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US SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
Amendment No. 4
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
EUROTELECOM COMMUNICATIONS, INC.
(Name of Small Business Issuer in its Charter)
DELAWARE 87-0409699
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Farfield Park
Wath Upon Dearne
South Yorkshire
England S63 5BD
(Address of Principal Executive Offices)
Tel: 011 44 1709 874600
Issuer's Telephone number
SECURITIES TO BE REGISTERED UNDER SECTION 12(b) OF THE ACT: NOT APPLICABLE
SECURITIES TO BE REGISTERED UNDER SECTION 12(g) OF THE ACT: COMMON STOCK, $.0l
PAR VALUE
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PART I
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Effective date of this Amendment 4 to the Company's registration statement on
Form 10-SB
The narrative sections of this document speak as at December 15, 1999, the date
the Company's registration statement on Form 10-SB became effective. The
financial statements presented with this amendment are the June 30, 1999 audited
financial statements and the unaudited quarterly financial statements ended
September 30, 1999. The management discussion and analysis section at Item 2
covers the periods referred to in those financial statements. Up to date
information on the Company required to be disclosed and filed with the
Securities and Exchange Commission was filed in the Company's last quarterly
report on Form 10-Q on May 19, 2000.
Forward looking statements.
EuroTelecom Communications, Inc. (EuroTelecom or the Company) has included
forward-looking statements in this document. Forward-looking statements include
statements concerning plans, objectives, goals, strategies, expectations, future
events or performance and underlying assumptions and other statements, which are
other than statements of historical facts. Certain statements contained herein
are forward-looking statements and, accordingly, involve risks and
uncertainties, which could cause actual results, or outcomes, to differ
materially from those expressed in the forward-looking statements. EuroTelecom's
expectations, beliefs and projections are expressed in good faith and are
believed by the Company to have a reasonable basis, including without
limitations, management's examination of historical operating trends, data
contained in the Company's records and other data available from third parties,
but there can be no assurance that management's expectations, beliefs or
projections will result or be achieved or accomplished. In addition to other
factors and matters discussed elsewhere herein, the following are important
factors that, in the view of the Company, could cause actual results to differ
materially from those discussed in the forward-looking statements: the ability
of the Company to obtain acceptable forms and amounts of financing to fund
planned acquisitions and operations, technology development, marketing and other
expansion efforts; the global market for technology; and the ability of the
Company to complete proposed acquisitions. The Company has no obligation to
update or revise these forward-looking statements to reflect the occurrence of
future events or circumstances.
1 ITEM 1 - DESCRIPTION OF BUSINESS
1.1 Definitions
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To make the narrative descriptions of the Company's business more understandable
the following definitions have been provided:
"AIM" Alternative Investment Market of The London
Stock Exchange Limited
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"application linking" the provision and management of end user
applications within building structures and
building complexes, usually by means of an
integrated fiber optic and or wireless platform
which is supplied under a single service
contract with the Group. The term "linking" is
an established technology term used to describe
the joining of a "path" between two nodes.
Application linking is used as a generic term to
describe the linking of end user applications on
a single path and node structure comprising the
"application linking platform"
"application linking platform" the term used by the Company to describe a means
of providing a communication path between a
series of devices, or nodes, in a network
linking together different end user applications
"application service provider" a service that hosts business application
or "ASP" software for third parties to access over the
Internet
"CCTV" closed circuit television
"Company" or "EuroTelecom" EuroTelecom Communications, Inc.
"connectivity solutions" the ability to connect electronically to two or
more devices. An example is a telephone system
where the telephones are replaced with different
types of hardware (for example, mainframe
computers, personal computers or laptops).
Software sold by the Company provides a common
language over this new telephone system
"end user applications" products and services used in building
structures and building complexes such as
telecommunications, voice, data and video
delivery services, buildings access, control,
monitoring and maintenance systems, such as,
CCTV, air conditioning and information kiosks
"Group" the EuroTelecom group of companies
"intelligent building" a building which utilizes self monitoring and
self supporting technology to control internal
building services such as lighting, heating, air
conditioning, alarms and communications
"Internet protocol suite" a standard set of rules to enable Internet users
to communicate with each other
"Internet service provider" a company which provides a service which enables
or "ISP" a user to access the Internet
"multiplexer" a device that enables a number of signals to be
transmitted over a single line
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"network file systems" a file system is simply an electronic file
cabinet. There are two types of systems: 'Local'
-- specific to the user, and 'Remote' -- which
operates like a public library. A network file
system is like a public library, which can be
used locally
"node" a connection point of a network to enable
electronic data to be extracted for use by end
user applications
"protocol" a set of rules that enable communications
between items of hardware, for example modem to
personal computer
"protocol converter" a device which is used to translate one form of
digital information into another to enable the
end user application to function
"secure computer networks" in general, computer networks such as telephone
networks do not provide any form of privacy from
electronic eavesdropping. Secure networks, such
as a secure telephone systems, provide a method
of encoding information so that an eavesdropper
is unable to interpret it
"SDH" Synchronous Digital Hierarchy - a recognized
transmission standard for telecommunications
networks
"terminal emulation" terminals provide the facility to enter and view
data received from a mainframe computer. The old
expression for terminal was VDU (Visual Display
Unit). Different mainframes require different
input devices (VDUs). Terminal emulation
software allows a personal computer to "mimic"
the functions of these VDUs
1.2 Introduction to product and services
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1.2.1 EuroTelecom's revenues to date have principally been derived from
providing computer services to the UK defense sector, the sale of
software products and the provision of commercial security. These
existing services and revenues derived from them are explained in
detail below. EuroTelecom's strategy for the future is to build its
business to design, install, operate and manage fiber optic and
microwave based technical infrastructures for buildings and building
complexes. The Company has identified application linking as the
process of managing, under one service contract, a range of end user
applications such as lighting, heating, air conditioning, alarms and
communications services within a single building infrastructure.
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Currently in the UK, where the Company's operations are predominantly
based, end user applications are typically supplied from a variety of
sources and are operated through numerous technical platforms which are
not always interlinked or compatible without additional hardware being
installed. The application linking platform can accommodate and
integrate with conventional wire, as well as fiber optic or microwave
based infrastructures. The potential market for application linking
includes the owners, developers and operators of large buildings,
retail centers, sporting stadia, science and technology parks, local
authority and government sites and residential developments.
1.2.2 The application linking platform comprises the fiber optic and/or wired
and/or wireless technical infrastructure of a building or building
complex to provide services such as lighting, heating, air
conditioning, alarms and communications services. The application
linking platform uses components, developed and supplied by third
parties, to provide a technical infrastructure. The application linking
platform typically consists of a series of nodes that are linked by
either fiber optic cable, microwave signals, or a combination of both.
The application linking platform will also integrate with traditional
wire based building infrastructures. Microwave radio nodes can also be
installed within the application linking platform to complete a network
ring where it is impractical or uneconomic to lay a fiber optic cable.
An application linking platform can be installed throughout a building
or building complex and is designed to be directly linked to end user
applications. The Company considers that application linking has a
number of features which distinguishes it from conventional fiber optic
or wire based systems or networks for buildings and building complexes.
These features include the following:
(a) Single Service Contract
Typically each end user application is provided by a different
service provider, whether it is CCTV, air conditioning or fire
alarms, often necessitating a series of individual service
contracts between the end user and the provider. The
application linking platform to be provided by the Company
will provide end user applications from an integrated
infrastructure which will enable the Group to provide these
services under a single service contract.
(b) Integrity
The application linking platform uses two independent rings or
paths which enhance the integrity of the infrastructure, as
one path operates as a fail safe should the other become
damaged or cease to operate. The network incorporates
specialist software which is activated in the event that both
the operating and protective loops are broken, bypassing the
breach and creating the necessary connection within the node
itself.
(c) Reliability
By streamlining the infrastructure, the active components of
the application linking platform are expected to have a
typical mean time before failure of over 11 years based on
estimates made in accordance with standards laid down by
professional bodies such as the Institute of Electrical and
Electronic Engineers in the UK.
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(d) Flexibility
End user applications can simply be added or removed from the
application linking platform without the requirement for
re-engineering, which differs from many traditional fiber
optic or wire based communication infrastructure designs,
where different end user applications require separate
multiplexers and protocol converters for each particular end
user application.
(e) Management and hardware costs
A typical conventional fiber optic or wire based network will
employ at least two levels of multiplexers to extract the
bandwidth required by the end user application to function. In
addition, a typical conventional fiber optic or wire based
network will also require protocol converters to transform
this bandwidth into a digital signal that can then be used by
the end user application. The application linking platform
does not require this hardware since the technology within the
node enables the digital signal to be extracted directly from
the network ring to the end user application. The effect of
simplifying the infrastructure can enhance not only the
system's efficiency, but it can also reduce the cost of
installing, operating and maintaining the platform.
Furthermore, the application linking platform can also result
in a more efficient use of building space by reducing the need
for areas dedicated to housing hardware.
1.3 The Potential market
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1.3.1 Global deregulation of telecommunications, the resulting increased
competition and the rapid development and application of new
technologies have stimulated a growing demand for advanced
telecommunications services. The Company believes that corporate
customers in commerce and industry (financial services, entertainment
and leisure industries, manufacturing, public utilities and other
sectors) have become aware of the power of advanced information and
communications technology to bring competitive advantage by:
o Extending their markets.
o Reducing costs.
o Speeding products to market.
o Improving standards of customer service.
o Developing new and innovative ways to approach the market.
