AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON May 19, 2000
REGISTRATION NO. 33-____________
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
____________________
GTC TELECOM CORP.
(Exact Name of Registrant as Specified in Its Charter)
NEVADA 88-0318246
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3151 Airway Ave., Suite P-3
Costa Mesa, California 92626
(Address of Principal Executive Offices, Including Zip Code)
____________________
Consulting Agreements
Legal Services Agreements
(Full Title of the Plan)
____________________
S. Paul Sandhu
President & CEO
3151 Airway Ave., Suite P-3
Costa Mesa, California
(714) 549-7700
(Name, Address, and Telephone Number of Agent for Service)
COPIES TO:
M. Richard Cutler, Esq.
Cutler Law Group
610 Newport Center Drive, Suite 800
Newport Beach, California 92660
(949) 719-1977
CALCULATION OF REGISTRATION FEE
Proposed Maximum Proposed Maximum Amount of
Title of Securities Amount to be Offering Price Aggregate Offering Registration
to be Registered Registered per Share(1) Price Fee
- ------------------------------------------------------------------------------------------------
Common Stock,
par value $0.001(2) 463,833 $ 1.50 $ 695.750 $ 172.17
- ------------------------------------------------------------------------------------------------
TOTAL REGISTRATION FEE 463,833 $ 1.50 $ 695,750 $ 172.17
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(c).
(2) Represents shares of Common Stock issued to consultants of the Company.
Please refer to the Selling Shareholders section of this document.
EXPLANATORY NOTE
GTC Telecom Corp. ("GTC") has prepared this Registration Statement in accordance
with the requirements of Form S-8 under the Securities Act of 1933, as amended
(the "1933 Act"), to register shares of common stock, $.001 par value per share,
underlying options to purchase the Common Stock of GTC previously issued to
certain officers of the Company.
Under cover of this Form S-8 is a Reoffer Prospectus GTC prepared in accordance
with Part I of Form S-3 under the 1933 Act. The Reoffer Prospectus may be
utilized for reofferings and resales of up to 463,833 shares of common stock
acquired by the selling shareholders.
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
GTC will send or give the documents containing the information specified in Part
1 of Form S-8 to employees or consultants as specified by Securities and
Exchange Commission Rule 428 (b) (1) under the Securities Act of 1933, as
amended (the "1933 Act"). GTC does not need to file these documents with the
commission either as part of this Registration Statement or as prospectuses or
prospectus supplements under Rule 424 of the 1933 Act.
REOFFER PROSPECTUS
GTC TELECOM CORP.
3151 AIRWAY AVE., SUITE P-3
COSTA MESA, CALIFORNIA 92626
(714) 549-7700
463,833 SHARES OF COMMON STOCK
The shares of common stock, $0.001 par value per share, of GTC Telecom Corp.
("GTC" or the "Company") offered hereby (the "Shares") will be sold from time to
time by the individuals listed under the Selling Shareholders section of this
document (the "Selling Shareholders"). The Selling Shareholders acquired the
Shares pursuant to compensatory benefit plans pursuant to consulting and legal
services that the Selling Shareholders provided to GTC.
The sales may occur in transactions on the NASDAQ over-the-counter market at
prevailing market prices or in negotiated transactions. GTC will not receive
proceeds from any of the sale the Shares. GTC is paying for the expenses
incurred in registering the Shares.
The Shares are "restricted securities" under the Securities Act of 1933 (the
"1933 Act") before their sale under the Reoffer Prospectus. The Reoffer
Prospectus has been prepared for the purpose of registering the Shares under the
1933 Act to allow for future sales by the Selling Shareholders to the public
without restriction. To the knowledge of the Company, the Selling Shareholders
have no arrangement with any brokerage firm for the sale of the Shares. The
Selling Shareholders may be deemed to be an "underwriter" within the meaning of
the 1933 Act. Any commissions received by a broker or dealer in connection with
resales of the Shares may be deemed to be underwriting commissions or discounts
under the 1933 Act.
GTC's common stock is currently traded on the NASDAQ Over-the-Counter Bulletin
Board under the symbol "GTCC".
________________________
This investment involves a high degree of risk. Please see "Risk Factors"
beginning on page 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED WHETHER
THIS REOFFER PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
________________________
May 19, 2000
1
TABLE OF CONTENTS
Where You Can Find More Information 2
Incorporated Documents 2
The Company 3
Risk Factors 5
Use of Proceeds 10
Selling Shareholders 11
Plan of Distribution 11
Legal Matters 12
Experts 12
________________________
You should only rely on the information incorporated by reference or provided in
this Reoffer Prospectus or any supplement. We have not authorized anyone else
to provide you with different information. The common stock is not being
offered in any state where the offer is not permitted. You should not assume
that the information in this Reoffer Prospectus or any supplement is accurate as
of any date other than the date on the front of this Reoffer Prospectus.
