AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 15, 2004
Registration No. 333-________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
____________________
FORM S-8
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
TELECOM COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
____________________
INDIANA 2089848
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
74 Shanan Road
Panyu, Guangzhou, GD 511490, China
(8620) 8487 9179
(Address and Telephone Number of Principal Executive Offices)
____________________
TELECOM COMMUNICATIONS, INC.
2002 STOCK OPTION PLAN (AS AMENDED)
(Full Title of the Plan)
Copies to:
Fred Deng
Chief Executive Officer
Telecom Communications, Inc.
74 Shanan Road
Panyu, Guangzhou, GD 511490, China
(8620) 8487 9179
____________________
CALCULATION OF REGISTRATION FEE
============================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE AMOUNT OF
TITLE OF SECURITIES AMOUNT TO BE PRICE PER OFFERING REGISTRATION
TO BE REGISTERED REGISTERED SHARE PRICE FEE
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Common Stock, $.001 3,000,000 $0.70 $2,100,000 $266.07
par value per share (1)
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(1) This calculation is made solely for the purpose of determining the
registration fee pursuant to the provisions of Rule 457(h) under the
Securities Act, and is calculated upon the average of the bid and asked
price of the securities on the Over-the-Counter-Bulletin Board on March 11,
2004
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
This registration statement relates to separate prospectuses.
Items 1 and 2 of this Part I, and the documents incorporated herein by
reference pursuant to Item 3 of Part II of this Form S-8, constitute the first
prospectus relating to issuances to our employees, directors, consultants and
others of up to 3,000,000 shares of common stock pursuant to our 2002 Stock
Option Plan, as Amended (the "Plan"). Pursuant to the requirements of Form S-8
and Rule 428, we will deliver or cause to be delivered to Plan participants any
required information as specified by Rule 428(b)(1). The second prospectus,
referred to as the reoffer prospectus, relates to the reoffer or resale of any
shares that are deemed to be control securities or restricted securities under
the Securities Act of 1933.
PROSPECTUS
ITEM 1. PLAN INFORMATION
We established the Plan effective December 18, 2002 covering 2,500,000
shares of our common stock, to provide us with flexibility and to conserve our
cash resources in compensating certain of our technical, administrative and
professional employees and consultants. The Plan was thereafter amended on
January 29, 2004 to increase the covered shares to 5,500,000 shares of our
common stock. The issuance of shares under the Plan is restricted to persons and
firms who are closely-related to us and who provide services in connection with
the development and production of our products and services or otherwise in
connection with our business. Securities must be issued only for bona fide
services. Shares are awarded under the Plan pursuant to individually negotiated
compensation contracts or as determined and/or approved by the Board of
Directors or compensation committee. The eligible participants include
directors, officers, employees and non-employee consultants and advisors. There
is no limit as to the number of securities that may be awarded under the Plan to
a single participant. We anticipate that a substantial portion of the securities
to be issued under the Plan will be issued as compensation to our directors,
offices, employees and non-employee consultants and advisors who provide
services in the development and promotion of our various products and services
and assist the Company in developing our internal infrastructure, our strategic
planning, and our acquisition and strategic alliance program.
The Plan does not require restrictions on the transferability of securities
issued thereunder. However, such shares may be restricted as a condition to
their issuance where the Board of Directors deems such restrictions appropriate.
The Plan is not subject to the Employee Retirement Income Securities Act of 1974
("ERISA"). Restricted shares awarded under the Plan are intended to be fully
taxable to the recipient as earned income.
ITEM 2. COMPANY INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION
We will provide without charge, upon written or oral request, the documents
incorporated by reference in Item 3 of Part II of this Registration Statement.
These documents are incorporated by reference in the Section 10(a) prospectus.
We will also provide without charge, upon written or oral request, all other
documents required to be delivered to recipients pursuant to Rule 428(b). Any
and all such requests shall be directed to the Company at is principal office at
74 Shanan Road, Panyu, Guangzhou, GD 511940 China, attention: Chief Executive
Officer.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED ON THE ACCURACY OR
ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
No person has been authorized by us to give any information or to make any
representation other than as contained in this prospectus and, if given or made,
such information or representation must not be relied upon as having been
authorized by us. Neither the delivery of this prospectus nor any distribution
of the shares of common stock issuable under the terms of the Plan shall, under
any circumstances, create any implication that there has been no change in our
affairs since the date hereof.
Our principal offices are located at:
74 Shanan Road
Panyu, Guangzhou, GD 511940 China
Telephone (8620) 8487 9179
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
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REOFFER PROSPECTUS
TELECOM COMMUNICATIONS, INC.
3,000,000 SHARES OF COMMON STOCK
($.001 PAR VALUE)
This prospectus forms a part of a registration statement, which registers
an aggregate of 3,000,000 shares of common stock issued or issuable from
time-to-time under the Telecom Communications, Inc. 2002 Stock Option Plan, as
Amended. The initial Plan covered the issuance of 2,500,000 which has now been
increased to 5,500,000 shares of our Common Stock.
Telecom Communications, Inc. is referred to in this prospectus as
"Telecom," the "Company," "we," "us" or "our." The 3,000,000 shares issued
directly or underlying options covered by this prospectus are referred to as the
"shares." Persons who are issued shares underlying options or directly are
sometimes referred to as the "selling security holders."
This prospectus also covers the resale of shares by persons who are our
"affiliates" within the meaning of federal securities laws. Affiliated selling
security holders may sell all or a portion of the shares from time to time in
the over-the-counter market, in negotiated transactions, directly or through
brokers or otherwise, and at market prices prevailing at the time of such sales
or at negotiated prices, but which may not exceed 1% of our outstanding common
stock.
We will not receive any proceeds from sales of shares by selling security
holders.
These securities have not been approved or disapproved by the Securities
and Exchange Commission nor has the Commission passed on the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
This prospectus does not constitute an offer to sell securities in any
state to any person to whom it is unlawful to make such offer in such state.
The date of this prospectus is March 11, 2004.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, and, in accordance therewith, we file reports, proxy
statements and other information with the Securities and Exchange Commission.
Reports, proxy statements and other information filed with the Commission can be
inspected and copied at the public reference facilities of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. Copies of this material can also be
obtained at prescribed rates from the Public Reference Section of the Commission
at its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission also maintains a website on the Internet that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission at http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by us with the Commission are incorporated
herein by reference and made a part hereof:
- Annual Report on Form 10-KSB filed on January 23, 2004.
All reports and documents filed by us pursuant to Section 13, 14 or 15(d)
of the Exchange Act, prior to the filing of a post-effective amendment which
indicates that all securities offered hereby have been sold or which deregisters
all securities then remaining unsold, shall be deemed to be incorporated by
reference herein and to be a part hereof from the respective date of filing of
such documents. Any statement incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this prospectus to the extent that
a statement contained herein or in any other subsequently filed document, which
also is or is deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any statement modified or superseded shall not be
deemed, except as so modified or superseded, to constitute part of this
prospectus.
