As filed with the Securities and Exchange Commission on April 28, 1997
Registration No. 333-20011
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------------------
AMENDMENT NO. 1 TO
FORM SB-2
Registration Statement
Under the Securities Act of 1933
------------------------------------
EAGLE TELECOM INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
TEXAS 3669 76-0494995
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification Number)
organization) Code Number)
H. DEAN CUBLEY
910 GEMINI EAGLE TELECOM INTERNATIONAL, INC.
HOUSTON, TEXAS 77058 910 GEMINI
(281)280-0488 HOUSTON, TEXAS 77058
(Address, and telephone number (281) 280-0488
of principal executive offices) (Name, address and telephone number
of agent for service)
COPIES TO:
THOMAS C. PRITCHARD
BREWER & PRITCHARD, P.C.
1111 BAGBY, 24TH FLOOR
HOUSTON, TEXAS 77002
PHONE (713) 209-2911
FACSIMILE (713) 209-2921
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [X]
-----------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE BEING OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE
<S> <C> <C> <C> <C> <C>
Common Stock (2)............ 3,300,000 $__________ $ ______________ $______ (3)
Common Stock Underlying
Representative's
Warrant (4)(5)........... _________ $__________ $ ______________ ______ (3)
Common Stock to be Resold (6) 5,268,334 $ .50 $ 2,634,167 $ 797 (7)
TOTAL................ _________ - - $_____
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) Includes 300,000 shares of Common Stock issuable in the initial public
offering, including over-allotment option.
(3) To be supplied by amendment
(4) The Representative's Warrant allows the holder to purchase _______
shares.
(5) The registration statement also covers any additional securities which
may become issuable pursuant to anti-dilution provisions of the warrants.
(6) The book value of the Common Stock, calculated pursuant to Rule 457(f).
(7) Previously paid.
-------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
----------------------------
<PAGE>
EAGLE TELECOM INTERNATIONAL, INC.
Cross-Reference Sheet
showing location in the Prospectus of
Information Required by Items of Form SB-2
<TABLE>
<CAPTION>
FORM SB-2 ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
<S> <C>
1. Front of Registration Statement and
Outside Front Cover of Prospectus............... Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus............................. Inside Front Cover Page; Outside Back Cover
Page
3. Summary Information and Risk Factors............ Prospectus Summary; Risk Factors; The
Company
4. Use of Proceeds................................. Use of Proceeds
5. Determination of Offering Price................. Outside Front Cover Page; Risk Factors; Plan
of Distribution and Selling Stockholders;
Underwriting (Offering Prospectus)
6. Dilution........................................ Dilution
7. Selling Security-Holders........................ Plan of Distribution and Selling Stockholders
8. Plan of Distribution............................ Outside Front Cover Page; Risk Factors; Plan
of Distribution and Selling Stockholders;
Underwriting (Offering Prospectus)
9. Legal Proceedings............................... Business
10. Directors, Executive Officers, Promoters
and Control Persons............................. The Company; Management -- Executive
Officers and Directors
11. Security Ownership of Certain Beneficial
Owners and Management........................... Principal Stockholders
12. Description of Securities....................... Description of Capital Stock
13. Interest of Named Experts and Counsel........... Experts
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities..................................... *
15. Organization Within Last Five Years............. The Company
16. Description of Business......................... Business
17. Management's Discussion and Analysis
or Plan of Operation............................ Management's Discussion and Analysis of
Financial Condition and Results of Operations
18. Description of Property......................... Business
19. Certain Relationships and Related
Transactions.................................... Management -- Certain Transactions
20. Market for Common Equity and Related
Stockholder Matters............................. Risk Factors; Description of Capital Stock;
Shares Eligible for Future Sale; Dividend
Policy
21. Executive Compensation.......................... Management -- Executive Compensation
22. Financial Statements............................ Financial Statements
23. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure...................................... Experts
</TABLE>
- -----------------------------
(*) None or Not Applicable
-------------------------
ii
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be
used in connection with a primary offering of up to 3,000,000 shares of Common
Stock (the "Offering Prospectus"), and one to be used in connection with the
secondary sale of 5,268,334 shares of Common Stock by certain Selling
Stockholders (the "Selling Stockholders' Prospectus"). The Offering Prospectus
and the Selling Stockholders' Prospectus will be identical in all respects
except for the alternate pages for the Offering Prospectus included herein which
are labeled "Alternate Page for Offering Prospectus".
iii
<PAGE>
SUBJECT TO COMPLETION, DATED __________, 1997
EAGLE TELECOM INTERNATIONAL, INC.
RESALE OF 5,268,334 SHARES OF COMMON STOCK
This Prospectus relates to the resale of 5,268,334 shares of Common Stock
of Eagle Telecom International, Inc. (the "Company"), which may be sold by the
holders thereof ("Selling Stockholders") from time to time as market conditions
permit in the market, or otherwise, at prices and terms then prevailing or at
prices related to the then current market price, or in negotiated transactions.
The shares of Common Stock to be resold are all currently issued and
outstanding. Shares offered by the Selling Stockholders may be sold by one or
more of the following methods without limitation: (i) ordinary brokerage
transactions in which a broker solicits purchases; and (ii) face to face
transactions between the Selling Stockholders and purchasers without a
broker-dealer. A current prospectus must be in effect at the time of the sale of
the shares of Common Stock to which this Prospectus relates. Each Selling
Stockholder or dealer effecting a transaction in the registered securities,
whether or not participating in a distribution, is required to deliver a current
prospectus upon such sale. See "Description of Capital Stock" and "Plan of
Distribution and Selling Stockholders." The Company will not receive any
proceeds from the resale of Common Stock by the Selling Stockholders.
As the resale of the shares of Common Stock is being registered under the
Securities Act of 1933, as amended ("Act"), holders who subsequently resell such
shares to the public may be deemed to be underwriters with respect to such
shares of Common Stock for purposes of the Act with the result that they may be
subject to certain statutory liabilities if the registration statement is
defective by virtue of containing a material misstatement or omitting to
disclose a statement of material fact. The Company has not agreed to indemnify
any of the Selling Stockholders regarding such liability. See "Plan of
Distribution and Selling Stockholders."
--------------------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE, INVOLVE A
HIGH DEGREE OF RISK AND SUBSTANTIAL IMMEDIATE DILUTION
AND SHOULD NOT BE PURCHASED BY ANYONE WHO CANNOT
AFFORD THE LOSS OF HIS ENTIRE INVESTMENT. SEE
"RISK FACTORS" BEGINNING ON PAGE 5.
----------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------------
The date of this Prospectus is , 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
1
<PAGE>
TABLE OF CONTENTS
PAGE
Available Information................................................. 2
Prospectus Summary.....................................................3
Risk Factors...........................................................5
Use of Proceeds........................................................7
Dividend Policy........................................................7
Capitalization.........................................................8
Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................8
Business...............................................................9
Management............................................................16
Principal Stockholders................................................19
Description of Capital Stock..........................................20
Shares Available for Future Sale......................................21
Plan of Distribution and Selling Stockholders.........................22
Legal Matters.........................................................40
Experts...............................................................40
Index to Financial Statements......................................F - 1
No person is authorized to give any information or to make any
representation other than those contained in this Prospectus, and if given or
made, such information or representation must not be relied upon as having been
authorized by the Company or any Underwriter. The Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any securities offered
hereby, or an offer to sell or a solicitations of an offer to buy any securities
offered hereby to or from any person in any jurisdiction in which such offer or
solicitation would be unlawful. Neither the delivery or this Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication that
there has been no change in the business or affairs of the Company since the
date hereof or that the information in the Prospectus is correct as of any time
subsequent to the date as of which such information is furnished.
AVAILABLE INFORMATION
The SEC maintains a Web site on the Internet that contains reports, proxy
and information statements and other information regarding issuers that file
electronically with the Commission. The address of the site is
http:\\www.sec.gov. Visitors to the site may access such information by
searching the EDGAR data base on the site.
Prior to the date of this Prospectus, the Company was not subject to the
information and reporting requirements of the Securities Exchange Act of 1934,
as amended ("Exchange Act"). As a result, the Company will become subject to
such requirements and, in accordance therewith, the Company will file periodic
reports, proxy materials and other information with the Securities and Exchange
Commission (the "SEC"). The Company will provide its shareholders with annual
reports containing audited financial statements and, if determined to be
feasible, quarterly reports for the first three quarters of each fiscal year
containing unaudited financial information. The Company has filed a registration
statement of Form SB-2 ("Registration Statement") under the Securities Act of
1933, as amended ("Act"), with respect to the securities being registered. This
Prospectus does not contain all the information set forth in the Registration
Statement and the exhibits and schedules thereto, to which reference is hereby
made. Copies of the Registration Statement and its exhibits are on file at the
offices of the Commission and may be obtained upon payment of the fees
prescribed by the Commission or may be examined, without charge, at the public
reference facilities of the Commission. The Company will provide without charge
to each person who receives a copy of the Prospectus, upon written or oral
request of such person, a copy of any of the information that is incorporated by
reference in this Prospectus (not including exhibits to the information that is
incorporated by reference unless the exhibits are themselves specifically
incorporated by reference). Such request should be directed to the Company,
attention Scott A. Cubley, at 910 Gemini, Houston, Texas 77058.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL DATA (INCLUDING FINANCIAL STATEMENTS AND NOTES
THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS.
THE COMPANY
Eagle Telecom International, Inc. (the "Company" or "Eagle") is a
worldwide supplier of telecommunications equipment and related software used by
service providers in the paging and other wireless personal communications
markets. The Company designs, manufactures, markets and services its products
under the Eagle name. These products include transmitters, receivers,
controllers, software and other equipment used in personal communications
systems (including paging, voice messaging, cellular and message management and
mobile data systems) and radio and telephone systems. The Company's products are
primarily purchased by its customers on an order by order basis, and not
pursuant to any long-term contracts. Company customers include Motorola
Communications and Electronics, Inc. ("Motorola"), Ericsson, Inc., Mobil-Media,
Inc., Pac-Tel, Paging Network, Inc., Norwegian Telecom, Inc., and Link-Two
Communications, Inc. ("Link II"). The Company has a broad line of products
covering the paging spectrum as well as specific personal communication systems
("PCS") and specialized mobile radio ("SMR") products, and products that have
been tested and approved by the Federal Communications Commission ("FCC").
The Company was incorporated in May 1993, but did not conduct any
substantive business operations until April 1996. In September 1996, the Company
amended its articles of incorporation and changed its name to its current name.
Unless otherwise indicated, all information in this Prospectus has been adjusted
to reflect the amended articles of incorporation. The Company's principal place
of business is located at 910 Gemini, Houston, Texas 77058 and its telephone
number is (281) 280-0488.
CONTEMPLATED PUBLIC OFFERING
The Company is conducting a primary offering to the public of 3,000,000
shares of its Common Stock at a price of $____ per share (the "Public Offering")
pursuant to a prospectus (the "Offering Prospectus") dated as of the date of
this Prospectus. The Public Offering is expected to result in net proceeds of
approximately $_________ to be used primarily for (i) acquisition of
$_____________ of inventory, (ii) funding of new product development, new
facility and manufacturing area expansion of $_____________, and (iii) the
balance for other general corporate purposes. ________ (the "Representative")
has agreed to purchase, subject to certain conditions, all 3,000,000 shares
offered and the transaction is expected to close by ___________ 1997.
THE RESALE OFFERING
Common Stock Outstanding....... 14,470,334 shares(1)(2)
Common Stock to be Resold...... 5,268,334 shares
Risk Factors................... Prospective purchasers are urged to carefully
review the factors set forth in "Risk Factors."
Nasdaq SmallCap Symbol......... _____
- ---------------------
(1)Does not include (i) 13,886,668 shares of Common Stock underlying outstanding
warrants including: (a) class A warrants to purchase an aggregate of
4,993,334 shares of Common Stock at $4.00 per share, which expire in August
2000("Class A Warrants"), (b) class B warrants to purchase an aggregate of
4,993,334 shares of Common Stock at $6.00 per share, which expire in August
2000 ("Class B Warrants"), (c) warrants to purchase 1,050,000 shares of
Common Stock at $.05 per shares which expire in July 1999 ($.05 Warrants"),
(d) warrants to purchase 1,375,000 shares of Common Stock at $.50 per share
which expire in July 1999 ("$.50 Warrants"), (e) class C warrants to purchase
1,050,000 shares of Common Stock at $2.00 per share which expire in August
2000("Class C Warrants"), and (f) warrants to purchase 425,000 shares of
Common Stock at $5.00 per share which expire in September 1999 ("$5.00
Warrants") (such Class A Warrants, Class B Warrants, Class C Warrants, $.05
Warrants, $.50 Warrants and $5.00 Warrants collectively, "Warrants") and (ii)
_______ shares of Common Stock reserved for issuance upon exercise of the
Representative's warrant ("Representative's Warrant"). See "Description of
Capital Stock."
(2)Includes 3,000,000 shares offered by the Company in the Public Offering,
assumung no exercise of the over-allotment option.
3
<PAGE>
SUMMARY FINANCIAL INFORMATION
The Company did not conduct any significant business operations until it
acquired cash, and certain inventory and assets, both of which occurred in March
1996, resulting in business operations commencing in April 1996 and its fiscal
year ends August 31.
FOR THE PERIOD ENDED
FEBRUARY 28, AUGUST 31,
1997 1996
STATEMENT OF EARNINGS UNAUDITED AUDITED
- --------------------- ---------- ----------
Net sales $2,376,629 $1,018,441
Cost of goods sold 1,178,264 644,271
Operating expenses 653,199 343,888
Earning before income tax 706,774 37,887
Net Earnings 466,470 32,204
BALANCE SHEET DATA
Working capital $5,534,581 $1,657,320
Total assets 6,746,130 3,446,992
Long-term debt, net 26,125 22,387
Shareholders' equity 6,085,748 2,077,006
4
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMPANY SECURITIES INVOLVES CERTAIN RISKS. PROSPECTIVE
INVESTORS SHOULD CAREFULLY REVIEW THE FOLLOWING FACTORS TOGETHER WITH THE OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS PRIOR TO MAKING AN INVESTMENT DECISION.
LIMITED OPERATING HISTORY OF THE COMPANY
The Company has a limited operating history and, accordingly, is subject
to all the substantial risks inherent in the commencement of a new business
enterprise. Additionally, the Company has a very limited business history that
investors can analyze to aid them in making an informed judgement as to the
merits of an investment in the Company. Any investment in the Company should be
considered a high risk investment because the investor will be placing funds at
risk in a company with unforeseen costs, expenses, competition and other
problems to which such ventures are often subject. The Company's prospects must
be considered in light of the risks, expenses and difficulties encountered in
establishing a new business in a highly competitive industry characterized by
rapid technological development. The Company had net sales of $1,018,441 and net
earnings of $32,204 for the period ended August 31, 1996, net sales of
$2,376,629 and net earnings of $466,470 for the six month period ended February
28, 1997, may incur losses in the future, and there can be no assurance when or
if the Company will sustain long-term profitability. The Company's financial
statements for the period ended August 31, 1996 reflect the commencement of
manufacturing and sales since April 1996. See "Management's Discussion and
Analysis of Financial Condition."
CAPITAL REQUIREMENTS; LIMITED SOURCES OF LIQUIDITY
The Company requires substantial capital to pursue its operating strategy.
Since inception, the Company has primarily funded its capital requirements
through the private issuance for cash of 4,993,334 shares of Common Stock and
Class A Warrants, Class B Warrants and Class C Warrants grossing $6,543,501. For
the six months ended February 28, 1997, the Company obtained $2,967,427 of cash
provided by financing activities and used $1,034,729 of cash in operations. At
August 31, 1996, the Company had working capital of $1,657,320, and for the six
month period ended February 28 1997, working capital of $5,534,581. As the
Company has limited internal sources of liquidity, it will continue to rely on
external sources of liquidity, and for the foreseeable future, the Company's
principal source of working capital will be from proceeds of the Public
Offering. The Company has not established any lines of credit or financing with
financial institutions or other unrelated third parties. The Company may need to
raise additional capital, in addition to the proceeds of the Public Offering, to
satisfy its business plan. The Company believes that its current working
capital, along with the proceeds of the Public Offering and revenues from
operations, will satisfy the Company's capital requirements through 1997;
however, such time may be shorter or longer depending on revenues generated, and
expenses incurred. There is no assurance that the Company will generate
sufficient cash in future periods to satisfy its capital requirements. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
DEPENDENCE ON CERTAIN CUSTOMERS
The Company's two largest customers accounted for approximately 36% and
19%, respectively, of the Company's revenue during the six months ended February
28, 1997. Link II accounted for approximately 36% of the Company's revenue in
such period and owed the Company $862,268 at February 28, 1997, approximately
59% of the accounts receivable at February 28, 1997. Certain principal
stockholders (or affiliates thereof) of the Company, including James Futer,
executive vice president, director and chief operating officer, and A.L.
Clifford, a director of the Company, are also principal stockholders of Link II.
Mr. Clifford is also the chairman, president and chief executive officer of Link
II and Dr. Cubley is a director of Link II. In addition, the Company and Link II
have executed an agreement, whereby the Company would receive up to an 8% equity
interest in Link II in lieu of accruing finance charges on the outstanding
balance owed by Link II to the Company. Under the agreement, equity in Link II
is earned at a rate of 0.2% per month per $100,000 payable and outstanding for
more than 30 days. As of February 28, 1997, the Company had earned the full 8%
equity interest to be evidenced by the issuance of 2,400,000 shares of Link II
common stock to the Company.
Many of the Company's customers contract with the Company on a purchase order
basis, which may result in fluctuations of revenue during various periods. The
sudden loss of a significant customer could have material adverse effect on the
Company's business. See "Business -- Customers" and "Management-Certain
Transactions."
TECHNOLOGY CHANGE
The design, development and manufacturing of PCS and SMR products is
highly competitive and characterized by rapid technology changes. The Company
will compete with other existing products and may compete against other
development technology. Development by others of new or improved products or
technologies may make the Company's products obsolete or less competitive. While
management believes that the Company's products are based on established
state-of-the-art technology, there can be no assurance that they will not be
obsolete in the near future or that the
5
<PAGE>
Company will be able to develop a commercial market for its products in response
to future technology advances and developments. See "Business -- Research and
Development."
DEPENDENCE ON KEY PERSONNEL
The success of the Company is dependent upon, among other things, the
services of H. Dean Cubley, president and chief executive officer and James
Futer, executive vice-president and chief operating officer. The loss of the
services of Dr. Cubley or Mr. Futer, for any reason, could have a material
adverse effect on the prospects of the Company. The Company has not entered into
employment agreements with Dr. Cubley and Mr. Futer nor does it maintain
insurance on their lives. The Company has enlisted experienced personnel in
several key positions; however, there can be no assurance that the Company will
be able to continue to attract and retain qualified employees to implement its
business plan. See "Management."
LACK OF PATENT PROTECTION
The Company's success depends upon its proprietary technologies. The
Company relies on certain non-disclosure agreements with employees, and common
law remedies with respect to certain of its proprietary technology. The Company
has not completed filing for or obtained patents on its key technology, and
there can be no assurance that the patents will be issued if applied for in the
future. There can be no assurance that others will not misappropriate the
Company's proprietary technologies or develop competitive technologies or
products that could adversely affect the Company. In addition, although the
Company is not aware of any infringement claims against it or any circumstances
which could lead to such claims, there can be no assurance that such a claim
could not be made which could adversely affect the Company. See "Business --
Proprietary Information."
FEDERAL REGULATION
The paging and PCS industry is heavily regulated. Although compliance with
such laws and regulations historically has not had a material adverse effect on
the Company's competitive position, operations or financial condition or
required material capital expenditures, there is no assurance that the
implementation of new or amended laws or regulations in the future would not
have such an effect or require such expenditures. See "Business -- Regulation."
COMPETITION
The wireless personal communications industry includes equipment
manufacturers that serve many of the same customers served by the Company.
Substantially all of the Company's competitors have significantly greater
resources, including financial, technical and marketing, than the Company, and
there can be no assurance that the Company will be able to compete successfully
in the future. See "Business -- Competition."
LACK OF CASH DIVIDENDS
It is not anticipated that any cash dividends will be paid to stockholders
in the foreseeable future. See "Dividend Policy."
