<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

(Mark One)
   X            Annual report under Section 13 or 15(d) of the Securities
-------         Exchange Act of 1934. For the fiscal year ended December 31,
                2001.

                                       OR

                Transition report under Section 13 or 15(d) of the Securities
-------         Exchange Act of 1934 for the transition period from
                ________________ to ________________.

                        Commission File Number: 001-16207

                        HUGO INTERNATIONAL TELECOM, INC.
                    ----------------------------------------
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

<TABLE>
<S>                                                                            <C>
                           Delaware                                                98-0226479
             -------------------------------                                     -------------
             (STATE OR OTHER JURISDICTION OF                                     (IRS EMPLOYER
              INCORPORATION OR ORGANIZATION)                                   IDENTIFICATION NO.)
</TABLE>

                                6 Waterside Drive
                      Langley Business Park, Langley Slough
                        Berkshire SL3 6EZ United Kingdom
                    ----------------------------------------
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

     Registrant's telephone number, including area code: 011-44-1753-542-828

           Securities Registered Pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
                                                                             Name of Each Exchange
                   Title of Each Class:                                      on which Registered:
                   -------------------                                       -------------------
<S>                                                                          <C>
             Common Stock, $0.0001 par value                                         None
</TABLE>

        Securities Registered Pursuant to Section 12(g) of the Act: None

        Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the 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. Yes  X  No
                                                                       ---    --

        Check if there is no disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [___]

        The issuer's revenues for its most recent fiscal year were $4,242,099.

        The aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of April 15, 2002, is $3,065,698.

        The number of shares of common stock outstanding as of April 15, 2002
was 20,557,306.

<PAGE>

                                     PART I

        The information set forth in this Report on Form 10-KSB including,
without limitation, that contained in Item 6, Management's Discussion and
Analysis and Plan of Operation, contains "forward looking statements" within the
meaning of Section 27A of the Securities Act of 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.

        References herein to "Hugo", the "company", "we"," us" or "ours" refer
to Hugo International and its subsidiaries.

ITEM 1. DESCRIPTION OF BUSINESS

SUMMARY

        Hugo International Telecom, Inc. ("we", the "company" or "Hugo") is a
holding company which, through its operating subsidiaries, Hugo International
Limited ("Hugo UK") and Hugo International (Ireland) Ltd. ("Hugo Ireland"),
supplies cellular telephone, radio and wireless data communications solutions to
business customers primarily in the British Isles who seek to improve their
customer service levels and control their communications costs. Our added value
is in our ability to build complex communication systems from basic products
currently available from wireless communications equipment and technology
providers. We believe technology advances in radio, fixed telephone and cellular
telephone systems has created new opportunities in business communications.

        Until recently, only large corporations could only afford complex
business communications systems because of infrastructure costs. The new
communications technology provides the basis for business customers to
re-consider their communication systems. We provide mobile and data
communications, network design, equipment sales, installation, systems
integration, consulting, and maintenance to businesses and government agencies.
We work with a customer to understand its communication systems requirements and
then build solutions for business customers. We select the best technology for
the customers' application from the range of technology available adding
software service and support to provide the complete solution to the customer.

        Our expertise in wireless data and mobile communications permits us to
offer customers a wide range of professional services, including network
planning, design, implementation, management, maintenance and optimization. Our
broad range of distribution of various wireless mobile and data equipment and
technology suppliers allows us to serve our customers as a vendor-neutral,
single-source provider of communications solutions, equipment and service. By
offering equipment and technology from a variety of vendors, we can provide
businesses with tailored, scalable solutions.

        We currently market our products and services to businesses in the
following industries:

                                       2
<PAGE>

        -       Government Agencies

        -       Local and Higher Education Institutions

        -       Transport

        -       Construction

        -       Healthcare, Medical, and Pharmaceutical institutions

        -       Retail and Service Companies

        We also intend to pursue an acquisition strategy to broaden our customer
base substantially.

        We incorporated in the State of Delaware on February 17, 2000 and
acquired our Hugo International Limited operating subsidiary on February 24,
2000 and our Hugo Ireland operating subsidiary on July 1, 2001.

SIGNIFICANT DEVELOPMENTS DURING 2001

        On July 27, 2001, Telesystems International Wireless, Inc. ("TIW"), the
parent company of Dolphin, our major airtime supplier at that time represents
30% of our revenues, voluntarily sought protection from its creditors under the
United Kingdom bankruptcy laws. On August 23, 2001 Dolphin ceased doing business
with us and on August 29, 2001, Dolphin served a statutory demand upon our Hugo
UK subsidiary for payment of outstanding fees for airtime service to its
customers. As a result of these actions, Hugo UK no longer provides airtime
service to its customers through Dolphin and is seeking a remedy through the
courts concerning the disputed amounts.

        As a result of the statutory demand by Dolphin, on October 12, 2001, an
order of administration was entered against Hugo UK under the United Kingdom
bankruptcy laws. The order provides Hugo UK protection from its creditors and
appoints administrators to aid Hugo UK in its day to day operations. The effects
of this on our operations is uncertain. To date, operations have proceeded
normally and we anticipate that Hugo UK will be able to meet the requirements to
successfully petition for removal of the order of administration.

        Our consolidated financial statements have been prepared assuming we
will continue as a going concern. However, we sustained a substantial loss of
$2,351,870 for the year ended December 31, 2001, have accumulated losses of
$3,711,687 since inception, has negative working capital of $2,023,622 and our
liabilities exceed our assets by $1,574,899, as of December 31, 2001, and we
have used cash in operations of $90,735 for the year ended December 31, 2001.
These factors and the administration proceeding 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.

        On July 1, 2001, we entered into a share exchange with Hugo Ireland, a
company in which David W. Foden, our Chairman and Chief Executive, held a
minority interest. Pursuant to the exchange agreement we issued 31,950
restricted shares of our common stock for all of Hugo Ireland's capital stock.
Upon consummation of the share exchange, Hugo Ireland became a wholly owned
subsidiary of Hugo.

                                       3
<PAGE>

THE UNITED KINGDOM BUSINESS COMMUNICATIONS MARKET

        The United Kingdom business communications market is large and growing.
According to the Department of Trade & Industries Statistics, it consists of
approximately 8,998,000 business telephone lines, an estimated 13,000,000
business mobile phone users and over 1,000,000 private and public access mobile
radio users.

BUSINESS MOBILE TELEPHONE OPPORTUNITIES

        Mobile phones were originally developed to allow mobile communications
using speech. This required low communications bandwidth. The new world of
communications requires the mobile phone to handle data as well as speech.
Currently, most widely available mobile telephones can transfer data at 9.6
kilobytes/sec using conventional GSM mobile telephone technology. This data rate
limits the way in which applications can operate with poor capability to handle
images. United Kingdom industry sources indicate the growth in business mobile
data in the United Kingdom market has rapidly increased from 400,000 users in
1997 to over 2,000,000 users in 2000 within our target markets. The new GRPS
(2.5G) technology is offering much improved data rates for mobile data users
which is to be followed by the UMTS (3G technology) in the near future. Both
technologies use the "packet data always on" technology and new charging
mechanism with considerable cost benefits for the user.

INNOVATIONS IN TECHNOLOGY

        Advances in switching and electronics have increased the bandwidth, or
transmission capacity, available for telecommunications networks. Historically,
carriers have built telecommunications networks based on circuit switching.
Circuit switching establishes and keeps open a dedicated path until a call is
terminated. Although circuit switching worked well for decades to provide voice
communication, it does not efficiently use transmission capacity. Once a circuit
is dedicated, it is unavailable to transmit any other information, even when
particular users of that circuit are not speaking or otherwise transmitting
information. Packet switching is replacing circuit switching. Packet switching
divides signals into small "packets" which are then independently transmitted to
their destination via the quickest path. Upon their arrival, the packets are
reassembled. Packet switching provides more efficient use of transmission
capacity because it does not require a network to establish inefficient
dedicated circuits that waste unused capacity. New packet networking
technologies include Internet Protocol (IP), asynchronous transmission (ATM) and
frame relay. Networks that employ packet switching technology are especially
efficient at carrying data signals. ATM service quality controls support
high-quality voice and video signals. Similar quality controls are being
developed for IP.

        Telecommunications network designs have traditionally created separate
networks using separate equipment for voice, data and video signals. The
evolution from analog to digital technologies, which convert voice and other
signals into a stream of "1"s and "0"s, eliminates the traditional distinctions
between data, voice and video transmission services and systems. High-bandwidth
networks that use advanced packet-switched technology transmit mixed digital
voice, data and video signals over the same network. This enables mobile users
to use a single device for voice, data and video communications.

                                       4
<PAGE>

RADIO COMMUNICATION MARKET

        According to A. D. Little, a market research company, there are
currently approximately 1,000,000 mobile radio subscribers in the United Kingdom
using PMR (Private Mobile Radio) or PAMR (Public Access Mobile Radio) systems.
Most of these users currently operate systems that use analog technology that
has performance limitations.

        Mobile radio users are generally businesses and government service
agencies. Many of these business and government users also need wide area voice
and data with workgroup coverage and virtual private network features to enhance
solutions to their particular operational problems.

        Currently, these mobile radio users see the benefits of digital cellular
technology while maintaining the benefits offered from PMR and PAMR. We believe
that a very large percentage of these PMR and PAMR users would transfer their
communication to cellular technology for coverage, price and telephony reasons,
if mobile phone networks offered the full set of features required by the PMR /
PAMR business user.

INCREASING DEMAND FOR COMMUNICATIONS SERVICES

        We believe that there is and will continue to be significant growth in
the demand for mobile data, Internet, voice and video services in the business
to business marketplace. The increase in computing power, number of computers
networked over the Internet, and connection speeds of networked computers are
driving tremendous increases in communications uses for the Internet and data
services. Prices for cellular and long distance voice services have decreased,
resulting in increased demand for these services. In addition, cost savings and
network efficiencies are driving demand for more robust voice and data network
equipment.

PRODUCTS AND SERVICES

CORE PRODUCT GROUPS:

        We distribute the products and services of a number of leading
communications suppliers. In radio and cellular equipment, we are an authorized
dealer for Motorola, Kenwood and Tait. In data and communications technology, we
are authorized service providers of BT Cellnet and Vodafone. Moreover, three new
technologies are now becoming available which combine cellular mobile telephony,
high-speed packet data, and other functions into a number of solutions to
address the business customer's mobile communications requirements.

        The changes in technology and the growth in the telecommunications
industry have led to the rapid development of the market for telecommunications
equipment and mobile applications. Hugo has attempted to position itself to take
advantage of the foregoing market opportunities by developing three core
internal product groups.

TELECOMMUNICATIONS:

        Providing complete solutions to business, including:

                                       5
<PAGE>

        -       High bandwidth

        -       Digital mobile telephony

        -       Value added products

        -       Least call routing

        -       Service and maintenance

        -       Voice-over Internet Provider (VOIP)

NETWORK SERVICES:

        Mobile applications solutions such as:

        -       Vehicle tracking

        -       Security monitoring

        -       Supply chain e-commerce Internet solutions

        -       Fleet management via the Internet

SYSTEMS:

        Sale of private and public access mobile radio communication equipment
and systems.

        -       Design / manufacture

        -       Installation

        -       Maintenance

        -       Service

        The portfolio of products and services encompasses state-of-the-art
telecommunications equipment, tailor-made technical communication solutions,
data applications, components, airtime sales, and equipment rental and
maintenance activities.

        The following product groups outline the solutions that we offer to
target customers.

BUSINESS MOBILE TELEPHONE SOLUTION

BT CELLNET AND THE NEW GPRS TECHNOLOGY

        GPRS or "General Packet Radio Service" is a new data network being
developed alongside BT Cellnet's existing analog and digital networks. It uses
existing radio base stations linked to a new network based on 'packet switch'
technology. The major benefit is data rates of 64 kilobytes/sec using packet
switch technology, six times faster than the current GSM networks.

        With its packet technology, GPRS allows a user to log into a data
network, typically a company local network or an Internet Service Provider, and
then send and receive data as and when required throughout the day. The GPRS
network is only utilized when data is being transmitted, but the user retains a
virtual connection to his computer network throughout the day, thereby
eliminating the need to reconnect each time a user wants to connect to a
network.

        Like existing mobile data services, initially most GPRS users will be
business people, but as GPRS integrates two of the worlds fastest growing
industries, mobile phones and the Internet, we believe it will spread rapidly to
cover many consumers too. There will also be the capability to have

                                       6
<PAGE>

GPRS devices hidden from view in the form of machines that will communicate to
control centers, for example:

        -       vehicle tracking systems

        -       vending machines reporting stock levels

        -       metering devices

        -       remote sensors

        -       alarms

        The largest single application of this new technology is expected to be
for the 'mobile office' user accessing the company Intranet for sending and
receiving emails while working away from the office, whether in the United
Kingdom or abroad. There will be many business applications tailored to the
needs of specific groups of workers. Users will be able to access company
databases and download plans, parts lists, customer information and history,
maps, pictures and other information. For example, users can transmit
information on fault diagnosis, parts used, and fault repair times can be
transmitted back to the office for immediate invoicing and updating of stock
records. Also, users will be able to view product details including full
pictures or videos. Order information from mobile salesmen will be a simple
operation as will the ability to browse stock levels.

        GPRS is based on the Internet Protocol (IP). This provides ease of
connectivity from mobile data terminals to the Internet and to IP-based company
Intranets. Existing IP applications will not need to be rewritten to work in a
mobile environment, and will therefore provide the same look and feel as when
they are in the office. GPRS is suitable for video and multi-media applications.

        Collectively these individual benefits combine to provide a real
advantage to business users. Companies can utilize the benefits of GPRS to keep
constantly in touch with their employees, their vehicles, and their machines,
and provide more efficient and responsive services to their customers.

         Most companies today are heavily dependent on their local area networks
(LAN). It is the heart of a business's daily operations and the information it
carries is its lifeblood, from e-mail and Intranet to customer databases and
order process systems. The introduction of GPRS is an important step in the
convergence of internet and mobile phone technologies.

