U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-SB/A-3
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of the Securities Exchange Act of 1934
NOSTRAD TELECOMMUNICATIONS, INC.
(Name of Small Business Issuer in its Charter)
Nevada 88-0306460
(State of Incorporation) (IRS Employee Identification No.)
Suite 420, 171 West Esplanade
North Vancouver, British Columbia Canada V7M 3J9
(Address of Principal executive Offices)
(604)983-8778
(Issuer's Telephone Number:)
Common Stock, $.001 par value per share
(Securities to be Registered Under Section 12(g) of the Act)
<PAGE>
TABLE OF CONTENTS
PART I
Page
Glossary 3
Item 1. Description of Business 5
Item 2. Management's Discussion and Analysis or Plan of Operation 25
Item 3. Description of Property 29
Item 4. Security Ownership of Certain Beneficial Owners and Management 30
Item 5. Directors, Executive Officers, Promoters and Control Persons 32
Item 6. Executive Compensation 35
Item 7. Certain Relationships and Related Transactions 35
Item 8. Description of Securities 36
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity
and Related Shareholder Matters 37
Item 2. Legal Proceedings 37
Item 3. Changes and Disagreements with Accountants 37
Item 4. Recent Sales of Unregistered Securities 37
Item 5. Indemnification of Directors & Officers 38
Item 13. Financial Statements 39
PART F/S
Financial Statements 39
PART III
Items 1 and 2 Index to and Description of Exhibits 53
2
<PAGE>
GLOSSARY
As used in this registration statement, the following terms and abbreviations
have the meanings set forth below.
"Addressable" means the ability to signal from the headend or job site in such a
way that only the desired subscribers' receiving equipment are affected. It is
possible to send a signal to a subscriber and effect changes in the subscriber's
level of service.
"ADSL" or "Asymmetric Digital Subscriber Line" refers to a technology that
allows more dots to be sent over existing copper telephone lines.
"Amplifier" means a device used to increase the operating level of an input
signal. It is used in a cable system's distribution plant to compensate for the
effects of line loss caused by coaxial cable and passive devices.
"Bandwidth" means the frequency allocated in any communications circuit.
"Beam benders" means low power signal repeaters that retransmit to an otherwise
shaded signal over a limited distance.
"CATV" means a broadband communications system capable of delivering multiple
channels of entertainment programming and non-entertainment information from a
set of centralized antennas, generally by coaxial cable, to a community. Many
cable television designs integrate microwave and satellite links into their
overall design and some now includes optical fibre as well. Commonly called
"Cable Television System".
"Converter" means a device for changing the frequency of a television signal. A
cable headend converter changes signals from frequencies at which they are
broadcast to clear channels that are available on the cable distribution system.
A set-top converter is added in front of a subscriber's television receiver to
change the frequency of the midband, superband, or hyperband signals to a
suitable channel or channels (typically a low VHF channel) which the television
receiver is able to tune into.
"Downlinking" means receiving signals via a Satellite dish refer to Uplinking
"DTH" or direct to Home Pay-Television Service means a satellite service of one
or more entertainment or information program channels that can be received
directly using an antenna on the subscribers' premises
"Exchange Act" means the United States Securities Act of 1934 as amended.
"GHz" refers to a unit of measurement known as a Gigahertz, or one billion
cycles per second.
"FCC" means the United States Federal Communications Commission.
"Home Passed or Pass By" refers to the ability of a household to have line of
site with transmitter in order to receive a wireless signal. In the case of hard
wire cable, a home that the cable actually passes.
"Headend" refers to the control center of a CATV system where incoming signals
are amplified, converted, processed, and combined into a common cable, along
with any origination cable-casting for transmission to subscribers. System
usually includes antennas, preamplifiers, frequency converters, demodulators,
modulators, processors, and other related equipment.
"ISP" means internet service provider
"MHz" refers to a unit of measurement known as a Megahertz, one million cycles
per second.
"MDS" or Multipoint Distribution System refers to an omni-directional common
carrier microwave radio service authorized to transmit television signals and
other communications. MDS operates in the 2150 - 2162 MHz frequency range, with
an effective radius of 30 km.
"MMDS" or Multichannel Multipoint Distribution System refers to a collection of
various MDS services and instructional television fixed service on the
directional microwave radio authorization combined to provide up to 66 channels
of entertainment, education, and information.
"MDU" refers to multiple dwelling units such as apartments, hotels, and
commercial building.
3
<PAGE>
"OTC BB" means the NASD over the counter electronic bulletin board.
"PPV" or Pay-Per-View, refers to usage-based fee structure used sometimes in
CATV programming in which the user is charged a price for individual programs
requested.
"RO" means the ability to receive only of data, video, or voice via satellite.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the United States Securities Act of 1933, as amended.
"SMATV" refer to a multi-channel cable network service offered to private
landowner of and MDU.
"Subscription Television" means a system of distributing programs for premium
television programming, either over the air or by cable, for which the
subscriber pays a fee. The signals for such programming may be scrambled to keep
non-subscribers from receiving service. A decoder or descrambler might be used
to allow the paying subscribers to receive the pay television programming.
Synonymous with "premium television".
"UHF" or Ultra High Frequency, refers to corresponding electromagnetic signals
ranging from 300 - 800 MHz; e.g. channels 14 - 69 on the television dial.
"Uplinking" refers to the beaming of signals from a terrestrial broadcast center
to a stationary Satellite.
"VSAT" or Very Small Aperture Terminals refer to small, software-driven earth
stations (typically 0.9-1.8 meters, which equates to 3-6 feet) used for the
reliable transmission of data, video, or voice via satellite.
"WCAI" or "WAC" refers to the Wireless Communications Association International
an organization which represents the broadband wireless industry worldwide. The
WCAI's mission is to advance the interests of the wireless systems that provide
video, voice and data services on a subscription basis through land-based towers
to fixed reception/transmit devices. Membership is comprised of fixed wireless
system operators worldwide, as well as: equipment and service suppliers; video,
software and other content providers; financial institutions; and engineers,
attorneys and other consultants.
4
<PAGE>
Item 1. Description of Business
A. The Company
1. Corporate Information
Nostrad Telecommunications, Inc. ("the Company" or "NTC") is a corporation
organized under the laws of the State of Nevada on September 24, 1993, as Cave
Productions, Inc. The Company changed its corporate name to Nostrad
Telecommunications, Inc. effective as of October 8th, 1997, in anticipation of
its acquisition of Nostrad Media Pte. Ltd. a Singapore company ("Nostrad Media")
and Omni Vision Africa Ltd., a British Virgin Island company ("OmniVision").
Please refer to "Item 1. Description of Business -The Company - Corporate
History. "
Although not required to do so, the Company has voluntarily filed this
registration statement because (1) it believes that it can more readily
accomplish its business and financing objectives if it were a reporting issuer
under the Exchange Act and (2) it wants to satisfy current conditions for
quotation of its common stock on the OTC BB.
The Company maintains its corporate offices at Suite 420 - 171 West
Esplanade, North Vancouver British Columbia V7M 3J9. Its telephone number is
(604) 983-8778 and, its facsimile number is (604) 983-8779. The Company moved
its head office from Las Vegas, Nevada in September of 1997, following the
acquisition of Nostrad Media and Omni Vision.
The Company maintains offices as follows: Vancouver, Canada; Singapore;
Ulaanbaatar, Mongolia; Kampala, Uganda; and Rabat, Morocco. Please refer to
"Item 3. Description of Property. "
2. Corporate Structure
The following chart sets out the Company's corporate structure and
ownership interest in its various subsidiaries:
-----------------------------------
| Nostrad Telecommunications Inc. |
-----------------------------------
|
|----------------------------------------------|
| |
-------------------------- ---------------------------
| OmniVision Africa Ltd. | | Nostrad Media Pte. Ltd. |
| 100% | | 100% |
-------------------------- ---------------------------
| |
|----------------|-----------|-----------| |
| | | | |
------------ ------------ ------------ ------------ ------------
|OmniVision| |OmniVision| |OmniVision| |OmniVision| | Mongolia |
| Uganda | | Tanzania | | Ghana | | Maroc | |HomeVision|
| 100% | | 80% | | 80% | | 65% | | 80% |
------------ ------------ ------------ ------------ ------------
5
<PAGE>
3. Corporate History
The Company was organized for the purpose of creating a vehicle to locate
and acquire an operating business entity which management believed would be a
suitable and viable acquisition candidate. The Company had limited operating
activities from inception to September 30, 1997 when it effected the
Acquisition.
By Agreement dated February 25, 1998 with Nostrad Telecommunications Pte.
Ltd.. a privately held Singapore company ("Nostrad Singapore"), the Company
agreed to purchase (the "Acquisition") from Nostrad Singapore all of the issued
and outstanding capital stock of each of Nostrad Media and OmniVision in
exchange for 3,700,000 shares of the Company's common stock (on a post split
basis) and a $300,000 promissory note.
In furtherance of the Acquisition, a restructuring (the "Restructuring")
consisting of the following was effected:
1. Name Change. The name of Cave Productions was changed to Nostrad
Telecommunications, Inc.
2. Stock Split. On September 29, 1997 the then Board of Directors of the
Company approved a 5,000 for 1 stock split, which stock split was effective upon
filing, on September 30, 1997, of a certificate of amendment to the Company's
certificate of incorporation.
The effect of the stock split was to increase the number of shares of the
Company's common stock $.001 par value per share, issued and outstanding from
600 to 3,000,000. The number of shareholders remained constant at eleven; being
the same eleven persons (the "Selling Shareholders") who acquired the 600 shares
on March 1, 1994. The Company believes that only one of the Selling Shareholders
was an affiliate of the Company at the time of the Acquisition.
3. Private Transactions. As an adjunct to and in order to facilitate the
Acquisition, the Selling Shareholders sold and transferred (the "Private
Transaction") to certain unaffiliated persons 2,840,000 shares of common stock
representing approximately 94.6% of the then issued and outstanding shares of
the Company's common stock.
As at April 26, 2000, the Company had 12,200,000 shares issued and
outstanding. Please refer to "Part II. Item 4. Recent Sale of Unregistered
Securities.
The Business of the Company
The Acquisition was treated as a "reverse take over" for accounting purposes.
Accordingly, by the business and financial information presented is that of
Nostrad Singapore.
The Company is, and for the past three years has been focused on developing,
acquiring and managing media and telecommunication operations in emerging
markets of Asia, Africa and at a later stage, Latin America. To date, the
Company has obtained Subscription Television licenses in Morocco, Uganda, and
Tanzania, as well as an ISP licenses in Morocco. The DTH services in Morocco
have been implemented with a launch of Showtime (a subsidiary of Viacom, Inc.)
programming in June 1999.
In order to implement its business in each country in which the Company
operates, the Company requires various operating permits, licenses, and
allocation of specific frequency and channels by the appropriate government
Ministry in each county. The Company's current operations include:
6
<PAGE>
A. Morocco Operations. Omni Vision Maroc, a 65% owned subsidiary, is licensed
to distribute satellite DTH Subscription Television programming. The
subsidiary has entered into an agreement with Showtime, to distribute
Showtime's DTH programming package throughout Morocco.
B. Tanzania MMDS Pay TV Operations. OmniVision Tanzania, an 80% owned
subsidiary, holds exclusive frequencies and licenses to operate a
eight-channel MMDS Subscription TV system in Tanzania. The Company has
applied for additional 8 channels in order to provide up to 16 channels of
Subscription Television service as well as wireless internet services.
C. Uganda MMDS Pay TV Operations. OmniVision Uganda, a 100% owned subsidiary
holds exclusive frequencies and licenses to operate a 21-channel MMDS
system in Uganda.
D. Uganda Paging Operations. OmniVision Uganda also holds licenses to operate
5 paging channels. The system is currently being implemented and is
expected to become operational by December of the year 2000.
E. Mongolia Paging Operations. HomeVision, an 80% owned subsidiary, holds
licenses to operate 5 paging channels. The system currently has 2 channels
in operation capable of providing service to 4,000 subscribers, the system
currently has 125 subscribers.
Overview
Television provides an important window to the world of entertainment,
knowledge and information while telecommunications is a gateway for human
interaction. The need and demand for these services are well documented. The
Company intends to provide these services to its chosen markets in emerging
economies, where market potential is significant and initial competition from
larger international corporations is limited or even non-existent.
For its Pay TV operations, the Company has chosen to deploy wireless MMDS
technology as a cost effective signal delivery solution that allows low-cost
entry and quick service roll-out. It enables the Company to provide appealing
and price competitive programming to its subscribers in the targeted markets.
The targeted countries were selected based on the Company's view of their
respective market potential, relative political stability and governmental
commitment to economic reforms and development.
In the paging business, the Company, guided by its corporate philosophy of
providing appealing and cost competitive solutions to its customers, is
implementing alphanumeric and voice paging services in the two countries that it
has paging licenses. Alphanumeric and voice paging were selected as the
appropriate solutions for these emerging markets because access to public
telephones, and telephones in general, is rather limited.
Overall, the media and telecommunications markets in the targeted countries
are relatively undeveloped and with limited competition, thus, offering the
opportunities of smaller scale starts. With the current developments in the
applied technologies, the Company envisages and believes that it will be able to
expand into multimedia services through the integration of other convergent
technologies in the future.
The Company has assembled a management and technical team with experience
in implementation, management and operation of cable TV, hardwire and wireless
telecommunication systems in developed and developing countries. The team will
focus on building the Company's subscriber base, with the goal of generating
7
<PAGE>
positive cash flows at low subscriber levels and endeavor to retain customers
through quality on-going services and marketing programs.
Over the longer term, the Company expects to expand through internal
growth, acquisitions and joint ventures. It also intends to enhance growth
through strategic alliances with international telecommunications companies,
should the opportunities arise, with the view of maximizing the intrinsic value
of the business and operations, and thus maximizing the long-term value for its
shareholders. The Company has already formed associations with G1obeComm Systems
and NetSat Express to develop VSAT Networks, and to provide technical and system
integration services to OmniVision Maroc.
Industry and Competitive Environment
Wireless system technology provides a low cost and competitive medium for
the transmission of entertainment and information services to customers in
single family homes, multiple dwelling unit properties and commercial
properties. A city-wide wireless system can be implemented in a relatively short
period of time (in less than 7 months, as compared to conventional cable which
may take as long as 3 to 4 years), with lower initial capital investment. The
system can be maintained for less than the maintenance cost of a conventional
cable TV system.
Unlike conventional cable systems, wireless systems do not require
extensive coaxial cable networks, amplifiers and related equipment to meet low
and fairly dispersed initial demand. As a result, capital costs and plant
related operating costs are lower. Hence, the Company anticipates that it will
be able to maintain cost and pricing advantages over conventional hard wire
cable and satellite delivery such as DBS (Direct Broadcast Satellite) or DTH
technology in the Subscription Television industry.
The Company will focus on developing wireless cable and telecommunications
systems in emerging markets where the terrain, frequency availability and other
conditions are conducive to the economical transmission of wireless signals. The
Company will target value-conscious consumers in both cabled and non-cabled
areas with its basic and premium programming. The Company will differentiate
itself by using its lower cost structure to offer customers competitive prices
for programming with an emphasis on customer service.
The Company is a development stage company; it has DTH subscribers in
Morocco and paging subscribers in Mongolia. It does not have any MMDS
subscribers in Uganda or Tanzania. The competition faced by the Company in its
markets comes from privately held companies, which do not disclose their
financial condition or subscriber information. Competition in each geographic
market is described under the heading "Areas of Operation."
