DRAFT #3 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of The Securities Exchange Act of 1934
ePHONE Telecom, Inc.
(Name of Small Business Issuer in its charter)
Florida 98-0204749
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Ste E - 39767 Paseo Padre Parkway, Fremont, California, U.S.A. 94539-7970
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (510) 661-9898
Issuer's Website: www.ephonetel.com
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
Common shares Nil
Securities to be registered pursuant to Section 12(b) of the Act:
Common shares $0.001 par value
(Title of Class)
ePhone Telecom, Inc. is filing this Form 10-SB on a voluntary basis for the
purpose of making itself a reporting company under the Act.
- 1 -
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
A. Business Development
ePhone Telecom, Inc. (the "Company") has not been in business for 3 years. The
development of the business of the Company as described below was essentially
commenced as of November, 1998. From the Company's original incorporation until
November, 1998 the Company did no business and made no attempt to do any
business. From November, 1998 to December, 1999, the Company did not business
and focused its efforts on the review of business potentials and, ultimately,
the business potential of the business described below.
The Company does not have a predecessor nor has there been any material
reclassification of its business or any purchase of any assets not in the
ordinary course of business.
The Company was incorporated pursuant to the laws of the State of Florida,
U.S.A., effective May 3, 1996, as IRA Fund Brokers Corp., and changed its name
to IFB Corp. on April 6, 1998. On March 22, 1999, IFB Corp. changed its name to
ePHONE Telecom Inc.
The possibility of voice communications travelling over the Internet, rather
than through the Public Switched Telephone Network ("PSTN"), first became a
reality in 1995 when VocalTec, Inc. introduced its Internet Phone software.
Designed to run on a personal computer ("PC") equipped with a sound card,
speakers, microphone, and modem, the software compressed the voice signal, and
translated it into Internet Protocol ("IP") packets for transmission over the
Internet. This PC-to-PC Internet telephony worked only if both parties were
using the same Internet Phone software, and had made an appointment to be
connected to the Internet at the same time.
The basic steps involved in originating an IP Telephony call, are: (1)
conversion of the analog voice signal to digital format; and (2)
compression/translation of the signal into IP packets for transmission over the
public Internet or managed IP networks. The process is reversed at the receiving
end.
Internet Protocol is a method of taking information, usually a data stream that
represents images or keystrokes, and dividing it into many small pieces, or
"packets". These packets each include a header, which carries the originating
address, the destination address, and a map for reassembling those packets when
they reach their destination. IP was created to carry data, the same collection
of zeros and ones that underlie every programme, document, and image created
using a computer.
IP is a very flexible protocol for sending information across a network that has
many different possible starting points and destinations, commonly known as
"any-to-any". Because IP packets can travel from their starting point to their
destination without staying linked together during the journey, they do not have
to look for pathways across networks large enough to carry large chunks of
information. Instead, the packets can scatter and exploit every available
pathway across a network. Over the PSTN, analog voice communications need a
direct point-to-point path and tie up this connection during the entire duration
of the communication.
- 2 -
<PAGE>
1. Principal Services and their Markets
(a) Services
Using Voice over Internet Protocol ("VoIP"), the Company will offer to small
office and small business users, first and foremost, a low-cost, high-quality
alternative to traditional long distance carriers. It intends to offer other
telephony features in the future. The components of the initial offering are
described below.
Central to the Company's proposed operation, is a high quality IP backbone
that will transport digitized packets of voice, fax and data, for its
clients, around the world. The Company has selected a supplier for this
component of its service - UUNET Technologies, Inc. (see Section 5 below).
The Company will install multi-port gateways at UUNET's Points of Presence
("POP") premises in targeted markets around the world. These gateways will
allow customers in those markets to access the ePHONE network, with no
equipment other than their regular telephone. Once a customer places a
call, either telephone or fax, the call is sent to the ePHONE gateway,
located at the local UUNET facility. The call then is converted into IP
packets and sent to destination using the most cost-effective route, as
determined by the Company's Network Operations Center ("NOC"). The Company
has selected Array Telecom Corp. ("Array") to supply the gateways for this
component of its service (see Section 5 below).
The first gateway will be installed in Rotterdam, The Netherlands in
January, 2000. This site will be used to test the network and billing
system.
A record of the call is created and sent to the Company's NOC, for purposes
of billing and customer service. While theoretically, one NOC could serve
the worldwide network, in practice, quality will be improved, and billing
simplified, by strategically locating a NOC in each main geographic region,
with a copy of the record sent to the Company's central NOC, for back-up.
The NOC consists of a gateway and server supplied by Array, and billing
software supplied by Infozech. The first NOC is being installed by Array at
its premises in Herndon, Virginia.
Finally, the Company will also enable customers to originate calls using a
Customer Premise Equipment ("CPE") device, the iGate, developed by TEK
DigiTel Corp. ("TEK") of Germantown, Maryland. It is an inexpensive 2-port
gateway that makes the conversion from analog to IP at the customer's
premises. The iGate interfaces with the customer's regular telephone
system. It connects to the Company's IP network via Integrated Services
Digital Network ("ISDN"), dial-up modem or Ethernet connection - LAN, CATV
(cable modem), or DSL (high-speed telephone). The Company's arrangements
with TEK are described in Section 5 below.
- 3 -
<PAGE>
The iGate represents a unique feature and competitive advantage for the
Company. It allows customers to access the Company's network anywhere there
is Internet service, without the need for a local ePHONE gateway. The iGate
enables phone-to-phone and fax-to-fax IP Telephony, making the service
transparent to users who simply pick up the phone and dial the destination
number.
(b) Customers
The Company's customers will fall into two main categories: small office/small
business users ("Retail"), and long distance regional/international carriers
("Carrier").
Retail
Small office/small business customers with less than $200 monthly long distance
usage, will use their telephone and/or fax to dial a local ePHONE gateway and
access the Company's IP network enabling them to call anywhere in the world at
greatly reduced rates. The Company will also offer a dialer to make the service
transparent to the user. When the customer dials a long distance number, the
dialer automatically dials the ePhone gateway, identifies the customer and dials
the destination number.
Customers who meet the minimum monthly usage criteria will receive an iGate at
no cost. The iGate will enable the customer to place call anywhere in the world
at greatly reduced rates, as well as placing calls to other iGate customers for
$0.03 per minute, irrespective of their location. This last feature will be
particularly attractive to multi-branch organizations and businesses, which have
frequently called numbers.
Those customers who do not meet the minimum monthly usage criteria, but who
would like to take advantage of the iGate features, will be asked to pay a
monthly network management fee of $5-25, depending on their monthly volume of
calls.
Carrier
The Company will use the ePHONE gateways, located at UUNet sites, to provide a
service helping long distance carriers make the transition from circuit
switching to VoIP packet switching.
For example, a San Francisco-based Competitive Local Exchange Carrier ("CLEC")
has a large customer base focused on the Asian market. An ePHONE gateway would
be located at the CLEC's premises in San Francisco. Customers' calls to Asia
would then be routed through the gateway, on to ePHONE's IP network, downloaded
in Hong Kong at an ePHONE gateway, and then sent to the destination number, via
the local PSTN.
- 4 -
<PAGE>
(c) Fixed Wireless Local Loop Project
The President and COO of the Company, Mr. Charlie Yang, prior to the acquisition
of his company, General Tel Inc., by the Company on July 8, 1999, had developed
a business relationship with Saigon Post and Telecommunications Corporation
("SPT") in Vietnam. The Company has agreed to continue to develop that
relationship.
On October 22, 1999, the Company signed an Agreement in Principle (Exhibit 10.3)
with SPT to jointly develop and operate a series of fixed Wireless Local Loop
("WLL") networks in the region of Ho Chi Minh City. The Company and SPT are
currently conducting a technical and financial feasibility study for the
project, which is expected to build to more than 80,000 subscribers in the next
5 years. The feasibility study is scheduled to be completed by February 28,
2000, at which time, if the outcome is positive, a Business Cooperation Contract
("BCC") will be signed between the two parties. The BCC will guide the
management and operation of the WLL project. The BCC will be in the nature of a
Joint Venture Agreement.
The parties are currently expecting the project to have 2,000-5,000 subscribers
by the end of 2000, rising to 40,000 by 2004. The Company will be seeking
separate financing for this project, primarily from investors in Hong Kong and
elsewhere in Asia. The extent of the financing required will not be known until
the feasibility study has been completed at the end of February, 2000.
2. Distribution of Services and Markets
The Company is targeting those markets that offer both volume and the greatest
margin between the prevailing long distance rates and the cost to the Company of
terminating calls over the IP network. These markets are primarily
intercontinental, i.e. Europe-North America, North America-Asia, and
Asia-Europe.