1.3.2 In particular, the Company believes that there will be an increasing
demand for application linking, particularly by the entertainment and
leisure industries. The single, managed, infrastructure that can be
provided by the Company offers major business opportunities as well as
substantial cost reductions due to the use of economic bandwidth
management and the ability to avoid the costs of buying auxiliary
equipment to the site developer and to the businesses on a site. The
Company currently has the ability to design and install networks that
will handle multi-media large screen displays, site administration,
security and access controls, CCTV monitoring, fire and intruder
alarms, advanced computer networking and internet access.
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1.3.3 In addition to the impact that high-speed integrated networks is having
on private industry, governments are also seeing networked information
systems as a way to help reduce costs, improve public service and
devolve and decentralize the functions of government. The military is
continually expanding the use of advanced telecommunications in
operational, command and control and administrative roles.
1.3.4 The Group has access to proven cost effective technologies (see
intellectual property held by the Company described at paragraph 1.8)
and has experience in practical, business related implementation in a
wide variety of applications. It is envisaged that EuroTelecom
application linking systems will be able to support e-commerce,
cash-point dispensers, retail card systems, "smart cards" for cash-less
transactions, information kiosks, video-walls and distance training.
Where a host of separately designed and installed networks are normally
used, EuroTelecom can provide services over a single integrated
application linking platform.
1.3.5 Furthermore, the Group will offer an approach to networking that is
adaptive. The application linking platform network can be expanded and
new applications can be added without necessarily involving a total
replacement of the network.
1.3.6 Based on the team's knowledge of the market and the above factors the
Directors believe that the Company is well positioned to exploit the
commercial opportunities from application linking when compared to
conventional fiber optic or wire based building infrastructures. The
Company's strategy is to establish itself as a leading provider of
application linking through organic growth and strategic acquisitions.
1.4 Description of the Group
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1.4.1 The companies that currently comprise the Group operate in the
following segments:
(1) Defense services - consultancy services and sale of equipment;
(2) Sale of software products;
(3) Commercial security - CCTV, access control, intruder alarms
and man guarding;
(4) Sale and installation of air-conditioning units;
(5) Application linking.
1.4.2 History and background of EuroTelecom
(a) The Company was incorporated on June 1, 1987, in Delaware
under the name American Telemedia Network, Inc.
(b) On June 25, 1987, American Telemedia Network, Inc. and ATN,
Inc., an entity incorporated in the State of Utah, merged. The
merged entity was called America Telemedia Network, Inc., a
Delaware corporation.
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(c) On December 21, 1989, the name of the Company was changed to
ATNN, Inc.
(d) On August 1, 1997, ATNN, Inc. acquired by way of merger all of
the outstanding shares of EuroTelecom, Inc. and on August 11,
1997, changed its name to EuroTelecom Communications, Inc.
(e) On September 16, 1997 a wholly owned subsidiary company,
EuroTelecom Secure Networks Limited, was incorporated in the
United Kingdom to provide certain Internet technology and
communication products and services. This subsidiary was
subsequently placed into voluntary liquidation. Details of
this liquidation are set out at paragraph 5.5(c). The
activities performed by EuroTelecom Secure Networks Limited
were similar to the current activities of EuroTelecom
Corporation Limited and involved the design and installation
of secure computer networks at the UK Ministry of Defense
using hardware sourced and supplied by EuroTelecom Corporation
Limited.
1.4.3 Group structure
The Group currently operates through a number of subsidiaries. The
structure of the Group is as follows: EuroTelecom Communications Inc.
is the Group holding company. RTC Inc. and EuroTelecom Corporation
Limited ("ECL") are both wholly owned subsidiary companies of
EuroTelecom Communications Inc. ECL is the UK holding company for the
following UK subsidiaries: Chunlan Ltd., Universal Communications
Solutions Ltd. ("UCS"), Easy IP Ltd., Objectiveplan Ltd, ET-Connect
Ltd. and E-Linking Ltd.
1.4.4 EuroTelecom Corporation Limited ("ECL")
ECL was formed on April 12, 1996, and provides the following services:
(a) Defense services
Defense services involves the provision of consultancy
services in connection with the design and installation of
secure computer networks, specifically for use in the UK
defense industry, and the sale of secure faxes and computer
hardware to the same market.
Defense services' main source of revenue in the period to June
30, 1999 was as a supplier of contracted labor to a third
party which was contracted by the UK Ministry of Defense. ECL
supplied between five and ten consultants on a weekly basis,
as and when required, who in turn were contracted to ECL,
whose main activity was the installation of secure computer
networks at various Ministry of Defense sites throughout the
UK. ECL charged consultants' time on the number of hours
worked in any one month, the average gross mark up being
approximately 20%. The contract has now been completed and no
further work in this area is anticipated for a number of
months. The contract between ECL and its consultants was also
terminated.
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Revenues generated, being the time costs of services provided
for this contract, were $129,140 in the period to June 30,
1999, and $NIL in the period to September 30, 1999. Revenues
from the sale of equipment was $271,632 in the period to June
30, 1999, and $393,344 in the period to September 30, 1999.
(b) Commercial security
Since November 1998, these activities have operated from the
Group's Central Monitoring CCTV Station in South Yorkshire on
which capital expenditure of approximately $30,000 was spent
in the period to June 30, 1999. The business currently
comprises CCTV systems, maintenance and manned security guard
services.
The business concentrated on the South Yorkshire area of the
UK for the period to June 30, 1999 and September 30, 1999.
Revenues were generated from CCTV sales to various different
types of customer, e.g., local government authorities, car
dealerships, factories, car parks, etc. The equipment supplied
to these sites was purchased from a third party supplier. ECL
employed personnel to install the systems and provided a 24
hour monitoring service, if required by the client, from ECL's
central monitoring station. Personnel were employed on a shift
basis to monitor each individual site. The screens in the
monitoring station would only be activated if unauthorized
access was gained to any site. This enables the central
monitoring station to monitor at any one time up to 250
different locations. The monitoring station would have at any
one time a maximum of 3 people in the station. Individual
installations would on average create revenues of $30,000 with
a gross margin of approximately 30%. The installations would
typically be sold with one year's free maintenance. Towards
the end of the first year ECL then typically seeks to sell a
further maintenance contract for two years. In addition to the
above, ECL also provides security guards on sites where CCTV
is not required by the customer or is impractical. There are
approximately 75 guards at any one time employed by ECL
protecting properties in the UK.
Revenues for the provision of these services are invoice based
for sale and installation. Revenue from maintenance contracts
are recognized on a straight line basis over the period
covered by the contract.
Commercial security generated revenues in the six months to
June 30, 1999 of $218,864 and for the three months to
September 30, 1999 of $172,118 all of which related to the
sale and installation of security equipment and the provision
of security guards.
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1.4.5 Easy IP Limited ("Easy IP")
(a) Easy IP is a distributor of third party developed software.
The software product specializes in providing connectivity
solutions such as terminal emulation or network file systems
between personal computers and mainframes. With a base of over
300 ultimate customers (such as retailers, local
municipalities and universities) in the UK, Easy IP holds the
sole rights in the UK to distribute to such customers
Microplex software and is one of a select number of UK
software distributors of Attachmate, Netmanage and Netopia.
Easy IP is not involved in software design. This distribution
function comprises a sale of appropriate software to meet
specific customer requirements following consultation with the
customer. Other than in relation to the sole rights in the UK
to Microplex, Easy IP does not have exclusive software
distribution rights.
(b) Revenues for Easy IP for the twelve months immediately prior
to its acquisition in April 1999 were $2,148,410 and net
profit before taxation was $132,288. Revenues for the three
months post acquisition were $531,925 to June 30, 1999 and
$592,700 for the period to September 30, 1999.
(c) In respect of EuroTelecom's future business strategy, Easy IP
software allows customers to use computer systems which could
be installed within an application linking platform provided
by EuroTelecom. EuroTelecom is targeting Easy IP customers who
have a potential intelligent building development requirement,
e.g., retailers, local authorities and universities.
(d) No changes in management or staff have been undertaken since
the acquisition of Easy IP. Since the date of the acquisition,
there has been no material change or disruption to the Easy IP
customer base or business.
1.4.6 UCS
(a) UCS was incorporated on February 21, 1999 and is involved in
sales and marketing activities for EuroTelecom's application
linking platform product. UCS recruited personnel with
knowledge and experience of the installation of application
linking technology, principally gained within the off-shore
oil industry in the Middle East. These individuals have
particular knowledge of the following areas:
(1) SDH, microwave and fiber optic systems;
(2) CCTV and safety surveillance;
(3) multi-frequency radio systems; and
(4) multiplexers and associated peripheral and terminal
equipment.
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(b) UCS operates in the UK and is in advanced discussions for the
design and supply of an application linking platform at the
"Printworks" retail and leisure development in Manchester City
Centre, in the UK, and with Q.ton Limited, the developer of
the "Q.ton Forum", a video conferencing and leisure complex,
on the Cambridge Science Park, also in the UK. Details of
these prospective projects are set out at paragraphs 1.5.2 and
1.5.3. There can be no assurance that definitive agreements
will be entered into with these companies or, if entered into,
whether such agreements will be on such terms as described in
such paragraphs.
(c) No revenues were contributed by the company for the period to
30 June 1999, or September 30, 1999.
(d) UCS is the first company in the Group to achieve
internationally recognized Quality Assurance accreditation of
ISO 9001 (International Standards Organization). The UCS
Quality Manager responsible for this success is now working
with each EuroTelecom division to help them achieve ISO
accreditation.
