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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A1
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES 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)
3838 CAMINO DEL RIO NORTH, SUITE 333, SAN DIEGO CA 92108-1789
(Address of principal executive offices) (Zip Code)
1-800-668-9880
(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 EQUITY, PAR VALUE $.001
(Title of Class)
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GLOBAL TELEPHONE COMMUNICATION, INC.
FORM 10-SB/A1
TABLE OF CONTENTS
<TABLE>
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NO. TITLE PAGE NO.
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PART 1
Item 1. Description of Business. . . . . . . . . . . . . . . . . . . . . . . . . .3
Item 2. Management's Discussion and Analysis or Plan of Operations . . . . . . . .9
Item 3. Description of Property. . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 4. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 5. Directors, Executive Officers, Promoters and Control Persons . . . . . . 19
Item 6. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 7. Certain Relationships and Related Transactions . . . . . . . . . . . . . 21
Item 8. Description of Securities. . . . . . . . . . . . . . . . . . . . . . . . 22
PART II
Item 1. Market Price of and Dividends on the Registrant's Common
Equity and Other Shareholder Matters . . . . . . . . . . . . . . . . . . 23
Item 2. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Item 3. Changes in Disagreements with Accountants. . . . . . . . . . . . . . . . 24
Item 4. Recent Sales of Unregistered Securities. . . . . . . . . . . . . . . . . 25
Item 5. Indemnification of Directors and Officers. . . . . . . . . . . . . . . . 28
PART F/S
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . .29
PART III
Item 1 Index to Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Item 2 Description of Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . 30
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
The Registrant was incorporated on March 10, 1970 for the purpose of
raising capital to develop and possibly put into production certain oil and
mineral deposits. The Registrant was unable to raise development money and the
Registrant's operations ceased and the mineral deposits were abandoned.
On June 23, 1997, the Registrant acquired all of the outstanding shares of
Chow's Consulting Corporation for 90,000 common shares of its common stock.
The only asset of Chow's was a mining claim that has since been deemed
worthless and Chow's was dissolved.
On October 14, 1997 the Registrant changed its name from Dynasty Oil and
Minerals Corporation to Global Telephone Communication, Inc., in line with a
change in its strategic direction. The Registrant's current focus is to seek
and develop opportunities in the IT (Information Technology),
telecommunications, and Internet industries. To capitalize on management's
industry experience and relationships, the Registrant will favor opportunities
in Southeast Asia, with an emphasis on the People's Republic of China (PRC.)
On February 9, 1998, the Registrant acquired all of the issued and
outstanding shares of an operating multimedia company, Planet City Graphics
Corp. (Planet City), a private company incorporated under the laws of British
Columbia, Canada, with offices in Vancouver, BC. The Registrant issued a total
of 1,500,000 common shares in exchange for all the issued and outstanding
shares of Planet City.
Also, on February 9, 1998, the Registrant also acquired all of the issued
and outstanding shares of another operating multimedia company, Webworks
Multimedia Corporation (Webworks), a private company incorporated under the
laws of British Columbia, Canada, with offices in Vancouver, BC. The Registrant
issued a total of 500,000 common shares in exchange for all the issued and
outstanding shares of Webworks.
Both Planet City and Webworks are in the businesses of Web graphic design
and hosting and systems integration. However, these entities failed
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to operate profitably and the Registrant has decided that these operations do
not complement its current business direction and thus, disposed of these
operations on October 1, 1999. (See Item 2 Management's Discussion and Plan of
Operation for more details.) .
On March 24, 1998 the Registrant changed its domicile from the State of
Utah to the State of Nevada.
On April 16, 1998, the Registrant entered into a Share Exchange Agreement
(Regent Agreement) with Regent Luck Holdings Ltd., (Regent), a corporation
registered and headquartered in Hong Kong, whereby the Registrant acquired all
the issued and outstanding shares of Regent by issuing and exchanging 4,950,000
shares of the Registrant with the shareholders of Regent, which constituted
approximately 63% of the Registrants then outstanding shares.
Regent has a 90% interest in a joint venture company, Shenzhen Global Net
Computer Information Co. Ltd., (SGNCI), organized under the laws of the PRC,
with Shenzhen Newsnet Co., Ltd. (SNC). The 10% minority owner is Shenzhen Xin
Yun Da Electronics Co. Ltd. a company owned by citizens of the of the PRC.
The telecommunications business in the PRC is highly regulated by the
central Government's Telecommunications Bureau. A Chinese company must get
authorization from many different levels of government before entering the
telecommunications business. The first step is to obtain Joint Venture
approval from the Foreign Merchant Investment Bureau. To qualify for this
level of approval, an applicant must provide a Joint Venture Feasibility
Report, a Joint Venture Contract, and a Joint Venture Corporate Charter. This
approval, along with all aforesaid documents are then forwarded to the National
Industrial and Commercial Administrative Bureau for a business license.
On June 8, 1998, the SGNCI joint venture was given the approvals in
accordance with the PRC Sino-Foreign Equity Joint Venture Enterprise Law and by
Shenzhen Foreign Investment Bureau (No. 1998 0520). The business scope of this
license includes computer software development, Internet Protocol (IP) product
development along with the related technical consulting, computer systems
integration and Internet service provider (ISP). The China National Industrial
and Commercial Administrate Bureau issued the
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Joint Venture business license on July 28, 1998 effective for 12 years. The
cost of the license itself from the Chinese government was $200.
SNC is a subsidiary of China Telecom and is the biggest ISP in the city of
Shenzhen with a subscriber base of over 40,000. SNC entered into an exclusive
agency agreement with SGNCI which gives SGNCI the rights to act as exclusive
agents to conduct all telecommunications and Internet business and services in
Shenzhen, Guangdong Province and in six of the biggest cities in China. The
term of the agency agreement is for 12 years with options to renew, subject to
further negotiations. Profits will be shared on a 69%-31% basis in favor of
SGNCI for the first 18 months and 55%-45% thereafter. As part of the Regent
Agreement, the Registrant agreed to provide funds as capital for the SGNCI
joint venture in the amount of $1,300,000. To date, the Registrant has provided
approximately $975,000. The Registrant will provide the balance of $325,000 by
December 31, 1999, in the form of cash, as paid-in-capital, to SGNCI from
proceeds of a private placement of the Registrant's common shares.
With respect to the SGNCI Joint Venture, the Registrant will be engaged in
the delivery of web-based e-mail, voice over IP, systems integration, Internet
access and content, and other IT/Internet value added applications.
These products and services will be delivered under licenses provided
directly from China Telecom, the dominant carrier in the PRC, or through its
wholly owned subsidiaries. The services will be delivered to commercial,
residential and educational users through the Public Switched Telephone network
and will have their origin on Internet service platforms owned jointly or
independently by the Registrant.
Currently, SNC is a leading ISP in the Southern PRC with a 60% market
share in the Shenzhen region. On a national scale, SNC holds a 2% market
share. For all six cities, the major competition is from the ISP arm of China
Telecom. SNC is targeting an average market share of 30% for each city.
Customers usually base their purchase decisions on quality, timing and the
range of services that are offered.
On March 9, 1999, the Registrant acquired 51% of the issued and outstanding
shares of Pacific Asset International Ltd., (PAI) a Hong Kong corporation in
exchange for 600,000 shares of the Registrant's common
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shares which constituted approximately 4% of the Registrant's then issued
common stock. PAI is anticipated to provide the Registrant access to
institutional and banking e-commerce business in Asia. The Registrant plans to
assist PAI in the development of its business in the telecommunications and IT
sector. However, because the Registrant has limited resources, it will not
pursue this opportunity at this time.
On September 15, 1999 the Registrant signed an agreement with
International Communications Enterprises Ltd. (ICE), a company operating in and
incorporated in the United Kingdom, to provide funding for a Joint Venture
Agreement between ICE and First Telecom (FT) of Hong Kong. The primary purpose
of the Joint Venture will be to originate and terminate telephone traffic in
the PRC. The Registrant will make an investment totaling $250,000 for 25% of
the gross revenue due to ICE from all activities generated by the ICE/FT
venture on a monthly basis. (See Item 2 Management Discussion and Plan of
Operation for more details).
Subsequent to the joint venture on October 21, 1999, GTCI entered into a
second joint venture with ICE as a financial partner to ICE to assist ICE in
the development and distribution of promotional commemorative prepaid calling
cards relating to sports figures. Initially the program is primarily directed
towards the leading drivers of Formula 1 race car teams. The company (ICE) has
several contracts in place already, and a copy of the Contract for the Yamaha
Co. Is included as an exhibit. (See Item 2 Management Discussion and Plan of
Operation for more details).
The Internet and IT industries are relatively new and subject to rapid
change. Regulatory and political issues in Asia pose many potential problems.
The size of the Asian market, and the low cost of entry into these new
industries are attracting an increasing number of new entrants. Weaknesses in
infrastructure further complicate the task of building reliable and responsive
systems. Intense competition from existing and potential competitors with
longer operating histories, greater brand name recognition, larger customer
bases and greater financial, technical and marketing resources, may adversely
affect the Registrant's ability to secure a viable position in the marketplace.
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During 1998 and 1999 the Registrant publicly announced:
the marketing of Year 2000 software solutions;
its Global Positioning System (GPS) project;
its plans to acquire an ISP company and
various marketing agreements.
The Registrant has not pursued any of these due to the following reasons:
In November of 1998 the Registrant's management team decided that it would
become a provider of Year 2000 (Y2K) software solutions for the PRC.
Management believed that this was complimentary to the Registrant's core IT
business. As a result of this business decision, on March 4, 1999 the
Registrant entered into a Marketing Agreement with Planet City to market Planet
City's Y2K solutions (the Millennium Bug Compliance Kit) in the PRC and on
April 21, 1999 the Registrant entered into 2 Agency Agreements with Manful
Commerce Co. Ltd. and Beijing JinXunDa Telecommunications Technology
Development Co. Ltd. to supply the Millennium Bug Compliance Kit to the Chinese
Government. Subsequently, the Y2K solution was sent to China for testing.
After failing the required battery of tests, the Registrant terminated all
contracts involving this product, without penalty, and decided to terminate all
related business interests.
With respect to the GPS project, on June 10, 1999 the Registrant's joint
venture company, Beijing Global Net Communication Technology Co., Ltd.,
received Chinese governmental approval and the required business licenses to
provide GPS in the PRC. However, the Registrant has elected to postpone
further efforts in this area due to the attractiveness of other opportunities.
On June 14, 1999 the Registrant signed a conditional Memorandum of
Agreement to enter into a joint venture with Beijing Tian Guang Information
Communication Services Ltd. (BTGIC), a PRC company with a valid permit from the
State Information Technologies Ministry to operate as an IP in the cities of
Beijing, Shanghai and Guangzhou. The Registrant was to issue 1,200,000
restricted common shares for a 65% equity interest in BTGIC. After the
Registrant's management team completed its due diligence, it determined that
this joint venture would not be beneficial to the Registrant at the agreed upon
terms and conditions, and the agreement was terminated.
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On January 8, 1999 the Registrant announced that it entered into a teaming
agreement with Veronex Technologies, Inc. to jointly pursue business
opportunities in the PRC. On February 24, 1999 the Registrant announced that
it had entered into a marketing agreement with iBiz Technology Corp to market
iBiz technology and products in the Pacific Rim. The opportunity has not yet
sufficiently developed to pursue these prospects.
The Registrant has structured activities in accordance with current local
and foreign governmental regulations.
While there can be no certainty, the Registrant believes that the
regulatory environment will continue to support the Registrant's current and
planned activities. However, any reversal of current government willingness to
continue to approve such activities could have a serious material negative
effect on the business prospects for the Registrant.
The Registrant has spent approximately $50,000 over the past 2 years in
developing relationships and opportunities and obtaining licenses and
approvals.
The available telecommunication and IT market is substantial and
underserved. The Registrant will not be reliant upon any small number of major
customers in any of its markets.
The Registrant believes there is minimal, if any, cost to the Registrant
for compliance with current environmental laws.
The Registrant currently employs 8 full time employees and expects the
total number of employees to reach 20 or more within 6 months.