In its market development work to date, the Company has targeted telephone
equipment distributors and Internet Service Providers ("ISPs") in Europe and to
a lesser extent in Asia, to act as distributors of its services. Telephone
equipment distributors traditionally sell telephone equipment and provide
training to interconnectors who in turn sell, install and maintain telephone
switches and other telecommunications equipment for businesses. These
distributors also sell telephone equipment to retail outlets in their area.
The Company has had a presence in Europe for the last nine months, through Hans
van Yzeren, a Director of the Company, located in Belgium. A number of potential
distributors have signed Letters of Intent to distribute the Company's services
. As part of these agreements, the distributors have been testing the iGate on
their premises. These tests, conducted over the last six months, have
demonstrated to the potential distributors, the high level of voice quality
delivered by ePHONE's iGate.
- 5 -
<PAGE>
The potential distributors include:
Webby Corp of the Netherlands, distributors of WebTV devices, which
proposes a US$500,000 advertising campaign starting in January 2000,
exclusively devoted to the ePHONE products.
MA&C Europe of Gant, Belgium, has proposed distribution in Belgium and
France.
Q-Net CL SRO of the Czech Republic.
Starcom of Warsaw, Poland, intends to cover Poland, Slovenia and Hungary.
Vestel Elecktronik A.S, the largest independent ISP in Turkey.
X/IP Communications Ltd of London, England, a subsidiary of Interoute
World Online, of Vianen, The Netherlands, covers most of the countries in
Western Europe as ISPs.
In addition, strong demonstration of interest has been expressed by a number of
other potential distributors in Eastern Europe, Africa and Asia.
E-Commerce, particularly in business-to-business offerings is believed by the
Company to be an increasingly important part of today's marketing and sales
strategy. The Company has spent in excess of $US 60,000 developing its website -
www.ephonetel.com - including the recruitment of distributors.
3. New Products or Services
The Company's focus, currently and for the next few months, is to establish its
IP network, physically locate the initial ePHONE gateways, finalize testing on
the iGate, finalize the contractual arrangements with its distributors, and
generate revenues through the sale of the services described above.
Additional services are expected to be introduced after the establishment of a
strong business base. These will include voice mail and unified messaging.
4. Competitive Conditions
The internet telephony market is, in Management's opinion, changing and growing
rapidly. Long distance rates are dropping every day, which in turn places
pressure on internet telephony rates. A number of products currently on the
market enable VoIP services using a telephone or fax. Typically these products
require the terminating party to have the identical equipment and in some cases,
to be forewarned of an impending call. Two-step dialing is required and often
configuring the equipment can be cumbersome.
- 6 -
<PAGE>
The Company believes that its iGate represents a significant competitive
advantage. It does not require two-step dialing. It does not require that the
other party has an iGate. Choosing the private IP network over the public
Internet will enhance the quality of the call. Customer testing conducted with
potential distributors indicates that the iGate, working together with the
gateways and IP network, represents a very attractive solution. Furthermore, the
iGate is priced very competitively and the cost will go down as volume
increases.
However the Company is keenly aware that it must not delay the launch of its
service line. It is imperative that the Company generates revenues in the first
quarter of the year 2000.
5. Suppliers
(a) Internet Backbone
An important element of the Company's operation is a high quality IP
backbone that will transport digitized packets of voice, fax and data,
for its clients, around the world. To this end, the Company has signed
a CoLocation Agreement dated August 26, 1999 with UUNET Technologies
Inc., for UUNET's site in San Jose, California. The Company has had an
iGate Server located at the San Jose site since September, 1999.
The Company will install its gateways at other UUNET's Points of
Presence (POP) premises around the world, to serve as its origination
and termination points when sending voice, fax or data via the Internet
or its dedicated IP network. It has signed a second CoLocation
Agreement with UUNET dated December 12, 1999 for UUNET's site in
Rotterdam, The Netherlands, where a 30-port gateway will be installed
in January, 2000.
(b) Gateways
On November 9,1999, the Company issued a Purchase Order, in the amount
of $1,000,000, to Array, to supply multi-port gateways over the next 12
months. The Company has so far ordered the billing software and server,
and the first 3 gateways, to be located respectively in Rotterdam, The
Netherlands, Herndon, Virginia, and Hong Kong, during the first quarter
of 2000. The Company has also ordered two low-density gateways for
testing purposes.
- 7 -
<PAGE>
(c) Customer Premise Equipment
The Company signed a Memorandum of Understanding on July 19, 1999 with TEK.
TEK undertook to support the development and delivery of the iGate as a
first priority, and to provide customer support. The Company undertook to
order and prepay for a certain number of iGate units. In an Addendum to the
MOU, dated September 11, 1999, TEK agreed to provide the Company with
exclusive worldwide distribution rights to the "ePhone" solution, defined
as the integration/combination of TEK's iGate and Array Telecom's
Gateway/Gatekeeper. In return, the Company agreed that if it manufactures
the TEK iGate, it will pay a one-time manufacturing rights fee and per unit
royalties to TEK. The Company also agreed to certain minimum sales of iGate
units.
Under an Agreement dated November 9, 1999 Array is testing Customer Premise
Equipment (iGate Servers) supplied by TEK. The testing revolves around
interoperability of the iGates with the Array gateways, and with the ePHONE
billing software. The results of these tests indicate that the iGates are
interoperable with ePHONE's Array gateways, as well as with the Company's
billing software. Further testing is underway to determine the ability of
the iGates to "wake up" the caller equipment at the point of termination,
in the case where the receiving party is not online. Testing is due to be
completed by January 31, 2000.
6. Dependence on a few major customers
The Company is seeking to establish a number of distributorships in each of
its major market areas. In addition, it will seek to attract customers over
the web. The Company's business does not lend itself to being dependent on
a very few customers.
7. Government Approvals and Regulations
The Company will not attempt to enter into any market, which is subject to
regulation, without first determining that it can satisfy the regulatory
requirements.
In order to conduct telephony business in the United States, the Company
will have to prepare and file applications and associated tariffs for
international and interexchange telecommunications certification before the
Federal Communications Commission and State Commissions, respectively.
The Company's need for licenses in Europe and Asia will be a function of
whether the Company operates as a foreign company in those locations, or
whether it works with licensed foreign partners.
- 8 -
<PAGE>
8. Patents, Trademarks and Royalty Agreements
The Company does not have any patents, trademarks, licences or protective
agreements other than that it has trademarked its logo in Canada. The
Company also has concluded the Agreement with Charles Yang described in
Item 7D hereof (Exhibit 10.1).
9. R. & D. Activities
The Company considers that it has to the date hereof spent on research and
development activities related to its above-described business
approximately $200,000. There is no specific allocation of any of those
costs to the Company's future customers - although it will be the Company's
objective to charge for its products and services in sufficient amounts to
enable it to recover its research and development costs.
10. Y2K Compliance
The Company is not planning to commence operations until the first quarter
of 2000. Hence, it will avoid any potential problems arising from the
actual date change itself. Nonetheless, it has taken steps to confirm that
its suppliers are compliant.
UUNET's Y2K report is available on its website at:
http://www.wcom.com/about_the_company/year_2000_compliance/uunet_y2k. UUNET
has made it clear that for an organization of it's magnitude, it is
imperative to have a smooth crossover from 1999 to 2000 and that all the
necessary precautions have been taken.
Array Telecom, has confirmed that the hardware and software used for the
network management and call routing, has been tested, no anomalies were
found and that it is Y2K compliant.
TEK, the supplier of the iGate Servers has confirmed that the iGate does
not use or contain a real time clock and is therefore in no way affected by
the Y2K problem and that no testing is necessary or required.
The Company's actual costs incurred in addressing the Y2K issue have been
minimal. The Company is a start-up company, using new technologies,
supplied by others. Any future costs related to the Y2K problem will be the
suppliers' responsibility, and will not affect the Company's financial
condition.
- 9 -
<PAGE>
11. Employees
At the date hereof the Company has only 1 employee, being Charles Yang, who
is employed as the Company's President and Chief Operating Officer on a
full-time basis. The Company otherwise functions through the efforts of its
officers and contracted consultants.
C. Reports to Security Holders
The Company is not presently required under any Act or Regulation to
deliver financial statements or other information to any of its
shareholders. However:
1. Annual Reporting
Regardless of whether it becomes required to do so by applicable rules or
regulations, the Company will, voluntarily, send to all of its securityholders
an Annual Report on or before the 30th day of June in each year, which will
include the financial statements of the Company audited to the preceding
December 31st, being the Company's fiscal year-end.
