XSNI...the whole story. This is lengthy, but when you see they own G.O.D., the Global Online Directory Ltd, receiving over 5 million hits per month, and Nethead, a leading web development company, it is worth reading. This company is awesome, with some great relationships.
<<This is the Feb 1 1999 release to "shareholders":
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1 00% FREE Internet access
1 st February 1999
258"260 Lavender HID Landon SW111 u
To: All Shareholders of The X-Stream Network Inc. (formerly Mega Com Group, Inc.)
TEL: +44 (0)870 730 8486 FAX: +44 (0)870 730 -InfoOx -lb8Im.~
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Dear Shareholder:
We are writing to update you on several exciting developments that have occurred at The X-Stream Network Inc. (the "Company"), formerly Mega Com Group, Inc., over the past year. The most significant is the acquisition by the Company of X-Stream Technologies, Inc. ("X-Stream").
This letter will serve to provide some background, explain the reasons for the X-Stream acquisition and highlight the Company's incredible growth and prospects.
Information on the Company
Background
The Company was incorporated in the State of Delaware, USA on October 6, 1994. In December 1996, the Company changed its name to Mega Com Group, Inc. and, in January 1997, acquired a majority interest in Firecrest Group Plc, now Mega Com Group Plc ("Mega Corn"). At present, the Company owns approximately 96% of Mega Com. Since 1997, both the Company and Mega Com have focused entirely on the Internet.
In view of the fact that The X-Stream Network is now the primary focus of our business. the Board and the holders ofa majority of our shares determined to change our name to The X-Stream Network Inc. The name change became effective on 17 June 1998. It will not affect those shareholders that hold Mega Com Group. Inc. certificates.
Financial Results
For the year ended 30 April 1998, the audited, consolidated accounts of the Company show that revenue for that year end was $466, 735 US, while operating losses were $1,080' 750 US. After writing down our investment in Netex Network CommunIcation Corporation the loss was $5,205,749 US. Shareholders' equity (deficit) was $(2,053,304) US. A copy of the 30 April 1998 accounts is attached, together with the comparison for the 16 months ended 30 April 1997.
Our growth since then has been significant. For the six months ended 31 October 1998 total revenue (unaudited) was $734,969 US with a net loss of $(268,318) US representing a strong improvement in our performance.
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Notably, the results for our operating subsidiary, X-Stream, were impressive, particularly for an Internet company. Total revenue (unaudited) for the six months ended October 31, 1998 was $634,307 US with positive net pre-tax earnings of $66,936 US. Being cash flow positive is virtually unheard of among 1nternet companies, which is why X-Stream has attracted such a great deal of attention from all corners.
Information regarding X-Stream and its Prospects
To further its Internet-focused strategy, effective as of February 20, 1998, we acquired X-Stream.
Based on unique, proprietary software, X-Stream has pioneered the UK's first 100% free Internet access service, which has received great critical acclaim. X-Stream's service oper-ates under the name 'The X.Stream Network' and is supported by paid advertising. Provided users have a computer, modem and phone line, for the cost of a call they may enjoy surfing the Internet for free. Internet users save as much as £150 per year in Internet access fees and are delivered highly targeted advertisements based on their selected interests which are specified when the user registers for our service.
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our software is visible when surfing the Internet as a banner at the top of the user's comput-er screen. Businesses pay to advertise their products or services graphically within this adver. tising space. If desired, users are able to link directly to an advertiser's web page, by simply clicking on the advertisement, to inquire about the advertiser's products or services.
When users join our service, they must complete a straightforward registration form that enables us to determine user demographics and purchasing profile. This information in turn enables us to target advertisements to users. In this way, advertisers achieve a level of tar-geting and interaction with users that is second to none on the Internet, and users are able to view ads that coincide with their interests.
The service was launched in the UK on 8 March 1998. Our launch sponsors included Amazon.corn (online book retailer), Dell UK (computers)1 The Roya1 Bank of Scotland (bank-ing) and Intercasino (online gaming). In the ten months since launch, there has been an extremely posjtive response from the public. At the time of writing, our service boasts over 200,000 users in the UK. The X-Stream Network is now widely regarded as one of the UK's fastest growing Internet service providers and ranks amongst the top 51argest ISP's. The crit-iCally acclaimed new service has received extensive coverage in many magazines and news-papers, and a feature on the Channel 5 programme" Serious Money".