WHERE YOU CAN FIND MORE INFORMATION
GTC is required to file annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission (the "SEC") as
required by the Securities Exchange Act of 1934, as amended (the "1934 Act").
You may read and copy any reports, statements or other information we file at
the SEC's Public Reference Rooms at:
450 Fifth Street, N.W., Washington, D.C. 20549;
Seven World Trade Center, 13th Floor, New York, N.Y. 10048
Please call the SEC at 1-800-SEC-0330 for further information on the Public
Reference Rooms. Our filings are also available to the public from commercial
document retrieval services and the SEC website (http://www.sec.gov).
INCORPORATED DOCUMENTS
The SEC allows GTC to "incorporate by reference" information into this Reoffer
Prospectus, which means that the Company can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this Reoffer
Prospectus, except for any information superseded by information in this Reoffer
Prospectus.
GTC's Annual Report on Form 10-KSB, dated October 13, 1999, is incorporated
herein by reference. In addition, all documents filed or subsequently filed by
the Company under Sections 13(a), 13(c), 14 and 15(d) of the 1934 Act, before
the termination of this offering, are incorporated by reference.
The Company will provide without charge to each person to whom a copy of this
Reoffer Prospectus is delivered, upon oral or written request, a copy of any or
all documents incorporated by reference into this Reoffer Prospectus (excluding
exhibits unless the exhibits are specifically incorporated by reference into the
information the Reoffer Prospectus incorporates). Requests should be directed to
the Chief Financial Offer at GTC, at GTC's executive offices, located at 3151
Airway Ave., Suite P-3, Costa Mesa, California 92626. GTC's telephone number is
(714) 549-7700. The Company's corporate Web site address is
http://www.gtctelecom.com.
2
THE COMPANY
GTC is a provider of various Telecommunication and Internet related services,
including long distance telephone, and calling card services as well as various
Internet related services including Internet Service Provider Access and Web
Page Hosting. On May 29, 1997, our founders formed GenX, LLC ("GenX") in the
state of Delaware for the purpose of providing long distance telephone service.
On February 3, 1998, GenX reorganized from a limited liability company to a
corporation and changed its name to GenTel Communications, Inc., a Colorado
corporation ("GenTel"). On August 31, 1998, GenTel was acquired by Bobernco,
Inc., a Nevada corporation ("Bobernco"). Prior to its acquisition of GenTel,
Bobernco had no significant operations. Immediately following the
transaction, our founder owned a majority of the outstanding stock of Bobernco,
and thus had control of Bobernco. For accounting purposes we recorded the
transaction as a reverse acquisition whereby GenTel was treated as having
acquired Bobernco. Following the transaction, Bobernco changed its name to GTC
Telecom Corp.
The founders of GenTel agreed to be acquired by Bobernco because Bobernco was a
public company whose common stock was listed for trading on the Over The Counter
Bulletin Board. As a public company, we felt that it would be easier to raise
the money necessary to carry out our business plan.
Immediately prior to the acquisition, Bobernco had 1,800,000 shares of Common
Stock outstanding. As part of Bobernco's reorganization with GenTel, Bobernco
issued 8,986,950 shares of its Common Stock to the shareholders of GenTel in
exchange for 8,986,950 shares of GenTel Common Stock. Subsequent to the
acquisition, the former shareholders of GenTel constituted 83.31% of the total
outstanding shares of the Common Stock of GTC and the original shareholders of
Bobernco constituted 16.69% of the total outstanding shares of the Common Stock
of the Company. Our common stock currently trades on the NASD OTC Bulletin
Board under the symbol "GTCC."
BUSINESS OF THE COMPANY
We currently offer a variety of services designed to meet its customer's
telecommunications and Internet related needs. Our services currently consist
of the following:
3
Telecommunications Related Services
We are currently licensed in 48 states and the District of Columbia to provide
long distance telecommunications services. We primarily service small and
medium sized businesses and residential customers throughout the United States.
We have positioned ourselves to be a low-cost provider in the marketplace. By
offering low rates, we expect to add customers at an accelerated pace. To date,
we have operated as a switchless, nonfacilities-based reseller of long distance
services. By committing to purchase large usage volumes from carriers such as
Worldcom, Inc. pursuant to contract tariffs, we have been able to procure
substantial discounts and offer low-cost, high-quality long distance services to
its customers at rates below the current standard industry levels.
We currently provide long distance telephone service under a variety of plans.