The Registrant plans to market its products and services both directly and
indirectly. A direct sales force will be developed to market the Registrant's
services and products. Furthermore, the Registrant's will use its contacts and
relationships in the PRC to further develop and market the Registrant's
products as they are developed.
The Registrant is now subject to the reporting requirements of Section
12(g) and consequently, the Registrant is now required to file annual and
quarterly reports in accordance with the Securities Act of 1934.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS PLAN OF OPERATIONS.
On June 4, 1997 the Registrant acquired Krystar International Ltd.
(Krystar) for x6,000,000 common shares. Krystar had proprietary ownership of a
technology that transported minerals using Boundary Air/Laminar Flow
Technology. On September 24, 1997, the Board of Directors of the Registrant
decided to discontinue the operations of Krystar and the 6,000,000 common
shares were cancelled. The disposal was effected by discontinuing efforts
associated with this acquisition. While there was no impact of this
discontinued operation in 1998, there was loss from discontinued operations of
$87,429 in 1997.
From February, 1998 through March of 1999, the Registrant made 4
acquisitions via share exchange agreements. The first two of these
acquisitions, Planet City and Webworks were rescinded as of October 1, 1999 due
to the following business decisions and events:
Originally, on February 17, 1998 the Registrant concluded negotiations
with two multimedia companies, Planet City and Webworks. The scope of the
business was to develop Internet based telecommunications application software,
products and services. The Registrant acquired combined assets of $220,000 in
exchange for a total of 2,000,000 shares of the Registrants stock. Shortly
thereafter, in March 1998, the Registrant was approached with joint venture
opportunities in the PRC. Due to the underdeveloped telecommunications market
in the PRC, the Registrant's management team believed that it was a prudent
business decision to change the scope of the business. The Registrant then
acquired its subsidiary, Regent, to pursue these opportunities.
Subsequent to the acquisition of Planet City and Webworks, it became
apparent to the Registrant's management team that the strategy and objectives
of both companies were widely divergent from the Registrant's. Further, the
resources of the two acquired companies did not fit well with the Registrant's
needs to exploit new telecommunications opportunities in the PRC. For example,
the Registrant discovered that the management teams of Planet City and Webworks
were unable to carry out the launching of the Registrant's Web-hosting,
e-commerce and systems integration operations in the PRC. In addition, upon
closer examination, the computer equipment and software owned by Planet City
and Webworks needed considerable upgrading in order to serve the needs of the
Registrant. The
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Registrant also discovered that the management of Planet City and Webworks had
independently entered into other businesses and diverted resources and capital
away from the Registrant's business. As a result, rather than allocating
resources to these two operations, in August of 1999, the Registrant's Board of
Directors decided that the most prudent action was to rescind the agreements
with the two entities. On October 1, 1999, the rescission was completed.
Management believes that these rescissions will not have a material impact
on the Registrant's short or long term liquidity.
During the years 1998 and 1999 the only operating subsidiaries of the
Registrant were Planet City and Webworks. As a result, all of the Registrant's
revenues were generated from these companies. During the nine months ended
September 30, 1999, the Registrant generated revenues of $151,158, a gain on
the sale of securities of $26,203, and operating expenses of $329,320,
resulting in a net loss of $175,466.
During the nine months ended September 30, 1998 the Registrant raised
$303,591 from notes payable to fund its operations.
During the nine months ended September 30, 1999 the Registrant raised
$2,378,714 from the sale of equity securities and $629,440 from notes payable
to fund current operations.
The third subsidiary, Regent, has an office in Hong Kong, but no
operations to date. The acquisition agreement requires the Registrant to
provide $1,300,000 in development funds, $975,000 of which was provided through
September 30, 1999 from private placement proceeds. The $975,000 was deposited
into an escrow account in a Hong Kong bank which was then used as
paid-in-capital for the funding of the Agency Agreement between Regent and SNC.
As of September 30, 1999, of the $975,000, $50,000 was spent on opening an
office in Shenzhen, employee expenses, license fees and equipment purchases.
The remaining $325,000 commitment will be provided by December 31, 1999. The
Registrant intends to fund this payment via the private placement of its common
stock. After the Registrant has fulfilled its financial obligation to fund the
Regent and SNC Joint Venture, this newly formed company will begin
investigating ISP and related business opportunities in six selected PRC cities.
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The ISP Agency Agreement between SGNCI and SNC will initiate in Shenzhen
and then intends to move into 5 other cities (Beijing, Shanghai, Wuhan,
Guangzhou and Chongquing). The timing of the development will depend upon the
success of the Shenzhen operation. When initiated, each additional facility
will cost approximately $1,300,000
The strategic partnership with SNC (a subsidiary of China Telecom) gives
the Registrant certain advantages in the market place over its competitors. It
gives the Registrant's Joint Venture operation a direct customer base of over
40,000, more favorable terms from China Telecom in lease-line contracts and
technical support
The fourth subsidiary, PAI was acquired in March, 1999. The Registrant
agreed to assist PAI in the development of its business and to further
strengthen its relationships with the Asian banking community. However, due to
its limited availability of resources, the Registrant has decided not to expend
time or money on PAI. At this time, the Registrant's management team believes
that with its background and prior business experience, opportunities in the
Asian telecommunications and IT industries offer greater upside potential and
lower risk than the PAI venture. Accordingly, the Registrant will reevaluate
the PAI venture after higher priority investments have completed.
The Registrant has only external sources of liquidity. During the years
ended December 31, 1997, and December 31, 1998, the Registrant was engaged
primarily in fund raising activities. Pursuant to private placement offerings
$31,000 in 1997, $180,800 in 1998 and $2,378, 714 through September 30, 1999
was raised.
On September 15, 1999 the Registrant made a commitment for capital
expenditures. The Registrant signed an agreement with ICE to provide funding
for a Joint Venture agreement between ICE and FT of Hong Kong. The
Registrant will receive revenue participation for the $250,000 investment.
ICE is to be a provider of telephony services to business customers, with a
focus on multinational companies in the European Union. The Registrant's
objective is to become a leading provider of such services in its areas of
operations. ICE has uncovered niche telephony products for this market,
which it believes represent revenue opportunities. This Joint Venture will
allow ICE to deliver voice, fax and data traffic via earth stations owned by
First Telecom in the Peoples Republic of China for termination into
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the PRC at rates below current market pricing. ICE is now seeking funding
for its next stage of development in the PRC. The Registrant's commitment is
to make an investment of approximately $250,000 for 25% of the gross revenue
due to ICE from all activities generated by the ICE/FT venture on a monthly
basis. The Registrant will receive this percentage for a period of time
beginning with the first month of revenue generation and ending when ICE's
revenue participation from the ICE/FT venture has exceeded approximately
$807,000 (L500,000) per month for 12 individual months. The Registrant's
gross revenue participation will then decrease to 12 1/2 % of the gross
revenue due to ICE from all activities generated by the ICE/FT Venture, on a
monthly basis, for the duration of the ICE/FT Venture. As of September 30,
1999 the Registrant had made an investment of $20,000 in ICE. Through
November 30, 1999 there were additional investments made totaling $141,000.
As at December 31, 1999, GTCI had completed its investment obligation and
GTCI expects revenue from this joint venture to begin late 1st quarter to
early 2nd quarter, 2000.
Subsequent to the joint venture on October 21, 1999, GTCI entered into a
second joint venture with ICE as a financial partner to ICE to assist ICE in the
development and distribution of promotional commemorative prepaid calling cards
relating to sports figures. Initially the program is primarily directed towards
the leading drivers of Formula 1 race car teams. ICE has several contracts in
place already, and a copy of the contract for the Yamaha Co. Is included as an
exhibit.
GTCI has paid approximately $48,400 US (L30,000) option for the right of
first refusal on any and all such cards that ICE may choose to do. The Yamaha
contract has already begun entering orders, and GTCI expects to see initial
revenues in late January or early February 2000.
GTCI will invest approximately $121,000 (L75,000) per card for design,
artwork, impression, printing, testing and delivery of satisfactory network
delivery and support capabilities. In exchange, GTCI will receive 50% of ICE's
gross revenue monthly until GTCI has received twice (2x) its original
investment, and subsequently, 25% of gross monthly revenues for as long as the
contract is in force, including renewals.
GTCI has completed it $121,000 (L75,000) obligation to ICE for the Yamaha
contract. Two other contracts are also now being funded.
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A copy of the "Revenue Participation Agreement" for promotional calling
cards is also included as an exhibit.
GTCI reasonably expects revenues from its two (2) ICE joint ventures to
exceed $10,000,000 (US) for the calendar year 2000.
There have been no seasonal aspects that caused any material changes in the
Registrant's financial statements.
The Registrant's viability is contingent upon its ability to raise
additional funds to support development efforts. There is no assurance the
Registrant will obtain additional financing on terms it deems acceptable.
The implementation and expansion of the Registrant's business, including
acquisitions, will require a commitment of substantial funds. At present, the
Registrant is awaiting the placement of a subordinated debt facility of
$12,000,000 which was anticipated to close by the second week of October, 1999.
While there has been a delay, the Registrant expects to receive the funding
between December 15, 1999 and end of January, 2000. Further developments will be
disclosed in the General Form of Annual Report for Small Business Issuer (Form
10K SB).
The $12,000,000 will be used to expand facilities and for growth. In the
interim, the Registrant is seeking additional equity in the amount of
$1,380,000, $920,000 of which was received by December 3, 1999.
Additional funding will be required in the future to satisfy capital needs
of the Registrant and its subsidiaries. Issuing additional equity will result
in dilution to the existing shareholders. If adequate funds are not available,
the Registrant's business could be adversely affected since internally generated
funds are not expected to be sufficient to fund the Registrant's expansion needs
in the next 12 months.
The Registrant believes that the aforesaid $12,000,000 will provide
sufficient funds for its operational activities for the next 12 months.
Nevertheless, the Registrant intends to pursue additional funding in the form
of direct equity. The Registrant does not intend to develop its own
value-added products and services at this time. It will, instead, purchase
or license those products and services from third parties.
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On November 15, 1999 the PRC signed a trade agreement with the United
States that lifts trade barriers. The pact obligates China to cut tariffs an
average of 23% which promises greater access for telecommunications firms.
But the PRC must still sign agreements with several other nations including
the European Union before it can be admitted to the World Trade Organization
(WTO), which will take additional time to resolve.
Socio-political factors and other variables will impact the Registrant's
future financial condition. Primarily, the PRC's imminent entry into the WTO
and the liberalization of its telecom markets to foreigners will have a
direct effect on the Registrant's and its subsidiaries business operations.
Some of these factors are, the lowering of tariff and non-tariff barriers for
IT products and services; more transparency and clearer rules and regulations
with respect to the telecom industry; an increase in globalization and the
free flow of information among trading partners; access to more reliable
market data; and other multilateral arrangements and market reforms that are
prerequisites for entry into the WTO.
Present indications from Beijing point to the liberalization of foreign
investment in the PRC's Internet sector. There is widespread consensus that
by the end of this year the Chinese Government will put in place new rules
and regulations governing foreign participation in this sector. The
liberalization of the telecom sector will allow the Registrant to provide
capital and investment in other value-added products and services within the
IT/Internet sector such as IP Telephony and Long Distance Calling Cards that
were previously prohibited from foreign participation.
In the meantime, there are inherent risks in operating in this sector
where the rules and regulations are still uncertain. Opening of the
IT/Internet sector to foreign participation will also mean an increase in
competition from multinational telecommunications companies in the PRC. The
degree to which it will affect the Registrant's future operations and
financial results is uncertain and will depend on the competency of the
management team in executing its business plan and carrying out an effective
implementation of the core operations of the joint ventures.
As a result of conducting overseas operations, the Registrant is vulnerable
to foreign exchange fluctuations. This is especially true in Asia where currency
fluctuations and devaluations are not only determined by market forces but are
also affected by the monetary and fiscal policies of
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foreign governments. There are also risks associated with the laws and
regulations that apply to the repatriation of capital from overseas
operations.
The success of the Registrant and its subsidiaries' operations in the
PRC is subject to the political and economic uncertainties of that region.