2. SEC Reporting
As the Company became a reporting company on December 15, 1999, pursuant to the
SEC Rules, it will hereafter supply reporting as is required by its reporting
company status.
3. Public Access
The public may read and copy any materials that this Company files with the
United States Securities and Exchange Commission at its Public Reference Room at
450 - 5th Street N.W., Washington, D.C., U.S.A. 20549. The public may also
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. Further, to the extent that the Company files with the
SEC electronically the SEC maintains an Internet site that contains reports,
proxy and Information Statements and other information regarding issuers, and
interested persons may obtain information on the site http:\\www.sec.gov. The
Company's Internet address is http:\\ www.ephonetel.com.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company has not had any revenues from any operations as it has not commenced
its proposed business operations. The Company's plan of operation for the next
12 months is principally as follows:
- 10 -
<PAGE>
The Company has tentatively agreed with certain private investors (including
many of the Directors and Officers) to make a $1,000,000 Regulation S private
placement of shares to them November 3, 1999. The shares will be subject to a
one-year hold. The proceeds from this private placement are being used to fund
operations and equipment purchases so far in 1999. As of November 30, 1999,
approximately $800,000 has been expended, of which $250,000 has been advanced to
TEK DigiTel Corp as prepayment for 500 iGate Servers.
Currently, the Company requires approximately $60,000 per month for salaries,
rent, marketing, general administration, consulting and legal fees. This amount
will increase in the first quarter of 2000 as revenue is generated. It does not
include gateways and other required equipment purchases, which in the fourth
quarter of 1999 will amount to $100,000.
These working capital requirements and equipment purchases will continue to be
funded out of the above-noted private placement for the period ending March 31,
2000. The Company will have to raise additional funds starting prior to March
31, 2000 in order to continue start-up operations.
The Company is currently in negotiations with a Canadian investment dealer for a
$5,000,000 equity/debt financing. The funding is subject to the Company
satisfying the requirements of the Eligibility Rules of NASD and becoming again
quoted on the National Association of Securities Dealers' Over-The-Counter
Bulletin Board. These funds are needed for the Company to continue to cover
working capital requirements as well as the purchase of the Array gateways
referred to above.
As an alternative, the Company is also discussing withanother company a plan to
lease finance the Customer Premise Equipment, the iGate servers, and possibly
the Array gateways.
If the Company fails to again qualify to be quoted on the Over-The-Counter
Bulletin Board, it will have to solicit personal loans or private placements
from individuals, officers and directors to continue operations. The
compensation of officers and consultants would be reviewed and where possible
reduced. The offices would be consolidated and expenses would not be incurred
unless mandatory.
ITEM 3 DESCRIPTION OF PROPERTY
(a) Plants or property
The Company does not own or have any rights to purchase any plants or other
property. Its only physical assets are computers and office equipment.
(b) Investment Policies
The Company does not have any policies which limit or guide the types of
investments that it might acquire or invest in. However, at the date
hereof, the Company does not have any expectations that it will acquire any
investments other than those which might be compatible with, and will
enhance or support, the Company's business objectives as described above.
The Company does not have any policy which would lead it to acquiring
assets or investments for capital gain. Such assets or investments as it
may acquire or invest in would be to advance the business described above
with the objective of generating income.
- 11 -
<PAGE>
ITEM 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains information with respect to beneficial ownership of
the outstanding common shares of the Company as of September 20, 1999 for: (i)
each shareholder known to be the beneficial owner of 5% or more of the
outstanding common shares; (ii) each of the Company's executive officers and
directors; and (iii) all executive officers and directors of the Company as a
group. In general, a person is deemed to be a "beneficial owner" of a security
if that person has or shares the power to vote or direct the voting of such
security, or has the power to dispose or direct the disposition of such
security. A person is also deemed to be a beneficial owner of any securities of
which the person has the right to acquire beneficial ownership within 60 days.
At November 30, 1999 the Company had 12,000,000 shares issued and outstanding
and had outstanding options entitling the purchase, within 60 days, of 3,775,000
shares. The following information as to percentage of beneficial ownership is
therefore of the total of the shares issued or under option, being 15,775,000.
<TABLE>
Name and Address Number of Common Shares Percent of
or Identity of Individual Beneficially Owned Beneficial
or Group or Deemed Beneficially Owned Ownership
- ------------------------------ ---------------------------- ----------
<S> <C> <C>
Robert G. Clarke
915 Leyland Street
West Vancouver, B.C. V7T 2L6 Nil shares
Director, Chairman and Chief 1,000,000 options 6.34%
Executive Officer and Promoter
- 12 -
<PAGE>
Charles Yang
39767 Paseo Padre Parkway
Suite E, Nil shares
Fremont, California, 94538 500,000 options
Director, President and Chief Operating of which only 300,000 are 1.9%
Officer exercisable within 60 days)
Peter Francis
Suite 3C, Tung Shan Terrace, Nil shares 1.58%
Stubbs Road, 250,000 options
Hong Kong
Director
Hans van Yzeren
Gorzendreef 12 Nil shares 1.58%
2360 Oud-Turnhout 250,000 options
Belgium
Director
Charlie Rodriguez
162 West Petunia Place Nil shares 1.58%
Tucson, Arizona 250,000 options
U.S.A.
85737
Secretary and Vice-President
John Fraser
104 Elm Avenue Nil shares 1.58%
Toronto, Ontario 250,000 options
M4W 1P2
Director and Executive Vice-President
Ben Leboe
16730 Carrs Landing Rd. Nil shares 1.58%
Lake Country, B.C. 250,000 options
V4V 1B2
Chief Financial Officer
Executive Officers and Directors as a group Nil shares
(7) persons 2,550,000 options 16.16%
- 14 -
<PAGE>
Americana International Inc.*
Hong Kong 2,550,000 shares 16.16%
Holder of more than 5%
</TABLE>
* Management is advised that the owner of 100% of the issued shares of
Americana International Inc. is Gary Kenneth Urwin, Chartered Accountant,
of 27 Hamilton Parade, Pymble, Sydney, Australia. Mr. Urwin has no other
relationship to the Company.
ITEM 5 DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
All Directors serve until the next Annual General Meeting of the Shareholders or
until they earlier resign. Officers are elected by the Board of Directors and
their terms of office are, except to the extent that the engagement of Mr. Yang
is governed by an Agreement, at the discretion of the Board of Directors.
Further details of the Directors and Officers are as follows:
Name, Age and Positions held with the Company
Robert G. Clarke - 55 - Appointed Director, president andChief Executive
Officer June 3, 1999. Effective August 9, 1999 resigned as President and
was appointed Chairman of the Board. Also deemed the promoter of the
Company.
Business experience during past 5 years
Holds degrees, Bachelor of Commerce and Master of Business Administration.
During portions of the last 5 years has acted as independent business
consoltant. Director, President and Chief Executive of Waverider
Communications Inc. (trades OTC BB under Symbol "WAVC" January, 1997
December, 1997. Director Global CT & T Telecommunications Inc. ("GLC" -
Vancouver Stock Exchange , September 18, 1995 - October 17, 1996 and again
from February 11, 1998 - October 11, 1999. Corporate Secretary, Pacific
Western Capital Corporation (traded on Vancouver Stock Exchange) August 15,
1995 - October 17, 1996.
Name, Age and Positions held with the Company
Charles Yang - 39 Appointed Director, President and Chief Operating Officer
of the Company, August 9, 1999
Business experience during past 5 years
1994-1996: President of Charles Industries, Inc., Los Angeles, California
directing multimedia communications system integration; 1995: International
Sales Manager, North America/Greater China, of AFLA Inc., of Taiwan and
California - multimedia network hardware manufacturer; 1996: Director of
Sales and marketing, DFI Inc. of Fremont, California, marketing multimedia
notebook and mobile computing system integration; 1997: President Arlotto
Technologies, Inc., Fremont, California, marketing in U.S. and Canada data
communication equipment; 1997-1999: Founder, President and Chief Executive
Officer of General-Tel Inc., Fremont, California. Marketing
telecommunication services and technolgies. Mr. Yang has undertaken to
particularly, as part of his general full-time duties with the Company,
focus on the potential for marketing of the Company's products and services
in China and to assist Mr. Fraser in the development of the contractual
arrangements which have been evolving in Vietnam.
- 14 -
<PAGE>
Name, Age and Positions held with the Company
John G. Fraser - 53 Appointed Director and Executive Vice-President of the
Company June 3, 1999.
Business experience during past 5 years
Masters Business Administration degree University of Pittsburg. Bachelor of
Commerce and Administration, Victoria University, Wellington, New Zealand.