1.4.7 Chunlan Limited ("Chunlan")
(a) Chunlan was formed in February 1998 and began operations in
August 1999. Chunlan presently imports, distributes and
installs air conditioning units for industrial commercial and
domestic application linking platform. The units are acquired
from third party suppliers. Projects completed to that date
were small fittings of air conditioning units in office space
valued at approximately $3,000 per project. The intended
market area is the North of England initially, expanding to
all the UK. Air conditioning is typical of the type of "end
user applications" which can be connected within an
application linking platform. It is intended to develop
Chunlan to source and manage the installation of building
control products and systems such as air conditioning and
lighting. Chunlan is located in leased premises at
Huddersfield, West Yorkshire.
(b) No revenues were generated by Chunlan in the period to June
30, 1999, revenues of $51,878 were generated in the period to
September 30, 1999.
1.4.8 RTC Inc. ("RTC")
(a) RTC provides technical sales and marketing consultancy
services to businesses seeking to provide specialist
communications equipment and technology to US Government
departments. Revenues are generated based on the invoiced
value of time spent. The intention of management is to develop
RTC as the US arm of UCS's activities. RTC is looking to
further develop its business by providing marketing to
technology companies that wish to expand their market share to
develop new business with the United States Department of
Defense, certain other agencies in the US government and
commercial companies in the Maryland, Virginia and Washington,
DC area.
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(b) RTC entered into an agreement on November 1, 1999 with
Intelect Network Technologies Company ("Intelect") under which
RTC has been granted the non-exclusive rights to market and
promote the sales of certain Intelect software products
including FibreTrax, a major component of the application
linking platform, in the states of Virginia, West Virginia,
Maryland, Georgia and the district of Washington, DC.
(c) No revenues were generated by RTC in the period to June 30,
1999. Revenues of $NIL were generated in the period to
September 30, 1999.
1.4.9 ET-Connect Limited ("ET-Connect")
(a) ET-Connect was incorporated on September 16, 1999 and
established as an ASP in September 1999 in order to deliver
the following applications:
(1) Teleconference center - the ability to establish and
manage teleconferences over a public telephone
network;
(2) Presentation center - the ability to provide
Internet-based presentations; and
(3) Message center - a unified messaging service that
will enable subscribers to retrieve, manage and send
voice mail, e-mail and fax messages that can be
accessed from any Internet enabled PC or any standard
touch tone telephone.
(b) ET-Connect has been appointed as a sales agent in the UK for
products of TelePost Limited, a US based supplier of the
connectivity software to be used in the above applications,
pursuant to a sales agency agreement, dated September 22,
1999, with TelePost Limited, under which ET-Connect acts as
sales agent for TelePost's products in the UK. The agreement
is for an initial period of three years and may be renewed for
a further three years. Pursuant to this agreement, ET-Connect
will be engaged in enhancing and further developing the
software acquired. It is expected that revenues will be
generated from the initial installation and subsequent use of
the above-mentioned applications.
(c) No revenues have been generated by this company in the period
to June 30, 1999 and September 30, 1999.
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1.4.10 The following table sets out the subsidiaries of EuroTelecom, their
business, percentage ownership by EuroTelecom and country of
organization:
<TABLE>
<CAPTION>
% COUNTRY OF
NAME BUSINESS OWNERSHIP ORGANIZATION
<S> <C> <C> <C>
EuroTelecom Corporation Management company for all UK subsidiary 100 UK
Limited companies and provision of consultancy
services and supply of hardware
RTC Inc. technical marketing, sales and consulting 100 Maryland, USA
firm
Chunlan Limited supplier of air conditioning units 100 UK
manufactured by third parties
Universal Communication sales and marketing of application linking 100 UK
Solutions Limited platforms
Easy IP Limited software distribution 100 UK
Objectiveplan Limited dormant company 100 UK
ET-Connect Limited Internet application service provider 100 UK
delivering teleconferencing, presentation
and messaging services
E-Linking Limited dormant company 100 UK
EuroTelecom Secure liquidated 100 UK
Networks Limited
</TABLE>
1.4.11 The Company does not require government approval for any of its
principal products and services. The Company has not incurred research
and development costs in the past two fiscal years or in the period to
June 30, 1999 and September 30, 1999.
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1.5 Commercial prospects
--------------------
1.5.1 Revenues to date have principally been derived from defense services,
sale of software products and commercial security. The Group is
targeting the following areas for its future development.
1.5.2 The Group is currently in discussions, as noted below, in respect of
application linking projects. Revenues from such projects are expected
to be derived from the sale of hardware, installation and the long term
management of the application linking platform and the end user
applications running from it. Accordingly, there is unlikely to be any
significant revenues from application linking projects in the fiscal
year ended June 30, 2000, when sales of hardware to the UK Ministry of
Defense and CCTV services are expected to continue to be of greatest
significance. Given the long term nature of the building projects with
which the Company would become involved for the installation of
application linking platforms, revenues from these activities are
likely to be subject to long lead times.
1.5.3 The Group is currently in advanced negotiations with Richardson
Developments Limited, an English company, in relation to "Printworks",
a proposed major urban entertainment center in Manchester city center
in the United Kingdom, for the design and supply of an application
linking platform to the "Printworks" development. The proposed
development, which is being promoted as Europe's largest entertainment
center, will provide 350,000 square feet of retail and leisure
facilities including a proposed 3D IMAX Cinema and 20 screen cinema
complex. The Company is seeking to provide ongoing facilities
management to the tenants of Printworks. There can be no assurances
that such a facilities management agreement will be entered into. The
contracts for this project are currently under negotiation and have not
been entered into and therefore the revenues to be earned, if any,
cannot be ascertained with certainty. No significant costs have been
incurred to date.
1.5.4 The Group is in advanced negotiations with Q.ton Limited to design and
supply an application linking platform in the "Q.ton Forum", which is a
proposed video conferencing and leisure center, being developed at
Cambridge Science Park in the United Kingdom. The Company is also in
discussions to provide ongoing facilities management and other
technical services for building control at the same location. However,
there can be no assurance that any agreement between Q.ton Forum and
the Company will be consummated.
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1.6 Sales Force
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1.6.1 EuroTelecom employs over 20 sales professionals who are trained to
provide customers with sales and customer service relating to all
EuroTelecom services. The sales force includes specialized
professionals who focus on sales of the varying technologies offered
through the Group.
1.7 Significant Customers
---------------------
In the period to June 30, 1999 the Company had two customers who
accounted for 20% and 13%, respectively, of total consolidated
revenues. In the period to September 30, 1999 the Company had one
customer who accounted for 20% of total consolidated revenues.
1.8 Intellectual Property and Proprietary Rights
--------------------------------------------
1.8.1 The Group is not a primary technology developer and manufacturer. The
Group is not dependent on any patents and/or other proprietary
intellectual property rights which the Company considers are of
fundamental importance to the Group's business.
1.8.2 The technology which shall be used for the application linking platform
in the future has been provided under two main agreements. One is an
exclusive UK supply agreement with a US based supplier of fiber optic
tracking (the "FibreTrax Agreement"- see below) which will be used as
the backbone in the application linking platform for the Group's
intended core business. The agreement is exclusive in the UK and
non-exclusive in the rest of Europe. In addition, the Group has
recently entered into a non-exclusive supply agreement with the same US
based supplier for the non-exclusive rights in certain US states for
the supply to the Company of the same technology platform (the
"SonetLYNX Agreement"- see below).
1.8.3 The FibreTrax agreement is dated December 1, 1999, between ECL and
Intelect Network Technologies Company under which ECL acquired the sole
distribution rights to the fiber optic access product (known as
FibreTrax) in the UK. The agreement is for an initial term of one year
to November 30, 2000, and may be renewed for a further five years
unless notice is given by either party 30 days prior to the termination
of the agreement. The supplier may be able to terminate the agreement
if there is a breach of the agreement including, among other matters,
if the forecast annual sales by ECL of FibreTrax (currently US$2
million) is not reached. The Company expects this target will be met
although there can be no assurance in this regard. If the supply
agreement is terminated then the Company believes an appropriate
alternative manufacturer and supplier for such product could be found
without a significant effect on the business or financial position of
the Group.
15
<PAGE>
1.8.4 The SonetLYNX agreement is dated November 1, 1999, between RTC and
Intelect Network Technologies Company under which RTC Inc. acquired the
non-exclusive distribution rights to the products, SonetLYNX, LANscape
Video Conferencing, FibreTrax and OmmLYNX for Virginia, West Virginia,
Maryland, Georgia and Washington DC. Although the agreement is
expressed to be for an initial term of one year to September 30, 2000,
it may automatically be renewed for one year periods unless written
notice of termination is given by either party 30 days prior to the
termination of the Agreement. The Agreement is terminable on 90 days'
notice. RTC is entitled to a commission on a negotiated percentage of
sales.
1.9 Competition
-----------
The market for the Company's products and services is competitive.
The Company's commercial security business competes directly or
indirectly for customers with the following UK companies: The Shorrock
Group, Chubb Security Limited, Group 4 Security Services Limited,
Securicor Services Limited and Modern Alarms Ltd.
The Company believes that the principal competitive factors affecting
the markets for its products and services include effectiveness, scope
of product offerings, technical features, ease of use, reliability,
customer service and support, distribution channels and price.
While the Company believes that the barriers to entry to the
application linking business of the Group are low, particularly to
companies such as British Telecommunications plc, Energis plc and Cable
& Wireless plc, the Company is not currently aware of any companies in
the UK who have adopted the same approach as it has to application
linking in the Company's target markets.
1.10 Employees
---------
1.10.1 The Company currently has some 110 full time staff and 10 part time
staff and also employs a number of independent contractors as required
from time to time.
1.10.2 The Company engages consultants as and when specialist advice is
required. In particular, the Company has retained the services of
Defense Business & Marketing International Limited ("DBMI"), specialist
defense consultants in the UK. DBMI's principal defense consultant is
Lieutenant General Sir John Foley, former Chief of Defense Intelligence
in the UK. DBMI is paid based on invoices rendered.