We bejieve that X-Stream is well positioned for explosive growth in rapidly expanding Internet markets worldwide. Industry analysts predict that much of the rest of the world is on the verge of experiencing the dramatic Internet growth that the United States has seen tn the past few years. With its unique value.proposition and business strategy, we are confident that X-Stream will be able to capture a large percentage of this burgeoning industry and become the first global player offering 100% free fnternet access. Remarkably, not only has X.Stream achieved an unprecedented rise since its introduction ten months ago, but it ;is already cash. flow positive and is poised for rapid expansion in new markets.
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The X-Stream Network is currently distributing its software from its web site at x-stream.com and by diskette, avajlable directly from X-Stream or through distribution on wide-ly circulated PC and Internet trade magazines.
We have put in place a strong management team of highly qualified indjvtduals to execute on its aggressive business plan and, by year's end, we aim to be the one of the largest interna-tional ISPs offering free Internet access.
We have also commenced a strategic marketing and distribution plan, jn an effort to ;further grow X-Stream's already significant user base.
X-Stream has recently been chosen as a partner by Microsoft and is the only UK ISP to offer a co.branded version of the world's most successful on-line travel service, MSN Expedia.
Other important partnerships have been made with Associated New Media, PC Science and Ziff Davis Publishing.
Mega Com Group Plc (formerly Firecrest Group Plc)
In addition to the excellent news regarding The X.Stream Network, we have also enjoyed success in the past year with Nethead Limited ("Nethead") and Global Online Directory Ltd. ("G.O.D."), both wholly owned Internet subsidiaries of Mega Com.
Nethead
Nethead is now firmly established as one of the leading web design companies in Europe, and this is endorsed by a portfolio that goestrom strength to strength. 1997 and 1998 saw the client list expand with the addition of such prestigious clients as Criterion Software (a lead. ing edge subsidiary of Canon, the major Japanese company), Telia, Swedish Telecom's UK subsidiary, Courtaulds/DXA, Motability Finance Ltd (the operator of Europe's 1argest con-tract hire fleet) and Prince Charles's own personal charity, The Prince's Trust. A recent inno-vative website that Nethead has produced is for BBC TV's Robot Wars TV Programme.
To ensure our continued success, we have built the best team available. Nethead now has a solid core of multi-skilled, enthusiastic professionals whose objective is to develop a profitable portfolio with a cljent mix that gives it both a secure financial base and the ability to stay;close to the leading edge of the Internet.
G.O.D.
The last year has seen the launch of many new products and servjcesfor G.O.D.
In October 1997, G.O.D launched Version 3 utilising object-based technology. The implementation of G.O.D. V3 required ten months' development and the results have been dramatic. In September 1998, the G.O.D. site received 5.67 million visjts. The lat-est additions to G.O.D are SoftwareShop (a secure online purchase point for software con-taining over 100,000 titles) and a revised free classified ad section which enables users to search and add advertisements for free.
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G.O.D. has an e-commerce partnership with Digital River selling software online and contin-ues to carry more advertisers and sponsors than any other similar service in the UK. Its advertisers include Interflora, British Airways, Charles Schwab, Abbey National, FT Quicken, Screentrade, Tropical Places and Thompson Holidays.
Strategic Relationship with New World Telecom
We have also recently entered into a strategic relationship wtth New World Telecom LLC ("NWT"), which has become a significant warrantholder in the Company. NWT is a worldwide developer of communications infrastructure, including GSM cellular, PCS, wireless local loop, Internet services, public phones, satellite communjcations and related services. We are working with NWT to expand into new markets in Europe, Africa, Asia/Pacific, the Caribbean, CIS and the Middle East. Two directors of NWT have joined our Board of Directors as. well as that of X-Stream.
Strong Management Team
We have significantly expanded in 199a--and your Company is now led by a very capable man. agement team that draws from the experience, judgment and diverse relationships of its Board of Directors. Together, your management team has years of experience in founding and rapidly growing companies, and specifically expertise in the Internet, communications, soft-ware design, business operations, law and finance.
The Company's management now includes the following individuals:
Name
Eosition
Robert Manning Gregory Sukornyk Paul Myers Christopher Sukornyk
Chairman of the Board
Chief Executive Officer, Director Chief Operating Officer, Director President & Chief Technology Officer, Director
Secretary. Treasurer, Director Director
Director
Executive Director
Gregory Carvatho Richard Schwartz Rehan Chaudhri
Dr. Chirinjeev Kathuria
A description of your management team is attached to this letter as Schedule;A.