With KPMG Canada, Chartered Accountants from November 1976 until 1998. Most
recent position held was Vice-Chairman, with national responsibility for
KPMG Consulting which provides a full range of management consulting
services, strategy, reengineering, human resources, information technology
and package applications. Annual revenues were approximately $100 million,
with professional staff of 600 and offices in 12 locations. Specific duties
included providing strategic and business direction, quality assurance,
professional development, risk management, compensation and promotions.
Member of the firm's Management Committee and International Management
Consulting Committee; Chair of the Management Consulting Policy Committee
and the KPMG Centre for Government Foundation.
In addition to his general duties Mr. Fraser has assumed responsibility for
directing the development of the contractual arrangements that have been
established in Vietnam.
- 15 -
<PAGE>
Name, Age and Positions held with the Company
Charlie Rodriguez - 55 Appointed Corporate Secretary and Vice-President -
Corporate Affairs June 3, 1999
Business experience during past 5 years
Master Business Administration Degree.
Zephyr Technologies, Inc., Omaha, Nebraska. Served as Chief Financial
Officer for a biometrics and smartcard software integrator company.
Prepared business plan, contracts and marketing materials for presentations
to investment bankers.
WaveRider Communications, Inc., (a NASD OTC Bulletin Board reporting
company), Vancouver, Canada, formerly named Channel I, Inc. Served as
director from January to November 1997, and as President and CEO from May
1995 to January 1997. Developed an infrastructure for the implementation of
the strategic business plan, presented management reports and implemented a
business plan and a public offering of common shares.
Hogan Clinics, Las Vegas, Nevada. Served as an outside consultant on an
ongoing basis during 1998. Provided administrative management for all
business and clinical operations including strategic planning, accounting,
finance, supplies, equipment, contracting, and personnel for Medical
Clinic. Restructured clinical operations eliminating duplication of
functions.
Advisory Services of Arizona, Inc., Scottsdale, Arizona. An investment
banking and consulting company specializing in public companies. Served as
an in-house consultant from October 1994 to December 1996. Assisted in the
design and structure of various mergers and acquisitions and financings by
clients. Provided operational analysis, and developed business plans and
assisted in implementing infrastructures for various clients. Bullet-Cougar
Golf Equipment Manufacturing Company (a NASDAQ company), Irvine,
California. Provided due diligence for the purchase of three-golf equipment
manufacturing subsidiaries merging into a public company. Interim Treasurer
and Chief Financial Officer November 1994 to March 1995. Re-engineered
operations and initiated a material requirements plan and direct order
software system.
- 17 -
<PAGE>
Name, Age and Positions held with the Company
Benjamin Leboe - 54 Management Appointed Chief Financial Officer of the
Company June 3, 1999.
Business experience during past 5 years
British Columbia Chartered Accountant and Certified Consultant.
Vice-President and Chief Financial Officer of VECW Industries Ltd. 1991 -
June 1995; Director and President of CPT Pemberton Technologies Ltd.
(shares traded on Vancouver Stock Exchange "CPT") 1991 - June, 1995; from
July 1995 to date, Owner/Manager of Independent Management Consultants of
British Columbia.
Name, Age and Positions held with the Company
Peter Francis - 50 Director since June 3, 1999
Business experience during past 5 years
From 1984 to present has operated his own investment and corporate advisory
company - in the course of which he has incidentally sat on the Boards of
or was a shareholder of or advisor to 12 companies that were publicly
listed for trading on Asian markets.
Designated to have responsibility for development of the Company's business
in Southeast Asia - exclusive of Vietnam and China
Name, Age and Positions held with the Company
Hans van Yzeren - 52 Director since June 3, 1999
1998 to present:
1996 - 1998: Data Services NV, Belgium. Position: Partner/Managing
Director; Developing and establishing a new brand name of computer
peripherals especially computer monitors in the European market. Extensive
communication and negotiations with manufacturers and component suppliers
regarding product, quality and price. Development of product design and
manufacturing and established relationships with suppliers and customers.
1990 - 1996: G-Tel Communications S.a.r.l., Luxembourg; Position:
Partner/Director. Development of new style cordless telephone low and high
frequency for all markets. Extensive involvement in R & D, product design,
manufacturing, cost reduction and marketing. Mr. van Yzeren's commitment to
the Company has been to, on a part-time basis, assist in the development of
market opportunities for the Company's products and services in Europe.
- 17 -
<PAGE>
ITEM 6 EXECUTIVE COMPENSATION
A. Cash compensation
The Company paid no compensation, cash or otherwise, to any of its directors or
executive officers during the fiscal years ended December 31, 1998.
No directors or executive officers are presently under any agreement pursuant to
which they are guaranteed salary or other direct compensation. Various of the
directors and executive officers perform functions for the Company on a
consulting basis and are paid for their services rendered from time to time on
such basis as is negotiated with them from time to time by the Chief Executive
Officer, Mr. Clarke. Mr. Yang is currently entitled to compensation on a basic
monthly basis with additional potential commissions and shares of the Company
pursuant to the agreement described in Item 7 below.
B. Option grants
No options were granted by the Company during any period prior to December 31,
1998. The Company does not have a stock option plan. However, the Company did
grant, effective July, 1998, share purchase incentive options to 12 directors,
executive officers, non-executive officers and individuals providing service to
the Company entitling them to purchase up to an aggregate total of 4,000,000
shares of the Company exercisable at $0.50 per share on or before June 30, 2002.
Provided that, the options granted to any individual will terminate within 30
days after the individual ceases to perform services for the Company or within 6
months after the date of the death of such individual. The numbers of shares
optioned to each of the Company's Directors and Executive Officers is shown in
the table in Item 4 above.
C. Charles Yang
With the number of shares Charles Yang could receive pursuant to the agreement
described in Item 7(d) and attached as an Exhibit hereto, he could become the
largest single shareholder with enough shares to affect control of the Company.
- 18 -
<PAGE>
ITEM 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A. On May 8, 1996, immediately following the incorporation of the Company, the
Company issued 1,000,000 common shares for $0.001 per share. Of these
975,000 shares were issued by the Company to Ira Schwartz, the Company's
then sole director and officer.
B. By an Agreement dated July 8, 1999 the Company engaged Charles Yang (who
was not previously related to the Company) to provide his services on a
full-time basis as the President and Chief Operating Officer of the Company
for a basic term of 4 years. The Agreement provides for the payment to Mr.
Yang of a fee of $7,500 per month initially, escalating to $17,500 per
month for the period April 1 - June 30, 2000. For the second, third and
fourth years of Mr. Yang's engagement his compensation will be reviewed but
will increase by a minimum of not less than 15% over the amount paid to him
in the preceding year.
The Agreement also provided for Mr. Yang to be granted options and, pursuant
thereto, Mr. Yang was granted options to purchase 500,000 common shares of the
Company exercisable at $0.50 per share, during the term of his Engagement
Agreement, the options vesting on the following schedule:
100,000 shares on execution of the Agreement
200,000 shares October 1, 1999
1999 200,000 shares January 1, 2000
In the Agreement the Company also agreed to acquire from Mr. Yang 100% of the
issued shares of a company owned by him, General-Tel Inc., in exchange for
1,500,000 voting common shares of the Company. The Agreement provides that the
Company must, within 6 months of the closing of the acquisition of General-Tel,
raise funding for itself (and possibly use by General-Tel) of not less than
$1,100,000, and if such financing is not raised within the said deadline Mr.
Yang will be entitled to cancel the negotiations or the acquisition agreement
and have 100% of the shares of General-Tel re-transferred to him in
consideration for which he must return 1,350,000 of the Company's shares to it.
The Company has also agreed to issue Mr. Yang 2,000,000 voting common shares
(which it has not yet done). The certificates for the shares will be held in
escrow by the Company's Canadian lawyers, and 25% of such shares - i.e. 500,000
shares - will be released to Mr. Yang upon the Company achieving the following
performance thresholds:
(i) net sales revenues of $5,000,000
(ii) aggregate cumulative net sales revenues of $12,000,000
(iii) aggregate cumulative net sales revenues of $30,000,000
(iv) aggregate cumulative net sales revenues of $50,000,000
- 19 -
<PAGE>
The Agreement requires that Mr. Yang bring to the company the benefit of all
negotiations and technical knowledge initiated or held by him to sell hardware
or services with respect to a technology referred to as Wireless Local Loop
("WLL"). The Company has agreed to issue Mr. Yang 1,000,000 voting common shares
if he succeeds in developing an agreement for the sale of WLL to one or more
purchasers brought to the Company by Mr. Yang - such shares to be issued on the
following schedule:
(i) 300,000 shares upon completion of negotiation and signing of
Memorandum of Understanding with the purchaser of WLL;
(ii) 300,000 shares upon completion of signing of a formal contract for the
sale of WLL;
(iii)400,000 shares upon the receipt by the Company from the sale of WLL of
payments and revenues of not less than $500,000.
