10QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended March 31, 2000
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from __________ to _______
Commission file number 0-15818
GLOBAL TELEMEDIA INTERNATIONAL, INC.
(Name of small business issuer in its charter)
DELAWARE 64-0708107
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4675 MacArthur Court, Suite 710, Newport Beach, California, 92660
(Address of principal executive offices)
Issuer's telephone number (949) 253-9588
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
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date. 75,000,000 Common Stock as of
March 31, 2000
Transitional Small Business Disclosure Format (Check One): Yes No X
--- ---
GLOBAL TELEMEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-QSB
FOR QUARTER ENDED MARCH 31, 2000
INDEX
Page
----
Consolidated Balance Sheet as of March 31, 2000 . . . . . . . . . . . .
Consolidated Income Statements for the Three
Months ended March 31, 2000 and March 31, 1999 . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the three
Months ended March 31, 2000 and March 31, 1999 . . . . . . . . . . . .
Consolidated Statements of Shareholders' Equity for the
three Months ended March 31, 2000 . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . .
Part I - Item 2. Management's Discussion and Analysis of Financial
Condition, Liquidity and Capital Resources, and Results of Operations
Part II - Item 1. Legal Proceedings . . . . . . . . . . . . . . . . .
Part II - Item 4. Submission of Matters to a Vote of Security Holders .
Part II - Item 6. Exhibits . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GLOBAL TELEMEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
MARCH 31, 2000
----------------
ASSETS
----------------
Current Assets
Cash $ 161,040
Accounts receivable, net of allowance 184,026
Other current assets 560,416
----------------
Total Current Assets 905,482
Property, plant and equipment, net of accumulated depreciation of $1,170,907 7,658,017
Goodwill, net of accumulated amortization of $873,379 38,419,273
Other assets 371,894
----------------
Total Assets $ 47,354,666
================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------
Current Liabilities
Accounts payable $ 19,787,444
Accrued expenses 2,293,189
Notes payable 5,884,395
----------------
Total Current Liabilities 27,965,028
Long-Term Liabilities
Long-term debt, net of current portion -
----------------
Total Long-Term Liabilities -
----------------
Total Liabilities 27,965,028
StockholdersEquity
Common stock, $.004 par value, authorized 75,000,000 shares; 298,685
issued and outstanding 75,000,000
Preferred stock, $.004 par value, authorized 75,000,000 shares;
issued and outstanding 4,000 16
Deposit on Future Stock Subscriptions 312,500
Additional paid-in capital 21,808,030
Accumulated Deficit (6,908,626)
Cummulative Translation Adjustment (1,883,673)
Minority Interest 5,762,706
----------------
Total StockholdersEquity 19,389,638
----------------
TOTAL LIABILITY AND STOCKHOLDERSEQUITY $ 47,354,666
================
GLOBAL TELEMEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
Three Months ended
March 31
2000 1999
TOTAL REVENUES: $ 580,269 $ -
-------------------- ------------
COST OF GOODS SOLD 126,517 -
-------------------- ------------
GROSS PROFIT 453,752 -
-------------------- ------------
OPERATING EXPENSES:
Selling, General and Administrative 1,062,754 471,798
-------------------- ------------
Total Operating Expenses 1,062,754 471,798
-------------------- ------------
Operating (Loss) Income (609,002) (471,798)
-------------------- ------------
OTHER INCOME (EXPENSES):
Interest Expense (55,000) (62,747)
Other Income 615 -
-------------------- ------------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST (663,387) (534,545)
-------------------- ------------
PROVISION FOR INCOME TAXES 23,975 -
-------------------- ------------
(687,362) (534,545)
-------------------- ------------
Minority interest in subsidiaries' earnings (33,459) -
-------------------- ------------
NET LOSS $ (720,821) $ (534,545)
==================== ============
NET LOSS PER SHARE $ (0.01) $ (0.01)
==================== ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 75,000,000 75,000,000
==================== ============
The accompanying notes are an integral
part of these consolidated financial statements.