Share Capital, Amended Certificate of Incorporation, Stock Options and Warrants
On 5 February 1998, we increased the Company's authorized share capital, by written con-sent of a majority of shareholders, from 20 million common shares to 50 million common shares. On 2 September, 1998, we have further increased, by written consent of a majority of shareholders, the Company's authorized capital from 50 million to 100 million shares and 10 million preferred shares, to allow for future financings. We have also amended the Certificate of Incorporation to include a more precise indemnity provision applicable to directors and offi-cers of the Company so as to encourage participation and decision-maktng.
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We have granted stock options and warrants to key members of management, employees, and consultants, to attract and retain the best available personnel for positions of substantial responsibility with the Company and its subsidiaries, as well as, to provide additional incentive to such persons to exert their maximum efforts toward the success of the Company.
Engagement of Lehman Brothers as Financial Advisors
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Over the past year, we have positioned ourselves as a leader in the very high.growth business of Internet service provision, with a view to significantly enhancing shareholder value. We have also recently engaged the prestigious investment bank, Lehman Brothers, to assist in raising necessary capital for our rapid expansion and to review various financing strategies. includ. ing the possibjlity of an Initial Public Offering of the Company's Common Stock.
Our prospects have never been greater. We will write to you again to provide greater detail surrounding our intentions in this regard.
FUture prospects
The lnternet js the fastest growing medium of communication in the world today, with user rates estimated to be increasing by more than 25% per month. As people grow comfortable with transacting1 carrying out research and simply browsing through this medium, there will be an ever-increasing demand for new Internet technologjes and specifically free Internet access.
We will be there to meet this demand.
We are devoting all of our attention towards fortifying The X-Stream Network's position as a household name in the UK and rapidly expanding our free Internet service jnto new territories. We invite you to visit X-Stream's website at x-stream.com and view our progress for yourself. Or, simply install the software from the enclosed floppy disk, which we include for your convenience, to experience the world's first free Internet service for yourself. To install the software and connect to The X-Stream Network's free Internet service, simply follow the brief instructions on the enclosed disk. We welcome you as a user.
As you can see, we have an exciting future led by a strong new Management team. We look forward to reporting to you with additionatpositive developments, including growth in the value of your shareholding.
Sincerely.
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J Robert Manning Chairman
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Gregory Sukornyk Chief Executive Officer
Schedule A
Descrlotionof Managlment
Robert Manning
Chairman of the Board
He is the senior partner jn a Leeds firm of solicitors, Fox Hayes. It is a member of Law Group, a nationwide network of solicitors' firms where the emphasis is on quality control. Mr. Manning is also a director or involved in a number of property and development tnvestment companies. He was very involved in the promotion of companies providing residential tenancies through the 4K government-sponsored Business Expansion Schemes, raising tens of mjlltons of pounds for investment in resjdences for letting.
Gregory Sukornyk
Chief Executive Officer & Co-Founder ofX.Stream; Director
Gregory Sukornyk has been involved with the X.Stream concept since inception. Previously, Mr. Sukornyk was a partner in a consulting business he co-founded, GS & Associates, which assists small, primarily high-tech and Internet companies in corporate structuring issues, acquisttions arid public listing in the U.S. While with GS & Associates, Mr. Sukornyk provided advice ranging from financial structure to business operations. He is a lawyer by profession having previously worked at a large law firm in Toronto. He completed his law degree at The London School of Economics.
Christopher Sukornyk
Presjdent, Chief Technology Officer & Co-Founder of X-Stream,. Director
Chris Sukornyk conceived of the X-Stream model while a computer science student at Queen's University jn Canada. The X-Stream concept spawns from his years of study in computer languages and Internet applications. Mr. Sukornyk has also received honours for his work on various Internet projects, including a top placing in aSun Microsystems sponsored competition.
Mr. Sukornyk has overseen the ongoing development of the X-Stream software jnter-face and planning the innovation of new products for the company. Previously, Mr. Sukornyk was a technical consultant to GS & Associates.
Paul Myers
Chief Operating Officer and Managing Director (X -Stream UK); Director
Paul Myers' background spans from the music business to the Internet. In his early twenties, he began writing, producing and re.mixing records, which led to a deal with Polydor Records, a publishing contract with Sony, Top 20 sjngles, a platinum disc, film soundtracks and eventually brought him in touch with computers.
In 1995 after joining the group as a consultant, Mr. Myers focused his attention on technological frontiers and the 'information super highway'. Discovering early on that to access all the incredible information available on the Internet, you needed first to know where to find it, Mr. Myers founded G.O.D., the GlobafOnline Directory, the UK's
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first Web search directory. Paul Myers remains Managing Director of both G.O.D. and Nethead.