Technology
Wireless cable systems, otherwise known as Multichannel Multipoint Distribution
Systems or MMDS operates from a central re-transmission facility known as the
"head-end" consisting of satellite reception equipment and other equipment
necessary to receive or produce the desired programming. The programming is then
transmitted by microwave transmitters from an antenna located on a tower to
provide a wide coverage area up to distances of 30 Kms. At the subscriber's
location, a small antenna typically located on the rooftop, receives the
microwave signals and converts them to frequencies that can be carried via
conventional in-home coaxial cable to a descrambling converter located on top of
the subscriber's television set.
8
<PAGE>
The MMDS technology to be employed by the Company has very similar
technical characteristics to that used in the United States and Canada.. The
spectrum of frequencies used, (2.5 to 2.9 Hz), the bandwidth per channel, (6
MHz), and other technical characteristics are virtually the same. Although MMDS
requires direct line-of-sight reception and may be subject to interference by
weather and topography, signal quality is high and much less subject to the
outages and degradation often experienced by CATV coaxial cable systems.
Market Segmentation and Competing Pay-TV Delivery Technologies
Other than the MMDS technology chosen by the Company as its delivery
platform, television signals are replayed by various competing services and
technologies, as follows:
Cable
In the United States, cable competes effectively with wireless only because
of amortized sunk costs in the cabling infrastructure which was built out over
the last 30-40 years, before the advent of wireless technologies. In addition,
the available MMDS frequencies in North America are limited, hence restricting
the number of channels that can be offered through this platform.
Capital investment for MMDS is generally less than that of conventional
cable television investment. MMDS can also serve market areas where it will not
be economically viable for cable operators due to low housing density (cost per
subscriber's ratio). Hence, in markets with little or no cable infrastructure,
MMDS will be more cost efficient to implement.
However, the major issue impeding development of wireless cable in
developed countries, such as those in North America and Europe, have not been
construction costs, but burdensome frequency licensing procedures and the
problems in obtaining access to the most desirable cable network areas.
Television Receive Only ("TVRO")
TVRO's are used by customers for direct reception of video programming from
various satellites, and are generally used to receive free-to-air programming.
They are generally used in markets where subscribers do not have access to cable
or MMDS services. A conventional TVRO system can cost each subscriber between
$1,000 and $3,000 (for the installation and purchase of a full-size satellite
dish), depending on the features of the system, plus a monthly fee for access to
specific programming that are encoded. There is also a need to re-position the
receiver dish to several different satellites for different programming.
Although, this positioning can be done via motorized controls it would entail a
higher equipment cost.
Satellite Master Antenna Television ("SMATV")
SMATV is a multi-channel cable network system service offered to private
landowners of multiple dwelling units. SMATV uses satellite receivers to receive
and compile programming and distributes the multi-channel programming to the
subscribers in multiple dwelling units and large buildings. SMATV is, however,
restricted mainly to free-to-air satellite programs as royalty fees for the
encrypted programming are presently high.
9
<PAGE>
Direct to Home ("DTH")
DTH companies transmit high-powered signals from a satellite directly to a small
dish (about 60-90 cm in diameter) located at subscribers' homes. DTH is capable
of delivering over 500 channels of digital programming. Currently, receiving
equipment plus installation fees can cost each subscriber between $700 and
$1,500, however the price of this $1,500 equipment is being reduced and it is
expected that the price deferential between MMDS and DTH will, at some point
disappear. Each additional independent outlet requires a separate decoder device
at an additional cost to the subscriber. MMDS enjoys certain advantages over
DTH, specifically DTH's:
o cost for constructing and launching satellites;
o cost for equipment required for receiving signal;
o limited local programming due to the small number of DTH subscribers
in each country at this time.
Foreign DTH operators, do present a source of competition for the Company.
A DTH operator can provide service to urban and rural communities, since their
broadcast footprint covers the whole country. Additionally DTH providers are in
some of the Company's target markets are subsidizing the cost of the equipment
and its installation; this may have an impact on the cost differential that MMDS
has over DTH at this time and may make DTH a more competitive alternative to
MMDS.
Telephone Companies - Video on Demand
Recently telephone companies in developed countries have been implementing
ADSL technology capable of providing audio/video services over telephone lines.
Such services are at present costly to implement and restricted to offering
video-on-demand and high speed Internet service. It is as yet uncertain as to
whether the technology may be able to support multi-channel programming. The
Company believes that MMDS will continue to maintain a cost advantage over such
video services for the near term.
The cable industry has developed a "Pay-Per-View" service that enable
customers to order and pay for individually selected programs. PPV has been
especially successful for specialty events carried on a pay-per-event basis,
such as sports events. PPV requires subscribers to have addressable converters,
as employed by the Company, which allow the Company to control what subscribers
watch without having to visit the subscribers' residences. The Company believes
that PPV has the potential for becoming popular as additional exclusive events
become available for distribution.
Digital compression, currently being developed by several equipment
manufacturers, will allow several programs to be carried on one bandwidth, as
opposed to current technology that allows only one program per bandwidth.
Estimates of compression ratios are between 4:1 and 10:1 (about 150 to 300
channels). Digital technology will also enable MMDS to transmit high definition
television signals. NTC believes that any compression technology that becomes
commercially available will be beneficial to MMDS operators and will help to
greatly expand the channel capacity available for programming.
Currently, franchise cable operators are rebuilding their infrastructures
with fibre optic networks in order to provide their customers with greater
numbers of programming channels and services. In the past, franchise cable
systems have been limited to the number of programming channels offered to
customers by their current analogue transmission and coaxial cable technologies.
10
<PAGE>
Other Wireless Competitors
In its target markets the Company can expect other MMDS wireless operators to
provide limited competition. This is mainly due to the limited bandwidth
(channel capacity) allocated in the target markets by the government authorities
in the MMDS band. Over the longer term, the Company anticipates the market for
subscription TV will be large enough to support the emergence of more and larger
competitors, as the market develops within its region of operation.
In Africa, the main competitor for the Company is Multichoice, which broadcasts
terrestrially in the UHF frequency spectrum and via DTH, for the premium
direct-to-home market. While Multichoice focuses on such premium DTH delivery,
the Company will focus on terrestrial wireless broadcast, with direct capital
investments into its countries of operations. In the longer term, it is the
Company's view that localized Pay TV industries are more likely to be favored
over imports by the governments of the countries in which it operates. Please
refer to "Part I - Item 1. Description of Business - Areas of Operations."
C. Areas of Operation
The Company has compiled as to each country in which it operates information set
forth under the caption "Vital Statistics", "Mongolia", "Morocco", "Uganda", and
"Tanzania", from generally available public information as of January 2000,
published sources which the Company believes to be generally reliable.
11
<PAGE>
Morocco
OmniVision Maroc SARL ("OVM") is currently holding the following documents:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
Date of License Title of License or Certificate Notes Duration
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
July 20, 1998 Incorporation Certificte
-------------------------------------------------------------------------------------------------
April 23, 1998 Exclusive Distribution Contract with Soread/OmniVision/ 5 years
Soread (government Pay-TV distributor) ShowTime/Gulf DTH
-------------------------------------------------------------------------------------------------
Jan 14th 1999 Amendment granting OmniVision Maroc with Gulf DTH 5 years
Exclusive Distribution Rights for /OmniVision
ShowTime channels in Morocco
-------------------------------------------------------------------------------------------------
March 11, 1999 Letter confirming OmniVision's Gulf DTH/ 5 years
distribution agreement OmniVision
-------------------------------------------------------------------------------------------------
Jan 14th 1999 Amendment to Agreement dated Jan 14 1999 Gulf DTH/ 5 years
amending various issues. OmniVision
-------------------------------------------------------------------------------------------------
Jan 14th 1999 Master Agreement granting certain Gulf DTH/ 5 years
Non-Exclusive Rights to distribute OmniVision
ShowTime in Morocco
-------------------------------------------------------------------------------------------------
July 16, 1999 Agreement to develop VSAT Networks, and Globecomm/OmniVi 5 years
technical and system integration sion Maroc
-------------------------------------------------------------------------------------------------
</TABLE>
OmniVision Africa Ltd., through its subsidiary OVM, was granted the necessary
licenses by the Ministry of Communication to distribute a DTH service throughout
Morocco. OVM on January 14, 1999 executed an agreement with Showtime, to
distribute its programming package throughout Morocco. Showtime started
uplinking its digital services on NileSat, in March of 1999, which allows its
signals to be received throughout most of North Africa on a 90 cm dish. NileSat
has rapidly established itself as one of the leading satellite solutions for the
Middle East and North Africa delivering a wide variety of Western and Arabic
channels 24 hours per day 7 days per week. OVM in June of 1999 commenced the
soft launch and on October 22nd proceeded with the hard launch of the Showtime
service. OVM is offering 13 channels providing programming 24 hours per day.
Showtime is offered at packages from $49 per month to $89 per month. The
subscribers' receiving equipment can be purchased from the Company or leased
from the Company at $60 per month. Payments are made monthly, quarterly or
annually in advance.
Competition
There are two local free to air TV channels operating.
All pay television must be distributed through a government owned agency named
SOREAD. The Company is one of the three Pay TV operators permitted by SOREAD to
provide Pay Television services in Morocco. The other two operators are Canal &
Horizon (estimated 20,000 subscribers) which offers IDTH channel at a cost of
$18 per month and ART (estimated 3000 subscribers) which offers 10 channels at a
cost of $14 to $28 per month.
From the period October 1, 1999 through December 1999 OmniVision had 200
individual subscribers (as at April 30, 2000 there were 300 individual
subscribers) and 3 hotels generating revenues of US$ 85,000.
OVM signed an agreement with Globecomm Systems "GSI" (NASDAQ: GCOM) to provide
systems integration and end to end wireless solutions for its ISP operations in
Morocco. As part of the agreement, GSI's subsidiary, NetSat Express, will
provide Satellite Internet Access into the US Internet backbone to OmniVision.
GSI designs, assembles and installs satellite ground segment systems and
networks which support a wide range of satellite
12
<PAGE>
communications applications, including fixed, mobile and direct broadcast
services as well as military applications. NetSat Express provides satellite
based Internet access services, digital media distribution, and integration
data, voice and video communications services. The Company plans to use NetSat
Express ACCESS PLUS services to provide a comprehensive variety of Internet
services including internet access, hosting, caching, ip multicasting, ip
telephony, multi-media, broadcasting. The Company expects to begin to offer
service by the middle of the year 2000.
Regulations
The government does not have any specific legislation regarding terrestrial re
broadcasting by MMDS systems. In the future legislation may be introduced that
may impact on the business of the Company. The Company monitors on an ongoing
basis legislation or regulation changes that may impact its business.
Vital Statistics
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
Demography, Economy Source 1994 1995 1996 1997
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Population 1 26,075,000 26,621,000 27,170,000 27,518,000
------------------------------------------------------------------------------------------------------------------
GNP per capita 1 1,164 1,218 1,355
------------------------------------------------------------------------------------------------------------------
GNP per capita (PPP) 1 3,160 2,980 3,320
------------------------------------------------------------------------------------------------------------------
Average exchange rate per US$ 1 9.20 8.54 8.72 9.53
------------------------------------------------------------------------------------------------------------------
Consumer price index 1 126 134 138
------------------------------------------------------------------------------------------------------------------
Main Telephone Lines 1 1,007,000 1,158,000 1,251,000 1,378,000
------------------------------------------------------------------------------------------------------------------
Cellular Subscribers 1 13,794 29,511 42,942 74,442
------------------------------------------------------------------------------------------------------------------
Television Receivers 1 1,830,000 2,500,000 3,500,000 5,000,000
------------------------------------------------------------------------------------------------------------------
Television Households 1 3,480,000 4,480,000
------------------------------------------------------------------------------------------------------------------
Television per 100 inhabitants 1 7.02 9.39 12.88 18.16
------------------------------------------------------------------------------------------------------------------
Home Satellite Antennas 1 403,000
------------------------------------------------------------------------------------------------------------------
Internet Hosts 1 229 468 1,405
------------------------------------------------------------------------------------------------------------------
Number of personal computers 1 35,000 45,000
------------------------------------------------------------------------------------------------------------------
</TABLE>
1. African Telecommunication Indicators -1998
Morocco
Morocco is bounded on the north by the Mediterranean Sea, on the east and
southeast by Algeria, on the south by Western Sahara, and on the west by the
Atlantic Ocean. The area of Morocco is about 446,550 sq. km (about 172,413 sq.
mi.).
Morocco's resources are primarily agricultural, but mineral resources are also
significant. Among the latter, the most important is phosphate rock; other
minerals include coal, iron, lead, manganese, petroleum, silver, tin, and zinc.
The estimated population for 1995 was 28,260,000, giving the country an overall
population density of about 63 persons per square kilometer (about 164 per
square mile).
13
<PAGE>
The capital of Morocco is Rabat, with a population (1998 estimate, greater city)
of approximately 1,872,000. Other major urban centers, with their 1998 estimated
(greater city) populations, are Casablanca (5,210,000), the country's largest
city and main seaport; Marrakech (1,817,000) and Fes (1,412,000), both important
trade centers; and Tangier (854,000), a seaport on a bay of the Strait of
Gibraltar.
Islam is the established state religion of Morocco. Almost the entire population
is Sunni Muslim. The monarch is the supreme Muslim authority in the country.
About 1 percent of the population is Christian, and less than 0.2 percent is
Jewish.
In 1963 schooling became compulsory in Morocco for children between the ages of
7 and 13, but significantly fewer girls than boys attend classes, and less than
40 percent of secondary-school-age Moroccans actually attend secondary school.
Arabic is the main language of instruction, and French is also used in secondary
schools. In the early 1990s it was estimated that 50 percent of the population
was literate. In the late 1980s more than 2.9 million pupils attended primary or
pre-primary schools, and more than 1.3 million students were enrolled in
secondary and vocational schools.
About 240,000 people were enrolled in schools of higher education in Morocco in
the late 1980s. Higher education of the traditional type is centered in Fes at
A1 Qarawiyin University, which was founded in AD 859. Modern higher education is
offered at Mohammed V University (1957), at Rabat; Mohammed Ben Abdellah
University (1974), at Fes; Cadi Ayyad University (1978), at Marrakech; Hassan 11
University (1976), at Casablanca; and Mohammed I University (1978), at Oujda.
Rabat also has colleges of fine arts, public administration, agriculture, and
economics, and the School of Native Arts and Crafts (1921) is in Tetouan.
Morocco is primarily an agricultural country, although no more than about 20
percent of the land is cultivated. In the early 1990s gross domestic product
(GDP) was estimated at $28 billion, or about $1,005 per person. The estimated
budget during the same period included revenues of about $7.5 billion and
expenditures of about $7.7 billion.
The principal crops of Morocco are cereals, particularly wheat and barley (3
million metric tons in the early 1990s); potatoes (900,000 metric tons);
tomatoes (900,OOOmetric torts); melons (551,000 metric tons); olives (500,000
metric tons); grapes (294,000 metric tons); pulses (163,000 metric tons); dates
(82,000 metric tons); and sugarcane and sugar beets (3.7 million metric tons).
Many other fruits andvegetables are also grown. Livestock included about 17
million sheep, 5.5 million goats, and 3.3 million head of cattle.
Morocco is a leading producer of phosphate rock; annual output was about 21.4
million metric tons in the early 1990s. Other minerals produced were coal
(526,000 metric tons), iron ore (149,500), lead (95,300 metric tons), manganese
ore (49,400 metric tons), and zinc (40,100 metric tons).
Morocco's manufacturing sector is made up mostly of small-scale enterprises.