We hereby undertake to provide without charge to each person, including any
beneficial owner, to whom a copy of the prospectus has been delivered, on the
written request of any such person, a copy of any or all of the documents
referred to above which have been or may be incorporated by reference in this
prospectus, other than exhibits to such documents. Written requests for such
copies should be directed to Corporate Secretary, Telecom Communications, Inc.,
74 Shanan Road, Panyu, Guangzhou, GD 511940 China.
THE COMPANY
Telecom was incorporated on January 6, 1997 in the State of Indiana under
the corporate name MAS Acquisition XXI Corp. Prior to December 21, 2000, we were
a blank check company seeking a business combination with an unidentified
business. On December 21, 2000, we acquired Telecom Communications of America,
which was a sole proprietorship doing business in Los Angeles, California since
August 15, 1995 and changed our name to Telecom Communications, Inc.
On September 30, 2003, Telecom consummated a Stock Purchase Agreement with
Arran Services Limited ("Arran") and its sole shareholder, Mr. Fred Chiyuan
Deng, for the acquisition of all of the capital stock of Arran, a British Virgin
Island corporation. In exchange for the capital interest, Mr. Deng and his
designate received a total of 23.8 million shares of Telecom common stock,
representing approximately 64% of the outstanding shares of Telecom. On
September 30, 2003, Telecom discontinued its operations in the U.S. On the
closing of the Stock Purchase Agreement, Mr. Deng was elected chairman and CEO,
and Mr. Ou Zhixiong and Ms. Lijian Deng were elected as directors.
On December 31, 2003, TCOM acquired an additional 20% interest of IC Star
MMS Limited ("IC Star") from Auto Treasure Holdings Limited, an entity 100%
owned by Mr. Deng, for a consideration of 9,889,000 shares of Telecom common
stock and 10,000,000 warrants to purchase 10,000,000 shares of Telecom common
stock at $2 per share. As a result, as of December 31, 2003, Telecom owned 100%
of IC Star. On December 31, 2003, Mr. Tak Hiromoto and Ms. Elizabeth Hiromoto
resigned as directors and as President and Secretary, respectively. Mr. Deng was
appointed as President, while Ms. Deng was appointed as Secretary.
OVERVIEW
Arran, our wholly-owned subsidiary, was founded on December 3, 2001 and
commenced its operations in January 2003. Arran, through its acquisition of
partially-owned subsidiaries, is engaged in the construction of communication
infrastructure and residential and commercial buildings and is a content
provider focused on the design and development of entertainment content. Arran
is targeting users of mobile devices such as mobile phones and PDA's. Arran has
been working together with other local Chinese companies to develop
telecommunication value-added service application software and system
integration for commercial, industrial, cultural and educational usage.
Our participation in the construction of communication infrastructure
allows us to leverage our capacity of content development in delivering services
to broader communities. Network infrastructure has always been considered as the
necessary fundamental for the telecommunications industry.
By contracting with various service providers, the Company has been able to
expand its delivery capacity across China and provide lifestyle information to
end-users through Short Message Service, Multimedia Messaging Service and other
wireless devices. IC Star, one of our subsidiaries, has entered into a service
agreement with a distribution partner in China, namely IC Soft. The service
agreement enables the Company to distribute its latest entertainment news and
lifestyle information content through IC Soft to subscribers of China Mobile and
China Unicom across China.
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RISK FACTORS AFFECTING OUR FUTURE RESULTS OF OPERATIONS
Our future results of operations involve a number of risks and
uncertainties. The following paragraphs discuss a number of risks that could
impact the company's financial condition and results of operations.
THE COMPANY'S STRATEGY INCLUDES PURSUING STRATEGIC ACQUISITIONS THAT MAY NOT BE
SUCCESSFUL.
As part of the Company's strategy for growth, it will consider acquiring
businesses that are intended to accelerate its product and service developments
processes and add complementary products and services. Acquisitions involve a
number of operational risks, including risks that the acquired business will not
be successfully integrated, may distract management attention, may involve
unforeseen costs and liabilities, and possible regulatory costs, some or all of
which could have a material adverse effect on the Company's financial condition
or results of operations.
The Company may make these additional acquisitions with cash or with stock,
or a combination thereof. If the Company does make any such acquisitions,
various associated risks may be encountered, including potential dilution to the
Company's then current shareholders as a result of additional shares of common
stock being issued in connection with the acquisitions.
THE COMPANY'S REVENUES AND OPERATING RESULTS CAN BE UNPREDICTABLE.
The Company's revenues and operating results could fluctuate substantially
from quarter to quarter and from year to year. The Company's ability to
recognize revenue during a quarter from customers depends upon its ability to
provide its services and satisfy other contractual obligations of a customer
sale in that quarter. Internal, revenue and operating results in any reporting
period may fluctuate due to factors including, among others:
- loss of a customer;
- the timing and size of customers;
- changes in customer's requirements;
- the introduction of new products or services by the Company or its
competitors;
- changes in the price or availability of components for the Company's
services and products; and
- satisfaction of contractual customer acceptance criteria and related
revenue recognition issues.
As a result, the Company may continue to experience fluctuations in
operating expenses and general overhead. The Company's future operating results
may depend on its ability to continue to expand its facilities and services in a
timely manner so that the Company can satisfy its commitments to its customers.
The Company's failure to meet its customer's commitments would harm its
business, financial condition and results of operations
OUR CHINESE OPERATIONS ARE HEAVILY IMPACTED BY DEVELOPMENTS IN THE PEOPLES
REPUBLIC OF CHINA ("PRC").
Currently, the Company's revenues are derived from sale of its construction
services and content software to customers in the PRC. The Company hopes to
expand its operations to countries outside the PRC; however, expansion has not
yet commenced, and there are no assurances that the Company will be able to
achieve an expansion successfully. Therefore, a downturn or stagnation in the
economic environment of the PRC could have a material adverse effect on the
Company's financial condition.
WE HAVE ONLY A LIMITED OPERATIONAL HISTORY, AND THERE ARE SUBSTANTIAL RISKS
ASSOCIATED WITH CONDUCTING OPERATIONS IN THE PRC.
Our revenue-producing operations are limited, and the information available
about us makes an evaluation of us difficult. We have conducted limited
operations, and we have little operating history that permits you to evaluate
our business and our prospects based on prior performance. You must consider
your investment in light of the risks, the business and our prospects based on
prior performance. You must consider your investment in light of the risks,
uncertainties, expenses and difficulties that are usually encountered by
companies in their early stages of development, particularly those engaged in
international commerce. In addition to competing with other telecommunication
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and web companies, the Company could have to compete with larger U.S. companies
who have greater funds available for expansion, marketing, research and
development and the ability to attract more qualified personnel if access is
allowed into the PRC market. If U.S. companies do gain access to the PRC
markets, they may be able to offer products at a lower price. There can be no
assurance that the Company will remain competitive should this occur.
Our real estate development business is subject to various risks including,
without limitation, risks relating to the ability to locate and consummate the
acquisition of suitable parcels of land, the availability and timely receipt of
zoning, land use, building, occupancy and other required regulatory permits or
approvals, the cost and timely completion of construction (including risks from
causes beyond our control, such as weather, labor conditions or material costs
and shortages) and the availability of financing on favorable terms. These risks
could result in substantial unanticipated delays or expenses and, under certain
circumstances, could prevent completion of development activities, any of which
could have a material adverse effect on our business.
CURRENCY EXCHANGE RISKS MAY SUBSTANTIALLY AFFECT OUR BUSINESS ACTIVITIES.