        GPRS/UMTS and Cerocom

        The new technology of data over a packet based systems offers users a
significant cost benefit compared to conventional data technology. These
benefits can be accessed with the right hardware and software to support the
technology. Hugo has established a new operation called Cerocom to address this
new market. Cerocom's focus is on building a customer base in the users of the
new communication technology. They are active in GRPS/UMTS modem sales and for
software to help build efficient applications in the market. In addition there
are numbers of opportunities to sell expertise to customers to help them build
their strategy to exploit the new technology.

TRADECOM

        One of the most important changes in business operations is the use of
the Internet for commercial transactions. Any strategy to use the Internet in
United Kingdom therefore must have a call centre solution included. Internet
usage and thus the ability to reach customers is still low in United

                                       7
<PAGE>

Kingdom compared to the United States but changing very quickly.

        Hugo is building a new route to market which will increasingly be
Internet focused. This operation is called TradeCom, it will enable customers to
order products online and have a simple and fast delivery. The focus is on
providing the ability to supply standard products or previously supplied
products off the shelf with minimum lead-time with any standard service
requested.

        TradeCom provides a low cost of sales operation, which utilizes the
Internet, telesales, direct marketing, and fax ordering that provides the
customer with the product, or service he wants in the most efficient manner
possible.

RADIO COMMUNICATIONS MARKET SOLUTION

        PMR and PAMR Systems

        Currently, we supply PMR and PAMR systems that have been fundamental in
providing instant call set-up communications for the following market segments:

        -       Police/Fire/Ambulance

        -       Security

        -       Utilities

        -       Health

        -       Social services

        -       Retail

        -       Construction

        -       Transport

        The analog PMR radio markets currently support approximately 500,000
voice users, many of which are network owners. These users need instant call
set-up and group working which has not previously been available from a digital
network.

        These private and public networks have supplemented the mainstream
audio, data and visual fixed networks operated by among others, British Telecom
and Cable and Wireless. The market has, thus far, tolerated these fixed
communications mediums.

PROFESSIONAL SERVICES

        We design, build and operate advanced voice, data and integrated
communications systems. To meet our customers' needs, we evaluate technologies
such as Internet Protocol, frame relay, DSL and ATM, and then select, integrate
and deploy the appropriate routers, switches, access devices and mobile
equipment.

        We offer our customers a variety of wireless data and voice equipment.
We also install, configure and integrate all the equipment we sell to our
customers.

        We provide service, maintenance and support for our customers' growing
data and voice communications systems, as well as sell and install data and
mobile communications equipment. We

                                       8
<PAGE>

maintain and service our clients' voice and data systems primarily through
maintenance plans or project specific plans based on time and significance.

VENDOR RELATIONSHIPS

        We have agreements with the wireless voice and data equipment/technology
manufacturers and providers listed below:

        BT Cellnet

        Motorola

        Kenwood

        Tait

        Siemens

        Our agreements with these manufacturers and technology providers allow
for the distribution, resale or integration of products, and/or acting as agents
for these equipment manufacturers and technology providers. Normally, we receive
volume discounts from manufacturers and service providers on products and
services.

RESEARCH AND DEVELOPMENT

        The Internet is providing a first class mechanism to change business
processes to reduce cost in many areas of business. The catalyst for the change
is the combination of the new communications technology with the Internet that
provides the ability to process large volumes of data remotely at low cost. A
simple example is that now images of a product range can easily be displayed to
a customer using the GPRS mobile phone and a portable computer for them to
select the product they require.

        Using the Internet, plus the national communications network of BT
Cellnet, Hugo is developing a link between members of staff on remote sites and
a warehouse. Using a hand held computer the on site personnel can order
materials for delivery or browse a product list before ordering. Advantages
arise for Hugo from the capital sale, ongoing network service revenue and
Internet call receipts.

        This application will provide benefits across a wide range of vertical
markets. Many markets require information to be entered remotely or can reduce
the business processes required to complete order entry:

        -       On Site Retail Ordering

        -       Vending equipment

        -       Service Engineers

        -       Remote Sales Order Processing

MARKETING AND SALES STRATEGY

        We seek to build a strong base of blue chip customers as clients. We
believe that long-term relationships built on quality solutions, equipment,
customer service, short response time and

                                       9
<PAGE>

competitive pricing are the most effective way of attaining our business
objectives. We are seeking expansion of our client base through targeted
solicitation of clients in our existing geographic and vertical markets. We are
also undergoing a public relations campaign to gain the maximum visibility for
our products and services by creating awareness of the technology with senior
executives, chief information or technology officers and IT/IS managers. We also
advertise in order to establish Hugo's identity in the marketplace. The intent
is to re-enforce our direct marketing effort and to build confidence among
targeted customers in our products and services.

        We believe it is important to use follow on opportunities from the
public relations campaign and re-enforce the benefit gained from public
relations or to preview our products before public relations activity in order
to gain the maximum impact.

COMPETITION

        The business marketplace for communications products is highly
competitive. The size of a client, the geographic scope and product platform
preferences of our target client base dictates the competition we face. The
market for wireless mobile and data communications services and products sales
is highly competitive on a national and international basis. The level of
competition intensifies, while the number of qualified competitors diminishes as
the level of technological and design expertise rises and product distribution
rights narrow.

        Our goal is to continuously expand our geographic coverage on the
national and international level, as well as expand upon our growing expertise
within the wireless mobile and data equipment platforms.

        We face increasing competition in our targeted markets as we expand our
geographic coverage on the national and international level, as well as expand
upon our growing expertise within the wireless mobile and data equipment
platforms. This competition covers larger mobile and network design,
installation, maintenance and monitoring projects and contracts on a national
and international basis.

        Within the market for voice and data solutions area, PMR and PAMR our
direct competitors come from the existing PMR and PAMR industry including:

        -       London Communications Ltd.

        -       Relcom Ltd.

        -       Airsys Technologies Ltd.

        -       Two-Way Radio Communications

        -       Mobile Radio (Banbury)

        -       Securicor Radio Services

        The competition base in the GSM mobile phone area is large with many
companies supplying product. The difference in Hugo supplying products is that
the supply is only to business and focused on adding value to the basic
technology. Other potential competition may come from cable operators,
commercial vehicle distributors, facilities management companies and business
communications retailers.

                                       10
<PAGE>

EMPLOYEES

        We have 18 full-time employees. Of these, 8 are in sales and marketing,
4 are in technical and distribution, and 6 are in administration. We believe our
relationship with our employees is satisfactory.

WHERE YOU CAN FIND MORE INFORMATION

        We file annual, quarterly and special reports, proxy statements and
other information with the SEC. Our SEC filings are available to the public over
the Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms.

ITEM 2. DESCRIPTION OF PROPERTIES

        Our headquarters are located at 6 Waterside Drive, Langley Business
Park, Langley Slough, Berkshire SL3 6EZ United Kingdom, where we occupy
approximately 4,500 square feet of leased space under a lease that ends in 2008.
We have an option to terminate the lease by giving notice 6 months prior to
December 25, 2003. Annual base rent under the lease is approximately $90,000. We
believe the space occupied by our staff is adequate for our current needs.

ITEM 3. LEGAL PROCEEDINGS

        As described in Item 1 above, on July 27, 2001, Telesystems
International Wireless, Inc. ("TIW"), the parent company of Dolphin, our major
airtime supplier at that time, voluntarily sought protection from its creditors
under the United Kingdom bankruptcy laws. On August 23, 2001 Dolphin ceased
doing business with us and on August 29, 2001, Dolphin served a statutory demand
upon our Hugo UK subsidiary for payment of outstanding fees for airtime service
to its customers. As a result of these actions, Hugo UK no longer provides
airtime service to its customers through Dolphin and is seeking a remedy through
the courts concerning the disputed amounts.

        As a result of the statutory demand by Dolphin, on October 12, 2001, an
order of administration was entered against Hugo UK under the United Kingdom
bankruptcy laws. The order provides Hugo UK protection from its creditors and
appoints administrators to aid Hugo UK in its day to day operations. The effects
of this on our operations is uncertain. To date, operations have proceeded
normally and we anticipate that Hugo UK will be able to meet the requirements to
successfully petition for removal of the order of administration.

                                       11
<PAGE>

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         During the last quarter of the year ended December 31, 2001, no matters
were submitted to a vote of shareholders.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        On March 15, 2001, our common stock was approved for trading on the OTC
Bulletin Board under the trading symbol "HGOI." The following table sets forth,
for the periods indicated, the range of the high and low bid quotations (as
reported by Nasdaq). The bid quotations set forth below reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not reflect
actual transactions:

<TABLE>
<CAPTION>
PERIOD                                                                      HIGH                 LOW
------                                                                      ----                 ---
<S>                                                                           <C>                <C>
Fiscal Year 2001
----------------
First Quarter (from March 15, 2001)                                           $3.25              $3.25
Second Quarter                                                                 5.60               3.25
Third Quarter                                                                  4.93               3.35
Fourth Quarter                                                                 1.15               0.26
</TABLE>

        As of April 15, 2002, there were 425 holders of record of our common
stock.

        We have never declared or paid any cash dividends on our common stock.
We currently intend to retain future earnings, if any, to finance the
development and expansion of our business and, therefore, we do not anticipate
declaring or paying any cash dividends on our common stock in the foreseeable
future. Our payment of cash dividends, if any, will depend upon our general
financial condition and other factors deemed relevant by our board of directors.

RECENT SALE OF UNREGISTERED SECURITIES

        All sales of unregistered securities by us during the year ended
December 31, 2001 were previously reported.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

        Exchange Rates

        The business of Hugo UK is predominantly conducted in Pound Sterling
Sterling and therefore the effect of movements in exchange rates can have a
significant effect on the results as reported. The exchange rate for the year of
2000 was Pound Sterling1=$1.519691 for the income statement and Pound
Sterling1=$1.493500 for the balance sheet. For the year of 2001 the income
statement rate was Pound Sterling1=1.44131 and for the balance sheet was
$1.45150. The business of Hugo Ireland is conducted in Euros from the date of
acquisition, July 1, 2001

                                       12
<PAGE>

to December 31,2001. These exchange rate movements should be borne in mind
whilst analyzing the comparative results.

OVERVIEW

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

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
      Area Number           Description                         2001 $                  2000 $                     % Change
                                                                                                                  2001 to 2000
-------------------------------------------------------------------------------------------------------------------------------
<S>                        <C>                                <C>                     <C>                          <C>
         1                 Exports                              $690,887              $1,076,133                    -35.8%
-------------------------------------------------------------------------------------------------------------------------------

         2                 Basic Products                     $1,909,393              $1,785,697                     +6.9%
-------------------------------------------------------------------------------------------------------------------------------

         3                 On-going Revenue                   $1,397,083              $1,918,755                    -27.2%
-------------------------------------------------------------------------------------------------------------------------------

         4                 Telecomms                            $105,691                $492,010                    -78.5%
-------------------------------------------------------------------------------------------------------------------------------

         5                 Solution Providers                   $139,045                $243,647                    -42.9%
-------------------------------------------------------------------------------------------------------------------------------

                           TOTAL                              $4,242,099              $5,516,242                    -23.1%
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

AREA 1 - EXPORTS

        We are a licensed reseller of Motorola products to Africa. However we
are able to sell and distribute our vehicle tracking systems on a worldwide
basis. Current export sales continue to be strong with continuing interest with
BP Amoco and their procurement agents. The decrease in 2001 from 2000 was
principally due to a reduction in sales from BP/Amoco from $392,286 in 2000 to
$99,232 in 2001, a reduction of $293,054. Our next significant order was in the
first quarter of 2002.

AREA 2 - BASIC PRODUCTS

        In addition to Motorola, we sell products from a number of manufacturers
including 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 benefit
from the high caliber sales staff that we have in this area. We are continuing
to generate significant sales in shopping mall communications and security
systems. Our main customer in this sector is the large multi-national retailer,
Marks and Spencer, and sales to them in 2001 were approximately $526,000. In the
year 2001 all of the recorded sales for Hugo Ireland of $107,928 are recorded
under this category. The main markets in Ireland include transport and taxi
operators. This sector was not affected by the termination of the Dolphin
contract.

                                       13
<PAGE>

AREA 3 - ONGOING REVENUE STREAMS

        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. However on July 27, 2001 Dolphin, who was
our single largest airtime provider, filed for bankruptcy protection and as a
result our service provider agreement was automatically terminated. Currently we
are taking advantage of our agreements with British Telecom to migrate existing
customers and add new customers to their GSM Network. For this we receive
commissions on both connections and also ongoing airtime. Although at a lower
level than with Dolphin there are significantly reduced selling costs and a
higher gross margin. As a result of these changes our sales for the year to
December 31, 2001 were $1,397,083 a reduction of $521,672 from sales in the year
to December 31, 2000 of $1,918,755.

AREA 4 - TELECOMMUNICATIONS SOLUTIONS

        During 1999 opportunities began to become evident for us to enter the
telecommunications marketplace, in particular the switch (a telephone exchange
unit) and DECT (digitally enhanced cordless telephony) markets. However the
general economic factors in the UK mean that many potential customers are
deferring decisions for these significant capital projects. Although we will
continue to take any opportunities in this business sector we achieved
disappointing sales of $105,691 for the year ended December 31, 2001.

AREA 5 - SOLUTION PROVIDERS

        Hugo International has always recognized that exploiting available
technologies can add significant value to customers. Total sales in this area
were $139,045 for the year ended December 31, 2001. We have, during the final
quarter of 2001, changed our major supplier of this equipment. The changes have
led to a temporary reduction in the business activity but we expect a
significant upturn in sales during 2002. The main demand for these services
continue to be in vehicle distribution and machinery hire companies, although we
believe that there are opportunities to exploit these services among other
industries.

