<PAGE>   1
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              Washington D.C. 20549

                                   FORM 10-QSB

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.

For the three months ended June 30, 2001

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.

For the transition period from __________, 19__, to __________, 19__.

                         Commission File Number 0-26857

                        Hugo International Telecom, Inc.
               (Exact Name of Registrant as Specified in Charter)


<TABLE>
<S>                                        <C>
         Delaware                                        98-0226479
(State or Other Jurisdiction of            (I.R.S. Employer Identification Number)
Incorporation or Organization)
</TABLE>

            6 Waterside Drive, Langley Business Park, Langley Slough
                        Berkshire SL3 6EZ, United Kingdom
                    (Address of Principal Executive Offices)

                               011-44-1753-542-828
              (Registrant's Telephone Number, Including Area Code)



Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.

                         [X]    YES            [ ]    NO

There were 20,525,356 shares of the Registrant's $.0001 par value common stock
outstanding as of June 30, 2001.

Transitional Small Business Format (check one)  Yes   [ ]    NO   [X]
<PAGE>   2
                                    FORM 10-QSB
                 HUGO INTERNATIONAL TELECOM, INC. AND SUBSIDIARIES

                                 TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                               Page
                                                               ----
<S>                                                            <C>
PART I   FINANCIAL INFORMATION

   Item 1. Consolidated Financial Statements ...............     F1

   Item 2. Management's Discussion and Analysis of Financial
              Condition and Results of Operations ..........      4




PART II  OTHER INFORMATION


   Item 2. Changes in Securities ...........................      9


   Item 6  Exhibits and Reports on Form 8-K ................      9

Signatures .................................................     10
</TABLE>


                                      -2-
<PAGE>   3
                           PART I - FINANCIAL INFORMATION



ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS


                          HUGO INTERNATIONAL TELECOM, INC.
                         CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (UNAUDITED)


                                      CONTENTS


Consolidated Financial Statements:

<TABLE>
<S>                                                                             <C>
   Consolidated Balance Sheet............................................          F1
   Liabilities and Stockholders' Deficit.................................          F2
   Consolidated Statements of Operations.................................          F3
   Consolidated Statements of Changes in Stockholders' Deficit...........          F4
   Consolidated Statements of Cash Flows ................................       F5-F6
   Notes to Consolidated Financial Statements............................       F7-F9
</TABLE>


                                      -3-
<PAGE>   4
                        Hugo International Telecom, Inc.
                           Consolidated Balance Sheet
                            JUNE 30, 2001 (UNAUDITED)




<TABLE>
<S>                                                                            <C>
ASSETS
Current assets:
   Cash                                                                        $   50,518
   Accounts receivable, net of allowance for doubtful accounts of $104,200      1,244,661
   Income tax refund                                                               67,877
   Inventory                                                                      126,449
   Prepaid expenses and other current assets                                       75,991


                                                                               ----------
Total current assets                                                            1,565,496


Property and equipment, net of accumulated depreciation                           192,111


Other receivables                                                                  24,150


Goodwill, customer lists, and other intangibles, net of accumulated
   amortization                                                                   755,577
                                                                               ----------
                                                                               $2,537,334
                                                                               ==========
</TABLE>


                                                                            -F1-
<PAGE>   5
                        Hugo International Telecom, Inc.

                      Liabilities and Stockholders' Deficit


<TABLE>
<S>                                                                    <C>
Current liabilities:
   Bank overdraft                                                      $   134,215
   Accounts payable                                                      1,023,735
   Current portion of long-term debt                                       414,460
   Stockholder note payable                                                241,264
   Current portion of capital lease obligations                             23,136
   Accrued expenses                                                        202,149
   Deferred income                                                          42,456
                                                                       -----------
Total current liabilities                                                2,081,415
                                                                       -----------


Long-term liabilities:
   Long-term debt                                                          163,122
   Stockholder note payable                                                367,949
   Capital lease obligations                                                52,645
                                                                       -----------
Total long-term liabilities                                                583,716
                                                                       -----------