GLOBAL TELEMEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months ended
March 31
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) $ (720,821) $534,545
-------------------- --------
Adjustments to reconcile net loss to net cash
used in operating activities:
Minority interest in earnings of consolidated
subsidiaries 33,459
Cummulative translation adjustment (13,448)
Depreciation and amortization 322,892 3,695
Bad Debt - 5,000
Stock issued for services - 39,000
Changes in assets and liabilities: -
Loss on sale of equipment -
Decrease (increase) in: -
Receivables (62,002)
Due from Stockholders -
Inventories -
Other current assets 7,681
Increase in:
Accounts payable and accrued expenses (254,672) 386,189
-------------------- --------
Total adjustments 33,910 433,884
-------------------- --------
Net cash provided(used) by operating activities (686,911) 968,429
-------------------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Goodwill adjustment on 3G purchase 785,931
Acquisition of fixed assets (515,216)
Acquisition of other assets (187,281) -
-------------------- --------
Net cash provided by investing activities 83,434 -
-------------------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on notes payable -
Payments on notes payable (2,318,238)
Debt acquisition costs
Shares issued in settlement of liabilities - 916,160
Proceeds from issuance of common stock 2,965,850 54,500
-------------------- --------
Net Cash Provided by Financing Activities 647,612 970,660
-------------------- --------
Net Increase in Cash 44,135 2,231
Cash at Beginning of Period 116,905 5,189
-------------------- --------
Cash at End of Period $ 161,040 $ 189
-------------------- --------
The accompanying notes are an integral
part of these consolidated financial statements
GLOBAL TELEMEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERSEQUITY
MARCH 31, 2000
(UNAUDITED)
Common Additional Preferred Cummulative
Stock Issued Paid-in Stock Translation
Shares Par Value Capital par value Adjustment Deficit
------------- -------------- ------------ ------------ ------------ ------------
Balance, December 31, 1999 75,000,000 $ 298,685 $18,842,180 $ 16 $(1,870,226) $(6,187,805)
============= ============== ============ ============ ============ ============
Cummulative
translation adjustment - (13,449.00)
Stock surrender
and sale of stock - 2,985,863.00
Minority interest in
subsidiaries' earnings -
Net Loss (720,821)
Balance as of March 31, 2000 75,000,000 298,685 21,828,043 16 (1,883,675) (6,908,626)
============= ============== ============ ============ ============ ============
Future Total
Stock Minority Shareholders'
subscription Interest Equity
-------------- ---------- ------------
Balance, December 31, 1999 $ 312,500 $5,729,247 $17,124,597
============== ========== ============
Cummulative
translation adjustment $ (13,449)
Stock surrender
and sale of stock $ 2,985,863
Minority interest in
subsidiaries' earnings 13,448 $ 13,448
Net Loss $ (720,821)
-------------- ---------- ------------
Balance as of March 31, 2000 312,500 5,742,695 19,389,638
============== ========== ============
The accompanying notes are an integral part of these consolidated financial
statements
GLOBAL TELEMEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2000
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of the Company and
its wholly owned subsidiaries, as well as less than majority owned entity which
it controls. Significant inter-company accounts and transactions have
been
eliminated in consolidation.
PROPERTY, PLANT AND EQUIPMENT
Purchased property and equipment are recorded at cost, and depreciated using the
straight-line method over the estimated useful lives of the assets, commencing
when the assets are installed or placed in service. The estimated useful lives
are ten years for furniture and fixtures, seven years for office equipment, five
years for computer equipment, ten years for transportation equipment, twenty
years for machinery, twenty years for improvements, and thirty years for plant
construction costs. The cost of installed equipment includes expenditures for
installation. Capital Leases are recorded at lower of fair market value or the
present value of future minimum lease payment. Assets recorded under capital
leases and leasehold improvements are depreciated over the shorter of their
useful lives or the term of the related lease.
GOODWILL
Purchased goodwill is recorded at cost, and amortized using the straight-line
method over the estimated useful life of forty years
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued SFAS 123
"Accounting for Stock Based Compensation," which the Company elected to adopt as
of January 1, 1996. Under SFAS 123, the Company recognizes compensation expense
for all stock-based compensation, using a fair value methodology. This policy
is consistent with the company's prior accounting.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles (GAAP) requires management to make
estimates and assumptions that effect the reported amounts of assets,
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results may differ from these estimates.
Significant estimates in the financial statements include the assumption the
Company will continue as a going concern. The assumption could change in the
near term.
INTERIM INFORMATION
The accompanying unaudited condensed consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries. All intercompany
accounts and transactions have been eliminated in consolidation.
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Rule 10-01 of
Regulation S-X promulgated by the Securities and Exchange Commission. Such
financial statements do not include all disclosures required by generally
accepted accounting principles for annual financial statement reporting
purposes.