NO ASSURANCE OF A PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE, SHARES
ELIGIBLE FOR FUTURE SALE
While the Common Stock to be resold pursuant to this offering will be free
of restrictions on transferability, prior to the date of this Prospectus, there
has been no public trading market for the Company's Common Stock and there is no
assurance that a public market will develop after this offering, or if one
develops, that it will not be volatile. In the event that any market develops
for the Company securities, the market price of the Common Stock may experience
fluctuations that are unrelated to the operating performance of, or announcement
concerning, the Company. Securities of issuers having relatively limited
capitalization or securities recently issued in a public offering, such as the
Company, are particularly susceptible to change based on short-term trading
strategies of certain investors. Although the initial Public Offering price of
the Common Stock reflects the Company's and the Representative's assessment of
current market conditions, there can be no assurance that the price of the
Company's securities will be maintained following the Public Offering.
Accordingly, purchasers may not be able to resell their Common Stock at or above
the Public Offering price, and a purchaser may not be able to liquidate his
investment even at a loss without considerable delay. See "Plan of Distribution
and Selling Stockholders"
Upon the closing of the Public Offering, a total of 14,470,334 shares of
Common Stock will be outstanding. The 5,268,334 shares of Common Stock offered
hereby, along with the 3,000,000 shares to be sold pursuant to the Public
Offering, will be eligible for immediate resale in the public market. In
addition, 13,886,668 shares of Common Stock will be issuable upon exercise of
the Warrants, although all of such shares will be subject to the resale
provisions of Rule 144 promulgated under the Act. The remaining 6,202,000 shares
of Common Stock outstanding will be subject to
6
<PAGE>
resale pursuant to the provisions of Rule 144 and will become subject to an
18-month contractual lock-up agreement, with one-third of such shares released
from such lock-up every six months from the date of this Propsectus. Sales of
Common Stock in the public market may have an adverse effect on prevailing
market prices for the Common Stock. See "Shares Eligible for Future Sale."
PENNY STOCK REGULATION
The SEC has adopted rules that regulate broker-dealer practices in
connection with transactions in "penny stocks." Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the Nasdaq
system, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange system). The penny
stock rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document prepared by the SEC that provides information about penny stocks and
the nature and level of risks in the penny stock market. The broker-dealer also
must provide the customer with bid and offer quotations for the penny stock, the
compensation of the broker-dealer, and its salesperson in the transaction, and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules require that prior to
a transaction in a penny stock not otherwise exempt from such rules, the
broker-dealer must make a special written determination that a penny stock is a
suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in any secondary market for a stock
that becomes subject to the penny stock rules, and accordingly, investors in
Company securities may find it difficult to sell their securities, if at all.
AUTHORIZED STOCK
The Board of Directors of the Company has the authority to issue up to
5,000,000 shares of "blank check" preferred stock with such designations, rights
and preferences as may be determined by the Board of Directors. Accordingly, the
Board of Directors of the Company is empowered, without further shareholder
approval, to issue preferred stock with dividend, liquidation, conversion,
voting or other rights which could adversely affect the voting power or other
rights of the holders of the Company's Common Stock. Certain companies have used
the issuance of preferred stock as an anti-takeover device and the Board of
Directors could, without further shareholder approval, issue preferred stock
with certain rights that could discourage an attempt to obtain control of the
Company in a transaction not approved by the Board of Directors. The Board of
Directors of the Company also has authority to issue up to 100,000,000 shares of
Common Stock. See "Description of Capital Stock."
LACK OF DISINTERESTED, INDEPENDENT DIRECTORS
All of the directors of the Company have a direct financial interest in
the Company. While management believes that its current directors will be able
to exercise their fiduciary duties as directors, the Company intends to add an
independent, disinterested director to serve on the Board of Directors in the
near future. See "Management."
USE OF PROCEEDS
The Company will receive no proceeds from the resale of shares of Common
Stock by the Selling Stockholders. The net proceeds to the Company from the sale
of 3,000,000 shares of Common Stock being offered in the Public Offering are
estimated to be approximately $___________ ($___________ if the underwriters'
over-allotment option is exercised in full), assuming an initial Public Offering
price of $_____ per share and after deducting underwriting discounts and
estimated offering expenses. The Company intends to use such proceeds for (i)
acquisition of $______________ inventory, (ii) funding of new product
development, new facility and manufacturing area expansion of
$____________________ and (iii) the balance for other general corporate
purposes.
To the extent such proceeds are not used immediately for the above
purposes, such funds will be deposited in interest bearing accounts or invested
in short-term, interest-bearing, investment-grade securities. Management of the
Company may, at its discretion, reallocate the application of such proceeds, as
it determines in the interests of the Company.
DIVIDEND POLICY
It is the present policy of the Company not to pay cash dividends and to
retain future earnings to support the Company's growth. Any payment of cash
dividends in the future will be dependent upon the amount of funds legally
available therefor, the Company's earnings, financial condition, capital
requirements and other factors that the Board of Directors may deem relevant.
The Company does not anticipate paying any cash dividends in the foreseeable
future.
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CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
as of February 28, 1997 and as adjusted to give effect to the sale and issuance
of the 3,000,000 shares of Common Stock offered in the Public Offering and the
application of the estimated net proceeds therefrom as described in "Use of
Proceeds." This table should be read in conjunction with the Company's financial
statements and notes thereto that are included elsewhere in this Prospectus.
ACTUAL AS ADJUSTED
---------- --------
Stockholders' Equity:
Preferred Stock, par value $.001 per share;
5,000,000 shares authorized, 0 shares
outstanding ....................................... --
Common Stock, par value $.001 per share;
100,000,000 shares authorized, 11,225,334
shares issued and outstanding(1) (2) .............. $ 11,226 $ 14,226
Additional Paid-In Capital ........................... 5,575,848
Retained Earnings .................................... 498,674 498,674
---------- --------
Total Stockholders' Equity ........................... $6,085,748 $
========== ========
- -------------
(1) Does not reflect 13,886,668 shares underlying the Warrants and _______
shares underlying the Representative's Warrant.
(2) Does not reflect 245,000 shares issued subsequent to February 28, 1997.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Financial
Statements of the Company and accompanying Notes to the Financial Statements.
GENERAL
The Company was incorporated in May 1993, but did not conduct any
significant business operations until it acquired cash, certain inventory and
assets, both of which occurred at the end of March 1996 resulting in business
operations commencing in April 1996. There exists limited historic operations
with respect to the operation of the Company. The Company's fiscal year is
August 31. The financial information contained in this Prospectus is for the
fiscal year ended August 31, 1996 and for the six month period ended February
28, 1997.
FIVE MONTHS COMPRISING FISCAL YEAR ENDED AUGUST 31, 1996
For the period ended August 31, 1996, the Company had net sales of
$1,018,441, cost of goods sold was $644,271, resulting in a gross profit of
$374,170. For this period, total operating expenses for such period were
$343,888 resulting in net earnings of $32,204. For the period ended August 31,
1996, the Company had total current assets of $3,004,919, working capital of
$1,657,320, long-term debt, net liabilities of $22,387, and total shareholders'
equity of $2,077,006.
SIX MONTHS ENDED FEBRUARY 28, 1997
For the six months ended February 28, 1997, the Company had net sales of
$2,376,629, total cost of goods sold was $1,718,264, resulting in a gross profit
of $1,198,365. For this period, total operating expenses were $653,199,
resulting in net earnings of $466,470. For the six months ended February 28,
1997, the Company had a total current assets of $6,168,838, working capital of
$5,534,581, long-term debt, net liabilities of $26,125 and shareholders' equity
of $6,085,748.
LIQUIDITY AND CAPITAL RESOURCES
As of February 28, 1997, the Company's primary source of equity was
$3,865,865 of cash, $1,734,724 of accounts receivable, and $568,249 of
inventories. Since inception, the Company has primarily funded its capital
requirements through the private issuance for cash of 4,993,334 shares of Common
Stock, Class A Warrants, Class B Warrants and Class C Warrants grossing $
6,543,501 (the "Private Offerings"). Net cash provided by operating
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activities for the period ended August 31, 1996, was $175 compared with
$1,034,729 used in operating activities for the six months ended February 28,
1997. This decrease was primarily due to an increase in accounts receivable. Net
cash provided by financing activities was $2,854,782 for the period ended August
31, 1996 compared with $2,967,427 for the six months ended February 28, 1997.
The Company expects any negative cash flow from its operations to continue which
will be funded primarily from working capital and secondarily from proceeds of
the Public Offering.
During the six months subsequent to August 31, 1996, the Company raised an
aggregate of $3,451,938 through the issuance of shares of Common Stock and
warrants to purchase Common Stock in the Private Offerings. The issuance of
these securities accounted for the $1,761,813 increase in cash and cash
equivalents from August 31, 1996 to February 28, 1997. In addition, accounts
receivable increased by $1,375,791 from August 31, 1996 to February 29, 1997 as
sales volume for the Company's wireless messaging products increased.
The Company believes that its working capital is sufficient to fund
operations through the end of the current calendar year. The Company has not
established a line of credit or other similar financing arrangements with any
lenders. There can be no assurance that the Company will be able to obtain any
funding from any external sources on suitable terms, if at all. Management
believes, however, that proceeds from the Public Offering will assist in meeting
its capital requirements for the current calendar year. However, a decrease in
expected revenues resulting from adverse economic conditions or otherwise,
unforeseen costs, insufficient market penetration and any new product
introductions could shorten the period during which the current working capital
and proceeds of the Public Offering may be expected to satisfy the Company's
capital requirements. As of February 28, 1997, the Company had no material
capital commitments.
BUSINESS
The Company is a worldwide supplier of telecommunications equipment and
related software used by service providers in the paging and other wireless
personal communications markets. The Company designs, manufactures, markets and
services its products under the Eagle name. These products include transmitters,
receivers, controllers, software and other equipment used in personal
communications systems (including paging, voice messaging, cellular and message
management and mobile data systems) and radio and telephone systems. The Company
has a broad line of products covering the paging spectrum as well as specific
personal communication systems ("PCS") and specialized mobile radio ("SMR")
products, and products that have been tested and approved by the FCC. Eagle
provides service and support for its products.
CURRENT PRODUCTS
The principal products and enhancements currently being manufactured and
sold by the Company relate to its wireless messaging products and include the
following:
LICENSE STARTER
This is a new product which was developed to provide new paging license
holders a method to install a system that will keep them in compliance with FCC
regulations. The product is expandable, giving the license holder the ability to
fund the expansion from revenues. Installation of this product requires 110VAC
power and a standard telephone line. Revenues from sales of this product for the
periods ended August 31, 1996 and February 28, 1997 were approximately $814,752
or 80% of total revenues and $1,663,640 or 70% of total revenues, respectively.
STEALTH SERIES SLIMLINE BASE STATIONS
This product is attractive and convenient where space has a high dollar
cost. The product has the same specifications as a full size base station
(described below) but takes up much less floor space and can be stacked for even
higher density.
FULL SIZE BASE STATION
This product line can be configured for substantially all domestic and
international paging frequencies.
R.F. POWER AMPLIFIERS
The high, medium and low power base station and link transmitter power
amplifiers are designed to operate with any FCC type accepted exciter or may be
combined with Eagle optional plug-in base station in the same volume as the
power amplifier. All Eagle power amplifiers above 100 watts are equipped with
Eagle "Heat Trap"(TM) design to provide the user with long life and high
reliability performance.
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EXTEND-A-PAGE
Extend-a-Page is designed to provide fill-in coverage in those locations
where normal paging service from a wide area paging system is not adequate.
Extend-a-Page receives the paging data on either a radio frequency ("RF")
control link or wireline link and converts this information into low power
simulcast compatible paging transmissions on any of the common paging
frequencies. The Extend-a-Page transmits the paging information at a one to two
watt level directly into hard to reach locations such as hospitals, underground
structures, large industrial plants, and many locations near the outer coverage
contour of paging systems.
LINK PRODUCTS
Major competitors have elected to license the Eagle Telecom 20x Control
software and have it resident on their terminals. However, the customer can
elect to purchase the same Link software directly from Eagle as part of an Eagle
system at a lesser cost. Management believes that its software allows the user
to mix and match the products of different vendors on a common system.
MICROBEEP
Management believes this to be the only small terminal resident in an IBM
PC taking power from the PC and giving the user POCSAG numeric and alphanumeric
flexibility at 512 and 1200 baud rate.
ARBITRATOR
Management believes this to be the only product that can reliably
adjudicate and allow up to eight terminals to share the same transmitter,
particularly in private carrier paging ("PCP") applications.
The following wireless messaging products are in the final beta testing phase
by the Company and have recently become available for commercial production and
sale.
KAR-STOPPER 950
The KS-950 offers safer personal protection during possible car-jacking
situations. When a thief demands and then takes possession, the driver is left
behind, safe but without his or her vehicle. The driver may go to any phone in
the U.S. or Canada and dial a special number, where a person will answer and
proceed to assist them. In some instances the vehicle owner can, also using a
touch tone phone, page the vehicle directly. A signal is then transmitted to the
vehicle via satellite to a paging system which sends out a signal to immediately
trigger a built in anti car-jacking device. Lights flash and a siren or horn
sound is initiated causing immediate attention to the vehicle and concern to the
thief. A shrill sounding 180db interior siren (optional) is also triggered. If
the thief attempts to turn off the ignition or open any door or open the hood,
the engine dies along with all functions of the ignition key switch. If the
thief attempts to stop the system by removing the battery cables, the KS-950
memory system goes into effect, and when the cables are re-connected, the system
resumes where it left off. The system can also be used to unlock vehicle doors
when the driver is accidentally locked out or to lock the vehicle doors. Among
the Kar-Stopper 950 features are: can be initiated from any phone i.e. (land,
cellular, pay phone, etc.); works all over the world; audible and visual alerts;
ignition disable circuit; four separate activation codes available; memory
back-up; and short circuit protection.
ENERGY WIZARD 2000
The Energy Wizard 2000 is a new product being developed for use by Public
Utility Companies to control switching in their sub-stations remotely using the
low-cost paging infrastructure. At the present time, the utilities use existing
voice channels on their radio communications system to control these
Sub-Stations. Unfortunately, when switching is necessary and voice channels are
being used, it reduces the capabilities and traffic capacity of the
communications systems at a time when maximum communications capabilities are
required to monitor emergencies on the system. The unit will be intelligent,
being capable of detecting over voltages in excess of 125VAC and turning the
system OFF activating various safety modes to avoid overloading sub-station or
blacking out of consumers served by the controlled sub-station. Counters will
register the activations and aborts of the controlled system. This system can be
modified to control any process, water, gas, oil, electrical power or any other
process that can be controlled by an ON/OFF relay.
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PRODUCT CATEGORIES
WIRELESS MESSAGING PRODUCTS
For the fiscal year ended August 31, 1996 and the six months ended
February 28, 1997, infrastructure equipment, which includes License Starter,
Base Stations, power amplifiers, L20X, arbitrator, Extend-a-Page, and Micro
Beep, accounted for substantially all of the Company's net sales.
Paging is a method of wireless telecommunication which uses an assigned
radio frequency to contact a paging subscriber anywhere within a service area. A
paging system is generally operated by a service provider which incurs the cost
of building and operating the system. Each service provider in the United States
licenses spectrum from the FCC and elsewhere from the authorized government body
to operate a paging frequency within either a local, regional, or national
geographical area. Each paging subscriber is assigned a distinct telephone
number which a caller dials to activate the subscriber's pager (a pocket-sized
radio receiver carried by the subscriber). Telephone calls by the subscriber are
received by a paging switch. A network of transmitters, that broadcast a signal
over a specific geographical area, then receives the information from the paging
switch through the controller and a radio signal is sent by the transmitters via
antennae to the subscriber's pager. The transmitters manufactured by Eagle are
specifically designed to simulcast, which is the transmission of the same signal
over two or more transmitters on the same channel at the same time in an overlap
area, resulting in superior voice and data quality and coverage area. The radio
signal causes the pager to emit a beep or to vibrate, and to provide the
subscriber with information from the caller in the form of a voice, tone,
numeric or alphanumeric message.
A pager has an advantage over a landline telephone in that the pager's
reception is not restricted to a single location, and has an advantage over a
cellular portable telephone in that a pager is smaller, has a much longer
battery life, has excellent coverage, and is less expensive to use.
Historically, the principal disadvantage of traditional paging service in
comparison to landline telephones or cellular portable telephones has been that
paging provided only one-way communication capabilities.
However, this limitation may have been overcome in the United States as a
result of the auction in 1994 by the FCC of nationwide and regional licenses for
designated narrowband personal communication services ("NPCS"), radio
frequencies or spectrum to service providers. Many of the nationwide license
holders and many of the regional license holders are current Eagle customers,
directly or indirectly. Additional licenses may be auctioned in 1996. The cost
of the licenses to the NPCS auction winners in 1994 was approximately $1
billion. The FCC anticipates that these NPCS licenses will be used to provide
such new services as pager location, two-way acknowledgment paging, advanced
voice paging and data services.
The NPCS radio frequencies or spectrum are located at three separate
points within the total radio spectrum, at 902-928 MHZ, 930-931 MHZ and 940-941
MHZ. Initially, the radio frequencies located at 930-931 MHZ and 940- 941 MHZ
have been designated for outbound message transmission (to the pager) and the
902-928 MHZ have been designated response channels (from the pager). This
application is similar to traditional paging except that these license holders
have been granted wider frequency band width permitting the user to transmit
substantially more information. In addition, Eagle manufactures other paging
infrastructure products that cater to the VHF and UHF paging frequencies in the
United States and other areas of the world as well as supporting most
international paging brands.
The NPCS nationwide licenses cover all fifty states, the District of
Columbia, American Samoa, Guam, the Northern Marianas Islands, Puerto Rico and
the United States Virgin Islands. These licenses are divided into 50 KHz paired
and unpaired channel categories. Paired channels permit both outbound and
inbound signals while unpaired channels are limited to only outbound signals.
Currently, there are 11 nationwide licenses and 6 additional licenses which were
auctioned on a regional basis that cover the nation. Remaining to be auctioned
are 7 licenses available on a major trading area ("MTA") basis and 2 licenses on
a basic trading area ("BTA") basis.
The FCC has imposed infrastructure construction or buildout requirements
on all NPCS license holders. Each NPCS license holder must establish a minimum
service availability for at least 37.5% of the population in its geographic
region within five years after receiving the license. After ten years, each NPCS
license holder must make the service available to at least 75% of the area's
population. If a NPCS license holder fails to achieve these build-out
requirements, it risks cancellation by the FCC of its NPCS license and a
forfeiture of any auction monies paid.
Eagle manufactures products that will enable paging license holders to
legally put their systems into operation, at a low cost, a strategy adopted by
the Company to create a "captive" customer in terms of future build out.
Eagle offers its customers an end-to-end solution for NPCS applications.
The Company has developed and introduced, at the September 1996 PCS show in San
Francisco, new technology based products with enhanced architecture and
technology from its existing paging systems to accommodate the advanced services
available through
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paging and PCS. This system approach includes full product lines of radio
frequency network controllers, transmitters, receivers, and a special satellite
receiver system (to receive the response message from the end-user). The Company
is currently shipping its NPCS products to various beta test sites, based on
product development schedules and the build-out requirements of the NPCS license
holders.
The design of a paging system is customer specific and depends on (i) the
number of paging subscribers the service provider desires to accommodate, (ii)
the operating radio frequency, (iii) the geography of the service area, (iv) the
expected system growth, and (v) specific features desired by the customer.
Paging equipment hardware and software developed by the Company may be used with
all types of paging service, including voice, tone numeric (telephone number
display) or alphanumeric messaging (words and numbers display).
SWITCHES
The Company is involved at an early stage in the development of industry
wide technology standards and is familiar with developments in paging protocol
standards throughout the world. The Company works closely with its customers in
the design of large, complex paging networks. Eagle believes that its customers'
purchasing decisions are based, in large part, on the quality and technological
capabilities of such networks. The Company has strategic agreements to purchase
switches from major switch manufacturers. The Company believes that the advanced
hardware and software features of its switches ensure high reliability and high
volume call processing.
RADIO FREQUENCY EQUIPMENT, TRANSMITTERS AND RECEIVERS
Transmitters are available in frequency ranges of 70 MHZ to 960 MHZ and in
power levels of 2 watts to 500 watts. Radio link receivers are available in
frequency ranges of 70 MHZ to 960 MHZ. Satellite link receivers are available
for integration directly with the transmitters at both Ku- and C- band
frequencies.
The Company's range of receivers detects the responses back from the
two-way NPCS subscriber devices. The receivers take advantage of DSP
demodulation techniques that maximize receiver performance.
Depending upon frequency, antenna height, topography and power, Eagle
transmitter systems are designed to cover broadcast cells with a diameter from 3
to 100 miles. Typical simulcast systems have broadcast cells which vary from 3
to 15 miles in diameter. Eagle transmitters are designed specifically for the
high performance and reliability required for high speed simulcast networks.