These include outbound service, inbound toll-free 800 service and dedicated
private line services for data. We do not currently provide local telephone
service. Our long distance services are billed on a monthly basis either
directly by us or by the Local Exchange Carrier ("LEC") through the services of
Billing Concepts, Inc. dba U.S. Billing ("USBI"). If these services are billed
directly by us, the customer has a choice of paying by credit card or sending
payment to us directly. If these services are billed by the LEC, the LEC is
responsible for collecting the amount billed and remitting the proceeds to us.
In addition, we are also exploring the possibility of providing local telephone
service. Whether we will be able to provide local telephone services is
dependent on our ability to negotiate contracts with third-party providers of
local telephone service on favorable terms. We have initiated negotiations with
certain local telephone providers but have not reached any agreements.
Therefore, there can be no assurances that we will be able to offer local
telephone service.
Internet Related Services
We have also provide international pc-to-phone telecommunication services
through our wholly owned subsidiary CallingPlanet.com, Inc., as well as a
variety of other Internet related services. These services, available to both
consumer and business users, include prepaid calling cards at our
ecallingcards.com web site; Internet Services Provider access through dial-up,
Digital Subscriber Line ("DSL"), and Wireless T-1 methods; and Internet Web Page
development and hosting services. Our Internet related services are billed
using the same methods as those used for billing our Telecommunication services.
Our Internet related services, with the exception of our prepaid calling cards,
are provided pursuant to contracts with third-party providers, who remain our
competitors. By contracting with third-party providers to purchase large
quantities of usage volumes, we are able to secure significant discounts which
then allows us to offer these services to our end-users at rates at or lower
than our competitors.
Our Internet Service Provider Access service is currently provided on a
nationwide basis. Dial-up service provides unlimited Internet access and
several related services using conventional modems at access speeds up to 56
kbps for a $9.95 monthly fee. DSL service provides a faster, more efficient
method for communicating digital data over telephone lines. DSL speeds are
significantly faster than conventional modem speeds (up to 1.1 Mbps versus 56
kbps for Dial-up service).
Currently, our Wireless T-1 services are only available in the Southern
California region. Wireless T-1 allows businesses to utilize connections at 1.5
Mbps without contracting for T-1 service from local telephone companies. Our
Wireless T-1 Service fees range from $299 to $899 per month with a one-time
set-up fee of $2,500. We plan on expanding this service to include other
regions. Whether we are able to provide our Wireless T-1 services to other
regions depends on whether we will be able to secure contracts with third-party
suppliers on favorable terms. There can be no assurances that we will be able
to obtain such contracts and therefore will be able to expand our Wireless T-1
service to other regions.
Our Internet Web Page Hosting services are currently available on a nationwide
basis. Internet Web Page Hosting services provide space on our Web Server
computers for customers to publish their own Web Pages. Internet Web Page
Hosting fees are $29.95 per month, with a one-time set-up fee of $29.95.
4
RISK FACTORS
In this section we highlight some of the risks associated with our business and
operations. Prospective investors should carefully consider the following risk
factors when evaluating an investment in the common stock offered by this
Reoffer Prospectus.
EXTREMELY LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT. Our executive
officers commenced our major lines of business B providing long distance and
Internet service B relatively recently. Accordingly, your evaluation of GTC
will be based on an extremely limited operating history. You must consider that
our prospects are subject to the risks, expenses and uncertainties frequently
encountered by companies in the early stage of development in new and rapidly
evolving markets. As of March 31, 2000, we had an accumulated deficit of
$8,994,149. Although we have experienced revenue growth in recent months, there
can be no assurance that our revenues will continue to increase. GTC has not
achieved profitability to date, and we anticipate that we will continue to incur
net losses for the foreseeable future. We currently expect to increase our
operating expenses significantly, expand our sales and marketing operations and
continue to develop and extend our Telecommunications and Internet related
services. If these expenses exceed revenues, our business, results of
operations and financial condition could be materially and adversely affected.
The extremely limited operating history of GTC and the uncertain nature of the
markets addressed by GTC make the prediction of future results of operations
difficult or impossible. Therefore, our recent revenue growth should not be
taken as indicative of the rate of revenue growth, if any, that can be expected
in the future. We believe that period-to-period comparisons of our results of
operations are not meaningful and that you should not rely on the results for
any period as an indication of future performance.