However, there has been no material change in the information disclosed in the
consolidated financial statements included in the Company's Form 10-KSB for the
year ended December 31, 1999, except as disclosed herein.
Accordingly, the information contained herein should be read in conjunction with
the consolidated financial statements and related disclosures contained in the
Company's Form 10-KSB for the year ended December 31, 1998 and December 31,
1999. The accompanying financial statements reflect, in the opinion of
management, all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the interim periods presented.
The periods presented are the three months ended March 31, 2000 and 1999,
respectively. Certain reclassifications have been made to the financial
statements for prior periods to conform to the current year presentation. These
reclassifications have no effect on the net income for any of the periods.
2. NOTES PAYABLE
Notes payable consist of the following at March 31, 2000
Current:
Various demand notes, interest rates 7% -12% . . . . . . . . . $ 625,500
Floating rate convertible debentures, due August 15, 1998 .. . 4,416,000
Floating rate notes, due on demand . . . . . . . . . . . . . . 250,000
----------
$5,291,500
==========
Long-term
- -----------------------------------------------------------------
Mortgage on Philippine Plant, prevailing interest rates,
due 2000. This mortgage is currently in foreclosure and
is due and payable in full by June 5, 2000 $ 443,405
- ----------------------------------------------------------------- ==========
3. FAIR VALUE OF FINANCIAL INSTRUMENTS
Significant financial instruments consist of accounts payable, notes payable,
or accrued expenses that are either demand or due through 2000. The Company is
negotiating with two New York based investment bankers for funds required to
settle these amounts. As a result, the Company is unable to estimate the timing
and ultimate form of the settlement of these liabilities. It believes that if
the current holders were to sell such instruments to other parties, the sales
price would be substantially less than the carrying value.
4. COMMITMENTS AND LITIGATION
The Company has employment agreements with certain officers and key employees,
which expire at various times through 2005. Resignation of the former officers
and key employees resulted in the cancellation of all previous employment
agreements.
Walsh Litigation. The Company proposed a settlement to the plaintiff. As of July
- -----------------
7, 1998, the Company entered into a settlement agreement for $120,000 payable
in 6 equal monthly installments beginning July 7, 1998. The August payment was
due and payable by August 13, 1998. The failure to make this payment resulted in
a $330,000 judgment, and delivery by the escrow agent of 250,000 shares of GTMI
common stock, as security for the judgment, in accordance with the consent
order. New management proposed a settlement, which was accepted.
CAM-NET Litigation. On February 20, 1997, a complaint was filed by CAM-NET
- --------------------
Communications Network, Inc. ("CN") in federal court for the Northern District
of Georgia, (197-CV-0448). The complaint sought recovery on two promissory
notes in the total principal amount of $250,000, together with interest thereon
to February 17, 1997 of $21,071.70, additional interest to date of payment,
attorney's fees, costs and expenses. The company has offered a split payment
cash settlement in this matter.
RBB Bank-Khalifa Litigation. On or about July 30 1996 and August 28, 1996,
---------------------------
The Company issued the aggregate 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) Canadian Imperial Bank of Commerce
("CIBC") ($1,350,000) (collectively, the "Debenture holders"). The Company has
finalized a negotiated settlement of these disagreements providing for payment
of $1,000,000 to Khalifa, and $3,417,667 to RBB Bank over a period of 6 months
commencing after the shareholders meeting. The settlement calls for conversions
every 45 days, at market rate in either cash, or stock at the Company's choice.
The payments will commence within 30 days of the next shareholders meeting.
WorldCom/WilTel Litigation. On August 29, 1997, a complaint was filed
---------------------------
against the Company by WorldCom Network Services, Inc. d/b/a WilTel in the
State Court of Dekalb County, Georgia (Action No. 97A-36948-3) seeking recovery
of Approximately $6 million for payment of services rendered as well as fees for
Attorneys and court costs. New management has offered a cash settlement in this
matter.