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001 COMPARED TO THE YEAR
ENDED DECEMBER 31, 2000

REVENUES

        Revenues for the year ended December 31, 2001 were $4,242,099 as
compared to $5,516,242 for the year ended December 31, 2000, a decrease of
$1,274,143, or 23%. The major areas of change were as follows, (i) we have the
recorded sales for Hugo Ireland of $107,928, which were not included in 2000,
(ii) the decreases are primarily due to the termination of our Dolphin
relationship and the timing of the significant BP Amoco orders which re-started
in the first quarter of 2002. Telecom sales are also down due to both external
market conditions and internal staffing reductions.

                                       14
<PAGE>

COST OF REVENUES

        Cost of Revenues for the year ended December 31, 2001 was $2,787,781, or
66% of revenues, as compared to $3,593,454, or 65% of revenues, for the year
ended December 31,2000. The reduction in cost of revenues was fundamentally in
line with the reduced revenues. As a result of the foregoing, gross profit was
reduced by $468,470 in 2001 to 34% of revenues from 35% of revenues in 2000. The
decrease in gross profit percentage is primarily due to the change in revenue
mix.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

        Selling, general and administrative expenses were $3,066,020, or 72% of
revenues, in 2001 as compared to $2,748,362, or 50% of revenues, in 2000. During
2001 we have also incurred an impairment charge of $581,566 which represents the
write-off of goodwill held in Hugo UK as a result of the cancellation of the
Dolphin contract. Excluding the aforementioned item, selling, general and
administrative expenses increased by $317,658, or 12%, for the year ended
December 31, 2001 compared with the comparable period of 2000. The increase is
primarily due to the following factors, (i) the inclusion of Hugo Ireland of
$68,388, (ii) the increase in the allowance of doubtful accounts of $319,000 as
a result of the termination of the Dolphin contract, (iii) the increase in
salaries by $116,700 in Hugo UK. There were also savings on overhead of $44,800
for reduced office supply purchases, $32,800 on bank and finance charges,
$13,000 on marketing and $13,500 on premises in Hugo UK and a reduction in the
parent company costs of professional fees of $56,800. Goodwill amortization for
2001 was approximately $126,000. Commencing January 2002, goodwill will no
longer be amortized. Impairment reviews may result in future period write-downs.

INTEREST EXPENSE

        Interest expense for the year ended December 31, 2001 was $89,156, as
compared to $125,013 for the comparable period in 2000. This reflects the
reduced borrowings throughout the year, including the termination of the Five
Arrows Discount Agreement in November 2000.

LOSS BEFORE INCOME TAXES

        The preceding factors combined to show an increase in the loss before
tax of $2,282,424 for the year ended December 31, 2001, as compared to a loss of
$950,987 for the year ended December 31, 2000.

LIQUIDITY AND CAPITAL RESOURCES

        The Company had a working capital deficit of $2,023,662 at December 31,
2001 which represented an increase of $1,123,001 from the working capital
deficit of $900,661 at December 31, 2000. The increase in the deficit is mainly
due to the reduction in net accounts receivable of $552,498 reflecting reduced
sales and the increase in allowance for doubtful accounts and increases in
current liabilities of $743,210 which includes liabilities subject to compromise
under the United Kingdom bankruptcy laws, offset by the increase in cash of
$212,705.

                                       15
<PAGE>

        Our investing activities used cash of $32,296 and $34,106 for the years
ended December 31, 2001 and 2000, respectively, principally for the acquisition
of property and equipment.

        Our financing activities provided cash of $339,813 for the year ended
December 31, 2001. The principal source of cash was the issuance of Series A
Convertible Preferred Stock of $450,000 and an additional capital contribution
by shareholders of $200,000. We decreased our bank overdraft during the year
ended December 31, 2001 by $280,812 to $0. Our financing activities provided
cash of $909,823 for the year ended December 31, 2000.

        As described in Note 2, "Going Concern" to the accompanying consolidated
financial statements, there is substantial doubt as to our ability to continue
as a going concern. We have incurred a net loss for the year ended December 31,
2001 of approximately $2,352,000, we have negative working capital of
approximately $2,024,000 as of December 31, 2001, and our liabilities exceed our
assets by approximately $1,575,000 at December 31, 2001.

        These conditions would raise substantial doubt about our ability to
continue as a going concern. Present management has set the following objectives
for fiscal 2002/2003 to enable us to continue as going concern:

        -       Continue to maximize our sales revenues in all areas of our
                sales strategy. We believe that our long term investments in
                ongoing revenue and partnership with BT, our co-operative
                partnership with Motorola in the export markets, our continuing
                good relationship with BP/Amoco and our development of the
                vehicle tracking system in the Solution Provision area will
                enable us to meet our objectives. The purchase of Hugo Ireland,
                Ltd. will continue to provide additional revenue. 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.

        -       Continue to reduce 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. During 2001 we incurred
                significant expenses with regard to the termination of the
                Dolphin contract of around $900,000 and the costs of the
                Administration of Hugo International Limited were around
                $23,000. We do not anticipate a repeat of this expense in 2002
                although there will be ongoing costs associated with the
                Administration. It is the intention of the Directors of Hugo
                International Limited to successfully petition for the removal
                of the order of administration. The timing and implications for
                the company are not yet known.

        We are considering raising additional funds through private offerings of
our shares. This would enable us to further reduce our long-term debt position
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. The appointment of a credit manager in January 2002 is already having a
noticeable improvement in reducing the aging of our accounts receivable.

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

                                       16
<PAGE>

FACTORS THAT MAY AFFECT OUR FUTURE RESULTS AND FINANCIAL CONDITIONS

        Investing in our securities involves a high degree of risk. In addition
to the other information contained in this annual report, including the reports
we incorporate by reference, you should consider the following factors before
investing in our securities.

WE EXPECT NET LOSSES TO OCCUR THROUGH AT LEAST 2002

        We incurred net losses in 2001 of $2,351,870 and we expect to continue
experiencing losses through at least the end of the year 2002. Because we expect
to continue to incur significant product development, sales and marketing, and
administrative expenses, we will need to generate significant revenues to become
profitable and sustain profitability on a quarterly or annual basis. We may not
achieve or sustain our revenue or profit goals. To the extent that increases in
operating expenses are not matched by increased revenue, our business, operating
results and financial condition will be harmed.

WE WILL LIKELY NEED ADDITIONAL FINANCING IN ORDER TO FULLY IMPLEMENT OUR
BUSINESS PLAN

        To date, we have had insufficient revenues to satisfy our ongoing
expenses of operation and we have been funded, in part, by loans from David W.
Foden our controlling stockholder. Due to our history of losses, we cannot
assure you that we will ever be profitable. If we do not become profitable or
obtain additional financing, we will be unable to continue our current level of
operations and fully implement our growth objectives outlined in our business
plan. As a result, we cannot assure you we will have adequate capital to
implement future expansion and enhancement of our communications systems, to
maintain our current level of operation or to pursue strategic acquisitions. Our
failure to obtain sufficient additional financing could result in the delay or
abandonment of some or all of our development, expansion and acquisition plans,
which could have an negative effect on us and on the value of our common stock.
See "Management's Discussion and Analysis or Plan of Operations" for a more
detailed discussion of our losses, sources of funds for operations and other
financial information and "Description of Business" for a more detailed
discussion of our growth objectives.

WE MAY NOT BE ABLE TO OBTAIN ADDITIONAL FINANCING

        We currently have no legally binding commitments or understandings with
any third parties to obtain any additional financing. We cannot assure you that
we will be able to obtain any additional financing in the amounts or at the
times we may require the financing, or if we do obtain any financing that it
would be on acceptable terms. Moreover, our access to additional funds may be
limited by:

        -       market conditions affecting the business communications
                industry; and

        -       specific factors affecting our attractiveness as a borrower or
                an investment vehicle including:

                -       the potential commercial opportunities and risks
                        associated with implementation of our business plan;

                -       the market's perception of our performance and assets;
                        and

                -       the actual amount of cash we need to pursue our business
                        strategy.

                                       17
<PAGE>

BECAUSE OUR COMMON STOCK PRICE, LIKE THAT OF MANY TECHNOLOGY COMPANIES, IS
LIKELY TO BE HIGHLY VOLATILE THE MARKET PRICE OF OUR COMMON STOCK MAY BE LOWER
THAN YOU EXPECTED

        The market price of our common stock is likely to be highly volatile,
because the stock market in general, and the market for technology companies in
particular, have experienced significant volume and price fluctuations. You may
not be able to resell your shares following periods of volatility because of the
market's negative reaction to that volatility. The trading prices of many
technology companies' stocks have reached historical highs within the last year
and have reflected relative valuations substantially above historical levels.
However, during the same period, these companies' stocks have also been highly
volatile and several companies' stocks have recorded lows well below their
historical highs. These factors may significantly and negatively affect the
price of our common stock, regardless of our operating performance.

BECAUSE OUR OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS, WE MAY
NOT MEET EXPECTATIONS OF INVESTORS AND ANALYSTS AND OUR STOCK PRICE, IF A MARKET
IS ESTABLISHED, MAY DECLINE

        If our operating results do not meet expectations of investors and
analysts in a particular quarter, the price of our common stock could decline.
The rapidly evolving business communications market makes it difficult to
predict our operating results. Our operating results depend on a variety of
factors, including the following:

        -       continued growth in the use and quality of wireless
                communications products;

        -       the rate at which we are able to acquire new customers;

        -       introduction of new vehicle and asset tracking solutions;

        -       changes in our revenue arrangements with wireless network
                operators;

        -       timing of introduction of new products and services;

        -       changes in pricing policies and product offerings by us or our
                competitors;

        -       costs associated with advertising, marketing and promotional
                efforts to acquire customers; and

        -       capital expenditures and other costs and expenses related to
                improving our business, expanding our operations and adapting to
                new technologies and changes in customer preferences.

        In addition, our operating expenses are based on our expectations of the
future demand for our products and services. Moreover, we frequently will incur
expenses in connection with integration and offering of products and services,
which are likely to be incurred well in advance of related revenues. We may be
unable to adjust spending quickly enough to offset any unexpected demand
shortfall or delay in offering our products and services. As a result, our
operating results are likely to fluctuate from period to period.

WE HAVE A LIMITED OPERATING HISTORY ON WHICH TO EVALUATE US

        Because we have recently shifted our focus significantly in order to
take advantage of advances in wireless communications technology, we should be
viewed as an early stage enterprise notwithstanding the fact that we have been
engaged in business operations for approximately nine years. We expect to spend
significant resources on expanding our products and services and promoting our

                                       18
<PAGE>

brand name for the foreseeable future. We face a number of risks encountered by
early stage companies in the wireless data and equipment communications
industry, including:

        -       the uncertainty of market acceptance of our new products and
                services;

        -       our substantial dependence on products with only limited market
                acceptance to date;

        -       our need to introduce reliable and robust products that meet the
                demanding needs of mobile individuals, wireless network
                operators, Internet media networks, corporate enterprises and
                wireless handset manufacturers;

        -       our need to expand our product development, marketing, sales,
                consulting and support organizations, as well as our
                distribution channels; and

        -       our ability to anticipate and respond to market competition.

BECAUSE WE OPERATE IN A NEW AND RAPIDLY DEVELOPING MARKET, OUR FUTURE
PROFITABILITY IS UNCERTAIN

        Although we were founded in 1992, increased growth in digital wireless
capabilities has occurred fairly recently and, as a result, the focus of our
business has changed significantly. Due to changes in technology and the
emergence of digital communications networks, our business has expanded from
providing radio communications systems to providing complete mobile and wireless
data communications solutions. As a result, we face a number of risks
encountered by companies in the rapidly evolving wireless data communications
market and when making your investment decision, you should consider the risks,
expenses and difficulties that we may encounter or incur in a new and rapidly
evolving market. Our business strategy may not be successful, and we may not
successfully address these risks.

WE MAY BE UNABLE TO ANTICIPATE AND ADAPT IN A TIMELY MANNER TO TECHNOLOGICAL
CHANGES

        Our future success depends, in part, on our ability to anticipate and
adapt in a timely manner to technological changes. New products and technologies
will emerge and existing products and technologies will further develop. We
cannot predict the effect of these technological changes on our business. While
changes in technology can create new demand for products and services that we
may provide, these new products and technologies may reduce the demand in the
future for products and services that we currently offer. Alternately, such
changes in technology may be made available to us for sale or distribution. As a
result, our most significant competitors in the future may be new entrants to
our markets with access to new technology and products, who would not be
burdened by a technical personnel base familiar with older technology and
equipment. Although we are constantly training our personnel on the latest
technologies and equipment, it may be cost prohibitive for us to retrain
personnel on an entirely new hardware/software platform.

AN INCREASE IN MARKET COMPETITION COULD HAVE A NEGATIVE IMPACT ON OUR BUSINESS

        Our markets are new, rapidly evolving and highly competitive, and we
expect this competition to persist and intensify in the future. This increase in
competition could lead to price reductions, decreased sales-volume,
under-utilization of employees, reduced operating margins and loss of market
share. There can be no assurance that we will be able to successfully compete
for customers in our targeted markets.

                                       19
<PAGE>

        Our failure to maintain and enhance our competitive position could
seriously harm our business and operating results. We encounter current or
potential competition from a number of sources, including:

        -       Equipment manufacturers

        -       Equipment distributors

        -       Network integrators

WE FACE COMPETITION FROM ESTABLISHED COMPETITORS

        Many of our competitors have significantly greater financial, technical
and marketing resources, and/or greater name recognition. As a result, some of
our competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements than we can. Some of our
competitors have longer operating histories and greater overall resources than
we do. Many of these companies have more extensive customer bases and broader
customer relationships that they could leverage, including relationships with
many of our current and potential customers. These companies also have
significantly more established customer support and professional services
organizations than we do.

BECAUSE WE HAVE NON-EXCLUSIVE AGREEMENTS WITH BT CELLNET, MOTOROLA, AND KENWOOD
WHICH SUPPLY US WITH TECHNOLOGY AND EQUIPMENT, OUR COMPETITORS MAY BE ABLE TO
OBTAIN ARRANGEMENTS SIMILAR TO OURS

        Our existing agreements with the companies that supply a significant
portion of our equipment and technology are non-exclusive. All of these
suppliers have established relationships with our competitors. If our
competitors were able to obtain similar or more competitive arrangements with
our suppliers, our business and growth prospects would suffer.