WE ARE DEPENDENT ON A LIMITED NUMBER OF SUPPLIERS. We currently depend upon
Worldcom, Inc., ("Worldcom") as our sole provider of long distance service. We
contract with Worldcom to provide us with long distance services which we resale
to our customers. We will continue to depend upon Worldcom to provide
transmission facilities, maintenance and international long distance services
for the foreseeable future. This agreement is probably our most vital agreement
and our ability to provide our long distance service depends upon whether we can
continue to maintain a favorable relationship with Worldcom. Worldcom may
terminate its contract with us for limited reasons, including for nonpayment by
GTC, for national defense purposes or if the provision of services to GTC were
to have a substantial adverse impact on Worldcom's network. Under the terms of
the contract, Worldcom is required to provide us with a minimum notice of 5-days
in the case of a material breach prior to termination of the contract. Although
we have no specific contingency arrangements in place to provide service to our
customers if Worldcom were to discontinue its service to us, based upon
discussions we have had with other long distance providers and based on such
providers' published rates, we believe that we could negotiate and obtain
contracts with other long distance providers to resell long distance services at
rates at or below our current rates with Worldcom. If we were to switch to
another provider, however, we believe that it would take approximately thirty
(30) days to switch our customers to a new provider. Although we believe that
we have the right to switch our customers without their consent to such other
providers, our customers have the right to discontinue such service at any time.
Accordingly, the termination or nonrenewal of our contract with Worldcom or the
loss of the telecommunications services provided by Worldcom would likely have a
material adverse effect on our results of operations and financial condition.
5
We currently use third party merchant card payment processing services to
process our customer's credit card payments. Termination, disruptions, or
reductions in the ability of our third party processing services to process our
customer's credit card payments could disrupt our ability to collect payment for
our services and could have a material adverse effect on our results of
operations. The Company has experienced such disruptions in the past and may
encounter such disruptions in the future. In an effort to minimize the effects
of such disruptions, the Company is currently in the process of securing
multiple merchant card payment processors. However, there can be no assurances
that the Company will be able to secure such additional processors.
We currently use and will continue to use billing services provided by US
Billing, a publicly traded company ("USBI"). USBI is in the business of
providing billing services to the LEC. There can be no assurance that USBI will
continue to offer us billing services on terms we find acceptable. USBI may
decrease the extent to which its name may be used on bills for which it provides
billing services. The loss of USBI's billing services or decreased customer
awareness of the USBI name could have a material adverse effect on our marketing
strategy and retention of existing customers.
We do not have our own Internet Network. We currently provide our Internet
Service Provider Access services pursuant to a one-year agreement with Ziplink,
Inc., ("Ziplink"). Pursuant to the Agreement, the Company is subject to a
monthly minimum commitment of $500. In addition, we are committed to pay an
additional set-up fee of $100. Although we believe that our relations with
Ziplink are strong and should remain so with continued contract compliance, the
termination of our contract with Ziplink, the loss of Internet services provided
by Ziplink, or a reduction in the quality of service we receive from Ziplink
could have a material adverse effect on our results of operations.
Our Wireless T-1 services are currently provided pursuant to a contract with
Global Pacific Internet ("Global"). Currently, our T-1 services are available
only in the Southern California region. Under the terms of its contract with
Global, we are not subject to a monthly minimum revenue commitment. Although we
believe that our relations with Global are strong and should remain so with
continued contract compliance, the loss of Wireless T-1 services provided by
Global, or a reduction in the quality of service we receive from Global could
have a material adverse effect on our results of operations. We anticipate that
it would take between thirty (30) to sixty (60) days to locate a replacement
supplier in the event that our agreement with Global is terminated. We
currently plan to expand our Wireless T-1 services to other regions. However,
there can be no assurances that we will or will be able to expand this service
to other regions.
6
FUTURE CAPITAL NEEDS. To date, we have relied mostly on private funding from
the sale of restricted shares of our Common Stock and short term borrowing to
fund our operations. To date, we have generated insufficient revenue to meet
our ongoing expenses and have extremely limited cash liquidity and capital
resources. Our future capital requirements will depend on many factors,
including our ability to market our services successfully, our cash flow from
operations, and competing market developments. Our business plan requires
additional funding beyond the proceeds previously generated from the sale of our
restricted Common Stock. Consequently, although we currently have no specific
plans or arrangements for financing, we intend to raise additional funds through
private placements, public offerings or other financings. Any equity financings
would result in dilution to our then-existing shareholders. Additionally,
sources of debt financing may result in higher interest expense. Any financing,
if available, may be on terms unfavorable to us. If adequate funds are not
obtained, we may be required to reduce or curtail operations. We currently
anticipate that our existing capital resources will not be adequate to satisfy
our current operating expenses and capital requirements for the next full fiscal
year. Consequently, we may have to secure additional financing in order to
develop our business plan.
THERE IS A LIMITED PUBLIC TRADING MARKET FOR OUR COMMON STOCK. Our Common Stock
presently trades on the Nasdaq over-the-counter bulletin board under the symbol
GTCC. There can be no assurance, however, that such market will continue or
that investors in this offering will be able to liquidate their shares acquired
in this Offering at the price herein or otherwise. There can be no assurance
that any other market will be established in the future. There can be no
assurance that an investor will be able to liquidate his or her investment
without considerable delay, if at all. The price of our Common Stock may be
highly volatile. Additionally, the factors discussed in this Risk Factors
section may have a significant impact on the market price of the shares offered
in this Reoffer Prospectus.