K&S International Communications, Ltd Arbitration.The Company was involved
---------------------------------------------------
in an arbitration proceeding with Extelcom Corporation (a/k/a K&S International
Communications, Ltd."K&S") with respect to a former agreement under which each
party was to provide services to the other. The Company believes that
Extelcom's claims are without substantial merit but due to the nature of the
arbitration process, at the end of 1997 elected to increase its litigation
reserves by an amount in excess of $1,000,000 for the potential liability claim
by Extelcom. Based upon a technical default, an award was entered against the
Company in May 1998 for $2.5 million. The Company has negotiated a $390,000
settlement in this matter and has paid $90,000 towards this settlement. A final
payment is due on May 1st 2000
BUSINESS COMBINATIONS
- ----------------------
New management, having spent considerable funds and effort in the
investigation of new technologies, concluded that the future of the Company lies
in e-commerce web-hosted products, e-music, unified messaging and other enhanced
web-based services. Management is developing a proprietary SmartCard that will
give corporate clients and consumers direct access to enhanced technological
services and provide the Company with a strategic advantage in the
marketplace.
Management believes that these new technologies will play an important
role in achieving and retaining market share. The Company's new management
has decided that it will review available wireless technologies carefully.
Prior management had invested exploratory funds in new technology concerning
wireless research. However, due to insufficient funds to continue investment in
exploratory research, current management is re-evaluating committed funds
required to become a "Carrier's Carrier." Instead, current management considers
owning software patents, proprietary SmartCard products and e-commerce products
with strategic alliances with web design and unified messaging companies would
bring the Company significant recurring revenues and global market share in the
near-term.
On April 2, 1999, the Company, via a share exchange, and pending the
occurrence of certain conditions precedent, acquired 100% of BHFC in
exchange for 29,595,139 common shares of GTMI and 4,000 shares of Series "A"
GTMI Preferred Shares (Series "A" Preferred Shares are convertible at 208,274
shares of GTMI common stock per each preferred share). Two hundred eighteen
Series "A" Preferred Shares, representing 5% of the Company, were allocated
for CyberAir's principals conditioned upon the engagement of the previously
discussed marketing agreement with CyberAir and the deployment of technology
pursuant to the agreement. On December 18, 1999, the Company called on CyberAir
to make available its technology, however, CyberAir was unable to meet its
contractual obligations. Subsequently, the Company retired the preferred shares
reserved for the CyberAir principals until further developments regarding the
technology contemplated by the CyberAir agreement are realized.
To clearly identify, create and fund the distinct revenue streams and
cultivate specialized management on the telecom side, the Company acquired the
majority interest in a Nevada corporation named BentleyTel.com, Inc.
BentleyTel.com, holds proprietary software products and enhanced services, which
will be deployed in the Pacific Rim, Europe, China, Japan and North America.
During the 4th quarter of 1999, BentleyTel.com (USA) acquired three
companies: Octa4 Pty. Ltd. Located in Darwin, Australia, 3G Communications,
Inc. located in Davao, Philippines and DynaSem Communications Sdn. Bhd.
located in Kuching, Malaysia. The acquisitions have provided the Company with
income from long-distance telecommunications, e-commence business, ISP services
and technology training. In the future, it is anticipated that the acquisitions
will provide a platform for the sale of VOIP continental and international
calling cards.
BENTLEYTEL.COM, INC., GROUP OF COMPANIES-DESCRIPTION
- --------------------------------------------------------
The BentleyTel.com Group of Companies (www.bentleytel.com) now includes:
------------------
a) Octa4 Pty. Ltd. is an Australian internet service, long distance
and International telecommunications provider. Established in 1991, Octa4
is offering ISP to 4,000 + members and maintains a new national network
offering ISP, virtual ISP, VIOP (Voice Over the Internet), VPN (Virtual Private
Networks) and e-commerce to every Australian state. Octa4 and its clients
account for almost 50% of Australia's e-commerce. Octa4, located on the web at
www.octa4.net.au, has also developed the "Centrebet" Internet international web
hosted betting system, which can be viewed at www.centrebet.com.
b) 3G Communications, Inc., located in Davao, Philippines is a long
distance telecommunications company that owns and operates 44 mobile satellite
long distance tele-centers and 12 V-Sat Kiosks. 3G plans to deploy up to 100
satellite tele-centers in Mindanao by the end of the year 2001. (3G),
BentleyTel.com Phils is currently nine (9) months ahead of schedule opening its
44th tele-centers and 12 cell Kiosks, completing 70% of the year's roll-out in
the first quarter of 2000. 3G has a carrier contract with San Diego based
WorldxChange Inc.
www.worldxchange.com
- --------------------
c) DynaSem Communications, Inc., ("DynaSem") located in the city of
Kuching, Malaysia, and on the world-wide web at www.mdc.com.my, is a computer
sales and technology training company. BentleyTel.com acquired DynaSem to
assist with technology transfers between the BentleyTel.com companies and to
train BentleyTel.com personnel in VIOP, ISP, secure data transfer and
e-commerce. It is anticipated that the acquisition of DynaSem will facilitate
the Company's entry into the Malaysian multi-media corridor. DynaSem is
affiliated with the prestigious Tun Abdul Razak Universities which have 12
campuses.
