Amendment No. 5
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A
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.
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(Name of Small Business Issuer in its charter)
Florida 98-0204749
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Suite 1000, 355 Burrard Street Vancouver, B.C., Canada V6C 2G8
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (604) 482-6166
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Issuer's Website: www.ephonetel.com
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Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
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Common shares Nil
Securities to be registered pursuant to Section 12(b) of the Act:
Common shares $0.001 par value
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(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.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
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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 date, the Company has not been in business and
has focused its efforts on the review of business potentials and, ultimately,
the development 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.
B. Business of Issuer
The Company's vision is to become a global telecommunications carrier providing
a full complement of telecommunications services, including phone-to-phone
one-step dialing, using Voice over Internet Protocol ("VoIP") technology.
Using a call origination approach that involves its own Customer Premise
Equipment ("CPE"), and a combination of its own dedicated Internet Protocol
("IP") network, the public Internet and the public switched telephone network
("PSTN"), the Company will provide voice and fax transmission and other
telephony features at high quality and low cost.
Ease of use is key to the Company's vision. The network will be designed so that
customers will simply have to pick up a telephone handset and dial, as they do
with their present telephone company.
The Company's business plans are still being refined. It has not yet commenced
commercial operations. No specific time frames have yet been settled for
commencement of revenue generating activities or when the Company will become
financially self-sufficient. This uncertainty is due to the fact that the
Company cannot predict how quickly it can complete all of the matters remaining
before it can start operating commercially - nor how quickly it can raise the
additional funding that will be required. Below are described, first, the
infrastructure or network it is planning to create, and secondly, the services
it is planning to offer from the network.
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1. Infrastructure and Services
The Company's ability to attract and retain customers will depend on the
credibility, reliability and quality of the IP network it creates. Management's
primary focus over the next 1-2-years will be to develop a high quality network
and to ensure that the creation of a customer base is staged to keep pace with,
and to follow the network development.
1.1 Infrastructure, or ePHONE network
Central to the Company's ability to provide products and services to
its customers is the ePHONE network. The ePHONE network is proposed to
be eventually deployed worldwide, and will consist of the following
elements:
o An IP backbone used to carry telecommunications traffic, and
to link switches in the ePHONE network.
o Switches in the ePHONE network that interface with customers
and provide the actual services being offered by the Company.
o The ePHONE network operations center ("NOC"). From this
centralized point, ePHONE technical staff will ensure
uninterrupted operation of the ePHONE network and services.
The NOC, which has not yet been established, will also serve
as a collection point for billing information used in
invoicing for services rendered.
o Access devices used by ePHONE customers to interface with the
ePHONE network.
The remainder of this section describes each of the components of the
ePHONE network.
1.1.1 ePHONE IP Backbone
In order to deliver high quality voice services with quality that is
comparable to traditional public telephone services, the Company
requires a high quality IP backbone to carry traffic between ePHONE
switches. The IP Backbone must have the following characteristics:
o Low latency. Since any delay in network transmission is
directly perceptible by the end user, it is critical to ensure
that the underlying backbone delivers data with low latency.
The requirement for low latency imposes certain restrictions
on the underlying network technology that can be used. For
example, older satellite technology (still prevalent in
certain areas of the world) is unsuitable, because although
the bandwidth (overall transmission rate, e.g. 64kbps) is
sufficient for voice communication, the delay (which can reach
500ms) makes voice communication difficult.
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o Low jitter. Jitter refers to the variation in latency from one
packet to another. Since jitter can result in breakups in
voice, it can be a more serious problem than latency, and is
typically addressed by buffering, which further increases
latency. In order to deliver a high quality voice service, it
is necessary to build an IP backbone that provides low jitter;
in other words, a network that has consistent performance.
o Sufficient bandwidth. When the amount of data being
transmitted exceeds the capacity of the network to carry that
traffic, the result is that latency will increase drastically
(since data packets have to wait before they can be
transmitted), and ultimately, data will be lost. Ensuring
sufficient bandwidth to prevent packet loss and to ensure that
latency remains low is a key requirement in the ePHONE
network.
Because of the capital costs that would be involved, it is not
practical for the Company to buy and deploy its own IP backbone. At the
same time, quality requirements dictate that the public Internet cannot
be used directly. To address this, the Company has entered into an
agreement with UUNET Technologies Inc. ("UUNET") as the backbone
provider for it's worldwide IP network (see Section 3.4 below). Under
the terms of this agreement, UUNET has provided guarantees on the level
of performance required by the Company in delivering its services
successfully. Since this relationship leverages UUNETs high quality
worldwide IP network used in providing UUNETs Internet service, but
without using public unmanaged Internet routers to carry traffic, the
result is expected to be a dependable level of quality at reasonable
cost.
Because of the structure of ePHONE switches (see section 1.1.2), it is
possible for the Company to add a dedicated point-to-point connection
between two major cities if the volume of traffic demands greater
bandwidth than UUNET is capable of providing. This strategy also allows
the Company to deploy Points of Presence ("POPs") into areas in which
UUNET is not able to provide the requisite level of service.
1.1.2 ePHONE Switches
In each region where the Company establishes a presence, an ePHONE
switch will be installed. Each ePHONE switch will interface to the IP
Backbone in order to provide the services that ePHONE intends to offer.
The key components of each ePHONE switch will be the following:
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o Network routers used to connect a switch as a whole to the IP
Backbone. These routers will allow access to the IP Backbone
by any device that is part of the ePHONE switch. Such devices
include gateways, UPSs, and other sub-components of an ePHONE
switch.
o PSTN/IP gateway that serves as the interface between the local
PSTN (or other traditional telecommunications provider) and
the IP Backbone. This VOIP gateway is the connection between
the ePHONE network and the existing public telephone network.
o Application servers used to deliver actual services to the end
user. Much like a web server, application servers will be used
to host the applications that end-users interact with. Since
VOIP gateways may be embedded devices with limited
capabilities in terms of providing sophisticated services, it
is necessary to deliver the applications through personal
computer ("PC") based application servers.
o Uninterruptable Power Supplies ("UPSs"). Each ePHONE switch
will have sufficient UPS capacity to ensure that brownouts and
other short term power disruptions do not affect the operation
of the ePHONE network. In the event of a long-term failure,
the UPS will allow the failure to be notified to the NOC, so
that traffic can be routed around the affected area.
The Company proposes to deploy 300 POPs throughout the world over the
next three years. These switches will be strategically located, and
established initially in key high population cities. It is expected
that, with a relatively small number of ePHONE switches in these key
locations, the Company will be able to provide competitive rates
worldwide by terminating each call partially over the ePHONE network,
with the final portion of a call occurring on the PSTN.
The Company proposes to use switches developed by Array Telecom Corp.
("Array") of Herndon, Virginia (see Section 3.1 below).
1.1.3 ePHONE Network Operations Center (NOC)
The ePHONE NOC will be the centralized command center from which ePHONE
technical staff will manage the various components of the ePHONE
network, as well as the services being provided. The NOC will be
staffed 24 hours a day, 7 days a week. The NOC, which will be connected
to the ePHONE network via a high-speed dedicated IP connection, will
provide the following services:
o Real-time collection of call detail record information from
all ePHONE switches.