16
<PAGE>
2 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
2.1 Business Development
--------------------
ATNN was developing its business during the years ended December 31,
1994, 1995 and 1996. On August 1, 1997, ATNN completed a merger with
EuroTelecom Inc. EuroTelecom Inc. was incorporated in Delaware on
December 19, 1996 under the name Wing Systems, Inc. and changed its
name to EuroTelecom Inc. on January 31, 1997. ATNN was the surviving
entity of the merger and changed its name to EuroTelecom
Communications, Inc. In connection with the merger:
o ATNN effected a 1 for 117.05941 reverse split of the
11,705,941 shares of its Common Stock outstanding prior to the
merger, leaving 100,000 shares outstanding. A further
reduction was made of 22,821, leaving a net balance
outstanding of 77,179 shares of Common Stock;
o the Company issued 5,865,000 post-reverse split shares of
Common Stock to the former shareholders of EuroTelecom Inc.
(of which 1,866,140 shares were subsequently canceled due to
non-performance of consulting services);
o the Company issued 734,477 post-reverse split shares of Common
Stock to certain consultants in consideration of services
rendered in connection with the transaction which has been
charged as an expense in the period to December 31, 1997.
The pre-merger financial statements of EuroTelecom Inc. are now those
of EuroTelecom Communications, Inc.
On September 16, 1997 a wholly owned subsidiary company, EuroTelecom
Secure Networks Limited ("Secure Networks"), was incorporated in the UK
to provide certain Internet technology and communication products and
services. On February 19, 1999, Secure Networks was placed into
voluntary liquidation due to the loss of key employees and contracts
and continuing losses of customers. As a result, the assets of Secure
Networks have been written down to their fair value less the estimated
cost of their sale, and the Company has recorded a total loss of
$123,928 and $NIL for the six month period ended June 30, 1999 and for
the period ended September 30, 1999, respectively.
Note 1b of the consolidated financial statements to June 30, 1999,
attached as Exhibit 99.4, further discusses EuroTelecom Secure Networks
Limited.
The details of the acquisition of Easy IP limited on April 19, 1999,
are set out at paragraph 2.6. On August 16, 1999, the Company acquired
the services of Ray May through an acquisition of all the shares of
RTC, Inc.
17
<PAGE>
2.2 Results of Operations
---------------------
2.2.1 The following table sets forth certain operating information regarding
EuroTelecom for the years ended December 31, 1998 and 1997, the six
month periods ended June 30, 1999 and 1998 and three month periods
ended September 30, 1999 and 1998. This information should be read in
conjunction with EuroTelecom's consolidated financial statements and
notes.
Year Ended Year Ended
December 31, 1998 December 31, 1997
Revenues.................... $ 64,000 $ 1,212,352
Cost of Revenues............ $ 0 $ 777,742
Net Loss.................... $(1,478,885) $ (636,598)
Net Loss Per Share.......... $ (0.25) $ (0.14)
6 Months Ended 6 Months Ended
June 30, 1999 June 30, 1998
Revenues.................... $ 1,322,971 $ 32,000
Cost of revenues............ $ 803,178 $ 0
Net Loss.................... $(2,237,289) $ (656,456)
Net Loss Per Share ......... $ (0.29) $ (0.12)
3 Months Ended 3 Months Ended
September 30, 1999 September 30, 1998
Revenues.................... $ 1,210,040 $ 16,000
Cost of revenues............ $ 1,049,525 $ 0
Net Loss.................... $ (834,788) $ (175,539)
Net Loss Per Share.......... $ (0.07) $ (0.03)
18
<PAGE>
2.2.2 The following table presents comparative cash flow information of
EuroTelecom for the years ended December 31, 1998, and, 1997, the six
month periods ended June 30, 1999 and 1998, and the nine month periods
ended September 30, 1999 and 1998.
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
<S> <C> <C>
Net cash (used in) provided by operating activities .. $ (954,470) $ 168,718
Net cash (used in) investing activities .............. $ (2,823) $ (239,162)
Net cash provided by financing activities ............ $ 887,904 $ 136,855
6 Months Ended 6 Months Ended
June 30, 1999 June 30, 1998
Net cash (used in) operating activities............... $(1,275,846) $ (284,951)
Net cash (used in) investing activities............... $ (10,978) $ (44,859)
Net cash provided by financing activities............. $ 1,275,138 $ 260,000
3 Months Ended 3 Months Ended
September 30, 1999 September 30, 1998
Net cash (used in) operating activities............... $ (397,544) $ (290,227)
Net cash (used in) provided by investing activities... $ (167,172) $ 11,434
Net cash provided by financing activities............. $ 578,839 $ 278,793
</TABLE>
19
<PAGE>
2.3 Comparison of year ended December 31, 1998 to year ended December 31,
---------------------------------------------------------------------
1997
----
Revenues of EuroTelecom decreased from $1,212,352 during fiscal 1997 to
$64,000 during fiscal 1998 (a decrease of 95%). Major contracts the
Company was working on failed to materialize and it was considered
appropriate by the management of the holding Company to cease trading
in Secure Networks, which occurred in February 1999.
Cost of revenues decreased from $777,742 during fiscal 1997 to $nil
during fiscal 1998; and gross profit decreased to $64,000 during fiscal
1998 from $434,610 during fiscal 1997.
Operating expenses increased from $1,002,104 in fiscal 1997 to $1,488,
495 in fiscal 1998 (an increase of 48.5%), arising primarily from
increases in general and administrative expenses and other support
costs due to the Company developing its business. The operating
expenses for 1998 also included a charge for loss from closure of one
subsidiary of $291,923, being EuroTelecom Secure Networks Limited.
During fiscal 1998 EuroTelecom entered into discussions with US Digital
Communications Inc (USDI) with a view to a possible merger or takeover.
Whilst these discussions were taking place USDI made two loans to
EuroTelecom ; $260,000 and $250,000 repayable on March 31, 1999 and
July 31, 1999, respectively. Both loans bore interest at 10% per annum.
EuroTelecom repaid the first loan of $260,000 in full. The second loan,
together with accrued interest, was assigned by USDI to Westbury
Investments S.A., Scribe Investments S.A. and DJF Associates Limited
(the Assignees) for 50% of the total balance outstanding. The Assignees
were related parties to EuroTelecom as stockholders.
The assignees then re-assigned the net debt back to EuroTelecom
resulting in a forgiveness of debt of $145,667 in the period to June
30, 1999 which has been credited to additional paid in capital.
20
<PAGE>
2.4 Comparison of six months ended June 30, 1999 to six months ended June
---------------------------------------------------------------------
30, 1998
--------
Revenues increased by $1,290,971 (4,034%) from $32,000 for the six
months ended June 30, 1998 to $1,322,971 for the six months ended June
30, 1999. The increase is due to increased volume of sales in the
period and the fact that the Company was still developing its business
in the six months ended June 30, 1998. In the period to June 30, 1998
the only business in operation was Secure Networks, which ceased to
trade in February 1999.
Easy IP, which was acquired in April 1999, contributed revenues for the
six months ended June 30, 1999 of $531,925, with a gross margin of
$83,888.
The commercial security division operating out of the Mexborough
office, achieved revenues of $218,864, with a gross margin of $163,794.
The defense services division operating out of the Blandford office,
achieved revenues of $400,772, with a gross margin of $169,619.
Gross profit increased $487,793 (1,524%) from $32,000 for the six
months ended June 30, 1998 to $519,793 for the six months ended June
30, 1999. This increase was due to the increased volume of sales and
the development of the business in 1999 compared to 1998 when the only
active company was Secure Networks.
Selling, general and administrative expenses increased $974,429 (146%)
from $664,758 for the six months ended June 30, 1998 to $1,639,187 for
the six months ended June 30, 1999.
Directors remuneration increased 46% from $80,000 for the six months
ended June 30, 1998 to $116,713 for the six months ended June 30, 1999.
This increase reflects increased levels of remuneration.
Consulting fees increased $172,988 (41%) from $423,555 for the six
months ended June 30, 1998 to $596,543 for the six months ended June
30, 1999. This increase was mainly due to retaining additional
consultants to target potential acquisitions.
Wages and salaries increased $531,387 (50%) from $10,500 for the six
months ended June 30, 1998 to $541,887 for the six months ended June
30, 1999. Telephone and office stationery expenses increased $49,147
(393%) from $12,514 for the six months ended June 30, 1998 to $61,661
for the six months ended June 30, 1999. Motor and travel expenses
increased $102,248 from $63,905 for the six months ended June 30, 1998
to $166,153 for the six months ended June 30, 1999, an increase of
160%. These increases were due to the hiring of additional employees
during this period.
21
<PAGE>
Advertising and general expenses increased $27,449 (268%) from $10,220
for the six months ended June 30, 1998 to $37,669 for the six months
ended June 30, 1999. This increase was due the Company's implementation
of a small advertising campaign intended to increase the general
awareness of the Company.
Legal and professional expenses increased 36% from $52,565 for the six
months ended June 30, 1998 to $71,482 for the six months ended June 30,
1999. This increase was due to additional compliance work, audit fees
and legal work during the period.
Rent increased from $743 for the six months ended June 30, 1998 to
$42,062 for the six months ended June 30, 1999, an increase of 5,561%
due to the opening by the Company of additional offices during the
period.
An additional amount of $171,410 was invoiced to Chelsfield plc, a UK
public company, by Euro Telecom Secure Networks in the period for the
decentralization of the control facility at Merryhill Shopping Centre.