CONTROLLERS
The Company currently offers products for transmitter control known as
Eagle's L20TX transmitter control system, which is a medium-feature transmitter
control system used in domestic and international markets, and the Company's new
advanced Kar-Stopper 950 and Energy Wizard 2000 products were introduced at the
September 1996 show in San Francisco.
MANUFACTURE OF NEW PRODUCTS
The Company has identified several new products that would complement
existing products and broaden its product base. The Company's strategy is to
develop upgrades on existing products to enable it to obtain increased market
share or extend the life of those products by several years.
SERVICE AND SUPPORT
Eagle provides service to customers on a regular basis including
installation, project management of turnkey systems, training, service or
extended warranty contracts with the Company. The Company believes that it is
essential to provide reliable service to customers in order to solidify customer
relationships and to be the vendor of choice when new services or system
expansions are sought by a customer. This relationship is further developed as
customers come to depend upon the Company for installation, system optimization,
warranty and post-warranty services.
The Company has a warranty and maintenance program for both its hardware
and software products and maintains a customer service network in its operating
locations. Eagle's standard warranty provides its customers with repair or
replacement of any defective Eagle manufactured equipment. The warranty is valid
on all products for the period of one year from the later of the date of
shipment or the installation by an Eagle qualified technician.
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CUSTOMERS
Eagle sells to a broad range of customers worldwide. In the United States,
customers include the regional Bell operating companies, medical paging
operators, and public and private radio common carriers. Internationally,
customers include public telephone and telegraph companies, as well as private
telecommunication service providers. Company customers include: Motorola,
Ericsson, Inc., Mobil-Media, Inc., Pac-Tel, Paging Network, Inc., Norwegian
Telecom, Inc., and Link II.
The Company's two largest customers, Link II, and Houston Telephone
accounted for approximately 36% and 19%, respectively, of the Company's sales
for the six months ended February 28, 1997. Link II is a common carrier of
exclusively wholesale one-way paging network services. Its customers purchase
paging network services as an aggregator and resell Link II's network services
to individual subscribers and other communications providers. Link II has
secured the rights to use or options to purchase five PCP frequencies, three of
which provide coverage in ten of the top ten markets, and several RCC
frequencies providing regional coverage in two of the top ten markets. Link II
will provide high-quality network services by utilizing regional network
operational centers ("NOC") that will enable it to utilize a star network
topology to control paging networks in multiple local markets within a wide
geographical region. Link II intends to build its first NOC in metro New York
City followed by Chicago, Los Angeles, Dallas and Atlanta. Link II then intends
to expand operations nationwide by constructing five additional NOCs in top
markets to allow for nationwide, local and national paging services.
MARKETING AND SALES
The Company markets its products and services in the United States through
representative organizations and internationally through agents. As the
Company's business is highly technical, a majority of sales are complete systems
with technical support. A large percentage of the Company's marketing comes from
direct sales by the employees. The Company also utilizes distributors and agents
to sell its products in certain countries and geographic regions to market
outside of the Company's core markets.
The Company currently has non-exclusive arrangements with 6 of such
distributors and agents to service Canada and the midwest, eastern seaboard, and
northeast regions of the United States. A non-exclusive arrangement is also in
effect with one distributor on a worldwide basis and the Company has one
exclusive arrangement with a distributor to service Australia. Terms of these
arrangements provide for payments to the distributors on either a fixed
percentage commission or discount from list price basis.
As part of the Company's integrated marketing and sales efforts, Eagle
encourages a philosophy of open communication between the Company and its
customers.
INTERNATIONAL BUSINESS RISKS
In 1996 and 1997, the Company generated net sales in markets outside of
the United States, which amounted to 1.9% and 2.9% of total Company net sales
for the periods ended August 31, 1996 and February 28, 1997, respectively.
International sales are subject to the customary risks associated with
international transactions, including political risks, local laws and taxes, the
potential imposition of trade or currency exchange restrictions, tariff
increases, transportation delays, difficulties or delays in collecting accounts
receivable, and, to a lesser extent, exchange rate fluctuations. To protect its
interests, the Company only services international business using letters of
credit drawn on American or limited foreign corresponding banks.
RESEARCH AND DEVELOPMENT
The Company believes that a strong commitment to research and development
is essential to the continued growth of its business. One of the key components
of the Company's development strategy is the promotion of a close relationship
between its development staff, internally with Eagle's manufacturing and
marketing personnel, and externally with Eagle's customers. This strategy has
allowed Eagle to develop and bring to market customer-driven products.
The Company has extensive expertise in the technologies required to
develop wireless communications systems and products including high power, high
frequency RF design digital signal processing, real-time software, high-speed
digital logic, radio frequency and data network design. The Company believes
that by having a research and development staff with expertise in these key
areas, it is well positioned to develop enhancements for its existing products
as well as the next generation of personal communication products. Investment in
advanced computer-aided design tools for simulation and analysis has allowed
Eagle to reduce the time for bringing new products to market. Research and
development costs incurred by the Company for the periods ended February 28,
1997 and August 31, 1996 were $71,515 and $48,829 respectively.
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MANUFACTURING
Eagle currently manufactures its products at Company facilities in
Houston, Texas. The Company's manufacturing expertise resides in assembling
sub-assemblies and final systems that are configured to its customers'
specifications. The components and assemblies used in the Company's products
include electronic components such as resistors, capacitors, transistors, and
semiconductors such as field programmable gate arrays, digital signal processors
and microprocessors, and mechanical materials such as cabinets in which the
systems are built. Substantially all of the components and parts used in the
Company's products are available from multiple sources. In those instances where
components are purchased from a single source, the supplier is reviewed
frequently for stability and performance. Additionally, as necessary, the
Company purchases sufficient quantities of certain components which have
long-lead requirements in the world market. The Company ensures that all
products are tested, tuned and verified prior to shipment to the customer.
The Company plans to implement a total quality management philosophy
throughout all of its operations, which it believes will eventually lead to ISO
9001 qualification. The Company plans to define standards and implement controls
that will position it to seek ISO 9002 certification of is production and
installation operations. The criteria for obtaining an ISO 9002 certification is
defined by the International Organization for Standardization. Compliance with
ISO 9002 standards is assessed by independent ISO certified ISO auditors.
Compliance beyond the original certification is reviewed periodically by
independent ISO auditors and on-going compliance is required to maintain the ISO
certification. The Company has purchased and is implementing a computer-based
manufacturing and sales management system. This new system, external
consultants, and existing personnel will be utilized to define and implement the
changes that will be required for ISO 9002 certification. The attainment of ISO
9002 certification would allow the Company to expand its sales to the European
Common Market.
The Company is in the process of implementing a computerized system which
will be used to control and monitor all areas of the Company from sales to
shipping.
COMPETITION
The Company supplies transmitters, receivers, controllers and software
used in paging, voice messaging and message management systems. While the
services from the foregoing products represent a significant portion of the
wireless personal communications industry today, the industry is expanding to
include new services and new markets. The wireless personal communications
industry includes equipment manufacturers that serve many of the same PCS
markets served by the Company. Certain of the Company's competitors, and all
competitors that have publicly tradeable securities, have significantly greater
resources than the Company, and their can be no assurance that Eagle will be
able to compete successfully in the future. In addition, manufacturers of
wireless telecommunications equipment, including those in the cellular telephone
industry, certain of which are larger and have significantly greater resources
than the Company, could elect to enter into the Company's markets and compete
with Eagle's products. There can be no assurance that the Company will be able
to increase its market share in the future.
PROPRIETARY INFORMATION
The Company attempts to protect its proprietary technology through a
combination of trade secrets, non-disclosure agreements, technical measures, and
common law remedies with respect to certain proprietary technology. Such
protection may not preclude competitors from developing products with features
similar to the Company's products. The laws of some foreign countries in which
the Company sells or may sell its products do not protect the Company's
proprietary rights in the products to the same extent as do the laws of the
United States. Although the Company believes that its products and technology do
not infringe on the proprietary rights of others, there can be no assurance that
third parties will not assert infringement claims against the Company in the
future. If such litigation resulted in the Company's inability to use
technology, the Company might be required to expend substantial resources to
develop alternative technology. There can be no assurance that the Company could
successfully develop alternative technology on commercially reasonable terms.
REGULATION
Many of the Company's products operate on radio frequencies. Radio
frequency transmissions and emissions, and certain equipment used in connection
therewith, are regulated in the United States and internationally. Regulatory
approvals generally must be obtained by the Company in connection with the
manufacture and sale of its products, and by customers to operate the Company's
products. There can be no assurance that appropriate regulatory approvals will
continue to be obtained, or that approvals required with respect to products
being developed for the personal communications services market will be
obtained. The enactment by federal, state, local or international governments of
new laws or regulations or a change in the interpretation of existing
regulations could affect the market for the
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Company's products. Although recent deregulation of international
telecommunications industries along with recent radio frequency spectrum
allocations made by the FCC have increased the demand for the Company's products
by providing users of those products with opportunities to establish new paging
and other wireless personal communications services, there can be no assurance
that the trend toward deregulations and current regulatory developments
favorable to the promotion of new and expanded personal communications services
will continue or that future regulatory changes will have a positive impact on
the Company. On February 9, 1996, the FCC released a notice of proposed rule
making covering a licensing rule and procedure change on the 929 MHZ and 931 MHZ
as well as certain other paging frequencies which included a freeze on its
acceptance of new applications for paging system licenses. The Company believes
that this freeze will increase sales of certain of its product lines as
customers respond to the "install of lose" nature of the proposed licensing
rule. The long-term effect is expected to cause the current system operators to
purchase and install new equipment using their current licenses in an effort to
increase the efficiency of operations rather than expanding into new
territories.
EMPLOYEES
At February 28, 1997, the Company employed approximately 35 persons and
retained 10 independent contractors. The Company believes its employee relations
to be good. The Company enters into independent contractual relationships with
various individuals, from time to time, as needed.
DESCRIPTION OF PROPERTY
The Company's headquarters are located in Houston, Texas and include
approximately 15,000 square feet of leased office and warehouse space. The lease
is at market rates and expires in 1998. The Company insures its facilities in an
amount it believes is adequate and customary in the industry. The Company
believes that its existing facilities are adequate to meet its current
requirements but anticipates the need for additional space within the next year.
The Company believes that suitable additional space in close proximity to its
existing headquarters will be available as needed to accommodate such growth of
its operations through the foreseeable future.
15
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's directors and executive officers are:
NAME AGE POSITION
H. Dean Cubley 55 Chairman of the Board of Directors,
President and Chief Executive Officer
Christopher W. "James" Futer 57 Director, Executive Vice President
and Chief Operating Officer
A. L. Clifford 53 Director
Richard Royall 51 Chief Financial Officer
H. DEAN CUBLEY has served as chairman of the board, president and chief
executive officer of the Company since March 1996. Prior to that, Dr. Cubley
served as vice-president of Eagle, Inc. from 1993 to March 1996. Dr. Cubley is
also a member of the Oversight Committee for the University of Houston Epitaxy
Center which managed the Wake Shield Flight aboard the Shuttle in September
1995. In February 1992, Dr. Cubley personally filed for protection under the
federal bankruptcy laws, which filing was discharged in June 1992. Dr. Cubley
has over 35 years of extensive experience in the field of telecommunications.
From 1965 to 1984, Dr. Cubley worked for the NASA Manned Spacecraft Center in
the Electromagnetic Systems Branch of the Engineering and Development
Directorate. For a five year portion of that period, Dr. Cubley was the Antenna
Subsystems Manager for all spacecraft antennas for the Shuttle Program. Dr.
Cubley's duties included overall responsibility for the design, development,
costs schedules and testing of the antennas and hardware for all Shuttle
flights. Throughout his career, Dr. Cubley has authored or co-authored over
fifty publications. In addition, he has a total of eight patents and
patents-pending registered in his name. Dr. Cubley received a bachelor of
science degree in electrical engineering from the University of Texas in 1964
and a masters degree in from the University of Texas in 1965. In 1970, Dr.
Cubley received his Ph D in Electrical Engineering from the University of
Houston. Since 1977, Dr. Cubley has been actively engaged in the commercial
telecommunications industry and has been instrumental in many of its
technological advancements.
JAMES FUTER has served as a director, chief operating officer and vice
president of the Company since March 1996. Prior to that, Mr. Futer served as
general manager of Eagle Aerospace, Inc. Telecom Division from November 1994
until February 1996. From May 1993 to November 1994, Mr. Futer was employed as a
vice president of operations with Starcom, Inc. Prior thereto, he was employed
with Paging Products International. Mr. Futer was a manager of Universal
Cellular, Inc., a California corporation ("UCI"), from October 1990 until
February 1991. Mr. Futer resigned from UCI in February 1991 due to his
disagreement with UCI management over its business policy and practices. In June
1993, UCI filed for protection under the federal bankruptcy laws. Mr. Futer's
spectrum of experience has included work in the fields of hi-tech flight
simulation and display technologies (especially those of light emitting diodes
and liquid crystal displays), and in consumer electronics, i.e. electronic
watches, pocket calculators, and electronic games. Most recently, he has been
involved in pager design, manufacture and marketing, as well as the wider field
of paging equipment. His international background includes work with Hatfield
Instrument (in England, where he was born), Canadian Aviation Electronics,
located in Montreal, Canada, General Instruments (in Canada and the United
States), Litronix (in California) and Siemens (living in California and England
and commuting to the head office in Munich, as well as Berlin, Paris and Milan).
In 1975, he was instrumental in implementing a major "turn-key" technology
transfer from Canada to the (then) Soviet Union for the manufacture of hand-held
electronic calculators, an operation which the Soviets then improved from the
consumer level and adapted to suit their particular requirements. Since 1975,
Mr. Futer has had extensive in-depth experience of interfacing with Pacific Rim
countries. In 1992 and 1993, he spent time in the People's Republic of China
co-ordinating a successful technology transfer for one of the first pager
manufacturing facilities.
A. L. CLIFFORD has served as a director since December 1996. Mr. Clifford
has served as president of Clifford & Associates for over five years, a company
involved in the distribution of electrical and electronic products throughout
the Midwest since 1920. Mr. Clifford is a graduate of the University of Miami,
where he studied business and attended law school.
RICHARD R. ROYALL has been a certified public accountant since 1971. From
1971 to 1976, Mr. Royall was employed with Haskins & Sells, Laventhol & Horwath
(a partner from 1976 to 1986), and Bracken, Krutilek & Royall
16
<PAGE>
(1986). In 1986, Mr. Royall practiced accounting as a sole proprietor. Since
1987, Mr. Royall has been a partner in Royall & Fleschler, certified public
accountants. In addition to the foregoing, Mr. Royall serves as financial
officer and director of companies operating in the oil and gas industry,
software industry and chemical industries, none of which are affiliated with the
Company.
The directors of the Company hold office until the next annual meeting of
stockholders of the Company and until their successors in office are elected and
qualified. None of the directors receive any compensation or reimbursement of
out-of-pocket expenses to attend Board meetings. The Company has not established
and does not maintain any compensation, audit, executive or nominating
committees. All officers serve at the discretion of the Board of Directors.
There are no family relationships between or among any of the directors and
executive officers of the Company.
EXECUTIVE COMPENSATION
Dr. Cubley is currently paid a salary of $70,000 per year. For the fiscal
year ended August 31, 1996, Dr. Cubley was paid $30,000. No other executive
officer received in excess of $100,000 in compensation during the fiscal year
ended August 31, 1996. The Company has not entered into employment agreements
with any of its executive officers.
STOCK OPTIONS
In July 1996, the Board of Directors and majority stockholders adopted a
stock option plan under which 400,000 shares of Common Stock have been reserved
for issuance. As of the date of this Prospectus, no options have been granted
pursuant to such plan and the Company has no present plans for the issuance
thereof. The Company does not have a defined benefit plan or any retirement or
long-term incentive plans.
CERTAIN TRANSACTIONS
The Company was incorporated in May 1993, but did not conduct any
substantive business operations until it acquired cash, certain inventory and
test equipment from Hou-Tex Trust, Bailey Trust, Futer Family Trust and John
Nagel totaling approximately $500,000 and concurrently acquired certain assets
from an affiliate of Dr. Cubley totaling approximately $260,000, both of which
occurred in April 1996. Additionally, the Company assumed liabilities owed to
certain principal stockholders and founders as follows: (i) $145,000 to an
affiliate of Dr. Cubley; (ii) $33,000 to certain founding shareholders; and
(iii) $82,000 to certain unrelated third parties. Promoters of the Company are
Hou- Tex Trust, B and F Trust, Futer Family Trust, Dr. Cubley, Mr. Futer, Mr.
Clifford, Mr. Porter Barton and Re-alt Group, LLC. The officers of the Company
disclaim beneficial ownership, as well as the voting and disposition power of
the Company securities owned by Hou-Tex Trust B and F Trust, and Futer Family
Trust.
In connection with the organization of the Company, 3,150,000 shares of
Common Stock were issued to the Hou-Tex Trust, 990,000 shares of Common Stock
were issued to the Futer Family Trust, 180,000 shares of Common Stock were
issued to the Bailey Trust, and 180,000 shares of Common Stock were issued to
John Nagel, such issuances were for nominal services rendered, contribution of
certain net assets and cash valued at approximately $345,000. In July 1996, the
Company issued for fundraising services rendered: $.05 Warrants to purchase
350,000, 110,000, 20,000 and 20,000 shares, respectively, to the Hou-Tex Trust,
the Futer Family Trust, the Bailey Trust and Mr. Nagel, respectively; and $.50
Warrants to purchase 350,000, 110,000, 20,000 and 20,000 shares, respectively,
to the Hou-Tex Trust, the Futer Family Trust, the Bailey Trust and Mr. Nagel,
respectively. Neither of these $.05 Warrants or $.50 Warrants are exercisable
until and unless the shares of Common Stock trade at a minimum of $5.50 per
share for 20 consecutive trading days. The Company issued, for fundraising
services rendered, to the Hou-Tex Trust, the Futer Family Trust, the Bailey
Trust and Mr. Nagel: Class A Warrants to purchase 350,000 shares, 110,000
shares, 20,000 shares, and 20,000 shares, respectively; and Class B Warrants to
purchase 350,000 shares, 110,000 shares, 20,000 shares, and 20,000 shares,
respectively. The Company issued, for fundraising services, warrants to purchase
an aggregate of 700,000 shares of Common Stock at $.01 per share to the
following entities and individuals: warrants to purchase 490,000 shares to the B
and F Trust, warrants to purchase 154,000 shares to the Futer Family Trust,
warrants to purchase 28,000 shares to the Bailey Trust and warrants to purchase
28,000 shares to John Nagel. All of such warrants became exercisable in December
1996 and were exercised in full in February 1997.
From September 1996 through December 1997, the Company issued to Messrs.
Clifford and Barton and Re-alt Group, LLC the following securities: 366,000,
975,000 and 567,000 shares of Common Stock, respectively; $.05 Warrants to
purchase 166,667 shares, 166,667 shares and 166,666 shares of Common Stock,
respectively; and $.50 Warrants to purchase 166,667 shares, 106,667 shares and
166,666 shares of Common Stock, respectively; Class A Warrants to purchase
166,667 shares, 166,667 shares, 166,666 shares, respectively; and Class B
Warrants to purchase 166,667 shares, 166,667 shares, and 166,666 shares,
respectively. Amounts listed for Mr. Barton include securities
17
<PAGE>
issued to the Barton Family Trust. All of the above issuances of Common Stock
were for approximately $120,000 of expenses incurred on behalf of the Company by
these parties in connection with fundraising activities. The issuance of the
Warrants were for fundarising services rendered.
Certain principal stockholders (or affiliates thereof) of the Company,
including Messrs. Futer and Clifford are also principal stockholders of Link II.
Mr. Clifford is also the chairman, president and chief executive officer of Link
II and Dr. Cubley is a director of Link II. In addition, the Company and Link II
have executed an agreement, whereby the Company would receive up to an 8% equity
interest in Link II in lieu of accruing finance charges on the outstanding
balance owed by Link II to the Company. Under the agreement, equity in Link II
is earned at a rate of 0.2% per month per $100,000 payable and outstanding for
more than 30 days. As of February 28, 1997, the Company had earned the full 8%
equity interest to be evidenced by the issuance of 2,400,000 shares of Link II
common stock to the Company. As of February 28, 1997, Link II owed the Company
$862,268, comprising approximately 59% of the accounts receivable at such date.