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o Consolidation of all billing information collected by ePHONE
switches located throughout the network.
o Back office functions such as account setup, management,
termination, billing.
o IP network monitoring, to ensure that the IP backbone delivers
consistently high quality performance and results.
o Monitoring of each switch in the ePHONE network to ensure
availability. Such monitoring is not limited to monitoring on
the IP network. Additional steps may be taken to ensure PSTN
availability for a given ePHONE switch.
o Deployment of new services to ePHONE switches.
o Bandwidth monitoring and planning activities to determine the
appropriate timing and structure of improvements to ePHONE's
network infrastructure.
o Co-ordination of the deployment of new ePHONE switches, and
extensions of the IP Backbone to include new regions.
It is likely that several other services will be required of the NOC
with regards to specific services being offered by the Company. For
example, a toll free service might require the NOC to interface with
PSTN providers to ensure the correct toll free setup. Such services to
be provided by the NOC will vary from time to time, as new services are
added and requirements evolve.
The proposed location of the NOC is in the Commonwealth of Virginia in
the United States.
1.1.4 Service Access Methods
Another key to the success of the ePHONE network is the ability to
provide customers access to the network in a convenient and efficient
way. Many IP telephony operators today restrict access to their
services to two-stage PSTN access, effectively creating a situation
where only a certain class of home consumers will be willing to use
their services. In order to target a broader market, the Company will
support a range of access methods to the network. The initial access
methods are listed below. Access methods that may be added a later time
(such as 1010XXX, 1+ access) are not described.
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PSTN Access
Traditional PSTN access methods, which involve calling an access number
and entering information such as a personal identification number and a
number to call, will be supported by ePHONE switches. This access
method is widely used, particularly for prepaid calling cards, and
requires no investment in order to provide a particular customer with
service. Since all ePHONE switches will support this capability
inherently, there is no cost associated with supporting PSTN access.
CPE Gateway - Embedded
The embedded customer premises equipment (CPE) Gateway model focuses on
delivering direct IP-based access to the ePHONE network, allowing lower
costs (since only one ePHONE switch is required, instead of two for
PSTN access) that can be passed on to this user. A model being used by
other companies requires a PC with speakers, and a microphone, to make
a call. By comparison, ePHONE's embedded CPE gateways will allow
one-stage dialing from a traditional telephone switchboard (PBX).
Where a customer does not have a PBX, or does not wish to make use of
the services of the ePHONE network from behind a PBX, the customer
connects the embedded CPE gateway to the Internet on one side, and to a
regular analog telephone on the other. Two versions of Internet
connectivity are planned; an Ethernet version, in which the customer
makes use of their existing local area network ("LAN") connection to
the Internet, and a dialup version, in which the embedded CPE gateway
manages a direct connection to the Internet. In the dialup version, the
embedded CPE gateway can establish and terminate the connection to the
Internet as is required. Furthermore, the embedded CPE gateway allows
calls to be received over the Internet from the ePHONE network, and for
those calls to ring the attached phones. This capability allows calls
to be received from other ePHONE customers or from remote exchange
numbers / toll free numbers being provided by the ePHONE network.
In the case where a customer does have a PBX, ePHONE embedded CPE
gateways integrate on the line side of the PBX, emulating one or more
analog trunks. Through least cost routing (LCR) functions and line
grouping functions found in all modern PBXs, it is possible for the
customer to direct their long distance traffic to the ePHONE network.
In order to do this, the PBX is programmed to route some or all calls
to the group of lines attached to the embedded CPE gateway. This
configuration also facilitates inbound calls, as the PBX will handle
them in the same way as calls received directly over the PSTN.
The Company proposes to use as its embedded CPE gateway, the "V-Server
iGate", developed by TEK DigiTel Corp. of Germantown, Maryland, USA.
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CPE Gateway - Complete
While significant functionality can be provided by embedded CPE
gateways, there are some restrictions to the applications and scale
that can be effectively handled with an embedded solution. Typically,
embedded gateways do not provide the ability to deploy applications,
and as such, all traffic must be routed to alternate locations for
services such as interactive voice response ("IVR") and routing. The
embedded CPE gateways have these restrictions, but are justified given
that the Company's goal is to have a simple, inexpensive solution that
does not require significant investment.
However, some customers are expected to require larger systems, digital
connectivity, integrated applications, and other such capabilities. For
example, a large corporation with multiple offices may want to use
their existing wide area network to carry traffic between nodes, but to
have all long distance traffic handled by the ePHONE network. It might
also want to provide a service to its employees to be able to dial in
remotely, and originate calls using the ePHONE network at reduced
prices. Such applications demand a complete IP gateway solution.
Although complete IP gateway solutions may be available through
embedded devices, providing such services normally is challenging for a
purely embedded device. To meet the needs of sophisticated customers,
the Company intends to use a combination of embedded technology and PC
servers, deployed at the customer site.
These complete gateways will provide to the Company's customer all of
the benefits described for the embedded CPE gateway. In addition, such
gateways will be capable of managing restrictions on individual users
of the system, flexible routing, and will support other applications
that the Company may wish to offer to the customer in the future.
Complete CPE gateways will be capable of handling up to 120 ports of
connectivity to the ePHONE network, ensuring that the requirements of
even the largest customers can be handled successfully.
Automated Dialers
In many cases, potential customers for the Company's services may not
have an IP network connection, nor may they be inclined to obtain one.
While such customers can use PSTN access numbers to access the services
provided by the ePHONE network, the Company will provide automated
dialers, also referred to as autodialers, to provide one-stage access
to the ePHONE network and services.
The autodialer will provide the user with a dial tone, and is
pre-programmed with access numbers, user ID, and other information that
is necessary in order to access ePHONE services. During the dialing
process, the autodialer will connect to the nearest ePHONE switch, and
supply the necessary information for the ePHONE switch to deliver the
desired service to the customer. The autodialer may even be capable of
routing around ePHONE switches that are experiencing problems,
guaranteeing a customer that no service disruption will be possible.
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Since autodialers are relatively inexpensive, this approach allows the
Company to provide the benefits of one-stage access to smaller
customers whose traffic does not justify the cost involved in deploying
either an embedded or complete CPE gateway.
The Company proposes to use autodialers supplied by Lampus Inc. (see
Section 3.5).
1.2 Services offered by the Company
1.2.1 One-Stage Calling
The fundamental service that the Company will offer - and from which it
will receive its revenues - through the ePHONE network is a one-stage
calling service. This service allowing businesses and individuals to
direct their long-distance traffic via the ePHONE network. Initially,
the Company will provide one stage calling through access devices such
as dialers. The one-stage calling service offered by the Company will
differ significantly from offerings from other providers.
First, by providing a wide range of access devices, the Company will be
able to offer its services to the following markets.
o Large businesses with existing PBXs, which require many lines
of long distance connectivity and have dedicated Internet
access;
o Small and medium business that may or may not have a PBX, and
may require one to four lines of long distance connectivity; o
Small businesses and home offices that require only one or two
lines of connectivity, and which may not have Internet access.
