SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the quarterly period ended: December 31, 1997
GS TELECOM LIMITED
(Exact name of registrant as specified in its charter)
TELECONFERENCING SYSTEMS INTERNATIONAL, INC.
(Former name)
Colorado 0-13313 36-3296861
(State or other (Commission IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
33 Great James Street, London, England WC1N 3HB
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 44-171-404-9442
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days.
Yes X No ____
As of December 31, 1997, there were 14,778,220 shares of common
stock, no par value, outstanding.
GS TELECOM LIMITED
Condensed Consolidated Balance Sheet
December 31, June 30, 1997
1997
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $45,647 $204
Accounts Receivable 83,048 -
Inventories 30,835 -
Prepaid Value Added Tax 39,454 -
Total Current Assets 198,984 204
PROPERTY AND EQUIPMENT, less of 32,704 -
accumulated depreciation of $8,380
OTHER ASSETS -
Goodwill, less accumulated 692,648 -
amortization of $1,620
Other 11,180 -
703,828 -
$935,516 $204
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES
Accounts payable $621,208 -
Convertible notes payable 376,500 -
Accrued interest payable 2,766 -
Total current liabilities 1,000,474 -
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, no par value per share;
authorized 100,000,000 shares; issued
and outstanding 14,778,220 and 278,220
shares, respectively
Additional paid-in capital 1,116,857 966,857
Common stock issuable, 2,050,000 20,500 -
shares
Accumulated deficit (1,205,315) (966,653)
Foreign currency translation 3,000 -
adjustments
Total stockholders' (deficit) (64,958) 204
$935,516 $204
See Accompanying Notes
<caption
GS TELECOM LIMITED
Condensed Consolidated Statement of Operations
(Unaudited)
Three Months Six Months Ended
Ended December 31
December 31
1997 1996 1997 1996
NET SALES $28,477 $781 $28,477 $5,779
COST OF SALES 18,744 - 18,744 -
GROSS PROFIT 9,733 781 9,733 5,779
SELLING, GENERAL AND 248,395 10,079 248,395 10,271
ADMINISTRATIVE
OPERATING LOSS (238,662) (9,298) (238,662) (4,492)
LOSS BEFORE EXTRAORDINARY (238,662) (9,298) (238,662) (4,492)
ITEM
EXTRAORDINARY ITEM - - (60) - 1,930
SETTLEMENT AND
EXTINGUISHMENT OF TRADE
PAYABLES
NET LOSS $(238,662) (9,358) $(238,662) $(2,562)
INCOME (LOSS) PER COMMON
SHARE:
BEFORE EXTRAORDINARY ITEM $(.03) - $(.06) -
EXTRAORDINARY ITEM - - - -
NET INCOME (LOSS) $(.03) - $(.06) -
WEIGHTED AVERAGE SHARES 8,553,220 278,220 4,315,720 278,220
OUTSTANDING
See Accompanying Notes
GS TELECOM LIMITED
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Six Months Ended
Ended December 31,
December 31,
1997 1996
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $(238,662) $(2,562)
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Common stock issuable for 20,500 -
services
Depreciation and amortization 2,947 -
Changes in operating assets and
liabilities:
Receivables (9,657) (1,974)
Inventories (23,434) 1,604
Prepaid value added tax (16,306) -
Accounts payable (239,279) (2,809)
Payable to related parties 134,083 4,880
Accrued interest payable 2,766 -
Other - 117
(367,042) (744)
CASH FLOWS FROM INVESTING
ACTIVITIES
Cash of subsidiary at date of 36,173 -
business acquisition
Purchase of intangibles (188) -
35,985 -
CASH FLOWS FROM FINANCING -
ACTIVITIES
Issuance of convertible notes 376,500 -
payable
376,500 -
NET INCREASE (DECREASE) IN CASH 45,443 -
CASH - BEGINNING OF PERIOD 204 840
CASH - END OF PERIOD $45,647 $840
Noncash Investing and Financing Activities:
On November 15, 1997, the Company acquired GS Telecom Limited, an Isle
of Man company, and for which it also issued a $150,000 convertible
note. The note was subsequently converted to 14.5 million shares of
common stock. The combination has been accounted for as a purchase as
follows:
Net liabilities of subsidiary assumed $544,268
Issuance of common stock 150,000
Goodwill $694,268
GS TELECOM LIMITED
Condensed Consolidated Statement of Changes in Stockholder's Equity
(Deficit)
Common Common Addi- Common Accumu- Other Total
Stock Stock tional Stock lated
Shares Amount Paid-in Issuable Deficit
Capital
[S] [C] [C] [C] [C] [C] [C] [C]