In September 1996, Richard Royall was issued $.05 Warrants to purchase
12,500 shares of Common Stock, and $5.00 Warrants to purchase 12,500 shares of
Common Stock. The $.05 Warrants are not exercisable until and unless the shares
of Common Stock trade at a minimum of $5.50 per share for 20 consecutive trading
days.
LIMITATION OF DIRECTORS' LIABILITY
The Company's Articles of Incorporation eliminates, subject to certain
exceptions, the personal liability of directors of the Company or its
stockholders for monetary damages for breaches of fiduciary duty by such
directors. The Articles of Incorporation do not provide for the elimination of
or any limitation on the personal liability of a director for (i) any breach of
the director's duty of loyalty to the Company or its stockholders, (ii) acts or
omissions not in good faith that constitutes a breach of duty of the director or
which involve intentional misconduct or a knowing violation of law, (iii) any
transaction from which such director derives an improper personal benefit,
whether or not the benefit resulted from an action taken within the scope of the
director's office, or (iv) an act or omission for which the liability of a
director is expressly provided by an applicable statute. This provision of the
Articles of Incorporation will limit the remedies available to the stockholder
who is dissatisfied with a decision of the Board of Directors protected by this
provision; such stockholder's only remedy may be to bring a suit to prevent the
action of the Board. This remedy may not be effective in many situations,
because stockholders are often unaware of a transaction or an event prior to
Board action in respect of such transaction or event. In these cases, the
stockholders and the Company could be injured by a Board's decision and have no
effective remedy.
18
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the date of this Prospectus, the
number and percentage of outstanding shares of Company Common Stock owned by (i)
each person known to the Company to beneficially own more than 5% of its
outstanding Common Stock, (ii) each director, (iii) each named executive
officer, and (iv) all officers and directors as a group.
NUMBER OF SHARES OF COMMON STOCK
<TABLE>
<CAPTION>
BENEFICIALLY OUTSTANDING PERCENTAGE OF OWNERSHIP
----------------------------------- -------------------------
BEFORE AFTER BEFORE AFTER
NAME AND ADDRESS OF PUBLIC PUBLIC PUBLIC PUBLIC
BENEFICIAL OWNERS (1) OFFERING (2) OFFERING(3) OFFERING(2) OFFERING(3)
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Hou-Tex Trust ....................................... 3,850,000(4) 3,850,000 31.6% 25.4%
H. Dean Cubley (5) .................................. -- -- -- --
Futer Family Trust .................................. 1,364,000(6) 1,364,000 11.7% 9.3%
Christopher W. "James" Futer(7) ..................... -- -- -- --
Philippe Caland ..................................... 1,050,000(8) 1,050,000 8.4% 6.8%
Wallington Investment, Ltd. ......................... 1,020,000(9) 1,020,000 8.4% 6.7%
Mohamad Hadeed ...................................... 960,000(10) 960,000 7.9% 6.4%
Re-alt Group, LLC ................................... 900,332(11) 990,332 7.6% 6.1%
Barton Family Trust (12) ............................ 746,634(13) 746,634 6.3% 5.0%
A. L. Clifford ...................................... 699,334(14) 699,334 5.9% 4.7%
All officers and directors (4 persons) .............. 711,834(15) 699,334 6.2% 4.9%
</TABLE>
- -------------
(1) Each address is the Company, except for (i) Mohamad Hadeed c/o Ritz
Carlton Hotel, 2100 Massachusetts Ave., NW Washington, DC 20008, (ii)
Barton Family Trust at 45 Alhambra Plaza, Coral Cables, Florida, 33134,
(iii) Re-alt Group, LLC at 8692 M-32 Highway, Elmira Michigan 49730, (iv)
A. L. Clifford at 1801 W. 18th Street, Indianapolis, IN 46202, (v)
Wallington Investment, Ltd. at 6 Walmannstrasse, Zurich, Switzerland
CH-8024(7), (vi) Hou-Tex Trust and Futer Family Trust at 1331 Lamar, Suite
1375, Houston, Texas 77010, and (vii) Philippe Caland at 951 Napoli,
Pacific Palasades, CA 90272.
(2) Does not give effect to the $.05 Warrants and $.50 Warrants as these
warrants are not exercisable until and unless the shares of Common Stock
trade at a minimum of $5.50 per share for 20 consecutive trading days. It
is assumed, for purposes of this table, that this will not occur within 60
days of the date of this Prospectus. See "Management -- Certain
Transactions" and "Description of Capital Stock -- Warrants."
(3) Assumes that 3,000,000 shares are sold in the Public Offering.
(4) Includes (i) 350,000 shares underlying Class A Warrants and (ii) 350,000
shares underlying Class B Warrants. See "Management-- Certain
Transactions."
(5) Dr. Cubley disclaims beneficial ownership, as well as voting and
disposition power of the shares of Common Stock and Warrants owned by the
Hou-Tex Trust.
(6) Includes (i) 110,000 shares underlying Class A Warrants and (ii) 110,000
shares underlying Class B Warrants. See "Management-- Certain
Transactions."
(7) Mr. Futer disclaims beneficial ownership, as well as voting and
disposition power of the shares of Common Stock and Warrants owned by
Futer Family Trust.
(8) Includes 1,050,000 shares underlying Class C Warrants.
(9) Includes 340,000 shares underlying Class A Warrants and 340,000 shares
underlying Class B Warrants, which securities were purchased in a private
offering, which shares of Common Stock were purchased at a purchase price
of $1.50 per share.
(10) Includes (i) 320,000 shares underlying Class A Warrants and (ii) 320,000
shares underlying Class B Warrants.
(11) Includes 166,666 shares underlying Class A Warrants and 166,666 shares
underlying Class B Warrants. See "Management-- Certain Transactions."
(12) An affiliate of Porter Barton.
19
<PAGE>
(13) Includes 24,388 shares, 166,667 shares underlying Class A Warrants and
166,667 shares underlying Class B Warrants held in the name of Porter
Barton. See "Management -- Certain Transactions."
(14) Includes 166,667 shares underlying Class A warrants and 166,667 shares
underlying Class B Warrants. See "Management-- Certain Transactions."
(15) Includes warrants to purchase 333,334 shares of Common Stock that are
currently exercisable.
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company is authorized to issue up to 100,000,000 shares of Common
Stock. There are 11,470,334 shares of Common Stock issued and outstanding,
3,000,000 shares are reserved for issuance in connection with the Public
offering, up to 13,886,668 shares are reserved for issuance upon exercise of the
Warrants, _______ shares are reserved for issuance upon exercise of the
Representative's Warrant and 400,000 shares are reserved for issuance under the
Company's stock option plan.
The holders of shares of Common Stock are entitled to one vote per share
on each matter submitted to a vote of stockholders. In the event of liquidation,
holders of Common Stock are entitled to share ratably in the distribution of
assets remaining after payment of liabilities and liquidation preferences on the
Preferred Stock, if any. Holders of Common Stock have no cumulative voting
rights, and, accordingly, the holders of a majority of the outstanding shares
have the ability to elect all of the directors. Holders of Common Stock have no
preemptive or other rights to subscribe for shares. Subject to the prior rights
of any series of Preferred Stock which may from time to time be outstanding, if
any, holders of Common Stock are entitled to such dividends as may be declared
by the Board of Directors out of funds legally available therefor. The
outstanding Common Stock is, and the Common Stock to be outstanding upon
completion of this offering will be, validly issued, fully paid and
nonassessable.
PREFERRED STOCK
The Company is authorized to issue up to 5,000,000 shares of Preferred
Stock, $.001 par value per share. The Preferred Stock may be issued in one or
more series, the terms of which may be determined at the time of issuance by the
Board of Directors, without further action by stockholders, and may include
voting rights (including the right to vote as a series on particular matters),
preferences as to dividends and liquidation, conversion, redemption rights and
sinking fund provisions.
No shares of Preferred Stock will be outstanding as of the closing of
this offering, and the Company has no present plans for the issuance thereof.
The issuance of any such Preferred Stock could have the effect of delaying or
preventing a change in control of the Company. The issuance of such Preferred
Stock could also adversely affect the rights of the holders of Common Stock and,
therefore, reduce the value of the Common Stock.
WARRANTS
The Company has issued the following warrants to purchase an aggregate of
13,886,668 shares of Common Stock.
CLASS A WARRANTS
The Company has issued Class A Warrants to purchase 4,993,334 shares of
Common Stock at $4.00 per share. The Class A Warrants are currently exercisable
and expire on August 31, 2000. If the closing bid price of the Common Stock
shall have equaled or exceeded $5.50 per share for a period of 20 consecutive
trading days at any time, the Company may redeem the Class A Warrants by paying
holders $.05 per Class A Warrant provided that such notice is mailed not later
than 20 days after the end of such period and prescribes a redemption date at
least 30 days but not more than 60 days thereafter. Class A Warrant holders will
be entitled to exercise Class A Warrants at any time up to the business day next
preceding the redemption date. The Class A Warrants provide for the payment, by
the Company, of a 3% solicitation fee.
CLASS B WARRANTS
The Company has issued Class B Warrants to purchase 4,993,334 shares of
Common Stock at $6.00 per share. The Class B Warrants are currently exercisable
and expire on August 31, 2000. If the closing bid price of the Common Stock
shall have equaled or exceeded $7.50 per share for a period of 20 consecutive
trading days at any time, the Company may redeem the Class B Warrants by paying
holders $.05 per Class B Warrant provided that such notice is mailed not later
than 20 days after the end of such period and prescribes a redemption date at
least 30 days but not more than 60 days thereafter. Class B Warrant holders will
be entitled to exercise Class B Warrants at any time up to the
20
<PAGE>
business day next preceding the redemption date. The Class B Warrants provide
for the payment, by the Company, of a 3% solicitation fee.
CLASS C WARRANTS
The Company has issued Class C Warrants to purchase 1,050,000 shares of
Common Stock at $2.00 per share. The Class C Warrants are currently exercisable
and expire on August 31, 2000. If the closing bid price of the Common Stock
shall have equaled or exceeded $5.50 per share for a period of 20 consecutive
trading days at any time, the Company may redeem the Class C Warrants by paying
holders $.05 per Class C Warrant provided that such notice is mailed not later
than 20 days after the end of such period and prescribes a redemption date at
least 30 days but not more than 60 days thereafter. Class C Warrant holders will
be entitled to exercise Class C Warrants at any time up to the business day next
preceding the redemption date. The Class C Warrants provide for the payment, by
the Company, of a 3% solicitation fee.
$.05 WARRANTS
The Company has issued $.05 Warrants to purchase 1,050,000 shares of Common
Stock at $.05 per share, which expire in July 1999. The $.05 Warrants are not
exercisable until and unless the shares of Common Stock trade at a minimum of
$5.50 per share for 20 consecutive trading days.
$.50 WARRANTS
The Company has issued $.50 Warrants to purchase 1,375,000 shares of Common
Stock at $.50 per share, which expire in July 1999. The $.50 Warrants are not
exercisable until and unless the shares of Common Stock trade at a minimum of
$5.50 per share for 20 consecutive days.
$5.00 WARRANTS
The Company has issued $5.00 Warrants to purchase 425,000 shares of Common
Stock at $5.00 per share. The $5.00 Warrants are currently exercisable and
expire in July 1999.
In connection with the Public Offering, the Company has agreed to sell to
the Representative the Representative's Warrant to purchase from the Company
_______ shares of Common Stock.
TRANSFER AGENT
Registrar & Transfer Company serves as the transfer agent for the shares of
Common Stock.
SHARES AVAILABLE FOR FUTURE SALE
Upon the closing of the Public Offering, there will be 14,470,334 shares
of Common Stock issued and outstanding and up to 13,886,668 additional shares
will be issuable upon exercise of the Warrants. The 3,000,000 shares of Common
Stock offered in the Public Offering will be eligible for immediate resale in
the public market. In addition, the 5,268,334 shares of Common Stock to be
resold pursuant to this offering currently outstanding are eligible for
immediate resale in the public market The remaining 6,202,000 shares of Common
Stock outstanding and all 13,886,668 shares issuable upon exercise of the
Warrants will be subject to the resale provisions of Rule 144 and the shares
currently outstanding will become subject to an 18-month contractual lock-up
with______________, restricting the resale of such shares for six months after
the date of this Prospectus, with 33% freely tradeable after six months after
the date of this Prospectus, 33% freely tradeable after the next six months and
33% freely tradeable after the next six months. Sales of shares of Common Stock
in the public markets may have an adverse effect on prevailing market prices for
the Common Stock.
Rule 144 governs resale of "restricted securities" for the account of any
person (other than an issuer), and restricted and unrestricted securities for
the account of an "affiliate" of the issuer. Restricted securities generally
include any securities acquired directly or indirectly from an issuer or its
affiliates which were not issued or sold in connection with a public offering
registered under the Act. An affiliate of the issuer is any person who directly
or indirectly controls, is controlled by, or is under common control with, the
issuer. Affiliates of the Company may include its directors, executive officers,
and persons directly or indirectly owning 10% or more of the outstanding Common
Stock.
21
<PAGE>
Under Rule 144 unregistered resales of restricted Common Stock cannot be made
until it has been held for one year from the later of its acquisition from the
Company or an affiliate of the Company. Thereafter, shares of Common Stock may
be resold without registration subject to Rule 144's volume limitation,
aggregation, broker transaction, notice filing requirements, and requirements
concerning publicly available information about the Company ("Applicable
Requirements"). Resales by the Company's affiliates of restricted and
unrestricted Common Stock are subject to the Applicable Requirements. The volume
limitations provide that a person (or persons who must aggregate their sales)
cannot, within any three-month period, sell more than the greater of one percent
of the then outstanding shares, or the average weekly reported trading volume
during the four calendar weeks preceding each such sale. A non-affiliate may
resell restricted Common Stock which has been held for two years free of the
Applicable Requirements.
PLAN OF DISTRIBUTION AND SELLING STOCKHOLDERS
This Prospectus relates to the resale of 5,268,334 shares of Common Stock
by the Selling Stockholders, all of which shares are currently issued and
outstanding.
The table below sets forth information with respect to the resale of
shares of Common Stock by the Selling Stockholders. The Company will not receive
any proceeds from the resale of Common Stock by the Selling Stockholders.
RESALE OF COMMON STOCK BY SELLING STOCKHOLDERS
SHARES CURRENTLY OUTSTANDING ("S"),
SHARES TO BE ISSUED UPON EXERCISE OF CLASS A WARRANTS ("A"),
CLASS B WARRANTS ("B"),
CLASS C WARRANTS ("C"),
$.05 WARRANTS ("$.05"),
$.50 WARRANTS ("$.50"),
AND $5.00 WARRANTS ("$5.00")
AMOUNT OFFERED
SHARES (ASSUMING ALL SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE IMMEDIATELY OWNED AFTER PERCENT
STOCKHOLDER RESALE SOLD) RESALE AGE
----------- ------------ -------------- ------------ ------
Adhikary, Tapan Kumar 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5000 B
Allen, Norman A. & Pamela
Holberg 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Asbeck, Marcia and Peter 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Auchstetter, Gerald A. 15,000 S 15,000 S *
15,000 A 15,000 A
15,000 B 15,000 B
Azbell, Frederic K. &
Barbara A. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B *
B and F Trust 490,000 S 490,000 S -0-
22
<PAGE>
AMOUNT OFFERED
SHARES (ASSUMING ALL SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE IMMEDIATELY OWNED AFTER PERCENT
STOCKHOLDER RESALE SOLD) RESALE AGE
----------- ------------ -------------- ------------ ------
Bach, Robert L. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Bailey Trust 208,000 S 208,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
20,000 ($0.50) 20,000 ($0.50)
20,000 ($0.05) 20000 ($0.05)
Barrett, Gloria J. &
James L. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Barrett, James G. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Barrett-Nelson, Hollye J. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Basche, Scott 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Benson, Mark J. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Bestgen, Ted 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Bloom, James August 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Brown, Jodie 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Brutger, Wayne A. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Buchanan, Jeffery L. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Burger, Cynthia 20,000 S 20,000 S *
20,000 A 20,000 A
23
<PAGE>
AMOUNT OFFERED
SHARES (ASSUMING ALL SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE IMMEDIATELY OWNED AFTER PERCENT
STOCKHOLDER RESALE SOLD) RESALE AGE
----------- ------------ -------------- ------------ ------
20,000 B 20,000 B
Caland, Pierre 120,000 S 120,000 S 2.00%
120,000 A 120,000 A
120,000 B 120,000 B
CASZ LLC 50,000 S 50,000 S *
50,000 ($0.50) 50,000 ($.50)
50,000 ($5.00) 50,000 ($5.00)
Chisholm, Roger L. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Ciszewski, Mary & Mary H. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
CLFS Equities 25,000 S 25,000 S ($0.50) *
25,000 ($0.50) 25,000 ($0.50)
25,000 ($5.00) 25,000 ($5.00)
Clifford, John C. 40,000 S 40,000 S *
40,000 A 40,000 A
40,000 B 40,000 B
Coatta, Jay D. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Coatta, Jean E. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Coatta, John B. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Cohen, Morris 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000
Cole, David L. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Collis, Noel D. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Corlis IRA, Robert J. 20,000 S 20,000 S ??
20,000 A 20,000 A
20,000 B 20,000 B
24
<PAGE>
AMOUNT OFFERED
SHARES (ASSUMING ALL SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE IMMEDIATELY OWNED AFTER PERCENT
STOCKHOLDER RESALE SOLD) RESALE AGE
----------- ------------ -------------- ------------ ------
Corliss, Robert J. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Craven, Richard F. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Crook, James W. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Dahlberg, David 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
David L. Cole Pension Plan &
Trust 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Derrer, Roland Jack & Kay
Jean 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Dillon, Jr., Robert J. 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Dompnier, Rene 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Donald M. Robinson IRA 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Dulas, Daniel 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Elituv, Chavan 40,000 S 40,000 S *
40,000 A 40,000 A
40,000 B 40,000 B
Eric J. Overing IRA 9,000 S 9,000 S *
9,000 A 9,000 A
9,000 B 9,000 B
Erickson, Eric 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Ericson, James E. 20,000 S 20,000 S *
25
<PAGE>
AMOUNT OFFERED
SHARES (ASSUMING ALL SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE IMMEDIATELY OWNED AFTER PERCENT
STOCKHOLDER RESALE SOLD) RESALE AGE
----------- ------------ -------------- ------------ ------
20,000 A 20,000 A
20,000 B 20,000 B
Ericson, Sr., James 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Erkkila, Russell E. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Estrich, Mark and Terry 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Estrich, Walter and Florence 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Eye Guys, Inc 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Flink, John Leonard 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Fowler, Lawarence C. &
Dianne K. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Francis, Donald F. &
Barbara J. 12,500 S 12,500 S *
12,500 ($0.50) 12,500 ($0.50)
12,500 ($5.00) 12,500 ($5.00)
Franckowiak and Sparks,
James Deborah H. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Franckowiak, Norbert & Janet 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Franckowiak, Norbert & Mary 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Fransen, Gene A. and Lois J. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Gabos, John 20,000 S 20,000 S *
26
<PAGE>
AMOUNT OFFERED
SHARES (ASSUMING ALL SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE IMMEDIATELY OWNED AFTER PERCENT
STOCKHOLDER RESALE SOLD) RESALE AGE
----------- ------------ -------------- ------------ ------
20,000 A 20,000 A
20,000 B 20,000 B
Garrison, Valarie A. &
Lynn R. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Gayken, Lydell 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Geislinger, Betty 1,333 S 1,333 S *
1,333 A 1,333 A
1,333 B 1,333 B
Geislinger, Irv 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Geislinger, Jeffrey J. 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Geraci IRA, Joseph 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Geraci, Joseph A. 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Gerald D. Stoltz Profit
Sharing Plan 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Gill, Robert A. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Glutzer, Norman M. and
Barbara 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Goetz, Jr., Roger H. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Goetzke, Lester 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Goldberg, Bennett 10,000 S 10,000 S *
10,000 A 10,000 A
27
<PAGE>
AMOUNT OFFERED
SHARES (ASSUMING ALL SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE IMMEDIATELY OWNED AFTER PERCENT
STOCKHOLDER RESALE SOLD) RESALE AGE
----------- ------------ -------------- ------------ ------
10,000 B 10,000 B
Graybow, Bruce 40,000 S 40,000 S *
40,000 A 40,000 A
40,000 B 40,000 B
Graybow, Rita 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Graybow, Rita 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Graybow, Steven 30,000 S 30,000 S *
30,000 A 30,000 A
30,000 B 30,000 B
Griner, Jr., Frank W. 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Gross, Charles V. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Gustafson, William T. and
Barbara J. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Hadeed, Mohamad 320,000 S 320,000 S
320,000 A 320,000 A 5.30%
320,000 B 320000 B
Hafiz, Richard J. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Hanneman, William E. 15,000 S 15,000 S *
15,000 A 15,000 A
15,000 B 15,000 B
Hart, Gary 25,000 S 25,000 S *
25,000 ($0.50) 25,000 ($0.50)
25,000 ($5.00) 25,000 ($5.00)
Hennen, Eugene 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Hennen, Jr, Joseph P. 20,000 S 20,000 S *
20,000 A 20,000 A
28
<PAGE>
AMOUNT OFFERED
SHARES (ASSUMING ALL SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE IMMEDIATELY OWNED AFTER PERCENT
STOCKHOLDER RESALE SOLD) RESALE AGE
----------- ------------ -------------- ------------ ------
20,000 B 20,000 B
Hennen, Sr., Joe 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Hewitt, Robert C. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Hillen, John 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Hoffmann, D.C. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Holberg, Darlyne L. 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Holberg, Larry W. 50,000 S 50,000 S *
50,000 A 50,000 A
50,000 B 50,000 B
Hooe, Jr., Nelson D. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Hopkins, Evan 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Horsell, William & Cheryl 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Huot, Irene R. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Irving J. Geislinger IRA 3,667 S 3,667 S *
3,667 A 3,667 A
3,667 B 3,667 B
Jensen, Julian S. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Johnson, Bryan T. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
29
<PAGE>
AMOUNT OFFERED
SHARES (ASSUMING ALL SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE IMMEDIATELY OWNED AFTER PERCENT
STOCKHOLDER RESALE SOLD) RESALE AGE
----------- ------------ -------------- ------------ ------
Jones, Robert A. 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Kaatz, Gary 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Kammerer, Celine 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Kaufman, Lewis H. 40,000 S 40,000 S *
40,000 A 40,000 A
40,000 B 40,000 B
Kaufmann, Walter A. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Keczmer, Daniel L. & Lisa A. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Keczmer, Daniel Pattrick, Sr.