BT CELLNET, MOTOROLA AND KENWOOD MAY BECOME OUR COMPETITORS

        The companies that supply our equipment and technology could become our
competitors by offering the same or similar equipment and services directly to
our targeted markets. These companies are substantially larger, more established
than Hugo and have access to greater financial, technical, and marketing
resources. If these companies began competing directly with us, our business and
growth prospects would suffer.

OUR ABILITY TO COMPETE BASED ON THE PRICE OF OUR PRODUCTS AND SERVICE OFFERINGS
WILL BE LIMITED

        Factors affecting our ability to provide competitive pricing in our
targeted markets include the following:

        -       Some of our competitors are financially stronger than we are,
                which allows them to price their service packages at levels
                below those that we can or are willing to match.

        -       Our equipment may be more expensive than some competitors, which
                may negatively affect our growth and operating results.

                                       20
<PAGE>

WE MAY FACE CONTINUING PRESSURE TO REDUCE PRICES, WHICH COULD NEGATIVELY AFFECT
OPERATING RESULTS AND THE VALUE OF YOUR INVESTMENT.

        Our technology and equipment are sourced from leading suppliers in each
segment of our targeted markets so that we can have the best of breed products
in each market. The competitiveness of the pricing of these products is
therefore dependent on the choice of the product supplier.

        Over the past several years, as the number of wireless communications
service and product providers in our market areas has increased, our
competitors' prices in these markets have generally decreased. We may encounter
further market pressures to:

-   reduce our digital mobile communications products offering prices;

-   respond to particular short term, market specific situations, for example,
    special introductory pricing or packages that may be offered by new
    providers launching their service in a particular market; or

-   reduce prices if BT Cellnet generally continue to reduce the prices charged
    to their customers.

WE CANNOT PREDICT WHETHER DEMAND FOR OUR PRODUCTS AND SERVICES WILL CONTINUE TO
DEVELOP, PARTICULARLY AT THE VOLUME OR PRICES THAT WE NEED TO BECOME CASH FLOW
POSITIVE.

        Although wireless and mobile device usage is growing rapidly, we cannot
be certain that this growth will continue in its present form, or at all. We
believe our success ultimately will depend upon, among other things, our ability
to:

        -       increase awareness of Hugo's brand and the availability of our
                products and services;

        -       continue to attract and develop relationships with wireless data
                communications; technology and equipment providers; and

        -       continue to attract and retain customers.

IF WIRELESS AND MOBILE DEVICES MARKETED BY US ARE NOT WIDELY ACCEPTED BY
BUSINESSES TO ADDRESS THEIR COMMUNICATIONS NEEDS, OUR BUSINESS WILL BE ADVERSELY
AFFECTED

        Our future success depends, in part, on the acceptance of the wireless
and mobile devices we market by businesses to address their communications
needs. We cannot assure you that wireless and mobile users will accept the use
of handheld devices to receive data and services essential to their business
operations. Most businesses currently use computers to access the Internet and
remotely retrieve real-time information and e-mail. Computers are generally
designed for the visual presentation of data, while, historically, wireless
devices have been limited to messaging by letters, numbers and a limited number
of symbols.

IF WE ARE UNABLE TO MAINTAIN, IMPROVE AND DEVELOP OUR PRODUCTS AND SERVICES, WE
MAY NOT ACHIEVE PROFITABILITY

        In order to become profitable, we need to maintain and improve our
current products and services and to develop or license new ones on a timely
basis. If we cannot effectively maintain, improve and develop products and
services we may not be able to recover our fixed costs or otherwise become
profitable. We may not be able to develop and introduce new products, services
and

                                       21
<PAGE>

enhancements that respond to technological changes, evolving industry standards
or customer needs and trends on a timely basis. Because of the complexities
inherent in our offerings, major new wireless data services, applications,
business communications systems and service enhancements may require long
development and testing periods. We may experience difficulties that could delay
or prevent the successful development, introduction or marketing of new
products, services and service enhancements. These new products, services and
service enhancements may not achieve market acceptance or our competitors may
develop alternative technologies that gain broader market acceptance than our
products and services.

IF OUR NEW WIRELESS COMMUNICATIONS TECHNOLOGY DOES NOT PERFORM IN A MANNER THAT
MEETS CUSTOMER EXPECTATIONS, WE WILL BE UNABLE TO ATTRACT AND RETAIN CUSTOMERS

        Customer acceptance of the services we offer is and will continue to be
affected by technology-based differences and by the operational performance and
reliability of transmissions on our communications systems. If we are unable to
address and resolve satisfactorily performance or other transmission quality
issues as they arise, or if these issues limit our ability to expand the
coverage or capacity as currently planned, or if these issues were to place us
at a competitive disadvantage to other wireless communications equipment and
service providers in our markets, we may have difficulty attracting and
retaining customers.

IF WE DO NOT RESPOND EFFECTIVELY AND ON A TIMELY BASIS TO RAPID TECHNOLOGICAL
CHANGE, OUR PRODUCTS AND SERVICES MAY BECOME OBSOLETE AND WE MAY LOSE SALES

        We may not be successful in developing and marketing, on a timely and
cost-effective basis, new products and services that respond to technological
changes, evolving industry standards or changing customer and supplier
requirements. The market for business communications is characterized by rapidly
changing technologies, industry standards, customer needs and competition, as
well as by frequent new product and service introductions. Our products and
services must also be compatible with a variety of communications networks Our
ability to grow and achieve profitability will depend, in part, on our ability
to accomplish all of the following in a timely and cost-effective manner:

        -       effectively use and integrate new wireless and data
                technologies;

        -       continue to develop our technical expertise;

        -       enhance our wireless data, engineering and system design
                services;

        -       develop applications to suit business customer needs; and

        -       influence and respond to emerging industry standards and other
                changes.

BECAUSE THE ADOPTION CYCLE FOR OUR PRODUCTS AND SERVICES BY OUR CUSTOMERS WHO
BUY OUR PRODUCTS AND SERVICES MAY BE LONG, OUR STOCK PRICE COULD DECLINE IF
REVENUES ARE DELAYED

        We cannot predict the rate of adoption by government agencies and
business customers of our products and services or the price they may be willing
to pay for our products and services in the future. This may cause a delay in
revenue realization and negatively affect our operating performance. Also,
fluctuations in our operating performance are exacerbated by the length of time
between our first contact

                                       22
<PAGE>

with a potential customer and the first revenue from sales of products and/or
services to such customer. If our operating performance does not meet investor
expectations as a result of these delays, our stock price and the value of your
investment may decline.

WE DEPEND ON INCREASED BUSINESS FROM OUR CURRENT CUSTOMERS

        If we fail to generate repeat and expanded business from our current
customers, our business and operating results would be seriously harmed. Many of
our customers initially make a limited purchase of our products and services for
pilot programs. These customers may not choose to purchase additional products
or services from us. Because the total amount of maintenance and support fees we
receive in any period, which constitutes a substantial portion of our revenues,
depends in large part on the products we previously sold, any downturn in our
sale of products would negatively impact our future service revenues. In
addition, if customers elect not to renew their maintenance agreements, our
service revenues could be significantly negatively affected.

CONCERNS ABOUT HEALTH RISKS RELATING TO THE USE OF WIRELESS COMMUNICATIONS
DEVICES MAY AFFECT OUR PROSPECTS AND THE VALUE OF YOUR INVESTMENTS

        Portable communications devices have been alleged to pose health risks,
including cancer, due to radio frequency emissions from these devices. Studies
performed by wireless telephone equipment manufacturers have investigated these
allegations, and additional studies are ongoing. The actual or perceived risk of
wireless communications devices could negatively affect us through a reduced
customer growth rate, a reduction in customers, reduced network usage per
customer or through reduced financing available to the mobile communications
industry.

WE DEPEND UPON THIRD-PARTY DISTRIBUTION RELATIONSHIPS

        We have a limited number of distributorship agreements and we may not be
able to increase our number of distribution relationships in the future or
maintain existing relationships or obtain rights to new product offerings.
Currently, our distributorship agreements authorize us to act as a distributor
of communications products and technology for various vendors, including:

-   BT Cellnet

-   Motorola

-   Kenwood

        Our current agreements with these suppliers do not prevent them from
doing business with others, and we cannot guarantee that we will continue to
receive the volume of products that we need at all times. Periodically, these
distribution agreements expire and must be renegotiated in order to continue
distributing each vendor's products at competitive prices. Certain of our
distribution agreements are merely oral contracts that may be terminated by
either party at will. This is also true of certain of our written contracts. As
a result, we cannot be certain that any vendor with whom we do business will
elect to continue their relationship with us in the future on substantially the
same terms and conditions. We believe that an interruption, or substantial
changes in our distribution relationships, particularly with BT Cellnet could
have a significant negative effect on our business, operating results and/or
financial condition.

                                       23
<PAGE>

BECAUSE WE DEPEND UPON WIRELESS NETWORKS FOR ACCESS TO SUFFICIENT CAPACITY AND
LEVEL OF SERVICE QUALITY, WE MAY BE UNABLE TO DELIVER OUR PRODUCTS AND SERVICES
TO OUR USER BASE AND REVENUE COULD DECREASE

        Our ability to grow and achieve profitability depends in part on our
ability to access sufficient capacity on the networks of wireless carriers such
as BT Cellnet and on the reliability and security of their systems. The airtime
purchased by our customers is provided by transmission services of these third
parties. We depend on these companies to provide uninterrupted and quality
service and would not be able to service our mobile phone users' needs if our
wireless network operators fail to provide the required capacity or level of
service.

DEPENDENCE UPON CURRENT KEY PERSONNEL FOR OUR SUCCESS

        If any officers or the following key personnel cease employment with us
before we find qualified replacements, it might have a significant negative
impact on our operations and overall business. Our success is dependent upon the
personal efforts and abilities of our executive officers, including David W.
Foden, Chairman and Chief Executive Officer and Michael Christmas, Chief
Financial Officer. Currently, we maintain key man life insurance solely on David
W. Foden.

IF WE LOSE KEY MANAGEMENT OR OTHER PERSONNEL, WE MAY EXPERIENCE DELAYS IN OUR
PRODUCT DEVELOPMENT AND OUR GROWTH PROSPECTS

        Our growth and success also depends on our ability to attract, hire and
retain additional highly qualified management, technical, marketing and sales
personnel. These individuals are in high demand and we may not be able to
attract the staff we need. The hiring process is intensely competitive, time
consuming and may divert the attention of our management from our operations.
Competitors and others have in the past, and may in the future, attempt to
recruit our employees. If we lose the services of any of our senior management
or key technical personnel, or if we fail to continue to attract qualified
personnel, our business could suffer.

WE MAY BE UNABLE TO HIRE THE NECESSARY PERSONNEL TO EXPAND OUR MARKETING AND
SALES OPERATIONS.

        We need to expand our marketing and direct sales operations in order to
increase market awareness of our product and service offerings and generate
increased revenue. We cannot be certain that we will be able to expand our
marketing staff and sales force or that the cost of establishing such a
marketing staff or sales force will not exceed our revenues. Competition for
qualified sales personnel is intense and we may not be able to hire enough
qualified individuals in the future. Our products and services require a
sophisticated sales effort targeted at the senior management of our prospective
customers. In addition, we will require personnel with experience marketing
products on a broad basis to a large number of potential customers, an area in
which we currently have limited experience. New hires require extensive training
and typically take at least six months to achieve full productivity.

BECAUSE OUR BUSINESS HAS GROWN RAPIDLY, WE MAY NOT BE ABLE TO EFFECTIVELY MANAGE
OUR GROWTH

        Our growth has placed, and any further growth is likely to continue to
place, considerable strain on our management team and other personnel, our
internal accounting and management information

                                       24
<PAGE>

systems and the third-party systems on which we depend. If we fail to manage our
growth effectively our business will be negatively affected. Our growth plans
are likely to continue to place a significant strain on our personnel, and we
believe that our current accounting and management information systems are
inadequate to handle our anticipated growth. We are actively attempting to hire
new employees to help us manage our growth, and we are evaluating supplementing
or replacing our accounting and other systems to enable us to manage our
expansion. Our failure to hire additional personnel or to improve our systems
increases the risk that we will not be able to achieve our growth objectives or,
if achieved, we will not be able to manage our operations effectively.

IF WE ACQUIRE OR INVEST IN ANOTHER COMPANY, THIS MAY DISRUPT OUR BUSINESS OR
DISTRACT OUR MANAGEMENT

        We have limited experience in acquiring businesses, technologies,
services or products. From time to time, we engage in discussions and
negotiations with companies regarding our acquiring or investing in these
companies' businesses, products, services or technologies. If we acquire or
invest in another company, we could have difficulty assimilating that company's
personnel, operations, products, services, technology and software. In addition,
the key personnel of the acquired company may decide not to work for us. These
difficulties could disrupt our ongoing business, distract our management and
employees, increase our expenses and negatively affect our results of
operations. Also, we may have to take on additional debt or issue stock to pay
for any future acquisitions. If we issue stock, it may dilute the stockholdings
of our existing stockholders. As of December 31, 2001, we had no agreement to
enter into any significant investment or acquisition transaction.

WE ARE CONTROLLED BY OUR DIRECTORS AND OFFICERS

        As of April 15, 2002, our current directors and officers beneficially
own approximately 53.4% of our outstanding common stock. As a result, our
current directors and officers will continue to exercise control over the
affairs of Hugo, including the ability to elect directors and determine the
outcome of votes by our stockholders on all corporate matters, including
mergers, sales of all or substantially all of our assets, charter amendments and
other matters requiring stockholder approval.

SINCE WE OPERATE IN A REGULATED INDUSTRY, WE MAY BE NEGATIVELY AFFECTED BY
GOVERNMENTAL REGULATION

        There are an increasing number of laws and regulations pertaining to
wireless telephony and the Internet under consideration in the United Kingdom
and elsewhere. Our wireless technology and equipment suppliers are subject to
regulation by governmental agencies and regulations that affect them and as a
result Hugo, could increase our costs or reduce our ability to continue
distributing our suppliers' products and services.