Further, Mr. Yang will receive 10% of the gross profits earned by the
Company from the sales of WLL.
Mr. Yang will also, from the sale of the Company's products or services, receive
royalties on the following basis:
(i) from sales of equipment or services in China, Vietnam or Taiwan,
provided the Company's gross profit margin is not less than 20%
from such sales, Mr. Yang will be paid 5% of the gross profits from
such business; and
(ii) for countries other than China, Vietnam or Taiwan where the Company
pays sales commissions or representatives or agents in such other
country, Mr. Yang will be paid monies equal to 1% of the amount of
the gross sales revenues from such countries;
(iii) where sales to China, Vietnam or Taiwan produce gross profits of
less than 20% then Mr. Yang will, in lieu of the aforesaid 5%,
receive commissions equal to 1% of the gross sales revenues from
such countries.
B. The Company issued the options described in Item 6B hereof to various of its
directors and executive officers.
ITEM 8 DESCRIPTION OF SECURITIES
The Company's authorized capital consists only of voting common shares.
12,000,000 shares are issued and outstanding as of the date of this Statement
and are held by 27 registered shareholders. The 12,000,000 shares are the number
which are issued as a result of the Company's 1:3 split which came effective
July 16, 1999. Prior to the split the Company had 4,000,000 shares issued.
- 20-
<PAGE>
All of the common shares rank equally with each other, and none have attached to
them any dividend, pre-emptive or other rights or restrictions attached to them.
Each share has attached to it one (1) non-cumulative vote. The Company's By-Laws
do not contain any provisions which defer or prevent a change in control of the
Company.
The Registrar and Transfer Agent of the Company's shares is Interwest Transfer
Co., Inc., 100 - 1981 East 4800
south, Salt Lake City, Utah, U.S.A.
PART II
ITEM 1 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
A. Market Information
The common voting shares of the Company are traded on the Over-The-Counter
electronic Bulletin Board - under the symbol "EPHO" until December 15, 1999.
From and after that date trades have been made on the National Quotation
Bureau's electronic "Pink Sheets" under the symbol "EPHO". The Company's shares
do not trade on any stock exchange or any other market.
The reported high and low bid prices for the Company's shares for the quarters
of the last two completed fiscal years ending December 31, 1998 and the first
three quarters of 1999 and for the forth quarter up to December 15, 1999, are as
follows. The quotations reflect inter-dealer prices and do not include retail
mark-ups, mark-downs or commissions, and may not represent actual transactions.
The source of the bid information given is the Nasdaq-Amex Market Group.
Year and Quarter High Bid $ Low Bid $
- ----------------- ---------- ---------
1997
1st Quarter 0 0
2nd Quarter 0 0
3rd Quarter 0 0
4th Quarter 0 0
- 21 -
<PAGE>
Year and Quarter High Bid $ Low Bid $
- ----------------- ---------- ---------
1998
1st Quarter 0 0
2nd Quarter 0 0
3rd Quarter $0.50 $0.50
4th Quarter $0.50 $0.50
Year and Quarter High Bid $ Low Bid $
- ----------------- ---------- ---------
1999
1st Quarter $0.625 $0.50
2nd Quarter $2.125 $0.5313
3rd Quarter - July 1 - July 16, 1999 $3.125 $1.75
1:3 split -
July 16, 1999 - September 30, 1999 $3.00 $0.75
October 1 - December 15, 1999 $1.65 $0.4375
As the Company's shares started trading on a 1:3 split basis effective July 16,
1999 the figures given above for the periods prior to that date are of pre-split
shares. The Company's shares were not posted for trading on the OTC Bulletin
Board until May 18, 1998 - and hence no bid prices are shown for the period
prior to that date.
B. Holders
As of December 20, 1999 there were 27 shareholders of record of the Company's
outstanding shares. One registered holder was the brokers' nominee and clearing
house Cede & Co., of New York City, New York, U.S.A. - which was the registered
holder of 5,368,000 shares.
C. Dividends
The Company has not paid any cash dividends to date and no cash dividends will
be declared or paid on the Common Shares in the foreseeable future. Payment of
dividends is solely at the discretion of the Board of Directors.
On July 2, 1999, the Board of Directors unanimously approved a stock dividend of
2 shares for each 1 issued share - having the same net effect as a 3-1 forward
split of the Company's Common Shares. The record date of the stock split was the
close of business on July 6, 1999 and was such that each shareholder received 2
additional shares for each share owned at the close of business on July 16,
1999. The Company does not anticipate that there will be any stock dividends
paid by the Company in the foreseeable future.
- 22 -
<PAGE>
ITEM 2 LEGAL PROCEEDINGS
The Company is not involved in, or has no knowledge of, any threatened or
pending legal proceedings against it.
ITEM 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company has had no disagreements with its auditor Barry Friedman, C.P.A.,
during the fiscal years ended December 31, 1997 and 1998, six months ended June
30, 1999, and subsequent periods.
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES
The Company has, in the past 3 years, sold securities, namely voting common
shares - without registering the securities under the United States Securities
Act of 1933, as follows:
(a) Effective March 1, 1999 the Company issued 1,000,000 shares in its capital
for a price of $0.01 per share - being a total of $10,000 - to 8 purchasers none
of whom were related to the Company or its Directors or Officers;
(b) Effective April 1, 1999 the Company issued 2,000,000 shares in its capital
for a price of $0.045 per share - for a total of $90,000 - to a total of 20
purchasers who included the 8 purchasers of the shares described in sub-clause
(a) above - none of whom were otherwise related to the Company or its Directors
or Officers.
All of the shares referred to in Clauses (a) and (b) have since been split on a
1:3 basis so that they have become a total of 9,000,000 issued shares.
All of the sales were made directly by the Company and not through the use of
underwriters. No underwriting discounts or commissions were paid with respect to
any of the sales - all of which were made for cash at the prices designated
above.
The sales were made without registration pursuant to the exemption granted by
Rule 504 of Regulation D to the Securities Act. All sales made within a 12 month
period were for less than an aggregate total of $1,000,000. All of the sales
were made to non United States persons outside of the United States.
ITEM 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS
Neither the Company's Charter documents nor any contracts or arrangements in
existence provide for any insurance or indemnification of any Director, Officer
or controlling person of the Company affecting his or her liability in such
capacity.
- 23 -
<PAGE>
Section 607.0850 of the Statutes of Florida (pursuant to which the Company was
incorporated) grants to a company the power to provide indemnification to
directors, officers, employees or agents of the corporation. While the
provisions of the Statute contain an extensive description of situations where
indemnification may be granted generally, the corporation can grant
indemnification to directors, officers, employees or agents or others serving
the company with respect to either actions by third parties or by the company if
the person being indemnified was, with respect to the subject of the action,
acting in good faith and in a manner he or she reasonably believed to be in the
best interests of the company, and had no reason to believe was unlawful.
Indemnification and the extent of the indemnification must be determined in each
instance after a claim arises by a majority vote of the board of directors.
Indemnification, even if previously approved, shall not be given if a final
adjudication determines that the actions which are the subject of the
indemnification were:
(a) a violation of the criminal law unless the person being indemnified had
reasonable cause to believe that the conduct was not unlawful; or
(b) involves a transaction in which the person derived or was to derive an
improper personal benefit; or
(c) the person is a director and liability provisions elsewhere in the Statutes
of Florida are applicable; or
(d) the actions of the person proposed to be indemnified constituted wilful
misconduct or conscious disregard for the best interests of the
corporation.
As of the date hereof the Company has not agreed to grant any indemnification to
any person pursuant to the foregoing statutory provisions.
PART F/S
Audited financial statements of the Company are provided herein. They cover the
last two completed fiscal years of the Company ending December 31, 1997 and
December 31, 1998 and the half-yearly period ending June 30, 1999. Unaudited
statements covering the stub period to September 30, 1999 are also included
- 24 -
<PAGE>
IFB CORP.
(FORMERLY IRA FUND BROKERS CORP.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
December 31, 1998
December 31, 1997
December 31, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT ................................................2
ASSETS ......................................................................3
LIABILITIES AND STOCKHOLDERS' EQUITY ........................................4
STATEMENT OF OPERATIONS .....................................................5
STATEMENT OF STOCKHOLDERS' EQUITY ...........................................6
STATEMENT OF CASH FLOWS .....................................................7
NOTES TO FINANCIAL STATEMENTS .............................................8-9
- 1 -
<PAGE>
BARRY L. FRIEDMAN, P.C.