Stockholders' deficit:
   Preferred stock; $.0001 par value; 600,000 shares authorized;
     0 shares issued and outstanding
   Series A Convertible preferred stock; $.0001 par value; 400,000
     shares authorized; 90,000 shares issued and outstanding;
     liquidation value of $450,000                                               9
   Common stock; $.0001 par value; 50,000,000 shares authorized;
     20,525,356 shares issued and outstanding                                2,053
   Additional paid-in capital                                            1,676,392
   Accumulated other comprehensive income                                   42,450
   Stock subscriptions receivable                                             (507)
   Accumulated deficit                                                  (1,848,194)
                                                                       -----------
Total stockholders' deficit                                               (127,797)
                                                                       -----------


                                                                       $ 2,537,334
                                                                       ===========
</TABLE>



                                                                            -F2-
<PAGE>   6
                        Hugo International Telecom, Inc.

                Consolidated Statements of Operations (Unaudited)





<TABLE>
<CAPTION>
                                             Three Months Ended                  Six Months Ended
                                                   June 30,                           June 30,
                                        ------------------------------      ------------------------------
                                            2001              2000              2001              2000
                                        ------------      ------------      ------------      ------------

<S>                                     <C>               <C>               <C>               <C>
Revenues                                $  1,078,170      $  1,123,629      $  2,661,354      $  2,448,308

Cost of revenues                             740,763           731,159         1,725,662         1,578,148
                                             -------           -------         ---------         ---------
Gross profit                                 337,407           392,470           935,692           870,160

Selling, general and administrative
   expenses                                  695,659           750,880         1,368,140         1,421,533
                                        ------------      ------------      ------------      ------------

Loss from operations                        (358,252)         (358,410)         (432,448)         (551,373)

Other expense                                 28,282            29,076            55,929            70,849
                                        ------------      ------------      ------------      ------------

Loss before taxes                           (386,534)         (387,486)         (488,377)         (622,222)

Income tax (expense) benefit                                    (1,018)                             28,314
                                        ------------      ------------      ------------      ------------
Net loss                                $   (386,534)     $   (388,504)     $   (488,377)     $   (593,908)
                                        ============      ============      ============      ============

Basic loss per share                    $       (.02)     $       (.02)     $       (.02)     $       (.03)
                                        ============      ============      ============      ============

Weighted average number of
   common shares used in loss
   per share computation                  20,517,833        20,004,945        20,508,966        17,529,945
                                        ============      ============      ============      ============
</TABLE>


                                                                            -F3-
<PAGE>   7
                        Hugo International Telecom, Inc.
           Consolidated Statements of Changes in Stockholders' Deficit

                   SIX MONTHS ENDED JUNE 30, 2001 (UNAUDITED)


<TABLE>
<CAPTION>
                                                         Preferred  Stock       Common Stock
                                                         Shares   Amount       Shares      Amount
                                                         ------   ------       ------      ------
<S>                                                     <C>       <C>        <C>          <C>
Balance, December 31, 2000                                                   20,500,000   $2,050

Stock issued in satisfaction of note
   payable (unaudited)                                                           25,356        3

Preferred stock issued for cash (unaudited)               90,000     $9

Collection of subscription receivable
   (unaudited)

Comprehensive loss (unaudited):
   Foreign currency translation adjustment
   Net loss for the period
Total comprehensive loss
                                                          ------      --     ----------   ------
Balance, June 30, 2001 (unaudited)                        90,000      $9     20,525,356   $2,053
                                                          ======      ==     ==========   ======
</TABLE>



<TABLE>
<CAPTION>
                                                                        Accumulated
                                         Additional                         Other         Stock          Total
                                           Paid-In       Accumulated    Comprehensive  Subscription  Stockholders'
                                           Capital         Deficit          Income      Receivable      Deficit
                                           -------         -------          ------      ----------      -------
<S>                                      <C>             <C>            <C>            <C>           <C>
Balance, December 31, 2000               $ 1,207,386     $(1,359,817)     $    31,578     $(1,541)   $(120,344)
Stock issued in satisfaction of note
  payable (unaudited)                         19,015                                                    19,018