These unknowns are characterized by unexpected changes in rules and
regulations; tariffs or other barriers; policy changes regarding foreign
asset ownership; changes in tax laws for foreign companies; unexpected
changes in monetary or fiscal policies; market reforms; austerity programs
enacted by the government; government subsidies that are anti-competitive in
nature; currency exchange regulations and lack of transparency in the
financial markets. These and other factors could have an adverse impact on
the Registrant's business and financial results in the future or require the
Registrant to modify its current business practices.
The market for IT products and services is characterized by rapidly
changing technology, frequent introductions of new products and evolving
industry standards that result in product obsolescence and short product life
cycles. Accordingly, the Registrant's success is dependent upon its ability
to anticipate technological changes in the industry and to continually
identify, obtain and successfully market new products and services that
satisfy evolving technologies, customer preferences and industry requirements
within the markets that the Registrant and its subsidiaries operate.
There can be no assurance that competitors will not market products and
services in the Chinese markets that have certain competitive advantages over
those of the Registrant and its subsidiaries.
There are also uncertainties and risks attributable to the immature and
volatile nature of the Chinese IT market. This market is still in its
nascent stage where sufficient data and market studies are not available for
any thorough analysis in determining the viability of the Registrant's
business plan. The Registrant and its subsidiaries mainly have to rely on
the experiences of its local joint venture partners and of its own management
team to make strategic decisions with respect to its operations. This lack
of clear and reliable market information dramatically increases the risk of
the Registrant making incorrect market assumptions.
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The Registrant believes that the size of the emerging market in the PRC
contributes positively to its prospects for success and that the current
availability of capital seems to support present and future needs of the
Registrant's operations. Any material change in the regulatory climate in the
PRC could be materially damaging to the Registrant's future prospects for
success.
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field and cannot
distinguish 21st century dates from 20th century dates. As a result, many
software and computer systems, including machines controlled by
microprocessors, may need to be upgraded or replaced in order to comply with
such Y2K requirements.
In general, the Registrant and its operating subsidiaries rely on
recently updated software developed by off-the-shelf software companies.
Because the Registrant and its subsidiaries are all in the early stages of
their development, none of these companies are currently using computers to
manage mission critical processes. At this time, neither the Registrant nor
its subsidiaries depend on customers or suppliers who have a material effect
on their operations or financial viability. The Planet City and Webworks
acquisitions have been rescinded and the operations in the PRC do not have
and will not have any obligations to third parties until after January, 2000.
The Registrant does have computers that it uses for its internal
operations. Tests indicate that they are Y2K compliant. Because there is
always a risk that they may not be compliant, senior management of the
Registrant is coordinating efforts to assess Year 2000 readiness, to adjust
non-compliant hardware and software if problems should arise, and to certify
Y2K compliance.
Because the assessment process is not yet complete, the Registrant cannot
yet accurately estimate the costs and risks that will be associated with Y2K
assessment and remediation. As of the date of this report, the Registrant has
not identified any costs associated with the necessary corrective efforts.
However, it is possible that costs may materialize as the Registrant collects
further assessment data.
Because they do not appear to be material, costs for Y2K compliance are not
being segregated from the Registrant's operating budget. Overall,
-16-
<PAGE>
the costs are not expected to have a significant effect on the Company's
consolidated financial position or results of operations. The cost is not
foreseen to be significant due to the developmental nature of the business.
Any costs will be deducted from income in the period incurred.
In the event that any of the Registrant's subsidiaries do not
successfully and timely achieve Y2K compliance, the Registrant's business or
operations will be minimally affected due to the fact that all pertinent data
has been backed up. Finally, Year 2000 problems could have a ripple effect
through world economies, which could adversely affect the demand for some or
all of the Registrant's products and services. Of course, this is the case
for all operating companies worldwide.
The Registrant intends as part of the certification process to have each
of its operating subsidiaries perform a Y2K "dry run", where the dates on all
computers and microprocessor-controlled equipment are set ahead to a date
within the year 2000. The Registrant hopes that such dry runs will identify
all remaining internal Y2K issues before problems occur. The company will
perform the dry run on a subsidiary by subsidiary basis and will complete
testing before December 15, 1999. These procedures will not, however,
identify external Y2K problems, and they will not provide any information as
to how Y2K problems throughout world economies may affect the Registrant. The
Registrant intends to create a contingency plan to address these latter types
of risks, but it has not yet done so.
In December, 1998, the Registrant signed two consulting contracts with
Lions Peak Capital Ltd. and Milan Financial Inc. These two companies have been
working with the Registrant to provide consulting services with respect to
investor relations, marketing and business development. Their contracts expire
in December of 1999, however, they are renewable through to November, 2000.
The Registrant, as of October 1st, 1999, appointed Thomas Brandenburg as
Chief Executive Officer and Robert Luth as Chief Financial Officer. Mr.
Brandenburg accepted the position as of October, 1999. However, while Mr. Luth
had originally accepted the position of CFO, due to unforeseen personal
circumstances, he was unable to act on his commitment.
-17-
<PAGE>
ITEM 3. DESCRIPTION OF PROPERTY.
The Registrant's principal office is located at 3838 Camino Del Rio
North, Suite 333, San Diego CA 92108. This office acts as the Registrant's
U.S. office and is approximately 1,300 square feet and is shared with the
Registrant's U.S. Counsel at no cost to the Registrant.
The Registrant also operates offices in Vancouver, British Columbia, Hong
Kong and Shenzhen, PRC.
The Vancouver office occupies approximately 1,000 square feet and is
located at Suite 910-510 Burrard Street, Vancouver BC, Canada V6C 3A8. The
Registrant leases this space for $3,000 per month on a month to month basis
from an affiliate.
The Hong Kong office occupies approximately 1,000 square feet and is
located at 1601 Causeway Bay Plaza 1, 489 Hennessy Road, Hong Kong. The
Registrant leases this space for $800 per month on a month to month basis.
The Shenzhen office occupies approximately 2,000 square feet and is
located at Room 201, Tower B, Fujian Building, Caitain South Road, Fujian
District, Shenzhen city, Quondong Province, PRC 518026. The Registrant leases
this space for $1,500 per month on a month to month basis.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information as to the shares of common
stock owned as of December 31, 1999:
I. Each person who beneficially owns so far as the Registrant has been
able to ascertain, more than 5% of the outstanding 19,897,368 shares
of the Registrant.
II. Each director
III. Each of the officers named in the summary compensation
table.
-18-
<PAGE>
IV. All the directors and officers as a group unless otherwise indicated
in the footnotes below on the table is subject to community property
laws where applicable, the persons as to whom the information is given
has sole investment power over the shares of common stock.
<TABLE>
<CAPTION>
PRINCIPAL
NAME BENEFICIAL OWNER NUMBER PERCENT
---- ---------------- ------ -------
<S> <C> <C> <C>
Sino Concourse Limited Mr. Leung Yip 1,875,000 9.4%
Sinoway Technology Ltd. Mr. Joseph Li 1,825,000 9.2%
Braveheart Inc. Mr. Roger Burns and
Mr. Jeffery Mill 1,494,000(1) 7.5%
Ricky Ming Wah Ng 1,250,000 6.3%
Terry Wong 588,000 3.0%
Thomas J. Kennedy -0- 0%
</TABLE>
- --------------------
(1) Shares were issued as collateral for a loan transaction and will be
cancelled upon the retirement of the loan, which has not been completed to
date.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
<TABLE>
<CAPTION>
SINCE
NAME AGE POSITION TERM SERVED
---- --- -------- ---- ------
<S> <C> <C> <C> <C>
1. Thomas C.
Brandenburg 63 CEO and Director 1 yr 10/99
2. Terry Wong 40 President and
Director 2 yrs 10/97
3. Thomas J. Secretary, Treasurer
Kennedy 50 and Director 2 yrs 10/97
</TABLE>
-19-
<PAGE>
THOMAS C. BRANDENBURG
Mr. Brandenburg founded US Network Corporation Inc., the first company to
negotiate territory wide term and volume based resale contracts with any US
Regional Bell Operating Company concluding contracts with Nynex and Ameritech.
Prior to his five-year involvement with that firm, he was the founding chairman
of Litel, Inc. from 1984-1988. He commenced his involvement in the
communications industry in 1978, providing equity to an MCI reseller, United
Networks Corp. in Dallas and subsequently selling the company to US Tel. From
1974-1978 Mr. Brandenburg served as President and CEO of Rocky Mountain
Industries managing and operating oil ventures in California and Canada, an auto
leasing company, a specialty steel company and land development activities.
Prior to this, he was the Senior Vice President of Graham Loving & Company, a
private brokerage firm. He held a ten year position as Senior Superintendent for
Zurich American Insurance Group from 1960 to 1970. Mr. Brandenburg holds a
Bachelors and Masters of Art in Literature from the University of Notre Dame.
TERRY WONG
Mr. Wong was the President of Fortune Maple Capital Ltd. (Hong Kong/Canada)
from 1989 to 1997. During this time he was instrumental in setting up major
telecommunications projects in North Eastern China and developing a strategic
joint-venture partnership with China's Post and Telecom real estate development
projects in Canada and China in excess of $80 million. He was also involved in
investments in high-growth, high-technology companies in both Asia and North
America. From 1984 to 1994, he held the position of director of sales and
marketing for Tak Kee Stevedoring and Shipping (Hong Kong) where he was
responsible for increasing sales for the company at an annual average rate of
65% during the ten year period and opened major markets for the company in both
China and Malaysia. Mr. Wong received a BA Commerce degree, with a focus on
finance, from Simon Fraser University, Vancouver, BC in 1982 and was enrolled in
the Master of Economics program the following year.
THOMAS J. KENNEDY
Mr. Kennedy has been practicing as a barrister, solicitor and management
consultant since 1991. Between 1981 and 1991, Mr. Kennedy was Vice Chairman of
the Workers Compensation Review Board. Prior to
-20-
<PAGE>
this, he served as a prosecutor for the Canadian Department of Justice,
Vancouver regional office. From 1991 to present, he has held the position of
Director for three public companies: Global Tree Technologies Inc., Rock
Resources Inc. and Nu-Lite Industries Ltd. Mr. Kennedy received a Bachelor of
Commerce and Business Administration degree in 1973 and a Bachelor of Law
degree in 1974 from the University of BC in Vancouver and was admitted to the
Law Society of BC in 1975.
ITEM 6. EXECUTIVE COMPENSATION.
Mr. Terry Wong, the President and Mr. Thomas Kennedy, the Secretary and
Treasurer are currently the only full time executives of the Registrant and
are not in receipt of any salary at this time.
SUMMARY COMPENSATION TABLE
There was no executive of director who received any cash or non-cash
compensation in excess of $100,000 in the years of 1998 or 1997.
The following sets forth information concerning all cash and non-cash
compensation to be awarded to the Registrant's officers in excess of $100,000
for the part of 1999 to December 31.
<TABLE>
<CAPTION>
OFFICER SALARY OTHER ANNUAL COMPENSATION
<S> <C> <C> <C>
1. Thomas C. Brandenburg -0- -0-
2. Terry Wong -0- -0-
3. Thomas Kennedy -0- -0-
</TABLE>
The Registrant has no outstanding share purchase options at this time.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
There was no transactions during the last two years, or proposed
transactions, to which the Registrant was or is to be a party, in which any
director, executive officer, nominee for directorship, security holder or
immediate family member had a direct or indirect material interest as defined by
Rule 404 of Regulation S-B.
-21-
<PAGE>
ITEM 8. DESCRIPTION OF SECURITIES.
(a) COMMON STOCK: At December 31, 1999, the Registrant had 19,897,368
shares of the common stock outstanding. The Registrant's certificate of
Amendment of Articles of Incorporation, filed March 24, 1998 authorized the
issuance of up to 25,000,000 of the Registrant's common equity shares with a
par value of $0.001. Holders of shares of the common stock are entitled to
one vote for each share on all matters to be voted on by the shareholders.
Holders of common stock have no cumulative voting rights. Holders of shares
of common stock are entitled to share proratably in dividends, if any, as may
be declared from time to time by the Board of Directors in its discretion,
from funds legally available therefore.