BECAUSE WE MAY NOT BE ABLE TO PROTECT OUR PROPRIETARY RIGHTS ,WE MAY INCUR
SUBSTANTIAL COSTS TO DEFEND OR PROTECT OUR BUSINESS AND INTELLECTUAL PROPERTY

        If we fail to protect our intellectual property, we may be exposed to
expensive litigation or risk jeopardizing our competitive position. The steps we
have taken may be inadequate to protect our technology and other intellectual
property. We may have to litigate to enforce our intellectual property

                                       25
<PAGE>

rights, to protect our trade secrets or to determine the validity and scope of
the proprietary rights of others. This litigation could result in substantial
costs and the diversion of our management and technical resources, which could
harm our business.

BECAUSE WE MAY NOT BE ABLE TO AVOID CLAIMS THAT WE INFRINGED THE PROPRIETARY
RIGHTS OF OTHERS, WE MAY INCUR SUBSTANTIAL COSTS TO DEFEND OR PROTECT OUR
BUSINESS AND INTELLECTUAL PROPERTY

        Although we have taken steps to avoid infringement claims from others,
these measures may not be adequate to prevent others from claiming that we
violated their patents, other trademarks or other proprietary rights. Any claim
of infringement could cause us to incur substantial costs defending against the
claim, even if the claim is invalid, and could distract our management from our
business. A party making a claim could secure a judgment that requires us to pay
substantial damages.

BECAUSE WE INTEND TO EXPAND INTERNATIONALLY, WE WILL BE SUBJECT TO RISKS OF
CONDUCTING BUSINESS IN FOREIGN COUNTRIES

        If, as we anticipate, we expand our operations outside of the United
Kingdom, we will be subject to the risks of conducting business in foreign
countries, including:

-   our inability to adapt our products and services to local cultural traits,
    customs and mobile user preferences,

-   our inability to locate qualified local employees, partners and suppliers,

-   the potential burdens of complying with a variety of foreign laws, trade
    standards and regulatory requirements, including the regulation of wireless
    communications and products and the uncertainty regarding liability for
    information retrieved and replicated in foreign countries;

-   geopolitical risks, such as political and economic instability and changes
    in diplomatic and trade relationships;

-   political, economic and social conditions in the foreign countries where we
    conduct operations;

-   currency risks and exchange controls;

-   potential inflation in the applicable foreign economies;

-   the impact of import duties on the cost or prices of equipment;

-   foreign taxation of earnings and payments received by us from our
    subsidiaries and affiliates; and

-   regulatory changes affecting the telecommunications industry and wireless
    communications.

        We cannot be certain that the risks associated with our anticipated
foreign operations will not negatively affect our operating results or
prospects, particularly as these operations expand in scope, scale and
significance.

ITEM 7. FINANCIAL STATEMENTS

        The consolidated financial statements of Hugo International Telecom,
Inc. and its subsidiaries including the notes thereto, together with the reports
thereon of Mahoney Cohen & Co., CPA and Pender Newkirk & Company, CPAs is
presented beginning at page F-1.

                                       26
<PAGE>

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

        (a)     On October 3, 2001, we selected the firm of Mahoney Cohen &
Company, CPA, P.C. ("MCC") as our new independent auditor. We simultaneously
dismissed Pender Newkirk & Company, CPAs ("Pender") as its independent auditor.
Our Board of Directors approved these actions.

         Pender's report on our financial statements for the fiscal years ended
December 31, 2000 and December 31, 1999, did not contain an adverse opinion, a
disclaimer of opinion or any qualifications or modifications related to
uncertainty, limitation of audit scope or application of accounting principles,
except that Pender's report on our financial statements for the fiscal years
ended December 31, 2000 and December 31, 1999 contain a modification as to the
uncertainty of our ability to continue as a going concern.

        During the fiscal years ended December 31, 1999 and December 31, 2000
and through the date of termination of the engagement, there were no
disagreements with Pender on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure with respect to
our financial statements that, if not resolved to Pender's satisfaction, would
have caused Pender to make reference to the subject matter of the disagreement
in connection with Pender's report.

        During the fiscal years ended December 31, 1999 and December 31, 2000,
and through the date of termination of the engagement, there have been no
reportable events as defined in Item 304(a)(1)(v) of Regulation S-K promulgated
by the Securities and Exchange Commission (the "Commission").

        Pender furnish it with a letter addressed to the Commission stating that
it agrees with the above statements. Such letter was filed as an exhibit to an
amendment to the report on Form 8-K as filed on October 17, 2001.

        The Company has not consulted with MCC regarding the application of
accounting principles to a specified transaction or the type of audit opinion
that might be rendered on the Company's financial statements during the two most
recent fiscal years through the present.

                                       27
<PAGE>

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT.

        Our executive officers, directors and other significant employees and
their ages and positions are as follows:

<TABLE>
<CAPTION>
Name of Individual                 Age   Position with News Communications and Subsidiaries
------------------                 ---   --------------------------------------------------
<S>                                <C>   <C>
David W. Foden                     48    Chairman of the Board, President and Director of the company
Michael Christmas                  46    Director, Secretary and Treasurer of the company
Ian Bowles                         55    Director of the Company
Raj Sangha                         33    International Sales Manager of Hugo International Limited.
Andrew Wood                        34    General Manager of Hugo International Limited
Andrew Pearce                      31    Sales Manager of Hugo International Limited
</TABLE>

----------------

        DAVID W. FODEN has been a director and Chairman of the Board and
President of Hugo since its formation in February 2000. Mr. Foden also has been
a managing director of Hugo since 1992.

        MICHAEL CHRISTMAS has been a director, Secretary, Treasurer and
Financial Controller of Hugo since its formation in February 2000. Mr. Christmas
also has been a director, company secretary and the finance director of Hugo
International Ltd. since February 2000. He also has been the financial
controller of Hugo International Ltd. since September 1999. Mr. Christmas was
the financial controller of Thatch International Ltd., a private United Kingdom
company, from September 1997 until September 1999 and the financial controller
of United Barcode Industries Ltd., a private United Kingdom company and a
subsidiary of United Barcode Industries Ab, a public company organized under the
laws of Sweden, from September 1994 until September 1997.

        IAIN BOWLES has been a director of Hugo since its formation in February
2000. Mr. Bowles also has been a non-executive director of Hugo International
Ltd. since February 2000. Mr. Bowles also is a managing director of Beechfirst
Ltd. and Standard Platform Ltd, private United Kingdom companies. Mr. Bowles
also has served as a consultant to Beechfirst Ltd. since January 1997.

        RAJ SANGHA has been with Hugo International since December 1996 and is
the international Sales Manager. He graduated from the University of East London
in 1990 with a BSc in Applied Economics and majored in International and
Financial Economics. Mr. Sangha was previously employed at the Department of
Education and Employment from 1992 to 1996 within Finance and Adjudication,
before moving to Hugo International Limited in 1996. Mr. Sangha has been
instrumental in growing and developing International business within Hugo
International Limited.

        ANDREW WOOD has been with Hugo International since January 2001 and
appointed General Manager in October 2001. After completing studies in Marine
Electronic Engineering at Glasgow

                                       28
<PAGE>

College of Nautical Studies in 1982, Mr. Wood worked for Motorola Limited until
1996 in a variety of Technical positions. In 1994 he moved to Germany with
Motorola Limited to manage their Central and Eastern European Technical and
Training Support. In 1996 Mr. Wood joined Zetron Inc. as Distribution Manager
with all sales in Europe, Middle East and Africa.

        ANDREW PEARCE has been with Hugo International since July 2001 as Sales
Manager. Mr. Pearce worked for Securicor Limited from January 1992 - January
2000 in a variety of Sales roles finishing as Major Account Manager working with
blue chip clients. From February 2000 to July 2001 he worked for BRP Limited,
firstly as Major Account Manager and latterly as Sales and Marketing manager.

        The directors serve until the next annual meeting of stockholders and
until their respective successors are elected and qualified. Officers serve at
the discretion of the Board of Directors. There are no family relationships
among the directors, officers or key employees.

DIRECTOR COMPENSATION

        We have no established compensation arrangements with our directors but
directors may be reimbursed for their reasonable expenses incurred in connection
with the attendance at board and committee meetings.

        Compliance with Section 16(a) of the Exchange Act

        Section 16(a) of the Securities Exchange Act of 1934 requires a
company's officers, directors and persons who own more than ten percent of a
registered class of such company's equity securities to file reports of
ownership and changes in ownership with the SEC. Officers, directors and ten
percent stockholders are required by regulation to furnish us with copies of all
Section 16(a) forms they file.

        During fiscal 2001, the following individuals were late with their
filings: David Foden has not reported on Form 4 the 9,585 shares that he
acquired on July 1, 2001 in exchange for his shares in Hugo Ireland. Michael
Christmas failed to report on Form 4 the acquisition of 1,000 shares of our
Common Stock on February 27, 2001.

ITEM 10. EXECUTIVE COMPENSATION.

SUMMARY COMPENSATION TABLE

        The following table details information for Hugo, Hugo International
Limited and Hugo Ireland for each of the fiscal years ended December 31, 2001,
2000 and 1999 concerning compensation of:

        all individuals serving as the company's chief executive officer during
the fiscal years ended December 31, 2001, 2000 and 1999; and

        each other executive officer or key employee of the company whose total
annual salary and bonus exceeded $100,000 for the fiscal years ended December
31, 2001, 2000 and 1999:

                                       29
<PAGE>

<TABLE>
<CAPTION>
                                                                                                     Other Annual
                                                             Annual Compensation                     Compensation
                                               ------------------------------------------------- ---------------------
                                                                    Salary            Bonus
Name and Principal Position                         Year              ($)              ($)               ($)
---------------------------------------------- --------------- ------------------ -------------- ---------------------
<S>                                                 <C>           <C>                 <C>            <C>
David W. Foden, Chairman of the Board and           2001          $183,335(1)         $     0        $       0
    President of the company and Hugo               2000          $151,000(2)         $     0        $       0
    International Ltd.                              1999          $ 74,228(3)         $     0        $       0
</TABLE>

(1) $114,000 of Mr. Foden's salary was paid to RCI as management fees, a company
    that Mr. Foden controls.

(2) $113,000 of Mr. Foden's salary was paid to RCI as management fees, a company
    that Mr. Foden controls.

(3) $68,000 of Mr. Foden's salary was paid to RCI as management fees, a company
    that Mr. Foden controls.

        STOCK OPTION GRANTS IN LAST FISCAL YEAR. There were no grants of stock
options during the fiscal year ended December 2001.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                          SECURITY OWNERSHIP OF CERTAIN
                        BENEFICIAL OWNERS AND MANAGEMENT

        The following table details certain information regarding ownership of
our common stock, as of April 15, 2002, by each person known by us to own
beneficially more than 5% of the outstanding common stock, by each person who is
a director of the company, by each person listed in the Summary Compensation
Table above and by all directors and officers of the company as a group.

        The information contained in the table was provided by the persons
listed. The calculations of the percent of shares beneficially owned are based
on 20,557,306 shares of common stock outstanding on April 15, 2002.

<TABLE>
<CAPTION>
                                                                Number of Shares
         Name and Address                                      Beneficially Owned                 Percentage
         ----------------                                      ------------------                 ----------
<S>                                                            <C>                                <C>
David Foden                                                         10,956,000                       53.29
Hugo International Ltd.
6 Waterside Drive
Langley Slough, Berkshire SL3 6EZ
United Kingdom
</TABLE>

                                       30
<PAGE>

<TABLE>
<CAPTION>
                                                                Number of Shares
         Name and Address                                      Beneficially Owned                 Percentage
         ----------------                                      ------------------                 ----------
<S>                                                            <C>                                <C>
Michael Christmas                                                       11,000                            *
61 Franklin Avenue
Tadley Hants, United Kingdom
RG26 4EZ

Iain Bowles                                                             10,000                            *
34 Barrow Green Road
Oxted Surrey United Kingdom
RH8 ONL

George Sukornyk                                                      1,215,030                        5.91%
2 Chedington Place Suite 4A
Toronto, Ontario, Canada
M4N 3R5

Gillian Foden                                                        1,310,000                        6.37%
Hugo International Ltd.
6 Waterside Drive
Langley Slough, Berkshire SL3 6EZ
United Kingdom

All Directors and Executive Officers as a Group (3                  10,977,000                       53.40%
persons)
</TABLE>

-----------------------------

        *       Less than one percent.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

        The transactions described below are on terms as favorable to Hugo as
those that could have been obtained from independent third parties and
arms-length negotiations.

        In 2000, we paid $113,000 in management fees to RCI Management.

        In 2000, we issued 284,000 shares of common stock in partial
satisfaction of outstanding advances payable of $456,786 due to David W. Foden.
The remaining balance of $274,030 was converted into a note, payable upon
demand, and bears interest at 11% annually. The balance due of $217,229 is
included in liabilities subject to compromise. We anticipate repaying the note
by the end of the fourth quarter 2002.

        In 2000, we paid $15,000 in consulting fees to Beechfirst Ltd. Iain
Bowles, a member of our Board of Directors, serves as Managing Director and a
consultant to Beechfirst Ltd.

                                       31
<PAGE>

        On July 1, 2001, we entered into a share exchange with Hugo
International (Ireland) Ltd., a company in which David W. Foden held a minority
interest. Pursuant to the exchange agreement we issued 31,950 restricted shares
of our common stock for 1,000 shares of Hugo Ireland's capital stock, which
constitutes all of Hugo International Ireland's issued and outstanding capital
stock. Of the 31,950 shares of our restricted common stock issued in the share
exchange, Mr. Foden received 9,585 shares. Upon consummation of the share
exchange, Hugo Ireland became a wholly owned subsidiary of Hugo.

        In 2001, we had sales of $6,126 to Hugo International (Ireland) Ltd.
from January 1, 2001 to June 30, 2001.