and Alice 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Keczmer, Pamela 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Kelly, David J. 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Kinney, Larry J. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Klein, Gerald A. 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Klein, Robert N. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Klein, Roger A. & Darlene C. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
30
<PAGE>
AMOUNT OFFERED
SHARES (ASSUMING ALL SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE IMMEDIATELY OWNED AFTER PERCENT
STOCKHOLDER RESALE SOLD) RESALE AGE
----------- ------------ -------------- ------------ ------
Klein, Sr., Roger H. 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Kolb, Robert T. 25,000 S 25,000 S *
25,000 ($0.50) 25,000 ($0.50)
25,000 ($5.00) 25,000 ($5.00)
Kosar, Jr., Bernie 60,000 S 60,000 S 1.00%
60,000 A 60,000 A
60,000 B 60,000 B
Kosar, Sr., Bernard and
Geraldine 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Langer, IRA, Vern J. 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Langer, Michael 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Laritson, John 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Larson, Wayne H. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Lauerman, James E. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Lauret, Thurman 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Lease, Micheal W. 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Leckrone, Janine 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Lehrke, Ronald K. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Lilja, David S. 40,000 S 40,000 S *
31
<PAGE>
AMOUNT OFFERED
SHARES (ASSUMING ALL SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE IMMEDIATELY OWNED AFTER PERCENT
STOCKHOLDER RESALE SOLD) RESALE AGE
----------- ------------ -------------- ------------ ------
40,000 A 40,000 A
40,000 B 40,000 B
Maddern, James R. and
Kristine K. 3,334 S 3,334 S *
3,334 A 3,334 A
3,334 B 3,334 B
Magnusson, Jan H. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Mahon, William F. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Mangini, Oscar R. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Mark and Margaret Damon
Trust 60,000 S 60,000 S 1.00%
60,000 A 60,000 A
60,000 B 60,000 B
Matelski Lumber Company 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Matelski, Wanda E. & Carl D.
Parker 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
McKeehan, Robert J. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Meyer, Daniel 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Miller, Thomas D. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Miller, Wallace F. &
DeLois J. 60,000 S 60,000 S 1.00%
60,000 A 60,000 A
60,000 B 60,000 B
Mitchell, Gerald M. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Mitroo, J.B. 5,000 S 5,000 S *
32
<PAGE>
AMOUNT OFFERED
SHARES (ASSUMING ALL SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE IMMEDIATELY OWNED AFTER PERCENT
STOCKHOLDER RESALE SOLD) RESALE AGE
----------- ------------ -------------- ------------ ------
5,000 A 5,000 A
5,000 B 5,000 B
Monty, Edward G. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Moriarty, Barbara J. and
Maurice F. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Mount, Richard L. 25,000 S 25,000 S *
25,000 ($0.50) 25,000 ($0.50)
25,000 ($5.00) 25,000 ($5.00)
Nagel, Gregory A. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Nagel, John 208,000 S 208,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
20,000 ($0.50) 20,000 ($0.50)
20,000 ($0.05) 20000 ($.05)
Nakagawa, Cressey H. 25,000 S 25,000 S *
25,000 ($0.50) 25,000 ($0.50)
25,000 ($5.00) 25,000 ($5.00)
Nicksa, James H. 25,000 S 25,000 S *
25,000 ($0.50) 25,000 ($0.50)
25,000 ($5.00) 25,000 ($5.00)
Nicolodi, Fulvia Casella 60,000 S 60,000 S 1.00%
60,000 A 60,000 A
60,000 B 60,000 B
Nyquist, R. Dwight and Marie
Ann B. 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Park, M.D., Myung C. 100,000 S 100,000 S 1.70%
100,000 A 100,000 A
100,000 B 100,000 B
Patzner, Rick M. 70,000 S 70,000 S 1.20%
70,000 A 70,000 A
70,000 B 70,000 B
Pearson, Eldean 5,000 S 5,000 S *
5,000 A 5,000 A
33
<PAGE>
AMOUNT OFFERED
SHARES (ASSUMING ALL SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE IMMEDIATELY OWNED AFTER PERCENT
STOCKHOLDER RESALE SOLD) RESALE AGE
----------- ------------ -------------- ------------ ------
5,000 B 5,000 B
Pechota, Gary L. 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Peddireddi, Srinivasa R. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Peddireddi, Srinivasa R. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Pellerito, Ronald 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Penn, Sean 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Perman, Mark 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Port, Adam 2,500 S 2,500 S *
2,500 A 2,500 A
2,500 B 2,500 B
Port, Joseph 2,500 S 2,500 S *
2,500 A 2,500 A
2,500 B 2,500 B
Port, Joshua 2,500 S 2,500 S *
2,500 A 2,500 A
2,500 B 2,500 B
Port, Moses 2,500 S 2,500 S *
2,500 A 2,500 A
2,500 B 2,500 B
Port, Stephen & Phyllis 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Powell, John R. 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Quam, Scott A. and
Kristine S. 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
34
<PAGE>
AMOUNT OFFERED
SHARES (ASSUMING ALL SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE IMMEDIATELY OWNED AFTER PERCENT
STOCKHOLDER RESALE SOLD) RESALE AGE
----------- ------------ -------------- ------------ ------
Redman, Mark Victor 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Rieman, Raymond 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Robarge, Ralph and Patricia 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Robert H. Tucker Trust 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Rohkohl, Arlene A. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Sanderman, Robert J. 45,000 S 45,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
25,000 ($0.50) 25,000 ($0.50)
25,000 ($5.00) 25,000 ($5.00)
Schaffer, Don M. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Schank, Daniel J. 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Segal, Randy 40,000 S 40,000 S *
40,000 A 40,000 A
40,000 B 40,000 B
Severini, Dominic &
Kerrjie A. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Severini, Jr., Fred 15,000 S 15,000 S *
15,000 A 15,000 A
15,000 B 15,000 B
Severini, Jr., Vincent J. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Sexton, David 5,000 S 5,000 S *
5,000 A 5,000 A
35
<PAGE>
AMOUNT OFFERED
SHARES (ASSUMING ALL SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE IMMEDIATELY OWNED AFTER PERCENT
STOCKHOLDER RESALE SOLD) RESALE AGE
----------- ------------ -------------- ------------ ------
5,000 B 5,000 B
Shaffer, Byron G. 100,000 S 100,000 S 1.70%
100,000 A 100,000 A
100,000 B 100,000 B
Silletto, Jan and Donna 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Simmons, Ed 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Siwecki, Henry A. &
Christine F. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Siwecki, Henry T. 25,000 S 25,000 S *
25,000 ($0.50) 25,000 ($0.50)
25,000 ($5.00) 25,000 ($5.00)
Siwecki, Henry T. & Marie 60,000 S 60,000 S 1.00%
60,000 A 60,000 A
60,000 B 60,000 B
Smalley, Cathy M. 2,500 S 2,500 S *
2,500 ($0.50) 2,500 ($0.50)
2,500 ($5.00) 2,500 ($5.00)
Solo One LLC 6,000 ($0.50) 6,000 ($0.50)
6,000 ($5.00) 6,000 ($5.00)
Stark, Randall P. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Stein, Charles M. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Stein, Charles M. 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Steinke, Charles J. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Stelton, Craig 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Stoffel, August M. and
Ann M. 20,000 S 20,000 S *
36
<PAGE>
AMOUNT OFFERED
SHARES (ASSUMING ALL SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE IMMEDIATELY OWNED AFTER PERCENT
STOCKHOLDER RESALE SOLD) RESALE AGE
----------- ------------ -------------- ------------ ------
20,000 A 20,000 A
20,000 B 20,000 B
Stoffel, August M. and
Michel1e L. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Sud, Jim 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Sulak, Cecilia 12,500 S 12,500 S *
12,500 ($0.50) 12,500 ($0.50)
12,500 ($5.00) 12,500 ($5.00)
Sylla, Craig J. 1,000 S 1,000 S *
1,000 A 1,000 A
1,000 B 1,000 B
Tancheff, John 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Tautges, Thomas and Mary Jo 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Tell, Brian 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Tesch, Michael A. & Carmen M.35,000 S 35,000 S *
35,000 A 35,000 A
35,000 B 35,000 B
Thomas S. Shoopman IRA 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Traut, Mark Joseph 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Tulgestke, Gordon 6,250 S 6,250 S *
6,250 ($0.50) 6,250 ($0.50)
6,250 ($5.00) 6,250 ($5.00)
Tuschner, Jeni 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
37
<PAGE>
AMOUNT OFFERED
SHARES (ASSUMING ALL SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE IMMEDIATELY OWNED AFTER PERCENT
STOCKHOLDER RESALE SOLD) RESALE AGE
----------- ------------ -------------- ------------ ------
Tuschner, John M. Tuschner
&Julie K. Havlicek 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Tutewohl, Leo & Sharon 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
Van Alen, Judith F. 70,000 S 70,000 S 1.20%
70,000 A 70,000 A
70,000 B 70,000 B
VanOverbeke, James C. &
Michaline A. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Vatland, Harlan J. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Vehling and Robinson,
Derek K.and Karen A. 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Villavicencio, Gilbert 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Wallace F. Miller, IRA 40,000 S 40,000 S *
40,000 A 40,000 A
40,000 B 40,000 B
Wallington Investment Ltd. 340,000 S 340,000 S 5.60%
340,000 A 340,000 A
340,000 B 340,000 B
Wayne, E. Robie 10,000 S 10,000 S *
10,000 A 10,000 A
10,000 B 10,000 B
Westman, Bruce 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Zaremba Group LLC 67,750 S 67,750 S *
20,000 A 20,000 A
20,000 B 20,000 B
47,750 ($0.50) 47,750 ($0.50)
38
<PAGE>
AMOUNT OFFERED
SHARES (ASSUMING ALL SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE IMMEDIATELY OWNED AFTER PERCENT
STOCKHOLDER RESALE SOLD) RESALE AGE
----------- ------------ -------------- ------------ ------
47,750 ($5.00) 47,750 ($5.00)
Zaremba, David 3,125 S 3,125 S *
3,125 ($0.50) 3,125 ($0.50)
3,125 ($5.00) 3,125 ($5.00)
Zaremba, Frank J. 3,125 S 3,125 S *
3,125 ($0.50) 3,125 ($0.50)
3,125 ($5.00) 3,125 ($5.00)
Zaremba, James R. 3,125 S 3,125 S *
3,125 ($0.50) 3,125 ($0.50)
3,125 ($5.00) 3,125 ($5.00)
Zaremba, John M. 3,125 S 3,125 S *
3,125 ($0.50) 3,125 ($0.50)
3,125 ($5.00) 3,125 ($5.00)
Zaremba, Walter 25,000 S 25,000 S *
25,000 ($0.50) 25,000 ($.50)
25,000 ($5.00) 25,000 ($5.00)
Zbikowski IRA, Scott T. 20,000 S 20,000 S *
20,000 A 20,000 A
20,000 B 20,000 B
Zbikowski, Scott T. 50,000 S 50,000 S *
50,000 A 50,000 A
50,000 B 50,000 B
Zurek, Mark J. 5,000 S 5,000 S *
5,000 A 5,000 A
5,000 B 5,000 B
* denotes less than 1%
The 5,268,334 shares offered by the Selling Stockholders may be sold by
one or more of the following methods, without limitation: (i) ordinary brokerage
transactions and transactions in which the broker solicits purchases; and (ii)
face-to-face transactions between sellers and purchasers without a
broker-dealer. In effecting sales, brokers or dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate. Such
brokers or dealers may receive commissions or discounts from the Selling
Stockholders in amounts to be negotiated. Such brokers and dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Act, in connection with such sales. The Selling Stockholder or
dealer effecting a transaction in the registered securities, whether or not
participating in a distribution, is required to deliver a Prospectus. As a
result of such shares being registered under the Act, holders who subsequently
resell such shares to the public may be deemed to be underwriters with respect
to such shares of Common Stock for purposes of the Act with the result that they
may be subject to certain statutory liabilities if the registration statement to
which this Prospectus relates is defective by virtue of containing a material
misstatement or omitting to disclose a statement of material fact. The Company
has not agreed to indemnify any of the Selling Stockholders regarding such
liability.
39
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the issuance of shares of Common Stock
offered hereby will be passed upon for the Company by Brewer & Pritchard, P.C.,
Houston, Texas. Principals of Brewer & Pritchard, P.C. own $.05 Warrants to
purchase 12,500 shares of Common Stock and $5.00 Warrants to purchase 12,500
shares of Common Stock.
EXPERTS
The audited financial statements as of August 31, 1996 included in this
Prospectus have been included herein in reliance upon the report of McManus &
Co., P.C., independent accountants, given on the authority of said firm as
experts in auditing and accounting.
40
<PAGE>
[MCMANUS & CO., P.C. LETTERHEAD]
INDEPENDENT ACCOUNTANT'S REPORT
To the Stockholders of
Eagle Telecom International, Inc.
We have reviewed the accompanying balance sheet of Eagle Telecom International,
Inc. as of February 28, 1997, and the related statements of earnings,
shareholder's equity, and cash flows for the period September 1, 1996 through
February 28, 1997 in accordance with statements on standards for Accounting and
Review Services issued by the American Institute of Certified Public
Accountants. All information included in these financial Statements is the
representation of the management of Eagle Telecom International, Inc.
A review consists principally of company personnel and analytical procedures
applied to financial data. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with general accepted accounting principles.
The financial statements for the year ended August 31, 1996, were audited by us,
and we expressed an unqualified opinion on them in our report dated September
25, 1996, but we have not performed any auditing procedures since that date.
MCMANUS & CO., P.C.
CERTIFIED PUBLIC ACCOUNTANTS
MORRIS PLAINS, NEW JERSEY 07950
March 21, 1997
F-1
<PAGE>
EAGLE TELECOM INTERNATIONAL, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
August 31,
February 28 -------------------------
1997 1996 1995
(Unaudited) (Audited) (Audited)
----------- ----------- ------
<S> <C> <C> <C>
Current Assets:
Cash and Cash Equivalents (Note 1) ................................... $ 3,865,865 $ 2,104,052 --
Accounts Receivable .................................................. 1,734,724 358,933 1,000
Inventories (Note 1) ................................................. 568,249 525,311 --
Prepaid Expenses ..................................................... -- 16,623 --
----------- ----------- ------
Total Current Assets ......................................... 6,168,838 3,004,919 1,000
Property and Equipment (Note 1):
Operating Equipment .................................................. 532,834 425,735 --
Less: Accumulated Depreciation ....................................... (68,770) (33,104) --
----------- ----------- ------
Total Property and Equipment ................................. 464,064 392,631 --
Other Assets:
Security Deposits .................................................... 10,568 8,950 --
Deferred Financing Fees .............................................. -- 37,500 --
Investment In Link Two Communications, Inc. ......................... 100,000 -- --
Organization Expense (net of accumulated amortization) ............... 2,660 2,992 --
Total Other Assets ........................................... 113,228 49,442 --
----------- ----------- ------
Total Assets ......................................................... $ 6,746,130 $ 3,446,992 $1,000
=========== =========== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable - trade ............................................. $ 82,890 $ 168,013 --
Accrued Payroll Taxes ................................................ 12,999 --
Accrued Expenses ..................................................... 44,599 173,527 --
Customer Deposits .................................................... 37,438 211,783 --
Shareholders' Advances (Note 9) ...................................... 185,000 290,000 --
Subscriptions Payable ................................................ -- 97,500 --
Notes Payable (Note 2) ............................................... -- 386,082 --
Capital Lease Obligations (Note 3) ................................... 34,851 20,694 --
Federal Income Taxes Payable (Note 4) ............................... 234,780 -- --
Deferred Taxes (Note 4) .............................................. 1,700 -- --
----------- ----------- ------
Total Current Liabilities .................................... 634,257 1,347,599 --
Long - Term Liabilities:
Capital Lease Obligations
(net of current maturities) (Note 3) ......................... 16,618 16,704 --
Deferred Taxes (Note 4) .............................................. 9,507 5,683 --
----------- ----------- ------
Total Long - Term Liabilities ................................ 26,125 22,387 --
Commitments and Contingent Liabilities (Note 10)
Shareholders' Equity:
Preferred Stock - $.001 par value
Authorized 5,000,000 shares
Issued -0- shares ............................................ -- -- --
Common Stock - $.001 par value
Authorized 100,000,000 shares
Issued 11,225,334; 6,946,145; and
1,000 shares respectively ................................ 11,226 6,946 1,000
Paid in Capital ...................................................... 5,575,848 2,037,856 --
Retained Earnings .................................................... 498,674 32,204 --
----------- ----------- ------
Total Shareholders' Equity ................................... 6,085,748 2,077,006 1,000
----------- ----------- ------
Total Liabilities and Shareholders' Equity ........................... $ 6,746,130 $ 3,446,992 $1,000
=========== =========== ======
</TABLE>
See accompanying accountant's report and notes to the financial statements.
F-2
<PAGE>
EAGLE TELECOM INTERNATIONAL, INC.
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
For the Six Months For the Years Ended August 31,
Ended February 28, --------------------------------------
1997 1996 1995 1994
(Unaudited) (Audited) (Audited) (Audited)
----------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Net Sales ..................................................... $ 2,376,629 $ 1,018,441 $ -- $ --
Cost of Goods Sold
Materials and Supplies ............................... 610,624 228,765 -- --
Direct Labor and Related Costs ..................... 260,530 290,743 -- --
Depreciation and Amortization ........................ 21,400 19,986 -- --
Other Manufacturing Costs ............................ 285,710 104,776 -- --
----------- ----------- -------- ---------
Total Cost of Goods Sold ................... 1,178,264 644,271 -- --
----------- ----------- -------- ---------
Gross Profit .................................................. 1,198,365 374,170 -- --
----------- ----------- -------- ---------
Operating Expenses
Selling, General and Administrative
Salaries and Related Costs .................. 307,393 181,338 -- --
Advertising and Promotion .................... 89,837 65,461 -- --
Depreciation and Amortization ................ 14,600 13,451 -- --
Other Support Costs .......................... 241,369 83,638 -- --
----------- ----------- -------- ---------
Total Operating Expenses ..................... 653,199 343,888 -- --
----------- ----------- -------- ---------
Earnings From Operations Before Other
Revenues / (Expenses) and Taxes ...................... 545,166 30,282 -- --
Other Revenues / (Expenses)
Interest Income ....................................... 164,444 10,501 -- --
Interest Expense ...................................... (2,836) (2,896)
----------- ----------- -------- ---------
Total Other Revenues ......................... 161,608 7,605 -- --
----------- ----------- ---- ----
Earnings Before Income Taxes ................................. 706,774 37,887 -- --
Provision For Income Taxes .................................. 240,304 5,683 -- --
----------- ----------- -------- ---------
Net Earnings .................................................. 466,470 32,204 -- --
Retained Earnings - Beginning of Period ..................... 32,204 -- -- --
----------- ----------- -------- ---------
Retained Earnings - End of Period ........................... $ 498,674 $ 32,204 $ -- $ --
=========== =========== ======== =========
Net Earnings Per Common Share:
Primary (Note 1) ............................................... $ 0.022 $ 0.003 $ -- $ --
Fully Diluted (Note 1) ........................................ $ 0.019 $ 0.002 $ -- $ --
</TABLE>
See accompanying accountant's report and notes to the financial statements.