Secondly, the Company will offer innovative pricing plans for this
service. The one-stage calling service will support multiple pricing
models so that different pricing models can be used in different areas,
and so that future pricing models can be added later without disrupting
existing pricing models. This allows for one-time promotional offers,
better pricing plans for early users of the system, and so forth.
Pricing for the one-stage calling plan will be characterized by an
ability to offer differentiated pricing for on-net calls (which
originate and terminate on the ePHONE network) and off-net calls (which
are originated by ePHONE customers but are made to non-ePHONE
customers). The ability to offer such differentiated pricing plans is
an important part of the one-stage calling service.
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1.2.2 Toll Free
Toll Free services provided by traditional carriers allows an
organization to have calls to its toll free number directed to the
service center closest to the person making the call. With such toll
free services, the organization is responsible for paying both the fee
for having the toll free number, and for the long distance portion of
every call placed to that long distance number.
With ePHONE network nodes located at strategic communication hubs, the
Company will be able to lower the cost of toll free services to the
customers. By directing traffic to a customer's toll free number to the
nearest ePHONE switch, and carrying the long distance portion of the
call over ePHONE's network, the long distance portion of the charges
will be reduced significantly. By taking advantage of intelligent
routing capabilities on ePHONE switches, toll free services can be
provided without any additional hardware or infrastructure investments.
Calls to a customer's toll free number would be recognized by ePHONE
switches and forwarded directly to the customer's office. This routing
of calls can additionally be based on time of day, allowing calls at
different times to be directed to different service centers.
1.2.3 Prepaid Calling Cards
Prepaid calling card services will represent a significant opportunity
for the ePHONE network. By leveraging the intelligence in each switch
in the ePHONE network, it is possible for the Company to offer a
prepaid calling card service, with prepaid calls terminated by the
ePHONE network. Since each ePHONE switch is capable of providing
account balance announcements, real-time billing with automatic cutoff
and other key features, no additional investments are required in order
to use the ePHONE network to provide prepaid calling card services.
1.2.4 Customized Online Billing
Because the ePHONE network is built on IP technology, it is able to
deliver transactional and e-commerce applications identical to those
used by Web-based retailers. Since all ePHONE switches collect billing
information in real-time, with immediate transmission of billing
information to the NOC, the Company will be able to provide online
services allowing a customer to review their bills, sign up for new
plans and services, or make changes to existing services. The ability
to offer up to date information at all times is an enhanced service not
presently offered by existing telecommunications service providers.
This service will also provide immediate feedback to customers of the
benefits and savings they enjoy through the use of the ePHONE network.
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1.2.5 Foreign Exchange Numbers
The Company will have ePHONE switches in a number of key calling areas.
This will permit the Company to obtain, at low cost, local telephone
numbers in those areas, and to have those telephone numbers directed at
ePHONE switches. Because of the intelligent routing capability of
ePHONE switches, it is then possible to forward calls to these numbers
to alternate final destinations. This allows the Company to offer its
customers local telephone numbers in any region covered by the ePHONE
network. For example, the Company could provide a customer located in
Paris with a local telephone number in New York. As with toll free and
prepaid calling card services, this can be accomplished without any
additional investment in equipment and infrastructure. Furthermore, the
Company can combine this service with the toll free service to offer
international customers a North America wide toll free number that
directs calls to their international offices.
2. Partnership Program
The following is a description of how the Company will finance the
ePhone network, and generate revenues.
A key element in the Company's overall strategy is its proposed
Partnership Program. The ePHONE Partnership Program is being designed
to facilitate the rapid deployment and sales of services with a minimum
of capital investment on the part of the Company. There are four
elements to the ePHONE Partnership Program:
o Alliance Partner Program
o Sales Partner Program
o Technical Partner Program
o Strategic Partner Program
Each one of these four programs is described in the sections below.
2.1 Alliance Partner Program
This program is designed to allow interested parties to participate in
the deployment of the ePHONE network by providing the capital needed to
locate an ePHONE switch in a defined area ("AP Area"). Once that switch
is installed, the ePHONE Alliance Partner will market ePHONE services
in the AP Area, taking a share of any profits generated by the switch.
The responsibilities of an Alliance Partner will be as follows:
o Provide initial capital required in the creation of an ePHONE
POP for the AP Area. Prior to approval, the Company will
determine the viability of the proposed location, and reserves
the right to reject any locations that are deemed unsuitable.
It is currently estimated that the required capital will be
approximately US$50,000.
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o Select one or more services offered by the Company, and sell
those services within the AP Area. Certain requirements may be
established concerning levels of performance, in order for an
Alliance Partner to qualify to sell that service.
The benefits to Alliance Partners are the following:
o Deployment and maintenance of equipment will be handled by the
Company, allowing an Alliance Partner to sell service without
being responsible for the deployment and maintenance of the
actual equipment used to provide services.
o Receive a percentage of the net operating profit from services
sold in the AP Area and from the operation of the switch
installed in the AP Area. Because individual Alliance Partners
may select various services to sell, the portion of the net
operating profit each Alliance Partner will receive will be
separately negotiated. It is anticipated that the percentage
may be as much as 50% for an Alliance Partner which elects to
sell all of the services offered by the Company and reaches
the maximum performance levels that may be negotiated with
that Alliance Partner.
The typical profiles of an Alliance Partner are expected to be:
o Resellers of carriers and existing phone companies
o Internet service providers that have either sales forces or
advertising programs
o Sales organizations and network marketing organizations
As an illustration, Webby Corp. of the Netherlands, distributors of
WebTV devices, has announced its intention to negotiate an Alliance
Partner Program agreement, to participate in the installation of a
projected 25 gateways, primarily in northern Europe - the Netherlands,
Belgium, Germany and the Scandinavian countries.
2.2 Sales Partner Program
Under this program, the Company will recruit resellers who will make no
capital investment, but will specialize in selling services within an
existing area where the Company has deployed a switch. Sales Partners
will be required to commit to targets for each of the ePHONE services
that they sell. However, Sales Partners will be paid commissions based
on sales. The approximate structure of such a commission is expected to
be as follows:
o $100 for securing sign-up by a new customer
o 10% commission on 1st year billings from a signed-up customer
o 7.5% commission on 2nd year billings from a signed-up customer
o 5% commission on billings from customers in subsequent years.
Receiving ongoing commission will be conditional upon maintaining
active status as a sales partner.
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2.3 Technical Partners
The CPE model requires a significant number of installations (of
embedded gateways, complete gateways, or automated dialers) by the
Company. Rather than building a large organization of installers that
travel around the world installing such devices, the Company plans to
enlist the services of technical partners around the world to install
CPE access devices. Technical Partners will be paid a fee based on
completing installations of access devices. Technical Partners may have
different backgrounds and as such, compensation arrangements will vary
from one Technical Partner to another.
3. Suppliers
The Company has identified above a significant amount of technology
that will be required to create the network and to deliver services to
customers. Although the Company will have to have the technical
expertise to create some systems, its strategy is to purchase from
other companies that provide the required technology and can meet the
Company's requirements. A list of the suppliers that the Company
presently intends to use are listed as follows.