The Company generates revenue and incurs expenses and liabilities in
Chinese renminbi, Hong Kong dollars and U.S. dollars. As a result, the Company
is subject to the effects of exchange rate fluctuations with respect to any of
these currencies. Since 1994, the official exchange rate for the conversion of
renminbi to U.S. dollars has generally been stable, and the renminbi has
appreciated slightly against the U.S. dollar. However, given recent economic
instability and currency fluctuations in the world, the Company can offer no
assurance that the renminbi will continue to remain stable against the U.S.
dollar or any other foreign currency. The Company's results of operations and
financial condition may be affected by changes in the value of renminbi and
other currencies in which its earnings and obligations are denominated. The
Company has not entered into agreements or purchased instruments to hedge its
exchange rate risks, although the Company may do so in the future.
WE HAVE SUBSTANTIAL RISKS AS A GENERAL CONTRACTOR IN THE PRC.
We act as general contractor on our construction projects. Construction
services are performed by us and by unaffiliated subcontractors. As a general
contractor, we are responsible for the performance of the entire contract,
including work assigned, to unaffiliated subcontractors, and may be liable for
personal injury or property damage caused by the subcontractors. It is a common
business practice in China not to carry liability insurance. Should an uninsured
loss or a loss in excess of insured limits under our general liability or excess
liability insurance occur, such loss could have a material adverse effect on our
business and financial position.
RISKS OF GOVERNMENTAL REGULATION ON OUR BUSINESS IN THE PRC.
As we expand our efforts to develop new products and services, we will have
to remain attentive to relevant federal and state regulations. We intend to
comply fully with all laws and regulations, and the constraints of federal and
state restrictions could impact the success of our efforts.
As our services are available in multiple states and foreign countries,
these jurisdictions may claim that we are required to qualify to do business as
a foreign corporation in each such state and foreign country. New legislation or
the application of laws and regulations form jurisdictions in this area could
have a detrimental effect upon our business. We cannot predict the impact, if
any, that future regulatory changes or developments may have on our business,
financial condition, or results of operation.
Our construction projects are subject to various laws and governmental
regulations relating to our business operations and project developments, such
as zoning requirements. We believe we are currently in compliance with all laws,
rules and regulations applicable to our projects and properties, and such laws,
rules and regulations do not currently have a material impact on our operations.
However, due to the increasing popularity and growth in development in the areas
of China where our present and future projects will be developed and operated,
it is possible that new laws, rules and/or regulations may be adopted with
respect to our projects or proposed projects. The enactment of any such laws,
rules or regulations in the future may have a negative impact on our projected
growth, which could, in turn, decrease our projected revenues or increase our
cost of doing business.
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COMPETITION IN PRC IS INTENSIVE.
Certain regions in China are currently being heavily expanded and developed
with the assistance of its government. We anticipate that there will be
extensive competition from other companies and businesses, including some large,
multi-national hotel and resort developers. Our competitors include established
real estate development companies. Many of our current and potential competitors
have longer operating histories and financial, sales, marketing and other
resources substantially greater than those of the Company. As a result, our
competitors may be able to adapt more quickly to changes in customer needs or to
devote greater resources than we can to the sales of our real estate projects.
Such competitors could also attempt to increase their presence in our markets by
forming strategic alliances with other competitors, by offering new or improved
products or by increasing their efforts to gain and retain market share through
competitive pricing. As the market for real estate development matures, price
competition and ability to purchase prime real estate for development has
intensified and is likely to continue to intensify. Such competition has
adversely affected, and likely will continue to adversely affect, our gross
profits, margins and results of operations. There can be no assurance that we
will be able to continue to compete successfully with existing or new
competitors.
IF THE COMPANY DOES NOT EFFECTIVELY MANAGE ITS GROWTH, IT MAY NOT BE ABLE TO
SUCCESSFULLY EXPAND ITS BUSINESS.
Growth of its business has placed, and will continue to place, a
significant strain on the Company's management systems and resources. The
Company's ability to successfully offer its products and implement its business
plan in a rapidly evolving market requires an effective planning and management
process. The Company will need to continue to improve its financial, managerial
and manufacturing process and reporting systems, and will need to continue to
expand, train and manage its workforce worldwide. If the Company fails to
effectively manage its growth and address the above requirements, it could
affect its ability to pursue business opportunities and expand its business.
THE COMPANY'S FUTURE GROWTH DEPENDS ON ITS ABILITY TO ATTRACT NEW CUSTOMERS, AND
ON THE COMPANY'S ABILITY TO SELL ADDITIONAL SERVICES TO ITS CUSTOMERS.
The Company's growth depends on its success in selling its services. The
Company's success will depend on its ability to effectively anticipate and adapt
to customer requirements and offer products and services that meet customer
demands. Any failure of the Company's current or prospective customers to
purchase services from the Company for any reason would seriously harm the
Company's ability to grow its business.
LACK OF FUNDING WILL ADVERSELY AFFECT OUR ABILITY TO GENERATE REVENUES.
The Company's goals are all contingent upon raising debt or equity funding.
Currently there are no sources for such funding. There are significant risks,
difficulties, delays and unforeseen expenses related to development stage
companies with little or no operating history. Constraints we face due to a lack
of funding include:
- Inability to generate necessary revenue to operate for the next 12
months or thereafter;
- Advertising and marketing costs that may exceed our current estimates;
- Unanticipated development expenses; and
- The Company's ability to generate sufficient revenues to offset the
substantial costs of operating our business.
START-UP EXPENSES AND FUTURE LOSSES WILL ADVERSELY AFFECT OUR OPERATIONS.
Because of significant up-front expenses, including inventory, marketing
programs, website development and operations, and other expenses required to
develop our business, the Company anticipates that it may incur some losses
until revenues are sufficient to cover its operating costs. Future losses are
likely before our operations become profitable. As a result of the Company's
lack of operating history, you will have no basis upon which to accurately
forecast the Company's:
- total assets, liabilities, and equity;
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- total revenues;
- gross and operating margins; and
- labor costs.
Accordingly, our proposed business plans may not either materialize or prove
successful, and the Company may never be profitable.
OUR ABILITY TO GENERATE REVENUES COULD BE ADVERSELY AFFECTED BY SYSTEMS
INTERRUPTIONS.
Our ability to generate revenues depends, in part, on the ability of our
customers to reliably access servers and on the appeal of our web site. Any
system interruptions that result in the unavailability of our systems could
reduce the attractiveness of our products and services. Like many companies
whose operations are dependent upon IT systems, we have occasionally experienced
system interruptions in the past, and it is likely that we will continue to
experience system interruptions from time to time in the future
WE WILL BE REQUIRED TO MAKE SOFTWARE AND HARDWARE UPGRADES TO REMAIN
COMPETITIVE.
We will be required to add additional software and hardware and further
develop and upgrade our existing technology. Any delay or inability on our part
in upgrading our systems may cause unanticipated system disruptions, slower
response times, impaired quality and or delays in reporting information. There
can be no assurance that we will be able to accurately project the rate of
increases, if any, in the use of our web site or in a timely manner upgrade our
existing systems. Any inability to do so could have a material adverse effect on
our business, prospects, financial condition and results of operations.
THE SUCCESS OF OUR GROWTH STRATEGY IS DEPENDENT ON CONTINUED GROWTH OF THE
INTERNET.
Our Internet strategy is a key component in our overall business strategy.