Gregory Carvalho
Secretary & Treasurer; Director
Prior to the Company, Mr. Carvalho has been Finance Director or Financial Controller of several advertising agencies, including Kimpher Group, Dorland Advertising, Lonsdale Advertising and Lonrho in Kenya where he was born. He is a member of the Association of Accounting Technicians in England.
Richard Schwartz
Director
Mr. Schwartz has been tnvolved in managing investments from 1980 to the present. Prior to 1980, he was Director of Business Affairs and Accounting for Atlantic Recording Corporation in New York, where he worked with the Vice-Chairman of the Board and his duties included supervisory and managerial responsibilities of daily operations. From 1975 to 1979, Mr. Schwartz held a variety of positions at RCA Corporation, including Director of International Financial Operations. He directed financial activities In RCA 's Far East and Latin American subsidiaries, including profit planning, financial analysis, developing managerial reports, identifying financial problem areas and evaluating all capital proposals.
Mr. Schwartz has a Masters of Business Administration from Rutgers University.
Dr. Chirinjeev Kathuria
Executive Director, The X -Stream Network; President, New World Telecom
Dr. Kathuria is a founder and President of New World Telecom, a U.S..based telecommunications infrastructure development company specializing jn emerging ma rkets around the world. It is currently developing and capitalizing on opportunities in cellu-lar and PCS services, public phones, wireless local loop, international and domestic tele-phony seryices, tn Eastern Europe, CIS countries, Africa, the Caribbean and Asia/Pacific.
Dr. Kathuria has extensive experience in the telecom industry and was very closely involved in the privatization of India's telecom industry.
Dr. Kathuria is a Director and founding partner of the following consortiums that have been awarded the licenses to operate cellular mobile telephone services, basic telephone services and paging services in India:
. Koshika Telecom Ltd: A joint venture between Group Usha, Alcatel SA and Dr. Kathuria. The consortium has won the license to operate cellular mobile telephone servtces in four states in 'ndia, serving a combined population base; of 260 mfllion and an area of over 700,000 square miles. Koshika js currently operational in over 50 cities in India and ts the largest GSM Mobile Network in the world in terms of population base and area covered.
. Techno Telecom Ltd: A joint venture between Group Usha, the state owned Moscow Telephone Company, and Dr. Kathuria. The consortia won the license to operate basjc telephone services in a state in India with a population base of over 90 million.
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Dr. Kathuria was previously Manager, Investment Banking Division, Morgan Stanley Asia, and helped set up Morgan Stanley's India offices.
Dr. Kathuria ho1ds a Bachelor of Science degree (BSc) and a Doctor of Medicjne (MD) from Brown University. He also holds a Masters of Business Administration (MBA) and a Masters in Public Management Certificate (M PM) from Stanford University.-He has also completed graduate studies in international finance at the Stockholm School of Economics.
Rehan Chaudhri
Director, The X-Stream Network; Director, Legg Mason/Brandywine Asset Management; Director, New World Telecom
As a Director for Legg Mason/Brand~ine Asset Management, Mr. Chaudhri is responsible fora broad range of activities relating to Legg Mason's US$700 million international value fund. His management activities include portfolio investing and construction, stock selection, quantitative analysis, and fundamental strategic company analysis. Mr. Chaudhri brings a substantial amount of direct business and investment experience from the Pacific Rim, ;South Asia, and Europe.
Mr. Chaudhri is also a Director of New World Telecom.
Previously, Mr. Chaudhri worked in the Equities Division, Asian Telecommunications department at Morgan Stanley both in Hong Kong and New York where he advised telecommunications clients in some of the largest deals in Asia, including the largest telecommunications privatization in Asia. While a member of the highly regarded Morgan Stanley team, he was responsible for valuing and recommending Asian telecommunications equities for global money management accounts. He has also valued and developed investment cases for a US$1 billton PCS network ftnancing pro-ject in Canada and a for global cable operator whose focus has been on cable tele-phony operations in Latin America and Asia.
Mr. Chaudhri has also worked with Lehman Brothers where his primary focus was on project finance and strategic management in regulated industries in emerging markets.
Mr. Chaudhri holds an undergraduate degree from McGi11 University and a Masters of Business Administration from The Wharton School at University of Pennsylvania.
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X-STREAM NETWORK INC (OTC: XSNI) Date: May 21
Last Trade
3 11/16
Change
+ 5/8 (+20.41%)
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4 00
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0176,7000
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3 1/16 Open
3 1/16
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3 00 - 3 15/16
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52-week range: 0.625 - 6 3/4
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