3.1 Array Telecom Corp. of Herndon, Virginia, U.S.A.
Array Telecom Corp (" Array") has been selected as the provider of both
the IP gateway (with larger 4 to 120 port capacity) and application
technology used to operate ePHONE switches, as well as the provider of
complete CPE-based gateways. On November 9,1999, the Company entered
into a basic purchase agreement with Array. Under the terms of this
agreement, Array will supply the initial equipment required to build
the ePHONE network as the Company gives it purchase orders. To date,
the Company has 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.
A range of potential vendors was considered prior to the selection of
Array. The following are the key differentiating factors leading up to
the selection of Array as a key technology provider:
o Array is the only known IP telephony gateway vendor to have
fully integrated its equipment with automatic dialers. Array
equipment provides special services for interaction with
dialers, with automatic switchover to IVR-based voice
interaction when an autodialer is not detected. This
capability allows the Company to provide both dialer-based and
IVR-based services from the same ePHONE switch.
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o Array's products support open standards such as H.323 ensuring
interoperability with equipment from different vendors. This
was found to be true of most vendors investigated, but is
important nonetheless as open standards were not universally
supported.
o The Array Series 3000 product incorporates an open application
programming interface (API) that can be used to develop new
applications. Any programmer familiar with C++ can use this
API to develop new applications that run on top of the Array
Series 3000 product platform.
o Array is unique in the ability to use Dialed Number
Identification Service (DNIS) information (indicating what
number was dialed by the user to reach the system) to select
from a variety of available services. For example, if multiple
phone numbers were assigned to the Array product, it could
provide a prepaid calling card service on one number and a
toll free service on another number.
o The Array Series 3000 product provides support for
multilingual voice prompts. This will be highly important in
many markets, because it allows the Company to provide
multiple numbers that are pointed to the same ePHONE switch.
Depending on the number dialed, the language used to provide
service will be selected. For example, calling 1(877)EPHONE1
might provide service in English, whereas calling
1(877)EPHONE2 might provide service in French.
o The Array Series 3000 product was suitable for operation both
as a complete CPE gateway, as well as an ePHONE switch. This
simplifies deployment, and ensures that the solution will be
compatible without any troubleshooting.
o Array provides a model for back office integration, through
their Database and Routing servers. The database server
provides an open documented interface that can be used by the
Company in order to manipulate account records, billing
information, and so forth. In addition, Array provides
graphical tools to assist in this manipulation. Centralized
CDR collection to an ODBC database was a key requirement met
by Array but which most other vendors failed to meet.
Array products are built on standard off-the-shelf PC hardware
technology. This is significant since alternate PC hardware can be
selected in the case where the default hardware platform provided by
Array is not certified for use in a particular environment.
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3.2 Infozech
Infozech, based in India, provides a billing system for IP gateways.
The Infozech system was found to provide sufficient capabilities to
meet the Company's requirements. Additionally, it has been determined
that Infozech is willing to customize its products in order to meet
specific requirements. The main reason for the selection of Infozech as
a provider of billing software is that Infozech has integrated its
billing software with Array's Series 3000 products. The Company does
not have an agreement with Infozech and proposes to purchase software
programs as it needs them at prices to be negotiated from time to
time.
3.3 TEK DigiTel Corp. of Germantown, Maryland, U.S.A.
TEK DigiTel Corp. (TEK) has been selected as the manufacturer of
embedded CPE gateway devices. TEK manufacturers a product named the
V-Server iGate. This product is a smaller two-port embedded gateway,
with support for H.323 and proprietary network protocols. On the
telephony side, the TEK product supports both analog trunk and analog
station interfaces, and provides two ports, both of which can either be
a station port or a trunk port, simply by connecting to the appropriate
port.
For connection to the IP network, TEK provides two options; an Ethernet
+ ISDN BRI interface which allows the V-Server iGate to act as a router
of traffic between the Internet and local LAN, as well as a Dual
Ethernet version. The V-Server iGate is priced reasonably and provides
the following capabilities not found in many of the competing products:
o Support for H.323, allowing integration with Array gateways
and other H.323-based equipment. Many of the competitors'
products investigated do not support H.323 and use a
proprietary protocol that prevents integration with other
equipment.
o Built-in ISDN routing capabilities. Many smaller organizations
and individual users, particularly in Europe, use ISDN to
access the Internet. However, such organizations typically use
ISDN modems, rather than full scale ISDN routers. The
capabilities provided by the TEK equipment to these customers
will be attractive, as the simple routing capabilities meet
the basic needs of such clients.
o ISDN wakeup capabilities. ISDN wakeup capabilities allow an
iGate to activate the ISDN connection to the Internet as
required, eliminating the need to be online 100% of the time.
This allows operation in situations where complete CPE
gateways without ISDN wakeup would be unsuitable. An important
aspect of TEK's implementation of this feature is that a
centralized directory server is capable of remotely "waking
up" an iGate by signaling on the ISDN B-Channel. This allows a
disconnected iGate to be connected to the network without
establishing an actual call that might be subject to a toll.
-15-
<PAGE>
The Company signed a Memorandum of Understanding (MOU) on July 19, 1999
with TEK. TEK undertook to support the development and delivery of a
customized version of their 2 port CPE gateway as a first priority, and
to provide customer support to ePHONE users. In consideration of this
work, the Company agreed to prepay for 500 2 port CPE device units at a
unit cost of $700 each. Of the total commitment of $350,000, the
Company has paid $300,000.
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 CPE
gateway and Array's Series 3000 product.
Under the Agreement dated November 9, 1999, referred to in Section 3.1
above, the Company contracted Array to perform interoperability and
functional testing on the TEK V-Server iGate products. The testing
revolves around interoperability of the 2 port CPE gateways with the
Array gateways, Array large CPE devices, and with the Infozech billing
software. The results of these tests indicate that the above
technologies are interoperable with one another, as well as with
ePHONE's billing software. Further testing is underway to verify the
ISDN wakeup features described above. Testing is due to be completed by
March 31, 2000.
3.4 UUNET Technologies Inc.
A high quality IP data network is critical in order for the Company to
deliver its service. UUNET Technologies Inc. (UNET) has been selected
as the provider of this IP data network.
In addition to the basic provision of IP networking capabilities,
agreements have also been entered into with UUNET with regards to
co-location of ePHONE switches. To this end, ePHONE signed an Internet
Service Agreement dated December 23, 1999 with UUNET Technologies Inc.
Under this Agreement, the Company is allowed to install ePHONE switches
at UUNET facilities around the world, subject to separate co-location
agreements being signed for each site. This will allow the Company to
rapidly deploy nodes in its network without having to arrange for
physical facilities to house them. A co-location agreement was signed
dated December 12, 1999, for the location of an ePHONE switch at
UUNET's site in Rotterdam, The Netherlands, where a 30-port ePHONE
switch was installed in February 2000. It is anticipated that the
Company will enter into further co-location agreements with UUNET as
its network is expanded.