Future sales and profits which may come, if any, depend in part upon the
widespread acceptance and use of the Internet as an effective medium of
entertainment business and communication. Rapid growth in the use of and
interest in the Internet has occurred only in recent years in the PRC. As a
result, acceptance and use may not continue to develop at historical rates, and
a sufficiently broad base of consumers may not adopt, and continue to use, the
Internet and other online services as a medium of entertainment and commerce.
The Internet may not be accepted as a viable long-term commercial
marketplace for a number of reasons, including potentially inadequate
development of the necessary network infrastructure or delayed development of
enabling technologies and performance improvements. The success of our business
strategy will depend, in large part, upon third parties maintaining the Internet
infrastructure to provide a reliable network backbone with the speed, data
capacity, security and hardware necessary for reliable Internet access and
services.
GOVERNMENTAL REGULATION OF THE INTERNET AND DATA TRANSMISSION OVER THE INTERNET
COULD ADVERSELY AFFECT OUR BUSINESS.
Laws and regulations directly applicable to communications or commerce over
the Internet are becoming more prevalent. The laws regarding the Internet,
however, remain largely unsettled, even in areas where there has been some
legislative action. It may take years to determine whether and how existing laws
such as those governing privacy, libel and taxation apply. The rapid growth and
development of the market for online commerce may prompt calls for more
stringent consumer protection laws, both in China, the United States and abroad,
that may impose additional burdens on companies conducting business online. The
adoption or modification of laws or regulations relating to Internet businesses
could adversely affect our ability to attract and serve customers.
OUR BUSINESS MAY BE ADVERSELY AFFECTED IF WE DO NOT KEEP UP WITH TECHNOLOGICAL
CHANGES.
The Internet is characterized by technological change. Our success will
depend, in part, on our ability to enhance our existing services, develop new
services that address the needs of our prospective customers and respond to
technological advances and practices on a timely basis. The development of a web
site entails significant technical, financial and business risks. There can be
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no assurance that we will successfully implement new technologies or adapt our
web site, proprietary technology and transaction-processing systems to customer
requirements or emerging industry standards. If we are unable, for technical,
legal, financial or other reasons, to adapt in a timely manner in response to
changing market conditions, such inability could have a material adverse effect
on our business, prospects, financial condition and results of operations.
POLITICAL CONSIDERATIONS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.
Under its current leadership, the government of the PRC has been reforming
and is expected to continue to reform the PRC's economic and political systems.
Such reforms have resulted in significant economic growth and social progress.
Many of the reforms are unprecedented or experimental and are expected to be
refined and improved upon. Other political, economic and social factors can also
lead to further readjustment of the reform measures. This refinement and
readjustment process may not always have a positive effect on the operations of
the Company. Results at times may also be adversely affected by changes in the
PRC's political, economic and social conditions and by changes in policies of
the PRC government, such as changes in laws and regulations, the introduction of
measures to control inflation, changes in the rate of method of taxation and
imposition of additional restrictions on currency conversion and remittances
abroad. Although historically there have been periods of political instability,
such as during the "Cultural Revolution," and certain of the reform measures
have from time to time been readjusted, because of the broad support for the
reform process and because the economic system in the PRC has already undergone
extensive changes as a result of the success of such reforms, the Company
believes that the basic principles underlying the reforms will continue to
provide the framework for the PRC's political and economic system.
THE PRC'S ECONOMY, ECONOMIC REFORM AND INFLATION COULD HAVE MATERIAL ADVERSE
EFFECT ON OUR BUSINESS.
The economy of the PRC differs from the economies of most countries in such
respects as structure, government involvement, level of development, growth
rate, capital reinvestment, allocation of resources, self-sufficiency, rate of
inflation and balance of payments position, among others. In the past, the
economy of the PRC has been primarily a planned economy subject to State plans.
Although the majority of productive assets in the PRC are still owned by the PRC
government, the portion of the PRC economy subject to State plans has been
gradually diminishing. There can be no assurance, however, that the PRC
government's policies for economic reforms will be consistent or effective.
A significant portion of the economic activity in the PRC is related to
exports and may, therefore, be affected by developments in the economies of the
PRC's principal trading partners. The United States annually reconsiders the
renewal of "Most Favored Nation" ("MFN") trading status for the PRC, which
provides the PRC with certain trading privileges available generally to trading
partners of the United States.
PRC GOVERNMENT CONTROL OF CURRENCY CONVERSION AND EXCHANGE RATE RISKS COULD HAVE
A MATERIAL ADVERSE EFFECT ON THE BUSINESS OF THE COMPANY.
The PRC government imposes control over the convertibility of renminbi into
foreign currencies. Currently, foreign investment enterprises ("FIEs")
(including Sino-foreign joint ventures) are required to apply to the SAEC for
"Foreign Exchange Registration Certificates" ("FERCs"). With such FERCs (which
are granted to FIEs upon fulfilling certain specified conditions and which are
reviewed annually b the SAEC) and authorization from the SAEC (which is obtained
on a transaction-by-transaction basis), FIEs may enter into transactions at the
swap centers to obtain foreign exchange for their needs. There can be no
assurance that exchange rates will not become volatile or that the renminbi will
not devalue again against the U.S. dollar. Exchange rate fluctuations may
adversely affect the Company's financial performance.
PRC LEGAL SYSTEM COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.
Since 1979, many laws and regulations dealing with economic matters in
general have been promulgated in the PRC. Despite this activity in developing
the legal system, the PRC does not have a comprehensive system of laws. In
addition, enforcement of existing laws may be uncertain and sporadic, and
implementation and interpretation thereof inconsistent. The PRC judiciary is
7
relatively inexperienced in enforcing the laws that exist, leading to a higher
than usual degree of uncertainty as to the outcome of any litigation. Even where
adequate law exists in the PRC, it may be difficult to obtain swift and
equitable enforcement of such law, or to obtain enforcement of a judgment by a
court of another jurisdiction. The PRC's legal system is based on written
statutes, and, therefore, decided legal cases are without binding legal effect,
although they are often followed by judges as guidance. The interpretation of
PRC laws may be subject to policy changes reflecting domestic political changes.
As the PRC legal system develops, the promulgation of new laws, changes to
existing laws and the pre-emption of local regulations by national laws may
adversely affect foreign investors. The trend of legislation over the past years
has, however, significantly enhanced the protection afforded foreign investors
in enterprises in the PRC. However, there can be no assurance that changes in
such legislation or interpretation thereof will not have an adverse effect upon
the business and prospects of Telecom.
Telecom's activities in the PRC are by law subject, in some particular
cases, to administrative review and approval by various national and local
agencies of the PRC government. In particular, part of Telecom's current
operations and the realization of its future expansion programs in the PRC will
be subject to PRC government approvals.
THERE IS NO ASSURANCE OF PROTECTION FOR PROPRIETARY RIGHTS; RELIANCE ON TRADE
SECRETS.
The Company's method of operations will have only limited proprietary
protection as it is unlikely that it will be able to secure meaningful
proprietary protection relevant to its methods of business operations. There are
no unique barriers for others to emulate the Company's methods of operations
except for those barriers and limitations confronting anyone engaged in
undertaking innovative activities and obtaining credibility in an emerging
industry. The Company, rather, will seek to maintain its proprietary rights by
trade secret protection and by the use of non-disclosure agreements with its
employees. There can be no assurance that meaningful proprietary protection can
be obtained, that the Company will be able to enter into or enforce agreements
which restrict competitive activities of its employees, or that various
individuals trained by the Company m ay not seek to engage in competitive
activities subsequent to their employment by the Company.