The Company's financial statements for the six months ended June 30,
1999 include a gross receivable of $270,330 from Chelsfield, against
which a reserve of $98,920 was provided for, resulting in a net
receivable of $171,410. This provision was calculated based on the
anticipated recoverable amount following discussions between the
Company and the Liquidator of Euro Telecom Secure Networks. The
provision was charged to selling general and administrative expenses.
Subsequent to concluding the audited financial statements for the
period ended June 30, 1999 and in the three-month period to September
30, 1999 the Company re-assessed the likelihood of recoverability of
the unprovided amount and established a reserve for the full amount.
2.5 Comparison of three months ended September 30, 1999 to three months
-------------------------------------------------------------------
ended September 30, 1998
------------------------
The revenues for the three months ended September 30, 1999 were
$1,210,040, compared with $16,000 for the three months ended September
30, 1998, an increase of $1,194,040 (7,463%). The increased revenues
produced a gross profit of $160,515 for the three months ended
September 30, 1999, compared to $16,000 for the three month period
ended September 30, 1998.
The reduction in the gross profit percentage from the period to June
30, 1999 arose mainly from the loss of the subcontractor contract in
defense networks.
The commercial security division operating out of Mexborough achieved
revenues of $172,118 and a gross margin of $68,536 before a write-down
in certain costs carried forward of $128,000.
The defense services division operating out of Blandford achieved
revenues of $393,344 and a gross margin of $43,828.
Chunlan achieved its first revenues in the quarter of $51,878 and a
gross margin of $12,531.
22
<PAGE>
Easy IP contributed revenues of $592,700 and a gross margin of
$163,620.
Selling, general and administrative expenses have increased to $876,620
for the three months ended September 30, 1999 compared to $169,197 for
the three months ended September 30, 1998, an increase of $707,423
(418%). This was expected due to the increased revenue activity in the
period.
Additional expenditure has also been incurred in taking on additional
staff to take account of the planned increase in the level of activity
for the following quarter.
Selling and administrative expenses for the three months ended
September 30, 1999 include professional costs of $68,052 relating to
the ongoing advice with potential acquisitions an increase of $23,102
from $44,950 for the three months ended September 30, 1998. Motor and
travel expenses of $116,284 were also incurred in the three months
ended September 30, 1999, an increase of $112,284, (or 2807%), from
$4,000 for the three months ended September 30, 1998.
The interest charge in the three months ended September 30, 1999
amounted to $32,281, an increase of $15,525 (or 93%) from $16,756 for
the three months ended September 30, 1998.
The conversion of the loan notes of $800,000 at July 1, 1999 into
common stock assisted in keeping the interest charge to a minimum.
The Company made an investment in Opcom Inc. in USA for common stock.
The total investment was made in 1997 and amounted to $89,397 and
equates to a 1% holding of Opcom's Common Stock. A provision of 50% was
made against this investment in the financial statements for the period
ended December 31,1997. In the period to September 30, 1999 the Company
re-assessed the position and concluded that it was necessary to make a
further provision of $43,964 which has been charged to selling, general
and administrative expenses.
2.6 Easy IP
-------
The share sale agreement dated April 19, 1999, was between Ian Reay,
Jayne Holmes and ECL, as amended by an agreement dated December 22,
1999, for the purchase by ECL of the entire issued share capital of
Easy IP. The total consideration was $193,250 in cash and 200,000
common stock shares in the Company valued at $331,250. Of the cash
consideration $96,625 was deferred, payable in equal installments on
November 30, 1999 and March 31, 2000. The amendment to the acquisition
agreement followed the Company being unable to meet the November
payment, resulting in the full deferred payment falling due on January
31, 2000. The acquisition has been accounted for as a purchase.
23
<PAGE>
At the same time of the agreement dated April 19, 1999 was entered
into, Ian Reay and Jayne Holmes were given the benefit of a Memorandum
of Deposit over the shares in Easy IP Limited, as security against the
payment of the deferred consideration.
On the acquisition of Easy IP, the gross assets purchased amounted to
$859,458, with the liabilities assumed of $681,158 ; the net assets
acquired amounted to $178,300. The excess of $407,750 is treated as
goodwill and is being written over 5 years.
The following table sets forth certain operating information regarding
Easy IP.
3 Months Ended 3 Months Ended
June 30, 1999 June 30, 1998
Revenues $ 531,925 $ 482,443
Cost of revenues (448,037) (411,520)
------------ ------------
Gross Profit 83,888 70,923
SG&A (91,396) (81,235)
------------ ------------
Net Loss $ (7,508) $ (10,312)
============ ============
3 Months Ended 3 Months Ended
September 30, 1999 September 30, 1998
Revenues $ 592,700 $ 530,435
Cost of revenues (429,080) (442,600)
------------ ------------
Gross Profit 163,620 87,835
SG&A (102,098) (86,467)
------------ ------------
Net Earnings $ 61,522 $ 1,368
============ ============
2.6.1 Comparison of three months ended June 30, 1999 and three months ended
---------------------------------------------------------------------
June 30, 1998
-------------
The revenues of Easy IP increased by $49,482 (10%) from $482,443 for
the three months ended June 30, 1998 to $531,925 for the three months
ended June 30, 1999. The increase is due to increased volume of sales
in this period.
Gross profit increased by $12,965 (18%) from $70,923 for the three
months ended June 30, 1998 to $83,888 for the three months ended June
30, 1999 This increase was due to the increased volume of sales and
improved purchasing terms from suppliers.
Selling, general and administrative expenses increased by $10,161 (12%)
from $81,235 for the three months ended June 30, 1998 to $91,396 for
the three months ended June 30, 1999. The increase was due to employing
more staff to service the increased revenues.
24
<PAGE>
Employee costs increased by $5,845 (17%) from $34,005 for the three
months ended June 30, 1998 to $39,850 for the three months ended June
30, 1999. Telephone expenses increased by $2,990 (12%) from $2,480 for
the three months ended June 30, 1998 to $5,470 for the three months
ended June 30, 1999.
2.6.2 Comparison of three months ended September 30, 1999 and three months
--------------------------------------------------------------------
ended September 30, 1998
------------------------
The revenues of Easy IP increased from $530,435 for the three months
ended September 30, 1998 to $592,700 for three months ended September
30, 1999 an increase of 11.7%.
Gross profit for the three months ended September 30, 1999 increased to
$163,620 compared with three months ended September 30, 1998 of
$87,835, an increase of 86%. This increase was due to the improved
purchasing terms for suppliers and improved margins to customers.
Selling, general and administrative expenses increased from $86,467 for
three months ended September 30, 1998 to $102,098 for the three months
ended September 30, 1999, an increase of 18.1%.
Employee costs increased from $34,330 for the three months ended
September 30, 1998 to $40,094 for the three months ended September 30,
1999, an increase of 16.8%. Directors costs increased from $16,000 for
the three months ended September 30, 1998, to $19,805 for the three
months ended September 30, 1999, an increase of 24%.
2.7 Capital Expenditures
--------------------
EuroTelecom has incurred capital expenditures for equipment and office
furniture used in its operations. Net capital expenditures during the
year ended December 31, 1998, totaled $33,426 and for the six months
ended June 30, 1999 of $37,075. The three months ended September 30,
1999, the Company incurred net capital expenditure of $201,493.
2.8 Capital Resources
-----------------
EuroTelecom's capital resources have been provided primarily by capital
contributions from its stockholders and through offerings of its Common
Stock under Rule 504 of Regulation D under the Securities Act of 1933.
Details of issues of securities are set out at ITEM 4.
2.9 Liquidity
---------
The Company has to December 1999 not generated positive cash flow from
operations. Accordingly, the Company has required additional capital to
fund activities and to provide for increased working capital
requirements which arise from increased sales activities. The Company's
working capital requirements have been met by collections of accounts
receivable and by borrowings under the revolving credit facility
together with additional sales of Common Stock. Our independent
auditors report on our consolidated financial statements states that:
"The Company's recurring operating losses and lack of working capital
raise substantial doubt about its ability to continue as a going
concern."
25
<PAGE>
During the three months ending September 30, 1999, the Company issued
5,810,00 shares of common stock as follows. The Company's convertible
loan notes totaling $800,000 with a 10 percent interest charge were
converted into 5,500,000 shares of common stock on July 1, 1999. An
additional 310,000 shares valued at an additional $306,175 were issued
as follows: July 22, 1999, 150,000 shares for $150,000; September 28,
1999, 160,000 shares for $156,175. During the three months ended
December 31, 1999, the Company raised additional equity through issuing
common stock pursuant to Regulation S promulgated under the Securities
Act of 1933, as amended. The Company issued 2,998,120 shares for
$2,297,340 to non-U.S. persons in consideration for a mixture of cash
and services provided to the Company.
The Company is currently in the process of raising additional capital
through a placement of shares on the Alternative Investment Market of
the London Stock Exchange. There can be no assurance that such proposed
placement will be successful or what the terms of such placement will
be, or what amount, if any, of additional capital will be raised.
2.10 Banking Arrangements
--------------------
The Company has a banking relationship with National Westminster Bank
plc in Mansfield, in the UK, for a line of credit in the amount of
$900,000. This line is to be used to finance working capital and is
repayable on demand. Interest is charged at 3% above the bank's base
rate on the first $560,000, thereafter at 6% above the banks base rate.
As at December 15, 1999, $821,000 under this facility.