In the event of a liquidation, dissolution or winding up of the
Registrant, the holders of shares of common stock are entitled to share pro
rata all assets remaining after payments in full of all liabilities. Holders
of common stock have no preemptive rights to purchase the Registrant's common
stock. All of the outstanding shares of common stock are fully paid and
non-assessable.
(b) PREFERRED STOCK: The Registrant is also authorized to issue
5,000,000 shares of preferred stock with a par value of $0.001. The
Registrant's Board of Directors may fix and determine the designations,
rights, preferences or other rights, preferences or other variations of each
class or series of the preferred stock. At this time the Registrant has not
issued any preferred stock.
(c) POSSIBLE CLASSIFICATION OF REGISTRANT'S SECURITIES AS A "PENNY
STOCK". By virtue of Rule 3a51-1 of the Securities Act of 1934 (the "Act"),
if the Registrant's common stock has a price of less than $5.00 per share it
will be considered a "penny stock." The perquisites required of
broker-dealers engaging in transactions involving "penny stocks" have
discouraged, or even barred, many brokerage firms from soliciting orders for
certain low priced stocks.
Still further, with respect to the trading of penny stocks, broker-dealers
have an obligation to satisfy certain special sales practice requirements
pursuant to Rule 15g-9 of the Act, including a requirement that they make an
individualized written suitability determination for the purchase and receive
the purchaser's written consent prior to the transaction.
-22-
<PAGE>
Still even further, such broker-dealers have additional disclosure
requirements as set forth in the Securities Enforcement Act Remedies and
Penny Stock Reform Act of 1990. These disclosure requirements include the
requirement for a broker-dealer, prior to a transaction in a penny stock, to
deliver a standardized risk disclosure document that provides information
about penny stocks and the risks of the penny stock market.
Still even further, a broker-dealer must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the
customer's account.
Accordingly, the above penny stock regulations and the associated
broker-dealer requirements will have an adverse effect on the market
liquidity of the Registrant's common stock and the ability of any present and
prospective shareholder investors to sell their securities in the secondary
market.
However, regardless of the price of the Registrant's stock, in the event
the Registrant has net tangible assets in excess of $2,000,000 and if the
Registrant has been in continuous operation for at least three (3) years, or
$5,000,000, if the Registrant has been in continuous operation for less than
three (3) years, Rule 3a51-1(g) of the Act will preclude the Registrant's
common stock from being classified as a "penny stock."
PART II
ITEM 1. MARKET PRICE AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND OTHER
STOCKHOLDER MATTERS.
(a) MARKET INFORMATION: The Registrant's common stock trades on the OTC
Bulletin Board under the symbol GTCI. The Registrant's common stock price as of
the close of business on December 31, 1999 was $1.95 per share.
(b) PRICE RANGE: The following is the range of the high and low bids for
the Registrant's common stock for each quarter within the last two fiscal
-23-
<PAGE>
years as determined by the over-the counter market quotations reflect
inter-dealer prices, without retail market, mark-down or commission and may
not represent actual transactions.
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
Quarter High Bid Low Bid High Bid Low Bid High Bid Low Bid
<S> <C> <C> <C> <C> <C> <C>
March $6.00 1 1/2 9/16 3/8 1 31/32 1 3/32
June $3.06 1 1/8 15/16 7/16 3 7/32 1 11/16
Sept. 11/12 1 1/8 13/16 5/16 2 7/16 1 1/2
Dec. 1 7/16 11/8 13/32 2 5/16 1 11/16
</TABLE>
(a) HOLDERS: The Registrant has approximately 329 common stock
shareholders.
(b) DIVIDENDS: The Registrant has never paid a cash dividend. It is the
present policy of the Registrant to retain any extra profits to finance
growth and development of the business. Therefore, the Registrant does not
anticipate paying cash dividends on its common stock in the foreseeable
future.
ITEM 2. LEGAL PROCEEDINGS.
The Registrant is not involved in any legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
The accountant has not resigned, declined to stand for re-election, nor
were they dismissed. The principal accountant's report on the financial
statements for the last two years contains no adverse opinion or disclaimer
of opinion, nor were they modified as to uncertainty, audit scope, or
accounting principles. There have been no disagreements with any former
accountants or any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure.
-24-
<PAGE>
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
(a) RECENT SALES: The Registrant had the following stock issuances as
described below. All such shares were sold by the officers and directors of
the Registrant and no underwriters were utilized.
1. On June 23, 1997, 90,000 shares of common stock were issued in
exchange for all of the issued and outstanding shares of Chow's
Consulting Corporation.
2. On October 23, 1997, 3,000,000 shares of common stock at $.01 per
share pursuant to Regulation D, Rule 504 Offering for a total offering
of $30,000.
3. On January 16, 1998, 1,140,142 shares of common stock at $.50 per
share pursuant to a Regulation D, Rule 504 Offering for a total
offering of $570,071. Of this offering, a total of $180,800 was for
cash and the balance of $389,271 was for the cancellation of debt.
4. On February 9, 1998, 1,500,000 shares of common stock were issued in
exchange for all of the issued and outstanding shares of Planet City
Graphics Corp.
5. On February 9, 1998, 500,000 shares of common stock were issued in
exchange for all of the issued and outstanding shares of Webworks
Multimedia Corporation.
6. On April 16, 1998, 4,950,000 shares of common stock were issued in
exchange for all of the issued and outstanding shares of Regent Luck
Holdings Limited. The Share Exchange Agreement called for the issuance
of a total of 5,000,000 shares, but due to an oversight on the part of
the Registrant's Stock Transfer Agent, only 4,950,000 shares were in
fact issued.
7. On January 16, 1999, 700,000 shares of common stock at $.25 per share
pursuant to a Regulation D, Rule 504 Offering for a total offering of
$175,000.
-25-
<PAGE>
8. On January 20, 1999, 1,649,000 shares of common stock at $.50 per
share pursuant to a Regulation D, Rule 504 Offering for a total
offering of $824,500.
9. On March 9, 1999, 600,000 shares of common stock were issued in
exchange for 51% of the issued and outstanding shares of Pacific Asset
International Ltd.
10. On March 15, 1999, 200,000 shares of common stock at $1.00 per share
for a total offering of $200,000.
11. On March 19, 1999, 200,000 shares of common stock at $1.00 per share
for a total offering of $200,000.
12. On March 26, 1999, 100,000 shares of common stock at $1.00 per share
for a total offering of $100,000.
13. On April 16, 1999, 200,000 shares of common stock at $1.00 per share
for a total offering of $200,000.
14. On June 14, 1999, 277,778 shares of common stock at $.72 for a total
offering of $200,000.
15. On June 28, 1999, 1,494,000 shares were issued as collateral for a
loan amount to be determined by the Registrant's trading share price
at the time of funding. The loan has not yet been funded and the loan
amount is anticipated to be approximately $900,000. Upon repayment of
this loan, the collateral shares will be cancelled.
16. On July 27, 1999, 69,444 shares of common stock at $.72 per share for
a total offering of $50,000.
17. On August 3, 1999, 69,445 shares of common stock at $.72 per share for
a total offering of $50,000.
18. On September 20, 1999, 125,000 shares of common stock at $.80 per
share for a total offering of $100,000.
-26-
<PAGE>
19. On October 13, 1999, 100,000 shares of common stock at $1.00 per share
for a total offering of $100,000.
20. On October 20, 1999, 212,766 shares of common stock at $.94 per share
for a total offering of $200,000.
21. On November 29, 1999, 1,050,000 shares of common stock at $1.20 per
share for a total offering of $1,260,000.
22. On December 29, 1999, 250,000 shares of common stock at $1.00 per
share for a total offering of $250,000.
23. On December 31, 1999, 250,000 shares of common stock at $1.00 per
share for a total offering of $250,000.
(a) EXEMPTIONS FROM REGISTRATION:
With respect to the issuance of the 3,000,000 common shares listed at
Item 4(a)2, the 1,140,142 shares listed at Item 4(a)3, the 700,000 common
shares listed at Item 4(a)7 and the 1,649,000 common share listed at Item
4(a)8, such issuances were made in reliance on the private placement
exemptions provided by Section 4(2) of the Securities Act of 1933 as amended,
(the "Act"), SEC Regulation D, Rule 504 of the Act and Nevada Revised
Statutes Sections 78.211, 78.215, 73.3784, 78.3785 and 78.3791 (collectively
the "Nevada Statutes").
With respect to the issuance of the 90,000 common shares listed at Item
4(a)1, the 1,500,000 common shares listed at Item 4(a)4, the 500,000 common
shares listed at Item 4(a)5, the 4,950,000 common shares listed at Item
4(a)6, the 600,000 common shares listed at Item 4(a)9, the 200,000 common
shares listed at Item 4(a)10, the 200,000 common shares listed at Item
4(a)11, the 100,000 common shares listed at Item 4(a)12, the 200,000 shares
listed at Item 4(a)13 the 277,778 shares listed at Item 4(a)14, the
1,494,000.shares listed at Item 4(a)15, the 69,444 shares listed at Item
4(a)16, the 69,445 shares listed at Item 4(a)17, the 125,000 shares listed at
Item 4(a)18, the 100,000 shares listed at item 4(a)19, the 212,766 shares
listed at Item 4(a)20, the 10,050,000 shares listed at Item 4(a)21, the
250,000 shares listed at Item 4(a)22 and the 250,000 shares listed at Item
4(a)23 such issuances were made in reliance upon the private
-27-
<PAGE>
placement exemptions provided by Section 4(2) of the Act and the Nevada
Statutes.
In each instance, each of the share purchasers had access to sufficient
information regarding the Registrant so as to make an informed investment
decision. More specifically, each purchaser signed either a written
Subscription Agreement, a Share Exchange Agreement, a Share Purchase
Agreement or a Collateral Loan Agreement, with respect to their financial
status and investment sophistication wherein they warranted and represented,
among other things, the following:
1. That they had the ability to bear the economic risks of investing in
the shares of the Registrant.
2. That they had sufficient knowledge in financial, business, or
investment matters to evaluate the merits and risks of the investment.
3. That they had a certain net worth sufficient to meet the suitability
standards of the Registrant.
4. That the Registrant has made available to them, his counsel and his
advisors, the opportunity to ask questions and that they have been
given access to any information, documents, financial statements,
books and records relative to the Registrant and an investment in the
shares of the Registrant.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Articles of Incorporation and Bylaws of the Registrant provide for
indemnification of the Registrant's officers and directors for liabilities
arising due to certain acts performed on behalf of the Registrant that are
not a result of any act or omission by any such director or officer:
provided, however, that the foregoing provision shall not eliminate or limit
the liability of directors or officers (i) for acts or omissions which
involve intentional misconduct, fraud or a knowing violation of the law, or
(ii) the payment of dividends in violation of section 78.300 of the Nevada
Revised Status. Although the state statutes allow for indemnification of
officers and directors, the SEC rules prohibit indemnification of officers
and directors of publicly held companies.
-28-
<PAGE>
PART F/S
The following financial statements are submitted pursuant to the
information required by Item 310 of Regulation S-B:
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NO. DESCRIPTION
---- -----------
<S> <C>
FS-1 Global Telephone Communication, Inc. and
Subsidiaries Consolidated Financial Statements
September 30, 1999 and December 31, 1998.
FS-2 Global Telephone Communication, Inc. Consolidated
Proforma Financial Statements September 30, 1999
FS-3 Global Telephone Communication, Inc. Consolidated
Proforma Financial Statements December 31, 1998
(Post Rescission of Subsidiaries)
FS-4 Global Telephone Communication, Inc. Consolidated
Proforma Financial Statements December 31, 1998
(Pre Rescission of Subsidiaries)
FS-5 Planet City Graphics Corporation Financial
Statements December 31, 1998
FS-6 Webworks Multimedia Corporation Financial
Statements December 31, 1998
FS-7 Regent Luck Holdings Limited Financial Statements
December 31, 1998
-29-
<PAGE>
FS-8 Pacific Asset International Limited - For The
Period From January 11, 1999 (Rate of
Incorporation) to September 30, 1999
</TABLE>
PART III
ITEM 1. INDEX TO EXHIBITS.