OUR ASSETS ARE OUTSIDE OF THE U.S., AND ENFORCEMENT OF CIVIL LIABILITIES AGAINST
FOREIGN PERSONS MAY BE AFFECTED.
While the Company is a U.S. corporation with executive offices in the State
of California, it is a holding company for entities which are domiciled outside
the U.S. For the foreseeable future, a substantial portion of the Company's
assets will be held or used outside the U.S. Enforcement by investors of civil
liabilities under the federal securities laws may also be affected by the fact
that while the Company is located in the U.S., its principal subsidiary and
operations will be located outside the U.S., none of the Company's current
executive officers or directors are U.S. residents, and all or a substantial
portion of the assets of the Company are located outside the U.S.
WE DO NOT EXPECT TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE.
Telecom has never paid dividends on our common stock and does not presently
intend to pay dividends on our common stock. Any future decisions as to the
payment of dividends will be at the discretion of Telecom's Board of Directors,
subject to applicable law.
WE DEPEND ON THE CONTINUED SERVICES OF OUR EXECUTIVE OFFICERS AND ON OUR ABILITY
TO ATTRACT AND MAINTAIN OTHER QUALIFIED EMPLOYEES.
Our future success depends on the continued services of Mr. Deng, our Chief
Executive Officer. The loss of his services would be detrimental to us and could
have a material adverse effect on our business, financial condition and results
of operations. We do not currently maintain key-man insurance on his life. Our
future success is also dependent on our ability to identify, hire, train and
retain other qualified managers and employees. Competition for these individuals
is intense and increasing. We may not be able to attract, assimilate, or retain
qualified technical and managerial personnel and our failure to do so could have
a material adverse effect on our business, financial condition and results of
operations.
8
OUR COMMON STOCK IS THINLY TRADED AND AN ACTIVE AND VISIBLE TRADING MARKET FOR
OUR COMMON STOCK MAY NOT DEVELOP.
Our common stock is currently traded on a limited basis on the
Over-the-Counter Bulletin Board under the symbol "TCOM." The quotation of our
common stock on the OTCBB does not assure that a meaningful, consistent and
liquid trading market currently exists. We cannot predict whether a more active
market for our common stock will develop in the future. In the absence of an
active trading market:
- investors may have difficulty buying and selling or obtaining market
quotations;
- market visibility for our common stock may be limited; and
- a lack of visibility for our common stock may have a depressive effect
on the market price for our common stock.
It is not possible to foresee all risks which may affect us. Moreover, we
cannot predict whether we will successfully effectuate our current business
plan. Each prospective purchaser is encouraged to carefully analyze the risks
and merits of an investment in the shares and should take into consideration
when making such analysis, among others, the Risk Factors discussed above.
9
TELECOM COMMUNICATIONS, INC.
2002 STOCK OPTION PLAN
INTRODUCTION
The following descriptions summarize certain provisions of the Plan. This
summary is not complete and is qualified by reference to the full text of the
Plan. A copy of the Plan (as amended) has been filed as an exhibit to the
registration statement of which this prospectus is a part. Each person receiving
a Plan option or stock award under the Plan should read the Plan in its
entirety.
On December 18, 2002, our Board of Directors authorized, and holders of a
majority of our outstanding common stock approved and adopted, the Plan covering
2,500,000 shares of common stock. As of January 31, 2004, 2,500,000 options and
restricted stock grants had been granted or issued under the Plan.
On January 29, 2004, the Plan was amended to increase the number of shares
covered by the Plan to 5,500,000 shares of our common stock.
The purpose of the Plan is to encourage stock ownership by our directors,
officers, employees and non-employee consultants and advisors, and to give such
persons a greater personal interest in the success of our business and an added
incentive to continue to advance and contribute to us. Our Board of Directors,
or a committee of the Board, will administer the Plan including, without
limitation, the selection of the persons who will be awarded stock grants and
granted options, the type of options to be granted, the number of shares subject
to each Option and the exercise price.
Plan options may either be options qualifying as incentive stock options
under Section 422 of the Internal Revenue Code of 1986, as amended, or
non-qualified options. In addition, the Plan allows for the inclusion of a
reload option provision, which permits an eligible person to pay the exercise
price of the option with shares of common stock owned by the eligible person and
receive a new option to purchase shares of common stock equal in number to the
tendered shares. Furthermore, compensatory stock amounts may also be issued. Any
incentive option granted under the Plan must provide for an exercise price of
not less than 100% of the fair market value of the underlying shares on the date
of grant, but the exercise price of any incentive option granted to an eligible
employee owning more than 10% of our outstanding common stock must not be less
than 110% of fair market value on the date of the grant. The term of each Plan
option and the manner in which it may be exercised is determined by the Board of
Directors or the committee, provided that no option may be exercisable more than
ten years after the date of its grant and, in the case of an incentive option
granted to an eligible employee owning more than 10% of the common stock, no
more than five years after the date of the grant.
ELIGIBILITY
Our directors, officers, employees and non-employee consultants and
advisors are eligible to receive stock grants and non-qualified options under
the Plan. Only our employees are eligible to receive incentive options.
ADMINISTRATION
The Plan will be administered by our Board of Directors or an underlying
committee (the "Committee"). The Board of Directors or the Committee shall
determine from time to time those of our directors, officers, employees and
non-employee consultants and advisors to whom stock grants or Plan options are
to be granted, the terms and provisions of the respective option agreements, the
time or times at which such options shall be granted, the type of options to be
granted, the dates such Plan options become exercisable, the number of shares
subject to each option, the purchase price of such shares and the form of
payment of such purchase price. All other questions relating to the
administration of the Plan, and the interpretation of the provisions thereof and
of the related option agreements, shall also be resolved by the Board or the
Committee.
SHARES SUBJECT TO AWARDS
We have currently reserved an additional 3,000,000 shares of our authorized
but unissued common stock for issuance under the Plan, and a maximum of
5,500,000 shares may be issued, unless the Plan is subsequently amended (subject
to adjustment in the event of certain changes in our capitalization), without
further action by our Board of Directors and shareholders, as required. Subject
to the limitation on the aggregate number of shares issuable under the Plan,
there is no maximum or minimum number of shares as to which a stock grant or
Plan option may be granted to any person. Shares used for stock grants and Plan
options may be authorized and unissued shares or shares reacquired by us,
including shares purchased in the open market. Shares covered by Plan options
which terminate unexercised will again become available for grant as additional
options, without decreasing the maximum number of shares issuable under the
Plan, although such shares may also be used by us for other purposes.
The Plan provides that, if our outstanding shares are increased, decreased,
exchanged or otherwise adjusted due to a share dividend, forward or reverse
share split, recapitalization, reorganization, merger, consolidation,
combination or exchange of shares, an appropriate and proportionate adjustment
shall be made in the number or kind of shares subject to the Plan or subject to
unexercised options and in the purchase price per share under such options. Any
adjustment, however, does not change the total purchase price payable for the
shares subject to outstanding options. In the event of our proposed dissolution
or liquidation, a proposed sale of all or substantially all of our assets, a
merger or tender offer for our shares of common stock, the Board of Directors
may declare that each option granted under the Plan shall terminate as of a date
to be fixed by the Board of Directors; provided that not less than 30 days
written notice of the date so fixed shall be given to each participant holding
an option, and each such participant shall have the right, during the period of
30 days preceding such termination, to exercise the participant's option, in
whole or in part, including as to options not otherwise exercisable.