2.11 Recent Accounting Treatment
---------------------------
On December 3, 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin 101, Revenue Recognition in Financial
Statements. SAB 101 summarizes some of the SEC's interpretations of the
application of generally accepted accounting principles to revenue
recognition. Changes resulting from SAB 101 require that a cumulative
effect of such changes for 1999 and prior years be recorded as an
adjustment to net income no later than July 1, 2000. Although the
Company is still in the process of reviewing SAB 101, it believes that
its revenue recognition practices are in substantial compliance with
SAB 101 and that adoption of its provisions would not be material to
its annual or quarterly results of operations.
26
<PAGE>
3 ITEM 3 - DESCRIPTION OF PROPERTY
3.1 The Company's principal place of business is Mexborough Business
Center, College Road, Mexborough, South Yorkshire, United Kingdom S64
9IP.
3.2 The Company leases the following premises:
<TABLE>
<CAPTION>
Property Term Annual Rent Sq. Ft.
--------------------------- --------------------------------------- ----------- -------
<S> <C> <C> <C>
Mexborough Business Center 1 year from 9 March 1999, thereafter $40,000 2,000
College Road monthly lease
Mexborough
England
Ollerton Road 1 year from 3 February 1999, thereafter $12,000 1,594
Tuxford monthly lease
Nottinghamshire
England
53 South Denes Road 1 year from 31 May 1999 $9,120 800
Great Yarmouth
Norfolk
England
Units 3 and 4 6 years from 5 October 1999 $28,000 3,859
Uplands Industrial Park
Blanford House
Blanford
Dorset
England
9086 Junction Drive 1 year from 1 October 1999 $9,811 933
Suite 1, Annapolis Junction
Maryland 20701
</TABLE>
3.3 The Company is presently negotiating terms for the granting of two
leases. The proposed terms are set out below:
Property Term Annual Rent
----------------------- -------- -------------------------
Unit F4 7 years Initial rent $54,400 and
Farfield Park $98,400 premium
Manvers
Rotherham
England
South Yorkshire 15 years Initial rent $48,000
North Wing, 1st Floor
The Kiln
Waterside
Newark on Trent
Nottinghamshire
England
27
<PAGE>
4 ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
4.1 The total number of shares of Common Stock of EuroTelecom beneficially
owned by each of the officers and directors, and all of such directors
and officers as a group, and their percentage ownership of the
outstanding Common Stock of EuroTelecom as at December 31, 1999, are as
follows, being a total 1,837,017:
Shares Percent of
Management Shareholder(1) Beneficially Owned (2) Common Stock
---------------------- ------------------------- ------------
Philip Shaun Derry 1,039,940 5.8%
Andrew Krawchuk 176,000 1.1%
Graham Ford 50,000 0.3%
David Walton 112,700 0.6%
Dr. John Spackman 75,000 0.4%
Ray May 419,377 2.3%
(1) The business mailing address for all management is c/o
EuroTelecom Communications, Inc., Mexborough Business Center,
Mexborough, South Yorkshire, United Kingdom S64 9JP.
(2) Except as otherwise noted, it is believed by EuroTelecom that
all persons have full voting and investment power with respect
to the shares indicated. Under the rules of the Securities and
Exchange Commission, a person (or group of persons) is deemed
to be a "beneficial owner" of a security if he or she,
directly or indirectly, has or shares the power to vote or to
direct the voting of such security, or the power to dispose of
or to direct the disposition of such security. Accordingly,
more than one person may be deemed to be a beneficial owner of
the same security. A person is also deemed to be a beneficial
owner of any security which that person has the right to
acquire within 60 days, such as options or warrants to
purchase the Common Stock of EuroTelecom.
28
<PAGE>
4.2 Principal Stockholders
----------------------
The following table sets forth information with respect to the
beneficial ownership of EuroTelecom's Common Stock by each shareholder
who beneficially owns more than five percent (5%) of EuroTelecom's
Common Stock, the number of shares beneficially owned by each and the
percent of outstanding Common Stock so owned of record as of December
31, 1999. It is believed by EuroTelecom that all persons listed have
sole voting and investment power with respect to their shares, except
as otherwise indicated.
<TABLE>
<CAPTION>
Percent of
Name and Address of Shares Beneficially Outstanding Common
Beneficial Owner Title of Class Owned (2) Stock
---------------- -------------- --------- -----
<S> <C> <C> <C>
Philip Shaun Derry (1) Common Stock 1,039,940 5.8%
Peter Drake (1) Common Stock 931,820 5.2%
Scribe Investments SA Common Stock 2,475,000 13.8%
2 Serjeants Inn
London, England
Westbury Investments SA Common Stock 2,475,000 13.8%
2 Serjeants Inn
London, England
</TABLE>
(1) See note (1) in the table above.
(2) Except as otherwise noted, it is believed by EuroTelecom that
all persons have full voting and investment power with respect
to the shares indicated. Under the rules of the Securities and
Exchange Commission, a person (or group of persons) is deemed
to be a "beneficial owner" of a security if he or she,
directly or indirectly, has or shares the power to vote or to
direct the voting of such security, or the power to dispose of
or to direct the disposition of such security. Accordingly,
more than one person may be deemed to be a beneficial owner of
the same security. A person is also deemed to be a beneficial
owner of any security which that person has the right to
acquire within 60 days, such as options or warrants to
purchase the Common Stock of EuroTelecom.
29
<PAGE>
5 ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
5.1 Details of directors and executive officers as of December 15, 1999 are
set out below:
<TABLE>
<CAPTION>
Date of
-------
Appointment as
--------------
Name Age Position a Director
---- --- -------- ----------
<S> <C> <C> <C>
Philip Shaun Derry 52 President, C.E.O. and Principal August 1997
Accounting Officer
Dr. John Spackman 67 Chairman October 1998
Andrew Krawchuk 53 Vice President Marketing October 1998
David Walton 47 Chief Operating Officer September 1999
Ray May 67 Vice President, US Operations August 1999
Graham Ford 49 Company Secretary September 1999
</TABLE>
5.2 The business experience of the above directors and executive officers
over the past five years and details of significant employees is set
out at paragraph 5.4 below.
5.3 There is no family relationship between or among the above directors
and officers. EuroTelecom's success will depend largely on the efforts
and abilities of EuroTelecom's senior management. In particular,
EuroTelecom is dependent upon Philip Shaun Derry, Chief Executive
Officer. The loss of services of senior management could have a
substantial adverse effect on EuroTelecom.
5.4 Directors and Senior Management
-------------------------------
5.4.1 Philip Derry, age 52, president and chief executive officer, has over
32 years' experience in the telecommunications industry. Mr. Derry
joined the Company in August 1997. He has set up and developed two
private telecommunication companies, Marlborough Communications Limited
("MCL") and Electronic Marketing Solutions Limited ("EMSL"). MCL was
set up in 1980 and became a leading Ministry of Defense contractor in
the early 1980's. He sold his interest in MCL in 1986 and in 1992 he
established Electronic Marketing Solutions Limited, a UK company
("EMSL"), which was acquired by Intelect Communications Inc.
("Intelect"), a NASDAQ quoted public company in 1995. From 1991 to
1996, Mr. Derry was managing director of Intelect Europe Limited
(formerly EMSL). Between 1996 and 1997, Mr. Derry was involved in the
process of establishing the Company.
5.4.2 Dr. John Spackman, age 67, non-executive chairman, served for 32 years
in the British Army during which time he held many technical and
computing appointments including branch chief in the information
systems division of Supreme Headquarters Allied Powers Europe. He
retired as a Brigadier, director of supply computer services in 1983.
As an under-secretary in the Department of Health and Social Security,
from 1983 to 1986, he was responsible for the modernization and
integration of the UK's social security, unemployment, National
Insurance and pensions systems. He was Director of Information Systems
for BT plc from 1986 to 1990, and director of European
Telecommunications Information Services from 1990 to 1993. From 1993 to
1997 he was the senior consultant in Information Systems in the office
of the Chairman of the Management Systems Unit of the Government of
Malta. Dr. Spackman joined the Company in 1997.
30
<PAGE>
5.4.3 David Walton, age 47, chief operating officer, has over 20 years'
experience within the telecommunications industry, including the UK
companies Costain Telecom Systems Limited and BT plc ("BT"). He was
employed by BT from 1991 until 1999 where he was most recently in the
management team and was responsible for the larger BT corporate
clients. Immediately prior to joining the Company in September 1999,
Mr. Walton was business development director of BT Corporate Business
Solutions.
5.4.4 Graham Ford, age 49, company secretary, was a director of Hallam
Corporate Services Ltd from 1991 to 1995. He also represented the South
Yorkshire Pensions Authority as a non-executive director of Doncaster
Minerals Ltd from 1993 to 1995. He has held senior management positions
at Amco Corporation Plc (1977 to 1984) including six years as Group
Company Secretary. From 1993 to 1997 he held the post of Deputy
Secretary and, from 1997 to 1999, the position of Company Secretary at
Marston, Thompson & Evershed plc. He is a Fellow of the Institute of
Chartered Secretaries and Administrators in the UK. Mr. Ford joined the
Company in late 1999.
5.4.5 Andrew Krawchuk, age 53, head of marketing, joined the Company in
October 1998. Mr. Krawchuk has extensive experience in the leisure
industry and in 1985 acted as a consultant in the marketing and
sponsorship of the then world's largest shopping center, in West
Edmonton, Alberta, Canada. He moved to the UK in 1988 to continue his
consultancy work until 1992 and worked on the Meadowhall Center in
Sheffield, England, and Centro, Oberhausen in Germany. Since 1992,
prior to joining the Company, Mr. Krawchuk was chairman of Atlantic
Partnerships International Ltd., a UK company.
5.4.6 Ray May, age 67, vice president of US operations, is chief executive
officer of the Group subsidiary, RTC, and has been President of RTC
Inc. since 1992. Mr. May has over 30 years of practical and sales
engineering experience with government agencies and the
telecommunications community.