COMPETITION. The long distance telecommunications industry is highly
competitive and affected by the introduction of new services by, and the market
activities of, major industry participants, including AT&T Corp., Worldcom,
Sprint Corporation, local exchange carriers such as Bell Atlantic, and other
national and regional interexchange carriers. Competition in the long distance
business is based upon pricing, customer service, billing services and perceived
quality. We compete against various national and regional long distance
carriers that are composed of both facilities-based providers (those that carry
long distance traffic on their own equipment) and switchless resellers (those
that resale long distance carried by facilities-based providers) offering
essentially the same services as GTC. Several of our competitors are
substantially larger and have greater financial, technical and marketing
resources. Although we believe that we have the human and technical resources
to pursue our strategy and compete effectively in this competitive environment,
our success will depend upon our continued ability to profitably provide high
quality, high value services at prices generally competitive with, or lower
than, those charged by our competitors.
We expect to encounter continued competition from major domestic and
international communications companies. In addition, we may be subject to
additional competition due to the enactment of the Telecommunications Act, the
development of new technologies and increased availability of domestic and
international transmission capacity. A continuing trend toward business
combinations and alliances in the telecommunications industry may create
significant new competitors, which may have financial, personnel and other
resources significantly greater than those of GTC. Other potential competitors
include cable television companies, wireless telephone companies, electric
utilities, microwave carriers and private networks of large end users.
The telecommunications industry is in a period of rapid technological evolution,
marked by the introduction of new product and service offerings and increasing
transmission capacity for services similar to those provided by us. We cannot
predict which of many possible future product and service offerings will be
important to maintain our competitive position or what expenditures will be
required to develop and provide such products and services.
7
The market for Internet-based online services is relatively new, intensely
competitive and rapidly changing. Since the advent of commercial services on the
Internet, the number of Internet Service Providers and online services competing
for users' attention and spending has proliferated because of, among other
reasons, the absence of substantial barriers to entry, and we expect that
competition will continue to intensify. Many of our current and potential
competitors such as Earthlink, PsiNet, AOL, UUNET, Microsoft Network, and
Prodigy have longer operating histories, larger customer bases, greater brand
recognition and significantly greater financial, marketing and other resources.
These competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements and to devote greater
resources to the development, promotion and sale of their products and services
than we are.
We currently believe that our Internet Related Services are marketed at
competitive rates and provide quality and services comparable to our
competitors. However, our Internet Related Services are intended more as a
value added service to attract customers to the our Telecommunication Services
as opposed to a revenue generating service. We are offering unlimited dial-up
service for $9.95 per month and DSL service at rates raging from $59.95 to
$249.95 per month. We anticipate that revenue generated exclusively from our
Internet Related Services will be immaterial to our results of operations.
Rather, we expect to derive sufficient revenue from our Telecommunication
Services and Internet related advertising revenue to pay for the costs of our
Internet Related Services.
We can make no representations or assurances that there will not be increased
competition or that our projections will ever be realized due to the intensity
of competition.
CONCENTRATION OF STOCK OWNERSHIP. As of May 15, 2000, the present directors and
executive officers, and their respective affiliates beneficially owned
approximately 29.68% of our outstanding common stock, along with vested options
to purchase an additional 607,667 shares of the Company's Common Stock. As a
result of their ownership, the directors and executive officers and their
respective affiliates collectively are able to significantly influence all
matters requiring shareholder approval, including the election of directors and
approval of significant corporate transactions. This concentration of ownership
may also have the effect of delaying or preventing a change in control of GTC.
DEPENDENCE ON MANAGEMENT. Our success depends, to a significant extent, upon
certain key employees and directors, including primarily, Paul Sandhu, Eric
Clemons, Mark Fleming, Gerald A. DeCiccio, John Eger and Clay T. Whitehead. The
loss of services of one or more of these employees or directors could have a
material adverse effect on our business. In addition, we have substantial need
for additional qualified management and marketing personnel. We believe that
our future success will also depend in part upon our ability to attract, retain
and motivate qualified personnel. There can be no assurance that we will be
successful in attracting and retaining such personnel. Competition for such
personnel is intense. We currently do not maintain a policy of key man life
insurance on any employees.
MAINTENANCE OF CUSTOMER DATABASE. Our customers are not obligated to purchase
any minimum usage amount and can discontinue service, without penalty, at any
time. There can be no assurance that customers will continue to buy their long
distance telephone service through us. In the event that a significant portion
of our customers decide to purchase long distance service from another long
distance service provider, there can be no assurance that we will be able to
replace our customer base from other sources. Loss of a significant portion of
our customers would have a material adverse effect on our results of operations
and financial condition.