During the 1st quarter of 2000, BentleyTel.com continued to provide
complex e-commerce solutions, multi-media and high speed Internet and wireless
communications, including international and long distance Voice over IP, LAN,
VPN (Virtual Private Networks), ISP, Virtual ISP, and PC-PC, PC-Phone
transmission of data and voice to and within the BIMP-EAGA. BentleyTel(Aus) is
part of a Consortium consisting of Optus, NEC, Compaq and Cable and Wireless
which was successful in obtaining a $110 million 5 year contract to provide the
Government of the Northern Territory of Australia with Internet access,
VPN,(Virtual Private Network) and LAN/WAN systems. On June 2000,
BentleyTel.com Australia will take over ownership and management of the
Australian Northern Territory Government Internet.
The group of companies now comprising BentleyTel.com have all maintained
a 100% growth rate in recent years. It is anticipated that the transfer of
technology and networking between the companies will significantly increase the
Company's earnings over time.
BentleyTel.com executed share exchange agreements effective on October
Pursuant to the share exchanges, BentleyTel.com agreed to provide capital,
as required to each of the subsidiaries to support their business development
and operations.
Given the expected growth and continued need for capital, BentleyTel.com
intends to conduct an initial public offering of BentleyTel.com stock by late
2000.
5. BUSINESS COMBINATION
Bentley House Furniture Company Acquisition. On April 2, 2000, the Company
- -----------------------------------------------
closed an agreement to acquire Bentley House Furniture Company ("BHFC"), a
Philippine holding company with interests in: telecommunications; agriculture;
mining; timber exports; and furniture manufacturing. BHFC has significant
housing construction contracts with the Philippine Government, which include
exclusive supply of Internet, CableTV and telecommunications for one million
Government houses to be constructed over the next 25 years. Pending Hotel
contracts in Australia and the Philippines as well as government housing
contracts, telecommunication, and reforestation projects should result in an
excess of US$120,000,000 of net income over the life of the contracts. BHFC
has significant Government contracts for forestry land development, which
include all environmental certifications, harvesting permits and title to the
standing timber. For proper entry into the books of the Company, BHFC has
engaged the international audit firm of KPMG to independently value the timber
assets following which the Company will make those assets available for the
purpose of establishing the credit facilities necessary for the combined
companies to realize their new joint business plan.
BHFC has existing facilities for the milling and finishing of raw timber as well
as a newly constructed "state of the art" furniture manufacturing facility,
designed and financed with the assistance of Sumitomo Corporation, with whom
BHFC has an international agreement. This 10-acre factory/office complex
includes the BHFC Asean Head office, and is believed by the management of BHFC
to be one of the largest and most modern furniture factories in the Philippines.
BHFC's equipment includes BACCI Italian shaping machines; high frequency
microwave wood bending machines and Italian automated heated spray booths. The
factory has a certified output capacity of 10,000 finished pieces per month. The
Company utilizes mahogany, teak and other hardwood timber from its plantations
to supply hotels and resorts under construction with timber and interior
furniture. The factory is currently in foreclosure and has had all operations
suspended. The factory operations are suspended to focus the available financial
resources in restructuring Global Telemedia. Management, however, has only a
balance due of $725,000 on its $8 million dollar factory office complex and
intends to pay this remaining balance and re-open the factory for operations in
the second quarter of 2000 Management, however, intends to pay the remaining
balance on the mortgage and re-open the factory for operations in the second
quarter of 2000.
On April 2nd 2000, the Company closed its share exchange with the delivery of
99.8% of Bentley House Furniture Company stock to the escrow attorney. New
management has developed a schedule of resolutions for its present outstanding
debts and lawsuits.
In the reverse acquisition the assets and liabilities of the legal acquirer
(GTMI) are re-valued to its fair market values. The purchase price is
then
allocated to the assets and liabilities assumed by the accounting acquirer
(BHFC). The remaining difference resulting from the purchase price adjustments
and adjustments to the legal acquirer's (GTMI) capital structure is charged or
credited to paid-in capital. As such, the Company will report financial
information on a consolidated basis prospectively, and will not include
comparative proforma financial information in these notes as they will provide
little or no relevant information.