TERMS OF EXERCISE
The Plan provides that the options granted thereunder shall be exercisable
from time to time in whole or in part, unless otherwise specified by the Board
of Directors or the Committee.
The Plan provides that, with respect to incentive stock options, the
aggregate fair market value (determined as of the time the option is granted) of
the shares of common stock, with respect to which incentive stock options are
first exercisable by any option holder during any calendar year shall not exceed
$100,000.
EXERCISE PRICE
The purchase price for shares subject to incentive stock options must be at
least 100% of the fair market value of our common stock on the date the option
is granted, except that the purchase price must be at least 110% of the fair
market value in the case of an incentive option granted to a person who is a
"10% stockholder." A "10% stockholder" is a person who owns (within the meaning
of Section 422(b)(6) of the Internal Revenue Code of 1986) at the time the
incentive option is granted, shares possessing more than 10% of the total
combined voting power of all classes of our outstanding shares. The Plan
provides that the fair market value shall be determined by the Board or the
Committee in accordance with procedures which it may from time to time
establish. If the purchase price is paid with consideration other than cash, the
Board or the Committee shall determine the fair market value of such
consideration to us in monetary terms.
The exercise price of non-qualified options shall be determined by the
Board of Directors or the Committee, but shall not be less than the par value of
our common stock on the date the option is granted.
The per share purchase price of shares issuable upon exercise of a Plan
option may be adjusted in the event of certain changes in our capitalization,
but no such adjustment shall change the total purchase price payable upon the
exercise in full of options granted under the Plan.
2
MANNER OF EXERCISE
Plan options are exercisable by delivery of written notice to us stating
the number of shares with respect to which the option is being exercised,
together with full payment of the purchase price therefor. Payment shall be in
cash, checks, certified or bank cashier's checks, promissory notes secured by
the shares issued through exercise of the related options, shares of common
stock or in such other form or combination of forms which shall be acceptable to
the Board of Directors or the Committee, provided that any loan or guarantee by
us of the purchase price may only be made upon resolution of the Board or
Committee that such loan or guarantee is reasonably expected to benefit us.
OPTION PERIOD
All incentive stock options shall expire on or before the tenth anniversary
of the date the option is granted except as limited above. However, in the case
of incentive stock options granted to an eligible employee owning more than 10%
of the common stock, these options will expire no later than five years after
the date of the grant. Non-qualified options shall expire ten years and one day
from the date of grant unless otherwise provided under the terms of the option
grant.
TERMINATION
All Plan options are nonassignable and nontransferable, except by will or
by the laws of descent and distribution, and during the lifetime of the
optionee, may be exercised only by such optionee. If an optionee shall die (a)
while our employee or (b) within three months after termination of employment by
us because of disability, or retirement or otherwise, such options may be
exercised, to the extent that the optionee shall have been entitled to do so on
the date of death or termination of employment, by the person or persons to whom
the optionee's right under the option pass by will or applicable law, or if no
such person has such right, by his executors or administrators.
In the event of termination of employment because of death while an
employee or because of disability, the optionee's options may be exercised not
later than the expiration date specified in the option or one year after the
optionee's death, whichever date is earlier, or in the event of termination of
employment because of retirement or otherwise, not later than the expiration
date specified in the option or one year after the optionee's death, whichever
date is earlier.
If an optionee's employment by us terminates because of disability and such
optionee has not died within the following three months, the options may be
exercised, to the extent that the optionee shall have been entitled to do so at
the date of the termination of employment, at any time, or from time to time,
but not later than the expiration date specified in the option or one year after
termination of employment, whichever date is earlier.
If an optionee's employment shall terminate for any reason other than death
or disability, optionee may exercise the options to the same extent that the
options were exercisable on the date of termination, for up to three months
following such termination, or on or before the expiration date of the options,
whichever occurs first. In the event that the optionee was not entitled to
exercise the options at the date of termination or if the optionee does not
exercise such options (which were then exercisable) within the time specified
herein, the options shall terminate.
If an optionee's employment shall terminate for any reason other than
death, disability or retirement, all right to exercise the option shall
terminate not later than 90 days following the date of such termination of
employment.
If an optionee's employment with the Company is terminated for any reason
whatsoever, and within three months after the date thereof optionee either (i)
accepts employment with any competitor of, or otherwise engages in competition
with, the Company, or (ii) discloses to anyone outside the Company or uses any
confidential information or material of the Company in violation of the
Company's policies or any agreement between the optionee and the Company, the
Committee, in its sole discretion, may terminate any outstanding Stock Option
and may require optionee to return to the Company the economic value of any
award that was realized or obtained by optionee at any time during the period
3
beginning on that date that is six months prior to the date optionee's
employment with the Company is terminated.
The Committee may, if an optionee's employment with the Company is
terminated for cause, annul any award granted under this Plan to such employee
and, in such event, the Committee, in its sole discretion, may require optionee
to return to the Company the economic value of any award that was realized or
obtained by optionee at any time during the period beginning on that date that
is six months prior to the date optionee's employment with the Company is
terminated.
MODIFICATION AND TERMINATION OF PLANS
The Board of Directors or the Committee may amend, suspend or terminate the
Plan at any time. However, no such action may prejudice the rights of any holder
of a stock grant or optionee who has prior thereto been granted options under
the Plan. Further, no amendment to this Plan which has the effect of (a)
increasing the aggregate number of shares subject to this Plan (except for
adjustments due to changes in our capitalization), or (b) changing the
definition of "Eligible Person" under the Plan, may be effective unless and
until approved by our shareholders in the same manner as approval of this Plan
is required. Any such termination of the Plan shall not affect the validity of
any stock grants or options previously granted thereunder. Unless the Plan shall
theretofore have been suspended or terminated by the Board of Directors, the
Plan shall terminate on December 18, 2012.
FEDERAL INCOME TAX EFFECTS
The following discussion applies to the Plan and is based on federal income
tax laws and regulations in effect on September 30, 2003. It does not purport to
be a complete description of the federal income tax consequences of the Plan,
nor does it describe the consequences of state, local or foreign tax laws which
may be applicable. Accordingly, any person receiving a grant under the Plan
should consult with his own tax adviser.
The Plan is not subject to the provisions of the Employee Retirement Income
Security Act of 1974 and is not qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code").
An employee granted an incentive stock option does not recognize taxable
income either at the date of grant or at the date of its timely exercise.
However, the excess of the fair market value of common stock received upon
exercise of the incentive stock option over the exercise price is an item of tax
preference under Section 57(a)(3) of the Code and may be subject to the
alternative minimum tax imposed by Section 55 of the Code. Upon disposition of
stock acquired on exercise of an incentive stock option, long-term capital gain
or loss is recognized in an amount equal to the difference between the sales
price and the incentive option exercise price, provided that the option holder
has not disposed of the stock within two years from the date of grant and within
one year from the date of exercise. If the incentive option holder disposes of
the acquired stock (including the transfer of acquired stock in payment of the
exercise price of an incentive stock option) without complying with both of
these holding period requirements ("Disqualifying Disposition"), the option
holder will recognize ordinary income at the time of such Disqualifying
Disposition to the extent of the difference between the exercise price and the
lesser of the fair market value of the stock on the date the incentive option is
exercised (the value six months after the date of exercise may govern in the
case of an employee whose sale of stock at a profit could subject him to suit
under Section 16(b) of the Securities Exchange Act of 1934) or the amount
realized on such Disqualifying Disposition. Any remaining gain or loss is
treated as a short-term or long-term capital gain or loss, depending on how long
the shares are held. In the event of a Disqualifying Disposition, the incentive
stock option tax preference described above may not apply (although, where the
Disqualifying Disposition occurs subsequent to the year the incentive stock
option is exercised, it may be necessary for the employee to amend his return to
eliminate the tax preference item previously reported). We are not entitled to a
tax deduction upon either exercise of an incentive option or disposition of
stock acquired pursuant to such an exercise, except to the extent that the
option holder recognized ordinary income in a Disqualifying Disposition.