Preferred stock issued for cash
  (unaudited)                                449,991                                                   450,000

Collection of subscription receivable
  (unaudited)                                                                               1,034        1,034

Comprehensive loss (unaudited):
  Foreign currency translation adjustment                                      10,872
  Net loss for the period                                   (488,377)

Total comprehensive loss                                                                              (477,505)
                                         -----------     -----------      -----------     -------    ---------
Balance, June 30, 2001 (unaudited)       $ 1,676,392     $(1,848,194)     $    42,450     $  (507)   $(127,797)
                                         ===========     ===========      ===========     =======    =========
</TABLE>


                                                                            -F4-
<PAGE>   8
                        Hugo International Telecom, Inc.
                Consolidated Statements of Cash Flows (Unaudited)


<TABLE>
<CAPTION>
                                                                                      Six Months Ended
                                                                                           June 30,
                                                                                     2001           2000
                                                                                   ---------      ---------
<S>                                                                                <C>            <C>
OPERATING ACTIVITIES
   Net loss                                                                        $(488,377)     $(559,734)
   Adjustments to reconcile net loss to net cash used by operating activities:
        Depreciation and amortization                                                106,306        115,464
        (Increase) decrease in:
          Accounts receivable                                                        274,343        (39,366)
          Income tax refund                                                                         (43,264)
          Inventories                                                                (40,973)       (75,065)
          Other current assets                                                        95,698         33,959
          Other assets                                                               (24,508)
        Increase (decrease) in:
          Accounts payable                                                          (465,531)       175,350
          Accrued expenses                                                           (23,397)        29,952
          Deferred income                                                             (8,547)
                                                                                   ---------      ---------
   Total adjustments                                                                 (86,609)       197,030
                                                                                   ---------      ---------
   Net cash used by operating activities                                            (574,986)      (362,704)
                                                                                   ---------      ---------

INVESTING ACTIVITIES
   Acquisition of property and equipment                                              (4,739)       (31,041)
                                                                                   ---------      ---------

FINANCING ACTIVITIES
   Increase in bank overdraft                                                       (133,826)       (96,326)
   Payments on capital lease obligations                                             (30,265)       (28,889)
   Net borrowings on stockholder advances                                                           122,595
   Proceeds from borrowings                                                          373,399
   Payments on borrowings                                                            (98,744)      (318,842)
   Proceeds from the issuance of preferred stock                                     450,000
   Proceeds from the issuance of common stock                                                       700,050
   Payments on subscription receivable                                                 1,034
                                                                                   ---------      ---------
   Net cash provided by financing activities                                         561,598        378,588
                                                                                   ---------      ---------

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                          10,003         10,953
                                                                                   ---------      ---------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                             (8,124)        (4,204)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                        58,642         67,812
                                                                                   ---------      ---------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                           $  50,518      $  63,608
                                                                                   =========      =========
</TABLE>


                                                                            -F5-
<PAGE>   9
                        Hugo International Telecom, Inc.
                Consolidated Statements of Cash Flows (Unaudited)


<TABLE>
<CAPTION>
                                                                                   Six Months Ended
                                                                                      June 30,
                                                                                   2001        2000
                                                                                   ----        ----
<S>                                                                             <C>           <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION AND NONCASH INVESTING AND
   FINANCING ACTIVITIES:
     Cash paid during the period for interest                                   $  43,524     $78,192
                                                                                =========     =======
</TABLE>

     During the period ended June 30, 2001, the Company incurred capital lease
     obligations for the purchase of equipment in the amount of $54,204.

     During the period ended June 30, 2001, the Company issued 25,356 shares of
     common stock in satisfaction of a note payable in the amount of $19,018.