The exhibits listed and described below in Item 2 are filed herein as the
part of this Registration Statement.
ITEM 2. DESCRIPTION OF EXHIBITS.
The following documents are filed herein as Exhibit Numbers 2, 3, 5, 6 and
7 as required by Part III of Form 1-A:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
2 CHARTER AND BY-LAWS
2.1 Articles of Merger Merging Global Telephone
Communication, Inc. (a Utah Corporation) into
Global Telephone communication, Inc. (a Nevada
Corporation)
2.2 Articles of Incorporation of Global Telephone
Communication, Inc.
2.3 Articles of Amendment and Restatement to Articles
of Incorporation of Dynasty TMT Corp.
2.4 Articles of Amendment to Articles if Incorporation
of Dynasty TMT Corp.
-30-
<PAGE>
2.5 Articles of Amendment to the Articles of
Incorporation of Dynasty TMT Corp.
2.6 Articles of Incorporation of Dynasty Ore and
Minerals Corporation
2.7 By-Laws of Global Telephone Communication, Inc.
3. NONE INSTRUMENTS REFINING THE RIGHTS OF SECURITY
HOLDERS
7. NONE VOTING TRUST AGREEMENTS
6 MATERIAL CONTRACTS
6.1 Share Exchange Acknowledgment
for Planet City Graphics Corp.
6.2 Share Exchange Acknowledgments
for Webworks Multimedia Corporation
6.3 Share Exchange Agreement with
Regent Luck Holdings Ltd.
6.4 Amendment of Share Exchange
Agreement with Regent Luck Holdings Ltd.
6.5 Joint Venture Agreement between Shenzhen Xun Yun
Yun Da Electronics Co. Ltd. and Regent Luck
Holdings ltd. for Shenzhen Global Net Computer
Information Co. Ltd.
-31-
<PAGE>
6.6 Agency Agreement between Shenzhen Newsnet
Information co. and Shenzhen Global Net Computer
Information co. Ltd.
6.7 Telecommunication Business Operation Approval of
Peoples Republic of China for Shenzhen Newsagent
Co. Ltd.
6.8 Share Exchange Agreement with Pacific Asset
International Ltd.
6.9 Consulting Agreement with Lions Peak Capital Ltd.
6.10 Consulting Agreement with Milan Financial Inc.
6.11 Revenue Participation and Option to Purchase
Agreement with International Communications
Enterprises Ltd.
6.12 Mutual Rescission Agreement - Planet City
6.13 Mutual Rescission Agreement - Webworks
6.14 Yamaha Promotional Calling Card Programme
6.15 First Continental Capital L.P. Revenue
Participation Agreement
27 FINANCIAL DATA SCHEDULE
</TABLE>
-32-
<PAGE>
SIGNATURES
In accordance with Section 12 the Securities and Exchange Act of 1934
the Registrant caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized.
GLOBAL TELEPHONE
COMMUNICATION, INC.
DATED: January 19, 2000 BY: /s/ Terry Wong
--------------------------
TERRY WONG
President
-33-
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --- -----------
<S> <C>
FS-1 GLOBAL TELEPHONE COMMUNICATIONS,
INC. AND SUBSIDIARIES CONSOLIDATED
FINANCIAL STATEMENTS SEPTEMBER 30, 1999
AND DECEMBER 31, 1998
FS-2 GLOBAL TELEPHONE COMMUNICATIONS,
INC. CONSOLIDATED PROFORMA
FINANCIAL STATEMENTS SEPTEMBER 30, 1999
FS-3 GLOBAL TELEPHONE COMMUNICATION, INC.
CONSOLIDATED PROFORMA FINANCIAL
STATEMENTS DECEMBER 31, 1998
(POST RESCISSION OF SUBSIDIARIES)
FS-4 GLOBAL TELEPHONE COMMUNICATION, INC.
CONSOLIDATED PROFORMA FINANCIAL
STATEMENTS DECEMBER 31, 1998
(PRE RESCISSION OF SUBSIDIARIES)
FS-5 PLANET CITY GRAPHICS CORPORATION
FINANCIAL STATEMENTS DECEMBER 31, 1998
FS-6 WEBWORKS MULTIMEDIA CORPORATION
FINANCIAL STATEMENTS DECEMBER 31, 1998
FS-7 REGENT LUCK HOLDINGS LIMITED
FINANCIAL STATEMENTS DECEMBER 31, 1998
FS-8 PACIFIC ASSET INTERNATIONAL LIMITED
REPORTS AND FINANCIAL STATEMENTS
FOR THE PERIOD FROM 11TH JANUARY, 1999
(DATE OF INCORPORATION) TO 30TH SEPTEMBER, 1999
</TABLE>
<PAGE>
EXHIBIT FS-1
GLOBAL TELEPHONE COMMUNICATIONS,
INC. AND SUBSIDIARIES CONSOLIDATED
FINANCIAL STATEMENTS SEPTEMBER 30, 1999
AND DECEMBER 31, 1998
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENT
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
<PAGE>
C O N T E N T S
<TABLE>
<S> <C>
Independent Auditors' Report............................................................................ 3
Consolidated Balance Sheets............................................................................. 4
Consolidated Statements of Operations................................................................... 6
Consolidated Statements of Stockholders' Equity (Deficit)............................................... 7
Consolidated Statements of Cash Flows................................................................... 8
Notes to the Financial Statements...................................................................... 10
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Global Telephone Communication, Inc. and Subsidiaries
Vancouver, British Columbia, Canada
We have audited the accompanying consolidated balance sheets of Global Telephone
Communication, Inc. and Subsidiaries as of December 31, 1998 and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for the years ended December 31, 1998 and 1997. These financial statements
are the responsibility of the Company=s management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Global
Telephone Communication, Inc. and Subsidiaries as of December 31, 1998 and the
results of their consolidated operations and their cash flows for the years
ended December 31, 1998 and 1997 in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company is a development stage company
with no significant operating results to date, which raises substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 2. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Jones, Jensen & Company
Salt Lake City, Utah
July 8, 1999
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----------------- -----------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 1,114,618 $ 16,390
Accounts receivable - 5,928
Marketable securities 316,080 81,878
Prepaid expenses 89,245 80
Loans to officers - 8,450
----------------- -----------------
Total Current Assets 1,519,943 112,726
----------------- -----------------
FIXED ASSETS, NET (Note 8) 164,086 151,202
----------------- -----------------
OTHER ASSETS
Goodwill, net (Note 1) 798,000 -
----------------- -----------------
Total Other Assets 798,000 -
----------------- -----------------
TOTAL ASSETS $ 2,482,029 $ 263,928
================= =================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----------------- -----------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 202,249 $ 158,148
Accrued interest payable (Note 3) 30,584 8,296
Notes payable (Note 3) 86,555 297,174
Shareholder payable (Note 3) 729,440 -
Current portion of long-term lease (Note 9) 22,118 57,107
----------------- -----------------
Total Current Liabilities 1,070,946 520,725
----------------- -----------------
LONG-TERM DEBT
Lease obligations - long term (Note 9) 1,631 10,139
----------------- -----------------
Total Long-Term Debt 1,631 10,139
----------------- -----------------
TOTAL LIABILITIES 1,072,577 530,864
----------------- -----------------
MINORITY INTEREST - -
----------------- -----------------
COMMITMENTS (Note 7)
STOCKHOLDERS' EQUITY (DEFICIT)
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, 18,143,368 and 12,245,935 shares
issued and outstanding, respectively 18,143 12,246
Additional paid-in capital 4,412,767 1,279,164
Deficit accumulated during the development stage (3,021,458) (1,558,346)
----------------- -----------------
Total Stockholders' Equity (Deficit) 1,409,452 (266,936)
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 2,482,029 $ 263,928
================= =================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the
Nine Months Ended For the Years Ended
September 30, December 31,
--------------------------------- ----------------------------------
1999 1998 1998 1997
--------------- --------------- ---------------- ----------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES $ - $ 3,529 $ 4,705 $ -
---------------- --------------- --------------- ----------------
OPERATING EXPENSES
General and administrative 1,452,847 164,163 407,555 46,642
Depreciation and amortization 47,321 280 373 -
---------------- --------------- --------------- ----------------
Total Operating Expenses 1,500,168 164,443 407,928 46,642
---------------- --------------- --------------- ----------------
OPERATING LOSS (1,500,168) (160,914) (403,223) (46,642)
---------------- --------------- --------------- ----------------
OTHER (EXPENSE)
Interest expense (8,734) (6,113) (8,151) -
---------------- --------------- --------------- ----------------
Total Other (Expense) (8,734) (6,113) (8,151) -
---------------- --------------- --------------- ----------------
MINORITY INTEREST - - - -
LOSS BEFORE GAIN (LOSS) FROM
FROM DISCONTINUED OPERATIONS (1,508,902) (167,027) (411,374) (46,642)
---------------- --------------- --------------- ----------------
GAIN (LOSS) FROM DISCONTINUED
OPERATIONS, Net of zero tax
benefit (Note 4) 45,790 (8,439) (11,251) (87,429)
---------------- --------------- --------------- ----------------
NET LOSS $ (1,463,112) $ (175,466) $ (422,625) $ (134,071)
================ =============== =============== ================
BASIC LOSS PER SHARE OF
COMMON STOCK ATTRIBUTABLE TO:
Continuing operations $ (0.09) $ (0.03) $ (0.05) $ (0.03)
Discontinued operations 0.00 (0.00) (0.00) (0.05)
---------------- --------------- --------------- ----------------
Total $ (0.09) $ (0.03) $ (0.05) $ (0.08)
================ =============== =============== ================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 16,023,681 5,877,627 7,836,836 1,634,839
================ =============== =============== ================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
6
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders= Equity (Deficit)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
-------------------------- Paid-in Development
Shares Amount Capital Stage
--------- ------------- ------------- -----------------
<S> <C> <C> <C> <C>
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)
Common stock issued to acquire
subsidiaries (Note 1) 6,950,000 6,950 (6,950) -
Common stock issued for cash and
notes payable 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 for cash
(unaudited) 3,803,433 3,803 2,295,697 -
Common stock issued to acquire
subsidiary (unaudited) 600,000 600 839,400 -
Common stock issued as collateral
for loan (unaudited) 1,494,000 1,494 (1,494) -
Net loss for the nine months ended
September 30, 1999 (unaudited) - - - (1,463,112)
---------------- ------------- ------------- -----------------
Balance, September 30, 1999
(unaudited) 18,143,368 $ 18,143 $ 4,412,767 $ (3,021,458)
================ ============= ============= =================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
7
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the
Nine Months Ended For the Years Ended
September 30, December 31,
--------------------------------- ----------------------------------
1999 1998 1998 1997
---------------- --------------- ---------------- ----------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,463,112) $ (175,466) $ (422,625) $ (134,071)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization expense 77,308 47,311 57,836 -
Changes in operating assets and liabilities:
(Increase) in accounts receivable - (15,590) (5,928) -
(Increase) in other assets (74,787) - (80) -
Increase in accounts payable 44,101 1,207 151,033 7,015
Increase (decrease) in accrued expenses 22,288 - (30,931) 32,208
---------------- --------------- ---------------- ---------------
Net Cash (Used) by Operating Activities (1,394,202) (142,538) (250,695) (94,848)
---------------- --------------- ---------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of marketable securities 58,295 74,172 340,416 -
Purchase of marketable securities (292,497) (182,456) (521,209) -
Purchase of fixed assets (48,192) (173,292) (209,038) -
---------------- --------------- ---------------- ---------------
Net Cash (Used) by Investing Activities (282,394) (281,576) (389,831) -
---------------- --------------- ---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of notes payable (210,619) - - -
(Increase) decrease in stock offering costs - 8,204 8,204 (8,204)
Increase in notes payable 729,440 303,591 313,671 41,500
Common stock issued for cash 2,299,500 - 180,800 201,780
Payments on capital lease obligations (43,497) - - -
---------------- --------------- ---------------- ---------------
Net cash Provided by Financing Activities 2,774,824 311,795 502,675 235,076
---------------- --------------- ---------------- ---------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 1,098,228 (112,319) (137,851) 140,228
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 16,390 154,241 154,241 14,013
---------------- --------------- ---------------- ---------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 1,114,618 $ 41,922 $ 16,390 $ 154,241
================ =============== ================ ===============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
8
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
For the
Nine Months Ended For the Years Ended
September 30, December 31,
--------------------------------- ----------------------------------
1999 1998 1998 1997
---------------- --------------- ---------------- ----------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH PAID FOR:
Interest $ 19,197 $ 23,707 $ 66,384 $ -
Income Taxes $ - $ - $ - $ -
NON-CASH FINANCING ACTIVITIES:
Common stock issued for debt $ - $ - $ 389,271 $ -
Common stock issued to acquire subsidiaries $ 840,000 $ - $ - $ -
Common stock issued as collateral for debt $ - $ - $ - $ -
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
9
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1999 and December 31, 1998
NOTE 1 - ORGANIZATION AND HISTORY
The financial statements presented are those of Global Telephone
Communication, Inc. The Company was incorporated on March 10, 1970
for the purpose of raising capital to develop and possibly mine
certain oil and mineral deposits. The Company was unable to raise
development money and the Company's operations ceased and the
mineral deposits were abandoned. The Company has been seeking new
business opportunities believed to hold a potential profit. The
Company changed its name to Global Telephone Communication, Inc.
on October 14, 1997.