Certified Public Accountant
1582 TULITA DRIVE OFFICE (702) 361-8414
LAS VEGAS, NEVADA 89123 FAX NO. (702) 896-0278
INDEPENDENT AUDITORS' REPORT
Board of Directors July 16, 1999
IFB Corp.
Vancouver, BC, Canada
I have audited the accompanying Balance Sheets of IFB Corp., (Formerly
Ira Fund Brokers Corp.), (A Development Stage Company), as of December 31,
1998, December 31, 1997, and December 31, 1996, and the related statements of
operations, stockholders, equity and cash flows for the two years ended
December 31, 1998, and December 31, 1997, and the period May 3, 1996,
inception, to December 31, 1996. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audit provides a reasonable basis for
my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of IFB Corp.,(Formerly
Ira Fund Brokers Corp.), (A Development Stage Company) as of December 31, 1998,
December 31, 1997, and December 31, 1996, and the results of its operations and
cash flows for the two years ended December 31, 1998, and December 31, 1997,
and the period May 3, 1996, inception, to December 31, 1996, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note #3 to the
financial statements, the Company has no established source of revenue. This
raises substantial doubt about its ability to continue as a going concern.
Management's plan in regard to these matters are also described in Note #3. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
[signed]
Barry L. Friedman
Certified Public Accountant
- 2 -
<PAGE>
<TABLE>
<CAPTION>
IFB CORP.
(FORMERLY IRA FUND BROKERS CORP.)
(A Development Stage Company)
BALANCE SHEET
ASSETS
December December December
31, 1998 31, 1997 31,1996
------------- ------------- -------------
<S> <C> <C> <C>
CURRENT ASSETS $ 0 $ 0 $ 0
------------- ------------- -------------
TOTAL CURRENT ASSETS $ 0 $ 0 $ 0
------------- ------------- -------------
OTHER ASSETS
Computer (Net) (Note #2) $ 4,875 $ 0 $ 0
------------- ------------- -------------
TOTAL OTHER ASSETS $ 4,875 $ 0 $ 0
------------- ------------- -------------
TOTAL ASSETS $ 4,875 $ 0 $ 0
============= ============= =============
The accompanying notes are an integral part of these financial statements
- 3 -
<PAGE>
IFB CORP.
(FORMERLY IRA FUND BROKERS CORP.)
(A Development Stage Company)
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EOUITY
December 31, December 31, December 31,
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
CURRENT LIABILITIES
Officers Advances (Note #6) $ 12, 046 $ 0 $ 0
Accounts Payable 11, 073 0 0
------------- ------------- -------------
TOTAL CURRENT LIABILITIES $ 23, 119 $ 0 $ 0
------------- ------------- -------------
STOCKHOLDERS' EQUITY
(Note #1)
Common stock, $0.001 par
valueauthorized 50,000,000
Sharesissued and outstanding at
December 31, 1996-1,000,000 shs $ 1, 000
December 31, 1997-1,000,000 shs $ 1, 000
December 31, 1998-1,000,000 shs $ 1, 000
Additional paid in Capital 0 0 0
Deficit accumulated during the - 19, 244 - 1, 000 - 1, 000
------------- ------------- -------------
development stage
TOTAL STOCKHOLDERS' $ - 18, 244 $ 0 $ 0
------------- ------------- -------------
EQUITY
TOTAL LIABILITIES AND $ 4,875 $ 0 $ 0
============= ============= =============
STOCKHOLDERS' EQUITY
The accompanying notes are an integral part of these financial statements
- 4 -
<PAGE>
<CAPTION>
IFB CORP.
(FORMERLY IRA FUND BROKERS CORP.)
(A Development Stage Company)
STATEMENT OF OPERATIONS
May 3,1996
Year Ended Year Ended Year Ended (inception) to
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCOME
Revenue $ 0 $ 0 $ 0 $ 0
------------- ------------- ------------- -------------
EXPENSES
Depreciation $ 542 $ 0 $ 0 $ 542
General and Administrative 1, 516 0 1, 000 2, 516
Investor Relations 990 0 0 990
Professional Fees 14, 643 0 0 14, 643
Office Supplies 150 0 0 150
Travel 403 0 0 403
------------- ------------- ------------- -------------
Total Expenses $ 18, 244 $ $ 1, 000 $ 19, 244
------------- ------------- ------------- -------------
Net Profit/Loss (-) $ - 18, 244 $ $ - 1, 000 $ - 19, 244
============= ============= ============= =============
Net Profit/Loss (-) per weighted
share (Note #1) $ - .0182 $ $ - .0010 $ - .0192
============= ============= ============= =============
Weighted average number of
common shares outstanding
1, 000, 000 1, 000, 000 1, 000, 000 1, 000, 000
============= ============= ============= =============
The accompanying notes are an integral part of these financial statements
- 5 -
<PAGE>
IFB CORP.
(FORMERLY IRA FUND BROKERS CORP.)
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Additional
Common Stock paid-in Accumulated
Shares Amount capital Deficit
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
May 8, 1996
issuance of common stock 1, 000, 000 $ 1, 000 $ 0 $ 0
Net loss May 8, 1996
to December 31, 1996 - 1, 000
------------- ------------- ------------- -------------
Balance,
December 31, 1996 1, 000, 000 $ 1, 000 $ 0 - 1, 000
Net loss year ended
December 31, 1997 0
------------- ------------- ------------- -------------
Balance,
December 31, 1997 1, 000, 000 $ 1, 000 $ 0 $ - 1, 000
Net loss year ended
December 31, 1998 -18,244
------------- ------------- ------------- -------------
Balance,
December 31, 1998 1, 000, 000 $ 1, 000 $ 0 $ -19,244
============= ============= ============= =============
The accompanying notes are an integral part of these financial statements
- 6 -
<PAGE>
IFB CORP.
(FORMERLY IRA FUND BROKERS CORP.)
(A Development Stage Company)
STATEMENT OF CASH FLOWS
May 3,1996
Year Ended Year Ended Year Ended (inception) to
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Cash Flows from Operating
Activities
Net Loss $ -18, 244 $ 0 $ -1, 000 $ -19, 244
Adjustment to reconcile
net loss to net cash
provided by operating
activities Depreciation +542 +542
Changes in assets and
liabilities
Increase in other assets -5,417 0 0 -5,417
Increase in current
liabilities +23,119 0 0 +23,119
------------- ------------- ------------- -------------
Net cash used in operating
activities $ 0 $ 0 $ -1, 000 $ -1, 000
Cash Flows from investing
activities 0 0 0 0
Cash Flows from
Financing Activities
Issuance of common
Stock for services 0 0 +1, 000 +1, 000
------------- ------------- ------------- -------------
Net increase(decrease)
in cash $ 0 $ 0 $ 0 $ 0
Cash, beginning of period
------------- ------------- ------------- -------------
$ 0 $ 0 $ 0 $ 0
Cash, end of period $ 0 $ 0 $ 0 $ 0
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements
- 7 -
<PAGE>
IFB CORP.
(FORMERLY IRA FUND BROKERS CORP.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998, December 31, 1997, and December 31,1996
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized May 3, 1996, under the laws of the State of
Florida, as Ira Fund Brokers Corp. The Company currently has no operations and,
in accordance with SFAS #7, is considered a development stage company.
On May 8, 1996, the company issued 1,000,000 shares of its $0.001 par value
common stock for $ 1,000.
On April 17, 1998, the Company changed it's name to IFB Corp.
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES
Accounting policies and procedures have not been determined except as
follows:
1. The Company uses the accrual method of accounting.
2. Earnings per share is computed using the weighted average number of common
shares outstanding.
3. The Company has not yet adopted any policy regarding payment of
dividends. No dividends have been paid since inception.
4. Depreciation is calculated on the computer on the basis of 5 year straight
line method HY convention.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which contemplates
the realization of assets and liquidation of liabilities in the normal course of
business. However, the Company has no current source of revenue. Without
realization of additional capital, it would be unlikely for the Company to
continue as a going concern. It is management's plan to seek to raise additional
capital.
NOTE 4 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to issue any additional
shares of common stock.
- 8 -
<PAGE>
IFB CORP.
(FORMERLY IRA FUND BROKERS CORP.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998, December 31, 1997, and December 31,1996
NOTE 5 - RELATED PARTY TRANSACTION
The Company neither owns or leases any real property. Office services are
provided without charge by a director. Such costs are immaterial to the
financial statements and, accordingly, have not been reflected therein. The
officers and directors of the Company are involved in other business activities
and may, in the future, become involved in other business opportunities. If a
specific business opportunity becomes available, such persons may face a
conflict in selecting between the Company and their other business interests.