                                                                            -F6-
<PAGE>   10
                        HUGO INTERNATIONAL TELECOM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (UNAUDITED)




1.   CONSOLIDATED FINANCIAL STATEMENTS

In the opinion of management, all adjustments consisting only of normal
recurring adjustments necessary for a fair statement of (a) the results of
operations for the three and six months ended June 30, 2001 and 2000
(unaudited), (b) the financial position at June 30, 2001 (unaudited), and (c)
cash flows for the six-month periods ended June 30, 2001 and 2000 (unaudited),
have been made.

The unaudited consolidated financial statements and notes are presented as
permitted by Form 10-QSB. Accordingly, certain information and note disclosures
normally included in consolidated financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been omitted. The accompanying consolidated financial statements and notes
should be read in conjunction with the audited consolidated financial statements
and notes of the Company for the fiscal year ended December 31, 2000. The
results of operations for the six-month period ended June 30, 2001 (unaudited)
are not necessarily indicative of those to be expected for the entire year.


2.   GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. However, the Company has sustained
a substantial loss for the six months ended June 30, 2001, has accumulated
losses of $1,848,194 since inception, has negative working capital of $515,919,
its liabilities exceed its assets by $127,797 as of June 30, 2001, and it has
used cash in operations of $574,986 for the six months ended June 30, 2001.
These factors raise substantial doubt about the Company's ability to continue as
a going concern. These consolidated financial statements do not include any
adjustments relating to the recoverability and classification of recorded
assets, or the amounts and classification of liabilities that might be necessary
in the event the Company cannot continue in existence.


                                                                            -F7-
<PAGE>   11
                        HUGO INTERNATIONAL TELECOM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (UNAUDITED)





3.    SEGMENT INFORMATION

The Company classifies its operations into five reportable segments based on
market sectors. These sectors are used by management to make operating decisions
and performance assessments. The revenues, cost of sales, and gross profit of
these segments are as follows:

<TABLE>
<CAPTION>
                                                                             Six Months Ended
                                                                                 June 30,
                                                                            2001           2000
                                                                          ----------     ----------
                                                                         (Unaudited)    (Unaudited)
<S>                                                                       <C>            <C>
Revenues:
   Exports                                                                $  547,822     $  461,254
   Basic products                                                            803,810        836,155
   On-going revenue                                                        1,027,687        952,042
   Telecommunications                                                        172,365        171,658
   Solution providers                                                        109,670         27,199
                                                                          ----------     ----------
                                                                          $2,661,354     $2,448,308
                                                                          ==========     ==========

Cost of sales:
   Exports                                                                $  460,170     $  382,840
   Basic products                                                            545,292        543,840
   On-going revenue                                                          536,252        526,502
   Telecommunications                                                        107,727        107,286
   Solution providers                                                         76,221         17,680
                                                                          ----------     ----------
                                                                          $1,725,662     $1,578,148
                                                                          ==========     ==========

Gross profit:
   Exports                                                                $   87,652     $   78,413
   Basic products                                                            258,518        292,315
   On-going revenue                                                          491,435        425,540
   Telecommunications                                                         64,638         64,372
   Solution providers                                                         33,449          9,520
                                                                          ----------     ----------
                                                                          $  935,692     $  870,160
                                                                          ==========     ==========
</TABLE>

Management has not included net income (loss), total assets, depreciation
expense, and interest expense by segment due to the fact that they do not use
these amounts as a basis for their operating decisions.


                                                                            -F8-
<PAGE>   12
                        HUGO INTERNATIONAL TELECOM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (UNAUDITED)



4.    SUBSEQUENT EVENT

On July 27, 2001, Telesystems International Wireless, Inc. ("TIW"), the parent
company of the Company's major airtime supplier, voluntarily sought protection
from its creditors under the United Kingdom bankruptcy laws. The effects of this
on the Company's operations is uncertain; however, TWI has informed the Company
that operations will proceed as normal.