On June 23, 1997, the Company acquired all of the outstanding
shares of Chow's Consulting Corporation (Chow's) for 90,000 common
shares of the common stock of the Company. The asset was recorded
at predecessor cost since it was acquired form an entity under the
common control of the Company. The only asset of Chow's was a
mining claim which has since been deemed worthless and Chow's was
dissolved.
On February 9, 1998, the Company acquired all of the issued and
outstanding shares of an operating multimedia company, Planet City
Graphics Corp. (Planet City), a private company incorporated under
the laws of British Columbia, Canada, having its office in
Vancouver, B.C. The Company issued a total of 1,500,000 common
shares in exchange for all of the issued and outstanding shares of
Planet City. There was no cash consideration and the Company
accounted for the acquisition of all the shares of Planet City as
a purchase and an acquisition of a wholly-owned subsidiary. There
was no adjustment to the carrying value of the assets or
liabilities of Planet City.
On February 9, 1998, the Company acquired all of the issued and
outstanding shares of an operating multimedia company, Webworks
Multimedia Corporation (Webworks), a private company incorporated
under the laws of British Columbia, Canada, having its office in
Vancouver, B.C. The Company issued a total of 500,000 common
shares in exchange for all the issued and outstanding shares of
Webworks. There was no cash consideration and the Company
accounted for the acquisition of all the shares as a purchase and
an acquisition of a wholly-owned subsidiary. There was no
adjustment to the carrying value of the assets or liabilities of
Webworks.
On March 24, 1998, the Company changed its domicile from the
State of Utah to the State of Nevada.
On April 16, 1998, the Company entered into a Share Exchange
Agreement with Regent Luck Holdings Limited (Regent), a Hong Kong
corporation, with offices in Hong Kong, whereby the Company
acquired all the issued and outstanding shares of Regent by
issuing and exchanging 4,950,000 shares of the Company to the
shareholders of Regent.
Regent has a ninety percent (90%) ownership and interest in a
joint venture company, Shenzhen Global Net Computer Information
Co. Ltd. (SCNGI), organized under the laws of The Peoples
Republic of China, with Shenzhen Newsnet Co. Ltd.
Shenzhen Newsnet Co. Ltd. has obtained the Telecommunications
Business Operation Approval (No. GDSZ P90007) which allows it to
carry out computer information internet service.
10
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1999 and December 31, 1998
NOTE 1 - ORGANIZATION AND HISTORY (Continued)
Shenzhen Newsnet Co. Ltd. and the joint venture company, Shenzhen
Global Net Computer Information Co. Ltd. had entered into and
exclusive agency agreement for Shenzhen Global Net Computer
Information Co. Ltd. to act as exclusive agents to conduct all
telecommunications and internet business and services in
Shenzhen, Guangdong Province, PRC.
As part of the Share Exchange Agreement, the Company agreed to
provide funds as capital for the joint venture in the amount of
$1,300,000. As of September 30, 1999, the Company has provided
approximately $1,015,000 to the joint venture through Regent.
The Company accounted for the acquisition of all the shares of
Regent as a purchase and an acquisition of a wholly-owned
subsidiary. There was no adjustment to the carrying value of the
assets or liabilities of Regent.
On March 7, 1999, the Company entered into a share exchange
agreement with Pacific Asset International Ltd. (PAI), a Hong Kong
Corporation, whereby the Company acquired 51% of the outstanding
shares of PAI by issuing and exchanging 600,000 shares of the
Company's common stock to the shareholders of PAI.
On October 1, 1999, the Company sold Planet City and Webworks back
to the original shareholders of the respective companies. The
Company returned to the shareholders all the issued and
outstanding shares of common stock of each Company in exchange for
the shares of the Company=s common stock held by the shareholders.
There was no cash consideration and the Company accounted for the
disposition of all the shares of Planet City and Webworks as
discontinued operations. The statements of operations of the
Company have been adjusted to reflect the disposition of the
subsidiaries as discontinued operations retroactively for the nine
months ended September 30, 1999 and December 31, 1998.
b. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31 year
end. The Company was classified as a development stage company
until January 1, 1999.
c. Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments
with maturities of three months or less at the time of
acquisition.
d. Basic Loss Per Share
The computations of basic loss per share of common stock are based
on the weighted average number of shares outstanding during the
period.
12
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1999 and December 31, 1998
NOTE 1 - ORGANIZATION AND HISTORY (Continued)
e. Provision for Taxes
At September 30, 1999, the Company has net operating loss
carryforwards totaling approximately $2,900,000 that may be offset
against future taxable income through 2014. No tax benefit has
been reported in the financial statements because the Company
believes there is a 50% or greater chance the loss carryforwards
will expire unused. Accordingly, the potential tax benefits of the
loss carryforwards are offset by a valuation allowance of the same
amount.
f. Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
g. Principles of Consolidation
The consolidated financial statements include those of Global
Telephone Communication, Inc., its 51% subsidiary PAI, and its
wholly-owned subsidiary, Regent Luck Holdings Limited, and
Regent's 90% subsidiary, SGNCI. No loss has been attributed to the
minority interest because the minority owners had no basis in
their shares. All material intercompany accounts and transactions
have been eliminated.
h. Marketable Securities
Marketable securities represent shares of stock which are
classified as trading securities and are carried at market value.
Any change in market value from period to period will be included
in earnings.
There are no unrealized gains or losses in either trading
securities at September 30, 1999.
i. Advertising
The Company follows the policy of charging the costs of
advertising to expense as incurred.
j. Costs of Developing Relationships, Opportunities and Acquiring
Licenses
Due to the uncertainty of the recoverability of such costs in
developing relationships, opportunities and in acquiring licenses
and approvals , these costs are expensed when incurred.
13
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1999 and December 31, 1998
NOTE 1 - ORGANIZATION AND HISTORY (Continued)
k. Unaudited Consolidated Financial Statements
The following unaudited consolidated financial statements include
all of the adjustments which, in the opinion of management, are
necessary for a fair presentation. Such adjustments are of a
normal recurring nature.
l. Revenue Recognition
Revenue is recognized upon receipt of services by the customer.
m. Foreign Currency Translation
Monetary assets and liabilities denominated in foreign currencies
are translated into United States dollars at the period end
exchange rate. Non-monetary assets are translated at the
historical exchange rate and all income and expenses are
translated at the exchange rates prevailing during the period.
Foreign exchange currency translation adjustments will be included
in the stockholders' equity section.
n. Goodwill
The excess of the purchase price over the fair market value of the
assets and liabilities acquired in the purchase of PAI has been
recorded as goodwill.
Amortization of goodwill is determined using the straight-line
method over 10 years. Amortization expense was $42,000 and $-0-
for the nine months ended September 30, 1999, and the year ended
December 31, 1999, respectively.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of
liabilities in the normal course of business. However, the Company
does not have significant cash or other material assets, nor does
it have an established source of revenues sufficient to cover its
operating costs and to allow it to continue as a going concern. It
is the intent of the Company to enter the business of internet
service in China. In the interim, shareholders of the Company have
committed to meeting its minimal operating expenses.
14
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1999 and December 31, 1998
NOTE 3 - NOTES PAYABLE
Notes payable consisted of the following at September 30, 1999
and December 31, 1998.
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----------------- -----------------
(Unaudited)
<S> <C> <C>
Promissory note to a shareholder at 10%,
due on demand, unsecured. $ 729,440 $ -
Promissory note to an individual at 10%,
Due on demand, unsecured. 86,555 297,174
----------------- -----------------
Total Notes Payable $ 815,995 $ 297,174
================= =================
</TABLE>
Interest has been accrued for the above notes payable at their
respective rates:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----------------- -----------------
(Unaudited)
<S> <C> <C>
Accrued Interest Payable $ 30,584 $ 8,296
================= =================
</TABLE>
NOTE 4 - LOSS FROM DISCONTINUED OPERATIONS
On October 1, 1999, the board of directors discontinued the
operations of Planet City and Webworks. The following is a summary
of the loss from discontinued operations as required by APB No.
30. The September 30, 1999 and December 31, 1998 columns refer to
the disposition of Planet City and Webworks. The December 31, 1997
column refers to the disposition of Krystar International, Inc.
(Krystar). Krystar was involved in the technology of transporting
of materials using Air/Laminar Flow Technology. Keystar was
acquired on June 4, 1997 by the issuance of 6,000,000 shares of
common stock. On September 24, 1997, the agreement was rescinded
and the shares were canceled.
15
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1999 and December 31, 1998
NOTE 4 - LOSS FROM DISCONTINUED OPERATIONS (Continued)
<TABLE>
<CAPTION>
December 31,
September 30, ------------------------------------
1999 1998 1997
(Unaudited)
<S> <C> <C> <C>
REVENUE $ 100,497 $ 176,268 $ -
---------------- ----------------- -----------------
OPERATING EXPENSE
Depreciation 29,987 57,463 -
General and administrative expense 71,555 223,014 87,429
---------------- ----------------- -----------------
Total Operating Expense 101,542 280,477 87,429
---------------- ----------------- -----------------
OPERATING LOSS (1,045) (104,209) (87,429)
---------------- ----------------- -----------------
OTHER INCOME (EXPENSE)
Realized gain on marketable
securities 57,298 120,260 -
Interest expense (10,463) (27,302) -
---------------- ----------------- -----------------
Total Other Income (Expense) 46,835 92,958 -
---------------- ----------------- -----------------
GAIN (LOSS) FROM DISCONTINUED
OPERATIONS $ 45,790 $ (11,251) $ (87,429)
================ ================= =================
</TABLE>
The Company retains no assets which were attributable to prior
operations. No income tax benefit has been attributed to the loss
from discontinued operations.
NOTE 5 - STOCK TRANSACTIONS
On October 1, 1999, the Company canceled 2,000,000 shares of its
common stock in conjunction with the disposition of Planet City
and Webworks.
On June 28, 1999, the Company issued 1,494,000 shares of its
common stock as collateral for a loan.
On March 9, 1999, the Company issued 600,000 shares of its common
stock to acquire Pacific Asset International Ltd.
During the nine months ended September 30, 1999, the Company
issued 3,803,433 shares of its common stock for cash proceeds of
$2,299,500 at prices ranging from $0.25 to $1.00 per share.
On April 16, 1998, the Company issued 4,950,000 shares of its
common stock to acquire Regent Luck Holdings limited.
16
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1999 and December 31, 1998
NOTE 5 - STOCK TRANSACTIONS (Continued)
On February 9, 1998, the Company issued 1,500,000 shares of its
common stock to acquire Planet City Graphics Corporation.
On February 9, 1998, the Company issued 500,000 shares of its
common stock to acquire Webworks Multimedia Corporation.
On January 21, 1998, the Company issued 1,140,142 shares of its
common stock for a total offering of $570,071. Of this offering,
$180,800 was for cash and the balance of $389,271 was for the
cancellation of debt.