        In 2001, we paid $114,000 in management fees to RCI Management a company
that Mr. Foden controls.

        In 2001, we had sales to Hugo Globecom Limited of $24,284. Hugo Globecom
is a company that Mr. Foden controls.

        In 2001, we loaned $81,964 to Cerocom Limited. Cerecom Limited is a
company that Mr. Foden controls.

        In 2001, we had sales of $370 and purchases of $5,388 to and from Cape
Communications in Ireland. Cape Communications is a company owned by the wife of
Mr. Gundry a Director of Hugo International (Ireland) Ltd.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

        (a)     Exhibits

<TABLE>
<CAPTION>
                                                                                INCORPORATED BY
                                                                                REFERENCE FROM          EXHIBIT NO. IN
EXHIBIT NUMBER                          DESCRIPTION                              DOCUMENT (1)        REFERENCED DOCUMENT
---------------  -----------------------------------------------------------   -----------------    ---------------------
<S>              <C>                                                           <C>                  <C>
      2.1        Agreement for the Sale and Purchase of the Assets and                 A                     2.1
                 Business of Pro-Comm Radio Communications dated March 8,
                 1999 between M.L. Temple and A.R. Temple, Hugo
                 International Limited and D. W. Foden

      2.2        Exchange Agreement dated as of February 24, 2000 by and               A                     2.2
                 among Hugo International Telecom Inc., David W. Foden,
                 Brian H.C. Gundry and Gillan L. Foden

      3.1        Certificate of Incorporation of Hugo International                    A                     3.1
                 Telecom Inc. filed with the Secretary of State of the
                 State of Delaware on February 17, 2000

</TABLE>

                                       32
<PAGE>

<TABLE>
<CAPTION>
                                                                                INCORPORATED BY
                                                                                REFERENCE FROM          EXHIBIT NO. IN
EXHIBIT NUMBER                          DESCRIPTION                              DOCUMENT (1)        REFERENCED DOCUMENT
---------------  -----------------------------------------------------------   -----------------    ---------------------
<S>              <C>                                                           <C>                  <C>
      3.2        By-laws of Hugo International Telecom Inc.                            A                     3.2

      4.1        Form of Common Stock Certificate of Hugo International                A                     4.1
                 Telecom Inc.

      4.2        Form of Preferred Stock Certificate of Hugo                           A                     4.2
                 International Telecom Inc.

     10.1        Letter from Hugo International Limited to David Foden dated           A                     10.1
                 June 26, 2000 regarding loan from Mr. Foden in the
                 amount of Pound Sterling220,482

     10.2        Consulting Agreement between Hugo International Limited               A                     10.2
                 and RCI

     10.3        Purchase Order dated July 7, 1999 between Siemens                     A                     10.4
                 Communications Limited and Hugo International Limited

     10.4        Confidential Invoice Discounting Agreement with Term                  A                     10.5
                 Sheet dated March 18, 1999, between Hugo International
                 Limited and Five Arrows Commercial Finance Limited

     10.5        Deed of Guarantee and Indemnity dated April 20, 2000,                 A                     10.6
                 between Hugo International Telecom Incorporated and Five
                 Arrows Commercial Finance Limited

     10.6        Service Provider Agreement dated March 15, 1999 between               A                     10.7
                 Dolphin Telecommunications Limited and Hugo
                 International Limited

     10.7        Business Loan Agreement dated March 11, 1999 between                  A                     10.8
                 Lloyds Bank Plc and Hugo International Limited

     10.8        Lease of Cookham House dated January 26, 1999 between                 A                     10.9
                 Chaselands Limited and Hugo International Limited

     10.9        Service Provider Agreement dated July 29, 1998 between                A                     10.10
                 Dolphin Telecommunications
</TABLE>

                                       33
<PAGE>

<TABLE>
<CAPTION>
                                                                                INCORPORATED BY
                                                                                REFERENCE FROM          EXHIBIT NO. IN
EXHIBIT NUMBER                          DESCRIPTION                              DOCUMENT (1)        REFERENCED DOCUMENT
---------------  -----------------------------------------------------------   -----------------    ---------------------
<S>              <C>                                                           <C>                  <C>
                 Limited, National Bank Three Limited, Fleetcomm Limited
                 T/A Fleetcomm Mobile Radio Networks and Hugo
                 International Limited

     10.10       Private Business Radio Suppliers License issued to Hugo               A                    10.11
                 International Limited by the Secretary of State for
                 Trade and Industry by the Radiocommunications Agency on
                 May 7, 1998

     10.11       Reseller Agreement dated September 1, 1997 between                    A                    10.12
                 Motorola Limited and Hugo International Limited

     10.12       Motorola Customer Programming Software License Agreement              A                    10.13
                 dated as of November 1998, between Motorola, Inc. and
                 Hugo International

     10.13       Retainer Agreement dated as of March 16, 1999 between                 A                    10.14
                 Hugo International Limited and Mark Lawrence Temple

     10.14       Retainer Agreement dated as of March 16, 1999 between                 A                    10.15
                 Hugo International Limited and Andrew Robert Temple

     10.15       Order Appointing Administrators in the Matter of Hugo                 *
                 International Limited

     10.16       Report of Independent Person Pursuant to Rule 2.2 of the              **
                 Insolvency Rules in the Matter of Hugo International
                 Telecom Limited and the Matter of the Insolvency Act of
                 1986.

      21         Subsidiaries of the Company                                           A                      21
</TABLE>

NOTES:

A       Registration Statement of the company on Form SB-2, No. 333-43642, as
amended, filed with the SEC on August 9, 2001.

*       Filed herewith.
**      To be filed by amendment.

                                       34

<PAGE>

        (b)     No reports were filed on Form 8-K during the last quarter of
fiscal year 2001 except that on October 9, 2001 we filed a Form 8-K reporting
that on October 3, 2001, we selected the firm of Mahoney Cohen & Company, CPA,
P.C. as our new independent auditor. We simultaneously dismissed Pender Newkirk
& Company, CPAs as our independent auditor. The Report on Form 8-K was
subsequently amended on October 17, 2001.

                                       35
<PAGE>

        SIGNATURES In accordance with Section 13 or 15(d) 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.

                                          By  /s/  David W. Foden
                                          -------------------------------------
                                          David W. Foden,
                                          President and Chief Executive Officer

        Each person whose signature appears below hereby constitutes and
appoints David W. Foden, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments to this
report, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying all that said attorney-in-fact and agent or his substitute or
substitutes, or any of them, may lawfully do or cause to be done by virtue
hereof. In accordance with the requirements of the Exchange Act, this report has
been signed by the following persons in the capacities and on the dates
indicated.

<TABLE>
<CAPTION>
                Signature                                        Title                                 Date
                ---------                                        -----                                 ----
<S>                                         <C>                                                 <C>
  /s/ David W. Foden                        Director, Chief Executive Officer and Chairman      April ___, 2002
----------------------------------          (Principal Executive Officer)
David W. Foden

  /s/ Michael Christmas                     Director, Treasurer and Secretary (Principal        April ___, 2002
----------------------------------          Financial and Accounting Officer)
Michael Christmas

  /s/ Iain Bowles                           Director                                            April ___, 2002
----------------------------------
Iain Bowles
</TABLE>
<PAGE>
                         HUGO INTERNATIONAL TELECOM INC.
                                AND SUBSIDIARIES


                                      Index

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
Report of Mahoney Cohen & Company, CPA, P.C.                                 F-1

Report of Pender Newkirk & Company, CPAs                                     F-2

Consolidated Balance Sheet as of December 31, 2001                           F-3

Consolidated Statements of Operations for the Years Ended
    December 31, 2001 and 2000                                               F-4

Consolidated Statements of Changes in Stockholders' Deficiency
    for the Years Ended December 31, 2001 and 2000                           F-5

Consolidated Statements of Cash Flows for the Years Ended
    December 31, 2001 and 2000                                               F-6

Notes to Consolidated Financial Statements                                   F-8
</TABLE>
<PAGE>
                          INDEPENDENT AUDITOR'S REPORT

The Board of Directors
Hugo International Telecom Inc. and Subsidiaries
Berkshire, United Kingdom

            We have audited the accompanying consolidated balance sheet of Hugo
International Telecom Inc. and Subsidiaries as of December 31, 2001, and the
related consolidated statements of operations, changes in stockholders'
deficiency and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

            We conducted our audit in accordance with auditing standards
generally accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

            In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Hugo International Telecom Inc. and Subsidiaries as of December 31,
2001, and the results of their operations and their cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.

            The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern. As more fully
discussed in Note 2, at December 31, 2001, the Company has a working capital
deficiency of approximately $2,024,000 and a stockholders' deficiency of
approximately $1,575,000 and it has a net loss of approximately $2,352,000 for
the year ended December 31, 2001, which raises substantial doubt about the
Company's ability to continue as a going concern. The consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amount and classification of
liabilities that might be necessary should the Company be unable to continue in
existence.

                                        /s/ Mahoney Cohen & Company, CPA, P.C.



New York, New York
March 15, 2002

                                     F-1
<PAGE>
                          Independent Auditors' Report


Board of Directors
Hugo International Telecom, Inc.
Berkshire, United Kingdom

We have audited the accompanying consolidated statements of operations, changes
in stockholders' equity, and cash flows of Hugo International Telecom, Inc. for
the year ended December 31, 2000. These consolidated financial statements are
the responsibility of the management of Hugo International Telecom, Inc. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. These standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Hugo International Telecom, Inc. for the year ended December 31, 2000 in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. The Company incurred significant
losses for the year ended December 31, 2000 and used significant cash for
operations for the year ended December 31, 2000. These factors and others raise
substantial doubt about the Company's ability to continue as a going concern.
The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


Pender Newkirk & Company
Certified Public Accountants
Tampa, Florida
April 3, 2001


                                      F-2

<PAGE>




                         HUGO INTERNATIONAL TELECOM INC.
                                AND SUBSIDIARIES

                           Consolidated Balance Sheet

                                December 31, 2001

                                     ASSETS

<TABLE>
<S>                                                                 <C>
Current assets:
    Cash                                                            $   271,347
    Accounts receivable, net of allowance for doubtful
      accounts of $444,081                                              757,590
    Inventory                                                           103,941
    Due from affiliates                                                 148,349
    Prepaid expenses and other current assets                            49,897
                                                                    -----------
                Total current assets                                  1,331,124
Property and equipment, net                                             163,745
Other assets:
    Goodwill, net                                                       280,357
    Other assets                                                         23,051
                                                                    -----------
                Total other assets                                      303,408
                                                                    -----------
                                                                    $ 1,798,277
                                                                    ===========
</TABLE>

                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY
<TABLE>
<S>                                                                 <C>
Current liabilities:
    Accounts payable                                                $   879,029
    Current maturities of capital lease obligations                      12,652
    Due to director                                                      26,550
    Accrued expenses                                                    269,844
    Deferred revenue                                                     43,545
    Liabilities subject to compromise                                 2,123,166
                                                                    -----------
                Total current liabilities                             3,354,786
Capital lease obligations                                                18,390
Commitments and contingencies
Stockholders' deficiency:
    Common stock, par value - $.0001:
        Authorized - 50,000,000 shares
        Issued and outstanding - 20,557,306 shares                        2,056
    Preferred stock, par value - $.0001:
        Authorized - 600,000 shares
        Issued and outstanding - 0 shares                                    --
    Series A Convertible preferred stock, par value - $.0001:
        Authorized - 400,000 shares
        Issued and outstanding - 90,000 shares
        Liquidation value of $450,000                                         9
    Additional paid-in capital                                        2,068,089
    Accumulated other comprehensive income                               66,634
    Accumulated deficit                                              (3,711,687)
                                                                    -----------
                Total stockholders' deficiency                       (1,574,899)
                                                                    -----------
                                                                    $ 1,798,277
                                                                    ===========
</TABLE>

                             See accompanying notes.


                                      F-3
<PAGE>
                         HUGO INTERNATIONAL TELECOM INC.
                                AND SUBSIDIARIES
                      Consolidated Statements of Operations
                 For the Years Ended December 31, 2001 and 2000

<TABLE>
<CAPTION>
                                                               2001               2000
                                                           ------------       ------------
<S>                                                        <C>                <C>
Revenue                                                    $  4,242,099       $  5,516,242

Cost of revenue                                               2,787,781          3,593,454
                                                           ------------       ------------

Gross profit                                                  1,454,318          1,922,788

Selling, general and administrative expenses                  3,066,020          2,748,362
Write-off of goodwill                                           581,566                 --
                                                           ------------       ------------
                                                              3,647,586          2,748,362
                                                           ------------       ------------

Operating loss                                               (2,193,268)          (825,574)

Interest expense                                                 89,156            125,013
                                                           ------------       ------------

Loss before provision for (benefit from) income taxes        (2,282,424)          (950,587)

Provision for (benefit from) income taxes                        69,446            (44,618)
                                                           ------------       ------------

Net loss                                                   $ (2,351,870)      $   (905,969)
                                                           ============       ============


Basic and diluted net loss per share                       $       (.11)      $       (.05)
                                                           ============       ============

Weighted average number of common shares
    used in loss per share computation                       20,533,265         19,032,329
                                                           ============       ============
</TABLE>

                             See accompanying notes.