F-3
<PAGE>
EAGLE TELECOM INTERNATIONAL, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Total
September 1, 1993 Common Preferred Paid In Retained Shareholders'
To February 28, 1997 Stock Stock Capital Earnings Equity
-------- ------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
September 1, 1993 .............................. $ 1,000 $ -- $ -- $ -- $ 1,000
-------- ------- ----------- -------- -----------
Total Shareholders' Equity
As Of August 31, 1994 .......................... 1,000 -- -- -- 1,000
-------- ------- ----------- -------- -----------
Total Shareholders' Equity
As Of August 31, 1995 .......................... 1,000 -- -- -- 1,000
Net Earnings 1996 ............................... 32,204 32,204
Common Stock Relinquished ....................... (1,000) -- -- -- (1,000)
New Stock Issued to Shareholders
Hou - Tex Trust (April 1996) .............. 3,150 -- 238,627 -- 241,777
Futer Family Trust (April 1996) ........... 990 -- 74,996 -- 75,986
John Nagel (April 1996) ................... 180 -- 13,636 -- 13,816
Bailey Trust (April 1996) ................. 180 -- 13,636 -- 13,816
Private Placement ............................... 2,446 -- 1,926,254 -- 1,928,700
Issuance of Warrants for
Fundraising Activities .................... -- -- 88,343 -- 88,343
Syndication Costs ............................... -- -- (317,636) -- (317,636)
-------- ------- ----------- -------- -----------
Total Shareholders' Equity
As Of August 31, 1996 .......................... 6,946 -- 2,037,856 32,204 2,077,006
Net Earnings As of Feb. 28, 1997 ............... -- -- 66,470 466,470
Private Placement ............................... 1,303 -- 3,690,259 -- 3,691,562
Conversion of Advances for Syndication .......... 1,908 -- 118,092 -- 120,000
Costs to Common Stock
Conversion of Notes Payable
to Common Stock ........................... 369 -- 369,000 -- 369,369
Exercise of $.01 Warrants:
B & F Trust ............................... 490 -- 4,410 -- 4,900
Futer Family Trust ....................... 154 -- 1,386 -- 1,540
John Nagel ................................ 28 -- 252 -- 280
Bailey Trust .............................. 28 -- 252 -- 280
Issuance of Warrants for
Fundraising Activities .................... -- -- 192,000 -- 192,000
Syndication Costs ............................... -- -- (837,659) -- (837,659)
-------- ------- ----------- -------- -----------
Total Shareholders' Equity
As Of February 28, 1997 ........................ $ 11,226 $ -- $ 5,575,848 $498,674 $ 6,085,748
======== ======= =========== ======== ===========
</TABLE>
See accompanying accountant's report and notes to the financial statements.
F-4
<PAGE>
EAGLE TELECOM INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months For the Years Ended August 31,
Ended February 28, --------------------------------
1997 1996 1995 1994
(Unaudited) (Audited) (Audited) (Audited)
----------- ----------- -------- --------
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net Earnings ........................................................... $ 466,470 $ 32,204 $ -- $ --
Adjustments To Reconcile Net Earnings To Net Cash
Used By Operating Activities:
Depreciation and Amortization .................................. 36,000 33,437 -- --
(Increase)/Decrease in Accounts Receivable ..................... (1,375,791) (123,749) -- --
(Increase)/Decrease in Inventories ............................. (42,938) (228,978) -- --
(Increase)/Decrease in Prepaid Expenses ........................ 16,623 (16,623) -- --
Increase/(Decrease) in Accounts Payable ........................ (85,123) 168,013 -- --
Increase/(Decrease) in Payroll Taxes Payable .................. 12,999 -- -- --
Increase/(Decrease) in Accrued Expenses ........................ (128,928) (760) -- --
Increase/(Decrease) in Deferred Taxes .......................... 5,524 5,683 -- --
Increase/(Decrease) in Customer Deposits ....................... (174,345) 130,948 -- --
Increase/(Decrease) in Federal Income Taxes Payable ............ 234,780 -- -- --
----------- ----------- -------- --------
Total Adjustments .............................................. (1,501,199) (32,029) -- --
----------- ----------- -------- --------
Net Cash Used By Operating Activities .................................. (1,034,729) 175 -- --
Cash Flows From Investing Activities
Purchase of Property and Equipment ............................. (107,099) (55,735) -- --
(Increase)/Decrease in Other Assets ........................... 36,214 (49,775) -- --
Increase in Investment in Link Two Communications, Inc. ....... (100,000) -- -- --
Changes in Investing Assets and Liabilities Resulting
From Shareholder Capital Contributions
Increase in Property ................................... -- (300,000) -- --
Increase in Inventory .................................. -- (200,000) -- --
Changes in Investing Activities Resulting From
Acquiring Assets and Assuming Liabilities
Increase in Inventory .................................. -- (96,333) -- --
Increase in Accounts Receivable ........................ -- (234,184) -- --
Increase in Furniture & Fixtures ....................... -- (70,000) -- --
Increase in Accrued Expenses ........................... -- 140,510 -- --
Increase in Customer Deposits .......................... -- 80,835 -- --
Increase in Accrued Expenses ........................... -- 33,777 -- --
----------- ----------- -------- --------
Net Cash Used By Investing Activities .................................. (170,885) (750,905) -- --
Cash Flows From Financing Activities
Proceeds From Sale of Common Stock ............................. 3,541,938 2,043,802 -- --
Increase/(Decrease) in Notes Payable ........................... (375,000) 375,000 -- --
Increase/(Decrease) in Notes Payable ........................... (11,082) 11,082 -- --
Increase/(Decrease) in Capital Leases .......................... 14,071 37,398 -- --
Increase/(Decrease) in Capital Leases .......................... -- -- -- --
Increase/(Decrease) in Shareholders' Advances .................. (105,000) 290,000 -- --
Increase/(Decrease) in Subscriptions Payable ................... (97,500) 97,500 -- --
----------- ----------- -------- --------
Net Cash Provided By Financing Activities .............................. 2,967,427 2,854,782 -- --
Net Increase in Cash .................................................... 1,761,813 2,104,052 -- --
Cash at the Beginning of the Period ............................................ 2,104,052 -- -- --
----------- ----------- -------- --------
Cash at the End of the Period .................................................. $ 3,865,865 $ 2,104,052 $ -- $ --
=========== =========== ======== ========
</TABLE>
See accompanying accountant's report and notes to the financial statements.
F-5
<PAGE>
EAGLE TELECOM INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:
Eagle Telecom International, Inc., (the Company), incorporated as a Texas
corporation on May 24, 1993 and commenced business in April of 1996. The
Company is a worldwide supplier of telecommunications equipment and
related software used by service providers in the paging and other
wireless personal communications markets. The Company designs,
manufactures, markets and services its products under the Eagle name.
These products include transmitters, receivers, controllers, software and
other equipment used in personal communications systems (including paging,
voice messaging, cellular and message management and mobile data systems)
and radio and telephone systems.
Prior to April, 1996, the Company was inactive. During April, 1996, the
Company commenced operations the by issuance of stock for cash, certain
inventories, test equipment, other assets, and the assumption of certain
liabilities to its principal shareholder. Concurrent with this
transaction, the Company entered into an asset purchase agreement with a
company to acquire certain other production equipment, inventories and
furniture and equipment.
A) Cash and Cash Equivalents
The Company has $3,580,773 and $1,650,000 invested in interest bearing
accounts at February 28, 1997 and August 31, 1996, respectively.
B) Property and Equipment
Property and equipment are carried at cost less accumulated depreciation.
Depreciation is calculated by using the straight-line method for financial
reporting and accelerated methods for income tax purposes. The recovery
classifications for these assets are listed as follows:
YEARS
Machinery and equipment 7
Furniture and Fixtures 7
Expenditures for maintenance and repairs are charged against income as
incurred and major improvements are capitalized.
F-6
<PAGE>
EAGLE TELECOM INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 -BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES: (continued)
C) Inventories
Inventories are valued at the lower of cost or market. The cost is
determined by using the FIFO method. Inventories consist of the following
items:
FEBRUARY 28, AUGUST 31,
--------- ---------------------
1997 1996 1995
(UNAUDITED) (AUDITED) (AUDITED)
--------- --------- ------
Raw Materials ............ $325,202 $ 351,374 $- 0 -
Work in Process .......... 243,047 173,937 - 0 -
Finished Goods ........... - 0 - - 0 - - 0 -
--------- --------- ------
$568,249 $ 525,311 $- 0 -
========= ========= ======
D) Organizational Costs
Organizational costs are to be amortized using the straight - line method
over a period of sixty (60) months. Accumulated amortization is $665 and
$333 for the periods ended February 28, 1997 and August 31, 1996,
respectively.
E) Research and Development Costs
The Company's research and development costs occur as a result from
obligations to perform contractual services for outside parties. These
costs are expensed as contract revenues are earned. Research and
development costs of $71,515 and $48,829 were expenses for the periods
ended February 28, 1997 and August 31, 1996, respectively. Contract
revenues earned for the periods ended February 28, 1997 and August 31,
1996 were $150,000 and $150,000, respectively.
F) Income Taxes
The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes", which requires a
change from the deferral method to assets and liability method of
accounting for income taxes. Timing differences exist between book income
and tax income which relate primarily to depreciation methods.
F-7
<PAGE>
EAGLE TELECOM INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 -BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES: (continued)
G) Net Earnings Per Common Share
Net earnings per common share is shown as both primary and fully diluted.
Primary earnings per common share are computed by dividing net income less
any preferred stock dividends (if applicable) by the weighted average
number of shares of common stock outstanding plus any dilutive common
stock equivalents. Fully diluted earnings per common share are computed by
dividing net income less any preferred stock dividends (if applicable) by
the weighted average number of shares of common stock outstanding plus any
dilutive and anti-dilutive common stock equivalents. The components used
for the computations are shown as follows:
FEBRUARY 28, AUGUST 31,
1997 1996
---------- ----------
Weighted Average Number of Common
Shares Outstanding Including:
Primary Common Stock Equivalents ........... 21,147,002 12,415,243
Fully Dilutive Common Stock Equivalents .... 23,572,002 14,614,341
H) Warrants for Funding Activities
During the periods ended February 28, 1997 and August 31, 1996, the
Company issued the following warrants: 1,000,000 Class A; 1,000,000 Class
B; 483,334 Class C; 1,050,000 $.05; 1,375,000 $.50; and 425,000 $5.00.
Theses warrants were issued to individuals and trusts for their assistance
in the fundraising activities.
These warrants are valued at $280,343. This value is equivalent to the
commissions paid to the broker-dealer.
NOTE 2 - NOTES PAYABLE:
<TABLE>
<CAPTION>
FEBRUARY 28, AUGUST 31,
------------ ---------------------
1997 1996 1995
(UNAUDITED) (AUDITED) (AUDITED)
------------- ----------- ----------
<S> <C> <C> <C>
Notes to individuals due October 31, 1996,
bearing no interest, convertible into the
Company's common stock at the noteholder's
option. $ - 0 - $ 375,000 $ - 0 -
</TABLE>
F-8
<PAGE>
EAGLE TELECOM INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 2 - NOTES PAYABLE: (continued)
FEBRUARY 28, AUGUST 31,
------------ ---------------------
1997 1996 1995
(UNAUDITED) (AUDITED) (AUDITED)
------------ --------- ---------
Unsecured note to the insurance
company bearing interest at 8.75%,
due $2,265 monthly until January 1997 ........ -0- 11,082 -0-
----- ------- -----
Total ................................... -0- 386,082 -0-
Less Current Portion of
Long - Term Debt ..................... -0- 386,082 -0-
----- ------- -----
Total Long - Term Debt .................. $ -0- $-0- $ -0-
===== ======= =====
NOTE 3 - CAPITAL LEASE OBLIGATIONS:
FEBRUARY 28, AUGUST 31,
------------ ---------------------
1997 1996 1995
(UNAUDITED) (AUDITED) (AUDITED)
------------ --------- ---------
Equipment lease with Compix
bearing interest at 15%, payable in
monthly installments of $624; due
July 1998 ................................. $ 9,572 $12,049 $ -0-
Equipment lease with IFR bearing
interest at 15%, payable in monthly
installments of $1,427; due June 1998 ..... 20,736 25,349 -0-
Equipment lease with Associates
Capital bearing interest at 7%,
payable in monthly installments
of $1,177; due Sept. 1998 ................. 21,161 -0- -0-
------- ------- -----
Total Obligations .................. $51,469 $37,398 $ -0-
Less Current Portion of
Lease Obligations ............... 34,851 20,694 -0-
------- ------- -----
Total Long - Term Capital
Lease Obligations ................... $16,618 $16,704 $ -0-
======= ======= =====
F-9
<PAGE>
EAGLE TELECOM INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 3 - CAPITAL LEASE OBLIGATIONS: (continued)
The capitalized lease obligations are collateralized by the related
equipment acquired with a net book value of approximately $ 63,115 and $
41,892 at February 28, 1997 and August 31, 1996, respectively. The future
minimum lease payments under the capital leases and the net present value
of the future lease payments at February 28, 1997 and August 31, 1996 are
as follows:
FEB. 28, 1997 AUG. 31, 1996
------------- -------------
Total minimum lease payments ................. $55,670 $42,447
Less: Amount representing interest .......... 4,201 5,049
------- -------
Present value of net minimum
lease payments ........................... $51,469 $37,398
======= =======
Future obligations under the lease terms are:
Period Ending
FEB. 28, AMOUNT
-------
1998 ................................................... $34,851
1999 ................................................... 16,618
-------
Total ............................................... $51,469
=======
NOTE 4 - INCOME TAXES:
As discussed in note 1, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes". Implementation of SFAS 109 did not have a material cumulative
effect on prior periods nor did it result in a change to the current
year's provision.
A) The effective tax rate for the Company is reconcilable to statutory tax
rates as follows:
FEBRUARY 28, AUGUST 31,
----------- --------------------
1997 1996 1995 1994
-- -- --- ---
% % % %
U.S. Federal statutory Tax Rate ............. 34 34 -0- -0-
-- -- --- ---
Effective Tax Rate .......................... 34 15 -- --
F-10
<PAGE>
EAGLE TELECOM INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 4 - INCOME TAXES: (continued)
B) Deferred income taxes are provided for differences between financial
statement and income tax reporting. Principal difference is the manner in
which depreciation is computed for financial and income tax reporting
purposes.
NOTE 5 - PREFERRED STOCK, STOCK OPTIONS AND WARRANTS:
In July, 1996, the Board of Directors and majority shareholders authorized
5,000,000 shares of Preferred Stock with a par value of $.001. As of
February 28, 1997, no Preferred Stock has been issued.
In July, 1996, the Board of Directors and majority shareholders adopted a
stock option plan under which 400,000 shares of Common Stock have been
reserved for issuance. As of February 28, 1997, no options have been
granted pursuant to such plan.
In May of 1996, the Company received an aggregate of $375,000 in bridge
financing in the form of interest-free convertible notes from unaffiliated
individuals. Holders of $369,000 of these notes converted into 369,000
shares of Company common stock, and the balance of $6,000 was retired in
November of 1996. In conjunction with the issuance of such indebtedness,
the Company has agreed to issue such investors $.50 Warrants to purchase
375,000 shares of common stock, and $5.00 Warrants to purchase up to
700,000 shares of common stock.
The valuation utilized for the shares and warrants issued for the
convertible debt was based upon the discounted value used for the
previously issued shares and warrants attributable to the $500,000.
The Company has issued the following warrants which have since been
exercised:
700,000 stock purchase warrants which expire July, 2001. The
warrants are to purchase fully paid and non-assessable shares of the
common stock, par value $.001 per share at a purchase price of $.01
per share. These warrants were exercised as of February 28, 1997.
F-11
<PAGE>
EAGLE TELECOM INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 5 - PREFERRED STOCK, STOCK OPTIONS, AND WARRANTS: (continued)
The Company has issued and outstanding the following warrants which have
not yet been exercised at February 28, 1997:
1,050,000 stock purchase warrants which expire July, 1999. These
warrants are subject to restrictions regarding the timing of
exercise, the ability of the Company to become a public company and
future marketability of the common stock. The warrants are to
purchase fully paid and non-assessable shares of the common stock,
par value $.001 per share at a purchase price of $.05 per share.
These warrants, however, are not exercisable until and unless the
shares of Common Stock trade at a minimum of $5.50 per share for
twenty consecutive trading days, yet still expire July, 1999 if not
exercised.
1,375,000 stock purchase warrants which expire July, 1999. These
warrants are subject to restrictions regarding the timing of
exercise, the ability of the Company to become a public company and
future marketability of the common stock. The warrants are to
purchase fully paid and non-assessable shares of the common stock,
par value $.001 per share at a purchase price of $.50 per share.
These warrants, however, are not exercisable until and unless the
shares of Common Stock trade at a minimum of $5.50 per share for
twenty consecutive trading days, yet still expire July, 1999 if not
exercised.
425,000 stock purchases warrants which expire July, 1999. The
warrants are to purchase fully paid and non-assessable shares of the
common stock, par value $.001 per share at a purchase price of $5.00
per share. These warrants are subject to restrictions regarding the
timing of exercise, the ability of the Company to become a public
company and future marketability of the common stock.
4,748,334 Class A stock purchase warrants which expire August 31,
2000. These warrants are subject to restrictions regarding the
timing of exercise, the ability of the Company to become a public
company and future marketability of the common stock. The warrants
are to purchase fully paid and non-assessable shares of the common
stock, par value $.001 per share at a purchase price of $4.00 per
share. If, however, the closing bid price of the Common Stock shall
have equaled or exceeded $5.50 per share for a period of twenty
consecutive trading days at any time, the Company may redeem the
Class A Warrants by paying holders $.05 per Class A Warrant.
4,748,334 Class B stock purchase warrants which expire August 31,
2000. These warrants are subject to restrictions regarding the
timing of exercise, the ability of the Company to become a public
company, and future marketability of the common stock. The warrants
are to purchase fully paid and non-assessable shares of the common
stock, par value $.001 per share, at a purchase price if $6.00 per
share. If, however, the closing bid price of the Common Stock shall
have equaled or exceeded $7.50 per share for a period of twenty
consecutive trading days at any time, the Company may redeem the
Class B Warrants by paying holders $.05 per Class B Warrant.
F-12
<PAGE>
EAGLE TELECOM INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 5 - PREFERRED STOCK, STOCK OPTIONS, AND WARRANTS: (continued)
483,334 Class C stock purchase warrants which expire August 31,
2000. These warrants are subject to restrictions regarding the
timing of exercise, the ability of the Company to become a public
company, and future marketability of the common stock. The warrants
are to purchase fully paid and non-assessable shares of the common
stock, par value $.001 per share, at a purchase price if $2.00 per
share. If, however, the closing bid price of the Common Stock shall
have equaled or exceeded $7.50 per share for a period of twenty
consecutive trading days at any time, the Company may redeem the
Class C Warrants by paying holders $.05 per Class C Warrant.
The warrants outstanding are segregated into two categories (exercisable
and non-exercisable). They are summarized as follows:
CLASS OF EXERCISABLE EXERCISE
WARRANTS FEB. 28, 1997 AUG. 31, 1996 NON-EXERCISABLE PRICE
- ------------------- ------------- ------------- --------------- --------
$ .01 ............. Exercised 700,000 -- $ .01
.05 ............. -- -- 1,050,000 .05
.50 ............. -- -- 1,375,000 .50
5.00 ............. 425,000 425,000 -- 5.00
A ............. 4,748,334 4,748,334 -- 4.00
B ............. 4,748,334 4,748,334 -- 6.00
C ............. 483,334 -- -- 2.00
---------- ---------- ---------
Total ......... 10,405,002 10,621,668 2,425,000
========== ========== =========
NOTE 6 - RELATED PARTY TRANSACTIONS:
In April 1996, the Hou - Tex Trust, Bailey Trust, Futer Family Trust, and
John Nagle contributed inventory and property to the Company in the
amounts of $200,000 and $300,000, respectively. The Company also acquired
$260,000 of net assets. The Company borrowed $145,395 and assumed
liabilities totaling $114,612.