-16-
<PAGE>
The Company does not incur any direct cost as a result of having signed
the Internet Service Agreement. Costs are incurred as the Company
locates its switches at UUNET's facilities. The costs vary by facility
and country. For example, in Rotterdam, the Company will pay U$525 per
month facilities charge, plus U$100 per month plus usage charges for an
E1 PSTN line, and U$350 per month for Internet access. When the Company
requires an upgrade to a T1 line the monthly charge will increase to
U$4,500.
3.5 Lampus Inc.
Lampus, a Korean company, is a manufacturer of automated dialers, and
has been selected by the Company to supply the dialers used to access
ePHONE network services. The reason for the selection is that
interoperability between Lampus dialers and the Array Series 3000
software has previously been established. Other Array customers are
reportedly using the Lampus dialers successfully.
3.6 Other Suppliers
The above sections described the suppliers of key pieces of equipment
in the ePHONE network, and did not deal with commodity items such as
monitors, keyboards, etc. As such items (which are readily commercially
available) they will be obtained from whichever suppliers can supply
them at the best competitive prices.
4. Main Competitors
The following will be the main competitors for the Company:
4.1 The Internet Telephone eXchange Carrier (ITXC)
ITXC will be a major competitor. ITXC is a clearinghouse for Internet
telephony service providers and operates ITXC.net. Since April of 1998,
ITXC has been used to provide traditional carriers international call
completion with quality good enough for these carriers to serve their
phone-to-phone customers. ITXC has, as of January 2000, reportedly
installed 167 POPs in 45 countries, and 101 cities. The company adds
between 5-9 POPs a month.
ITXC's customers and partners include:
o Small independent IP Gateway owners and operators who wish to
obtain low cost call connections.
-17-
<PAGE>
o Telephony resellers specializing in customer acquisition,
service, and retention. This category includes resellers of
international prepaid calling cards, dial around and
international callback services.
o Internet Service Providers.
4.2 iBasis
iBasis, Inc. was founded in 1996 to provide Internet Protocol (IP)
telephony service to telecommunication carriers around the globe. The
company has POPs across Asia, Europe, the Middle East, and the
Americas. iBasis is in wholesale Internet telephony service.
Some of iBasis current reported customers are as follows:
o China United Telecommunications Corporation (China Unicom)
o ICG Communications, Inc., headquartered in Englewood, Colo.
U.S.A., has extensive switched fiber-optic networks and offers
local, long distance and enhanced telephony and data services
in California, Colorado, the Ohio Valley and parts of the
southeastern United States. The company provides Internet
communication solutions, connectivity and Web site hosting to
individuals and to small- and medium-sized businesses through
its subsidiary, NETCOM On-Line Communication Services, Inc.
ICG also is a designer and installer of copper, fiber and
wireless infrastructure for buildings and campuses.
o Glocalnet. Glocalnet is a next-generation telecommunications
group headquartered in Stockholm, Sweden.
4.3 Net2Phone
Net2Phone began as a subsidiary of IDT Corporation, and is a provider
of voice over public Internet communications services. Net2Phone
enables its customers to place telephone calls from their computers,
telephones, or fax machines to any telephone or fax machine in the
world. By routing calls via the public Internet, Net2Phone enables
users to save money on their international phone rates. Net2Phone
develops its own Gateway technology for IP voice services offered by
the company.
Recognized as the company who first bridged the Internet with the
public switched telephone network, Net2Phone routes millions of minutes
monthly over the public Internet. According to a recent study by Frost
& Sullivan, Net2Phone leads the Internet telephony services industry
with 30% market share.
-18-
<PAGE>
Net2Phone's product offerings include PC-to-phone service, IP telephony
service for phone or fax and Real-time PC-to-fax solution. It's network
currently reaches 30 countries and expects to be operational in 25
additional countries by the end of 2000.
4.4 DeltaThree.com
Founded in 1996, DeltaThree.com manages a network dedicated to the
transmission of voice over IP. Its services include PC-to-phone,
unified messaging, global access calling cards, voice greetings
accessible from the company's communications portal. Deltathree.com
currently operates a network of 37 international POPs. DeltaThree.com
is a subsidiary of RSL Communications Ltd., an international
facilities-based carrier.
Deltathree.com operates a managed network. According to Frost and
Sullivan's recent study, Deltathree.com routes 17% of all Internet
telephony traffic worldwide.
5. 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 has requested and received a
proposal from a US consulting company, to prepare and file the
applications, but has not yet given approval to proceed. The Company
understands that the process will require several months to complete.
No specific time frames for securing approvals in any particular
jurisdiction have been established.
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 local partners and no
specific decisions or arrangements have yet been made in this regard.
6. Patents, Trademarks and Royalty Agreements
The Company does not have any patents, trademarks, licenses or
protective agreements other than that it has trademarked its logo in
Canada. The Company signed, but is in the course of repudiating, the
Agreement with Charles Yang described in Item 7D hereof (Exhibit 10.1).
-19-
<PAGE>
7. Research & Development 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.
8. "Going Concern" Issues
The auditor in his report for the Company's financial statements for
the period ended December 31, 1999, raised doubt with respect to the
Company's ability to continue as a "going concern", since the Company
"has no established source of revenue". Below is Management's response
to this issue.
First, the Company has a vision of the entity as a viable and
significant telecommunications carrier using VoIP technology. It has
devoted significant resources to testing various business models/
technologies, and to the development of its business plan, as described
above. The Company plans to be operational in 2000.
Secondly, the Company has raised funds through a private placement with
private investors (see Item 2 below), to cover working capital needs
during the start-up period. Furthermore, the Company is confident that
current negotiations with a Canadian investment dealer (see also Item
2) will result a significant injection of funds required not only to
meet working capital needs, but also to complete an important
acquisition.
Thirdly, the Company is confident that as the Company's business grows
and develops it will be able to recruit and engage the required
additional personnel.
Fourthly, some of the officers and consultants are either reducing or
deferring compensation and direct expenses, in order to conserve funds
during this start-up period.
-20-
<PAGE>
9. Future Related Issues
A key strength of the Company's plan is that it proposes a variety of
services, using a number of different products, to customers ranging
from individuals to large corporations. This plan requires significant
technical integration. Since the Company is neutral towards the
selection of the hardware platform, it is likely that changes to the
basic hardware systems deployed will occur continuously, as industry
products, capabilities, and protocols evolve. The ongoing requirement
to integrate the best products and technology available will require
significant technical expertise and management. Even deploying the
initial network will require the integration of IP gateway technology,
autodialers, CPE devices, PSTN access ranging from single analog lines
to digital T-1/E-1 lines, IP routers and network interfaces, billing
systems, and much more. Integrating this variety of technology is
expected to be challenging. The Company understands that it will be a
challenge to build a competent team, given the current competitive
state of the job market for people with the relevant skills.
The plan calls for the Company to deliver a range of enhanced services.
In addition, the ePHONE NOC will require the ability to deploy these
services, bill for these services, and monitor these services. It is
likely that the Company will require a development team that builds the
technology to supply these services that cannot be purchased directly.
