<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(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.
GLOBAL TELEPHONE COMMUNICATION, INC.
(Exact name of Small Business Issuer in Its Charter)
NEVADA 87-0285729
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
SUITE 1800, 10 SOUTH RIVERSIDE PLAZA, CHICAGO, IL 60606
(Address of principal executive offices) (Zip Code)
1-877-901-4824 (GTCI)
(Issuer's Telephone Number)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange on Which
To be so Registered Each Class is to be Registered
------------------- ------------------------------
n/a n/a
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, PAR VALUE $.001
(Title of Class)
<PAGE>
Indicate by check mark whether the registrant (1) 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 such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date: As of May 11, 2000,
there were 18,088,275 shares of common stock outstanding.
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC.
FORM 10-QSB
TABLE OF CONTENTS
<TABLE>
<CAPTION>
No. Title Page No.
PART I
<S> <C> <C>
Item 1. Financial Statements............................................................1
Item 2. Management's Discussion and Analysis or Plan of Operation......................12
PART II
Item 1. Legal Proceedings..............................................................15
Item 2. Changes in Securities..........................................................15
Item 3. Defaults upon Senior Securities................................................15
Item 4. Submission of Matters to a Vote of Security....................................15
Holders........................................................................15
Item 5. Other Information..............................................................15
Item 6. Exhibits and Reports on Form 8-K...............................................15
Signatures.....................................................................16
</TABLE>
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
GLOBAL TELEPHONE COMMUNICATION, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND DECEMBER 31, 1999
1
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------------- -----------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 448,558 $ 1,485,896
Restricted cash 850,000 850,000
Notes receivable - related party, net 50,500 50,500
Investments 3,443 2,657
----------------- -----------------
Total Current Assets 1,352,501 2,389,053
----------------- -----------------
FIXED ASSETS, NET 39,498 36,825
----------------- -----------------
OTHER ASSETS
Goodwill 2,062,500 -
Deposits 1,495 1,495
----------------- -----------------
Total Other Assets 2,063,995 1,495
----------------- -----------------
TOTAL ASSETS $ 3,455,994 $ 2,427,373
================= =================
</TABLE>
2
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------------- -----------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 39,889 $ 143,883
Accrued expenses 167,945 166,811
Notes payable 1,015,328 543,631
Shareholder payable 1,289 1,289
----------------- -----------------
Total Current Liabilities 1,224,451 855,614
----------------- -----------------
LONG-TERM DEBT - -
----------------- -----------------
TOTAL LIABILITIES 1,224,451 855,614
----------------- -----------------
COMMITMENTS
STOCKHOLDERS' EQUITY
Preferred stock: 5,000,000 shares authorized of
$1.00 par value, -0- shares issued and outstanding - -
Common stock: 25,000,000 shares authorized of
$0.001 par value, 18,088,275 and 16,788,275 shares issued
and outstanding, respectively 18,088 16,788
Additional paid-in capital 7,408,365 5,359,665
Deficit accumulated during the development stage (5,194,910) (3,804,694)
----------------- -----------------
Total Stockholders' Equity 2,231,543 1,571,759
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 3,455,994 $ 2,427,373
================= =================
</TABLE>
3
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
From
For the Inception on
Three Months Ended March 10,
March 31, 1970 Through
------------------------------- March 31,
2000 1999 2000
------------- ------------- -----------------
<S> <C> <C> <C>
REVENUES $ - $ 1,000 $ 4,705
------------- ------------- -----------------
OPERATING EXPENSES
General and administrative 1,203,944 232,132 5,193,847
Depreciation and amortization expense 189,949 854 199,211
------------- ------------- -----------------
Total Operating Expenses 1,393,893 232,986 5,393,058
------------- ------------- -----------------
OPERATING LOSS (1,393,893) (231,986) (5,388,353)
------------- ------------- -----------------
OTHER INCOME (EXPENSE)
Interest income 7,290 - 14,293
Interest expense (3,613) (5,512) (20,961)
------------- ------------- -----------------
