein shall be deemed to be made by and be binding upon each
such person and his heirs, executors, administrators, successors, legal
representatives, and permitted assigns.
<PAGE>
VII. MODIFICATION. This Subscription Agreement shall not be modified or
waived except by an instrument in writing signed by the party against whom
any such modification or waiver is sought.
VIII. NOTICES. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt to the party to whom it
is to be given (a) if to either of the Company, at the address set forth above,
or (b) if to the undersigned, at the address set forth on the signature page
hereof (or, in either case, to such other address as the party shall have
furnished in writing in accordance with the provisions of this Section IX). Any
notice or other communication given by certified mail shall be deemed given at
the time of certification thereof, except for a notice changing a party's
address which shall be deemed given at the time of receipt thereof.
IX. ASSIGNABILITY. This Subscription Agreement and the rights and
obligations hereunder are not transferable or assignable by the undersigned.
X. APPLICABLE LAW. This Subscription Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York
without regard to its conflicts of laws principles.
XI. BLUE SKY QUALIFICATION. My right to purchase Shares under this
Subscription Agreement are expressly conditioned upon the exemption from
qualification of the offer and sale of the Shares from applicable Federal and
state securities laws. The Company shall not be required to qualify this
transaction under the securities laws of any jurisdiction and, should
qualification be necessary, the Company shall be released from any and all
obligations to maintain its offer, and may rescind any sale contracted, in
the jurisdiction.
XII. REGISTRATION OF THE SHARES.
(a) The Company hereby agrees that, by June 30, 1997, it will file a
registration statement (the "REGISTRATION STATEMENT") under the Securities Act
with the SEC, naming the Subscriber as a selling stockholder. The Subscriber is
referred to herein as the "HOLDER."
(b) Once filed, the Company will use its best efforts to cause the
Registration Statement to become effective as promptly as possible and, if any
stop order shall be issued by the SEC in connection therewith, to use its
reasonable efforts to obtain the removal of such order. Following the effective
date of the Registration Statement, the Company shall, upon the request of the
Holder, forthwith supply such reasonable number of copies of the Registration
Statement, prospectus and other documents necessary or incidental to the
registration as shall be reasonably requested by the Holder to permit the Holder
to make a public distribution of such Holder's Shares. The Company will use its
reasonable efforts to qualify the Shares for sale in such states as the Holder
shall reasonably request, provided that no such qualification will be required
in any jurisdiction where, solely as a result thereof, the Company would be
subject to general service of process or to taxation or qualification as a
foreign corporation doing business in such jurisdiction. The obligations of the
Company hereunder with respect to the Shares of the Holder are expressly
conditioned on the Holder furnishing to the Company such appropriate information
concerning the Holder, the Holder's Shares and the terms of the Holder's
offering of such Shares as the Company may reasonably request.
(c) The Company shall bear the entire cost and expense of the registration
of the Shares; provided, however, that the Holder shall be solely responsible
for the fees of any counsel retained by the Holder in connection with such
registration and any transfer taxes or underwriting discounts, commissions or
fees applicable to the Shares sold by the Holder pursuant thereto.
(d) Neither the filing of the Registration Statement by the Company
pursuant to this Subscription Agreement nor the making of any request for
prospectuses by any Holder shall impose upon any Holder any obligation to sell
the Holder's Shares.
(e) The Holder, upon receipt of notice from the Company that an event has
occurred which requires a post-effective amendment to the Registration Statement
or a supplement to the prospectus included therein, shall promptly discontinue
the sale of Shares until the Holder receives a copy of a supplemented or amended
prospectus from the Company, which the Company shall provide as soon as
practicable after such notice.