If the holder of an incentive stock option pays the exercise price, in full
or in part, with shares of previously acquired common stock, the exchange should
not affect the incentive stock option tax treatment of the exercise. No gain or
loss should be recognized on the exchange, and the shares received by the
employee, equal in number to the previously acquired shares exchanged therefor,
will have the same basis and holding period for long-term capital gain purposes
4
as the previously acquired shares. The employee will not, however, be able to
utilize the old holding period for the purpose of satisfying the incentive stock
option statutory holding period requirements. Shares received in excess of the
number of previously acquired shares will have a basis of zero and a holding
period which commences as of the date the common stock is issued to the employee
upon exercise of the incentive option. If an exercise is effected using shares
previously acquired through the exercise of an incentive stock option, the
exchange of the previously acquired shares will be considered a disposition of
such shares for the purpose of determining whether a Disqualifying Disposition
has occurred.
In respect to the holder of non-qualified options, the option holder does
not recognize taxable income on the date of the grant of the non-qualified
option, but recognizes ordinary income generally at the date of exercise in the
amount of the difference between the option exercise price and the fair market
value of the common stock on the date of exercise. However, if the holder of
non-qualified options is subject to the restrictions on resale of common stock
under Section 16 of the Securities Exchange Act of 1944, such person generally
recognizes ordinary income at the end of the six-month period following the date
of exercise in the amount of the difference between the option exercise price
and the fair market value of the common stock at the end of the six-month
period. Nevertheless, such holder may elect within 30 days after the date of
exercise to recognize ordinary income as of the date of exercise. The amount of
ordinary income recognized by the option holder is deductible by us in the year
that income is recognized.
In connection with the issuance of stock grants as compensation, the
recipient must include in gross income the excess of the fair market value of
the property received over the amount, if any, paid for the property in the
first taxable year in which beneficial interest in the property either is
"transferable" or is not subject to a "substantial risk of forfeiture." A
substantial risk of forfeiture exists where rights and property that have been
transferred are conditioned, directly or indirectly, upon the future performance
(or refraining from performance) of substantial services by any person, or the
occurrence of a condition related to the purpose of the transfer, and the
possibility of forfeiture is substantial if such condition is not satisfied.
Stock grants received by a person who is subject to the short swing profit
recovery rule of Section 16(b) of the Securities Exchange Act of 1934 is
considered subject to a substantial risk of forfeiture so long as the sale of
such property at a profit could subject the stockholder to suit under that
section. The rights of the recipient are treated as transferable if and when the
recipient can sell, assign, pledge or otherwise transfer any interest in the
stock grant to any person. Inasmuch as the recipient would not be subject to the
short swing profit recovery rule of Section 16(b) of the Securities Exchange Act
of 1934 and the stock grant, upon receipt following satisfaction of condition
prerequisites to receipt, will be presently transferable and not subject to a
substantial risk of forfeiture, the recipient would be obligated to include in
gross income the fair market value of the stock grant received once the
conditions to receipt of the stock grant are satisfied.
RESTRICTIONS UNDER SECURITIES LAWS
The sale of all shares issued under the Plan must be made in compliance
with federal and state securities laws. Our officers, directors and 10% or
greater shareholders, as well as certain other persons or parties who may be
deemed to be "affiliates" of ours under federal securities laws, should be aware
that resales by affiliates can only be made pursuant to an effective
registration statement, Rule 144 or other applicable exemption. Our officers,
directors and 10% and greater stockholders may also become subject to the "short
swing" profit rule of Section 16(b) of the Securities Exchange Act of 1934.
PLAN OF DISTRIBUTION
The information under this heading includes resales of shares covered by
this prospectus by persons who are our "affiliates" as that term in defined
under federal securities laws.
The shares covered by this prospectus may be resold and distributed from
time to time by the selling security holders in one or more transactions,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale of these shares as
principals, at market prices existing at the time of sale, at prices related to
existing market prices, through Rule 144 transactions or at negotiated prices.
Usual and customary or specifically negotiated brokerage fees or commissions may
be paid by the selling security holders in connection with sales of securities.
5
The selling security holders may sell shares in one or more of the
following methods, which may include crosses or block transactions:
- through the "pink sheets", on the over-the-counter Bulletin Board, or on
such exchanges or over-the-counter markets on which our shares may be listed
from time-to-time, in transactions which may include special offerings, exchange
distributions and/or secondary distributions, pursuant to and in accordance with
the rules of such exchanges;
- in transactions other than on such exchanges or in the over-the-counter
market, or a combination of such transactions, including sales through brokers,
acting as principal or agent, sales in privately negotiated transactions, or
dispositions for value, subject to rules relating to sales by affiliates; or
- through the writing of options on our shares, whether or not such options
are listed on an exchange, or other transactions requiring delivery of our
shares, or the delivery of our shares to close out a short position.
Any such transactions may be effected at market prices prevailing at the
time of sale, at prices related to such prevailing market prices, at negotiated
prices or at fixed prices.
In making sales, brokers or dealers used by the selling security holders
may arrange for other brokers or dealers to participate. The selling security
holders who are affiliates of Telecom and others through whom such securities
are sold may be "underwriters" within the meaning of the Securities Act for the
securities offered, and any profits realized or commission received may be
considered underwriting compensation. Information as to whether an
underwriter(s) who may be selected by the selling security holders, or any other
broker-dealer, is acting as principal or agent for the selling security holders,
the compensation to be received by underwriters who may be selected by the
selling security holders, or any broker-dealer, acting as principal or agent for
the selling security holders and the compensation to be received by other
broker-dealers, in the event the compensation of other broker-dealers is in
excess of usual and customary commissions, will, to the extent required, be set
forth in a supplement to this prospectus. Any dealer or broker participating in
any distribution of the shares may be required to deliver a copy of this
prospectus, including the supplement, if any, to any person who purchases any of
the shares from or through a dealer or broker.
We have advised the selling security holders that, at the time a resale of
the shares is made by or on behalf of a selling security holder, a copy of this
prospectus is to be delivered.
We have also advised the selling security holders that during the time as
they may be engaged in a distribution of the shares included herein they are
required to comply with Regulation M of the Exchange Act. With certain
exceptions, Regulation M precludes any selling security holders, any affiliated
purchasers and any broker-dealer or other person who participates in the
distribution from bidding for or purchasing, or attempting to induce any person
to bid for or purchase any security which is the subject of the distribution
until the entire distribution is complete. Regulation M also prohibits any bids
or purchase made in order to stabilize the price of a security in connection
with the distribution of that security.
Sales of securities by us and the selling security holders or even the
potential of these sales may have an adverse effect on the market price for
shares of our common stock.