                                      F-4
<PAGE>
                HUGO INTERNATIONAL TELECOM INC. AND SUBSIDIARIES
         Consolidated Statements of Changes in Stockholders' Deficiency
                 For the Years Ended December 31, 2001 and 2000

<TABLE>
<CAPTION>

                                                                                             Additional
                                         Common                     Preferred                 Paid-In        Accumulated
                                         Shares          Amount       Shares     Amount       Capital          Deficit
                                         ------          ------       ------     ------       -------          -------
<S>                                   <C>              <C>          <C>          <C>        <C>              <C>
Balance, January 1, 2000                      100      $     150          --     $   --     $        --      $  (453,848)
Common stock issued to
    reduce related party debt             284,000        456,786          --         --              --               --
Acquisition of company                 15,000,000          1,500          --         --          (1,500)              --
Recapitalization of company              (284,100)      (456,936)         --         --         456,936               --
Common stock issued for cash
    and subscription agreements         5,500,000            550          --         --         751,950               --
Comprehensive loss:
    Foreign currency translation
       adjustment                              --             --          --         --              --               --
    Net loss for the year                      --             --          --         --              --         (905,969)
                                      -----------      ---------      ------     ------     -----------      -----------
        Total comprehensive loss               --             --          --         --              --         (905,969)
                                      -----------      ---------      ------     ------     -----------      -----------
Balance, December 31, 2000             20,500,000          2,050          --         --       1,207,386       (1,359,817)
Common stock issued in
    satisfaction of notes payable          25,356              3          --         --          19,015               --
Preferred stock issued for cash                --             --      90,000          9         449,991               --
Common stock issued for the
    acquisition of subsidiary              31,950              3          --         --         191,697               --
Capital contribution                           --             --          --         --         200,000               --
Collection of stock subscription
    receivable                                 --             --          --         --              --               --
Comprehensive loss:
    Foreign currency translation
       adjustment                              --             --          --         --              --               --
    Net loss for the year                      --             --          --         --              --       (2,351,870)
                                      -----------      ---------      ------     ------     -----------      -----------
        Total comprehensive loss               --             --          --         --              --       (2,351,870)
                                      -----------      ---------      ------     ------     -----------      -----------
Balance, December 31, 2001             20,557,306      $   2,056      90,000     $    9     $ 2,068,089      $(3,711,687)
                                      ===========      =========      ======     ======     ===========      ===========
</TABLE>

<TABLE>
<CAPTION>
                                       Accumulated
                                           Other          Stock          Total
                                      Comprehensive    Subscription    Stockholders'
                                          Income        Receivable      Deficiency
                                          ------        ----------      ----------
<S>                                   <C>              <C>             <C>
Balance, January 1, 2000                 $ 55,227        $    --        $  (398,471)
Common stock issued to
    reduce related party debt                  --             --            456,786
Acquisition of company                         --             --                 --
Recapitalization of company                    --             --                 --
Common stock issued for cash
    and subscription agreements                --         (1,541)           750,959
Comprehensive loss:
    Foreign currency translation
       adjustment                         (23,649)            --            (23,649)
    Net loss for the year                      --             --           (905,969)
                                         --------        -------        -----------
        Total comprehensive loss          (23,649)            --           (929,618)
                                         --------        -------        -----------
Balance, December 31, 2000                 31,578         (1,541)          (120,344)
Common stock issued in
    satisfaction of notes payable              --             --             19,018
Preferred stock issued for cash                --             --            450,000
Common stock issued for the
    acquisition of subsidiary                  --             --            191,700
Capital contribution                           --             --            200,000
Collection of stock subscription
    receivable                                 --          1,541              1,541
Comprehensive loss:
    Foreign currency translation
       adjustment                          35,056             --             35,056
    Net loss for the year                      --             --         (2,351,870)
                                         --------        -------        -----------
        Total comprehensive loss           35,056             --         (2,316,814)
                                         --------        -------        -----------
Balance, December 31, 2001               $ 66,634        $    --        $(1,574,899)
                                         ========        =======        ===========
</TABLE>

                             See accompanying notes.


                                       F-5
<PAGE>
                         HUGO INTERNATIONAL TELECOM INC.
                                AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                 For the Years Ended December 31, 2001 and 2000

<TABLE>
<CAPTION>
                                                                   2001              2000
                                                               ------------      ------------
<S>                                                            <C>               <C>
Cash flows from operating activities:
    Net loss                                                   $ (2,351,870)     $   (905,969)
    Adjustments to reconcile net loss to net cash used in
      operating activities:
        Depreciation and amortization                               185,769           230,488
        Write-off of goodwill                                       581,566                --
        Loss on disposal of fixed assets                             46,326                --
        Change in assets and liabilities (net of effect of
          Hugo Ireland acquisition in 2001):
           Accounts receivable                                      621,831          (620,215)
           Income tax refund                                         71,631           (62,713)
           Inventory                                                 12,094            (5,497)
           Due from affiliates                                     (134,541)               --
           Prepaid expenses and other current assets                129,821           (83,019)
           Accounts payable                                         626,201           530,600
           Due to director                                           26,550                --
           Accrued expenses                                         104,035            49,761
           Deferred revenue                                         (10,148)            9,044
                                                               ------------      ------------
                Net cash used in operating activities               (90,735)         (857,520)
                                                               ------------      ------------
Cash flows from investing activities
    Acquisition of property and equipment                           (60,982)          (34,106)
    Cash acquired in Hugo Ireland acquisition                        21,158                --
    Proceeds from repayment of loans receivable                       7,528                --
                                                               ------------      ------------
                Net cash used in investing activities               (32,296)          (34,106)
                                                               ------------      ------------
Cash flows from financing activities:
    Increase (decrease) in bank overdraft                          (280,812)          162,235
    Payments of capital lease obligations                           (23,203)          (45,674)
    Net proceeds from (repayment of) stockholder advances           (56,801)          120,428
    Proceeds from long-term debt                                     49,088           303,936
    Payments of long-term debt                                           --          (382,061)
    Proceeds from issuance of common stock                               --           750,959
    Proceeds from issuance of preferred stock                       450,000                --
    Capital contribution                                            200,000                --
    Collection of stock subscription receivable                       1,541                --
                                                               ------------      ------------
Net cash provided by financing activities                           339,813           909,823
                                                               ------------      ------------
Effect of exchange rates on cash                                     (4,077)          (27,367)
                                                               ------------      ------------
Net increase (decrease) in cash                                     212,705            (9,170)
Cash, beginning of year                                              58,642            67,812
                                                               ------------      ------------
Cash, end of year                                              $    271,347      $     58,642
                                                               ============      ============
</TABLE>

                             See accompanying notes.


                                       F-6
<PAGE>
                         HUGO INTERNATIONAL TELECOM INC.
                                AND SUBSIDIARIES
                Consolidated Statements of Cash Flows (Concluded)
                 For the Years Ended December 31, 2001 and 2000


                Supplemental Disclosures of Cash Flow Information
                 and Non-Cash Investing and Financing Activities

<TABLE>
<CAPTION>
                                                                   2001              2000
                                                               ------------      ------------
<S>                                                            <C>               <C>
Cash paid during the year for:
    Interest                                                   $     88,943      $    122,282
</TABLE>


During the year ended December 31, 2001, the Company issued 25,356 shares of
common stock in satisfaction of notes payable in the amount of $19,018.

During the year ended December 31, 2001, the Company acquired Hugo International
(Ireland) Ltd., a wholly-owned subsidiary, for common stock valued at $191,700.

During the year ended December 31, 2000, the Company issued 284,000 shares of
common stock in payment of stockholder advances payable in the amount of
$456,786.

During the year ended December 31, 2000, the Company entered into capital leases
for equipment with a fair market value of $47,948.

During the year ended December 31, 2000, the Company converted stockholder
advances of $274,030 into a note payable.

                             See accompanying notes.


                                       F-7
<PAGE>
                         HUGO INTERNATIONAL TELECOM INC.
                   Notes to Consolidated Financial Statements


Note 1 - The Company

      Hugo International Telecom Inc. was incorporated in the state of Delaware
on February 17, 2000 and merged effectively in February 2000 with Hugo
International Limited, a private company incorporated in Berkshire, England in
1992. On July 1, 2001, Hugo International Telecom Inc. acquired Hugo
International (Ireland) Ltd. ("Hugo Ireland"), a private company formed under
the laws of Ireland (see Note 3).

      Pursuant to this merger between Hugo International Telecom Inc. and Hugo
International Limited, Hugo International Telecom Inc. issued 15,000,000 shares
of its common stock for all of the common stock of Hugo International Limited.
As a result of this acquisition, the stockholders of Hugo International Limited
effectively acquired Hugo International Telecom Inc. and control thereof.
Accordingly, this acquisition has been accounted for as a reverse acquisition
for consolidated financial statement purposes, with the historical financial
statements of Hugo International Limited being shown for all periods presented
prior to the date of acquisition.

      The Company's principal line of business is the sale of mobile radio, data
communication systems and air time to customers primarily located in Europe. The
headquarters of the Company is located in Berkshire, United Kingdom.

      Principles of Consolidation

      The accompanying consolidated financial statements include the accounts of
the following (which hereinafter are collectively referred to as the "Company"):
Hugo International Telecom Inc. and its wholly-owned subsidiaries, Hugo
International Limited and Hugo International (Ireland) Ltd. All significant
intercompany balances and transactions have been eliminated in consolidation.

      The consolidated financial statements for the year ended December 31, 2001
include the accounts of Hugo International (Ireland) Ltd. from July 1, 2001.

Note 2 - Going Concern

      The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. At December 31, 2001, the
Company has a working capital deficiency of approximately $2,024,000 and a
stockholders' deficiency of approximately $1,575,000 and it has a net loss of
approximately $2,352,000 for the year ended December 31, 2001, which raises
substantial doubt about the Company's ability to continue as a going concern.
The Company's ability to continue as a going concern is dependent upon
profitable operations and support from stockholders and investors. In that
regard, management plans to increase sales revenue as well as expanding its
business through acquisitions. The consolidated financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts


                                      F-8
<PAGE>
                         HUGO INTERNATIONAL TELECOM INC.
                   Notes to Consolidated Financial Statements


Note 2 - Going Concern (Continued)

or the amount and classification of liabilities that might be necessary should
the Company be unable to continue in existence. As more fully discussed in Note
4, on October 12, 2001, an order of administration was entered against Hugo
International Limited, the Company's operating subsidiary, under United Kingdom
bankruptcy laws.

Note 3 - Acquisitions

      On July 1, 2001, Hugo International Telecom Inc. entered into a share
exchange with all of the stockholders of Hugo Ireland, a company formed under
the laws of Ireland, pursuant to which Hugo International Telecom Inc. issued
31,950 restricted shares of its common stock, with a fair market value of $6.00
per share, in exchange for 1,000 shares of Hugo Ireland's capital stock, which
constitutes all of Hugo Ireland's issued and outstanding capital stock. Upon the
consummation of the share exchange, Hugo Ireland became a wholly-owned
subsidiary of Hugo International Telecom Inc. The acquisition was consummated
for the purpose of expanding its geographical presence.

      The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed at the date of acquisition:

<TABLE>
<S>                                                                   <C>
       Current assets                                                 $ 115,774
       Property and equipment                                            40,030
       Goodwill                                                         133,718
                                                                      ---------
          Total assets acquired                                         289,522
                                                                      ---------
       Current liabilities                                              (65,886)
       Long-term liabilities                                            (31,936)
                                                                      ---------
          Total liabilities assumed                                     (97,822)
                                                                      ---------
          Net assets acquired                                         $ 191,700
                                                                      =========
</TABLE>

Note 4 - Summary of Significant Accounting Policies

      Bankruptcy

      As a result of the statutory demand by one of the Company's suppliers, on
October 12, 2001, an order of administration was entered against Hugo
International Limited, an operating subsidiary, under United Kingdom bankruptcy
laws. The order provides Hugo International Limited protection from its
creditors and appoints administrators to aid Hugo International Limited in its
day-to-day operations. The effects of this on the Company's operations are
uncertain; however, to date operations have proceeded normally and the Company
anticipates that Hugo International Limited will be able to meet the
requirements to successfully petition for removal of the order of
administration.


                                      F-9
<PAGE>
                         HUGO INTERNATIONAL TELECOM INC.
                   Notes to Consolidated Financial Statements


Note 4 - Summary of Significant Accounting Policies (Continued)

      Bankruptcy (Continued)

      The consolidated financial statements have been presented in accordance
with the American Institute of Certified Public Accountants Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization under
Bankruptcy Code" ("SOP 90-7"), and have been prepared in accordance with
accounting principles generally accepted in the United States of America
applicable to a going concern, which principles, except as otherwise disclosed,
assume that assets will be realized and liabilities will be discharged in the
ordinary course of business. As a result of the order of administration under
the United Kingdom bankruptcy laws and circumstances relating to this event,
including the Company's debt structure, default on all pre-petition debt,
negative cash flows, its recurring losses and current economic conditions, such
realization of assets and liquidation of liabilities are subject to significant
uncertainty. While under the protection of the United Kingdom bankruptcy laws,
the Company may sell or otherwise dispose of assets, and liquidate or settle
liabilities, for amounts other than those reflected in the consolidated
financial statements. Additionally, the amounts reported on the consolidated
balance sheet could materially change because of changes in business strategies
and the effects of any proposed plan of reorganization.

      Appropriateness of using the going concern basis is dependent upon, among
other things, confirmation of a plan of reorganization, future profitable
operations, the ability to comply with the terms of the debtor-in-possession
financing facility and the ability to generate sufficient cash from operations
and financing arrangements to meet obligations.

      Liabilities Subject to Compromise

      Unsecured liabilities as of the Petition Date (October 12, 2001) are
subject to compromise or other treatment under a plan of reorganization which
must be confirmed by the United Kingdom Bankruptcy Court after submission to any
required vote by affected parties. For financial reporting purposes, those
liabilities and obligations whose treatment and satisfaction are dependent on
the outcome of the Reorganization Cases have been segregated and classified as
liabilities subject to compromise under reorganization proceedings on the
consolidated balance sheet. Generally, all actions to enforce or otherwise
effect repayment of pre-petition liabilities as well as all pending litigation
against debtors are stayed while the debtors continue their business operations
as debtors-in-possession. Unaudited schedules have been filed by the debtors
with the United Kingdom Bankruptcy Court setting forth the assets and
liabilities of the debtors as of the Petition Date as reflected in the debtors'
accounting records. The ultimate amount of and settlement terms for such
liabilities are subject to an approved plan of reorganization and, accordingly,
are not presently determinable.