Bal- 278,220 $278 $966,579 - $(966,653) $- $204
ances
July 1,
1997
Conver-
sion 14,500,000 14,500 135,500 - - - 150,000
of note
payable
issued
to
stock-
holders
of
acquired
sub-
sidiary
Stock - - - 20,500 - - 20,500
issuable
for
services
(2,050,000
shares)
Currency - - - - - 3,000 3,000
trans-
lation
adjust-
ments
Net loss - - - - (238,662) - (238,662)
(un-
audited)
Bal- 14,778,220 $14,778 $1,102,079 $20,500 $(1,205,315) $3,000 $(64,958)
ances,
Dec-
ember
31,
1997
(Un-
audited)
[/TABLE]
See accompanying notes
GS TELECOM LIMITED
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note A - General
GS Telecom Limited, formerly Teleconferencing Systems
International, Inc. (the "Company") was incorporated in
Colorado on December 19, 1983.
Activities of the company since June 30, 1995 until November
15, 1997, were primarily liquidation of operating assets and
settlement of obligations to creditors and employees as
previously reported. On November 15, 1997, the Company
acquired an Isle of Man Company, also named GS Telecom
Limited, by issuance of a $150,000 convertible note payable.
The acquired subsidiary had net liabilities of $544,268.
The note payable was subsequently converted to 14,500,000
shares of common stock which was issued to the acquired
company stockholders. The subsidiary's business is to
design and market energy saving and home management systems.
The assets of the subsidiary also includes Associated Power
Industries Limited ("API"), who design and manufacture
energy savings systems. The subsidiary owns 50% of API and
has an option to acquire the remaining 50% ownership
interest for three years. Substantially all intercompany
transactions have been eliminated in the accompanying
consolidated financial statements.
On January 6, 1998, the board of directors changed the
corporations name to GS Telecom Limited and approved a 150-
to one reverse split of the issued and outstanding common
shares of the Company. All share and per share amounts have
been retroactively restated in the accompanying financial
statements to reflect the effect of the reverse stock split.
The accompanying unaudited condensed financial statements
have been prepared in accordance with the instructions to
Form 10-QSB and do not include all of the information and
notes required by generally accepted accounting principles
for complete financial statements. In the opinion of
management, all material adjustments, consisting of only
normal recurring adjustments considered necessary for a fair
presentation, have been included. These statements should
be read in conjunction with the financial statements and
notes thereto included in the Company's Form 10-KSB for the
year ended June 30, 1997.
The results of operations for the six months ended December
31, 1997, are not necessarily indicative of the results for
the remainder of fiscal 1998.
Note B - Earnings (Loss) Per Share
Earnings (loss) per share of common stock are computed using
the weighted average number of shares outstanding during
each period.
ITEM 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations for the three month period ended December
31, 1997, compared to same period ended December 31, 1996
For the quarter ended December 31, 1997, the Company had
revenues of $28,477, and gross profit of $9,733. For the same
period in 1996, the net sales were $781 with no cost of sales for
a gross profit of $781.
The principal reasons for the increases in operations for
the three months ended December 31, 1997, over 1996 are due to
the operations of the newly acquired subsidiary GS Telecom, an
Isle of Man company which sells energy saving computerized
heating controls in Great Britain.
In quarter ended December 31, 1997, the Company incurred
general and administrative expenses of $248,395 resulting in a
net loss of ($238,662). For the same period in 1996 were $10,079
in selling, general, and administrative expenses which produced
operating loss of ($9,298) and with the extraordinary items, net
income of ($9,358).
The Company lost ($.03) per share in the three month period
compared to a nominal loss per share in the same period in 1996.
RESULTS OF OPERATIONS FOR SIX MONTH PERIOD ENDED DECEMBER
31, 1997 TO SAME PERIOD IN 1996.