5.4.7 Jim Sames, age 57 manager of the services group, joined the Company in
October 1999. He has over 30 years of industry experience and has held
senior management positions at Norsk Data Limited, Trend Communications
Limited and Workplace Technologies Limited. He joined the Group in late
1999. From October 1995 to October 1999, Mr. Sames was services
business development manager at Workplace Technologies plc.
5.4.8 Boy Hay, age 49, manager of the communications group, spent 15 years in
the British armed forces with the Royal Signals, specializing in
cryptographic, radio and data communication systems. From 1980 to 1992
he worked for a number of divisions with the Racal Data Group in the UK
and reached the post of Sales & Marketing Director for the Defense and
Secure IT and Communications Sector. In 1992, he joined Philip Derry's
management team at EMSL and was one of the founding members of the
Company.
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<PAGE>
5.5 Except as set out in paragraphs (a) to (c) below, no director,
executive officer or significant employee of the Company has been a
general partner or executive officer of any business when a bankruptcy
petition was filed against such business or within two years of such
filing:
(a) Mr. Derry was a principal shareholder and director of Wherry
Quay Marine Limited, a private company incorporated on October
14, 1986 which was engaged in yacht brokerage and the
provision of services to yacht owners. The company became
insolvent and was wound up by the Official Receiver by order
of the court dated April 29, 1991.
(b) Mr. Derry was formerly a director of EMSL which subsequently
changed its name to Intelect Europe Limited ("IEL"). IEL was
acquired by Intelect Inc. in August 1995 from Mr. Derry, as a
majority shareholder, and others. Mr. Derry was a director of
IEL at the time of its acquisition and he remained on the
Board. Mr. Derry resigned from the Board of IEL on May 8,
1996. IEL appointed a liquidator on January 30, 1997, under a
creditors' voluntary winding-up. IEL has ceased operations and
has been liquidated.
(c) Philip Derry (president and chief executive officer) and Dr.
Spackman (deputy chairman) were on the board of Eurotelecom
Secure Networks, a wholly owned subsidiary or the Company,
when it went into creditors voluntary liquidation in March
1999. The company has ceased operations and has been
liquidated. At the time of this liquidation, Mr. Hay was on
the board of EuroTelecom Communications Inc. Secure Networks
had previously acquired the business and assets of OSPL UK
Limited out of receivership.
32
<PAGE>
6 ITEM 6 - EXECUTIVE COMPENSATION
6.1 No executive officer or director of EuroTelecom received compensation
in excess of $100,000 during its fiscal period ended June 30, 1999 or
for the year ended December 31, 1998. The aggregate remuneration paid
and benefits in kind granted to the directors during the period to June
30, 1999 was $116,713.
6.2 Compensation for the Chief Executive Officer, Mr. Derry, was as
follows:
Period Ended December 31, 1997 December 31, 1998 June 30, 1999
Total $Nil $52,056 $57,600
6.3 During the fiscal year ended June 30, 1999, and during the interim
period ended September 30, 1999, EuroTelecom did not have a pension
plan, a profit sharing plan, or similar plans for the benefit of its
officers, directors or employees.
6.4 Directors of EuroTelecom who did not serve as officers during fiscal
period ended June 30, 1999, and during the interim period ended
September 30, 1999, were not compensated by EuroTelecom for meeting
attendance or otherwise, but are entitled to reimbursement for their
travel expenses. EuroTelecom does not pay additional amounts for
committee participation or special assignments of the Board of
Directors.
7 ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSCTIONS
There were no related party transactions in the fiscal years 1998 or
1999.
8 ITEM 8 - DESCRIPTION OF SECURITIES
8.1 Share Capital
-------------
8.1.1 As at December 31, 1999, the authorized share capital of the Company is
divided into 20,000,000 shares of Common Stock, par value $0.01, of
which 17,946,222 shares of Common Stock have been issued.
8.2 Common Stock
------------
8.2.1 Holders of Common Stock are entitled to receive ratably such dividends
as may be declared by the Board of Directors, out of funds legally
available, without any preference. Holders of Common Stock are entitled
to one vote per share. Cumulative voting is not allowed for purposes of
the election of directors. Thus, the holders of more than 50% of the
shares voting for directors can elect all directors. The holders of the
Common Stock of EuroTelecom have no preemptive rights to purchase new
issues of the securities of EuroTelecom. There are no redemption or
conversion features attached to the Common Stock.
33
<PAGE>
8.2.2 At the present time, EuroTelecom does not intend to pay any dividends
on its Common Stock. Upon liquidation or dissolution of EuroTelecom,
holders of Common Stock are entitled to receive pro rata, either in
cash or in kind, all of the assets of EuroTelecom after payment of
debts.
8.3 Delaware Corporate Law and Certain By-law Provisions
----------------------------------------------------
8.3.1 EuroTelecom is a Delaware corporation, and may become subject to the
anti-takeover provisions of the Delaware General Corporation Law (the
"Delaware Law"). In general, Delaware Law prevents take-over offers to
acquire equity securities of a Delaware corporation if the offeror
would become a beneficial owner of more than 20% of any class of
outstanding equity securities, and other similar provisions, subject to
certain exceptions such as the written approval of the board of
directors. The existence of these provisions would be expected to have
an anti-takeover effect, including attempts that might result in a
premium over the market price for the shares of Common Stock held by
stockholders.
8.3.2 Article II, Section 5 of EuroTelecom's By-Laws provides that only
EuroTelecom's President, Secretary, a majority of the members of
EuroTelecom's Board of Directors or certain shareholders at the written
request of the holders of at least 50% of the outstanding voting power
may call a special meeting of stockholders. These provisions of the
By-Laws could discourage potential acquisition proposals and could
delay or prevent a change in control of EuroTelecom. Such provisions
also may have the effect of preventing changes in the management of
EuroTelecom.
8.4 Transfer Agent and Registrar
----------------------------
8.4.1 The transfer agent and registrar for the Common Stock of EuroTelecom is
Olde Monmouth Stock Transfer Co. Inc, Memorial Parkway, Suite 101,
Atlantic Highlands, NJ 07716.
8.5 Reports to Stockholders
-----------------------
8.5.1 EuroTelecom will furnish its shareholders with annual reports
containing the financial statements of EuroTelecom examined by
independent certified public accountants. EuroTelecom presently intends
to issue unaudited quarterly reports and may distribute other reports
to the stockholders as it deems appropriate.
8.5.2 EuroTelecom has amended its fiscal year end from December 31 to June
30. The audited six months accounts to June 30 1999 are included at
Exhibit 99.4.
8.5.3 Copies of documents filed by EuroTelecom with the SEC and other
information about issuing companies generally may be read and copied by
Internet users at http://www.sec.gov.
34
<PAGE>
PART II
-------
9 ITEM 1 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS
9.1 The Company's Common Stock was removed from the OTC Bulletin Board on
November 18, 1999 and is now quoted in the "Pink Sheets", the paper
quotation system of the National Quotation Bureau, LLC, which reports
trades in the "over-the counter" securities market.
9.2 The following table sets forth the range of high and low closing bid
prices per share of the Common Stock of EuroTelecom as reported by The
OTC Bulletin Board or by the National Quotation Bureau, L.L.C. for the
relevant periods indicated. (These quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not
represent actual transactions.)
YEAR ENDED
----------
DECEMBER 31, 1998 HIGH BID LOW BID
----------------- --------- -------
1ST Quarter $0.50 $0.37
2nd Quarter $2.50 $2.25
3rd Quarter $0.94 $0.75
4th Quarter $0.28 $0.28
YEAR ENDED
----------
DECEMBER 31, 1999 HIGH BID LOW BID
----------------- -------- -------
1st Quarter $1.72 $1.50
2nd Quarter $2.06 $1.75
3rd Quarter $2.56 $2.28
4th Quarter $2.00 $2.00
9.3 Dividends
---------
9.3.1 EuroTelecom has not paid any dividends on its Common Stock and does not
expect to do so in the foreseeable future. The Directors anticipate
that earnings, if any, will be retained for development of the
Company's business and will not be distributed for the foreseeable
future. The declaration and payment by the Company of any future
dividends and the amount will depend upon the Company's results of
operations, financial condition, cash requirements, future prospects,
profits available for distribution and other factors deemed by the
Directors to be relevant at the time.
35
<PAGE>
10 ITEM 2 - LEGAL PROCEEDINGS
10.1 None.
11 ITEM 3 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
11.1 None.
12 ITEM 4 - RECENT SALES OF UNREGISTERED SECURITIES
12.1 During the period 1997 through 1999 (ending June 30, 1999), the Company
issued shares to the following persons and companies as compensation
for professional services rendered:
YEAR NAME NUMBER OF SHARES
------- ------------------------------- ----------------
1997 Basic Capital Corp. 34,500
Olympic Capital Corp. 161,000
Target Mall.Com 84,077
Type Investment Holdings 161,000
Wing Capital 293,900
-----------
734,777
===========
1998 Capital York 350,000
Type Investment Holdings 220,060
Olympic Capital 105,814
Target Mall.Com 74,126
Ray May 250,000
John Banas 250,000
P. Taylor 30,000*
-----------
1,280,000
===========
1999 D. Edwards 250,000*
G. Maud 120,000*
D. Newett 120,000*
J. Millthorpe 10,000*
D. Hutton 10,000*
* Non-US residents. Offerings also exempt from registration
under Regulation S of the Securities Act of 1933.
12.2 The above securities were issued in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933 as
amended. The above mentioned individuals and entities were
sophisticated investors who were knowledgeable about the Company's
operations and financial condition; they were able to evaluate the
risks and merits of receipt of the shares, and they each agreed to
accept the shares as compensation.