On October 23, 1997, the Company issued 3,000,000 shares of its
common stock for cash proceeds of $31,000.
On June 23, 1997, the Company issued 90,000 shares of its common
stock to acquire Chow=s Consulting Corporation.
NOTE 6 - STOCK OPTION PLAN
On October 14, 1997, the Company adopted the 1997 Stock Option
Plan (the "Plan"), initially reserving an aggregate of 166,667
shares of the Company's common stock (the "Available Shares") for
issuance pursuant to the exercise of stock options ("Options")
which may be granted to employees, officers, and directors of the
Company and consultants to the Company. The Plan provides for
annual adjustment in the number of Available Shares, commencing
December 31, 1997, to a number equal to 10% of the number of
shares outstanding on December 31 of the preceding year or 166,667
shares, whichever is greater. No options have been granted as of
September 30, 1999.
NOTE 7 - COMMITMENTS
a. Operating Leases - Related Party
The Company is renting its office space for approximately $3,000
per month on a month-to-month basis from an officer and director.
b. Joint Ventures
The Company is obligated under the terms of SGNCI joint venture
agreement to provide $1,300,000 capital for the operations of the
joint venture. As of September 30, 1999, the Company had advanced
approximately $1,015,000 to SGNCI through Regent.
On September 23, 1999, the Company made a commitment for capital
expenditures of approximately $250,000 to purchase an income
stream from a Hong Kong joint venture.
17
<PAGE>
GLOBAL TELEPHONE COMMUNICATION, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
September 30, 1999 and December 31, 1998
NOTE 8 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----------------- -----------------
(Unaudited)
<S> <C> <C>
Computer equipment $ 336,092 $ 287,900
Office equipment 25,942 25,942
----------------- -----------------
Subtotal 362,034 313,842
Accumulated depreciation (197,948) (162,640)
----------------- -----------------
Net property and equipment $ 164,086 $ 151,202
================= =================
</TABLE>
Depreciation expense for the nine months ended September 30, 1999
and the year ended December 31, 1998 was $5,321 and $57,836,
respectively.
Depreciation is computed using the straight-line method over the
estimated useful lives as follows:
<TABLE>
<S> <C>
Computer equipment 5 years
Office equipment 7 years
</TABLE>
NOTE 9 - LEASES
At December 31, 1998, the Company is liable under the terms of
non-cancelable operating leases for the following minimum lease
commitments:
<TABLE>
<CAPTION>
Period Ended Year Ended
Year September 30, December 31,
---- ------------------ ------------------
(Unaudited)
<S> <C> <C>
1999 $ 22,118 $ 57,107
2000 1,631 10,139
2001 - -
2002 - -
Later Years - -
------------------ ------------------
Total minimum lease payments $ 23,749 $ 67,246
================== ==================
</TABLE>
NOTE 10 - SUBSEQUENT EVENTS
On October 1, 1999, the Company disposed of two of its operating
subsidiaries, Planet City and Webworks. The common stock of the
subsidiaries was returned to the former shareholders of the
companies in exchange for the shares of the Company=s common
stock that was issued to the shareholders when the Company
purchased the stock of the subsidiaries. There was no cash
consideration for either the company or the shareholders on the
disposition of the Companies.
The Company subsequently canceled the shares of common stock that
had been returned by the shareholders of Planet City and
Webworks.
18
<PAGE>
EXHIBIT FS-2
GLOBAL TELEPHONE COMMUNICATIONS,
INC. CONSOLIDATED PROFORMA
FINANCIAL STATEMENTS SEPTEMBER 30, 1999
<PAGE>
GLOBAL TELEPHONE COMMUNICATIONS, INC.
CONSOLIDATED PROFORMA FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
<PAGE>
C O N T E N T S
<TABLE>
<S> <C>
Consolidated Proforma Balance Sheet............................................................................. 3
Consolidated Statement of Operations............................................................................ 5
Summary of Assumptions and Disclosures.......................................................................... 6
</TABLE>
<PAGE>
GLOBAL TELEPHONE COMMUNICATIONS INC.
Consolidated Proforma Balance Sheet
September 30, 1999
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
Proforma
Adjustments
Global Pacific Asset Increase Proforma
Telephone International (Decrease) Consolidated
----------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash $ 1,112,920 $ - $ - $ 1,112,920
Marketable securities 316,080 - - 316,080
Prepaid expenses 41,041 - - 41,041
----------------- ------------------ ------------------ ------------------
Total Current Assets 1,470,041 - - 1,470,041
----------------- ------------------ ------------------ ------------------
FIXED ASSETS, NET 45,862 - - 45,862
----------------- ------------------ ------------------ ------------------
OTHER ASSETS
Goodwill - - 777,000 777,000
Intercompany loans 1,568 - (1,568) -
----------------- ------------------ ------------------ ------------------
Total Other Assets 1,568 - 775,432 777,000
----------------- ------------------ ------------------ ------------------
TOTAL ASSETS $ 1,517,471 $ - $ 775,432 $ 2,292,903
================= ================== ================== ==================
</TABLE>
See Summary of Assumptions and Disclosures.
<PAGE>
GLOBAL TELEPHONE COMMUNICATIONS INC.
Consolidated Proforma Balance Sheet (Continued)
September 30, 1999
(Unaudited)
LIABILITIES AND STOCKHOLDERS= EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Proforma
Adjustments
Global Pacific Asset Increase Proforma
Telephone International (Decrease) Consolidated
----------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 199,758 $ - $ 25,000 $ 224,758
Accrued expenses 30,584 - - 30,584
Notes payable 86,555 - - 86,555
Notes payable to shareholder 729,440 - - 729,440
----------------- ------------------ ------------------ ------------------
Total Current Liabilities 1,046,337 - 25,000 1,071,337
----------------- ------------------ ------------------ ------------------
LONG-TERM DEBT
Intercompany loans - 1,568 (1,568) -
----------------- ------------------ ------------------ ------------------
Total Long-Term Debt - 1,568 (1,568) -
----------------- ------------------ ------------------ ------------------
TOTAL LIABILITIES 1,046,337 1,568 23,432 1,071,337
----------------- ------------------ ------------------ ------------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 25,000,000
shares authorized of $0.001
par value, 16,143,368 shares
issued and outstanding 15,543 - 600 16,143
Additional paid-in capital 3,575,367 - 812,832 4,388,199
Accumulated deficit (3,119,776) (1,568) (61,432) (3,182,776)
----------------- ------------------ ------------------ ------------------
Total Stockholders' Equity 471,134 (1,568) 752,000 1,221,566
----------------- ------------------ ------------------ ------------------
TOTAL LIABILITIES AND
STOCKHOLDERS
EQUITY (DEFICIT) $ 1,517,471 $ - $ 775,432 $ 2,292,903
================= ================== ================== ==================
</TABLE>
See Summary of Assumptions and Disclosures.
<PAGE>
GLOBAL TELEPHONE COMMUNICATIONS INC.
Consolidated Statement of Operations
For the Nine Months Ended September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Proforma
Adjustments
Global Pacific Asset Increase Proforma
Telephone International (Decrease) Consolidated
----------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
REVENUES $ - $ - $ - $ -
----------------- ------------------ ------------------ ------------------
OPERATING EXPENSES
Depreciation and
amortization 5,321 - 63,000 68,321
Genera and administrative 1,451,279 1,568 - 1,452,847
----------------- ------------------ ------------------ ------------------
Total Operating Expenses 1,456,600 1,568 63,000 1,521,168
----------------- ------------------ ------------------ ------------------
OPERATING (LOSS) INCOME (1,456,600) (1,568) (63,000) (1,521,168)
OTHER INCOME (EXPENSES)
Interest expense (8,734) - - (8,734)
----------------- ------------------ ------------------ ------------------
Total Other Income
(Expenses) (8,734) - - (8,734)
----------------- ------------------ ------------------ ------------------
LOSS BEFORE GAIN (LOSS)
FROM DISCONTINUED
OPERATIONS (1,465,334) (1,568) (63,000) (1,529,902)
----------------- ------------------ ------------------ ------------------
GAIN (LOSS) FROM
DISCONTINUED
OPERATIONS (17,140) - - (17,140)
----------------- ------------------ ------------------ ------------------
LOSS BEFORE INCOME
TAXES (1,482,474) (1,568) (63,000) (1,547,042)
INCOME TAXES - - - -
----------------- ------------------ ------------------ ------------------
NET (LOSS) INCOME $ (1,482,474) $ (1,568) $ (63,000) $ (1,547,042)
================= ================== ================== ==================
</TABLE>
See Summary of Assumptions and Disclosures.
<PAGE>
GLOBAL TELEPHONE COMMUNICATIONS INC.
Summary of Assumptions and Disclosures
NOTE 1 - ORGANIZATION AND HISTORY
a. Organization
Global Telephone Communications Inc. (the Company) was
incorporated on March 10, 1970 for the purpose of raising capital
to develop and possibly mine certain oil and mineral deposits. The
Company was unable to raise development money and the Company=s
operations ceased and the mineral deposits were abandoned.
On March 24, 1998, the Company changed its domicile from the State
of Utah to the State of Nevada.
On February 9, 1998, the Company acquired all the issued and
outstanding shares of an operating multimedia company, Planet City
Graphics Corporation (Planet City), a private company incorporated
under the laws of British Columbia, Canada, having its office in
Vancouver, B.C. The Company issued a total of 1,500,000 common
shares in exchange for all the issued and outstanding shares of
Planet City. There was no cash consideration and the Company
accounted for the acquisition of all the shares of Planet City as
a purchase and an acquisition of a wholly-owned subsidiary. There
was no adjustment to the carrying value of the assets or
liabilities of Planet City.
On February 9, 1998, the Company acquired all the issued and
outstanding shares of an operating multimedia company, Webworks
Multimedia Corporation (Webworks), a private company incorporated
under the laws of British Columbia, Canada, having its office in
Vancouver, B.C. The Company issued a total of 500,000 common
shares in exchange for all the issued and outstanding shares of
Webworks. There was no cash consideration and the Company
accounted for the acquisition of all the shares as a purchase and
an acquisition of a wholly-owned subsidiary. There was no
adjustment to the carrying value of the assets or liabilities of
Webworks.
On April 16, 1998, the Company entered into a Share Exchange
Agreement with Regent Luck Holdings Limited (Regent), a Hong Kong
corporation, with offices in Hong Kong, whereby the Company
acquired all the issued and outstanding shares of Regent by
issuing and exchanging 5,000,000 shares of the Company to the
shareholders of Regent.
Regent has a ninety percent (90%) ownership and interest in a
Joint Venture Company, Shenzhen Global Net Computer Information
Co. Ltd., organized under the laws of The Peoples Republic of
China, with Shenzhen Newsnet Co. Ltd.
Shenzhen Newsnet Co. Ltd. has obtained the Telecommunications
Business Operation Approval (No. GDSZ P90007) which allows it to
carry out Computer Information Internet Service.
Shenzhen Newsnet Co. Ltd. and the Joint Venture Company, Shenzhen
Global Net Computer Information Co. Ltd. had entered into an
Exclusive Agency Agreement for Shenzhen Global Net Computer
Information Co. Ltd. to act as exclusive agents to conduct all
telecommunications and internet business and services in
Shenzhen, Guangdong Province, PRC.
<PAGE>
GLOBAL TELEPHONE COMMUNICATIONS INC.
Summary of Assumptions and Disclosures
NOTE 1 - ORGANIZATION AND HISTORY (Continued)
a. Organization (Continued)
The Company accounted for the acquisition of all the shares of
Regent as a purchase and an acquisition of a wholly-owned
subsidiary. There was no adjustment to the carrying value of the
assets or liabilities of Regent.
On March 9, 1999, the Company entered into a share exchange
agreement with Pacific Asset International Ltd. (PAI), a Hong Kong
corporation, whereby the Company acquired 51% of the outstanding
shares of PAI by issuing and exchanging 600,000 shares of the
Company to the shareholders of PAI.
The proforma financial statements have been prepared as though the
acquisition of PAI occurred on January 1, 1999.