Six months ended December 31, 1997 compared to same period in 1996.
Sales for the six months ended December 31, 1997, increased
to $28,477 over the $5,779 recorded during the six months ended
December 31, 1996. The principal reason for the increase was the
acquisition of GS Telecom Limited as an operating subsidiary.
The acquisition also resulted in an increase of liabilities of
$544,268. In the six month period in 1997, GS Telecom Limited
cost of sales were $248,395 for a net operating loss of
($238,662) compared to $10,271 in general and administrative
expenses in the same period in 1996 for an operating loss of
($4,492).
Liquidity and Capital Resources
At period end, the Company had $45,647 cash capital and
current assets of $198,984 and total assets (including goodwill
of $692,648) of $935,516. The Company had $1,000,474 in current
liabilities at period end. The Company will be forced to either
borrow against or sell assets or make private placements of stock
or debt in order to fund continued operations. No assurance
exists as to the ability to make private placements of stock or
borrow funds.
To take advantage of an opportunity to expand its operations
into computerized heating controls, the Company, on October 28,
1997, acquired GS Telecom Limited for $694,268 in notes and
assumption of debts, and the notes were subsequently converted to
14,500,000 shares of common stock. To finance operations of this
acquisition, the Company incurred debt of $376,500 in convertible
debentures. As a result of this financing, the Company acquired
operations of GS Telecom Limited, as a wholly owned subsidiary.
Management is of the opinion that more funds will be needed to
meet the Company's anticipated needs during the ensuing twelve
months.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings - None.
Item 2. Changes in securities - None.
Item 3. Defaults upon senior securities - None.
Item 4. Submission of matters to a vote of security holders - None.
Item 5. Other information -
GS Telecom Limited, (the "Company"), designs and markets
proven hi-tech, low cost, energy saving and home management
systems.
The Company owns 100% of Guardian Smart Systems Limited,
which was formed in August 1996 to develop low cost home
management systems, and 50% of Associated Power Industries
Limited ("API") which it acquired on August 31, 1997. API is a
new company which was formed to facilitate the acquisition of the
business of Total Energy Control Systems from the original
proprietors, a partnership. The company holds options to acquire
the remaining 50% of API which can be exercised as to 12.5% from
August 1998 and the balance 12 months later, the exercise price
being based upon a price earnings ratio of 7 times. API does
business as Total Energy Controls ("TEC"). Its systems are
unique, environmentally friendly, energy saving systems, which
have been developed over a period of nearly 20 years. They can
reduce central heating energy usage and cost and CO2 emissions by
25% or more (a high of 51% has been recorded). The efficacy of
the TEC systems is supported by a study currently being completed
by Glasgow and Glamorgan Universities. There are 14.5 million
homes and about 2 million commercial operations with gas or oil
fired central heating systems in the UK alone. The Company
estimates that in the western world there are over 200 million
such systems. There are over 15,000 systems in use, many of them
with blue chip companies who have provided letters of
satisfaction. TEC systems are equipped to manage the smallest
domestic boiler up to the very largest of commercial boilers and
warm air systems.
Although many systems have been sold, sales were mainly
through dealers and the original proprietors did not benefit
materially from these sales and they lacked the financial and
other resources necessary to develop the business on their own.
The acquisition by the company has enabled API to commence
marketing its commercial and domestic systems in the last quarter
of 1997 and it believes that the sales will reach satisfactory
levels by the end of 1998.
Guardian Smart Systems Limited ("GSS") supplies home
management systems which provide the home with low cost,
monitored security and care, plus efficiency and economy.
Markets which at present are being serviced by more expensive
systems. These systems include the domestic version of the Total
Energy Control systems which adds an element to the smart home
management system which no one else offers, further reducing the
cost to the consumer. GSS will start marketing its systems in
February 1998.
With these products the company plans to market low cost,
computerized, environmentally friendly energy saving and home
management systems. There is an ever increasing demand in the
United States for such products and systems as reflected in
recent articles in American trade journals.