The Company intends to actively pursue joint ventures with other
telecommunication companies in the fields of ISP (Internet Service Provider) and
wireless telecommunications. The focus of this will be the Asia-Pacific
countries where the calling costs are significantly higher than in the USA.
In 1998, the Company funded seed money and entered into an agreement to act
as the primary marketing arm of CyberAir Communications, Inc. ("Cyber"). In
1998, Cyber is engaged in deploying an international network through a series of
contracts and alliances with various government agencies and global
telecommunication companies. In the first stage, the Company is scheduled to
market U.S. origination of both voice and data long distance to Mexico, China,
India and Pakistan.
The Company also funded seed money for UltraPulse Communications for the
development of "Broadband Spread Spectrum" wireless technology. On December 17,
1998, the principals of CyberAir Communications Inc., introduced the Company to
the principals of Bentley House Furniture Company Inc. (BHFC). BHFC entered
into a share exchange dialogue with the Company predicated on the contractual
agreement with CyberAir to act as its primary marketing arm (see 10QSB 9-30-98
and 10KSB 15/4/99) and a pending agreement to acquire UltraPulse Communications
Inc., which had developed a broadband Spread spectrum technology. The Company
had invested development capital in both CyberAir and UltraPulse to secure these
agreements.
The Company intends to further examine the viability of the Ultra-Pulse
and CyberAir technology and whether it will enhance the existing services and
or increase the Company's market-share, and or net profits.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-QSB (THE "REPORT") MAY BE DEEMED TO
CONTAIN FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS IN THIS REPORT OR
HEREAFTER INCLUDED IN OTHER PUBLICLY AVAILABLE DOCUMENTS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"), REPORTS TO THE COMPANY'S
STOCKHOLDERS AND OTHER PUBLICLY AVAILABLE STATEMENTS ISSUED OR RELEASED BY THE
COMPANY INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH
COULD CAUSE THE COMPANY'S ACTUAL RESULTS, PERFORMANCE (FINANCIAL OR OPERATING)
OR ACHIEVEMENTS TO DIFFER FROM THE FUTURE RESULTS, PERFORMANCE (FINANCIAL OR
OPERATING) OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS. SUCH FUTURE RESULTS ARE BASED UPON MANAGEMENT'S BEST ESTIMATES
BASED UPON CURRENT CONDITIONS AND THE MOST RECENT RESULTS OF OPERATIONS. THESE
RISKS INCLUDE, BUT ARE NOT LIMITED TO, THE RISKS SET FORTH HEREIN, EACH OF
WHICH COULD ADVERSELY AFFECT THE COMPANY'S BUSINESS AND THE ACCURACY OF THE
FORWARD-LOOKING STATEMENTS CONTAINED HEREIN.
THIS REPORT, INCLUDING THE DISCLOSURES BELOW, CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND/OR UNCERTAINTIES. WHEN USED
HEREIN, THE TERMS "ANTICIPATES," "EXPECTS," "ESTIMATES," "BELIEVES" AND SIMILAR
EXPRESSIONS, AS THEY RELATE TO THE COMPANY OR ITS MANAGEMENT, ARE INTENDED TO
IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR
IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS.
RESULTS OF OPERATIONS
The Company is finalizing its roll out program for its Proprietary
Smart-e-Card The Company has a marketing program to sell the cards through
telemarketing and has an agreement with Cambridge Inc a marketing company from
Florida. The Company has an additional Marketing agreement with Big Wheel
Promotions to market the product starting in Dallas, Houston, San Antonio and
other Texas Locations. Big Wheel is also the the agent for Western Union and
Corona Beer. Additionally, the company will market the product through its own
web site and its marketing group in California.
The Smart-e-Card has MasterCard Capability, ATM, Phone Card, e-funds transfer
and Unified Messaging. The card will be configured to operate in over 100
countries and the Company has applied for a business use patent.
The company also executed a co-development agreement with Data Exchange Inc of
Richardson Texas, to co-develop an integrated Unified Messaging system called
the Message PilotTM . The Message PilotTM will enable e-mail, voicemail, fax and
pager messages to be retrieved from remote locations around the world. The
Company also has an exclusive marketing agreement for Message PilotTM for the
Pacific Rim countries, China, Japan and Europe with exclusive retail marketing
in North America, Mexico and Canada; and co-marketing for wholesale in North
America.
