SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
January 24, 1997 (January 22, 1997)
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Date of Report (Date of Earliest Event Reported)
Global TeleMedia International, Inc.
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(Exact name of Registrant as specified in its charter)
Florida 0-15818 64-0708107
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(State or other (Commission (IRS Employer
jurisdiction of file Number) Identification No.)
incorporation or
organization)
1121 Alderman Drive
Suite 200
Alpharetta, Georgia 30202
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(Address of principal executive offices)
Registrant's telephone number, including area code: (770) 667-6088
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Item 5. Other Events
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On or about July 30 and August 28, 1996, Global TeleMedia International,
Inc. (the "Company") issued the aggregate par principal amount of $6,683,333 of
certain 3% Convertible Debentures, due August 15, 1998 (the "Debentures"), as
follows: (i) RBB Bank Aktiengesselschaft ("RBB Bank") ($4,000,000),
(ii) Mohammed Ghaus Khalifa ("Khalifa") ($1,333,333), and (iii) Wood Gundy
London, Ltd. ("Wood Gundy") ($1,350,000) (collectively, the "Debentureholders").
The Company received cash from the Debentureholders in the aggregate amount of
approximately $5,012,500, or 75% of the par principal amount of the Debentures.
The Debentures were issued in reliance on an exemption from registration
pursuant to Regulation S under the Securities Act of 1933, as amended (the
"Securities Act").
The terms of the Debentures provide that the Debentures are convertible
into shares of the Company's common stock, par value $0.004 per share (the
"Common Stock") based on the per share conversion price for the Debentures of
the lesser of: (x) $4.00, or (y) the average closing bid price of the Company's
Common Stock for the five (5) trading days immediately preceding the date of
notice of conversion. The entire obligation underlying the Debentures, as of
January 23, 1997, is currently convertible into Common Stock under the terms of
the Debentures.
During the period from November 15, 1996 - January 3, 1997, the Company
received requests for conversion of the par principal amount of Debentures set
forth below (plus accrued interest thereon) into unrestricted shares of Common
Stock, as follows: (i) Khalifa ($333,000 to be converted at the conversion
price of $0.332 per share), (ii) RBB Bank ($250,000 to be converted at the
conversion price of $0.324 per share and $250,000 to be converted at the
conversion price of $0.354 per share), and (iii) Wood Gundy ($50,000 to be
converted at $0.3832 per share and $50,000 to be converted at the conversion
price of $0.396 per share).
The Company has requested the Debentureholders to provide satisfactory
evidence that they are not subject to, or have met, the filing requirements of
Section 13(d), the Regulation S exemption remains available and any shares which
may be issued in connection with a conversion request are not subject to resale
restrictions for "affiliates" of an issuer under Rule 144 promulgated under the
Securities Act.
The Company has received notices, dated January 10 and 14, 1997, on behalf
of the Debentureholders asserting that the failure by the Company to issue
shares of Common Stock pursuant to said conversion notices constituted an event
of default under the Subscription Documents.
The Company has taken the position that the Debentureholders have not
complied with the terms of the subscription documents (the "Subscription
Documents") executed in connection with the issuance of the Debentures, and that
until the Debentureholders are in such compliance, the Debentureholders have not
fulfilled their obligations under the Subscription Documents, and no shares may
be issued pursuant to the purported conversion requests.
The Company has expressed its willingness, at this stage, to issue the
conversion shares to the Debentureholders with a restrictive legend, at such
time as the Debentureholders are in compliance with the terms of the
Subscription Documents. The Company has been advised that such offer has been
rejected by the Debentureholders. Therefore, the Company does not believe that
the Company is in default with respect to the conversion notices or the
Debentures.
The Subscription Documents for the Debentures provide, in pertinent part,
that the Debentureholders shall file a Schedule 13D pursuant to Section 13(d) of
the Securities Exchange Act of 1934 as amended (the "Exchange Act"), if any of
them become subject to such statute.