Significant experience is often required in order to successfully
establish any kind of telecommunications systems into a foreign
environment. Currently, the Company does not have adequate in-house
expertise in this area, which could potentially lead to delays in
deploying into particular areas.
Experts in networking, IP telephony, and network design will be
required in order to advise on the design and construction of the
ePHONE network and services. Often, such design involves the technical
evaluation of candidate products. Currently, the Company has contracted
Array Telecom Corp to perform a significant portion of this evaluation,
design and testing work.
10. Employees
At the date hereof, the Company has no employee. The Company functions
through the efforts of its officers and contracted consultants. As the
Company's business and development efforts expand additional personnel
will be engaged - who may become employees or who may supply their
services under contract.
-21-
<PAGE>
11. Fixed Wireless Local Loop Project ("WLL") - Vietnam
On October 22, 1999 the Company signed an Agreement in Principle with
Saigon Post & Telecommunications Corporation ("SPT"), of Ho Chi Minh
City (formerly Saigon), Vietnam. The Agreement in Principle provides
for the Company and SPT to jointly develop and operate a series of WLL
networks in the region of Ho Chi Minh City. The Company and SPT agreed
to conduct a technical and financial feasibility study for the Project.
Further, if the outcome of the feasibility study is positive a Business
Cooperation Contract is to be negotiated and signed between the parties
- to effectively create a joint venture between them for the management
and operation of the Project. While the Agreement in Principle is still
in effect the Company is not actively working on the feasibility study
at this point - and would not expect to do so in any event until
further funding is received from which the costs of the study could be
paid. Management of the Company is unsure at this date as to whether or
not it will proceed with the Agreement in Principle.
C. Reports to Security Holders
1. Annual Reporting
Regardless of whether it is required to do so by applicable rules or
regulations, the Company will 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. Securities and Exchange Commission (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 SEC
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.
-22-
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
The Company has not received any revenues from operations as it has not
commenced its proposed business operations on a commercial basis. The Company's
plan of operation for the next 12 months is as follows:
The Company, effective November 3, 1999 privately sold 1,350,000 shares, at a
price of $0.75 per share, to generate funding of $1,012,500. The proceeds from
this private placement have been used to fund operations and equipment purchases
to date. The Company anticipates that share purchase warrants attached to the
shares will be exercised, giving the Company further funding.
Currently, the Company requires approximately $60,000 per month for salaries,
rent, marketing, general administration, consulting and legal fees. 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.
Acquisition of the equipment required to build the network - the regional
gateways (ePHONE switches) and CPE devices - will be either equity or debt
financed or financed through the ePHONE Partnership Program described in Section
2 above.
The Company will commence development of its network, starting in Europe. The
Company, with its European partners, plans to install and test 30 regional
gateways, or ePHONE switches, in Europe during 2000, 80 gateways in 2001 and 190
gateways in 2002.
At the same time the Company recognizes the need to generate revenues from
operations. As regional gateways are tested and become operational, customers
will be added through the efforts of the Company's partners.
The immediate timetable for the rollout of the European network is shown below.
February 20, 2000 o Install Holland Regional Node -
February 29, 2000 achieved by installation in Rotterdam
March 15, 2000 - prior to March 1, 2000
now projected for o Confirm PSTN Provider - achieved by
April 30, 2000 March 20, 2000
o Install 5 Holland and 4 Belgiun
locations
o Technician hiring process engaged
April 1st, 2000 - o 3 Technicians in Europe have
now projected for been hired
April 30, 2000 o Credit Card Facility set-up and
finalized
-23-
<PAGE>
May 1st, 2000 o Sell CPE in Holland & Belgium for
Beta Test
June 1st, 2000 o Full CPE Sale in Holland &
Belgium
o Install 10 Regional Nodes in France
(Phase 1)
August 1st, 2000 o Sell CPE in France for Beta
September 1st, 2000 o Full Sell of CPE in France (Phase 1)
o Deploy 10 more locations in France
(Phase 2)
December 1st, 2000 o Full sale in France
The Company has entered into an Agency Agreement with Groome Capital.com Inc. of
1611 - 1 Place Ville-Marie, Montreal, Quebec, Canada ("Groome") dated March 16,
2000. Groome agreed to act as the Company's agent to offer, primarily in Canada,
but also elsewhere in the World but not in the United States, up to 16,363,636
Special Warrants at and for a price of $1.10 per Special Warrant. Each Special
Warrant will entitle the holder to receive at no cost 1 Unit. Each Unit will be
comprised of 1 common share of the Company and 1 Warrant entitling the holder to
purchase an additional share of the Company during a term of 24 months at and
for a price of $1.60 per share. The offering will have no minimum subscription.
The Company will pay Groome commissions of 8% of the gross proceeds received by
the Company from the sale of the Special warrants. Groome will also receive as
compensation:
(a) Units equal to 8% of the number of Units sold pursuant to the private
placement offering; and
(b) A 24 month option to purchase up to a further 250,000 common shares of
the Company exercisable at a price of $0.60 per share.
On March 31, 2000, the closing of the sale of the first portion of the Special
Warrants occurred. On April 7, 2000, the closing of the sale of a second portion
of the Special Warrants occurred, and on April 20, 2000 the closing of the sale
of the final portion of the Special Warrants occurred. The total net proceeds
received by the Company from the sale of Special Warrants was approximately
$12,205,000. The total number of Special Warrants sold by the Company was
13,780,838.
The Company will, until it becomes financially self-sufficient, have to moderate
its activities to fit the funds it has available. The Company anticipates the
proceeds from the sale of the Special Warrants will be sufficient to fund all of
the Company's equipment purchases and operating capital requirements for at
least the next year.
-24-
<PAGE>
ITEM 3. DESCRIPTION OF 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.
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 March 10, 2000 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 wnership within 60 days.
At November 30, 1999 the Company had 12,000,000 shares issued and outstanding,
has agreed to issue 1,350,000 shares pursuant to the private placement described
above, and had outstanding options entitling the purchase, within 60 days, of
4,000,000 shares. The following information as to percentage of beneficial
ownership is therefore of the total of the shares issued or under option, being
17,350,000.
<TABLE>
<CAPTION>
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
West Vancouver, B.C. Nil shares
Director, Chairman, President 1,000,000 options 5.76%
and Chief Executive Officer and
Promoter
Charles Yang
39767 Paseo Padre Parkway
Suite E, Nil shares
Fremont, California, 94538 500,000 options 2.88%
Director
Peter Francis
Suite 3C, Tung Shan Terrace, Nil shares 1.44%
Stubbs Road, 250,000 options
Hong Kong
Director
</TABLE>
-25-
<PAGE>
<TABLE>
<CAPTION>
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>
Willem Johan Henri ("Hans")
van Ijzeren
Gorzendreef 12 Nil shares 1.44%
2360 Oud-Turnhout 250,000 options
Belgium
Director
Charlie Rodriguez
162 West Petunia Place Nil shares 1.44%
Tucson, Arizona 250,000 options
U.S.A.