                                                                            -F9-
<PAGE>   13
                HUGO INTERNATIONAL TELECOM, INC. AND SUBSIDIARIES

ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The information contained in this Item 2, Management's Discussion and Analysis
or Plan of Operation, contains "forward looking statements" within the meaning
of Section 27A of the Securities Act 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Actual results may materially
differ from those projected in the forward-looking statements as a result of
certain risks and uncertainties set forth in this report. Although management
believes that the assumptions made and expectations reflected in the forward
looking statements are reasonable, there is no assurance that the underlying
assumptions will, in fact, prove to be correct or that actual future results
will not be different from the expectations expressed in this report.

Hugo International Telecom, Inc. is a provider of radio and data communications
solutions and telephone airtime access to business customers primarily in the
United Kingdom. Our expertise and broad range of distribution of various mobile
and data communications equipment and technology, allows us to be a
single-source provider of mobile and data communications, network design,
equipment sales, installation and systems integration, consulting and
maintenance to businesses and government agencies.

                       MANAGEMENTS DISCUSSION AND ANALYSIS

The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of our results of
operations and financial condition. The discussion should be read in conjunction
with our audited consolidated financial statements and notes thereto.

EXCHANGE RATES

The business of Hugo International Limited is predominantly conducted in L
Sterling and therefore the effect of the movements in exchange rates can have a
significant effect on the results as reported. The exchange rate for the first
half of 2000 was L1 =$1.574034 for the income statement and L1 =$1.513000 for
the balance sheet. For the first half of 2001 the income statement rate was L1 =
$1.436150 and for the balance sheet was L1 = $1.415190. This should be borne in
mind when analyzing the results.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting standards Board issued SFAS No. 142,
"Goodwill and Other Intangible Assets." Under its provisions, all goodwill and
other intangible assets will no longer be routinely amortized under a
stright-line basis of estimated useful life. Instead, they will be subject to
assessments for impairment by applying a fair-value-based test. The Company is
required to adopt SFAS No. 142 on January 1, 2002 and has not determined the
impact that this statement will have on its financial statements.


                                      -4-
<PAGE>   14
<TABLE>
<CAPTION>
                                                2001           2000            %
  AREA NUMBER    DESCRIPTION                     Q2             Q2           CHANGE
                                                 $              $         2001 TO 2000
  -----------    -----------                 --------      ---------      ------------
<S>             <C>                          <C>           <C>            <C>
       1        Exports                       547,822        461,254         18.7%
       2        Basic Products                803,810        836,155         -3.9%
       3        On-Going Revenue            1,027,687        952,042          7.9%
       4        Telecomms                     172,365        171,658          0.4%
       5        Solution Providers            109,670         27,199         303.2%
                                             ---------      ---------         ---
                TOTAL                        2,661,354      2,448,308         8.7%
                                             =========      =========         ===
</TABLE>

      During the last two fiscal years we have concentrated on positioning
ourselves to exploit each of the following main areas of business.


AREA 1 - EXPORTS

      We are a licensed reseller of Motorola products to certain regions in
Southern Africa. However we are able to sell and distribute our vehicle tracking
systems on a worldwide basis. Current export sales continue to grow
significantly up by 18.7% from the first half in 2000 to the first half in 2001.
We had sales of $86,524 to BP Amoco in 2001 as we continue to trade with this
important partner. The largest individual sale was for $225,316 to a customer
with a distribution center in Zimbabwe.

AREA 2 - BASIC PRODUCTS

      In addition to Motorola, we sell products from a number of other
manufacturers including both Kenwood and Tait in the United Kingdom. This market
is highly competitive with a number of suppliers in the market place. Success in
this area requires the services of top quality sales persons and we continue to
strengthen our team in this area. We are continuing to invest in shopping mall
communications and security systems. Our main customer in this sector is Marks
and Spencer and sales in the first half of 2001 were $128,047. We are also
expanding our hire radio portfolio and this generated sales of $47,612 in the
first half of 2001.