The Company has not formulated a policy for the resolution of such conflicts.
NOTE 6 - OFFICERS ADVANCES
While the Company is seeking additional capital through a merger with an
existing operating company, an officer of the Company has advanced funds on
behalf of the Company to pay for any costs incurred by it. These funds are
interest free.
- 9 -
<PAGE>
ePhone Telecom, Inc.
(Formerly IFB Corp.)
(Formerly Ira Fund Brokers Corp.)
(A Development Stage Company)
UNAUDITED FINANCIAL STATEMENTS
Nine months ended September 30, 1999 (and
audited for the years ended December 31, 1998 and 1997)
<PAGE>
ePhone Telecom, Inc.
(Formerly IFB Corp.)
(Formerly Ira Fund Brokers Corp.)
(A Development Stage Company)
UNAUDITED FINANCIAL STATEMENTS
TABLE OF CONTENTS
Company Comments...............................................................1
Assets.........................................................................2
Liabilities and Stockholders' Equity...........................................3
Statement of Operations........................................................4
Statement of Stockholders' Equity..............................................5
Statement of Cash Flows........................................................6
Notes to Financial Statements................................................7-9
<PAGE>
ePhone Telecom, Inc.
(Formerly IFB Corp.)
(Formerly Ira Fund Brokers Corp.)
(A Development Stage Company)
UNAUDITED FINANCIAL STATEMENTS
COMPANY COMMENTS
The Financial Statements for the nine months ended September 30, 1999 and the
years ended December 31,1998 and 1997 include, in the opinion of the Company,
all adjustments (which consist only of normal recurring adjustments) necessary
to present fairly the results of operations for such periods. The audited period
from inception (May 3, 1996) to December 31, 1996 has not been included
separately due to its lack of significance. Results of operations for the nine
months ended September 30, 1999, are not necessarily indicative of results of
operations which will be realized for the year ending December 31, 1999. The
financial statements should be read in conjunction with the Company's Form 10 -
SB.
- 1 -
<PAGE>
<TABLE>
<CAPTION>
ePhone Telecom, Inc.
(Formerly IFB Corp.)
(Formerly Ira Fund Brokers Corp.)
(A Development Stage Company)
BALANCE SHEET
ASSETS
30-Sep-99 31-Dec-98 31-Dec-97
(unaudited) (audited) (audited)
-------- -------- --------
<S> <C> <C> <C>
CURRENT ASSETS
Cash ................................................................ $ 66,840 $ 0 $ 0
-------- -------- --------
TOTAL CURRENT ASSETS ........................................... $ 66,840 $ 0 $ 0
-------- -------- --------
OTHER ASSETS
Purchase Advance (Note 7) ........................................... $250,000 $ 0 $ 0
Computers (Net) (Note 2) ............................................ $ 14,615 $ 4,875 $ 0
-------- -------- --------
TOTAL OTHER ASSETS ............................................. $264,615 $ 4,875 $ 0
-------- -------- --------
TOTAL ASSETS ............................................................. $331,455 $ 4,875 $ 0
======== ======== ========
The accompanying notes are an integral part of these financial statements.
- 2 -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ePhone Telecom, Inc.
(Formerly IFB Corp.)
(Formerly Ira Fund Brokers Corp.)
(A Development Stage Company)
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
30-Sep-99 31-Dec-98 31-Dec-97
(unaudited) (audited) (audited)
-------- -------- --------
<S> <C> <C> <C>
CURRENT LIABILITIES
Officers Advances (Note 6) ................................................ $ 62,331 $ 12,046 $ 0
Share Subscriptions (Notes 3, 8) .......................................... $ 492,000 $ 0 $ 0
Accounts Payable (Note 3) ................................................. $ 210,379 $ 11,073 $ 0
--------- --------- ---------
TOTAL CURRENT LIABILITIES ............................................ $ 764,710 $ 23,119 $ 0
--------- --------- ---------
STOCKHOLDERS' EQUITY (Notes 1, 3, 4) Common stock, $0.001 par value Authorized
50,000,000 shares Issued and outstanding at:
December 31, 1997 - 3,000,000 shares ...................................... $ 1,000
December 31, 1998 - 3,000,000 shares ...................................... $ 1,000
September 30, 1999 - 12,000,000 shares .................................... $ 4,000
Additional paid in Capital ................................................ $ 97,000 $ 0 $ 0
Deficit accumulated during the development stage .......................... ($534,255) ($ 19,244) ($ 1,000)
--------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY ........................................... ($433,255) ($ 18,244) $ 0
--------- --------- ---------
TOTAL LIABILITY AND STOCKHOLDERS' EQUITY ....................................... $ 331,455 $ 4,875 $ 0
========= ========= =========
The accompanying notes are an integral part of these financial statements.
- 3 -
</TABLE>
<PAGE>
<TABLE>
ePhone Telecom, Inc.
(Formerly IFB Corp.)
(Formerly Ira Fund Brokers Corp.)
(A Development Stage Company)
STATEMENT OF OPERATIONS
3 May 96
<S> <C> <C> <C>
1 Jan 99 to Year ended Year ended (inception to
30 Sept 99 31 Dec 98 31 Dec 97 30 Sept 99
(audited to
(unaudited) (unaudited) (unaudited) 31 Dec 98)
------------ ------------ ------------ ------------
INCOME
Revenue ................................................ $ 0 $ 0 $ 0 $ 0
------------ ------------ ------------ ------------
EXPENSES
Depreciation ........................................... $ 4,663 $ 542 $ 0 $ 5,205
General and Administrative ............................. $ 164,830 $ 1,516 $ 0 $ 167,346
Internet Web Site ...................................... $ 23,594 $ 0 $ 0 $ 23,594
Investor Relations ..................................... $ 39,269 $ 990 $ 0 $ 40,259
Market Development ..................................... $ 60,307 $ 0 $ 0 $ 60,307
Office Supplies ........................................ $ 3,100 $ 150 $ 0 $ 3,250
Postage ................................................ $ 348 $ 0 $ 0 $ 348
Professional Fees ...................................... $ 43,325 $ 14,643 $ 0 $ 57,968
Regulatory Expense ..................................... $ 3,087 $ 0 $ 0 $ 3,087
Rent ................................................... $ 70,753 $ 0 $ 0 $ 70,753
Travel ................................................. $ 101,735 $ 403 $ 0 $ 102,138
------------ ------------ ------------ ------------
TOTAL EXPENSES .................................... $ 515,011 $ 18,244 $ 0 $ 534,255
------------ ------------ ------------ ------------
NET PROFIT/LOSS ............................................. ($ 515,011) ($ 18,244) $ 0 ($ 534,255)
============ ============ ============ ============
NET PROFIT/LOSS per weighted share .......................... ($ 0.05) ($ 0.01) $ 0.00 ($ 0.11)
============ ============ ============ ============
Weighted average number of common shares outstanding (Note 2) 10,703,297 3,000,000 3,000,000 4,698,708
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
- 4 -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ePhone Telecom, Inc.
(Formerly IFB Corp.)
(Formerly Ira Fund Brokers Corp.)
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Common Stock Additional
--------------------------- paid-in Accumulated
Shares Amount capital Deficit
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 (audited) ................................... 3,000,000 $ 1,000 $ 0 ($ 1,000)
Net loss year ended December 31, 1997 ............................. $ 0
------------
Balance, December 31, 1997 (audited) ................................... 3,000,000 $ 1,000 $ 0 ($ 1,000)
Net loss year ended December 31, 1998 ............................. ($ 18,244)
------------
Balance, December 31, 1998 (audited) ................................... 3,000,000 $ 1,000 $ 0 ($ 19,244)
March 1, 1999 public offering for cash ............................ 3,000,000 $ 1,000 $ 9,000
April 1, 1999 public offering for cash ............................ 6,000,000 $ 2,000 $ 88,000
Net income January 1, 1999 to September 30, 1999 .................. ($ 515,011)
------------
Balance September 30, 1999 (unaudited) ................................. 12,000,000 $ 97,000 ($ 534,255)
========== ============ ============
The accompanying notes are an integral part of these financial statements.
- 5 -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ePhone Telecom, Inc.
(Formerly IFB Corp.)
(Formerly Ira Fund Brokers Corp.)