85737
Secretary and Vice-President
John Fraser
104 Elm Avenue Nil shares 1.44%
Toronto, Ontario 250,000 options
M4W 1P2
Director and Executive Vice-President
Ben Leboe
16730 Carrs Landing Rd. Nil shares 1.44%
Lake Country, B.C. 250,000 options
V4V 1B2
Chief Financial Officer
Executive Officers and Directors Nil shares
as a group of seven (7) persons 2,750,000 options 15.85%
Americana International Inc.*
Hong Kong 2,550,000 shares 14.7%
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.
-26-
<PAGE>
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. Reappointed
President March 9, 2000.
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 consultant
-- principally in the area of high tech start-ups -- providing advice with
respect to public and private financings, creating business plans, assembling
management teams and business opportunity assessments. 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. Officer positions terminated March 9, 2000.
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
technologies. Full-time engaged to provide services to the Company from July,
1999 to January 31, 2000.
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<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 February 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.
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.
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<PAGE>
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.
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
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<PAGE>
Name, Age and Positions held with the Company
Hans van Yzeren - 52 Director since June 3, 1999
Business Experience during past 5 years
April 1999 to present - self-employed providing services to the Company heading
up its efforts to research and develop markets in Europe.
1996 - April 1999: 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.
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.
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. The Company granted,
effective June 7, 1999, 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 3,500,000
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. Charles Yang was granted
options on 500,000 shares in the agreement with him described in Item 7. The
numbers of shares optioned to each of the Company's Directors and Executive
Officers is shown in the table in Item 4 above. None of the options have been
exercised.
-30-
<PAGE>
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.
Mr. Yang has been 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. As is noted in Item 7, Clause B below the
agreement is now in dispute and the Company is denying that it is bound by it.
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 services rendered to the Company for
a deemed price of $0.001 per share for a total of $1,000. 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, which is now in dispute, the Company
engaged Charles Yang 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
200,000 shares January 1, 2000
-31-
<PAGE>
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.
As part of the dispute with Mr. Yang, the Company will not purchase the shares
of General-Tel.
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
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.
-32-
<PAGE>
Mr. Yang was also, from the sale of the Company's products or services, to
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.
A breakdown in the relationship between the Company and Mr. Yang developed and
he ceased providing services to the Company by January 31, 2000. Mr. Yang's
positions as President and Chief Operating Office of the Company were formally
terminated March 9, 2000. Mr. Yang has given a notice that he requires his
dispute with the Company to be Arbitrated. The Company is taking the position
that it has no further liabilities or obligations to Mr. Yang.
B. The Company issued the options described in Item 6B hereof to various of its
directors and executive officers.
C. Note 6 to both of the Financial Statements included herein show liabilities
to Officers. These are amounts loaned, interest free, to the Company, by its
Promoter and former Chief Executive Officer Robert Clarke as monies were needed
by the Company from time to time. The amount was fully repaid, subsequent to
September 30, 1999, as the Company received proceeds from the sales of
securities disclosed in sub-clause (b) of Item 4 below.
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.
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.
-33-
<PAGE>
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
1998
1st Quarter 0 0
2nd Quarter 0 0
3rd Quarter $0.50 $0.50
4th Quarter $0.50 $0.50
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
-34-
<PAGE>
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 February 16, 2000 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 7,065,700 shares. The Company has no knowledge of who are the
beneficial owners of the shares registered in the name of Cede &Co.
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.
ITEM 2. LEGAL PROCEEDINGS
As is noted above Charles Yang has invoked the Arbitration provisions of the
Agreement dated July 8, 1999 - to arbitrate the dispute between him and the
Company relating to the said agreement. Otherwise, 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.
-35-
<PAGE>
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.
(c) Effective November 3, 1999 the Company made private sales of 1,350,000
shares, at a price of $0.75 per share, for proceeds of $1,012,500, pursuant to
U.S. Securities Regulation S. Each share has attached to it a detachable Warrant
entitling the holder to purchase 1 additional share of the Company for a price
of $1.25 per share. All of the sales were made to existing shareholders, friends
or business acquaintances of Directors or Officers, or companies controlled by
acquaintances of Directors or Officers of the Company.
All of the salesdescribed in clauses (a), (b) and (c) 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. None of the shares were offered
publicly. All of the sales were made to persons who are not U.S. persons (within
the meaning of Regulation S) outside of the United States without registration
under the Securities Act in reliance on Regulation S under the Securities Act.
(d) As is disclosed in Clause B of Item 6 of Part I above, no options were
granted by the Company during any period prior to December 31, 1998. The Company
does not have a stock option plan. The Company granted, effective June 7, 1999,
share purchase incentive options to 11 directors, executive officers,
non-executive officers and individuals providing service to the Company
entitling them to purchase up to an aggregate total of 3,500,000 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. Charles Yang was granted options
on 500,000 shares in the agreement with him described in Item 7. The numbers of
shares optioned to each of the Company's Directors and Executive Officers is
shown in the table in Item 4 of Part I above. None of the options have been
exercised. No cash consideration was received by the Company for the granting of
the options. Rather, the options were granted to the individuals in anticipation
of them providing, and continuing to provide, services to the Company. The
services expected to be provided to the Company by the 7 Directors and Officers
who received options are the services that, while not defined, are those which
would normally be provided pursuant to the various positions held. The other 4
optionees are individuals who are currently providing services to the Company on
a contract basis ranging from, and consisting primarily of, business consulting,
shareholder and public relations, book-keeping and secretarial services. As the
shares of the Company are publicly traded in the area of approximately $2.00 per
share on the date of the grant of the options, it could be considered that they
had a monetary value of approximately $1.50 per optioned share at the time of
being granted.
The options described in clause (d) above were granted without registration
under the Securities Act pursuant to Section 4(2) of the Securities Act and Rule
701 under the Securities Act. Options having an aggregate exercise price of
$1,962,500 to purchase a total of 3,9250,000 shares of the Company's common
stock were granted in reliance on Section 4(2) of the Securities Act. The nine
persons granted options in reliance on Section 4(2) of the Securities Act would
have qualified as "accredited investors" within the meaning of Regulation D
under the Securities Act by virtue of being executive officers or directors of
the Company and/or by virtue of satisfying the applicable income and/or net
worth thresholds. Options having an aggregate exercise price of $37,500 to
purchase a total of 75,000 shares of the Company's common stock were granted to
two individuals in reliance on Rule 701 under the Securities Act. All 11
optionees were involved in the preparation of the Company's initial business
plan and were given access to all available information regarding the Company,
including all information being used to prepare the Company's business plan.
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.
-36-
<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
Amended audited financial statements of the Company are provided herein,
following page 38. They cover the last two completed fiscal years of the Company
ending December 31, 1997 and December 31, 1998. Amended unaudited statements
covering the stub period between January 1, 1999 and September 30, 1999 are also
included.
-37-
<PAGE>
PART III - EXHIBITS
ITEM 1 INDEX TO AND DESCRIPTION OF EXHIBITS
3.1 Articles of Incorporation (previously filed)
3.2 Articles of Amendment to Articles of Incorporation (previously filed)
3.3 By-Laws (previously filed)
10.1 Engagement Agreement dated July 8, 1999 of Charles Yang - described
in Item 7 Cl. B starting on Page 31 (previously filed)
10.2 Specimen of form of Option Incentive Agreement signed by the
Company with the various optionees - described in Item 6, Cl.