A high level of customer attrition is inherent in the long distance industry,
and our revenues are affected by such attrition. Attrition is attributable to a
variety of factors, including termination of customers by us for nonpayment and
the initiatives of existing and new competitors as they engage in, among other
things, national advertising campaigns, telemarketing programs and the issuance
of cash or other forms of incentives.
8
LACK OF CONTROL OVER MARKETING ACTIVITIES. Certain marketing practices,
including the methods and means to convert a customer's long distance telephone
service from one carrier to another, have recently been subject to increased
regulatory review at both the federal and state levels. This increased
regulatory review could affect adversely the possible future acquisition of new
business from other resellers. Our marketing activities mandate compliance with
applicable state and federal regulations. We are unable to predict the effect
of such increased regulatory review.
GOVERNMENT REGULATION. Our provision of communications services is subject to
government regulation. Federal law regulates interstate and international
telecommunications, while states have jurisdiction over telecommunications that
originate and terminate within the same state. Changes in existing policies or
regulations in any state or by the Federal Communications Commission ("FCC")
could have a material adverse effect on our financial condition or results of
operations, particularly if those policies make it more difficult for us to
obtain service from Worldcom or other long distance companies at competitive
rates, or otherwise increase the cost and regulatory burdens of marketing and
providing service. There can be no assurance that the regulatory authorities in
one or more states or the FCC will not take action having an adverse effect on
the business or financial condition or results of operations of GTC.
We are subject to regulation by the FCC and by various state public service and
public utility commissions as a nondominant provider of long distance services.
We are required to file tariffs for interstate and international service with
the FCC, which tariffs are presumed lawful and become effective on one day's
notice. We are also required to file tariffs or obtain approval for intrastate
service provided in most of the states in which we market long distance
services. By engaging in direct marketing to end users, we will be subject to
applicable regulatory standards for marketing activities and the increased FCC
and state attention to certain marketing practices may become more significant
to us.
ADVERSE EFFECT OF RAPID TECHNOLOGICAL CHANGE AND SERVICE. The
telecommunications industry has been characterized by rapid technological
change, frequent new service introductions and evolving industry standards. We
believe that our future success will depend on our ability to anticipate such
changes, and to offer services on a timely basis that meet these evolving
standards. There can be no assurance that we will have sufficient resources to
make necessary investments or to introduce new services that would satisfy an
expanded range of end user needs.
EXPANSION INTO NEW BUSINESS ACTIVITIES. We will market its long distance
services directly to end users. Such direct marketing will increase our costs
as we hire new employees, provide increased customer support and collection
services, and acquire additional equipment. We also are required to comply with
additional regulatory standards for direct marketing of telecommunications
services.
PROTECTION OF PROPRIETARY INFORMATION. Currently, we do not hold patents or
trademarks on any of our names, products or processes under development. We do,
however, treat our technical data as confidential and rely on internal
nondisclosure safeguards, as well as on laws protecting trade secrets, to
protect its proprietary information. There can be no assurance that these
measures will adequately protect the confidentiality of our proprietary
information or that others will not independently develop products or technology
that are equivalent or superior to ours. We may receive in the future,
communications from third parties asserting that our products infringe the
proprietary rights of third parties. There can be no assurance that any such
claims would not result in protracted and costly litigation, having a materially
adverse and negative effect on us and our financial results.
9
DIFFICULTY OF PLANNED EXPANSION; MANAGEMENT OF GROWTH. We plan to expand our
level of operations. Our operating results will be adversely affected if net
sales do not increase sufficiently to compensate for the increase in operating
expenses caused by this expansion. In addition, our planned expansion of
operations may cause significant strain on our management, technical, financial
and other resources. To manage our growth effectively, we must continue to
improve and expand our existing resources and management information systems and
must attract, train and motivate qualified managers and employees. There can be
no assurance, however, that we will successfully be able to achieve these goals.
If we are unable to manage growth effectively, our operating results will be
adversely affected.
SHARES ELIGIBLE FOR FUTURE SALE. At the conclusion of this offering, a maximum
of 19,727,044 shares of our Common Stock will be issued and outstanding, of
which approximately 5,544,038 shares will be "restricted securities," and under
certain circumstances may, in the future, be sold in compliance with Rule 144
adopted under the Securities Act. In general, under Rule 144, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
GTC, who has beneficially owned restricted shares of Common Stock for at least
one year is entitled to sell, in certain brokerage transactions, within any
three-month period, a number of shares that does not exceed the greater of 1% of
the total number of outstanding shares of the same class, or if the Common Stock
is quoted on Nasdaq or a stock exchange, the average weekly trading volume
during the four calendar weeks immediately preceding the sale. A person who
presently is not and who has not been an affiliate of GTC for at least three
months immediately preceding the sale and who has beneficially owned the shares
of Common Stock for at least two years is entitled to sell such shares under
Rule 144 without regard to any of the volume limitations described above.