Construction materials, chemicals, textiles, footwear, processed food, wine,
refined petroleum, and many other kinds of goods are produced in Morocco.
Artisans produce fabrics, leather goods, ceramics, rugs and carpets, and
woodwork of high quality. Annual production in the early 1990s included about
1.2 million sq. m (about 1.4 million sq. yd) of rugs and carpets, 5.8 million
metric tons of cement, and 1.1 million tons of phosphoric acid.
Morocco's leading exports are phosphates and phosphoric acid. Other exports
include citrus fruit, wheat, fish, and minerals. Annual exports in the early
1990s earned $3.5 billion. Imports, consisting mainly of industrial equipment,
food products, manufactured goods, and fuels, were valued at $6.5 billion. The
principal trade
14
<PAGE>
partners of Morocco are France, Spain, Italy, Germany, the United States, and
the United Arab Emirates. Morocco gains much foreign exchange from remittances
by Moroccans working abroad and from the expenditures of the large number of
tourists who visit the country each year.
Morocco has extensive port facilities, concentrated principally at Casablanca.
Other ports include Agadir, Kenitra, Mohammedia, Safi, and Tangier. In the early
1990s the country had some 1893 km (some 1176 mi.) of railroad track and 59,198
km (36,786 mi.) of roads, some 47 percent of which were hard-surfaced. Morocco
had about 669,637 passenger cars during the same period. Domestic and
international air service is provided by Royal Air Maroc; several major foreign
airlines also serve Morocco.
Radio and television programs are broadcast in several languages in Morocco, and
about 5.4 million radios and 2.9 million television receivers are in use in the
early 1998s. The country has 12 daily newspapers and numerous periodicals.
Morocco's unit of currency is the dirham (10.6758 dirhams equal U.S.$1 at April
30, 2000).
Uganda
OmniVision Uganda Ltd. ("OVU") is currently holding the following documents:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Date of License Title of License or Certificiate Notes Duration
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
June, 4 1997 Certificate of Incorporation
544,490/1619978
------------------------------------------------------------------------------------------------------------
May 30, 1997 Joint Venture Agreement Orbitornics/Omni 50 years
Vision Africa
Joint Venture
------------------------------------------------------------------------------------------------------------
Dec 16, 1997 Uganda Communications Commission 2.484 Ghz - Indefinite
Assignment of Frequency 2.716 Ghz Refer to Risk Factor 14.
------------------------------------------------------------------------------------------------------------
Sept 7, 1999 Uganda Commuincations Commission 2.484 Ghz - Indefinite
Extension of Assignment of Frequency 2.716 Ghz Refer to Risk Factor 14.
------------------------------------------------------------------------------------------------------------
Oct 19, 1998 Uganda Commuincations Commission No Specific Duration
Permi.ssion to Operate TV Broadcasting Refer to Risk Factor 14.
Service Through MMDS Techniques
------------------------------------------------------------------------------------------------------------
May 7, 1998 Uganda Commuincations Commission 5 years
License to operate a Paging Services Refer to Risk Factor 14.
License # TL-98-15
------------------------------------------------------------------------------------------------------------
May 19, 1999 Public Notice of OmniVision's licenses MMDS-Broadcasting No Specific Duration
to operate by the Uganda Communications & Paging Refer to Risk Factor 14.
Commission
------------------------------------------------------------------------------------------------------------
</TABLE>
OmniVision Africa Ltd., through its subsidiary OVU, was granted the necessary
licenses by the Ministry of Communication and the Uganda Investment Authority
for undertaking telecommunications activities and to provide 21 channels of pay
TV (employing radio frequencies between 2.484 to 2.716 GHz). OVU was granted
approval by the Ministry of Communications in Uganda to expand its services to
include paging services in Kampala, Jinja and Entebbe. The paging operations are
scheduled to be operational in Kampala by the middle of the year 2000. OVU has
obtained an agreement to use the existing transmission tower and site on the top
of Kololo Hill in Kampala for its MMDS and paging transmission headends. The
agreement is for a period of 10 years and calls for annual payments $5,000.
15
<PAGE>
Competition in Uganda
The Company currently has no operations in Uganda and thus no competitive
position. However, the Company anticipates commencement of operations by the end
of the year 2000. The Company plans to launch a Pay TV service using MMDS
technology. There are three local free to air TV channels operating. One is run
by the local government called UTV, operating on channel 5 VHF; and the other
two, which are privately owned are Sanyu TV on channel 28 UHF and Channel TV on
channel 12 VHF. This last station, however, is not being received in most of
Kampala because of the poor location of its broadcast site.
Multichoice of South Africa offers a M-Net package of three subscription
channels, consisting of channels 7, 11, and 13 VHF, which are being broadcast in
encrypted mode. Their programming is comprised a Movie channel (Movie Magic), a
sport channel (Super Sport), and the M-Net channel showing BBC/Kid TV. Although
this is an adequate choice of programming, given limited alternatives, it is
very expensive. Its fees consist of approximately US$120.00 for the installation
and a monthly fee of about US$45.00. Nevertheless, even with this expensive
pricing, there are approximately 3,500 subscribers to this service.
16
<PAGE>
Proposed Programming Charges
Basic subscriber charge $17.50 for 15 channels of basic with 5 premium channels.
Regulations
The government does not have any specific legislation regarding terrestrial re
broadcasting by MMDS systems. In the future legislation may be introduced that
may impact on the business of the Company. Since a number of the Company's
licenses in Uganda do not have a specific term they may be more susceptible to
termination as a result of the enactment of new laws. Please refer to "Part I -
Description of Business - Risk Factor." The Company monitors on an on going
basis legislation or regulation change that may impact the business of the
Company.
Vital Statistics
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Demography, Economy Source 1994 1995 1996 1997
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Population 1 18,592,000 19,022,000 20,256,000 20,791,000
-------------------------------------------------------------------------------------------------------------------
GNP per capita 1 282 315 251
-------------------------------------------------------------------------------------------------------------------
GNP per capita (PPP) 1 860 960 1,030
-------------------------------------------------------------------------------------------------------------------
Average exchange rate per US$ 1 979.45 968.90 1,046.08 1,083.01
-------------------------------------------------------------------------------------------------------------------
Consumer price index 1 227 247 265 283
-------------------------------------------------------------------------------------------------------------------
Main Telephone Lines 30,449 38,972 47,927 51,829
-------------------------------------------------------------------------------------------------------------------
Cellular Subscribers 1,747 4,000 5,000
-------------------------------------------------------------------------------------------------------------------
Television Receivers 1 400,000 500,000 525,000
-------------------------------------------------------------------------------------------------------------------
Television Households 1 399,728 500,278 524,630
-------------------------------------------------------------------------------------------------------------------
Television per 100 inhabitants 1 2.15 2.63 2.59
-------------------------------------------------------------------------------------------------------------------
Home Satellite Antennas 1
-------------------------------------------------------------------------------------------------------------------
Internet Hosts 1 58 17 30
-------------------------------------------------------------------------------------------------------------------
Number of personal computers 1 10,000 10,500
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) African Telecommunication Indicators
Uganda
Uganda, a republic in eastern Africa, is bounded on the north by Sudan, on the
east by Kenya, on the south by Tanzania and Rwanda, and on the west by Zaire; it
is a member of the Commonwealth of Nations. Uganda has an area of 241,139 sq. km
(about 93,104 sq. mi.).
Almost all the inhabitants of Uganda are black Africans. About two-thirds of the
people speak the Bantu language; they live in the southern half of the country
and include the Ganda, Soga, Nyoro, Nkole and Toro ethnic groups. Most of the
remaining people speak the Nilotic language; they live in the north and include
the Acholi, Lango, and Karamojong ethnic groups.
The 1995 population estimate was 20,405,000, giving the country an overall
population density of about 85 persons per sq. km (about 219 per sq. mi.).
Uganda's growth rate in the early 1990s was about 3 percent.
Uganda's capital and largest city is Kampala (estimated population in 1997
1,373,463), which is located near Lake Victoria. Other cities include Jinja
(90,979), Mbale (53,634), Gulu (42,841), Entebbe (71,638), Soroti (40,602) and
Mbarara (40,383).
The British educational system has been influential in Uganda, and missionary
schools have played an important role in educating the people. In the late
1980's about 2.6 million pupils attended some 7,900 primary schools in Uganda
and some 240,000 students were enrolled in more than 900 secondary, technical
and teacher-training
17
<PAGE>
schools. Uganda's leading institutions of higher education are Makerere
University (1922) and Uganda Technical College (1954), both located in Kampala.
The economy of Uganda has shown a steady recovery since 1987 when the Government
of Uganda put into place an Economic Recovery Program Plan with assistance from
the World Bank and the IMF. As a result of the Government's commitment to
reforms, Uganda's annual Gross Domestic Product (GDP) growth averaged six
percent during fiscal years 1986-1994 and eight percent over the past three
years. GDP growth is expected to average six percent for the next three years.
The Government of Uganda appears to be liberalizing the economy. In the past few
years, the government has abolished monopolies in coffee, cotton, power
generation and telecommunications. Foreign exchange, based on a
market-determined exchange rate, can be freely purchased. Many public
enterprises have been privatized or are scheduled for privatization. Loss-making
companies are being liquidated, enterprises, which could be managed better by
private companies, are being divested, and other enterprises are being
restructured. In 1991 the Uganda legislature, the National Resistance Council,
enacted a law, the Investment Code, that provided conditions that are more
favorable for investment in Uganda for both local and foreign investors. Under
that same legislation, the Uganda Investment Authority was established with the
major aim of promoting and facilitating investments in Uganda.
Tanzania
OmniVision Tanzania Ltd. ("OVT") is currently holding the following documents:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Date of License Title of License or Certiciate Notes Duration
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Oct 29, 1998 Certificate of Incorporation # 35098 No Specific Duration
Refer to Risk Factor 14.
------------------------------------------------------------------------------------------------------------
Oct 15, 1998 Joint Venture Agreement between No Specific Duration
CableVision Africa Ltd./OmniVision Refer to Risk Factor 14.
Africa Ltd.
------------------------------------------------------------------------------------------------------------
Sept 10, 1998 Tanzania Broadcasting Commission 2.532 - 2.635 Ghz No Specific Duration
Allocation of MMDS Frequencies for 5 channels Refer to Risk Factor 14.
Pay-TV
------------------------------------------------------------------------------------------------------------
Aug 13, 1999 Tanzania Broadcasting Commi.ssion 2.509-2.683 Ghz No Specific Duration
Construction Permi.t for MMDS and 7 channels Refer to Risk Factor 14.
Assignment of additional Frequencies
for Pay-TV
------------------------------------------------------------------------------------------------------------
</TABLE>
OmniVision Africa Ltd., through its 80% owned subsidiary OVT, has been allocated
frequency licenses by the Ministry of Telecommunications for undertaking
telecommunications activities and to provide, initially, 7 channels
(applications for up to 15 channels have been submitted) of pay TV (employing
radio
18
<PAGE>
frequencies between 2.5 to 2.58 GHz). OVT's local partner, CableVision (Africa)
Ltd., the parent Company of Coast Television Network Ltd. (CTN), a local
television broadcaster, has agreed, under the terms of its Joint Venture
Agreement, to provide the use of its transmission tower atop their building and
transmission facilities for the MMDS Pay-TV project at no cost to the Company.
CTN has approximately eight years remaining on its lease. The Company currently
has no operations in Tanzania and thus no competitive position. The Company
plans launching its MMDS Pay TV project by the end of year 2000.
Tanzania
The United Republic of Tanzania is bounded on the north by Kenya and Uganda, on
the east by the Indian Ocean, on the south by Mozambique, Malawi and Zambia, and
on the west by Zaire, Burundi and Rwanda. The country includes the islands of
Zanzibar, Pemba and other offshore islands in the Indian Ocean. The total area
of Tanzania is 945,087 sq. km (364,898 sq. mi.). Dar es Salaam is the capital
and largest city.
The landscape of mainland Tanzania is generally flat and low along the coast,
but a plateau at an average altitude of about 1,200 m (about 4,000 ft)
constitutes the greater part of the country. Isolated mountain groups rise in
the northeast and southwest. The volcanic Kilimanjaro (5,895 m/19,340 ft), the
highest mountain in Africa, is located near the northeastern border. Three of
the great lakes of Africa lie on the borders of the country and partially within
it. Lake Tanganyika is located on the western border, Lake Victoria on the
northwest and Lake Nyasa (Malawi) on the southwest. Lakes Nyasa and Tanganyika
lie in the Great Rift Valley, a geological fault system extending from the
Middle East to Mozambique.
Zanzibar, separated from the coast of the mainland by a channel some 40 km (some
25 mi.) wide, is about 90 km (about 55 mi.) long and covers an area of 1,658 sq.
km (about 640 sq. mi.). It is the largest coral island off the coast of Africa.
Pemba, some 40 km (some 25 mi.) northwest of Zanzibar, is about 68 km (about 42
mi.) long and has an area of approximately 984 sq. km (380 sq. mi.). Both
Zanzibar and Pemba are mostly low-lying.
Diamonds are the most important of the minerals currently being exploited in
Tanzania. Large deposits of coal and iron ore are known to exist in the southern
region. Forestland constitutes one of the most substantial natural resources of
the country. Among the many hardwoods found are mahogany and camphorwood. The
country abounds in wildlife, including antelope, zebra, elephant, hippopotamus,
rhinoceros, giraffe, lion, leopard, cheetah and monkey. The population of
Tanzania (1995 estimate) is about 30,742,000, giving the country an overall
population density of about 33 persons per sq. km (about 84 per sq. mi.). Yet,
the population distribution is irregular, with high densities found near fertile
soils around Kilimanjaro and the shores of Lake Nyasa, and comparatively low
density throughout much of the interior of the country. The government has
reversed a policy of resettling people in registered villages after its
effectiveness proved limited.
The largest city and seat of government, Dar es Salaam, has an estimated
population (1997) of 3,260,850. Other major cities are Mwanza (223,013), a port
on Lake Victoria, and Tanga (187,634), an industrial center and seaport.
Zanzibar (357,634) is the largest city on the island. Dodoma (203,833) has been
designated as the eventual capital of Tanzania.
Under the new administration of President Benjamin Mkapa, the Tanzanian
Government has set out to reverse the socialist policies began by former
President Nyerere and to reduce government interference in the economy. As such,
the government has embarked on a policy of selling off government corporations.
This effort has continued over the last twelve months with a number of large
corporations going up for auction. The largest and most notable corporation on
the auctioning block, the Tanzanian Cigarette Company, has been sold to
RJR/Nabisco Corporation.
The economy of Tanzania is primarily agricultural. More than 80% of the
economically active population is engaged in farming and agricultural products
account for about 75% of the annual exports.
19
<PAGE>
The country is the world's largest producer of sisal and cloves. A series of
development plans has stressed growth of the agricultural cash economy and a
reduction in dependence on imports for manufactured goods. GDP (1995): US$ 4.0
bil. Real GDP Growth Rate (1995): 3.9%
The Tanzanian government continues to provide incentives to outside investors
wishing to invest in Tanzania. In 1990, the government created the Investment
Promotion Center (IPC) and charged it with promoting international investment in
Tanzania, assisting potential investors, and providing investment incentives to
individuals and companies wishing to set up shop in Tanzania. In 1995, the
government introduced a uniform tax of 5 percent on imported capital goods,
thereby rationalizing (and encouraging) investment across the board while
reducing the negative effect of excessive special exemptions.