Additionally, the Company issued a note payable to an affiliate in the
amount of $155,000 and concurrently issued 4,500,000 shares of common
stock for $345,395 .
For the period ended February 28, 1997, 1,908,000 shares had been issued
to the Re-alt Group, LLC. and Messrs. Clifford and Barton for advances
attributable to syndication costs
F-13
<PAGE>
EAGLE TELECOM INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 7 - SEGMENT INFORMATION:
The Company had gross revenues of $2,376,629 for the period September 1,
1996 through February 28, 1997. The following parties individually
represent a greater than ten percent of these revenues.
February 28, 1997
CUSTOMER AMOUNT PERCENTAGE
Link Two Communications, Inc. $ 862,268 36.28 %
Houston Telephone 442,578 18.62 %
$ 1,304,846 54.90 %
============= =======
At August 31, 1996, no parties comprised a greater than ten percent of
revenues.
NOTE 8 - INVESTMENT IN LINK TWO COMMUNICATIONS, INC.:
During the quarter ended February 28, 1997, the Company has earned a
minority interest of eight percent in Link Two Communications, Inc. This
interest has been earned through finance charges which have been accrued
on accounts receivable owed to the Company by Link Two Communications,
Inc.
NOTE 9 - RISK FACTORS:
At February 28, 1997, Link Two Communications, Inc. constituted 36.28% of
the Company's gross revenues and 47.96% of the Company's accounts
receivable. Although the Company generates such a large portion of its
gross income and accounts receivable from Link Two Communications, Inc.,
it is management's belief that due to the relationship between the
companies, this scenario presents no credit or economic risk factors for
the Company.
NOTE 10 - SHAREHOLDERS' ADVANCES:
Certain officers and an employee advanced the Company $290,000. At
February 28, 1997 and August 31, 1996 the Company owes $185,000 and
$290,000, respectively.
F-14
<PAGE>
EAGLE TELECOM INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 11 - FOREIGN OPERATIONS:
Although the Company is based in the United States, its product is sold on
the international market. Presently, international sales total 2.9 % and
1.9% at February 28, 1997 and August 31, 1996, respectively.
NOTE 12 - COMMITMENTS AND CONTINGENT LIABILITIES:
The Company leases its primary office space for $7,931 per month under a
non-cancelable lease expiring on March 31, 1999.
Future obligations under the lease terms are:
Period Ending
FEB. 28, AMOUNT
----------
1998................... $ 95,172
1999................... 95,172
2000................... 15,862
----------
Total $ 206,206
==========
NOTE 13 - SUBSEQUENT EVENTS:
Subsequent to February 28, 1997, the Company has finished a private
placement dated January 1997. In return for the $367,500 investment, the
shareholders received 245,000 primary shares of common stock; 245,000
Class A warrants; 245,000 Class B warrants; and 566,666 Class C warrants.
F-15
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Eagle Telecom International, Inc.
We have audited the accompanying balance sheet of Eagle Telecom International,
Inc. as of August 31, 1996 and 1995, and the related statements of earnings,
shareholders' equity, and cash flows for the years ended August 31, 1996, 1995
and 1994. These financial statements are the responsibility of Eagle Telecom
International, Inc. management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audit, the financial statements referred to above
present fairly, in all material respects, the financial position of Eagle
Telecom International, Inc. as of August 31, 1996 and 1995, and the results of
their operations, shareholders' equity, and their cash flows for the years ended
August 31, 1996, 1995 and 1994 in conformity with generally accepted accounting
principles.
MCMANUS & CO., P.C.
McManus & Co., P.C.
Certified Public Accountants
Morris Plains, New Jersey
September 25, 1996
F-16
<PAGE>
[ALTERNATE PAGE FOR OFFERING PROSPECTUS]
SUBJECT TO COMPLETION, DATED __________, 1997
EAGLE TELECOM INTERNATIONAL, INC.
3,000,000 SHARES OF COMMON STOCK
All of the 3,000,000 shares of common stock, par value $.001 per share
("Common Stock") are being offered by Eagle Telecom International, Inc. (the
"Company").
Prior to this offering there has been no public market for the
Company's securities. It is currently estimated that the initial public offering
price of the Common Stock will be between $_____and $____ per share. See
"Underwriting" for information considered in determining the initial public
offering price. The Company has applied for inclusion of the Common Stock in the
Nasdaq SmallCap Market and the Boston Stock Exchange.
--------------------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE, INVOLVE A HIGH DEGREE OF RISK
AND SUBSTANTIAL IMMEDIATE DILUTION AND SHOULD NOT BE PURCHASED BY ANYONE
WHO CANNOT AFFORD THE LOSS OF HIS ENTIRE INVESTMENT. SEE "RISK FACTORS"
BEGINNING ON PAGE 5 AND "DILUTION."
----------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Underwriting
Discounts and Proceeds to
Price to Public Commissions(1) Company(2)
Per Share.............$ $ $
Total(3)..............$ $ $
========================================= ===================== ==============
(1) Does not include compensation to _____________. ("Representative") in the
form of a non-accountable expense allowance of__ __ percent of the gross
proceeds of this offering. For a discussion of indemnification
arrangements with the Underwriters and additional compensation payable to
the Representative, see "Underwriting."
(2) Before deducting estimated offering expenses of $______________ payable by
the Company, including the non-accountable expense allowance.
(3) The Company has granted to the Underwriters a 45-day option to purchase up
to an additional 300,000 shares of Common Stock to cover over- allotments,
if any. If such option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$______________________, $______________________ and $__________________,
respectively. See "Underwriting."
---------------------------
The Common Stock is offered, subject to prior sale, when, as and if
delivered to and accepted by the Underwriters. The Underwriters reserve the
right to withdraw, cancel or modify the offering and to reject any orders in
whole or in part. It is expected that delivery of the Common Stock will be made
in the offices of _____________________________ on or about ____________, 1997.
[--------------------]
The date of this Prospectus is , 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE OVER-THE-COUNTER MARKET, OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
[Insert Photo]
2
<PAGE>
[ALTERNATE PAGE FOR OFFERING PROSPECTUS]
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL DATA (INCLUDING FINANCIAL STATEMENTS AND NOTES
THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL
INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE REPRESENTATIVE'S OVER-ALLOTMENT
OPTION IS NOT EXERCISED.
THE COMPANY
Eagle Telecom International, Inc. (the "Company" or "Eagle") is a
worldwide supplier of telecommunications equipment and related software used by
service providers in the paging and other wireless personal communications
markets. The Company designs, manufactures, markets and services its products
under the Eagle name. These products include transmitters, receivers,
controllers, software and other equipment used in personal communications
systems (including paging, voice messaging, cellular and message management and
mobile data systems) and radio and telephone systems. The Company's products are
primarily purchased by its customers on an order by order basis, and not
pursuant to any long-term contracts. Company customers include Motorola
Communications and Electronics, Inc. ("Motorola"), Ericsson, Inc., Mobil- Media,
Inc., Pac-Tel, Paging Network, Inc., Norwegian Telecom, Inc., and Link-Two
Communications, Inc. ("Link II"). The Company has a broad line of products
covering the paging spectrum as well as specific personal communication systems
("PCS") and specialized mobile radio ("SMR") products, and products that have
been tested and approved by the Federal Communications Commission ("FCC").
The Company was incorporated in May 1993, but did not conduct any
substantive business operations until April 1996. In September 1996, the Company
amended its articles of incorporation and changed its name to its current name.
Unless otherwise indicated, all information in this Prospectus has been adjusted
to reflect the amended articles of incorporation. The Company's principal place
of business is located at 910 Gemini, Houston, Texas 77058 and its telephone
number is (281) 280-0488.
THE OFFERING
Common Stock Outstanding
Prior to Offering............................ 11,470,334 shares(1)
Common Stock Offered........................... 3,000,000 shares
Common Stock to be Outstanding
After the Offering........................... 14,470,334 shares (1)
Estimated Net Proceeds to the Company $_______
Use of Proceeds................................ Working capital.
See "Use of Proceeds."
Risk Factors................................... Prospective purchasers are
urged to carefully review the
factors set forth in
"Risk Factors."
Nasdaq SmallCap Symbol......................... ____
- ----------------
(1) Does not include (i) 13,886,668 shares of Common Stock underlying
outstanding warrants including: (a) class A warrants to purchase an
aggregate of 4,993,334 shares of Common Stock at $4.00 per share, which
expire in August 2000 ("Class A Warrants"), (b) class B warrants to
purchase an aggregate of 4,993,334 shares of Common Stock at $6.00 per
share, which expire in August 2000 ("Class B Warrants"), (c) warrants to
purchase 1,050,000 shares of Common Stock at $.05 per shares which expire
in July 1999 ($.05 Warrants"), (d) warrants to purchase 1,375,000 shares of
Common Stock at $.50 per share which expire in July 1999 ("$.50 Warrants"),
(e) class C warrants to purchase 1,050,000 shares of Common Stock at $2.00
per share which expire in August 2000 ("Class C Warrants"), and (f)
warrants to purchase 425,000 shares of Common Stock at $5.00 per share
which expire in September 1999 ("$5.00 Warrants") (such Class A Warrants,
Class B Warrants, Class C Warrants, $.05 Warrants, $.50 Warrants and $5.00
Warrants collectively, "Warrants") and (ii) _______ shares of Common Stock
reserved for issuance upon exercise of the Representative's warrant
("Representative's Warrant").
See "Description of Capital Stock" and "Underwriting."
3
<PAGE>
[ALTERNATE PAGE FOR OFFERING PROSPECTUS]
RISK FACTORS
AN INVESTMENT IN THE COMPANY SECURITIES INVOLVES CERTAIN RISKS. PROSPECTIVE
INVESTORS SHOULD CAREFULLY REVIEW THE FOLLOWING FACTORS TOGETHER WITH THE OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS PRIOR TO MAKING AN INVESTMENT DECISION.
LIMITED OPERATING HISTORY OF THE COMPANY
The Company has a limited operating history and, accordingly, is subject to
all the substantial risks inherent in the commencement of a new business
enterprise. Additionally, the Company has a very limited business history that
investors can analyze to aid them in making an informed judgement as to the
merits of an investment in the Company. Any investment in the Company should be
considered a high risk investment because the investor will be placing funds at
risk in a company with unforeseen costs, expenses, competition and other
problems to which ventures are often subject. The Company's prospects must be
considered in light of the risks, expenses and difficulties encountered in
establishing a new business in a highly competitive industry characterized by
rapid technological development. The Company had net sales of $1,018,441 and net
earnings of $32,204 for the period ended August 31, 1996, net sales of
$2,376,629 and net earnings of $466,470 for the six month period ended February
28, 1997, may incur losses in the future, and there can be no assurance when or
if the Company will sustain long-term profitability. The Company's financial
statements for the period ended August 31, 1996 reflect the commencement of
manufacturing and sales since April 1996. See "Management's Discussion and
Analysis of Financial Condition."
CAPITAL REQUIREMENTS; LIMITED SOURCES OF LIQUIDITY
The Company requires substantial capital to pursue its operating strategy.
Since inception the Company has primarily funded its capital requirements
through the private issuance for cash of 4,993,334 shares of Common Stock, Class
A Warrants, Class B Warrants and Class C Warrants grossing $6,543,501. For the
six months ended February 28, 1997, the Company obtained $2,967,427 of cash
provided by financing activities and used $1,034,729 of cash in operations. At
August 31, 1996, the Company had working capital of $1,657,320, and for the six
month period ended February 28 1997, working capital of $5,534,581. As the
Company has limited internal sources of liquidity, it will continue to rely on
external sources of liquidity, and for the foreseeable future, the Company's
principal source of working capital will be from proceeds of this offering. The
Company has not established any lines of credit or financing with financial
institutions or other unrelated third parties. The Company may need to raise
additional capital, in addition to the proceeds of this offering, to satisfy its
business plan. The Company believes that its current working capital, along with
the proceeds of this offering and revenues from operations, will satisfy the
Company's capital requirements through 1977; however, such time may be shorter
or longer depending on the revenues generated, and expenses incurred. There is
no assurance that the Company will generate sufficient cash in future periods to
satisfy its capital requirements. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
DEPENDENCE ON CERTAIN CUSTOMERS
The Company's two largest customers accounted for approximately 36% and
19%, respectively, of the Company's revenue during the six months ended February
28, 1997. Link II accounted for approximately 38% of the Company's revenue in
such period and owed the Company $862,268 at February 28, 1997, approximately
59% of the accounts receivable at February 28, 1997. Certain principal
stockholders (or affiliates thereof) of the Company, including James Futer,
executive vice present, director and chief operating officer and A.L. Clifford,
a director of the Company and are also principal stockholders of Link II. Mr.
Clifford is also the chairman, president and chief executive officer of Link II
and Dr. Cubley is a director of Link II. In addition, the Company and Link II
have executed an agreement, whereby the Company would receive up to an 8% equity
interest in lieu of accruing finance charges on the outstanding balance owed by
Link II to the Company. Under the agreement, equity in Link II is earned at the
rate of 0.2% per month per $100,000 payable and outstanding for more than 30
days. As of February 27, 1997, the Company had earned the full 8% equity
interest to be evidenced by the issuance of 2,400,000 shares of Link II common
stock to the Company. Many of the Company's customers contract with the Company
on a purchase order basis, which may result in fluctuations of revenue during
various periods. The sudden loss of a significant customer could have a material
adverse effect on the Company's business. See "Business-Customers" and
"Management-Certain Transactions."
5
<PAGE>
[ALTERNATE PAGE FOR OFFERING PROSPECTUS]
LACK OF CASH DIVIDENDS
It is not anticipated that any cash dividends will be paid to stockholders
in the foreseeable future. See "Dividend Policy."
IMMEDIATE DILUTION; DISPROPORTIONATE RISK OF LOSS
Based on an initial public offering price of $_______ per share, purchasers
will incur immediate and substantial dilution of $___ per share in the pro forma
net tangible book value per share of their investment. In addition, purchasers
in this offering will be contributing approximately ___% of the total capital
consideration to the Company, but will receive only ___% of the shares
outstanding. Accordingly, in the aggregate, purchasers in this offering will
bear a greater risk of loss than the current stockholders. See "Dilution."
NO ASSURANCE OF A PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE, SHARES
ELIGIBLE FOR FUTURE SALE
While the Common Stock to be sold pursuant to this offering will be free of
restrictions on transferability, as of the date of this Prospectus, there is
presently no public trading market for the Company's Common Stock and there is
no assurance that a public market will develop after this offering, or if one
develops, that it will not be volatile. In the event that any market develops
for the Company securities, the market price of the Common Stock may experience
fluctuations that are unrelated to the operating performance of, or announcement
concerning, the Company. Securities of issuers having relatively limited
capitalization or securities recently issued in a public offering, such as the
Company, are particularly susceptible to change based on short-term trading
strategies of certain investors. Although the initial public offering price of
the Common Stock reflects the Company's and the Representative's assessment of
current market conditions, there can be no assurance that the price of the
Company's securities will be maintained following the offering. Accordingly,
purchasers may not be able to resell their Common Stock at or above the public
offering price, and a purchaser may not be able to liquidate his investment even
at a loss without considerable delay. See "Underwriting"
Upon the closing of this offering, a total of 14,470,334 shares of Common
Stock will be outstanding. The 3,000,000 shares of Common Stock offered hereby
will be eligible for immediate resale in the public market. In addition,
13,886,668 shares of Common Stock will be issuable upon exercise of the
Warrants, although all of such shares will be subject to the resale provisions
of Rule 144 promulgated under the Act. Of the remaining 11,470,334 shares of
Common Stock outstanding, (i) 5,268,334 shares are eligible for immediate resale
pursuant to a prospectus (the "Resale Prospectus") relating to the registration
for resale of such shares, issued to non-affiliates of the Company, that became
effective on the date of this Prospectus, and (ii) 6,202,000 shares will be
subject to resale pursuant to the provisions of Rule 144 and will become subject
to an 18-month lock-up agreement, with one-third of such shares released from
such lock-up every six moths from the date of this Prospectus. Sales of Common
Stock in the public market may have an adverse effect on prevailing market
prices for the Common Stock. See "Shares Eligible for Future Sale."
6
<PAGE>
[ALTERNATE PAGE FOR OFFERING PROSPECTUS]
PENNY STOCK REGULATION
The SEC has adopted rules that regulate broker-dealer practices in
connection with transactions in "penny stocks." Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the Nasdaq
system, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange system). The penny
stock rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document prepared by the SEC that provides information about penny stocks and
the nature and level or risks in the penny stock market. The broker-dealer also
must provide the customer with bid and offer quotations for the penny stock for
the compensation of the broker-dealer, and its salesperson in the transaction,
and monthly account statements showing the market value of each penny stock held
in the customer's account. In addition, the penny stock rules requires that
prior to a transaction in a penny stock not otherwise exempt from such rules,
the broker-dealer must make a special written determination that a penny stock
is a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in any secondary market for a stock
that becomes subject to the penny stock rules, and accordingly, investors in
Company securities may find it difficult to sell their securities, if at all.
AUTHORIZED STOCK
The Board of Directors of the Company has the authority to issue up to
5,000,000 shares of "blank check" preferred stock with such designations, rights
and preferences as may be determined by the Board of Directors. Accordingly, the
Board of Directors of the Company is empowered, without further shareholder
approval, to issue preferred stock with dividend, liquidation, conversion,
voting or other rights which could adversely affect the voting power or other
rights of the holders of the Company's Common Stock. Certain companies have used
the issuance of preferred stock as an anti-takeover device and the Board of
Directors could, without further shareholder approval, issue preferred stock
with certain rights that could discourage an attempt to obtain control of the
Company in a transaction not approved by the Board of Directors. The Board of
Directors of the Company also has authority to issue up to 100,000,000 shares of
Common Stock. See "Description of Capital Stock."
LACK OF DISINTERESTED, INDEPENDENT DIRECTORS
All of the directors of the Company have a direct financial interest in the
Company. While management believes that its current directors will be able to
exercise their fiduciary duties as directors, the Company intends to add an
independent, disinterest ed director to serve on the Board of Directors in the
near future. See "Management."
DETERMINATION OF OFFERING PRICE
The public offering of the Common Stock has been determined through
negotiations between the Representative and the Company. The price does not
necessarily bear any relationship to the Company's assets, book value, earnings
or other established criteria for valuing a company. Accordingly, the offering
price should not be considered an indication of the actual value of the
Company's securities. In determining the number of shares of Common Stock to be
offered and the offering price, the Company and the Representatives considered
the Company's history, capital structure, results of operations and financial
condition, prospects for the Company and for the industry in general, and the
general condition of the securities market.
7
<PAGE>
[ALTERNATE PAGE FOR OFFERING PROSPECTUS]
USE OF PROCEEDS
The net proceeds to the Company from the sale of 3,000,000 shares of Common
Stock being offered hereby are estimated to be approximately $___________
($______________ if the Underwriters' over-allotment option is exercised in
full) assuming an initial public offering price of $_______ per share and after
deducting underwriting discounts and estimated offering expenses. The Company
intends to use the proceeds for (i) acquisition of $____________ of inventory,
(ii) funding of new product development, new facility and manufacturing area
expansion of $______________ and (iii) the balance for other general corporation
purposes.
To the extent such proceeds are not used immediately for the above
purposes, such funds will be deposited in interest bearing accounts or invested
in short-term, interest-bearing, investment-grade securities. Management of the
Company may, at is discretion, reallocate the application of such proceeds, as
it determines in the interest of the Company.
DILUTION
Set forth below is a description of dilution to purchasers of the Company
Common Stock, assuming the sale of 3,000,000 shares of Common Stock in this
offering..