Total Other Income (Expense) 3,677 (5,512) (6,668)
------------- ------------- -----------------
Loss Before Discontinued Operations (1,390,216) (237,498) (5,395,021)
GAIN FROM DISCONTINUED OPERATIONS - - (251,441)
GAIN ON DISCONTINUED OPERATIONS - 56,083 451,552
------------- ------------- -----------------
NET LOSS $ (1,390,216) $ (181,415) $ (5,194,910)
============= ============= =================
Continuing Operations $ (0.08) $ (0.02)
Discontinued operations - 0.01
------------- -------------
NET LOSS PER SHARE OF COMMON STOCK $ (0.08) $ (0.01)
============= =============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 17,599,264 12,265,078
============= =============
</TABLE>
4
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
--------------------------------- Paid-in Development
Shares Amount Capital Stage
---------------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Balance, March 10, 1970 - $ - $ - $ -
Common stock issued for cash at
$16.00 per share during 1970 1,906 2 30,498 -
Common stock issued for services
rendered at $6.40 per share
during 1970 1,578 1 10,099 -
Common stock issued for cash
at $32.00 per share during 1971 4,075 4 130,396 -
Common stock issued for services
rendered at $15.52 per share during
the period of inception through 1983 11,641 12 180,581 -
Common stock issued for services
rendered at $6.40 per share
during 1988 2,817 3 18,027 -
Net loss from inception on
March 10, 1970 through
December 31, 1991 - - - (369,623)
---------------- ------------- ------------- -----------------
Balance, December 31, 1991 22,017 22 369,601 (369,623)
Net loss for the year ended
December 31, 1992 - - - (552)
---------------- ------------- ------------- -----------------
Balance, December 31, 1992 22,017 22 369,601 (370,175)
Net loss for the year ended
December 31, 1993 - - - (100)
---------------- ------------- ------------- -----------------
Balance, December 31, 1993 22,017 22 369,601 (370,275)
Common stock issued for services
rendered at $6.40 per share on
August 1, 1994 43,750 44 279,956 -
Net loss for the year ended
December 31, 1994 - - - (280,100)
---------------- ------------- ------------- -----------------
Balance, December 31, 1994 65,767 $ 66 $ 649,557 $ (650,375)
---------------- ------------- ------------- -----------------
</TABLE>
5
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Continued)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
---------------------------------- Paid-in Development
Shares Amount Capital Stage
---------------- -------------- ------------- -----------------
<S> <C> <C> <C> <C>
Balance, December 31, 1994 65,767 $ 66 $ 649,557 $ (650,375)
Net loss for the year ended
December 31, 1995 - - - (4,053)
---------------- -------------- ------------- -----------------
Balance, December 31, 1995 65,767 66 649,557 (654,428)
Expenses paid on the Company's
behalf by a shareholder - - 716 -
Common stock issued for cash at
$0.01 per share on July 23, 1996 1,000,000 1,000 39,000 -
Fractional shares issued in
conjunction with a 1-for-80 reverse
stock split 33 - - -
Fractional shares issued in conjunction
with a 3-for-1 forward stock split 34 - - -
Net loss for the year ended
December 31, 1996 - - - (347,222)
---------------- ------------- ------------- -----------------
Balance, December 31, 1996 1,065,834 1,066 689,273 (1,001,650)
Common stock issued to acquire
Chow's Consulting Corporation
on April 30, 1997 recorded at
predecessor cost of $0.00 90,000 90 (90) -
Fractional shares canceled in
conjunction with a 1-for-6
reverse stock split (41) - - -
Common stock issued for cash
at $0.01 per share 3,000,000 3,000 28,000 -
Net loss for the year ended
December 31, 1997 - - - (134,071)
---------------- ------------- ------------- -----------------
Balance, December 31, 1997 4,155,793 $ 4,156 $ 717,183 $ (1,135,721)
---------------- ------------- ------------- -----------------
</TABLE>
6
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Continued)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
---------------------------------- Paid-in Development
Shares Amount Capital Stage
---------------- -------------- ------------- -----------------
<S> <C> <C> <C> <C>
Balance, December 31, 1997 4,155,793 $ 4,156 $ 717,183 $ (1,135,721)
Common stock issued to acquire
subsidiaries 6,950,000 6,950 (6,950) -
Common stock issued for cash
at $0.50 per share 1,140,142 1,140 568,931 -
Net loss for the year ended
December 31, 1998 - - - (422,625)
---------------- ------------- ------------- -----------------
Balance, December 31, 1998 12,245,935 12,246 1,279,164 (1,558,346)
Common stock issued to acquire
subsidiaries 600,000 600 839,400 -
Common stock issued for cash from $0.50
to $2.00 ($0.78 average) per share 5,483,433 5,483 4,204,017 -