Mongolia
Nostrad Media), through its subsidiary, HomeVision obtained a license in
Mongolia to establish wireless broadcast. pay-television (license granted in
June 1996, frequencies of 2.3-2.99 GHz). HomeVision's signals will pass 120,000+
TV households. Given the current tolerance by Mongolia's government for
unlicensed cable operators to provide Pay TV, the Company has decided to delay
plans for Pay TV implementation indefinitely.
In line with HomeVision's plan to include telecommunications services in its
offerings, government approval for paging operations, including national
alphanumeric and voice paging, was obtained (frequencies 163.1, 146.300,
147.300, 155.300, and 156.300 MHz) in late 1996. The Company is operating voice,
numeric and alphanumeric paging (under the brand name of "NOSTRAD Paging") in
Ulaanbaatar. Subscription rates start at $5.00 for numeric, $10.00 for
alphanumeric and US 15.00 for voice paging services, equipment costs range from
$30.00 to $250.00. The Company currently has 250 subscribers.
HomeVision has obtained a long-term lease on a 3-storey broadcasting center,
including the use of the existing transmission tower, from the Mongolian Radio
and TV Company. The center houses a production studio, satellite signal
receiving and re-transmission headend, and corporate administration and
currently is the operations and transmission center for the paging network.
HomeVision currently employs 10 person for its paging operations.
D. Risk Factors
1. The Company has had a limited operating history.
The Company has only recently commenced operations and has limited assets.
It has a limited record of commercial production, earnings or sales. The
Company, therefore, must be considered promotional and in its early formative
and development stage.
2. The Company's recurring losses and negative cash flow raise
substantial doubt about its ability to continue as a going concern.
The Company has suffered significant recurring net losses, negative
operating cash flow and faces uncertainty as to the successful exploitation of
its assets, which raise substantial doubt about its ability to continue as a
going concern. As at December 31, 1999 the Company had a deficit of $2,816,646.
Please refer to the "Financial Statements" and the notes thereto.
3. The Company success is based upon the commercial acceptance of its
products and services.
There is no assurance that the Company's products and services will achieve
commercial acceptance or, if they do, that a functionally equivalent product or
service will not be developed by competitors with access to significantly
greater resources to devote to research, development and marketing. There is
nothing at this time upon which to base an assumption that the Company's
business plan will prove successful, and there is no assurance that the Company
will be able to operate profitably.
4. The Company will need additional funding in order to fully implement
its business plan.
The Company has limited financial resources and does not have any
significant cash flow at this time; accordingly, to the extent that additional
funds are required, the Company will seek to obtain such funds through equity
and/or debt offering. There is no assurance that if additional funding were
needed, it would be available to the Company on terms and conditions acceptable
to it. Failure to obtain such additional financing could result in delay or
indefinite postponement of the process to the market place or the ability to
supply sufficient product to the market place on a continual and profitable
basis.
5. The Company may face competition from larger companies.
The communications industry is intensely competitive and the Company
competes and will compete with companies having greater financial resources and
technical facilities. Therefore to the extent that the Company is able to
establish sales, revenues and property there is no assurance that it would be
able to sustain such sales, revenues and profits. Moreover, although not a major
factor today, if and when the Company begins achieving its objectives, larger,
better financed companies in peripheral businesses may be attracted to the
Company's markets. They may be prepared to spend large sums quickly to develop
competitive products and to mount major marketing campaigns. The Company is
aware of this possibility and hopes to establish itself as an industry leader
early on. Time is of the essence and the Company's financing and marketing
programs are essential to minimize this risk.
6. The Company's success in the countries in which it operates is dependent
on access to adequate labor and key personnel.
20
<PAGE>
The Company will depend upon recruiting and maintaining qualified personnel
to staff its operations. The Company believes that such personnel are currently
available at reasonable salaries and wages. There can be no assurance, however,
that such personnel will always be available in the future. The continuing
development of the process has been almost entirely dependent on the skills of
management and certain key employees of the Company with which the Company has
no employment agreements. Loss of the services of any part of this management
team and key employees could have a material adverse effect upon the Company.
Please refer to "Item 5. Directors, Executive Officers, Promoters and Control
Persons. "
7. In the future there may be conflicts of interest between the Company and
other entities affiliated with its officers and directors.
From time to time certain of the directors and executive officers of the
Company may serve as directors or executive officers of other companies and, to
the extent that such other companies participate in the industries in which the
Company may participate, the directors of the Company may have a conflict of
interest. In addition, the Company's dependence on directors and officers who
devote time to other business interests may create conflicts of interest, i.e.
that the fiduciary obligations of an individual to the other company conflict
with the individual fiduciary obligations of the Company and visa versa.
Directors and officers must exercise their judgment to resolve all conflicts of
interest in a manner consistent with their fiduciary duties to the Company. In
the event that such a conflict of interest arises at a meeting of the directors
of the Company, a director who has such a conflict will abstain from voting for
or against the approval of such a participation or such terms. In appropriate
cases, the Company will establish a special committee of independent directors
to review a matter in which several directors, or management, may have a
conflict. The Company is not aware of the existence of any conflict of interest
as described herein.
8. The Company has not paid any dividends nor does it expect to pay any
dividends in the foreseeable future.
Since its inception, the Company has had no earnings and has not paid any
dividends on its Common Stock. Payment of future dividends, if any, will be
determined by the Company's Board of Directors based on conditions then
existing, including the Company's financial condition, capital requirements,
cash flow, profitability, business outlook and other factors. Additionally, the
Company intends for the foreseeable future to follow a policy of retaining all
or substantially all of its earnings, if any, to finance the development and
expansion of its business.
9. The Company is subject to currency risks.
The Company is exposed to currency risk as some of its accounts payable are
denominated in currencies other than the US dollar. The Company earns revenue
and incurs operating expenses predominantly in US dollars. Unfavorable changes
in the applicable exchange rates may result in a decrease or increase in foreign
exchange gain or loss. The Company does not use derivatives to reduce its
exposure to foreign currency risk.
10. The Company may be subject to credit risks.
Credit risk arises from the possibility that the entities to which the
Company sells products or services may experience financial difficulty and be
unable to fulfill their contractual obligation. This risk is mitigated by
proactive credit management policies that include regular monitoring of the
debtor's payment history and performance, geographic location of the debtor, and
obtaining collateral security where appropriate.
11. The Company may be subject to "Year 2000" risks.
21
<PAGE>
Currently the Company does not rely on any computer programs that will
materially impact the operations of the Company in the event of a Year 2000
disruption. However, like any other Company, advances and changes in available
technology can significantly impact its business and operation. Consequently,
although the Company has not identified any specific year 2000 issue, the "Year
2000" problem creates risk for the Company from unforeseen problems in its own
computer systems and from third parties, including but not limited to financial
institutions, with whom it transacts business. Such failures of the Company
and/or third parties computer systems could have a material impact on the
Company's ability to conduct its business. Please refer to "Item 2. Management's
Discussion and Analysis or Plan of Operation. "
12. The sale or transfer of the shares by shareholders may be subject to
the "Penny Stock Rules."
Under Rule 15g-9 of the Exchange Act, a broker or dealer may not sell a
"penny stock" (as defined in Rule 3a51-1) to or effect the purchase of a penny
stock by any person unless:
(a) such sale or purchase is exempt from Rule 15g-9;
(b) prior to the transaction the broker or dealer has (1) approved the
person's account for transaction in penny stocks in accordance with
Rule 15g-9, and (2) received from the person a written agreement to
the transaction setting forth the identity and quantity of the penny
stock to be purchased; and
(c) the purchaser has been provided an appropriate disclosure statement as
to penny stock investment.
The Commission adopted regulations that generally define a penny stock to
be any equity security other than a security excluded from such definition by
Rule 3a51-1. Such exemptions include, but are not limited to (1) an equity
security issued by an issuer that has (i) net tangible assets of at least
US$2,000,000, if such issuer has been in continuous operations for at least
three years, (ii) net tangible assets of at least US$5,000,000, if such issuer
has been in continuous operation for less than three years, or (iii) average
revenue of at least US$6,000,000 for the preceding three years; (2) except for
purposes of Section 7(b) of the Exchange Act and Rule 419, any security that has
a price of US$5.00 or more; and (3) a security that is authorized or approved
for authorization upon notice of issuance for quotation on the NASDAQ Stock
Market, Inc.'s Automated Quotation System. It is likely that shares of Common
Stock, assuming a market were to develop therefore, will be subject to the
regulations on penny stocks; consequently, the market liquidity for the Common
Stock may be adversely affected by such regulations limiting the ability of
broker/dealers to sell the Company's Common Stock and the ability of
shareholders to sell their securities in the secondary market.
Moreover, the Company's shares may only be sold or transferred by its
shareholders in those jurisdictions in which an exemption for such "secondary
trading" exists or in which the shares may have been registered.
13. Since there is a limited market for the Company's Common Stock,
shareholders may find it difficult to sell their shares.
Although the Common Stock is quoted for trading on the "pink sheets," it is
not quoted on any exchange. Therefore, the market for and the liquidity of the
Common Stock is very limited.
In the absence of a security being quoted on NASDAQ, or the Company having
$2,000.000 in net tangible assets, trading in the Common Stock would be covered
by a Securities and Exchange Commission (the `Commission") rule under which
broker/dealers who recommend such securities to persons other than established
customers and accredited investors (generally institutions with assets in excess
of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse)
22
<PAGE>
must make a special written agreement to a transaction prior to sale. Securities
are also exempt from the rule if the market price is at least $5.00 per share.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure related to the market for penny stock and for trades in
any stock defined as a penny stock. The Commission has recently adopted
regulations under such act which defines penny stock to be any non-NASDAQ equity
security that has a market price of less than $5 per share (as defined). Unless
exempt, for any transaction in a penny stock, the new rules require the
delivery, prior to any transaction in a penny stock, of a disclosure schedule
prepared by the Commission explaining important concepts involving the penny
stock market, the nature of such market, terms used in such market, the
broker/dealer/s disciplinary history and the customer's rights and remedies in
case of fraud or abuse in the sale.
Disclosure also has to be made about commissions payable to both the
broker/dealer and the registered representative and current quotations of
securities. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. Non-NASDAQ stock would not be covered by the
definitions of penny stock for (i) issuers who have $2,000,000 in tangible
assets ($5,000,000 if the issuer has not been in continuous operations for three
years); (ii) transactions in which the customer is an institutional accredited
investor; and (iii) transactions that are not recommended by the broker/dealer.
14. Shareholders may be subject to dilution through the possible future
issuance of common stock.
The Company is authorized to issue up to 25,000,000 shares of Common Stock.
Presently there are 11,100,000 shares of Common Stock outstanding. Additional
issuances of Common Stock may be required foe raising capital, acquiring stock
or assets of other companies, compensating employees or undertaking other
activities without stockholder approval. These additional issuances of Common
Stock will increase the number of outstanding shares and further dilute
stockholders' interest. Since the Company's Common Stock is currently subject to
the existing rules on penny stocks, the market liquidity for the Company's
securities can be severely adversely affected.
15. The Company is subject to the risks generally associated with
operations in foreign and developing countries.
The Company is subject to risks associated with operating in foreign and
developing countries. These risks may take the form of, but not necessarily
limited to, nationalization, expropriation, or regulated out of existence (this
can be done in whole or in part), riots, and war change in tax rates, or a
freeze on capital repatriation.
The target countries have in place internationally recognized laws to
protect and encourage foreign investment. The target countries do not have any
specific legislation regarding terrestrial rebroadcasting by MMDS systems. In
the future legislation may be introduced that may impact on the business of the
Company. The Company monitors on an on-going basis legislation or regulation
changes that may impact the business of the country.
16. The Company is subject to general business risks associated with
providing its products and services.
Such risks include:
Pirating of Signals. All MMDS systems in the target markets will have in place
the most up to date encryption technology to reduce pirating of signals.
23
<PAGE>
Bill Collections. In order to minimize collection risk, the Company is
implementing computerized tracking, which will monitor customer payment records
and suspend or cancel service for non-payment. This can be done from the head
office without the need to visit the subscriber premises. As the Company will be
selling instead of leasing out its decoders, loss from non-payment is also
reduced.
Service interruptions due to poor installation. The Company will institute a
quality assurance program in conjunction with on-going training and customer
service monitoring to ensure quality service at a reasonable cost. The
installation of subscriber equipment is a relatively simple task, which requires
basic mechanical skills.
However, no assurance can be given that the Company's efforts to minimize or
eliminate these risks will prove successful.
17. The Company may be subject to certain risks arising from technical
problems associated with providing its products and services.
Such risks include:
Quality of hardware products can cause service problems. All the equipment
manufacturers providing systems for the projects will have installed MMDS
systems throughout the world and have a long service record.
Equipment maintenance problems due to non-availability of parts and timely
delivery. The Company will have back up equipment available on site. In
addition, the main transmitter has redundancy built in to reduce service
interruption.
Satellite Delivery problems. As programming originates, and is downlinked, from
numerous satellites in the region, program providers would be able to switch to
alternative delivery during periods of down time as there is available
transponder space for such switching.
Analog to Digital Conversion. The current engineering design of the systems to
be implemented have the ability to be upgraded to digital in the future. The
customer equipment will also have to be upgraded, however until the price
becomes more affordable the digital conversion will not take place.
However, no assurance can be given that the Company's efforts to minimize or
eliminate these risks will prove to be successful.
24
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
The Company is a development stage telecommunications company. Expenditures
to-date have been primarily focused on purchasing capital equipment, and for
general overhead in the Company's four international offices. Nostrad commenced
paging operations in Mongolia during 1998, and commenced providing DTH
subscription services in Morocco during 1999. The Company's primary focus for
the last three years has been and continues to be MMDS Subscription TV services
and is currently licensed in Kampala, Uganda; and in Dar es Salaam, Tanzania.
The Company is authorized to distribute DTH subscriber Pay-TV in Morocco. The
Company plans to implement the MMDS licenses as soon as possible and is also
endeavoring to obtain additional MMDS licenses in areas with potential for
Subscription TV. The Company currently has submitted application to the
appropriate regulatory agencies, for frequency which, if up-linked, would allow
for providing Pay TV in countries in Africa and Asia. It is the Company's
opinion that areas with potential for MMDS Pay TV, have at least 100,000 TV
households, which are not currently being serviced by cable or wireless Pay TV.
Year ended December 31, 1999 compared to the year ended December 31, 1998
During Fiscal-99, the Company:
1. Commenced providing direct to home ("DTH") television service in Morocco
during October 1999.
2. Commenced ordering the balance of the equipment required to launch its
Paging and MMDS operations in Kampala, Uganda. To date, the Company has
completed its construction of its head-end site for the Paging and MMDS
systems.
3. Completed the main antenna atop the largest building in Dar es Salaam.
Commenced leasehold improvements required
4. Completed engineering and systems design for Tanzania and Ghana and plans
to launch Pay TV services there by the end of 2000.
5. Indefinitely postponed the facilitation of the Subscription TV roll out in
Mongolia due to the slowdown of the Asian markets and unresolved
programming copyright issues
The Company has entered into an agreement to distribute "Showtime" programming
package, a Direct to Home (DTH) service. Showtime is a Viacom, Inc. company
headquartered in Dubai, UAE and uplinks 13 specialty Pay-TV channels and 25 Free
to Air channels. The Company is attempting to secure exclusive licenses for MMDS
frequencies in the Ivory Coast, Morocco, Tunisia, Bangladesh and Indonesia. In
Pakistan, the Company is in negotiations to provide Subscriber Management,
Programming, Operational and Technical Management for the country's exclusive
MMDS operator.