DESCRIPTION OF SECURITIES
GENERAL
The following description of our capital stock and provisions of our
Articles of Incorporation is a summary thereof and is qualified by reference to
our Articles of Incorporation, copies of which may be obtained upon request. Our
authorized capital consists of 80,000,000 shares of common stock, par value
$.001 per share, of which approximately 47,188,000 shares are issued and
outstanding. We are authorized to issue 20,000,000 shares of preferred stock, of
which no shares are issued or outstanding.
6
COMMON STOCK
Holders of shares of common stock are entitled to share, on a ratable
basis, such dividends as may be declared by the board of directors out of funds,
legally available therefor. Upon our liquidation, dissolution or winding up,
after payment to creditors, our assets will be divided pro rata on a per share
basis among the holders of our common stock.
Each share of common stock entitles the holders thereof to one vote.
Holders of common stock do not have cumulative voting rights which means that
the holders of more than 50% of the shares voting for the election of directors
can elect all of the directors if they choose to do so, and, in such event, the
holders of the remaining shares will not be able to elect any directors. Our
By-Laws require that only a majority of our issued and outstanding shares need
be represented to constitute a quorum and to transact business at a
stockholders' meeting. Our common stock has no preemptive, subscription or
conversion rights and is not redeemable by us.
PREFERRED STOCK
Our articles of incorporation authorize our board of directors to create
and issue series of preferred stock from time to time, with such designations,
preferences, conversion rights, cumulative, relative, participating, optional or
other rights, including voting rights, qualifications, limitations or
restrictions thereof as permitted under Indiana law.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is
Corporation Stock Transfer, Inc.
3200 Cherry Creek Drive South
Suite 430
Denver, CO 80209
(303) 282-4800
EXPERTS
The consolidated financial statements of Telecom Communications, Inc. as of
September 30, 2003, and for the years ended September 30, 2003 and 2002
appearing in our Annual Report on Form 10-KSB for the year ended September 30,
2003 have been audited by Sherb & Co., LLP, Certified Public Accountants, as set
forth in their report thereon and are incorporated by reference in reliance upon
the authority of such firm as experts in auditing and accounting.
INDEMNIFICATION
The Indiana Business Corporation Law allows us to indemnify each of our
officers and directors who are made a party to a proceeding if:
(1) the individual's conduct was in good faith;
(2) the individual reasonably believed:
(A) in the case of conduct in the individual's official capacity with
the corporation, that the individual's conduct was in its best
interests; and
(B) in all other cases, that the individual's conduct was at least
not opposed to its best interests;
(3) in the case of any criminal proceeding, the individual either:
7
(A) had reasonable cause to believe the individual's conduct was
lawful; or
(B) had no reasonable cause to believe the individual's conduct was
unlawful;
(4) a director's conduct with respect to an employee benefit plan for a
purpose the director reasonably believed to be in the interests of the
participants in and beneficiaries of the plan is conduct that
satisfies the requirement of subsection (a)(2)(B); and
(5) the termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is
not, of itself, determinative that the director did not meet the
standard of conduct described in this section.
Unless limited by its articles of incorporation, a corporation shall
indemnify a director who was wholly successful, on the merits or otherwise, in
the defense of any proceeding to which the director was a party because the
director is, or was, a director of the corporation against reasonable expenses
incurred by the director in connection with the proceeding.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, we will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
8
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The documents listed below are incorporated by reference in the
Registration Statement. All documents subsequently filed by the Registrant
pursuant to Section 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), prior to the filing of a post-effective
amendment which indicates that all securities offered have been sold or which
deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference in the Registration Statement and to be part thereof
from the date of filing of such documents.
- Annual Report on Form 10-KSB filed on January 23, 2004.
All reports and documents filed by us pursuant to Section 13, 14 or 15(d)
of the Exchange Act, prior to the filing of a post-effective amendment which
indicates that all securities offered hereby have been sold or which deregisters
all securities then remaining unsold, shall be deemed to be incorporated by
reference herein and to be a part hereof from the respective date of filing of
such documents. Any statement incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this prospectus to the extent that
a statement contained herein or in any other subsequently filed document, which
also is or is deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any statement modified or superseded shall not be
deemed, except as so modified or superseded, to constitute part of this
prospectus.
We hereby undertake to provide without charge to each person, including any
beneficial owner, to whom a copy of the prospectus has been delivered, on the
written request of any such person, a copy of any or all of the documents
referred to above which have been or may be incorporated by reference in this
prospectus, other than exhibits to such documents. Written requests for such
copies should be directed to Corporate Secretary, Telecom Communications, Inc.,
74 Shanan Road, Panyu, Guangzhou, GD 511940 China.
ITEM 4. DESCRIPTION OF SECURITIES
A description of the Registrant's securities is set forth in the Prospectus
incorporated as a part of this Registration Statement.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Indiana Business Corporation Law allows us to indemnify each of our
officers and directors who are made a party to a proceeding if:
(1) the individual's conduct was in good faith;
(2) the individual reasonably believed:
(A) in the case of conduct in the individual's official capacity with
the corporation, that the individual's conduct was in its best
interests; and
(B) in all other cases, that the individual's conduct was at least
not opposed to its best interests;
(3) in the case of any criminal proceeding, the individual either:
(A) had reasonable cause to believe the individual's conduct was
lawful; or
(B) had no reasonable cause to believe the individual's conduct was
unlawful;
(4) a director's conduct with respect to an employee benefit plan for a
purpose the director reasonably believed to be in the interests of the
participants in and beneficiaries of the plan is conduct that
satisfies the requirement of subsection (a)(2)(B); and
(5) the termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is
not, of itself, determinative that the director did not meet the
standard of conduct described in this section.
Unless limited by its articles of incorporation, a corporation shall
indemnify a director who was wholly successful, on the merits or otherwise, in
the defense of any proceeding to which the director was a party because the
director is, or was, a director of the corporation against reasonable expenses
incurred by the director in connection with the proceeding.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, we will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Persons eligible to receive grants under the Plan will have an existing
relationship with us and will have access to comprehensive information about us
to enable them to make an informed investment decision. The recipient must
express an investment intent and, in the absence of registration under the Act,
consent to the imprinting of a legend on the securities restricting their
transferability except in compliance with applicable securities laws.
ITEM 8. EXHIBITS
10.1 Telecom Communications, Inc. 2002 Stock Option Plan, as Amended*
23.1 Consent of Independent Certified Public Accountants*
-----------
* Filed herewith.
ITEM 9. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(a) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
2
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8 and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 against such liabilities (other than the payment by the registrant in
the successful defense of an action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel, the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Guangzhou, Country of China, on February 10th, 2004.
TELECOM COMMUNICATIONS, INC.
By: /s/ Fred Chiyuan Deng
-------------------------
Fred Chiyuan Deng,
Chief Executive Officer,
President and Chairman
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Fred Chiyuan Deng Chairman of the Board, March 11, 2004
--------------------------- President and CEO
Fred Chiyuan Deng (Principal Executive Officer)
/s/ Lijian Deng Secretary, Treasurer March 11, 2004
--------------------------- and Director
Lijian Deng
/s/ Gary Lam Principal Financial and March 11, 2004
--------------------------- Accounting Officer
Gary Lam
/s/ Ou Zhixiong Director March 11, 2004
---------------------------
Ou Zhixiong
4