AUTHORIZATION OF ADDITIONAL SHARES OF COMMON STOCK. Our Articles of
Incorporation authorize the issuance of up to 50,000,000 shares of Common Stock.
Our Board of Directors has the authority to issue additional shares of Common
Stock and to issue options and warrants to purchase shares of our Common Stock
without shareholder approval. Future issuance of Common Stock could be at
values substantially below current market prices therefore could represent
further substantial dilution to investors in this Offering. In addition, the
Board could issue large blocks of voting stock to fend off unwanted tender
offers or hostile takeovers without further shareholder approval.
AUTHORIZATION OF ADDITIONAL SHARES OF PREFERRED STOCK. Our Articles of
Incorporation also authorizes the issuance of up to 10,000,000 shares of
Preferred Stock in one or more series. Consequently, our Board of Directors
have the authority to fix the number of preferred shares and to determine or
alter for each such series, such voting powers, full or limited, or no voting
powers, and such designations, preferences, and relative, participating,
optional, or other rights and such qualifications, limitations, or restrictions
thereof, in a resolution or resolutions adopted by the Board of Directors
providing for the issue of such shares. The Board of Directors are also
authorized to increase or decrease (but not below the number of shares of such
series then outstanding) the number of shares of any series subsequent to the
issue of shares of that series.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of common stock
by the Selling Shareholders.
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SELLING SHAREHOLDERS
The Shares of GTC to which this Reoffer Prospectus relates are being registered
for reoffers and resales by the Selling Shareholders, who acquired the Shares
pursuant to a compensatory benefit plan with GTC for consulting services they
provided to GTC. The Selling Shareholders may resell all, a portion or none of
such Shares from time to time.
The table below sets forth with respect to the Selling Shareholders, based upon
information available to the Company as of May 15, 2000, the number of Shares
owned, the number of Shares registered by this Reoffer Prospectus and the number
and percent of outstanding Shares that will be owned after the sale of the
registered Shares assuming the sale of all of the registered Shares.
% OF SHARES
NUMBER OF NUMBER OF SHARES OWNED BY
SELLING SHARES OWNED REGISTERED BY NUMBER OF SHARES SHAREHOLDER
SHAREHOLDERS BEFORE SALE PROSPECTUS OWNED AFTER SALE AFTER SALE
- ---------------------- ------------ ---------------- ---------------- ------------
Edwin Wong 100,000 100,000 0 0.00%
- ---------------------- ------------ ---------------- ---------------- ------------
Johnathan Eng 24,000 24,000 0 0.00%
- ---------------------- ------------ ---------------- ---------------- ------------
Robert Gleckman 173,333 173,333 0 0.00%
- ---------------------- ------------ ---------------- ---------------- ------------
Dean Kern 100,000 100,000 0 0.00%
- ---------------------- ------------ ---------------- ---------------- ------------
Sheldon Goldberg 10,000 10,000 0 0.00%
- ---------------------- ------------ ---------------- ---------------- ------------
Mace Horowitz 3,000 2,000 1,000 < 1%
- ---------------------- ------------ ---------------- ---------------- ------------
Michael Freedman 5,000 5,000 0 0.00%
- ---------------------- ------------ ---------------- ---------------- ------------
Ed Jacobs 24,000 24,000 0 0.00%
- ---------------------- ------------ ---------------- ---------------- ------------
M. Richard Cutler (1) 40,500 25,500 15,000 < 1%
- ---------------------- ------------ ---------------- ---------------- ------------
(1) Mr. Cutler is GTC's securities attorney. The securities registered pursuant
to the Reoffer Prospectus represents shares of common stock issued to Mr. Cutler
in exchange for legal services provided to GTC.
PLAN OF DISTRIBUTION
The Selling Shareholders may sell the Shares for value from time to time under
this Reoffer Prospectus in one or more transactions on the Nasdaq
Over-the-Counter Bulletin Board, or other exchange, in a negotiated transaction
or in a combination of such methods of sale, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at prices
otherwise negotiated. The Selling Shareholders may effect such transactions by
selling the Shares to or through brokers-dealers, and such broker-dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Shareholders and/or the purchasers of the Shares
for whom such broker-dealers may act as agent (which compensation may be less
than or in excess of customary commissions).
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The Selling Shareholders and any broker-dealers that participate in the
distribution of the Shares may be deemed to be "underwriters" within the meaning
of Section 2(11) of the 1933 Act, and any commissions received by them and any
profit on the resale of the Shares sold by them may be deemed be underwriting
discounts and commissions under the 1933 Act. All selling and other expenses
incurred by the Selling Shareholders will be borne by the Selling Shareholders.