During Fiscal 99 there was a material change in the Company's sales and
gross profit outlined as follows:
---------------------------------------------------------------------------
Year to Dec 1999 Year to Dec 1998
---------------------------------------------------------------------------
Pager revenues - sales $ 5,660 $ 43,417
- service 22,240 16,583
DTH Equipment Sales 24,763 --
Subscription sales 53,237 --
-------- -------
105,900 60,100
-------- -------
Cost of Sales
Equipment costs - pagers 3,590 50,500
Equipment costs - DTH equipment 13,714 --
Cost of services 78,996 --
Marketing Costs 10,900 13,900
-------------------------------------
Total Cost of Sales 107,200 64,400
-------------------------------------
Gross Profit $( 1,300) $(4,300)
--------------------------------------------------------------------------
25
<PAGE>
The cost of providing DTH services were higher than expected. This was due
to discounts in installing equipment, training, and upfront fees.During 1999,
paging operations in Mongolia competed against inexpensive cellular telephone
services. Consequently, the Company experienced less than expected sales. Gross
profits remained consistent though at minus 7% for both years. The effect on the
earnings per share was minimal.
During October 1999, the Company officially launched its Pay-TV services in
Morocco, under an exclusive distribution agreement with Showtime (a Viacom
company). To date, the Company has completed its construction of its head-end
site for the Pay-TV and Paging systems in Uganda. The Paging transmitters,
terminal and pager inventory are on site and the Company plans to launch this
operation by Q3 2000. The Company has also recently completed engineering and
systems design for Tanzania and Ghana and plans to launch Pay TV services there
by the end of 2000. Due to the slowdown of the Asian markets and unresolved
programming copyright issues, facilitation of the Subscription TV roll out in
Mongolia has been delayed indefinitely.
The Company has secured an agreement to distribute "Showtime" programming
package, a DTH service in Morocco. Showtime is a Viacom Company headquartered in
Dubai, UAE and uplinks 13 specialty Pay-TV channels and 25 Free to Air channels.
During the 4th quarter, the Company commenced taking subscriptions to a
private placement of 1,000,000 Units (each consisting of one $0.001 par value
common share and one $0.001 par value common share purchase warrant, exercisable
at $1.50 during the first year of the term of the warrant and at $2.00 during
the second year) raising a total of $1,000,000. As at December 31, 1999,
$250,000 worth of subscriptions had been received. Also during the YE 99, the
Company closed on its acquisition of its 80% owned OmniVision Tanzania Ltd. by
issuing to Nostrad Singapore 1,300,000 shares ($0.001 par value commons stock).
During YE 99, General and administration expenses, net of depreciation were
$1,207,000 as compared to $792,000 during the YE 98. The cause of this $415,000
increase is due to increased activity in its US head office $192,000; and
increased activity in its Singapore office, $176,000; and the opening of its
Rabat, Morocco office, $114,000.
--------------------------------------------------------------------------------
1999 1998
--------------------------------------------------------------------------------
Mongolia
General and administration $ 33,000 $ 139,000
Depreciation 78,000 73,000
US Head Office
General and administration 546,000 354,000
Depreciation -- --
Singapore Office
General and administration 192,000 16,000
Depreciation and development costs expense 179,000 88,000
Kampala Office
General and administration 244,000 211,000
Depreciation 50,000 --
Morocco Office
General and administration 186,000 72,000
-----------------------------
Total General and administration $ 1,207,000 $ 792,000
-----------------------------
Total Depreciation and deferred cost write down- $ 307,000 $ 161,000
--------------------------------------------------------------------------------
During YE 99, general and administration expenses, in its US head office
rose to $546,000, up $192,000 from 1998. The increase was due to increased
consulting fees $165,000 and increased office costs of $27,000. Singapore
general and administration costs rose $176,000 to $192,000 during YE99. As most
of Singapore's activities focused on obtaining new licenses, the application of
SOP 98-5 had material impact on Singapore's expenses during YE 99 over 1998.
Morocco's general and administration expenses rose to $186,000 from $72,000
during YE 98. The cause of this $104,000 increase is due to increase office
expenditures during the year.
26
<PAGE>
Year ended December 31, 1998 compared to the year ended December 31, 1997
During YE 98 there was a material change in sales and gross profit outlined
as follows:
--------------------------------------------------------------------------
1998 1997
--------------------------------------------------------------------------
Pager revenues - equipment sales $ 43,417 $12,430
Subscriptions 16,583 3,570
---------------------------------------------------------------------------
60,000 16,000
Cost of Sales:
Cost of Equipment 50,000 12,600
Marketing Costs 14,600 2,500
--------------------------------------------------------------------------
Total Cost of Sales 64,600 17,100
--------------------------------------------------------------------------
Gross Profit $ (4,600) $ (1,100)
--------------------------------------------------------------------------
During 1997, paging operations in Mongolia were test launched. YE 98
revenues reflect marketing for the entire year, consequently sales were much
higher in 1998. Gross profits remained consistent though at minus 7% for both
years. The effect on the earnings per share was minimal. At the end of YE 98 the
Company commenced test launching of its Pay-TV services in Morocco, under an
exclusive distribution agreement with Showtime (a Viacom company). Sales of the
Pay-TV services commenced during October 1999. To date, the Company has
completed its construction of its head-end site for the Pay-TV and Paging
systems in Uganda. The Paging transmitters, terminal and pager inventory are on
site in Kampala and the Company plans to launch this operation by the end of
2000. The Company has also recently completed engineering and systems design for
Tanzania and Ghana and plans to launch Pay TV services there by the end of year
2000. Due to the slowdown of the Asian markets and unresolved programming
copyright issues, facilitation of the Subscription TV roll out in Mongolia has
been delayed.
During the 3rd quarter 1998, the Company completed a private placement of
1,500,000 shares raising a total of $955,255 net of $19,745 in finder's fees.
Also during the YE 98, the Company closed on its acquisition of the balance
(20%) of OmniVision (U) Ltd. by issuing 500,000 shares; as well as closing on
its 80% owned OmniVision Ghana Ltd. by issuing to Nostrad Singapore 1,200,000
shares. The Company also entered into a Stock Option Plan where it is committed
to issue up to 1,500,000 shares to officers, directors, employees, and
consultants upon exercise of options.
During YE 98, General and administration expenses, net of depreciation and
foreign exchange were $792,000 as compared to $128,000 during the YE 97. The
cause of this increase is due to the opening of its Kampala head office its
Morocco office, and increased administration activities in the Company's head
office and in Singapore as follows:
--------------------------------------------------------------------------------
1998 1997
--------------------------------------------------------------------------------
Mongolia
General and administration $ 139,000 $ 105,000
Depreciation 73,000 74,000
US Head Office
General and administration 354,000 23,000
Depreciation -- --
Singapore Office
General and administration 16,000 --
Depreciation and development costs expense 88,000 132,000
Kampala Office
General and administration 211,000 --
Morocco Office
General and administration 72,000 --
----------------------------
Total General and administration $ 792,000 $ 128,000
----------------------------
Total Depreciation and deferred cost write down- $ 161,000 $ 206,000
--------------------------------------------------------------------------------
27
<PAGE>
During YE 98, general and administration expenses, in its US head office
rose to $354,000, up $332,000 from 1997. The increase was due to increased
consulting fees $162,000 and increased office costs of $70,000. Singapore
general and administration costs rose $16,000 to $16,000 during YE98, as most of
Singapore's expenses were deferred. The $211,000 spent in opening the Kampala
office and the $72,000 spent in opening the Rabat, Morocco offices are also
reflected.
As at December 31, 1998, the Company's working capital was a $777,000
deficiency, as compared to working capital of $11,000 as at December 31, 1997.
The Company owed $582,000 to certain shareholders. This amount is included in
the working capital deficiency. The Company has no other long-term liabilities.
Liquidity and Capital Resources
As at December 31, 1999, the Company's working capital was a $1,677,000
deficiency, as compared to working capital deficiency of $778,000 as at December
31, 1998. The Company owed $1,037,000 to certain shareholders and related
companies. This amount is included in the working capital deficiency. The
Company has no other long-term liabilities. . Additional working capital is
intended to be raised by way private placement and further borrowings from its
majority shareholder.
Plan of Operation
Projects
o The Morocco DTH project. The Company has commenced providing and
marketing ShowTime's DTH services in October 1999. As of December 31,
1999 OmniVision has 150 individual subscriber (currently 350), and 3
Hotel's (with combined total of 780 rooms).
o The Uganda Pay TV project. It is anticipated that the Company will be
able to roll out the Pay TV project in the last half of the year
2000. In order to accomplish this the Company will require an
additional $800,000 to cover inventory, marketing, additional
equipment and other startup costs. Subject to receiving financing, the
Company anticipates that the equipment will arrive in Kampala by the
end Q3 2000. The Company has completed the construction of the
head-end and entered into a long term lease of tower space on Kololo
Hill.
o The Uganda Pager System. The Company has acquired licenses to provide
pager service throughout Kampala. It is planned to launch the Paging
service by Q3 2000. The Paging and Pay TV project will be administered
and managed from the same location.
o The Tanzania Pay TV project. The Company has decided to commence roll
out of Pay TV in Dar es Salaam at approximately the same time as
Uganda. In order to accomplish this the Company will require an
additional $1,000,000. The Company plans to co-locate its transmission
facilities with its local partner, Central Television Network (CTN),
which operates one of the local free to air Television stations.
28
<PAGE>
Funding
To date, the Company has obtained licenses to provide PAY-TV in areas where
over 5,400,000 TV households will be passed by the Company's signals. The
Company must now commence a marketing program and sell its receivers and
subscription to the TV households. If all or parts of the target markets are to
be rolled out, the Company must raise approximately $8.0 million over the next
24 months. The Company plans to raise the funds by way of equity, debt, or other
similar financial instruments. The Company plans to seek assistance from various
investment advisors to advise the Company on the most appropriate method of
raising these funds on a best effort basis. The Company has completed a private
placement for $1,000,000 as of April 26, 2000. The Company has made no
commitments for capital expenditures. Please refer to "Part II. Item 4. Recent
Sales of Unregistered Securities"
Statements in this registration statement that may not be historical facts
and that may be forwardlooking statements are subject to a variety of risks and
uncertainties. There are a number of important factors that could cause actual
results to differ materially from those expressed in any forward-looking
statements made by the Company. These factors include, but are not limited to:
(i) the nature of the Pay TV markets, specifically obtaining suitable
programming at a reasonable cost, (ii) the ability of the Company to raise
capital for projects within the context of overall telecommunication capital
market dynamics, (iii) the establishment of a sustainable subscriber base to the
point of economic viability, (iv) the viability of Pay TV projects based on
imperfect demographic analysis, (v) regulatory changes impacting on the nature,
scope and content of projects and operations, throughout the Company's areas of
operations, (vi) other factors detailed from time to time in the Company's
filings with the United States Securities and Exchange Commission, and (vii) or
any other factors. In order to mitigate the political risk in the Company's
target markets, the Company has arranged for political risk insurance provided
through Lloyd's of London, based on a variable valuation of the operating
companies in the nations concerned.
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. It is not
possible to be certain that all aspect of the Year 2000 Issue affecting the
Company, including those related to the efforts of customers, suppliers, or
other third parties will be fully resolved. To date the Company has not incurred
any Year 2000 Issues.
Item 3. Description of Property
Vancouver
The Company maintains an office at Suite 420 -- 171 West Esplanade, North
Vancouver, BC, Canada. The office lease is month to month term at a cost of CND
2,200 per month. Based on the current market conditions for office space the
Company is confident that it could secure other offices under similar terms and
conditions should its tenancy be terminated. It is equipped with the necessary
office telecommunications and equipment to provide the day to day management of
the Company's operations.
Singapore
The Company maintains an office at #14-20/03 Forum, 583 Orchard Road, Singapore
for a period of three (3) years commencing from 25 May 1998 to 24 April 2001
with an option to renew for a further term of three (3)
29
<PAGE>
years at a cost of $7,500 per month. It is equipped with the necessary office
telecommunications and equipment to provide the day to day management of the
Company's operations in Asia.
Ulanbatar Mongolia
HomeVision, maintains an operational office and transmission facility at the
Mongolia Broadcasting Station in Ulannbatar. The term of the lease is for 3
years commencing January 1 1997 currently the offices are on a month to month
basis at a cost of approximately $900 per month. Based on the current market
conditions for office space in Ulannbatar.Ulaanaabatar the Company is confident
that it could secure other offices under similar terms and conditions should its
tenancy be terminated. The offices are equipped with computers, and
telecommunication infrastructure. The transmission facility includes 2 DX and I
Eagle 250Watt paging transmitters, a Zetron 2000 and a 640A paging terminal,
transmission antennas and pager inventory.
Kampala, Uganda
OVU maintains an operational office at Plot 5 Clemente Road, Nakasero, Kampala,
Uganda. The term of the lease is for a period of five years from September 7,
1998 with one five-year option at a cost of $900 per month. The offices are
equipped with computers, telecommunication infrastructure, a Zetron 2000 paging
terminal, pager inventory, and radio link transmitters to the Company's Kololo
Hill transmitter facility. The transmission facility on Kololo Hill includes, 1
DX 250 Watt paging transmitter and 2 50 Watt ComWave MMDS transmitters,
satellite receiving equipment, power conditioning and electrical distribution
infrastructure.
Rabat, Morocco
OVM maintains an office a repair and distribution center at Villa Yasmina 31
Ave. Tarik ibn Ziad, Rabat Morocco. . The offices are sub-leased from Afro
American Services on a month to month basis at a cost of $1,000 per month. Based
on the current market conditions for office space in Rabat the Company is
confident that it could secure other offices under similar terms and conditions
should its tenancy be terminated. The offices are equipped with computers,
telecommunication infrastructure, VSAT receive only satellite dishes and
satellite receiver equipment. The offices also include demonstration facilities
for showing satellite television programs that the Company distributes. The
repair and distribution center includes test installation, and electronic repair
equipment, and Integrated Receiver Decoder, satellite dish and coaxial cable
inventory.
Item 4. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of March 31, 2000, (i) each
person who is known by the Company to own beneficially more than five percent
(5%) of the Company's outstanding Common Stock; (ii) each of the Company's
directors and officers; and (iii) all directors and officers of the Company as a
group.
<TABLE>
<CAPTION>
===============================================================================================
Shares of Percentage of
Common issued and
Stock outstanding
Name and address Beneficially shares held
of Beneficial Owner Owned
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Nostrad Telecommunications Pte. Ltd.
14-02-03 Forum 583 Orchard Road, Singapore 238884 5,303,000 48%
===============================================================================================
</TABLE>
30
<PAGE>
<TABLE>
=====================================================================================================
<S> <C> <C>
Siong Seng Teo
23 Queen Astrid Park, Singapore 266828 2,144,900(2) 19%
Kam Lo Lim
24 Cornwall Gardens, Singapore 269649 5,903,000(3) 52%
Cher Lim
437 Southborough Dr., West Vancouver, BC Canada V7S 1M3 100,000 1%
Chris Farnworth
901- 1188 Quebec Street, Vancouver, BC, Canada V6A 4B3 782,473(4) 7%
David Alexander
2555 Keats Road, North Vancouver, BC, Canada, V7H 2M7 217,000(5) 2%
Directors and Officers as a group (6 persons) 7,026,173 61%
=====================================================================================================
</TABLE>
(1) Nostrad Telecommunications Pte. Ltd. (previously defined as Nostrad
Singapore) is a privately owned Singapore company the share ownership of which
is as follows Kam Lo (Lawrence) Lim, a director and President of the Company who
owns 60%; Siong Seng Teo a director of the Company owns 30%; and, Chris
Farnworth, Chief Operating Officer and director of the Company owns 10%.