The Company has made an offer to purchase Data Exchange Inc, for $45 million in
cash and stock. The shareholders of Data Exchange have accepted the offer. Final
documents are being prepared.
3G Communications Inc. in the Philippines has filed to change its name to
BentleyTel.com Philippines, the Company has arranged a carrier agreement with
WorldxChange an international carrier located in San Diego. WorldxChange has
provided 44 trunk groups to BentleyTel.com Phils, and the company is now
enjoying international traffic both in and out of the Philippines. Worldxchange
has also arranged for the acceptance of credit card payments for international
collect calls in over 100 countries. BentleyTel.com Phils has expanded from 26
TeleCenters in December 1999 to 44 TeleCenters and 12 V-Sat Kiosks by March 31
2000.
With the launch of the Proprietary Smart-e-Card and Message Pilot the Company
expects to show significant revenues for 2000
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
OPERATING (LOSS)
Revenues for the three months ended March 31, 2000 and March 31, 1999 increased
from $0 revenues to $580,000. The revenue increases were primarily associated
with revenues generated by the operating subsidiaries in the telecommunications
and technology sectors.
Bentley House Furniture Company's new factory was suspended in 1999 and
2000 as the management concentrated their financial resources to the
reorganization of the Company and the financing of BentleyTel.com and its
products and development costs. Since the beginning of 2000 the Company has paid
3 million to banks and creditors and has scheduled the reopening of its Head
Office and manufacturing complex for 2nd quarter 2000. The company has existing
contracts and expects to generate significant revenues from its manufacturing in
the Philippines. These revenues are targeted to further expansion of the
telecommunications assets and multi-national and national marketing of its
proprietary Smart-e-Card and Message PilotTM .
General and administrative costs for the three months ended March 31, 2000
increased approximately by $591,000 from the corresponding periods in 1999.
The entire increase over the corresponding period in 1999, resulted from
the Company's acquisition of its subsidiaries. The merger between BHFC is
complete as is the construction of the new Davao City Factory Office complex,
pending contracts can now be executed. The merger between BentleyTel.com
was completed in the fourth quarter of 1999.
The Company has dealt with the majority of its disputes and legal matters
carried over from previous management and is confident that its legal and
finance expenses will be significantly reduced.
The Company has executed employment agreements with experienced telecom
executives such as John Walsh, former, MCI, GTE. FMC, Ken Heffner, former, Vice
President and General Manager of NORTEL, and Annette Gieseman, former, Vice
President of NORTEL Intelligent Networks. These executives are tasked prepare
international marketing programs, strategies and roll programs for the
Smart-e-Card and MessagePilotTM products and
Net loss/profits from operations for the three months ended March 31, 2000
and 1999 were approximately (609,000) and (471,798), respectively.
OTHER INCOME (EXPENSES)
Interest expense for the three months ended March 31, 2000 was
approximately $55,000 and $63,000 respectively, and were significantly higher
than comparable 1998 periods. The increase was due to the addition of the
mortgage note on the Company's Davao City plant. The Company will continue to
explore the most effective utilization of financial leverage as well as
alternative means of raising additional capital to enhance long-term growth and
maximize shareholder value.
LIQUIDITY AND CAPITAL RESOURCES
As of March 30, 2000, the Company had accounts payable and accrued
expenses totaling $22,080,633.
Notes payable was paid down by approximately $2,300,000 by using proceeds from
the surrender and sale of common shares by directors and officers.
New management has settled some and should settle all the remaining
creditors by end 2000. The Company has received co-operation from the
majority of creditors.
The Company has been financed by its New Management which is also negotiating
with financial institutions for long term loans backed by assets of
Bentleytel.com and BHFC.
Management anticipates that the Company will be able to build revenue and
sustain its expansion and growth under its new business plan.
YEAR 2000 COMPLIANCE
The Company's administrative operations have been reviewed for Year 2000
Compliance. Normal upgrades have resulted in essential operations being Year
2000 Compliant. The Company has consulted an external consultant with respect
to The Company's internal accounting software system, and has decided to
implement a international platform of accounting software for timely and
accurate reporting and filing.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Form 10-KSB filed April 15, 2000
The Company has employment agreements with certain officers and key employees,
which expire at various times through 2005. Resignation of the former officers
and key employees resulted in the cancellation of all previous employment
agreements.