Stock offering costs paid 6,383 6 (56,753) -
Rescinded acquisitions (2,000,000) (2,000) (1,998,000) -
Debt converted to equity at
$1.65 per share 52,524 53 86,612 -
Discount on options - - 505,625 -
Common stock issued for services at
$1.25 per share 400,000 400 499,600 -
Net loss for the year ended
December 31, 1999 - - - (2,246,348)
---------------- -------------- -------------- -----------------
Balance, December 31, 1999 16,788,275 $ 16,788 $ 5,359,665 $ (3,804,694)
---------------- ------------- -------------- -----------------
</TABLE>
7
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Continued)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
--------------------------------- Paid-in Development
Shares Amount Capital Stage
---------------- -------------- ------------- ----------------
<S> <C> <C> <C> <C>
Balance, December 31, 1999 16,788,275 $ 16,788 $ 5,359,665 $ (3,804,694)
Common stock issued to acquire
subsidiary valued at $2.50 per
share (unaudited) 500,000 500 1,249,500 -
Common stock issued for cash at
$1.00 per share (unaudited) 800,000 800 799,200 -
Net loss for the three months
ended March 31, 2000 (unaudited) - - - (1,390,216)
---------------- -------------- ------------- -----------------
Balance, March 31, 2000 (unaudited) 18,088,275 $ 18,088 $ 7,408,365 $ (5,194,910)
================ ============== ============= =================
</TABLE>
8
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the From
Three Months Ended Inception on
March 31, March 10,
--------------------------------- 1970 Through
2000 1999 2000
--------------- --------------- ----------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (1,390,216) $ (181,415) $ (5,194,910)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation expense 189,949 854 256,859
Allowance for bad debts - - 49,500
Common stock and options
issued for services and expenses
paid on behalf of the Company - - 1,495,064
Changes in operating assets and liabilities:
Increase (decrease) in restricted stock - - (850,000)
Increase (decrease) in inventories (786) - (3,443)
(Increase) decrease in accounts
receivable - - (105,928)
(Increase) decrease in other assets - - (180,873)
Increase (decrease) in deposits for 504 - - (785)
Increase (decrease) in accounts payable (103,994) 131,794 42,496
Increase (decrease) in accrued expenses 1,134 (8,296) 178,374
--------------- --------------- ----------------
Net Cash (Used) by Operating Activities (1,303,913) (57,063) (4,313,646)
--------------- --------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of subsidiary (350,000) - (350,000)
Cash paid out of discontinued operations - - (1,205,413)
Purchase of fixed assets (5,122) - (253,845)
--------------- --------------- ----------------
Net Cash (Used) by Investing Activities (355,122) - (1,809,258)
--------------- --------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of notes payable (178,303) - (178,303)
Increase in notes payable - 284,111 995,101
Common stock issued for cash 800,000 940,000 5,754,664
--------------- --------------- ----------------
Net Cash Provided by Financing Activities $ 621,697 $ 1,224,111 $ 6,571,462
--------------- --------------- ----------------
</TABLE>
9
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
From
For the Inception on
Three Months Ended March 10,
March 31, 1970 Through
------------------------------- March 31,
2000 1999 2000
------------- ------------- ---------------
<S> <C> <C> <C>
NET INCREASE (DECREASE ) IN CASH AND
CASH EQUIVALENTS $ (1,037,338) $ 1,167,048 $ 448,558
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 1,485,896 16,390 -
------------- ------------- ---------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 448,558 $ 1,183,438 $ 448,558
============= ============= ===============
CASH PAID FOR:
Interest $ 3,613 $ 5,512 $ 79,195
Income taxes $ - $ - $ -
NON-CASH FINANCING
ACTIVITIES:
Common stock and options issued for
services rendered and expenses
paid on behalf of the Company $ - $ - $ 1,495,064
Common stock issued for subsidiaries $ 1,250,000 $ 840,000 $ 2,090,000
Common stock rescinded for subsidiaries $ - $ - $ (2,000,000)
Common stock issued for debt $ - $ - $ 86,665
</TABLE>
10
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2000 and December 31, 1999
NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been
prepared by the Company without audit. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position of
operations and cash flows at March 31, 2000 and 1999 and for all
periods presented have been made.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these condensed consolidated
financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's
December 31, 1999 audited consolidated financial statements.