B starting on Page 30. (previously filed)
10.3 Agreement in Principle dated October 22, 1999 with Saigon Post and
Telecommunications Corp. - described in clause 11 starting on Page 21.
(previously filed)
10.4 Agency Agreement, dated as of March 16, 2000, between the Company and
Groome Capital.com Inc. (filed herewith)
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.
Date: June 5, 2000 By: /s/Robert Clarke
--------------------
Robert Clarke
-38-
<PAGE>
ePHONE TELECOM, INC.
(FORMERLY IFB CORP.)
(FORMERLY IRA FUND BROKERS CORP.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
December 31, 1998
December 31, 1997
December 31, 1996
<PAGE>
ePHONE TELECOM, INC.
(FORMERLY IFB CORP.)
(FORMERLY IRA FUND BROKERS CORP.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
December 31, 1998
December 31, 1997
December 31, 1996
TABLE OF CONTENTS
-----------------
Independent Auditors' Report................................................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.............................................7-8
<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 IFB CORP..
Vancouver, BC, Canada July 16, 1999
I have audited the accompanying Balance Sheets of Formerly IFB Corp., (Formerly
Ira Fund Brokers Corp.), (A Development Stage Company), as of December 31, 1998,
and 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 is 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
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
plans 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.
Barry L. Friedman
Certified Public Accountant.
<PAGE>
ePHONE TELECOM, INC.
(Formerly IFB Corp.)
(Formerly Ira Fund Brokers Corp.)
(A Development Stage Company)
BALANCE SHEET
ASSETS
31-Dec-98 31-Dec-97 31-Dec-96
--------- --------- ---------
CURRENT ASSETS
Cash $ 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.
-2-
<PAGE>
ePHONE TELECOM, INC.
(Formerly IFB Corp.)
(Formerly Ira Fund Brokers Corp.)
(A Development Stage Company)
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
31-Dec-98 31-Dec-97 31-Dec-96
--------- --------- ---------
<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 value authorized
50,000,000 shares; issued and outstanding at:
December 31, 1996 - 1,000,000 shares $1,000
December 31, 1997 - 1,000,000 shares $1,000
December 31, 1998 - 1,000,000 shares $ 1,000
June 31, 1999 - 4,000 000 shares
Additional paid in Capital $ 0 $ 0 $ 0
Deficit accumulated during the development stage ($19,244) ($1,000) ($1,000)
--------- -------- --------
TOTAL STOCKHOLDERS' EQUITY ($18,244) $ 0 $ 0
--------- -------- --------
TOTAL LIABILITY AND STOCKHOLDERS' EQUITY $ 4,875 $ 0 $ 0
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
ePHONE TELECOM, INC.
(Formerly IFB Corp.)
(Formerly Ira Fund Brokers Corp.)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
3-May-96
Year ended Year Ended 3-May-96 to (inception) to
31-Dec-98 31-Dec-97 31-Dec-96 31-Dec-98
--------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME
Revenue $ 0 $ 0 $ 0 $ 0
----------- ---------- ----------- ----------
EXPENSES
Depreciation $ 542 $ 0 $ 542
General and Administrative $ 1,516 $ 0 $ 1,000 $ 2,516
Investor Relations $ 990 $ 0 $ 990
Professional Fees $ 14,643 $ 0 $ 14,643
Office Supplies $ 150 $ 0 $ 150
Travel $ 403 $ 0 $ 403
----------- ---------- ----------- ----------
TOTAL EXPENSES $ 18,244 $ 0 $ 1,000 $ 19,244
----------- ---------- ----------- ----------
NET PROFIT/LOSS $ (18,244) $ 0 $ (1,000) $ (19,244)
=========== ========== =========== ==========
NET PROFIT/LOSS per weighted share (Note #1) $ (0.01) $ 0.00 $ (0.00) $ (0.01)
=========== ========== =========== ==========
Weighted average number of common shares outstanding (Note #7) 3,000,000 3,000,000 3,000,000 3,000,000
=========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
ePHONE TELECOM, INC.
(Formerly IFB Corp.)
(Formerly IRA Fund Brokers Corp.)
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
------------------------- 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)
========== ====== == =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
ePHONE TELECOM, INC.
(Formerly IFB Corp.)
(Formerly IRA Fund Brokers Corp.)
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
3-May-96
Year ended Year Ended 3-May-96 to (inception) to
31-Dec-98 31-Dec-97 31-Dec-96 31-Dec-98
--------------------------------------------------------------
<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 $0 $ 0 $ 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.
-6-
<PAGE>
ePHONE TELECOM, INC.
(FORMERLY 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, for services. On April 17, 1998, the Company changed its 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 as at December 31, 1998.
-7-
<PAGE>
ePHONE TELECOM, INC.
(FORMERLY 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/SHAREHOLDERS ADVANCES
While the Company is seeking additional capital through a merger with an
existing operating company, an officer/shareholders of the Company has advanced
funds on behalf of the Company to pay for any costs incurred by it. These funds
are interest free.
NOTE 7 - SUBSEQUENT EVENTS
On April 9, 1999 the Company changed its name to ePhone Telecom, Inc.
On June 7, 1999 the Company approved and granted options to purchase 3,500,000
voting common shares in its capital, exercisable on or before June 30, 2002 at a
price of $0.50 per share. On July 2, 1999 the Company declared a stock dividend
of two shares for each share held. The weighted average number of shares
outstanding has been restated in all periods to recognize the increase of common
shares outstanding from 1,000,000 to 3,000,000 as required by paragraph 54 of
SFAS 128.
-8-
<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>
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)
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-
<PAGE>
ePHONE TELECOM, INC.
(Formerly IFB Corp.)
(Formerly IRA Fund Brokers Corp.)
(A Development Stage Company)
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
30-Sep-99 31-Dec-98 31-Dec-97
--------- --------- ---------
(unaudited) (audited) (audited)
<S> <C> <C> <C>
CURRENT LIABILITIES
Due to Officers (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
========== ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
ePHONE TELECOM, INC.
(Formerly IFB Corp.)
(Formerly Ira Fund Brokers Corp.)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
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
--------------------------------------------------------------
(unaudited) (audited) (audited) (audited to 31 Dec 98)
<S> <C> <C> <C> <C>
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
=========== ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
ePHONE TELECOM, INC.
(Formerly IFB Corp.)
(Formerly IRA Fund Brokers Corp.)
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
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)
========== ======= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
ePHONE TELECOM, INC.
(Formerly IFB Corp.)
(Formerly Ira Fund Brokers Corp.)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
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
--------------------------------------------------------------
(unaudited) (audited) (audited) (audited to 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
========= ======== == =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<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 - DUE TO OFFICERS
While the Company is seeking additional capital, Officers of the Company have
advanced funds on behalf of the Company to pay for costs incurred by it and
deferred payment of some expense reimbursement and fees charged for services.
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. Pending the settlement and signing of a full
formal agreement the Company has no binding commitments or financial obligations
under the said Agreement.
-9-