As of February 28, 1997, the pro-forma net tangible book value of the
Company's Common Stock was $__________ or $___ per share. "Net Tangible book
value per share" represents the amount of total tangible assets less total
liabilities of the Company. Without taking into account any changes in net
tangible book value after February 28, 1997, the pro-forma book value of the
Common Stock after the sale of 3,000,000 shares of Common Stock for net proceeds
of $_________, will be $____ per share. Consequently, the purchasers of the
shares of Company Common Stock in this offering will sustain an immediate
substantial dilution (i.e., the difference between the offering price of $____
and the pro forma net tangible book value per share) after such offering of
$____ per share. The following table illustrates such dilution:
Pro forma Net Tangible Book Value of Outstanding
Common Stock........................................................$
Offering Price of the Common Stock ...................................$
Increase Attributable to Offering.....................................$
Pro forma Net Tangible Book Value After Offering......................$
Per Share Dilution to New Investors...................................$
The following table sets forth, as of the date of this Prospectus, the
total number of shares of Common Stock purchased from the Company, the total
consideration recorded and the average price per share for (i) existing holders
of Common Stock for shares acquired since inception and (ii) the new investors.
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
Existing shareholders(1)..11,470,334 79.3% (1) %
New shareholders(2)....... 3,000,000 20.7% (3) %
Total..................... 14,470,334 100.0% %
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(1) Prior to deducting any expenses associated with the issuances.
(2) Does not include shares underlying the Representative's Warrants.
(3) Prior to deducting any underwriting discounts and commissions and
estimated expenses of the offering.
8
<PAGE>
[ALTERNATE PAGE FOR OFFERING PROSPECTUS]
SHARES AVAILABLE FOR FUTURE SALE
Upon the closing of this Offering, there will be 14,470,334 shares of
Common Stock issued and outstanding and up to 13,886,668 additional shares will
be issuable upon exercise of the Warrants. The 3,000,000 shares of Common Stock
offered hereby will be eligible for immediate resale in the public market. In
addition, an aggregate of 5,268,334 shares of Common Stock currently outstanding
are eligible for immediate resale in the public market pursuant to the Resale
Prospectus registering the resale of such shares. The remaining 6,202,000 shares
of Common Stock outstanding and all 13,886,668 shares issuable upon exercise of
the Warrants will be subject to the resale provisions of Rule 144 and the shares
currently outstanding will be subject to an 18-month contractual lock-up with
___________, restricting the resale of such shares for six months after the date
of the Resale Prospectus, with 33% freely tradeable after six months after the
date of the Resale Prospectus, 33% freely tradeable after the next six months
and 33% freely tradeable after the next six months. Sales of shares of Common
Stock in the public markets may have an adverse effect on prevailing market
prices for the Common Stock.
Rule 144 governs resale of "restricted securities" for the account of any
person (other than an issuer), and restricted and unrestricted securities for
the account of an "affiliate" of the issuer. Restricted securities generally
include any securities acquired directly or indirectly from an issuer or its
affiliates which were not issued or sold in connection with a public offering
registered under the Act. An affiliate of the issuer is any person who directly
or indirectly controls, is controlled by, or is under common control with, the
issuer. Affiliates of the Company may include its directors, executive officers,
and persons directly or indirectly owning 10% or more of the outstanding Common
Stock. Under Rule 144 unregistered resales of restricted Common Stock cannot be
made until it has been held for one year from the later of its acquisition from
the Company or an affiliate of the Company. Thereafter, shares of Common Stock
may be resold without registration subject to Rule 144's volume limitation,
aggregation, broker transaction, notice filing requirements, and requirements
concerning publicly available information about the Company ("Applicable
Requirements"). Resales by the Company's affiliates of restricted and
unrestricted Common Stock are subject to the Applicable Requirements. The volume
limitations provide that a person (or persons who must aggregate their sales)
cannot, within any three-month period, sell more than the greater of one percent
of the then outstanding shares, or the average weekly reported trading volume
during the four calendar weeks preceding each such sale. A non-affiliate may
resell restricted Common Stock which has been held for two years free of the
Applicable Requirements.
UNDERWRITING
A syndicate of Underwriters named below (the "Underwriters"), for whom
____________. is acting as Representative, has severally agreed, subject to the
terms and conditions of the Underwriting Agreement dated as of the date of this
Prospectus, to purchase from the Company the number of shares set forth opposite
the name of each such Underwriter below:
Number
of
UNDERWRITER SHARES
Total ......................................3,000,000
=========
The Underwriting Agreement provides that the obligations of the Company
are subject to certain conditions precedent. The nature of the Underwriters'
obligation is that they are committed to purchase all shares offered hereby if
any of the shares are purchased. In the event of a default by any Underwriter,
the Underwriting Agreement provides that, in certain circumstances, the purchase
commitments of nondefaulting underwriters may be increased.
21
<PAGE>
[ALTERNATE PAGE FOR OFFERING PROSPECTUS]
The Company has been advised by the Representative that the
underwriters propose to offer the shares to the public at the initial offering
price set forth on the cover page of this Prospectus and to certain dealers at
such price less a concession not to exceed $____ per share, and that
underwriters may allow, and such dealers may re-allow, a concession not to
exceed $_____ per share to certain other dealers. After commencement of the
offering, the public offering price and other selling terms may be changed by
the Representative. The Underwriters do not anticipate that sales to
discretionary accounts will exceed one percent of the total number of shares of
Common Stock.
The Company has granted to the Underwriters an option, exercisable for
45 days from the date of this Prospectus, to purchase up to an aggregate of
300,000 additional shares Common Stock on a pro rata basis on the same terms as
set forth on the cover page of this Prospectus, solely to cover over-allotments,
if any, incurred in the sale of the shares of Common Stock offered hereby. To
the extent that the Underwriters exercise such options, each of the Underwriters
will have a firm commitment, subject to certain conditions, to purchase
approximately the same percentage of such additional shares of Common Stock that
the number of shares to be purchased by it shown in the table above bear to the
total number of shares initially offered hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Act, or to contribute to payments
the Underwriters may be required to make in respect thereof.
The Company has agreed to pay the Representative a non-accountable
expense allowance equal to ___% of the gross proceeds of this offering.
In connection with this offering, the Company has agreed to sell to the
Representative, for nominal consideration, warrants to purchase from the Company
_______ shares of Common Stock (the "Representative's Warrant"). The
Representative's Warrant (i) is exercisable at an exercise price of 120% of the
initial offering price per share for a period of five years, commencing one year
from the date of this Prospectus; (ii) contains provisions providing for
adjustment of the exercise price and the type of securities issuable upon
exercise thereof upon the occurrence of certain events; and (iii) grants to the
holder thereof certain registration rights in respect of the securities issuable
upon the exercise thereof.
Before this offering, there has been no public market for the Company's
securities. The initial public offering price of the shares was determined by
negotiation between the Company and the Representative and does not necessarily
bear any relationship to the Company's assets, book value, revenues or other
established criteria of value, and should not be considered indicative of the
actual value of the Common Stock. Factors considered in determining such public
offering price, in addition to prevailing market conditions, include the history
of, and prospects for, the industry in which the Company competes, an assessment
of the Company's management, its past and present operations, the prospects of
the Company, its capital structure and such other factors as were deemed
relevant.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to copies
of such agreements, which are filed as exhibits to the Registration Statement of
which this Prospectus is a part. See "Available Information."
22
<PAGE>
[ALTERNATE PAGE FOR OFFERING PROSPECTUS]
LEGAL MATTERS
Certain legal matters with respect to the issuance of shares of Common
Stock offered hereby will be passed upon for the Company by Brewer & Pritchard,
P.C., Houston, Texas. Principals of Brewer & Pritchard, P.C. own $.05 Warrants
to purchase 12,500 shares of Common Stock and $5.00 Warrants to purchase 12,500
shares of Common Stock. Certain legal matters in connection with the shares of
Common Stock offered hereby will be passed upon for the Underwriters by
_______________________.
EXPERTS
The audited financial statements as of August 31, 1996 included in this
Prospectus have been included herein in reliance upon the report of McManus &
Co., P.C., independent accountants, given on the authority of said firm as
experts in auditing and accounting.
AVAILABLE INFORMATION
The SEC maintains a Web site on the Internet that contains reports,
proxy and information statements and other information regarding issuers that
file electronically with the Commission. The address of the site is
http://www.sec.gov. Visitors to the site may access such information by
searching the EDGAR data base on the site.
Prior to the date of this Prospectus, the Company was not subject to
the information and reporting requirements of the Securities Exchange Act of
1934, as amended ("Exchange Act"). As a result, the Company will become subject
to such requirements and, in accordance therewith, the Company will file
periodic reports, proxy materials and other information with the Securities and
Exchange Commission (the "SEC"). The Company will provide its shareholders with
annual reports containing audited financial statements and, if determined to be
feasible, quarterly reports for the first three quarters of each fiscal year
containing unaudited financial information. The Company has filed a registration
statement on Form SB-2 ("Registration Statement") under the Securities Act of
1933, as amended ("Act"), with respect to the securities being registered. This
Prospectus does not contain all the information set forth in the Registration
Statement and the exhibits and schedules thereto, to which reference is hereby
made. Copies of the Registration Statement and its exhibits are on file at the
offices of the Commission and may be obtained upon payment of the fees
prescribed by the Commission or may be examined, without charge, at the public
reference facilities of the Commission. The Company will provide without charge
to each person who receives a copy of this Prospectus, upon written or oral
request of such person, a copy of any of the information that is incorporated by
reference in this Prospectus (not including exhibits to the information that is
incorporated by reference unless the exhibits are themselves specifically
incorporated by reference). Such request should be directed to the Company,
attention Scott A. Cubley, at 910 Gemini, Houston, Texas 77058.
23
<PAGE>
[ALTERNATE PAGE FOR OFFERING PROSPECTUS]
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OFFERED HEREBY, OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OFFERED HEREBY TO OR FROM ANY PERSON IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE BUSINESS OR AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION IN THIS PROSPECTUS IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE AS OF WHICH SUCH INFORMATION IS
FURNISHED.
-------------
TABLE OF CONTENTS
PAGE
Available Information...................................................... 2
Prospectus Summary......................................................... 3
Risk Factors............................................................... 5
Use of Proceeds............................................................ 8
Dilution................................................................... 9
Dividend Policy............................................................ 9
Capitalization............................................................. 10
Management's Discussion and Analysis of Financial
Condition
and Results of Operations............................................... 10
Business................................................................... 11
Management................................................................. 18
Principal Stockholders..................................................... 21
Description of Capital Stock............................................... 22
Shares Eligible for Future Sale............................................ 23
Underwriting............................................................... 24
Legal Matters.............................................................. 25
Experts.................................................................... 25
Index to Financial Statements..............................................F-1
------------------
UNTIL _______________, 1997 (25 DAYS FROM THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THE DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO SUBSCRIPTIONS.
3,000,000 Shares
Eagle Telecom International,
Inc.
-------------------
PROSPECTUS
-----------------
[ ]
___________, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
A The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
B. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
C. To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (A) and (B), or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
D. Any indemnification under subsections (A) and (B) (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (A) and (B). Such
determination shall be made (i) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than a quorum, or
(ii) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (iii) by the stockholders.
E. Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized by the Articles of Incorporation. Such expenses
(including attorneys' fees) incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the Board of Directors deems
appropriate.
F. The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
II-1
<PAGE>
G. The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under the Articles of Incorporation.
H. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be
incurred in connection with the distribution of the securities being registered.
The expenses shall be paid by the Registrant.
SEC Registration Fee.......................................$______
NASD Registration Fee...................................... ______
Printing and Engraving Expenses............................ 5,000
Legal Fees and Expenses.................................... *
Accounting Fees and Expenses............................... *
Blue Sky Fees and Expenses................................. 20,000
Transfer Agent Fees........................................ 5,000
Representative's Non-Accountable Expense Allowance......... _____
Miscellaneous.............................................. 20,000
TOTAL................................................. $_____
- --------------------
* To be supplied by Amendment.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In May 1996, the Company issued $375,000 of convertible
indebtedness of which $369,000 was converted into $375,000 worth of shares of
Common Stock and, in connection with the original issuance of such indebtedness,
the Company issued such investors 375,000 $.50 Warrants and 375,000 $5.00
Warrants. The Company believes that the above-captioned transactions are exempt
from registration pursuant to Section 4(2) of the Act as a transaction by an
issuer not involving any public offering.
In July 1996, the Company issued an aggregate of 4,500,000 shares
of Common Stock to certain founders (or affiliates thereof) of the Company for
nominal consideration. The Company believes that the transactions herein are
exempt from registration pursuant to Section 4(2) of the Act as a transaction by
an issuer not involving any public offering.
In July 1996, the Company issued to certain founders $.05 Warrants
to purchase an aggregate of 500,000 shares of Common Stock at an exercise price
of $.05 per share. The Company believes that the above captioned transaction is
exempt from registration pursuant to Section 4(2) of the Act as a transaction by
an issuer not involving any public offering.
In July 1996, the Company issued to certain founders $.50 Warrants
to purchase an aggregate of 500,000 shares of Common Stock at an exercise price
of $.50 per share. The Company believes that the above captioned transaction is
exempt from registration pursuant to Section 4(2) of the Act as a transaction by
an issuer not involving any public offering.
In July 1996, the Company issued to certain founders warrants to
purchase an aggregate of 700,000 shares of Common Stock at an exercise price of
$.01 per share. In February 1997, such warrants were exercised in full. The
Company believes that the above captioned transactions are exempt from
registration pursuant to Section 4(2) of the Act as a transaction by an issuer
not involving any public offering.
II-2
<PAGE>
In July 1996, the Company issued three individuals and one entity
three year warrants to purchase an aggregate of 50,000 shares of Common Stock at
an exercise price of $.05 per share for services rendered. The Company believes
that the above captioned transaction is exempt from registration pursuant to
Section 4(2) of the Act as a transaction by an issuer not involving any public
offering.
In July 1996, the Company issued three individuals and one entity
three year warrants to purchase an aggregate of 50,000 shares of Common Stock at
an exercise price of $5.00 per share for services rendered. The Company believes
that the above captioned transaction is exempt from registration pursuant to
Section 4(2) of the Act as a transaction by an issuer not involving any public
offering.
In August 1996, the Company issued 1,285,000 shares of Common
Stock, 1,285,000 Class A Warrants to purchase 1,285,000 shares of Common Stock
at an exercise price of $4.00 per share, and 1,285,000 Class B Warrants to
purchase 1,285,000 shares of Common Stock at an exercise price of $6.00 per
share to a limited number of investors pursuant to a private offering. The
Company believes that the above captioned transaction is exempt from
registration pursuant to Section 4(2) of the Act as a transaction by an issuer
not involving any public offering.
In November 1996, the Company issued 1,908,000 shares of Common
Stock to two individuals and an entity for services rendered in connection with
the above captioned private offering. The Company believes that the above
captioned transaction is exempt from registration pursuant to Section 4(2) of
the Act as a transaction by an issuer not involving any public offering.
In November 1996, the Company issued two individuals and one entity
three year warrants to purchase an aggregate of 500,000 shares of Common Stock
at an exercise price of $.05 per share for services rendered. The Company
believes that the above captioned transaction is exempt from registration
pursuant to Section 4(2) of the Act as a transaction by an issuer not involving
any public offering.
In November 1996, the Company issued two individuals and one entity
three year warrants to purchase an aggregate of 500,000 shares of Common Stock
at an exercise price of $.50 per share for services rendered. The Company
believes that the above captioned transaction is exempt from registration
pursuant to Section 4(2) of the Act as a transaction by an issuer not involving
any public offering.
In November 1996, the Company issued 870,000 shares of Common
Stock, 870,000 Class A Warrants to purchase 870,000 shares of Common Stock at an
exercise price of $4.00 per share and 870,000 Class B Warrants to purchase
870,000 shares of Common Stock at an exercise price of $6.00 per share to a
limited number of investors pursuant to a private offering. The Company believes
that the above-captioned transactions are exempt from registration pursuant to
Section 4(2) of the Act as a transaction by an issuer not involving any public
offering.
In December 1996, the Company issued 1,110,000 shares of Common
Stock , 1,110,000 Class A Warrants to purchase 1,110,000 shares of Common Stock
at an exercise price of $4.00 per share and 1,110,000 Class B Warrants to
purchase 1,110,000 shares of Common Stock at an exercise price of $6.00 per
share to a limited number of investors pursuant to a private offering. The
Company believes that the above-captioned transactions are exempt from
registration pursuant to Section 4(2) of the Act as a transaction by an issuer
not involving any public offering.
In December 1996, the Company issued 1,000,000 Class A Warrants to
purchase 1,000,000 shares of Common Stock at a purchase price of $4.00 per share
and 1,000,000 Class B Warrants to purchase 1,000,000 shares of Common Stock at a
purchase price of $6.00 per share to certain insiders for services rendered. The
Company believes that the above-captioned transactions are exempt from
registration pursuant to Section 4(2) of the Act as a transaction by an issuer
not involving any public offering.
From January 1997, through April 15, 1997 the Company issued
728,334 shares of Common Stock, 728,334 Class A Warrants to purchase 728,334
shares of Common Stock at an exercise price of $4.00 per share, 728,334 Class B
Warrants to purchase 728,334 shares of Common Stock at an exercise price of
$6.00 per share and 1,050,000 Class C Warrants to purchase 1,050,000 shares of
Common Stock at an exercise price of $2.00 per share to a limited number of
investors pursuant to a private offering. The Company believes that the
above-captioned transactions are exempt from registration pursuant to Section
4(2) of the Act as a transaction by an issuer not involving any public offering.
II-3
<PAGE>
ITEM 27. EXHIBITS
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
1.1(1) From of Underwriting Agreement
3.1(2) Articles of Incorporation of the Company, as amended
3.2(2) By-laws
4.1(2) Form of Common Stock Certificate
4.2(2) Class A Warrant Agreement and Form of Warrant
4.3(2) Class B Warrant Agreement and Form of Warrant
4.4(1) Form of Representative's Warrant
4.5(2) Form of $.05 Warrant
4.6(2) Form of $.50 Warrant
4.7(2) Form of $5.00 Warrant
4.8(1) Class C Warrant Agreement and Form of Warrant
5.1(1) Legal Opinion of Brewer & Pritchard, P.C.
10.1(2) Asset Purchase Agreement
10.2(2) Stock Option Plan
10.3(2) Form of Purchase Order
23.1(3) Consent of McManus & Co., Inc.
23.2(4) Consent of Brewer & Pritchard, P.C.
- ---------------
(1) To be filed by amendment.
(2) Filed as an Exhibit (with the same corresponding Exhibit No. listed herein)
to the Company's Registration Statement on Form SB-2 (File No. 333-20011)
and incorporated herein by reference.
(3) Filed herewith.
(4) Included in Exhibit 5.1
ITEM 28. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement:
i. To include any prospectus required by
Section 10(a)(3) of the Securities Act of
1933;
ii. To reflect in the prospectus any facts or
events arising after the effective date of
the registration statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the registration
statement; and
iii. To include any additional or changed material
information with respect to the plan of
distribution.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a
new registration statement relating to the
securities offered therein, and the offering of
such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities
being registered which remain unsold at the
termination of the offering.
(4) i. That, for the purpose of determining
liability under the Securities Act of 1933,
the information omitted from the form of
prospectus filed as part of this registration
II-4
<PAGE>
statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4), or 497(h) under
the Securities Act of 1933 shall be deemed to be
part of this registration statement as of the time
it was declared effective.
ii. That, for the purpose of determining liability
under the Securities Act of 1933, each
post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration
statement relating to the securities offered
therein, and the offering of such securities at
that time shall be deemed to be the initial BONA
FIDE offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on the 25th day of April,
1997.
Eagle Telecom International, Inc.
By /s/ H. DEAN CUBLEY
H. Dean Cubley, President, Chief
Executive Officer and Director
----------------------------
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ H. DEAN CUBLEY President, Chief Executive Officer April 25, 1997
H. Dean Cubley
/s/ RICHARD ROYALL Chief Financial Officer (Principal April 25, 1997
Richard Royall Financial and Accounting Officer)
/s/ CHRISTOPHER W. FUTER Director April 25, 1997
Christopher W. Futer
/s/ A. L. CLIFFORD Director April 25, 1997
A. L. Clifford
</TABLE>
II-6
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this SB-2 Registration Statement of our report
dated March 21, 1997 on our review of the financial statements of Eagle Telecom
International, Inc. We also consent to the reference to our firm under the
captions "Selected Financial Data" and "Experts".
MCMANUS & CO., P.C.
McManus & Co., P.C.
Certified Public Accountants
Morris Plains, New Jersey
April 25, 1997
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this SB-2 Registration Statement of our report
dated September 25, 1996 on our review of the financial statements of Eagle
Telecom International, Inc. We also consent to the reference to our firm under
the captions "Selected Financial Data" and "Experts".
MCMANUS & CO., P.C.
McManus & Co., P.C.
Certified Public Accountants
Morris Plains, New Jersey
April 25, 1997