The results of operations for periods ended March 31, 2000 and
1999 are not necessarily indicative of the operating results for
the full years.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
FORWARD-LOOKING STATEMENTS - CAUTIONARY STATEMENTS
THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS CERTAIN "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND SECTION 21E OF THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED (THE "EXCHANGE ACT"). SPECIFICALLY, ALL STATEMENTS OTHER
THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS REPORT, REGARDING THE
COMPANY'S FINANCIAL POSITION, BUSINESS STRATEGY AND PLANS AND OBJECTIVES OF
MANAGEMENT OF THE COMPANY FOR FUTURE OPERATIONS ARE FORWARD-LOOKING STATEMENTS.
THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF THE COMPANY'S
MANAGEMENT, AS WELL AS ASSUMPTIONS MADE BY AND INFORMATION CURRENTLY AVAILABLE
TO THE COMPANY'S MANAGEMENT. WHEN USED IN THIS REPORT, THE WORDS "ANTICIPATE,"
"BELIEVE," "COULD," "ESTIMATE," "EXPECT" AND "INTEND" AND WORDS OR PHRASES OF
SIMILAR IMPORT, AS THEY RELATE TO THE COMPANY OR THE COMPANY'S MANAGEMENT, ARE
INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS REFLECT THE
CURRENT VIEW OF THE COMPANY WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO
CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS AND RELATED FACTORS INCLUDING,
WITHOUT LIMITATIONS, COMPETITIVE FACTORS, GENERAL ECONOMIC CONDITIONS, CUSTOMER
RELATIONS, RELATIONSHIPS WITH VENDORS, INTEREST RATES, CURRENCY FLUCTUATIONS,
GOVERNMENT REGULATION AND SUPERVISION, POLITICAL EVENTS, THE OPERATION OF THE
COMPANY'S NETWORKS, TRANSMISSION COSTS, PRODUCT INTRODUCTIONS AND ACCEPTANCE,
TECHNOLOGICAL CHANGE, CHANGES IN INDUSTRY PRACTICES, ONE-TIME EVENTS AND OTHER
FACTORS DESCRIBED HEREIN ("CAUTIONARY STATEMENTS"). ALTHOUGH THE COMPANY
BELIEVES THAT THE EXPECTATIONS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT
SUCH EXPECTATIONS WILL PROVE TO BE CORRECT. BASED UPON CHANGING CONDITIONS,
SHOULD ANY ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD
ANY UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY
FROM THOSE DESCRIBED HEREIN AS ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED OR
INTENDED. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTED
TO THE COMPANY OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR
ENTIRETY BY THE APPLICABLE CAUTIONARY STATEMENTS.
RESULTS OF OPERATIONS
In the later part of 1999, the Registrant retained new senior
management and determined to focus on developing and pursuing its
telecommunications opportunities in China and Europe. As a result, among other
things, the Registrant rescinded, as of October 1, 1999, the practice of its two
Canadian multimedia subsidiaries, Planet City Graphics Corp. and Webworks
Multimedia Corporation, which were originally acquired in related transactions
on February 9, 1998.
Furthermore, on March 9, 1999 the Registrant had also acquired 51% of
Pacific Asset International Ltd. (Pacific Asset) for 600,000 shares of the
company's common stock. As at December 31, 1999, however, Pacific Asset had not
delivered its shares to the Registrant. As a result, as of January 13, 2000, the
Registrant rescinded the acquisition of Pacific Asset. On March 9, 1999, Pacific
Asset had no assets and no liabilities, and as of the date hereof, there have
been no business transactions between the Registrant and Pacific Asset.
Management believes that these rescissions will not have a material impact on
the Registrant's short or long term liquidity.
12
<PAGE>
As part of the Registrant's focus on developing its business in China,
on September 15, 1999, the Registrant entered into an agreement with
International Communications Enterprises Ltd. (ICE) to provide funding for a
joint venture between ICE and First Telecom of Hong Kong (FT). The primary
purpose of the joint venture will be to originate and terminate telephone
traffic in China. The Registrant made an investment of approximately $243,500
to acquire 25% of the gross revenue due to ICE from all activities generated by
the ICE/FT venture. On October 21, 1999, the Registrant entered into a second
joint venture with ICE as a financial partner to assist it in the development
and distribution of promotional commemorative prepaid calling cards relating to
sports figures.