In addition to any Shares sold hereunder, the Selling Shareholders may, at the
same time, sell any shares of common stock, including the Shares, owned by him
or her in compliance with all of the requirements of Rule 144, regardless of
whether such shares are covered by this Reoffer Prospectus.
There is no assurance that the Selling Shareholders will sell all or any portion
of the Shares offered.
The Company will pay all expenses in connection with this offering and will not
receive any proceeds from sales of any Shares by the Selling Shareholders.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by the Cutler Law Group, Newport Beach, California. Employees of
The Cutler Law Group currently hold 40,950 shares of the Company's Common
Stock.
EXPERTS
The balance sheets as of June 30, 1999 and the statements of operations,
shareholders' equity and cash flows for the two years ended June 30, 1999 and
1998 of GTC Telecom Corp., have been incorporated by reference in this
Registration Statement in reliance on the report of Corbin & Wertz LLP,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents are hereby incorporated by reference in this
Registration Statement:
(i) The Registrant's Annual Report on Form 10-KSB filed with the Commission
on October 13, 1999.
(ii) All other reports and documents subsequently filed by the Registrant
pursuant after the date of this Registration Statement pursuant to Sections
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 and prior to
the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference and to be a part hereof
from the date of the filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
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Certain legal matters with respect to the Common Stock offered hereby will be
passed upon for the Company by the Cutler Law Group, counsel to the Company.
Mr. M. Richard Cutler, principal of the Cutler Law Group is the beneficial owner
of 40,500 shares of Common Stock of the Company. 25,500 shares of the foregoing
are being registered for sale herein. Other employees of the Cutler Law Group
hold an additional 450 shares of the Common Stock of the Company.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Corporation Laws of the State of Nevada and the Company's Bylaws provide for
indemnification of the Company's Directors for liabilities and expenses that
they may incur in such capacities. In general, Directors and Officers are
indemnified with respect to actions taken in good faith in a manner reasonably
believed to be in, or not opposed to, the best interests of the Company, and
with respect to any criminal action or proceeding, actions that the indemnitee
had no reasonable cause to believe were unlawful. Furthermore, the personal
liability of the Directors is limited as provided in the Company's Articles of
Incorporation.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
The Shares were issued for advisory and legal services rendered. These sales
were made in reliance of the exemption from the registration requirements of the
Securities Act of 1933, as amended, contained in Section 4(2) thereof covering
transactions not involving any public offering or not involving any "offer" or
"sale".
ITEM 8. EXHIBITS
3.1 Articles of Incorporation of the Registrant, as amended
(incorporated herein by reference to Exhibits 3.1, 3.2, and
3.3 of the Registrant's Registration Statement on Form 10-SB
(File No. 0-25703), as amended (the "Form 10-SB").
3.2 Bylaws of the Registrant (incorporated herein by reference to
Exhibit 3.4 of the Registrant's Form 10-SB).
5.1 Opinion of M. Richard Cutler, Esq., counsel to the Registrant,
regarding legality of securities being registered.
10.1 Consulting Services Agreement by and between GTC Telecom Corp. &
Edwin Wong.
10.2 Consulting Services Agreement by and between GTC Telecom Corp. &
Johnathan Eng.
10.3 Consulting Services Agreement by and between GTC Telecom Corp. &
Robert Gleckman.
10.4 Consulting Services Agreement by and between GTC Telecom Corp. &
Dean Kern
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10.5 Consulting Services Letter Agreement by and between GTC Telecom
Corp. & Sheldon Goldberg.
10.6 Consulting Services Letter Agreement by and between GTC Telecom
Corp. & Mace Horowitz.
10.5 Consulting Services Letter Agreement by and between GTC Telecom
Corp. & Michael Freedman.
10.6 Consulting Services Agreement by and between GTC Telecom Corp. &
Ed Jacobs.
10.7 Legal Services Agreement by and between GTC Telecom Corp. and M.
Richard Cutler
23.1 Consent of M. Richard Cutler (included in Exhibit 5.1).
23.2 Consent of Corbin & Wertz LLP, Independent Public Accountants.
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ITEM 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a) (3) of the Securities
Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; provided,
however, that paragraphs (a) (1)(i) and (a) (1) (ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3 and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
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(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's Annual Report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that is meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Costa Mesa, State of California, on May 19, 2000
GTC TELECOM CORP.
By: /s/ S. Paul Sandhu
Its: President & CEO
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ S. Paul Sandhu President, CEO and Director
S. Paul Sandhu
/s/ Eric A. Clemons Secretary, Chief Operating Officer and Director
Eric A. Clemons
/s/ Gerald A. DeCiccio Chief Financial Officer
Gerald A. DeCiccio
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