(2) Includes 1,590,900 shares of the shares owned of record by Nostrad Singapore
and reflecting Mr. Teo's proportionate interest in Nostrad Singapore, but does
not include 91,667 owned by Teng Seng Teo (Mr. Teo's brother) as to which Mr.
Teo disclaims any beneficial ownership.
(3) Includes the 5,303,000 shares owned of record and beneficially by Nostrad
Singapore but does not include 93,333 shares owned of record by Lim Yok Blen
(Mr. Lim's father), 75,000 shares owned by Kam Soe Lim (Mr. Lim's brother),
91,667 owned by Siew Lee Lim (Mr. Lim's sister) and 98,334 shares owned by Tang
Wan Tien (Mr. Lim's mother) as to which shares Mr. Lim disclaims any beneficial
ownership. Also includes 200,000 hares underlying an option granted to Mr. Lim
by the Company. See "Item 6. Executive Compensation."
(4) Includes 530,000 shares of the shares owned by Nostrad Singapore and
reflecting Mr. Farnworth's proportionate interest in Nostrad Singapore, 18,000
shares owned of record by Mr. Farnworth's wife Myrna Farnworth, and 27,000
shares owned by GECO Holding Ltd, a British Columbia corporation, wholly owned
by Mr. Famworth.
Also includes 150,000 shares underlying an option granted to Mr. Farnworth by
the Company. See "Item 6. Executive Compensation."
(5) Owned of record by 482130 BC Ltd, a British Columbia corporation wholly
owned by David Alexander. Also includes 150,000 shares underlying an option
granted to Mr. Alexander by the Company. See "Item 6. Executive Compensation."
31
<PAGE>
Item 5. Directors, Executive Officers, Promoters and Control Persons
The following persons are the directors and executive officers of the Company:
<TABLE>
<CAPTION>
======================================================================================================
Name Age Position Held Term (Start
--- date)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dr. John Tydeman 53 Chairman of the Board and Director July 1, 1998
Chairman as of
September 27,
1999
------------------------------------------------------------------------------------------------------
Lawrence Lim 41 President, Chief Executive Officer, and Director September 30,
1997
------------------------------------------------------------------------------------------------------
Chris Farmworth 49 Chief Operating Officer, February 1,
1998.
Director May 27, 1998
------------------------------------------------------------------------------------------------------
David Alexander 48 Chief Financial Officer March 1, 1998
------------------------------------------------------------------------------------------------------
Siong Seng Teo 52 Director September 30,
1997
------------------------------------------------------------------------------------------------------
Cher Lim 28 Director September 30,
1997
------------------------------------------------------------------------------------------------------
</TABLE>
All directors and officers of the Company are elected annually to serve for
one year or until their successors are duly elected and qualified.
The Company currently has four full time personnel and is supported to the
extent required by outside experts and consultants. Additional staff will be
recruited as required to support the Company's growth and development. All of
the full time personnel are contracted consultants. Key personnel also have
equity positions and have executed confidentiality and non-competition
agreements. Compensation levels are and will be commensurate with industry
standards with incentive programs extended to the key personnel. Additionally
OVM has approximately 15 full time employees, OVU has approximately 10 full time
employees and HomeVision employs approximately 10 full time staff.
Directors and Officers
DR. JOHN TYDEMAN
Dr. John Tydeman, Chairman of the Board and Director, is the Programming and
Strategic Liaison for the Company. A summary of Dr. Tydeman's employment history
over the last five years is as follows: Dr. Tydeman is a self-employed
consultant to the telecommunications industry specializing in designing, fixing
and implementing pay television and satellite ventures. In June1995 - June1996,
Dr. Tydeman was Chief Executive Officer for the start-up of ATL (the News
Corporation and Subhash Chandra joint venture ZEE TV in India, reporting to
Rupert Murdoch). In June 1996- June 1997, Dr. Tydeman was the Chief Executive
Officer for the start up of ShowTime (a Kipco and Viacom joint venture). June
1997- Present Dr. Tydeman currently consults to ATL; ShowTime; the Dolphin
Group, a privately held Middle Eastern, multibusiness enterprise; and the
Shinawatra Group of Thailand.
32
<PAGE>
Dr. Tydeman holds a Ph.D. in systems engineering, an honors degree in
statistics, as well as a degree in economics. Dr. Tydeman's other interests do
not conflict with the business of The Company. Dr. Tydeman is available to the
Company on as required basis and devotes 30-40% of his time to the business of
the Company.
LAWRENCE LIM
Mr. Lawrence Lim, Director, President and Chief Executive Officer, is a
co-founder of the Company. A summary of Mr. Lim's employment history over the
last five years is as follows: Mr. Lim is the principal shareholder and Managing
Director of Nostrad International Pte. Ltd. ("NI"), a holding company with
interests in trading, distribution, manufacturing, and telecommunications
through sixteen subsidiary companies located in seven countries in Asia. Mr. Lim
has been working for NI continuously for the last 8 years. Mr. Lim holds a
Bachelor's degree from the University of British Columbia as well as a Master of
Business Administration degree from the National University of Singapore. Mr.
Lim's other interests do not conflict with the business of the Company. Mr. Lim
devotes 60-70% of his time to the business of the Company.
Mr. Lim's responsibilities include directing the overall management and business
development of the Company, as well as serving on the Board of Directors.
CHRISTOPHER FARNWORTH
Mr. Christopher Farnworth, Director and Chief Operating Officer, is a co-founder
of the Company. Mr. Farnworth has been employed by the Company and Nostrad Media
for the past five years. Mr. Farnworth has supervised the Company's technology
selection, identified the system vendors, and heads the long-term strategic
planning for the Company. Mr. Farnworth commenced his employment with the
Company and its predecessor during 1994.
Mr. Farnworth is responsible for the day-to-day operations of the Company
including international business market development and marketing, as well as
sitting on the Board of Directors.
SIONG SENG TEO
Siong Seng Teo is a director and a co-founder of the Company. A summary of Mr.
Teo's employment history over the last five years is as follows: Mr. Teo is a
shareholder and the Managing Director of Pacific International Lines Pte. Ltd.
("PIL"), a privately held shipping and transportation group in Southeast Asia.
Mr. Teo is also the Chief Executive Officer of Singamas Container Holdings
Limited, a container manufacturing companythe Company listed on the Hong Kong
Stock Exchange. Mr. Teo has been working continuously for PIL and Singmas for
the last 15 years. Mr. Teo is a member and the chairman of various advisory
committees of the Singapore Trade Development Board and serves as a council
member of the Singapore Chinese Chamber of Commerce and Industry. Mr. Teo holds
a First Class Honors degree in Naval Architecture and Ocean Engineering from the
University of Glasgow. Mr. Teo's other interests do not conflict with the
business of the Company. Mr. Teo is available to the Company on as required
basis and devotes 10-15% of his time to the business of the Company.
Mr. Teo's responsibilities include serving as a member of the Board of Directors
and assisting in formulating the long term strategic planning of the Company
CHER LIM
Cher Lim serves as a member of the Board of Directors. A summary of Ms. Lim's
employment history over the last five years is as follows: Ms. Lim worked for
Eurasia Damac, a major Asian diamond broker, headquartered in Singapore until
June 1996. From July 1996 to date, Ms. Lim has not been working. Ms. Lim's
otherinterests do not conflict with the business of the Company. Ms. Lim is
available to the Company on as required basis and devotes 10% of her time to the
business of the Company.
33
<PAGE>
DAVID ALEXANDER
David Alexander, CA, is the Chief Financial Officer and Controller for the
Company. A summary of Mr. Alexander's employment history over the last five
years is as follows: Mr. Alexander is a self employed consultant. Since
September 30, 1994, Mr. Alexander has served as chief financial officer of
Laminco Resources Inc., a resource exploration company. Since October 13, 1996,
Mr. Alexander has served as a director for Pinewood Resources Inc., a resource
exploration company. Mr. Alexander became CFO of the Company on March 1 1998.
Mr. Alexander has a degree in commerce from UBC and is an active member of the
Institute of Chartered Accountants of British Columbia. Mr. Alexander's other
interests do not conflict with the business of the Company. Mr. Alexander spends
approximately 95% of his time on the business of the Company
Mr. Alexander is responsible for providing the administrative support to
operations, as well as regulatory and shareholder reporting and liaison.
Key Employees
MICHAEL DEMAN
Mr. DeMan is the Company's Regional Manager. Mr. DeMan is based in the Company's
Kampala, Uganda office. A summary of Mr. DeMan's employment history over the
last five years is as follows: From May1998 to the present Mr. DeMan has worked
for the Company and has been responsible for the operations management and
subscriber development for the Company's telecommunications operations in
Africa. From 1991 to April 1998 he was involved in the design, construction and
operational management of a number of MMDS and SMATV networks, including
Cabletel and CableVision in Caracas Venezuela.
ANTON M. VAN WOUW
Mr. Anton M. van Wouw is an independent consultant who is responsible for the
engineering and systems integration for the Company. Mr. van Wouw's employment
history over the last five years is as follows: Mr. van Wouw's major clients
over the last ten years are Rogers Cable, Shaw Cable, BC Telephony, Multi-Vision
(Bolivia), and Can Bras (Brazil). Mr. VanWouw acts, as a consultant for a number
of companies with similar operations although in geographic areas that are
unrelated to the Company's business, his activities are related only to
technical and engineering duties and posses no conflict of interest.
Mr. van Wouw is responsible for system design, engineering, and integration.
General
During the past five years no director, person nominated to become a
director, executive officer, promoter or control person of the Company:
(1) was the subject any bankruptcy petition filed by or against any
business of which such person was a general partner or executive officer either
at the time of the bankruptcy or within two years prior to that time;
34
<PAGE>
(2) was convicted in a criminal proceeding or while subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);
(3) was subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; or
(4) was found by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law.
Item 6. Executive Compensation
The following table sets forth information concerning the compensation of
the named executive officers from September 30, 1997.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Awards Payments
Other Annual Securities All
Year Compen- Restricted Under- other
or sation Stock Lying LTIP Compen-
Name And Period Salary Bonuses ($) Award(s) Options/ Payouts sation
Principal Position Ended ($) ($) ($) SARs (1) ($) ($)
------------------ ----- ------ ------- ----------- ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lawrence Lim, President & CEO 12/31/97 --
12/31/98 80,000 200,000
12/31/99 96,000
David Alexanader, CFO 12/31/97
12/31/98 60,000 150,000
12/31/99 72,000
Chris Famworth, COO 12/31/97
12/31/98 60,000 150,000
12/31/99 72,000
TOTALS 12/31/97
12/31/98 200,000 500,000
12/31/99 240,000
</TABLE>
(1) The options are exercisable at $0.65 per share and expire in September
28, 2000.
Item 7. Certain Relationships and Related Transactions
The President of the Company, Lawence Lim, together with Vice President, Chris
Farnworth, and Siong Seng Teo, own a Singapore Company, Nostrad
Telecommunications Pte. Ltd. ("Nostrad Singapore"). Nostrad Singapore has
entered into a share purchase agreement with the Company whereby Nostrad
Singapore has had the following $0.001 par value common shares issued to it for
providing pay TV licenses:
1. Mongolia MMDS licenses 2,000,000 shares September 30, 1997
2. Uganda MMDS licenses 1,700,000 shares September 30, 1997
3. Ghana MMDS licenses 1,200,000 shares April 20, 1998
4. Tanzania MMDS licenses 1,200,000 shares September 15, 1999
Nostrad Singapore also received pursuant to the September 30, 1997 vend-in a
promissory note for $300,000 from the Company. Nostrad Singapore will receive
an additional 1,300,000 $0.001 par value common shares, as a Morocco Pay TV
license has been vended to the Company.
On February 1, 1998, the Company entered into five year Confidential Services
Agreements as follows:
1. Mr. Lawrence Lim at $8,000 per month.
35
<PAGE>
2. Mr. Christopher Farnworth at $6,000 per month through his wholly owned
holding company Geco Holdings Ltd.
3. Mr. David Alexander at $6,000 per month through his wholly owned holding
company 482130 BC Ltd.
Item 8. Description of Securities
The Company is authorized to issue 25,000,000 shares of the Common Stock of
which 11,100,000 shares were issued and outstanding as of December 31, 1999.
Each outstanding share of the Common Stock entitles the holder to one vote,
either in person or by proxy, on all matters that may be voted upon by the
owners thereof at meetings of the shareholders.
The holders of the Common Stock (i) have equal rights to dividends from
funds legally available therefore, when, and if, declared by the Board of
Directors of the Company; (ii) are entitled to share ratably in all of the
assets of the Company available for distribution to the holders of the Common
Stock upon liquidation, dissolution or winding up of the affairs of the Company;
(iii) do not have preemptive, subscription or conversion rights; and (iv) are
entitled to one non-cumulative vote per share on all matters on which
shareholders may vote at all meetings of shareholders.
The holders of the Common Stock of the Company do not have cumulative
voting rights, which means that the holders of more than 50% of such outstanding
shares, voting for the election of directors, can elect all directors of the
Company if they so choose and, in such event, the holders of the remaining
shares will not be able to elect any of the Company's directors.
36
<PAGE>
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters
The Common Stock has been quoted on the Pink Sheets since February 1999
under the symbol NSTC. The following table sets forth high and low bid prices
for the Common Stock for the calendar quarters indicated as reported by J.
Alexander Securities Inc. These prices represent quotations between dealers
without adjustment for retail markup, markdown or commission and may not
represent actual transactions.
High Low Volume
Feb. Through March 31, 1999 $ 1.50 $ 0.875 16,700
April Through June 30, 1999 1.30 .875 58,900
July Through September 30,1999 1.25 .875 17,000
October through December 31, 1999 1.00 .875 --
On June 14, 2000 the closing price was $1.375.
As at December 31, 1999 the Company had approximately 230 registered
holders of its common stock.
Item 2. Legal Proceedings
The Company is not a party to any proceeding or litigation and has no
knowledge of any threatened or pending proceeding or litigation against the
Company.
Item 3. Changes in and Disagreements with Accountants
There have been no changes in or disagreements with the Company's
accountants.
Item 4. Recent Sales of Unregistered Securities
1 Pursuant to the Acquisition and Restructuring, the Company issued 3,700,000
shares of the Company's common stock, par value $0.001, to Nostrad
Telecommunications Pte. Ltd. These shares were issued February 25, 1998 in
reliance on Section 4(2) of the Securities Act.
2 The Company commenced a private offering of up to 1,500,000 common shares,
par value $0.001, at a price of $0.65 per share, on November 27, 1997. The
Offering was concluded on September 15, 1998 to 17 non-US persons in
reliance of Regulation S of the Securities Act and 3 accredited investors
in reliance of Regulation D and/or Section 4(2)of the Securities Act.
3 The Company issued 500,000 shares of the Company's common stock, par value
$0.001, in reliance on Section 4 (2) of the Securities Act to Orbritronics
Inc. on September 15, 1998 in exchange for an additional 20% interest in
OmniVision Uganda Ltd.
4 The Company issued 1,200,000 shares of the Company's common stock, par
value $0.001 on September 15, 1998 to Nostrad Telecommunications Pte. Ltd.
under a share purchase agreement for obtaining pay TV licenses in Ghana.
These shares were issued in reliance on Section 4 (2) of the Securities
Act.
5 The Company issued 1,300,000 shares of the Company's common stock, par
value $0.001, on September 15, 1999 to Nostrad Telecommunications Pte. Ltd.