Section 13(d) of the Exchange Act, and the regulations promulgated
thereunder, generally require that a Schedule 13D be filed on behalf of any
person or persons who, directly or indirectly, acquire "beneficial ownership"
of more than 5% of any equity security which is registered pursuant to Section
12 of the Exchange Act. For purposes of determining "beneficial ownership" of
such an equity security, the term extends to any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship, or
otherwise has or shares: (i) voting power which includes the power to vote, or
to direct the voting of, such securities; and/or (ii) investment power which
includes the power to dispose, or to direct the disposition of, such security.
Further, a person shall be deemed to be the beneficial owner of a security, if
that person has the right to acquire beneficial ownership of such security
within 60 days, including, but not limited to any right to acquire through the
conversion of a security.
The Company initially received a copy of a purported form of Schedule 13D,
representing that the subject document was filed on behalf of Wood Gundy with
the Securities and Exchange Commission. Subsequently, the Company received a
copy of an amended Schedule 13D, dated December 26, 1996, purported to have been
filed on behalf of Canadian Imperial Bank of Commerce (the "Canadian Bank"),
purportedly as the true beneficial owner of the Debentures purchased in the name
of Wood Gundy. The amended Schedule 13D sets forth that if the Canadian Bank
"elects to convert the remaining $1,250,000 Convertible Debentures into Company
Common Stock, such an interest would constitute approximately 25% of the shares
[3,541,360 shares] of Company Common Stock issued and outstanding as of December
23, 1996 (based upon a total of 14,982,000) shares of Company Common Stock
issued and outstanding." However, the amended Schedule 13D states that the
Canadian Bank is the beneficial owner of 258,640 shares, based on the requested
conversion of $100,000 par principal amount of Debentures, but does not state
that the Canadian Bank is the beneficial owner of any additional shares which
may be convertible from the unconverted balance of the Debenture.
The number of shares of Common Stock issued and outstanding as of January
22, 1997, was approximately 16,274,437. The Company's Common Stock is currently
listed for trading in the over-the counter market, as quoted on the National
Association of Securities Dealers, Inc. "bulletin board" or in the "pink sheets"
maintained by the National Quotation Bureau, Inc. under the symbol "GTMI." On
January 22, 1997, the closing bid price for the Common Stock was approximately
$0.69 per share.
The Company has not received a copy of a Schedule 13D with respect to
Khalifa or RBB Bank, and has not received a copy of any filing by the
Debentureholders which may be required pursuant to Section 16 of the Exchange
Act.
On January 22, 1997, Khalifa and RBB Bank (collectively, "Plaintiffs")
filed a complaint in the United States District Court for the Northern District
of Georgia, Atlanta Division (Civil Action No. 1 97-CV-0179) against the
Company. The complaint alleges claims for breach of contract and for
declaratory and injunctive relief with respect to the requests of Khalifa and
RBB Bank to convert $333,000 and $500,000, respectively, par principal amount of
Debentures into shares of the Company's Common Stock pursuant to the
Subscription Documents. The complaint seeks injunctive relief against the
Company to issue the shares to Plaintiffs in accordance with the conversion
requests, and for an unstated amount of compensatory damages, attorney's fees,
costs and expenses.
Management of the Company believes that there are valid defenses to each of
these claims and intends to defend the action vigorously. The Company also
intends to file counterclaims against the Plaintiffs with respect to the
action.
There can be no assurances as to the resolution of these matters.
The Company reserves all rights with respect to a determination of the
number of conversion shares which may be issuable upon the conversion of the
Debentures, the availability of the Regulation S exemption to the
Debentureholders and the resale restrictions under Rule 144.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto authorized.
GLOBAL TELEMEDIA INTERNATIONAL, INC.
Dated: January 24, 1997 By: /s/ Roderick A. McClain
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Roderick A. McClain
Chief Executive Officer