                                      F-10
<PAGE>
                        HUGO INTERNATIONAL TELECOM INC.
                   Notes to Consolidated Financial Statements

Note 4 -     Summary of Significant Accounting Policies (Continued)

             Liabilities Subject to Compromise (Continued)

             The principal categories of obligations classified as liabilities
subject to compromise are identified below. The amounts below in total may vary
significantly from the stated amount of proofs of claim that will be filed with
the United Kingdom Bankruptcy Court and may be subject to future adjustment
depending on United Kingdom Bankruptcy Court action, further developments with
respect to potential disputed claims, determination as to the value of any
collateral securing claims, or other events.

<TABLE>
<S>                                                                                                <C>
             Payroll and other taxes payable                                                       $      217,168
             7.25% secured note payable                                                                   137,618
             Trade accounts payable                                                                       700,571
             Principal stockholder debt                                                                   217,229
             Related party debt                                                                           805,583
             Other payable                                                                                 44,997
                                                                                                   --------------
                                                                                                   $    2,123,166
                                                                                                   ==============
</TABLE>

             Inventory

             Inventory is stated at the lower of cost (first-in, first-out
method) or market.

             Property and Equipment

             Property and equipment is recorded at cost. Expenditures for major
additions and betterments are capitalized. Maintenance and repairs are charged
to operations as incurred. Depreciation of property and equipment is computed by
accelerated methods over the assets' estimated lives ranging from three to seven
years. Upon sale or retirement of equipment, the related cost and accumulated
depreciation are removed from the accounts and any gain or loss is reflected in
operations.

             Fair Value of Financial Instruments

             The estimated fair value of the Company's financial instruments as
of December 31, 2001 and 2000 approximates the carrying amounts.


                                      F-11
<PAGE>
                        HUGO INTERNATIONAL TELECOM INC.
                   Notes to Consolidated Financial Statements


Note 4 -     Summary of Significant Accounting Policies (Continued)

             Concentration of Credit Risk

             The Company's product line is sold primarily to various
corporations in Europe. The Company does not require collateral from its
customers. The accounts receivable are spread among a number of customers and
are geographically dispersed such that in management's opinion credit risk is
minimized.

             Accounting for the Impairment of Long-Lived Assets

             Financial Accounting Standards Board Statement of Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," requires companies to review their
long-lived assets and certain identifiable intangibles (collectively,
"Long-Lived Assets") for impairment whenever events or changes in circumstances
indicate that the carrying value of a long-lived asset may not be recoverable.

             Income Taxes

             Deferred income taxes are recognized for the tax consequences of
"temporary differences" by applying enacted statutory tax rates applicable to
future years to differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities. The effect on deferred taxes
of a change in tax rates is recognized in income in the period that includes the
enactment date. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense is
the tax payable or refundable for the period plus or minus the change during the
period in deferred tax assets and liabilities.

             Goodwill

             Goodwill acquired prior to July 1, 2001 is amortized using the
straight-line method over ten years. All other intangibles are amortized using
the straight-line method over the respective estimated useful lives. Goodwill
amortization for the years ended December 31, 2001 and 2000 totalled $126,000
and $131,000, respectively, and accumulated amortization at December 31, 2001
amounted to approximately $214,000. Commencing January 1, 2002 as a result of
adopting SFAS 142, goodwill will no longer be amortized, but will be reviewed
for impairment (see Accounting for the Impairment of Long-Lived Assets). If SFAS
142 had been in effect for the twelve months ended December 31, 2001 and 2000
net loss would have decreased by $126,000 and $131,000, respectively. The per
share impact would have been less than $.01 per share in 2001 and the net loss
per share would have decreased by $.01 per share in 2000.


                                      F-12
<PAGE>
                        HUGO INTERNATIONAL TELECOM INC.
                   Notes to Consolidated Financial Statements

Note 4 -     Summary of Significant Accounting Policies (Continued)

             Goodwill (Continued)

             During 2001, goodwill and customer lists of approximately $586,000
related to a previously acquired company were written off because they were
considered to have no continuing value.

             Translation of Foreign Currencies

             Assets and liabilities of foreign subsidiaries are translated at
current exchange rates and the effects of these translation adjustments are
reported as a separate component of stockholders' equity. Realized gains and
losses from foreign currency transactions are included in the consolidated
statements of operations, as are unrealized gains and losses arising from the
translation of the foreign subsidiaries' intercompany liability accounts into
U.S. dollars. Market risk is the potential loss arising from adverse changes in
market rates and prices, such as foreign currency exchange rates.

             Advertising Expenses

             Advertising expenses are charged to operations in the period in
which they are incurred. Advertising expenses for the years ended December 31,
2001 and 2000 were approximately $20,000 and $36,000, respectively.

             Revenue Recognition

             The Company recognizes revenue as follows:

             -  Product sales - upon shipment of products to customers
             -  Airtime contracts - as services are rendered
             -  Equipment rental - as services are rendered
             -  Maintenance contracts - deferred and recognized ratably over the
                term of the maintenance agreement, which is typically three
                months

             Use of Estimates

             The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.


                                      F-13
<PAGE>
                        HUGO INTERNATIONAL TELECOM INC.
                   Notes to Consolidated Financial Statements

Note 4 -     Summary of Significant Accounting Policies (Continued)

             Earnings (Loss) Per Share

             The Company calculates net income per share as required by
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128"). SFAS 128 replaces the calculation of primary and fully diluted earnings
per share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effect of stock options,
warrants and convertible securities.

             New Accounting Pronouncements

             In June 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 141, "Business Combinations"
("FAS 141"), and SFAS No. 142, "Goodwill and Other Intangible Assets" ("FAS
142"). Under these new standards, the FASB eliminated accounting for any mergers
and acquisitions as poolings of interests, eliminated amortization of goodwill
and indefinite life intangible assets and established new impairment measurement
procedures for goodwill. FAS 141 is effective for all business combinations
initiated after June 30, 2001 and for all business combinations accounted for by
the purchase method for which the date of acquisition is July 1, 2001 or later.
The Company is currently assessing the impact of adopting FAS 142 in 2002.

             In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS 143"). SFAS 143 addresses accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. This statement is effective
for fiscal years beginning after June 15, 2002. The Company is currently
assessing the impact of this new standard.

             In July 2001, the FASB issued SFAS No. 144, "Impairment or Disposal
of Long-Lived Assets," which is effective for fiscal years beginning after
December 15, 2001. The provisions of this statement provide a single accounting
model for impairment of long-lived assets. The Company is currently assessing
the impact of this new standard.

Note 5 -     Major Suppliers

             Purchases from two suppliers for the year ended December 31, 2001
represented approximately 56% of non-affiliated purchases. For the year ended
December 31, 2000, purchases from five suppliers represented approximately 63%
of non-affiliated purchases.


                                      F-14
<PAGE>
                        HUGO INTERNATIONAL TELECOM INC.
                   Notes to Consolidated Financial Statements


Note 6 -     Property and Equipment

<TABLE>
<S>                                                                                                  <C>
             At December 31, 2001, property and equipment consists of:

             Furniture and fixture                                                                   $    156,711
             Machinery and equipment                                                                       41,720
             Motor vehicle                                                                                101,843
                                                                                                     ------------
                                                                                                          300,274

             Less:  Accumulated depreciation                                                              136,529
                                                                                                     ------------
                                                                                                     $    163,745
                                                                                                     ============

             The following is a summary of the property included above that is
held under capital leases as of December 31, 2001:

             Motor vehicle                                                                           $     46,600
             Less:  Accumulated depreciation                                                               14,865
                                                                                                     ------------
                                                                                                     $     31,735
                                                                                                     ============
</TABLE>

Note 7       Related Party Transactions

             The Company paid approximately $114,000 and $113,000 in management
fees for the years ended December 31, 2001 and 2000, respectively, to an entity
controlled by certain directors of the Company.

             The Company paid approximately $15,000 in consulting fees for the
year ended December 31, 2000 to an entity controlled by a director of the
Company.

             The Company had sales to related parties of approximately $31,000
and $27,000 for the years ended December 31, 2001 and 2000, respectively.

             The Company paid expenses on behalf of certain companies affiliated
by common ownership during the year ended December 31, 2001. At December 31,
2001, the affiliate owed the Company approximately $82,000.

Note 8 -     Pension Plan

             Hugo International Limited has a non-contributory pension plan that
covers its executives. Contributions to the plan are made at the discretion of
the Board of Directors of the Company. Hugo International Limited did not make
contributions to the plan for the years ended December 31, 2001 and 2000.


                                      F-15
<PAGE>
                        HUGO INTERNATIONAL TELECOM INC.
                   Notes to Consolidated Financial Statements

Note 9 -     Income Taxes

             Hugo International Telecom Inc. is a corporation that reports and
files a U.S. corporation business tax return. Its wholly-owned subsidiaries,
Hugo International Limited and Hugo Ireland, are corporations that report and
file their corporate business tax returns in the United Kingdom and Ireland,
respectively. The components of the provision for (benefit from) income taxes
consist of:

<TABLE>
<CAPTION>
                                                                                  2001                   2000
                                                                              ------------           ------------
<S>                                                                           <C>                    <C>
             Current:
                Foreign                                                       $     69,446           $    (44,618)
                                                                              ============           ============
</TABLE>

             The following is a reconciliation of income taxes at the U.S.
federal and statutory rate to the amount of income taxes at the effective tax
rate for consolidated financial statement purposes:

<TABLE>
<CAPTION>
                                                                                  2001                   2000
                                                                              ------------           ------------
<S>                                                                           <C>                    <C>
             Tax benefit at U.S. statutory tax rate                           $   (776,024)          $   (323,200)
             Differential arising from:
                U.S. losses at surtax rate                                          -                     100,652
                Foreign loss                                                       258,625                 49,951
             Change in valuation allowance                                         581,913                121,417
             Other non-deductible expenses for taxes                                 4,932                  6,562
                                                                              ------------           ------------
                                                                              $     69,446           $    (44,618)
                                                                              ============           ============
</TABLE>

             The tax laws of the United Kingdom and Ireland do not allow a
deduction for amortization of intangible assets; however, these amounts may be
used to reduce the gain from the sale of a business enterprise. Management has
determined that it is more likely than not that the Company will not realize the
deferred tax asset and, therefore, has established a valuation allowance equal
to the amount of the deferred tax asset as of December 31, 2001 and 2000.

<TABLE>
<CAPTION>
                                                                                  2001                   2000
                                                                              ------------           ------------
<S>                                                                           <C>                    <C>
             Tax benefit of non-deductible amortization
                and impairment charge                                         $    328,699           $     88,423
             Tax benefit of net operating losses                                   429,055                 87,418
             Valuation allowance                                                  (757,754)              (175,841)
                                                                              ------------           ------------
             Net deferred tax asset                                           $     -                $    -
                                                                              ============           =====-------
</TABLE>


             The Company has a U.S. income tax operating loss carryforward of
approximately $744,000 that expires through the year 2021 and a United Kingdom
net operating loss carryforward of $789,000, which may be carried forward
indefinitely.


                                      F-16
<PAGE>
                        HUGO INTERNATIONAL TELECOM INC.
                   Notes to Consolidated Financial Statements

Note 10 -    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 revenue, cost of revenue and gross
profit of these segments are as follows:

<TABLE>
<CAPTION>
                                                                                  2001                   2000
                                                                            --------------         --------------
<S>                                                                         <C>                    <C>
             Revenue:
                Exports                                                     $      690,887         $    1,076,133
                Basic products                                                   1,909,393              1,785,697
                Ongoing revenue                                                  1,397,083              1,918,755
                Telecommunications                                                 105,691                492,010
                Solution providers                                                 139,045                243,647
                                                                            --------------         --------------
                                                                            $    4,242,099         $    5,516,242
                                                                            ==============         ==============

             Cost of revenue:
                Exports                                                     $      489,599         $      766,745
                Basic products                                                   1,413,050              1,314,909
                Ongoing revenue                                                    738,416              1,067,532
                Telecommunications                                                  60,508                293,206
                Solution providers                                                  86,208                151,062
                                                                            --------------         --------------
                                                                            $    2,787,781         $    3,593,454
                                                                            ==============         ==============

             Gross profit:
                Exports                                                     $      201,288         $      309,388
                Basic products                                                     496,343                470,788
                Ongoing revenue                                                    658,667                851,223
                Telecommunications                                                  45,183                198,804
                Solution providers                                                  52,837                 92,585
                                                                            --------------         --------------
                                                                            $    1,454,318         $    1,922,788
                                                                            ==============         ==============
</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.


                                      F-17
<PAGE>
                        HUGO INTERNATIONAL TELECOM INC.
                   Notes to Consolidated Financial Statements

Note 11 -    Commitments and Contingencies

             Minimum Future Lease Payments

             The Company has capitalized rental obligations for the lease of
motor vehicles (see Note 6). The obligations, which mature in 2003, represent
the total present value of future rental payments discounted at the interest
rates implicit in the leases. Minimum future lease payments under capital leases
as of December 31, 2001 are as follows:

<TABLE>
<CAPTION>
              Year Ending
             December 31,
             ------------
<S>                                                                           <C>
                  2002                                                        $     13,632
                  2003                                                              21,297
                                                                              ------------
             Total minimum lease payments                                           34,929
             Less:  Amount representing interest                                     3,887
                                                                              ------------
             Present value of net minimum lease payment                             31,042
             Less:  Current maturities of capital lease
                obligations                                                         12,652
                                                                              ------------
             Long-term portion                                                $     18,390
                                                                              ============
</TABLE>

             Operating Leases

             The Company leases office space under operating leases expiring in
various years through 2008. At December 31, 2001, the aggregate approximate
minimum annual rental commitments under non-cancellable leases are as follows:

<TABLE>
<CAPTION>
              Year Ending
             December 31,
             ------------
<S>                                                                           <C>
                  2002                                                        $     87,000
                  2003                                                              87,000
                  2004                                                              87,000
                  2005                                                              87,000
                  2006                                                              87,000
               Thereafter                                                          174,000
                                                                              ------------
                                                                              $    609,000
                                                                              ============
</TABLE>

             Rent expense for the years ended December 31, 2001 and 2000
amounted to approximately $93,000 and $101,000, respectively.


                                      F-18