These shares were issued, pursuant to a share purchase agreement in
exchange for pay TV licenses in Tanzania, in reliance on Section 4(2) of
the Securities Act.
6 The Company has offered, commencing October 15, 1999, to either accredited
investors pursuant to Regulation D and/or Section 4(2) of the Securities
Act, or to non-US individuals pursuant to Regulation S of the Securities
Act, the opportunity to invest in up to 1,000,000 units, at $1.00 per unit,
each unit consisting of one share of common stock and one common stock
purchase warrant. Each common stock purchase warrant entitles the holder to
acquire an additional share of common stock at $1.50 if exercised within
the first year, and $2.00 if exercised within the second year. The Company
issued 1,000,000 shares of the Company's common stock, par value $0.001 on
April 26, 2000 to 13 non-US persons in reliance on Regulation S of the
Securities Act and to 3 US accredited persons in reliance on Regulation D
and/or Section 4(2) of the Securities Act.
The Company believes that all of the issuances of the Common Stock were
exempt from the registration requirements of the Securities Act by virtue of
Section 4(2) thereof, or S under the Securities Act.
38
<PAGE>
Item 5. Indemnification of Directors and Officers
Except as hereinafter set forth there is no charter provision, bylaw,
contract, arrangement or statute under which any officer or director of the
Company is insured or indemnified in any manner against any liability which he
may incur in his capacity as such.
Article VIII of the Company's By-laws provides in relevant part, that:
"...the corporation shall indemnify any director, officer, employee or
agent of the corporation, or any person serving in any such capacity of any
other entity or enterprise at the request of the corporation, against any and
all legal expenses (including attorney's fees), claims and/or liabilities
arising out of any action, suit or proceeding, except an action by or in the
right of the corporation."
Expenses incurred in defending any action, suit or proceeding, may be paid
by the Company in advance of the final disposition, when authorized by the Board
of Directors. The Company does not have nor does it anticipating obtaining any
directors' and officers' liability insurance.
The Securities and Exchange Commission's Policy on Indemnification.
Insofar as indemnification for liabilities arising under the Act may be
permitted to any of the Company's directors, officers and controlling persons
pursuant to any provisions contained in the Company's certificate of
incorporation, by-laws or otherwise, the Company has been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person in connection with the securities being registered, the Company will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
indemnification by it is against public policy as expressed in the Act and will
be governed by final adjudication of such issue.
38
<PAGE>
PART F/S
Item 13. Financial Statements
NOSTRAD TELECOMMUNICATIONS INC.
-------------------------------
INDEX
A. Audited Page Number
Audited Report Dated April 29, 2000 40
Consolidated Balance Sheets
December 31, 1999 & 1998 41
Consolidated Statements of Operations
Years ended December 31, 1999, 1998 & 1997 42
Consolidated Statement of Shareholders Equity
For the year ended December 31, 1999 43
Consolidated Statement of Cash Flows
Years ended December 31, 1999, 1998 & 1997 44
Notes to Consolidated Financial Statements 45
39
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Nostrad Telecommunications, Inc.
We have audited the accompanying consolidated balance sheet of Nostrad
Telecommunications, Inc. and subsidiaries (the "Company") as of December 31,
1999, and 1998, and the related consolidated statements of loss, deficit and
cash flows for each of the two years then ended December 31, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion of these consolidated
statements based on our audit.
We conducted our 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 consolidated financial statements are free of
material misstatement. An audit includes examining, on test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
1999 and 1998, and the results of its operations and its cash flows for each of
the two years ending December 31, 1999, and 1998, in conformity with generally
accepted accounting principles.
The financial statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 1 to the financial statements,
the Company has suffered significant recurring net losses, negative operating
cash flow, and has uncertainty relative to the successful exploitation of its
assets which raise substantial doubt about its ability to continue as a going
concern. Management's plans regarding those matters are also described in Note 1
to the financial statements. The financial statements do not include any
adjustments that might arise from these uncertainties.
/s/ Jay Shapiro
--------------------------
JAY J. SHAPIRO, C.P.A.
A Professional Corporation
Encino, California
April 29, 2000
<PAGE>
Consolidated Financial Statements
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
Assets December 31, December 31,
1999 1998
------------ ----------
<S> <C> <C>
Current Assets
Cash $ 8,251 $ 74,367
Trade receivables 139,023 34,222
Due from related parties -- --
Inventory 63,948 108,114
Deposits & prepaid expenses 38,888 32,120
---------------------------------------------------------------------------------------------------------------
250,110 248,823
Licenses and Development Costs (note 3)
Licenses, net 523,768 275,140
Deferred development costs 25,057 386,447
---------------------------------------------------------------------------------------------------------------
548,825 661,587
Fixed Assets (note 4)
Fixed Assets 564,174 463,281
less Accumulated Depreciation (274,021) (144,730)
---------------------------------------------------------------------------------------------------------------
290,154 318,551
---------------------------------------------------------------------------------------------------------------
$ 1,089,088 $1,228,961
===============================================================================================================
Liabilities
Current Liabilities
Accounts payable (note 7) $ 1,019,836 $ 435,074
Shareholder loans (note 7) 600,800 581,849
Loans - related parties 405,503 8,867
---------------------------------------------------------------------------------------------------------------
2,026,139 1,025,790
---------------------------------------------------------------------------------------------------------------
Commitments (notes 5, 7, and 8)
Shareholders' Equity
(note 5)
Authorized
25,000,000 common shares, par value $0.001
Issued & outstanding - 11,200,000 common shares (9,900,000
1998) 11,200 9,900
Additional Paid-in Capital 1,618,395 1,489,695
Share subscriptions received 250,000 --
Accumulated Deficit (2,816,646) (1,296,424)
---------------------------------------------------------------------------------------------------------------
(937,051) 203,171
---------------------------------------------------------------------------------------------------------------
$ 1,089,088 $ 1,228,961
===============================================================================================================
</TABLE>
The notes to consolidated financial statements are an integral part thereof
41
<PAGE>
Consolidated Financial Statements
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended
December 30, December 30, December 30,
1999 1998 1997
<S> <C> <C> <C>
Revenues
Sales $ 30,560 $ 5,528 $ 12,431
Service Revenues 75,388 16,709 3,566
---------------------------------------------------------------------------------------------------------
105,948 60,126 15,997
Cost of Sales
Cost of Goods Sold 13,714 50,534 14,655
Cost of Services 79,046 -- --
Direct Marketing 10,898 13,931 2,458
---------------------------------------------------------------------------------------------------------
107,248 64,465 17,113
---------------------------------------------------------------------------------------------------------
Gross Profit (1,300) (4,339) (1,116)
Expenses
Professional costs 374,508 279,047 16,528
Office and administration 431,211 270,282 47,318
Travel 114,886 127,195 21,680
Depreciation & amortization 196,278 90,308 73,932
Salary and benefits 192,526 59,376 39,652
Communication costs 71,728 37,244 2,631
Investor relations 15,791 18,797 --
---------------------------------------------------------------------------------------------------------
1,397,027 882,249 201,741
---------------------------------------------------------------------------------------------------------
Operating Loss (1,398,327) (886,588) (202,857)
Other
Interest expense (net) (1,008) -- --
Deferred Development Cost write down (110,695) (71,307) (132,000)
---------------------------------------------------------------------------------------------------------
Net loss (1,510,030) (957,895) (334,857)
Foreign currency translation (10,192) (11,929) 8,257
---------------------------------------------------------------------------------------------------------
Net Comprehensive Income (loss) ($1,520,222) ($ 969,824) ($ 326,600)
=========================================================================================================
Average Number of outstanding 10,258,356 7,638,082 3,000,000
shares (note 5)
---------------------------------------------------------------------------------------------------------
Net (loss) per share (basic and fully diluted) $ (0.14) $ (0.13) $ (0.11)
=========================================================================================================
</TABLE>
The notes to consolidated financial statements are an integral part thereof
42
<PAGE>
Consolidated Financial Statements
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
December 31, 1999
Net
Subscribed Common Comprehensive
Stock Additional Loss/
--------------------- ---------------------- Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit Total
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Common stock split
after
January 1, 1997 -- $ -- 3,000,000 $ 3,000 $ -- $ -- $ 3,000
Share
Subscriptions 461,538 300,000 -- -- -- -- 300,000
Reverse Acquisition
by Nostrad -- -- 3,700,000 3,700 367,640 -- 371,340
Net Loss -- -- -- -- -- (334,857) (334,857)
Foreign Currency
Translation -- -- -- -- -- 8,257 8,257
----------------------------------------------------------------------------------------------------------------------------
Balance December 31,
1997
461,538 300,000 6,700,000 6,700 367,640 (326,600) 347,740
----------------------------------------------------------------------------------------------------------------------------
Private Placement,
net of Subcriptions (461,538) (300,000) 1,500,000 1,500 973,500 -- 675,000
Finders Fees -- -- -- -- (19,745) -- (19,745)
Shares issued for
Licenses -- -- 1,700,000 1,700 168,300 -- 170,000
Net loss - 1998 -- -- -- -- -- (957,895) (957,895)
----------------------------------------------------------------------------------------------------------------------------
Foreign Currency
Translation -- -- -- -- -- (11,929) (11,929)
----------------------------------------------------------------------------------------------------------------------------
Net Comprehensive Loss (969,824)
----------------------------------------------------------------------------------------------------------------------------
Balance
December 31, 1998 -- -- 9,900,000 9,900 1,489,695 (1,292,752) 203,171
----------------------------------------------------------------------------------------------------------------------------
Subscriptions Received -- 250,000 -- -- -- -- 250,000
Shares issued for
Licenses -- -- 1,300,000 1,300 128,700 -- 130,000
Net loss - 1999 -- -- -- -- -- (1,510,031) (1,510,031)
Foreign Currency
Translation -- -- -- -- -- (10,192) (10,192)
Net Comprehensive Loss (1,520,222)
----------------------------------------------------------------------------------------------------------------------------
Balance
December 31, 1999 -- $ 250,000 11,200,000 $11,200 $1,618,395 $(2,816,646) ($937,051)
============================================================================================================================
</TABLE>
The notes to the consolidated financial statements are an integral part thereof
43
<PAGE>
Consolidated Financial Statements
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended
December 30, December 30, December 30,
1999 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net comprehensive income (loss) for year $ (1520,222) $ (957,895) $(334,857)
Add expense items not involving cash
Development cost write down 110,695 71,307 132,000
Amortization of licenses 141,896 -- --
Depreciation 54,482 90,308 73,932
Add changes in non-cash working capital items:
Accounts receivable (104,801) (8,532) (25,690)
Inventory 44,166 (100,335) (7,779)
Deposits & prepaid expenses (6,768) 8,156 (40,277)
Accounts Payable 981,400 366,455 73,814
----------------------------------------------------------------------------------------------------------
Net funds (used) by operating activities (299,155) (530,536) (128,857)
INVESTING ACTIVITIES
Licenses & deferred development costs 64,982 (300,720) (413,526)
Fixed asset purchases (100,893) (259,432) (204,007)
----------------------------------------------------------------------------------------------------------
Net funds (used) by investing activities (35,911) (560,152) (617,533)
FINANCING ACTIVITIES
Shares issued for cash, net -- 955,255 --
Shares issued in reverse acquisition -- -- 374,340
Shares subscriptions 250,000 (300,000) 300,000
Shareholder loans 18,951 507,413 74,437
----------------------------------------------------------------------------------------------------------
Net funds provided by financing activities 268,951 1,162,668 748,777
----------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH (66,115) 71,979 2,387
Cash at beginning of year 74,366 2,387 --
----------------------------------------------------------------------------------------------------------
CASH AT END OF YEAR $ 8,251 $ 74,366 $ 2,387
==========================================================================================================
The notes to consolidated financial statements are an integral part thereof
Supplemental information:
Interest paid $ 1,008 $ -- $ --
--------- ------------ ---------
Taxes paid $ -- $ -- $ --
--------- ------------ ---------
Shares issued for licenses $ 130,000 $ 170,000 $ --
--------- ------------ ---------
</TABLE>
44
<PAGE>
Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
December 31, 1999
1. ORGANIZATION AND BASIS OF PRESENTATION
Nostrad Telecommunications Inc. ("Nostrad" or the "Company") was incorporated in
Nevada on September 24, 1993. On September 29, 1997, the Company's name was
changed from Cave Productions, Inc. to Nostrad. Effective September 30, 1997,
Nostrad Telecommunications Pte. Ltd., a private Singapore company ("Nostrad
Singapore") sold its wholly owned subsidiary companies Nostrad Media Pte. Ltd.,
a Singapore company which holds the Company's interests in Asian licenses; and
OmniVision Africa Ltd., a British Virgin Island company, which holds the
Company's interests in African licenses; (collectively as "Nostrad
Subsidiaries") to the Company for 3,700,000 common shares and $300,000 cash or
kind. The shares issued approximately 94.6% of the then issued and outstanding
common stock. The transaction represented a capital transaction and is accounted
for as a reverse acquisition, except that there is no allocation of purchase
price and no goodwill or other intangible recorded. There is no effect on the
historic financial statements of the Nostrad Subsidiaries.
The Company is focused on developing, acquiring and managing media and
telecommunication operations in emerging markets of Asia, Africa and at a later
stage, Latin America. To-date, Nostrad has obtained Subscription Television
licenses in Morocco, Uganda, Ghana and Tanzania. The DTH Subscription TV
services in Morocco have been implemented with a recently commenced soft-launch
in February 1999. Full launch of ShowTime (a subsidiary of Viacom) and ART
programming is expected to be in April 1999. In addition, Nostrad has obtained
nation-wide paging licenses in Uganda and is currently implementing alphanumeric
and voice paging services in Kampala. Apart from the foregoing, the Company is
also actively pursuing licenses for Subscription TV, Internet Service Provision,
Mobile and Fixed Wireless Telephony, and Paging Services in other countries in
Asia and the African sub-continent
A. Morocco Operations. A 65% owned company is licensed to distribute Satellite
DTH Subscription TV programming. The subsidiary has entered into an
agreement with Showtime, a Viacom company, to distribute Showtime's direct
to home (DTH) programming package throughout Morocco. Applications have
been made for operating license and frequencies to provide up to
60-channels of MMDS Subcription TV, Internet Services and Paging
operations.
B. Tanzania MMDS Pay TV Operations. A 80% owned company holds exclusive
frequencies and licenses to operate a seven-channel MMDS Subscription TV
system in Tanzania. Applications have been approved for additional
frequencies to provide up to 15 channels of programming.
C. Ghana MMDS Pay TV Operations. An 80% owned subsidiary holds exclusive
frequencies and licenses to operate a six-channel MMDS Subcription TV
system in Ghana. Applications have been made for additional frequencies to
provide up to 18 channels of programming.
D. Uganda MMDS Pay TV Operations. A 100% owned subsidiary holds exclusive
frequencies and licenses to operate a 19-channel MMDS system in Uganda.
Applications have been made for an additional 8 frequencies.
E. Uganda Paging Operations. A 100% owned subsidiary holds licenses to operate
5 paging channels. The system is currently being implemented.
F. Mongolia Paging Operations. An 80% owned subsidiary holds licenses to
operate 5 paging channels. The system currently has 2 channels in operation
capable of providing service to 4,000 subscribers.