36
<PAGE>
12.3 During 1997, the Company issued 3,998,860 shares in a stock for stock
acquisition of the shares of capital stock of EuroTelecom, Inc. These
securities were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933 as amended. The
purchaser and its shareholders were sophisticated investors who were
knowledgeable about the Company's operations and financial condition;
they were able to evaluate the risks and merits of receipt of the
shares, and they each agreed to accept the shares as compensation.
12.4 During 1997, the Company offered and sold 223,600 shares of the
Company's Common Stock to persons and entities who were not citizens or
residents of the United States of America in offerings exempt from
registration under Regulation S issued by the Securities and Exchange
Commission at a per share cash offer price of not less than $1.00.
12.5 During 1997 and 1998 the Company issued 1,710,286 shares at a price of
not less than $.25 per share, with the requirements that (i) share
offers and sales be made either to "accredited investors," as that
quoted term is defined in Rule 502 of the Securities Act of 1933 (the
"Act"), and/or up to a maximum of 35 non-accredited investors each of
whom, in the judgment of the Company's representatives, is determined
to have such knowledge and experience in high risk equity investments
and other financial matter as to be capable of evaluating the relative
risks and merits of an investment in the shares, as well as the
economic worth and liquidity to be able to sustain a complete loss of
his investment in the shares; (ii) each such offer and sale be
undertaken only in accordance with the transactional exemption from
registration afforded by Rule 504 of Regulation D, as promulgated under
Section 3(b) of the Act; and (iii) there was no minimum number of
shares which may be acquired by any qualified purchaser.
12.6 During 1998 and 1999 the Company issued 274,620 shares as bonus
payments to employees. These securities were issued in reliance on the
exemption from registration provided by Section 4(2) of the Securities
Act of 1933 as amended. In addition these shares were issued to persons
who were not citizens or residents of the United States of America in
offerings exempt from registration under Regulation S issued by the
Securities and Exchange Commission.
12.7 In the six months to June 30, 1999, the Company had the following stock
transactions:
(1) Issued 1,381,666 shares for $898,083 in cash;
(2) Issued 764,000 shares for $303,677 in consulting services;
(3) Issued 123,420 shares for $198,734 employees bonuses and
subscriptions; and
(4) Issued 200,000 shares in the acquisition of Easy IP, valued at
$331,250.
37
<PAGE>
12.8 In the six months ended December 31, 1999, the Company issued the
following stock:
(1) on July 1, 1999 unsecured convertible loan notes in the
amounts of $80,000, $360,000 and $360,000 issued on February
11, 1999 were converted into 550,000, 2,475,000 and 2,475,000
shares of Common Stock respectively;
(2) on July 22, 1999 the Company raised additional equity through
the issue of 150,000 Common Stock for $150,000 cash;
(3) in August 1999 the Company acquired the services of Ray May
through the purchase of RTC for 150,000 shares of Common Stock
valued at $250,000. RTC was purchased to gain access to its
brand name and key personnel. No other assets or liabilities
were acquired;
(4) on September 28, 1999 the Company raised additional equity
through the issue of 160,000 shares of Common Stock for
$156,175 cash; and
(5) in the three months ended December 31, 1999 the Company raised
additional equity through issuing Common Stock pursuant to
Regulation S promulgated under the Securities Act of 1933, as
amended. The Company issued 2,998,120 shares for $2,297,340 to
non US persons representing a mixture of cash and services
provided to the Company.
12.9 The Directors consider that stock issued through the period 1997 to
December 31, 1999 was issued at fair value in each such case.
12.10 A detailed and complete list of stock issuances between August 1, 1997
to December 31, 1999, is attached as Exhibit 99.5.
12.11 The Company has the following notes payable:
(1) Note in the original amount of $360,000, bearing interest at
10 percent per annum, due in September, 2000, convertible into
common stock at $0.145 per share;
(2) Note related to the acquisition of Easy IP Limited, due in two
equal installments of $48,000 in October, 1999 and May, 2000;
(3) Note in the original amount of $80,000, bearing interest at 10
percent per annum, due in September, 2000, convertible into
common stock at $0.145 per share;
(4) Note in the original amount of $360,000, bearing interest at
10 percent per annum, due in September, 2000, convertible into
common stock at $0.145 per share; and
(5) Note payable related to the purchase of a vehicle in June,
1998, bearing interest at 17.8 percent per annum for a term of
36 months. This note has a balloon payment of $10,000 due in
June, 2001.
38
<PAGE>
13 ITEM 5 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
13.1 Article 9 of the Certificate of Incorporation of the Company provides
that to the to the fullest extent permitted by the Delaware General
Corporation Law, a director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damage for
breach of fiduciary duty as a director.
13.2 Section 7.1 of the Bylaws of the Company provides, in essence, that
with regard to non-derivative claims, the Company shall indemnify any
person who was or is a party or is threatened to be made a party to any
pending or threatened suit or proceeding, civil criminal or otherwise,
by reason of the fact that he is or was a director, officer, employee,
trustee or agent of the Company or was serving at the request of the
Company as director, officer, employee, trustee or agent of another
entity, against all expenses incurred by him, including but not limited
to legal fees, judgements and penalties and amounts paid in settlement
actually and reasonably incurred, if he acted in good faith and in a
manner lie reasonably believed to be in or not opposed to the best
interest of the Company, or with respect to a criminal proceeding, had
no reasonable cause to believe his conduct was unlawful.
13.3 Section 7.2 of the By-laws provides, in essence, that with regard to
derivative suits, the Company shall indemnify any person who was or is
a party or is threatened to he made a party to any pending or
threatened suit or proceeding in the right of the Company, to procure a
judgement in its favor by reason of the fact that he is or was an agent
of the Company, against all expenses, including attorneys fees,
actually and reasonably incurred by him, in connection with the
defense, settlement or appeal of such action, 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 Company, except that no indemnification shall be
made if such Persons shall have been adjudged liable to the Company
unless and to the extent that the Delaware Court of Chancery or the
court in which such action was brought shall determine that, despite
such adjudication, such person is fairly and reasonably entitled to be
indemnified.
13.4 The Eleventh Article of the Articles of Incorporation of the Company
provides that the Company shall, to the fullest extent permitted by the
provisions of Sections 145 of the General Corporation Law of Delaware,
as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said section from
and against any and all of the expenses, liabilities or other matters
referred to in or covered by said section, and the indemnification
provided for shall not be deemed exclusive of any other rights to which
those indemnified may be entitled under any by-law, 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, and shall 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.
13.5 Section 6.10 of the Bylaws of the Company provides that the Company
shall indemnify all of its offers and directors, past, present and
future, against any and all expenses incurred by them, including but
not limited to legal fees, judgments and penalties which may be
incurred, rendered or levied ill any legal action brought against any
or all of them for or on account of any act or omissions alleged to
have been committed while acting within the scope of their duties as
officers or directors of the Company.
39
<PAGE>
PART III
--------
INDEX TO EXHIBITS
Exhibit No. Exhibit
----------- -------
3(ii).1 By-Laws of ATN Inc. (2)
3(ii).2 By laws of American Telemedia Network Inc. (2)
3(ii).3 By-laws of EuroTelecom Communications, Inc. as amended through
March 28, 2000 (3)
4.1 Corporate Records of Wing Systems Inc. (2)
4.2 Certificate of Incorporation of American Telemedia Network Inc.
(2)
4.3 Certificate of Amendment of Certificate of Incorporation of Wing
Systems Inc. (2)
4.4 Certificate of Incorporation of Wing Systems Inc. (2)
10.1 Share Sale Agreement - Shareholders of Easy IP Ltd and EuroTelecom
Corporation Limited. (2)
10.2 Employment Agreement Ray May and EuroTelecom Communication Inc.
(2)
10.3 Agreement and Plan of Merger of ATN Inc and American Telemedia
Network Inc. (2)
10.4 Agreement of Sale of RTC Inc to EuroTelecom Communications Inc.
(2)
10.5 Service Agreement - Ian Stuart Reay. (2)
27.1 Financial Data Schedule (4)
99.1 EuroTelecom Communications Inc. and Subsidiaries - Consolidated
Financial Statements - December 31 1998. (1)
99.2 Minutes of Special Meeting of Stockholders of American Telemedia
Network Inc. (2)
99.3 EuroTelecom Communications Inc and Subsidiaries Consolidated
Financial Statements - September 30, 1999. (4)
99.4 EuroTelecom Communications Inc and Subsidiaries - Consolidated
Financial Statements - June 30, 1999. (4)
99.5 Listing of Common Stock issuances from August 1, 1997 to December
31, 1999. (4)
99.6 Easy IP Limited Financial Statements - 31 March 1999 (4)
-----------------------
(1) Filed as an Exhibit to the Registrant's Form 10SB12G, filed with the
Securities and Exchange Commission on January 25, 2000, and
incorporated herein by reference.
(2) Filed as an Exhibit to the Registrant's Form 10SB12G, filed with the
Securities and Exchange Commission on November 5, 1999 and incorporated
herein by reference.
(3) Filed as an Exhibit to the Registrant's Form 10QSB, filed with the
Securities and Exchange Commission on May 19, 2000 and incorporated by
reference herein.
(4) Filed herewith.
40
<PAGE>
Signatures
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this to its registration statement to be signed on its behalf
by the undersigned, hereunto duly authorized.
EuroTelecom Communications, Inc.
Date: September 26, 2000
By: /s/ PHILIP SHAUN DERRY
Philip Shaun Derry
President and Chief Executive Officer
41
