UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): May 23, 2005
GTC Telecom Corp.
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(Exact name of registrant as specified in its charter)
Nevada
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(State or other jurisdiction of incorporation)
0-25703 88-0318246
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(Commission File Number) (IRS Employer Identification No.)
3151 Airway Ave., Suite P-3
Costa Mesa, CA 92626
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 549-7700
N/A
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On May 23, 2005, GTC Telecom Corp. (the "Company" or "GTC") closed on a
Subscription Agreement with certain "accredited" purchasers (the "Purchasers")
for the sale of securities (the "Securities") consisting of $1,088,235 principal
amount in convertible notes, and warrants to purchase shares of the Company's
Common Stock. Please see Item 3.02 of this report for a detailed description of
the Securities. Pursuant to the terms of the Subscription Agreement, the Note
was issued at a fifteen percent (15%) original issue discount, resulting in
gross proceeds of $925,000 to the Company. The Purchasers are: Alpha Capital
Aktiengesellschaft, Dcofi Master LDC, SCG Capital, LLC, Silver Oak Investments,
Inc., and Ellis International Ltd.
There are no other material relationships between the Company or its affiliates
and the Purchasers other than in respect to the material definitive agreement.
As previously reported, on May 12, 2005, the Company entered into a Subscription
Agreement with the Rapaport Family Trust for the purchase of a 12% Convertible
Note, $1,200,000 principal amount. On May 16, 2005, the Trust agreed to amend
the Note, extending the maturity date of the Note from November 12, 2006 to
December 31, 2006. Additionally, the Note was amended to provide that interest
under the Note would only be paid in those months where in the immediately
preceding month, the Company had, after payment of all other then current
obligations, at least $300,000 in available cash.
As previously reported, on March 6, 2005, the Company executed a Settlement
Agreement with MCI WorldCom Network Services, Inc. and affiliates (collectively
referred to as "MCI"). Pursuant to the terms of the Agreement, as amended, MCI
agreed to settle and resolve all outstanding obligations owing to MCI by GTC in
exchange for the payment by GTC of $769,000 (the "Settlement Amount"). On May
23, 2005, the Company satisfied the terms of the Settlement Agreement.
ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES
Pursuant to the Subscription Agreement described in Item 1.01, on May 23, 2005,
the Company issued the following unregistered securities: (i) $1,088,235
principal amount of the Company's convertible promissory notes (the "Note" or
"Notes"); (ii) two shares of the Company's common stock for each dollar of Note
principal; (iii) six Class A warrants for each dollar of Note principal to
purchase shares of the Company's common stock at an exercise price equal to
$0.22 per share, exercisable for a period of four years; and (iv) five Class B
warrants for each one dollar of Note principal to purchase shares of the
Company's common stock at an exercise price equal to $0.20 per share,
exercisable until a registration statement covering the warrants have been
effective for a period of 120 days. The Notes bear simple interest of twelve
(12%) per annum and may be converted into shares of the Company's common stock
pursuant to the terms of the Note. The issuance was an isolated transaction not
involving a public offering conducted without general solicitation to
"accredited investors" pursuant to Rule 506 and Section 4(2) of the Securities
Act of 1933.
In conjunction with Subscription Agreement, the Company issued warrants as
compensation to Hunter Wise Financial Group, LLC, to purchase 65,000 shares of
the Company's Common Stock, at an exercise price of $0.20 per share, exercisable
for a period of five (5) years from the date of issuance. The issuance was an
isolated transaction not involving a public offering conducted pursuant to
Section 4(2) of the Securities Act of 1933.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Ex 10.1 Subscription Agreement by and between GTC Telecom Corp. and Alpha
Capital Alpha Capital Aktiengesellschaft, Dcofi Master LDC, SCG
Capital, LLC, Silver Oak Investments, Inc., and Ellis International
Ltd. dated May 23, 2005.
10.1.1 Form of Class A Warrant -- Exhibit A1 to Subscription
Agreement dated May 23, 2005.
10.1.2 Form of Class B Warrant -- Exhibit A2 to Subscription
Agreement dated May 23, 2005.
10.1.3 Escrow Agreement -- Exhibit B to Subscription Agreement
dated May 23, 2005.
10.1.4 Security Agreement by GTC Telecom Corp. -- Exhibit C1 to
Subscription Agreement dated May 23, 2005.
10.1.5 Collateral Agent Agreement -- Exhibit D to Subscription
Agreement dated May 23, 2005.
Ex 10.2 Addendum No. 1 to Subscription Agreement dated May 12, 2005 by
and between the Company and the Rapaport Family Trust.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 23, 2005 GTC TELECOM CORP.
By: /s/ S. Paul Sandhu
S. Paul Sandhu
Chief Executive Officer