45
<PAGE>
Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
December 31, 1999
1. ORGANIZATION AND BASIS OF PRESENTATION (continued)
The summary chart of the Company's holdings are as follows:
-----------------------------------
| Nostrad Telecommunications Inc. |
-----------------------------------
|
|----------------------------------------------|
| |
-------------------------- ---------------------------
| OmniVision Africa Ltd. | | Nostrad Media Pte. Ltd. |
-------------------------- ---------------------------
| |
|----------------|-----------|-----------| |
| | | | |
------------ ------------ ------------ ------------ ------------
|OmniVision| |OmniVision| |OmniVision| |OmniVision| | Mongolia |
| Uganda | | Tanzania | | Ghana | | Maroc | |HomeVision|
------------ ------------ ------------ ------------ ------------
As of September 30, 1997, the Company agreed to issue 2,000,000 common shares
and pay $150,000 for 100 per cent of the issued and outstanding common shares of
Nostrad Media Pte. Ltd., and agreed to issue 1,700,000 common shares and to pay
$150,000 for 100 per cent of the issued and outstanding common shares of
OmniVision Africa Ltd. To date 1,200,000 performance shares have been issued for
obtaining the Ghana MMDS license, and 1,300,000 shares have been issued for
obtaining the Tanzania MMDS license. 1,300,000 shares have been reserved for
issuance for obtaining Pay TV licenses in Morocco.
The Company is in the process of establishing an international telecommunication
operation, which includes providing wireless cable, paging, telephone and
internet services. The recoverability of the amounts shown for licenses and
deferred development costs is dependent upon the ability of the Company to
obtain necessary financing to complete the infrastructure required to provide
these services, and to operate on a profitable basis. The Company has completed
a common stock offering of 1,500,000 common shares and has received $955,255 in
net proceeds. While these financial statements are prepared on a going concern
basis, the Company, during its startup phase, has experienced a substantial
operating deficit since inception of $2,707,616. Management has been dependent
on financing from related parties, which have invested approximately $1,000,000
as of December 31, 1999. There is no assurance that related parties will
continue such funding or that the Company can satisfy $2,026,139 in obligations
from the successful exploitation of its assets. These financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
46
<PAGE>
Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
December 31, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and of acquired subsidiary companies: Nostrad Media Pte. Ltd. (100%
owned), Mongolia Home Vision Corporation HH (80% owned by Nostrad Media Pte.
Ltd.), OmniVision Africa Ltd. (100% owned), OmniVision (U) Ltd. (100% owned by
OmniVision Africa Ltd.), OmniVision (Ghana) Ltd. (80% owned by OmniVision Africa
Ltd.), OmniVision (Tanzania) Ltd. (80% owned by OmniVision Africa Ltd. and
OmniVision (Maroc) Ltd. (65% owned by OmniVision Africa Ltd.). All significant
inter-company accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Company's management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and related notes to the financial statements.
Cash Equivalents
The Company defines cash equivalents as highly liquid financial instruments
purchased with a maturity of ninety days or less.
Inventory
The Company records inventory on a FIFO basis at the lower of cost or market.
Inventory is made up of equipment purchased but not yet shipped to operations
and paging and television receiving equipment.
Licenses and Deferred Development Costs
The Company capitalizes the costs related to obtaining rights to provide paging,
cable television, telephone, and Internet services in specific countries, and
for the rights to broadcast specific channels. Costs incurred are initially
capitalized as Deferred Development Costs. If after a twelve-month period,
rights have not been fully obtained, the Deferred Development Costs will be
expensed. There is no assurance that revenues exceeding these costs will be
realized by the Company. License costs are amortized their expected useful life
being the shorter of the period of the license or five years.
47
<PAGE>
Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
December 31, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fixed Assets
Fixed assets are recorded at cost and are depreciated on a straight line basis
over their estimated useful life as follows:
Years
-----
o Office equipment, furniture & fixtures 3
o Automotive & transportation equipment 3
o Leasehold improvements 3
o Operating Equipment & tools 3
o Transmission Station & Tower 5
Foreign Currency Translation
The Company's subsidiaries books and records are maintained as follows:
--------------------------------------------------------------------------------
Currency in which books and records
Country are maintained Functional Currency
--------------------------------------------------------------------------------
United States US Dollars US Dollars
Singapore Singapore Dollars US Dollars
Mongolia Mongolian Tugrik US Dollars
Uganda Uganda Shilling US Dollars
Morocco Moroccan Dirham US Dollars
Tanzania Tanzanian Shilling US Dollars
--------------------------------------------------------------------------------
Transactions recorded are translated into United States dollars, its reporting
and functional currency, as follows:
o Monetary assets and liabilities at the rate prevailing at the balance sheet
date.
o Non-monetary assets and liabilities at historic rates
o Income and expenses at the average rate in effect during the year. Any gain
or loss is reflected on the consolidated statement of operations & deficit.
The functional currencies are reflected on the books of Canada, Singapore,
Mongolia, Uganda and Ghana. Accordingly, the translation gain or loss is
reported as a component of Stockholder Equity.
Earnings per share
Earnings per share are calculated by dividing the income (loss) available to
common shockholders by the weighted average number of shares outstanding during
the period. The weighted average number of shares is determined by weighting the
number of shares outstanding by the number of days which the shares were
outstanding during the year.
48
<PAGE>
Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
December 31, 1999
3. LICENSES AND DEFERRED DEVELOPMENT COSTS
Accumulated costs incurred in obtaining license agreements and deferred
development costs for expenses used to obtaining licenses are as follows:
Licenses
Country Amount
--------------------------------------------------------------------------------
Ghana (a) $ 156,341
Uganda (b) 240,565
Tanzania(c) 146,946
Morocco (d) 49,805
Mongolia (e) 21,831
------------
615,488
Amortization (91,720)
------------
$ 523,768
============
Deferred Development Costs
Country Amount
--------------------------------------------------------------------------------
Pakistan $ 24,057
Egypt 1,000
------------
$ 386,447
============
(a) Ghana
The licenses granted to the Company by the Government of Ghana (see note 1) give
the Company exclusive rights to certain frequency spectrum. The Company has also
entered into agreements to broadcast certain channels in Ghana. The Company
issued Nostrad Singapore 1,200,000 shares as per agreement (See Note 5).
(b) Uganda
The licenses granted to the Company by the Government of Uganda (see note 1)
give the Company exclusive rights to certain frequency spectrum. The Company has
also entered into exclusive agreements to broadcast certain channels in Uganda.
In November 1997, the Company's interest in its Uganda subsidiary has increased
from 80% to 100%. (See Note 5 (a), Share Capital)
(c) Tanzania
The licenses granted to the Company by the Government of Tanzania (see note 1)
give the Company exclusive rights to certain frequency spectrum. The Company has
also entered into agreements to broadcast certain channels in Tanzania. The
Company issued Nostrad Singapore 1,200,000 shares as per agreement (See Note 5).
(d) Morocco
The Company has applied for exclusive rights to certain frequency spectrum to
the Government of Morocco. If received, the Company will enter into exclusive
agreement to broadcast certain channels in Morocco. The Company also has certain
rights to market Satellite DTH Subscription TV channels in Morocco. If the
Company is successful to obtaining exclusive rights to certain frequency
spectrum, the Company will be issuing Nostrad Singapore up to 2,000,000 shares
as per agreement.
(e) Mongolia
The Company has a paging system offering voice paging, answering services,
remote message retrieval, and storage in Ulaanbaator, Mongolia's capital.
49
<PAGE>
Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
December 31, 1999
3. LICENSES AND DEFERRED DEVELOPMENT COSTS (continued)
4. FIXED ASSETS
Fixed assets of the Company consist of the following:
December 31 December 31,
1999 1998
-------------------------------------------------------------------------------
Office equipment, furniture & fixtures $ 258,269 $ 85,537
Transportation equipment 51,074 26,000
Leasehold improvements 22,147 22,147
Transmission station & tower 300,816 267,289
Operating equipment & tools 41,712 62,308
----------------------------
562,907 463,281
Accumulated depreciation (274,021) (144,730)
----------------------------
$ 288,886 $ 318,551
----------------------------
5. SHARE CAPITAL
a) Common shares issued and outstanding since inception are as follows:
<TABLE>
<CAPTION>
Fiscal period and consideration received Number of shares Par value Additional paid-in
amount capital
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
March 1, 1993 - cash 3,000,000 $ 3,000 $ --
September 30, 1997
Purchase of Nostrad Media Pte. Ltd.
and OmniVision Africa Ltd. 3,700,000 3,700 367,640
December 31, 1997 6,700,000 6,700 367,640
September 15, 1998
Private Placement (b) 1,500,000 1,500 953,755
September 15, 1998
Acquisition of 20% of Uganda License 500,000 500 49.500
Acquisition of 80% of 1,500,000 shares for
Ghana license interests 1,200,000 1,200 118,800
December 31, 1998 9,900,000 9,900 1,489,695
September 13, 1999
Acquisition of 80% of Tanzania License 1,300,000 1,300 128,700
------------------------------------------------------
December 31, 1999 11,200,000 $ 11,200 $1,618,395
======================================================
</TABLE>
a) On October 15, 1997, the Company entered into an agreement to purchase the
remaining 20% interest in OmniVision (U) Ltd. for consideration of 500,000
shares of the Company. Shares were issued on September 15, 1998.
b) The Company entered into a Private Placement Offering dated November 27,
1997. Under the terms of this agreement, the Company issued 1,500,000
shares for total proceeds of $975,000. Finders fees of $19,745 were paid.
Nostrad Singapore had agreed to convert a maximum of the $300,000 owed to
shares by participating in the Private Placement Offering. As the Private
Placement Offering was oversubscribed, Nostrad converted $60,693 to acquire
shares.
50
<PAGE>
Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
December 31, 1999
5. SHARE CAPITAL (continued)
c) The Company has reserved 3,500,000 shares of common stock for successful
performance by Nostrad Singapore in obtaining licenses in three countries.
As formal agreements have been entered into with Ghana and Tanzania, the
Company has issued 1,200,000 shares to Nostrad Singapore for its 80%
interest in licenses in Ghana, and 1,300,000 shares to Nostrad Singapore
for its 80% interest in licenses in Tanzania.
d) On September 30, 1998, the Company entered into a Stock Option Plan. Under
the terms of this agreement, the Company can issue up to 1,500,000 shares
to officers, directors, consultants and key employees. Stock option
agreements entered into to date agree to issue up to 1,235,000 shares at
$0.65 per share. Each stock option agreement expires on September 30, 2000.
At the time the stock options were issued, there was no market for the
stock. Subsequently, the stock has commenced trading but with little
volume. Consequently, there is no compensation cost for the Company's stock
option plan and application of FASB Statement No. 123, "Accounting for
Stock-Based Compensation" results in the net loss and net loss per common
share remaining unchanged.
e) The Company entered into a Private Placement Offering on October 15, 1999,
offering 1,000,000 units, each unit consisting of one common share and one
share purchase warrant. Each warrant entitles the holder to purchase one
common share within one year for $1.50 and before the second year for
$2.00. As of December 31, 1999, 250,0000 units had been sold. As of April
26, 2000, as all 1,000,000 of the units had been sold, the Company issued
1,000,000 common shares and 1,000,000 common share purchase warrants.
6. INCOME TAXES
The Company has incurred losses totaling approximately $2,707,000 that may be
carried forward to reduce taxable income in future years. No deferred asset has
been recognized due to the uncertainty of future realization of any tax benefit.
7. COMMITMENTS
The Company has an agreement with its officers to provide international
management of its operations. The terms of the contract are for a period of four
years at an annual cost of $240,000. Related party transactions include amounts
in accounts payable due to officers or related companies of $437,000 and amounts
due to Nostrad Singapore of $600,800. These amounts are supported by notes
payable on demand.
8. YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. It is not
possible to be certain that all aspect of the Year 2000 Issue affecting the
Company, including those related to the efforts of customers, suppliers, or
other third parties will be fully resolved. No Year 2000 Issues have arisen.
51
<PAGE>
PART III
Items 1 and 2 Index to and Description of Exhibits
No. Description
--- -----------
1. Certificate of Incorporation*
2. Certificate of Amendment*
3. Certificate of Good Standing*
4. Certificate of Secretary of State*
5. By-Laws*
6.1 Agreement dated October 20,1998 between the Company and Asia Learning
World Pte Ltd.*
6.2 Memorandum of Understanding between OmniVision Africa Ltd. and
CableVision (Africa) Ltd.*
6.3 Agreement dated October 20, 1998 between Asia Learning World Pte Ltd.
and Entertainment World Limited CAN.*
6.4 Agreement dated October 20, 1998 between Asia Learning World Pte. Ltd
and Entertainment World Limited CAN*
6.5 Agreement between the Company and Entertainment World Limited CAN*
6.6 Memorandum of Understanding among Globecommm Systems, NetSat Express
and Omnivision Maroc SARL*
6.7 Agreement dated January 4, 1999 between OmniVision Maroc SARL and
GulfDTH Production*
6.8 Amending Agreement dated May 27, 1999 between Omnivision Maroc SARL
and GulfDTH Production*
6.9 Amendment Agreement dated January 14, 1999 between Omnivision Maroc
SARL and GulfDTH Production*
6.10 Lease Agreement dated February 5,1997*
6.11 Stock Purchase Agreement dated February 25, 1997*
6.12 Joint Venture Agreement dated May 30, 1997*
6.13 Agreement dated August 6, 1999 between the Company and Pfluger
Enterprises, L.L.C.*
6.14 Distribution Agreement between La Societe d'Etudes et Realization
audiovisuelles and OmniVision*
6.15 Agreement between the government of the Republic of Uganda and M/S
Omnivision (U) Ltd.*
27 Financial Data Schedule
-----------------
* Previously Filed
52
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant has caused this Amendment No 3 to its registration statement on Form
10SB to be signed on its behalf by the undersigned, thereunder duly authorized.
Dated: June 15, 2000 Nostrad Telecommunications, Inc.
By:/s/ Chris Farnworth
-------------------
Chris Farnworth, Chief Operating Officer
53
<PAGE>
NOSTRAD TELECOMMUNICATIONS, INC.
Registration Statement on Form 10 SB
Index to Exhibits
No. Description
--- -----------
1. Certificate of Incorporation*
2. Certificate of Amendment*
3. Certificate of Good Standing*
4. Certificate of Secretary of State*
5. By-Laws*
6.16 Agreement dated October 20,1998 between the Company and Asia Learning
World Pte Ltd.*
6.17 Memorandum of Understanding between OmniVision Africa Ltd. and
CableVision (Africa) Ltd.*
6.18 Agreement dated October 20, 1998 between Asia Learning World Pte Ltd.
and Entertainment World Limited CAN.*
6.19 Agreement dated October 20, 1998 between Asia Learning World Pte. Ltd
and Entertainment World Limited CAN*
6.20 Agreement between the Company and Entertainment World Limited CAN*
6.21 Memorandum of Understanding among Globecommm Systems, NetSat Express
and Omnivision Maroc SARL*
6.22 Agreement dated January 4, 1999 between OmniVision Maroc SARL and
GulfDTH Production*
6.23 Amending Agreement dated May 27, 1999 between Omnivision Maroc SARL
and GulfDTH Production*
6.24 Amendment Agreement dated January 14, 1999 between Omnivision Maroc
SARL and GulfDTH Production*
6.25 Lease Agreement dated February 5,1997*
6.26 Stock Purchase Agreement dated February 25, 1997*
6.27 Joint Venture Agreement dated May 30, 1997*
6.28 Agreement dated August 6, 1999 between the Company and Pfluger
Enterprises, L.L.C.*
6.29 Distribution Agreement between La Societe d'Etudes et Realization
audiovisuelles and OmniVision*
6.30 Agreement between the government of the Republic of Uganda and M/S
Omnivision (U) Ltd.*
`
27 Financial Data Schedule
-----------------
* Previously Filed
54