Walsh Litigation. The Company proposed a settlement to the plaintiff. As of July
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7, 1998, the Company entered into a settlement agreement for $120,000 payable
in
6 equal monthly installments beginning July 7, 1998. The August payment was due
and payable by August 13, 1998. The failure to make this payment resulted in a
$330,000 judgment, and delivery by the escrow agent of 250,000 shares of GTMI
common stock, as security for the judgment, in accordance with the consent
order. New management proposed a settlement, which was accepted.
CAM-NET Litigation. On February 20, 1997, a complaint was filed by CAM-NET
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Communications Network, Inc. ("CN") in federal court for the Northern District
of Georgia, (197-CV-0448). The complaint sought recovery on two promissory
notes in the total principal amount of $250,000, together with interest thereon
to February 17, 1997 of $21,071.70, additional interest to date of payment,
attorney's fees, costs and expenses. The company has offered a split payment
cash settlement in this matter.
RBB Bank-Khalifa Litigation. On or about July 30 1996 and August 28, 1996,
---------------------------
The Company issued the aggregate 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) Canadian Imperial Bank of Commerce
("CIBC") ($1,350,000) (collectively, the "Debenture holders"). The Company has
finalized a negotiated settlement of these disagreements providing for payment
of $1,000,000 to Khalifa, and $3,417,667 to RBB Bank over a period of 6 months
commencing after the shareholders meeting. The settlement calls for conversions
every 45 days, at market rate in either cash, or stock at the Company's choice.
The payments will commence within 30 days of the next shareholders meeting.
WorldCom/WilTel Litigation. On August 29, 1997, a complaint was filed
---------------------------
against the Company by WorldCom Network Services, Inc. d/b/a WilTel in the
State Court of Dekalb County, Georgia (Action No. 97A-36948-3) seeking recovery
of Approximately $6 million for payment of services rendered as well as fees for
Attorneys and court costs. New management has offered a cash settlement in this
matter.
K&S International Communications, Ltd Arbitration.The Company was involved
---------------------------------------------------
in an arbitration proceeding with Extelcom Corporation (a/k/a K&S International
Communications, Ltd."K&S") with respect to a former agreement under which each
party was to provide services to the other. The Company believes that
Extelcom's claims are without substantial merit but due to the nature of the
arbitration process, at the end of 1997 elected to increase its litigation
reserves by an amount in excess of $1,000,000 for the potential liability claim
by Extelcom. Based upon a technical default, an award was entered against the
Company in May 1998 for $2.5 million. The Company has negotiated a $390,000
settlement in this matter and has paid $90,000 towards this settlement. A final
payment is due on May 1st 2000
CAM-NET Litigation. On February 20, 1997, a complaint was filed by CAM-NET
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Communications Network, Inc. ("CN") in federal court for the Northern District
of Georgia, (197-CV-0448). The complaint sought recovery on two promissory
notes in the total principal amount of $250,000, together with interest thereon
to February 17, 1997 of $21,071.70, additional interest to date of payment,
attorney's fees, costs and expenses. Although the Company was successful in
reaching a compromise settlement of this action, its inability to make payment
of the settlement amount in January 1998 resulted in a summary judgment against
the Company for $250,000. New maanagent has offered a structured cash
settlement in this matter.
RBB Bank-Khalifa Litigation. On or about July 30 1996 and August 28, 1996,
---------------------------
The Company issued the aggregate 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) Canadian Imperial Bank of Commerce
("CIBC") ($1,350,000) (collectively, the "Debenture holders"). The Company has
finalized a negotiated settlement of these disagreements providing for payment
of $1,000,000 to Khalifa, and $3,417,667 to RBB Bank over a period of 6 months
commencing after the shareholders meeting. The settlement calls for conversions
every 45 days, at market rate in either cash, or stock at the Company's choice.
The payments will commence within 30 days of the next shareholders meeting.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
Exhibit 27 - Financial Data Schedule
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GLOBAL TELEMEDIA INTERNATIONAL, INC.
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(Registrant)
/s/ Jonathon Bentley-Stevens
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Jonathon Bentley-Stevens, CEO
Date: May 16, 2000
/s/ David Tang
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David Tang, Chief Financial Officer
Date: May 16, 2000