As of December 31, 1999, the Registrant fulfilled its obligation to
provide $1,300,000 in development funds to its Hong Kong based subsidiary,
Regent Luck Holdings Ltd. (Regent). These funds were provided as paid in capital
for Regent's 90% interest in Shenzhen Global Net Computer Information Co. Ltd.,
which has an Exclusive Agency Agreement with Shenzhen Newsnet Co. Ltd., a
wholly-owned subsidiary of China Telecom.
On January 29, 2000, the Registrant completed the acquisition of 70%
of a Hong Kong based company, Cyber 2000 Limited (Cyber 2000) for $1,350,000
in cash and 500,000 restricted shares of the Registrant's common stock. Cyber
2000 is engaged in the business of developing Voice over Internet Protocol
(VoIP) and is expected to become a provider of VoIP re-sale services with
major international telephony carriers. AT&T is expected to provide a number
of professional and management services to implement Cyber 2000's VoIP
Program in China and the US. Cyber 2000 has also established a cooperation
arrangement with Teleinfo pursuant to which Teleinfo will work with Cyber
2000 as part of this project to provide various supports in marketing and
technical programs.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 2000, the Registrant raised $1,800,000 through the
sale of common stock and the completion of a bridge financing, as compared to
the first quarter of 1999, during which the Registrant raised approximately
$1,459,500 through the sale of common stock. In the year ended December 31,
1999, the Registrant raised $4,209,500 from the sale of equity securities and
$543,631 from notes payable to fund current operations. The proceeds of such
financing transactions were used for working capital needs. The Registrant's
current ratio at March 31, 2000 was 1.10 compared to 2.80 at December 31, 1999.
The Registrant's operating activities used cash of approximately $1,303,913 for
the three months ended March 31, 2000. During this period, the Registrant had an
operating loss before depreciation and amortization of approximately $1,203,944
as compared to the first quarter of 1999, during which the Registrant had an
operating loss before depreciation and amortization of approximately $231,132.
During the year ended December 31, 2000, the Registrant had operating expenses
of $3,544,596, resulting in a net loss of $3,546,791.
In January 2000, the Registrant paid towards the aquisition of Cyber 2000
$850,000 in cash. In March, 2000
13
<PAGE>
the Registrant also loaned approximately $45,000 to ICE pursuant to a secured
promissory note due on July 4, 2000. As a result of the above activities and the
Registrant's increased operating costs, the Registrant experienced a decrease in
cash of $1,037,338 for the first three months of 2000.
BUSINESS RISK
Because of management's broad discretion with respect to the acquisition of
assets, properties or businesses, the Registrant may be deemed to be a growth
oriented company. Although management intends to apply substantially all of the
proceeds that it may receive through the issuance of stock or debt to suitable
acquisitions and development of acquired companies, such proceeds will not
otherwise be designated for any more specific purpose. The Registrant can
provide no assurance that any allocation of such proceeds will allow it to
achieve its business objectives.
As discussed previously, the Registrant's continuation of business is dependent
upon socio-political factors such as China's entry into the World Trade
Organization and the liberalization of foreign investment in China's Internet
sector. There are inherent risks involved in operating in China, a region where
the rules and regulations are still uncertain. The potential opening of the
information technology/Internet sector to foreign participation will also mean
an increase in competition from multinational telecommunications companies in
China. The degree to which these factors may affect the Registrant's future
operations and financial results is uncertain and will depend on the success of
the management team in executing its business plan and carrying out an effective
implementation of the core operations of the Registrant's joint ventures.
14
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There have been no changes since the Registrant's last report in Item
3, Legal Proceedings of Form 10-KSB for the fiscal year ended December 31,
1999.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits- None
Form 8-K- None
15
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GLOBAL TELEPHONE
COMMUNICATION INC.
DATE May 18, 2000 BY: /s/ Robert J. Andresen
-----------------------------------
Robert J. Andresen
President & Chief Operating Officer
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,298,558
<SECURITIES> 3,443
<RECEIVABLES> 50,500
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,352,501
<PP&E> 39,498
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,455,991
<CURRENT-LIABILITIES> 1,224,451
<BONDS> 0
0
0
<COMMON> 18,088
<OTHER-SE> 7,408,365
<TOTAL-LIABILITY-AND-EQUITY> 3,455,994
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,393,893
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,390,216)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,390,216)
<EPS-BASIC> 0.08
<EPS-DILUTED> 0
</TABLE>