AREA 3 - ONGOING REVENUE


      We also seek to secure repetitive income streams. These income streams
derive from providing maintenance and airtime contracts, and to a lesser extent
short and long term equipment rental. In 1999, we made the decision to purchase
certain assets in an airtime provider, ProComm, in order to secure a five year
license with Dolphin. We continue to expand the connection portfolio of Dolphin
customers up by 13.8% to 2547 units at June 30, 2001. This has resulted in a
7.9% increase in sales in this product category from the first half in 2000. On
July 27, 2001, Dolphin filed for bankruptcy protection and as a result our
service provider agreement was automatically terminated. Currently, we are not
authorized to migrate new customers to the


                                      -5-
<PAGE>   15
Dolphin network, however, Dolphin will continue to provide us and our existing
customers with airtime and related services. The details of this are more fully
described in Post Effective Amendment No. 1, filed with the SEC August 9, 2001,
to our Registration Statement on Form SB-2 (Registration No. 333-43642) filed
with the Commission on August 11, 2000.

AREA 4 - TELECOMMUNICATIONS SOLUTIONS

      During 1999 opportunities began to become evident for us to enter the
telecommunications market place, in particular the switch (a telephone exchange
unit) and DECT (digitally enhanced cordless telephony) markets. We continue to
sell into this market and achieved sales of $172,365 in the first half of 2001.
We are currently in a good position on a number of significant contracts and
believe that these will grow this product group further. We have signed an
agreement with a nation-wide company of building surveyors to support their
network of 170 offices.

AREA 5 - SOLUTION PROVIDERS

      Sales were $109,664 during the first half of 2001. Sales continue to
improve and the portfolio of customers is increasing. The main requirements
continue to be in vehicle distribution and machinery hire companies. There
remain ongoing overseas trials in Algeria and Nigeria.


RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2001 AND 2000.


REVENUES

      Revenues for the six-month period ended June 30, 2001 were $2,661,354 as
compared to $2,448,308 for the six-month period ended June 30, 2000, an increase
of $213,046 or 9 %. This increase is primarily due to the increase in export
sales of $86,569 and an increase in the sales of solution provisions of $82,466.
The continuing migration of customers from analogue to digital networks is
reflected in the results of sales of basic products falling, while ongoing
revenue continues to increase as our digital customer base increases.

COST OF REVENUES

      Cost of revenues for the six-months ended June 30, 2001 was $1,725,662 or
65% of revenues as compared to $1,578,148 or 64% of revenues for the six-months
ended June 30, 2000. The increase in cost of revenues was fundamentally in line
with the increased revenues.

      As a result of the foregoing, gross profit increased by $65,531 for the
six-months ended June 30, 2001 or 35% of revenues from 36% for the comparable
period in 2000. The reduction in gross profit percentage is primarily due to the
change in sales mix.


                                      -6-
<PAGE>   16
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

      Selling, general and administrative expenses amounted to $1,368,140 or 51%
of revenues for the six-months ended June 30, 2001 as compared to $1,421,533 or
58 % of revenues for the comparable period in 2000. The decrease of $53,393 is
primarily due to the reduction in the costs associated with the parent company.
We are pleased to report the overall reductions and will continue to increase
our efficient control on overheads.

INTEREST EXPENSE

      Interest expense for the six-months ended June 30, 2001 was $56,283 as
compared to $71,527 for the same period in 2000. This reflects the greatly
reduced borrowings throughout the period. The termination of the Five Arrows
Invoicing Discount agreement in November 2000 has decreased by approximately 60%
our overall borrowing requirements.

LOSS BEFORE INCOME TAXES

      The preceding factors combine to show a significant decrease in the loss
before taxes of $488,377 for the six-months ended June 30, 2001 as compared to
the six-months ended June 30, 2000 when the loss was $593,908.

LIQUIDITY AND CAPITAL RESOURCES

      We have financed our operations primarily through cash generated from
operations and a private offering of our Series A Convertible Preferred Stock in
June, 2001 for which we received gross proceeds of $450,000.

      We had a working capital deficit of $515,919 at June 30, 2001, which
represented a decrease in the deficit of $119,688 from the working capital
deficit of $635,607 at June 30, 2000. The reduction in the deficit is mainly due
to the increase in accounts receivable and a prompter settlement of accounts
payable.