(f) The Company shall indemnify and hold harmless the Holder from and
against any and all losses, claims, damages and liabilities caused by any untrue
statement of a material fact contained in the Registration Statement, any other
registration statement filed by the Company under the Securities Act, any post-
effective amendment to such registration statements, or any prospectus included
therein required to be filed or furnished by reason of this Subscription
Agreement or caused by any omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except, with respect to the Holder, insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission based upon
information furnished or required to be furnished in writing to the Company by
the Holder expressly for use therein, which indemnification shall include each
person, if any, who controls the Holder within the meaning of the Securities Act
and each officer, director, employee and agent of the Holder; provided, however,
that the indemnification in this paragraph (c) with respect
<PAGE>
to any prospectus shall not inure to the benefit of the Holder (or to the
benefit of any person controlling the Holder) on account of any such loss,
claim, damage or liability arising from the sale of Shares by the Holder, if a
copy of a subsequent prospectus correcting the untrue statement or omission in
such earlier prospectus was provided to the Holder by the Company prior to the
subject sale and the subsequent prospectus was not delivered or sent by the
Holder to the purchaser prior to such sale; and provided further, that the
Company shall not be obligated to so indemnify the Holder or other person
referred to above unless the Holder or other person, as the case may be, shall
at the same time indemnify the Company, its directors, each officer signing the
Registration Statement and each person, if any, who controls the Company within
the meaning of the Securities Act, from and against any and all losses, claims,
damages and liabilities caused by any untrue statement of a material fact
contained in the Registration Statement, any registration statement or any
prospectus required to be filed or furnished by reason of this Subscription
Agreement or caused by any omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
insofar as such losses, claims, damages or liabilities are caused by any untrue
statement or omission based upon information furnished in writing to the Company
by the Holder expressly for use therein.
(g) If for any reason the indemnification provided for in the preceding
subparagraph is held by a court of competent jurisdiction to be unavailable to
an indemnified party with respect to any loss, claim, damage, liability or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by the indemnified party as a result of such loss, claim, damage
or liability in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnified party and the indemnifying party,
but also the relative fault of the indemnified party and the indemnifying party,
as well as any other relevant equitable considerations.
XIII. FURTHER CONDITION. This Subscription Agreement shall only be
enforceable against the Subscriber when, and if, the obligations of Tom
Combrinck to transfer to the Subscribers in the Offering on a pro rata basis,
without further consideration, an aggregate of an additional 150,000 shares of
the Common Stock owned by Tom Combrinck. Until such transfer has been effected,
any amounts paid by the Subscriber to the Company shall be held in escrow. In
the event that this condition has not been satisfied on or before January 31,
1997, unless extended by the Subscriber, this Subscription Agreement shall
become null and void and all amounts paid to the Company shall be returned to
the Subscriber.
XIV. COUNTERPARTS. This Subscription Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this subscription by
signing any of such counterpart and delivering the same by telex, telecopy,
telegraph, cable or otherwise in writing (each delivery by any of such means to
be deemed to be "in writing" for purposes of this Subscription Agreement).
XV. USE OF PRONOUNS. All pronouns and any variations thereof used herein
shall be deemed to refer to the masculine, feminine, neuter, singular or plural
as the identity of the person or persons referred to may require.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this 21 day of NOVEMBER, 1996.
Number of Shares Subscribed 125,000
Total Subscription Amount $500,000
If the purchaser is a PARTNERSHIP, CORPORATION, or TRUST:
Interfinance Inv. Co. Ltd.
---------------------------------------------------------
Name of Partnership, Corporation or Trust
By: /s/ Ueli Ernst
------------------------------------------------------
Name: Ueli Ernst
Title: President
---------------------------------------------------------
Taxpayer Identification Number
---------------------------------------------------------
---------------------------------------------------------
Address
If the purchaser is an individual:
---------------------------------------------------------
Name (Print Below)
---------------------------------------------------------
---------------------------------------------------------
Taxpayer Identification Number
---------------------------------------------------------
---------------------------------------------------------
Address
ACCEPTED AND AGREED
UTG Communications International, Inc.
By: /s/ Thomas Combrinck
------------------------------------------------------
Name: Thomas Combrinck
Title:
Date: November 21, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
UTG COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL
STATEMENTS FOR THE NINE MONTH PERIOD ENDED DECEMBER 31, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 392,957
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,015,712
<PP&E> 2,166,830
<DEPRECIATION> 239,418
<TOTAL-ASSETS> 2,994,084
<CURRENT-LIABILITIES> 2,689,265
<BONDS> 0
0
0
<COMMON> 105
<OTHER-SE> 304,714
<TOTAL-LIABILITY-AND-EQUITY> 2,994,084
<SALES> 245,727
<TOTAL-REVENUES> 245,727
<CGS> 432,671
<TOTAL-COSTS> 432,671
<OTHER-EXPENSES> 780,751
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,982
<INCOME-PRETAX> (94,026)
<INCOME-TAX> 0
<INCOME-CONTINUING> (94,026)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (94,026)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