(A Development Stage Company)
STATEMENT OF CASH FLOWS
3 May 96
1 Jan 99 to Year ended Year ended (inception to
30 Sept 99 31 Dec 98 31 Dec 97 30 Sept 99
(audited to
(unaudited) (unaudited) (unaudited) 31 Dec 98)
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ............................................................... ($515,011) ($ 18,244) $ 0 ($534,255)
Adjustment to reconcile net loss to net cash provided by operating activities
Depreciation ........................................................... $ 4,663 $ 542 $ 0 $ 5,205
Common stock issued for services ....................................... $ 1,000
CHANGES IN ASSETS AND LIABILITIES
Increase in other assets ............................................... ($264,403) ($ 5,417) $ 0 ($269,820)
Increase in current liabilities ........................................ $ 741,591 $ 23,119 $ 0 $ 764,710
--------- --------- --------- ---------
NET CASH USED IN OPERATING ACTIVITIES ....................................... ($ 33,160) $ 0 $ 0 ($ 33,160)
CASH FLOWS FROM INVESTING ACTIVITIES ........................................ $ 0 $ 0 $ 0 $ 0
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock for cash ...................................... $ 100,000 $ 0 $ 0 $ 100,000
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH ............................................. $ 66,840 $ 0 $ 0 $ 66,840
CASH, BEGINNING OF PERIOD ................................................... $ 0 $ 0 $ 0 $ 0
--------- --------- --------- ---------
CASH, END OF PERIOD ......................................................... $ 66,840 $ 0 $ 0 $ 66,840
========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
- 6 -
</TABLE>
<PAGE>
ePhone Telecom, Inc.
(Formerly IFB Corp.)
(Formerly Ira Fund Brokers Corp.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized May 3, 1996, under the laws of the State of Florida,
as Ira Fund Brokers Corp. The Company currently has no operations and, in
accordance with SFAS #7, is considered a development stage company. The Company
has no subsidiaries to consolidate.
On May 8, 1996, the Company issued 1,000,000 shares of its $0.001 par value
Common Stock for $1,000.
On April 17, 1998, the Company changed its name to IFB Corp.
On March 1, 1999, the Company completed an offering of its Common Stock under
Regulation "D", Rule 504 for 1,000,000 Common Shares of stock at $0.01 per share
or $10,000.
On April 1, 1999, the Company completed an offering of its Common Stock under
Regulation "D", Rule 504 for 2,000,000 Common Shares of stock at $0.045 per
share or $90,000.
On April 9, 1999, the Company changed its name to ePhone Telecom, Inc.
On July 2, 1999, the Company declared a stock dividend of two shares for each
share held as at July 6, 1999. This dividend was effected July 16, 1999, thus
increasing the number of outstanding common shares from 4,000,000 Common Shares
to 12,000,000 Common Shares.
On July 19, 1999, the Company issued options for 3,500,000 Common Shares
exercisable at $0.50 per share expiring on June 30, 2002. None are exercised at
September 30, 1999.
In August, 1999 the Company approved an employment agreement to retain Mr. Yang
as President, effective July 8, 1999. The Agreement provides Mr. Yang with
options to purchase 500,000 common shares of the Company exercisable at $0.50
per share, vested as follows:
.........100,000 shares on execution of the Agreement
.........200,000 shares on October 1, 1999
.........200,000 shares on January 1, 2000
The Yang Agreement also provides for the Company to purchase 100% of General -
Tel Inc. for 1,500,000 common shares of the Company and to issue Mr. Yang
2,000,000 common shares to be held in escrow pending certain performance
thresholds. As at September 30, 1999 none of Mr. Yang's options have been
exercised and no common shares have been issued pursuant to other terms of the
Yang Agreement, which is under review.
- 7 -
<PAGE>
ePhone Telecom, Inc.
(Formerly IFB Corp.)
(Formerly Ira Fund Brokers Corp.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS CONTINUED
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES
Accounting policies and procedures have not been determined except as follows:
1. The Company uses the accrual method of accounting.
2. Earnings per share is computed using the weighted average number of Common
Shares outstanding, restated for the July 2, 1999 stock dividend.
3. The Company has not yet adopted any policy regarding payment of dividends.
Other than the aforementioned stock dividend no dividends have been paid
since inception.
4. Depreciation is calculated on the Computers on the basis of 5 year straight
line method half year convention:
30/9/99 31/12/98
Computers, at cost $ 19,820 $ 5,417
Accumulated depreciation $ 5,205 $ 542
-------- -------
Computers, net book value $ 14,615 $ 4,875
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using the generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company has no current source of revenue. Without
realization of additional capital, it would be unlikely for the Company to
continue as a going concern. It is management's plan to seek to raise additional
capital by offering 1,350,000 Units consisting of 1 Common share at $0.75 and 1
Common share warrant at $1.25 for $1,012,500 and $1,687,500 respectively. Cash
deposits of $492,000 have been received and recorded as Share Subscriptions at
September 30, 1999 for this offering which is expected to be completed this
fiscal year.
NOTE 4 - WARRANTS AND OPTIONS
There are no warrants outstanding as at September 30, 1999.
The Company has approved options for Directors, Officers, Employees and service
providers to purchase 3.5 million common shares at a price of $0.50 per share,
exercisable on or before June 30, 2002. None have been exercised to September
30, 1999. The Company has approved options for the purchase of 500,000 common
shares at a price of $0.50 per share in the Yang Agreement (Note 1). None have
been exercised to September 30, 1999.
- 8 -
<PAGE>
ePhone Telecom, Inc.
(Formerly IFB Corp.)
(Formerly Ira Fund Brokers Corp.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS CONTINUED
NOTE 5 - RELATED PARTY TRANSACTIONS
Certain services are provided by Directors and Officers in the course of their
business activities. Such costs are reflected in the financial statements in the
normal manner. The Officers and Directors of the Company are involved in other
business activities and may, in the future, become involved in other business
opportunities. If a specific business opportunity becomes available, such
persons may face a conflict in selecting between the Company and their other
business interests. The Company has not formulated a policy for the resolution
of such potential conflicts.
NOTE 6 - OFFICERS ADVANCES
While the Company is seeking additional capital, Officers of the Company have
advanced funds on behalf of the Company to pay for any costs incurred by it.
These funds are interest free.
NOTE 7 - PURCHASE ADVANCE
The Company has advanced $250,000 to Tek Digitel Corporation, for inventory to
be delivered as follows: 20 units by July 15, 1999, 40 units by July 30, 1999,
and the balance of 226 units by August 24, 1999. These deliveries have been
rescheduled to the first quarter of 2000.
NOTE 8 - SUBSEQUENT EVENTS
The Company has received the $1,012,500 for the common share unit offering
described in Note 3. On October 22, 1999 the Company signed an Agreement in
Principle with Saigon Post and Telecommunications Corporation in Vietnam to
jointly develop and operate a series of fixed Wireless Local Loop networks in
the region of Ho Chi Minh City.
- 9 -
<PAGE>
PART III
ITEM 1 INDEX TO EXHIBITS
Articles of Incorporation - Page
Articles of Amendment of Articles of Incorporation - Page
Bylaws - Page - Page
Engagement Agreement dated July 8, 1999 of Charles Yang - Page
Specimen of form of Option Incentive Agreement signed by the Company with
the various optionees - Page
Agreement in Principle dated October 22, 1999 with Siagon Post and
Telecommunications Corp. - Page
ITEM 2 DESCRIPTION OF EXHIBITS (previously filed)
3.1 Articles of Incorporation
3.2 Articles of Amendment of Articles of Incorporation
3.3 By-Laws
10.1 Engagement Agreement dated July 8, 1999 of Charles Yang
10.2 Specimen of form of Option Incentive Agreement signed by the Company with
the various optionees as detailed in Item 6.B of Part I
10.3 Agreement in Principle dated October 22, 1999 with Saigon Post and
Telecommunications Corp.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
ePHONE TELECOM, INC.
(Registrant)
Date: December 31, 1999 By: "Robert Clarke"
-----------------
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001085082
<NAME> ePhone Telecom, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 12-mos
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> JAN-1-1999 JAN-1-1998
<PERIOD-END> SEP-30-1999 DEC-31-1998
<EXCHANGE-RATE> 1.000 1.000
<CASH> 120,2058 0
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 66,840 0
<PP&E> 14,615 4,875
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 331,455 4,875
<CURRENT-LIABILITIES> 764,710 23,119
<BONDS> 0 0
0 0
0 0
<COMMON> 101,000 1,000
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 331,455 4,875
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 515,011 18,244
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (515,011) (18,244)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (515,011) (18,244)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (515,011) (18,244)
<EPS-BASIC> (0.0429) (0.0182)
<EPS-DILUTED> (0.0429) (0.0182)
</TABLE>