Conversion of Note to Equity
On January 20, 1998, the holders of a $150,000 promissory
note elected to convert said note into 14,500,000 shares of
common stock pursuant to the conversion option contained in the
note at $.01 per share. The Company issued 14,500,000 shares of
stock to the stockholders of the Isle of Man company in
cancellation of the debt.
Management Information
The appointment of Messrs. David Innes and Marshal Kaye as
directors was effective as of November 25, 1997:
David Innes, age 63, is a fellow of the Institute of
Chartered Accountants in England and Wales. He qualified in
1957. He was a director of ABACA Group, PLC from 1990-1992.
From 1992 until 1996, he orchestrated and co-managed the
privatization of Elit Ruhagyar Rt, a Hungarian clothing
manufacturer. He is the Chairman of his own management
consultant company, AKS Management Services, Ltd., since
1975. He has been Director and Chief Executive of GS
Telecom Ltd. since June, 1997.
Marshall Kaye, age 73, obtained a degree in Physics in 1943
and studied toward a further degree in Economics at Oxford
University. Mr. Kaye has been the Chairman of Cadmus
Newsletters, Ltd. in England, publishers of Parliamentary
and European government specialized newsletters from 1987 to
present. He has been Chairman of Rodney Deitch Associates
(England) since 1987, a government relations consultant. In
1995, Mr. Kaye became Chairman of Advanced Valve
Technologies in England, a composite value manufacturer.
From 1985 to 1991 he was Chairman of G.H. Zeal, Ltd. in
England, a manufacturer of thermometers and scientific
instruments.
On January 6, 1998, the Board of Directors appointed Marcia
Joslin Bennet, age 49, to the Board of Directors. Ms Bennet has
taken courses in Commerce and Banking from the University of
Toronto and has taken courses from the Canadian Securities
Institute. From 1981 to 1994, she was a director and Executive
Committee Member of Gordon Capital Corporation. Since 1994, she
has been Chairman and a Director of Treleven, Ltd. of Bermuda.
She has been a Registered Representative of the NASD and is a
Fellow in the Canadian Securities Institute.
Reverse Split
Pursuant to an Information Statement and Notice of Special
Meeting of Shareholders on January 5, 1998, the shareholders
approved up to a 150 to 1 reverse split of the issued and
outstanding common shares.
Name Change
Further, the shareholders approved the change of name of the
corporation to GS Telecom Limited.
GS Telecom Limited, formerly Teleconferencing Systems
International Inc. announce that their first Private Placement of
8% Convertible Loan Notes, due September 30, 2000, was closed in
December 1997. The sum raised was $376,500 which was subject to
Finder's Fees and Sales Commission of 10%. An additional $63,500
has been subscribed but not paid. The transaction was
accomplished to foreign investors pursuant to Regulation S.
The Holders of these Notes shall have the option to convert
one hundred percent (100%) of the original principal amount of
the Note issued to the Holder at any time after the 120th day
following the date of issue, into shares of the Company's Common
Stock at a conversion price equal to the lower of $2 per share or
at twenty five percent (25%) less than the average closing bid
price of the Company's Common Stock for the five (5) consecutive
trading days ending on the trading day immediately preceding the
date thereof. Notwithstanding the foregoing, if, after the
effectiveness of the Registration Statement or if an exemption is
available from registration, the closing bid price of the
Company's Common Stock reaches four dollars for the five (5)
consecutive trading days ending on the trading day immediately
preceding the date thereof, the Company shall have the option of
forcing conversion up to Fifty Percent (50%) of the original
principal amount of the Notes originally issued to the Holder,
and if, after such effectiveness, the closing bid price of the
Company's Common Stock reaches eight dollars, the Company shall
thereafter have the option of forcing conversion up to One
Hundred Percent (100%) of the original principal amount of the
Notes issued to the Holder.
Item 6. Exhibits and reports on Form 8-K
(a) The following are filed as Exhibits to
this Quarterly Report. The numbers refer to the
Exhibit Table of Item 601 of Regulation S-K: None.
(b) Reports on Form 8-K filed during the
three months ended December 31, 1997.
(incorporated by reference):
8-K filed November 5, 1997
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 of the undersigned thereunto duly authorized.
Dated: April 15, 1998
GS TELECOM LIMITED
by:/s/David Innes
David Innes, President