      Our investing activities used cash of $4,739 for the six-months ended June
30, 2001. Our investing activities used cash of $31,041 for the six-months June
30, 2000. The principal use was the acquisition of property and equipment.

      Our financing activities provided cash of $561,598 for the six-months
ended June 30, 2001. The principal sources of cash were proceeds from borrowings
and the issuance of Series A Convertible Preferred Stock. Our financing
activities provided cash of $378,588 for the six-months ended June 30, 2000. The
principal source of cash was the proceeds from the issuance of common stock.

      As described in Note 2, "Going Concern" to the accompanying financial
statements, there is a doubt as to our ability to continue as a going concern.
We have incurred operating losses for the six-months ended June 30, 2001 and
2000 (approximately $432,000 and $551,000, respectively), and have negative
working capital of $515,919 as of June 30 2001. However this


                                      -7-
<PAGE>   17
has been significantly reduced from negative working capital of approximately
$901,000 as at December 31, 2000.

      These conditions would raise doubt about our ability to continue as a
going concern. Present management has set the following objectives for fiscal
2001/2002 to enable us to continue as going concern:

      Continue to increase our sales revenues in all areas of our sales
strategy. We anticipate a continuing of the results of the first half where we
increased overall sales by 9% year on year to achieve a full year on year
increase. We believe that our long term investments in ongoing revenue, our
co-operative partnership with Motorola in the export markets, our continuing
good relationship with BP/Amoco, our development of the vehicle tracking system
in the Solution Provision area and the long term Telecommunications customers
will enable us to meet our objectives. We will seek to maintain gross margins at
the current levels in these productive markets. If successful, we would be able
to achieve cost reductions from our suppliers and we will continue to monitor
our purchasing policies.

      Reduce some areas of overhead expense. During 2000, we incurred
exceptional costs as a result of filing the SB-2 Registration Statement with the
Securities and Exchange Commission and associated costs of the creation of the
parent company of approximately $400,000. We do not anticipate a repeat of this
exceptional expense in 2001 or 2002. Also we are continuing to improve the
quality of our staff and strengthening our management team. We have recently
hired an Operations Manager and a Customer Services Manager. Generally,
overheads are being very tightly controlled.

      We are considering raising additional funds through private offerings of
our shares. This would enable us to reduce our long term debt position further
and assist the current cash flows. Accounts receivable is also targeted as an
area to produce a positive cash flow by undertaking more efficient collection
efforts including the appointment of a credit manager.

      At this time the present management cannot assess the likelihood of our
ability to achieve these objectives.


                                      -8-
<PAGE>   18
                                    PART II.
                                OTHER INFORMATION



ITEM 2. CHANGES IN SECURITIES

     A complete description of the terms on which securities of Hugo have been
sold during the period covered by this report is set forth in Post Effective
Amendment No. 1, filed with the SEC August 9, 2001, to Hugo's Registration
Statement on Form SB-2 (Registration No. 333-43642) filed with the Commission on
August 11, 2000, as amended from time to time.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

      A.  Exhibits - None

      B.  Reports on Form 8-K

            None.


                                      -9-
<PAGE>   19
                                   SIGNATURES


In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.



                          HUGO INTERNATIONAL TELECOM, INC.
                                    (Registrant)

In accordance with the requirements of the Exchange Act, this to the Registrant
caused this report to be signed on its behalf by the following persons in the
capacities and on the dates indicated.



<TABLE>
<CAPTION>
          Signature                          Title                     Date
          ---------                          -----                     ----

<S>                           <C>                                 <C>
                              Director, Chief Executive Officer   August 20, 2001
/s/ David W. Foden           and Chairman (Principal Executive
-----------------------
David W. Foden                Officer)

                              Director, Treasurer and Secretary   August 20, 2001
/s/ Michael Christmas        (Principal Financial and
-----------------------
Michael Christmas             Accounting Officer)

                              Director                            August 20, 2001
/s/ Iain Bowles
-----------------------
Iain Bowles
</TABLE>


                                      -10-