The following entries were recorded to properly reflect the
acquisition of PAI:
1. Record the issuance of the 600,000 shares of the Company=s
common stock and PAI goodwill:
<TABLE>
<S> <C>
Goodwill $ 840,000
Common stock (600)
Additional paid-in capital (837,832)
Accumulated deficit - PAI (1,568)
-----------------
Total $ -
=================
</TABLE>
2. Record additional acquisition costs relative to PAI:
<TABLE>
<S> <C>
Additional paid-in capital $ 25,000
Accounts payable (25,000)
-----------------
Total $ -
=================
</TABLE>
3. Amortize goodwill for the nine months ended September 30, 1999:
<TABLE>
<S> <C>
Amortization expense $ 63,000
Accumulated amortization - goodwill (63,000)
-----------------
Total $ -
=================
</TABLE>
<PAGE>
EXHIBIT FS-3
GLOBAL TELEPHONE COMMUNICATION, INC.
CONSOLIDATED PROFORMA FINANCIAL
STATEMENTS DECEMBER 31, 1998
(POST RESCISSION OF SUBSIDIARIES)
<PAGE>
GLOBAL TELEPHONE COMMUNICATIONS, INC.
CONSOLIDATED PROFORMA FINANCIAL STATEMENTS
DECEMBER 31, 1998
<PAGE>
C O N T E N T S
<TABLE>
<S> <C>
Consolidated Proforma Balance Sheet............................................................................. 3
Consolidated Statement of Operations............................................................................ 5
Summary of Assumptions and Disclosures.......................................................................... 6
</TABLE>
<PAGE>
GLOBAL TELEPHONE COMMUNICATIONS INC.
Consolidated Proforma Balance Sheet
December 31, 1998
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
Proforma
Planet City Webworks Adjustments Adjusted
Graphics Multimedia Increase Proforma
Consolidated Corporation Corporation (Decrease) Consolidated
----------------- ----------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash $ 56,983 $ - $ 21,958 $ - $ 35,025
Accounts receivable, net 5,928 - 5,218 - 710
Marketable securities 81,878 - 81,878 - -
Prepaid expenses 80 80 - - -
Loans to officers 8,451 - 8,451 - -
----------------- ----------------- ------------- ------------ -------------
Total Current Assets 153,320 80 117,505 - 35,735
----------------- ----------------- ------------- ------------ -------------
FIXED ASSETS, NET 151,201 139,325 5,664 - 6,212
----------------- ----------------- ------------- ------------ -------------
TOTAL ASSETS $ 304,521 $ 139,405 $ 123,169 $ - $ 41,947
================= ================= ============= ============ =============
</TABLE>
See Summary of Assumptions and Disclosures.
3
<PAGE>
GLOBAL TELEPHONE COMMUNICATIONS INC.
Consolidated Proforma Balance Sheet (Continued)
December 31, 1998
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Proforma
Planet City Webworks Adjustments Adjusted
Graphics Multimedia Increase Proforma
Consolidated Corporation Corporation (Decrease) Consolidated
----------------- ----------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
CURRENT LIABILITIES
Bank overdraft $ 40,593 $ 40,593 $ - $ - $ -
Accounts payable 158,148 16 2,590 - 155,542
Accrued expenses 8,296 5,664 - - 2,632
Current portion of long-term
lease obligations 57,107 57,107 - - -
----------------- ----------------- ------------- ------------ -------------
Total Current Liabilities 264,144 103,380 2,590 - 158,174
----------------- ----------------- ------------- ------------ -------------
LONG-TERM DEBT
Intercompany loans - 241,650 146,297 387,947 -
Long-term lease obligations
less current portion 10,139 10,139 - - -
Notes payable 297,174 45,853 21,656 - 229,665
----------------- ----------------- ------------- ------------ -------------
Total Long-Term Debt 307,313 297,642 167,953 - 229,665
----------------- ----------------- ------------- ------------ -------------
TOTAL LIABILITIES 571,457 401,022 170,543 387,947 387,839
----------------- ----------------- ------------- ------------ -------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 25,000,000
shares authorized of $0.001
par value, 12,245,935 shares
issued and outstanding 12,246 59 65 (6,826) 5,296
Additional paid-in capital 1,279,164 - - 6,950 1,286,114
Accumulated deficit (1,558,346) (261,676) (47,439) (388,071) (1,637,302)
----------------- ----------------- ------------- ------------ -------------
Total Stockholders' Equity (266,936) (261,617) (47,374) (387,947) (345,892)
----------------- ----------------- ------------- ------------ -------------
TOTAL LIABILITIES AND
STOCKHOLDERS
EQUITY (DEFICIT) $ 304,521 $ 139,405 $ 123,169 $ - $ 41,947
================= ================= ============= ============ =============
</TABLE>
See Summary of Assumptions and Disclosures.
4
<PAGE>
GLOBAL TELEPHONE COMMUNICATIONS INC.
Consolidated Statement of Operations
For the Year Ended December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Proforma
Planet City Webworks Adjustments Adjusted
Graphics Multimedia Increase Proforma
Consolidated Corporation Corporation (Decrease)
----------------- ----------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED
REVENUES $ 180,973 $ 97,649 $ 78,619 $ - $ 4,705
----------------- ----------------- ------------- ------------ -------------
OPERATING EXPENSES
Depreciation and
amortization 57,836 55,107 2,356 - 373
Genera and administrative 630,569 36,286 186,728 - 407,555
----------------- ----------------- ------------- ------------ -------------
Total Operating Expenses 688,405 91,393 189,084 - 407,928
----------------- ----------------- ------------- ------------ -------------
OPERATING (LOSS) INCOME (507,432) 6,256 (110,465) - (403,223)
----------------- ----------------- ------------- ------------ -------------
OTHER INCOME (EXPENSES)
Gamon marketable
securities 120,260 - 120,260 - -
Interest expense (35,453) (26,583) (719) - (8,151)
----------------- ----------------- ------------- ------------ -------------
Total Other Income
(Expenses) 84,807 (26,583) 119,541 - (8,151)
----------------- ----------------- ------------- -------------- -------------
LOSS BEFORE GAIN (LOSS)
FROM DISCONTINUED
OPERATIONS (422,625) (20,327) 9,076 - (411,374)
----------------- ----------------- ------------- ------------ -------------
GAIN (LOSS) FROM
DISCONTINUED
OPERATIONS - 24,949 16,788 (48,470) (90,207)
----------------- ----------------- ------------- ------------ -------------
LOSS BEFORE INCOME
TAXES (422,625) 4,622 25,864 (48,470) (501,581)
INCOME TAXES - - - - -
----------------- ----------------- ------------- ------------ -------------
NET (LOSS) INCOME $ (422,625) $ 4,622 $ 25,864 $ (48,470) $ (501,581)
================= ================= ============= ============ =============
</TABLE>
See Summary of Assumptions and Disclosures.
5
<PAGE>
GLOBAL TELEPHONE COMMUNICATIONS INC.
Summary of Assumptions and Disclosures
NOTE 1 - ORGANIZATION AND HISTORY
a. Organization
Global Telephone Communications Inc. (the Company) was
incorporated on March 10, 1970 for the purpose of raising capital
to develop and possibly mine certain oil and mineral deposits. The
Company was unable to raise development money and the Company=s
operations ceased and the mineral deposits were abandoned.
On March 24, 1998, the Company changed its domicile from the State
of Utah to the State of Nevada.
On February 9, 1998, the Company acquired all the issued and
outstanding shares of an operating multimedia company, Planet City
Graphics Corporation (Planet City), a private company incorporated
under the laws of British Columbia, Canada, having its office in
Vancouver, B.C. The Company issued a total of 1,500,000 common
shares in exchange for all the issued and outstanding shares of
Planet City. There was no cash consideration and the Company
accounted for the acquisition of all the shares of Planet City as
a purchase and an acquisition of a wholly-owned subsidiary. There
was no adjustment to the carrying value of the assets or
liabilities of Planet City.
On February 9, 1998, the Company acquired all the issued and
outstanding shares of an operating multimedia company, Webworks
Multimedia Corporation (Webworks), a private company incorporated
under the laws of British Columbia, Canada, having its office in
Vancouver, B.C. The Company issued a total of 500,000 common
shares in exchange for all the issued and outstanding shares of
Webworks. There was no cash consideration and the Company
accounted for the acquisition of all the shares as a purchase and
an acquisition of a wholly-owned subsidiary. There was no
adjustment to the carrying value of the assets or liabilities of
Webworks.
On April 16, 1998, the Company entered into a Share Exchange
Agreement with Regent Luck Holdings Limited (Regent), a Hong Kong
corporation, with offices in Hong Kong, whereby the Company
acquired all the issued and outstanding shares of Regent by
issuing and exchanging 5,000,000 shares of the Company to the
shareholders of Regent.
Regent has a ninety percent (90%) ownership and interest in a
Joint Venture Company, Shenzhen Global Net Computer Information
Co. Ltd., organized under the laws of The Peoples Republic of
China, with Shenzhen Newsnet Co. Ltd.
Shenzhen Newsnet Co. Ltd. has obtained the Telecommunications
Business Operation Approval (No. GDSZ P90007) which allows it to
carry out Computer Information Internet Service.
Shenzhen Newsnet Co. Ltd. and the Joint Venture Company, Shenzhen
Global Net Computer Information Co. Ltd. had entered into an
Exclusive Agency Agreement for Shenzhen Global Net Computer
Information Co. Ltd. to act as exclusive agents to conduct all
telecommunications and internet business and services in
Shenzhen, Guangdong Province, PRC.
6
<PAGE>
GLOBAL TELEPHONE COMMUNICATIONS INC.
Summary of Assumptions and Disclosures
NOTE 1 - ORGANIZATION AND HISTORY (Continued)
b. Disposition of Subsidiaries
On October 1, 1999, the Company determined to disposed of two of
its wholly-owned subsidiaries, Webworks and Planet City. To effect
the sale of the subsidiaries, the Company returned to the
respective companies' former shareholders all the issued and
outstanding shares of common stock of each company held by the
Company. In return, these shareholders returned all the shares of
common stock of the Company that had been issued to them at the
time the Company purchased the subsidiaries in 1998. No additional
compensation was paid to either the Company or the former
shareholders upon the disposition of the subsidiaries.
Subsequent to the disposition of the Planet City and Webworks, the
Company cancelled the shares returned to the Company pursuant to
the sale of the subsidiaries.
The operating results for the year ended December 31, 1998 have
been adjusted to reflect the results of operations from the Planet
City and Webworks as discontinued operations.
The Company has recorded the disposal of Planet City and Webworks
as discontinued operations and recorded the cancellation of common
stock pursuant to the sales of the subsidiaries. The common stock,
additional paid-in capital, and accumulated deficit accounts were
adjusted to properly reflect the disposition of the subsidiaries.
7
<PAGE>
GLOBAL TELEPHONE COMMUNICATIONS INC.
Summary of Assumptions and Disclosures
NOTE 1 - ORGANIZATION AND HISTORY (Continued)
b. Disposition of Subsidiaries (Continued)
The following entries were recorded to properly reflect the
disposition of Planet City and Webworks:
1. Record the additional expense relative to the write-off of
intercompany advances, common stock, and accumulated deficit
of the subsidiary companies:
<TABLE>
<S> <C>
Loss on discontinued operations $ 48,470
Accumulated deficit 339,601
Common stock (124)
Advances to Planet City (241,650)
Advances to Webworks (146,297)
-----------------
Total $ -
=================
</TABLE>
2. Record the cancellation of the common stock returned to the
Company in conjunction with the disposition of Planet City and
Webworks:
<TABLE>
<S> <C>
Common stock $ 6,950
Additional paid in capital (6,950)
-----------------
Total $ -
=================
</TABLE>
8
<PAGE>
EXHIBIT FS-4
GLOBAL TELEPHONE COMMUNICATION, INC.
CONSOLIDATED PROFORMA FINANCIAL
STATEMENTS DECEMBER 31, 1998
(PRE RESCISSION OF SUBSIDIARIES)
<PAGE>
GLOBAL TELEPHONE COMMUNICATIONS, INC.
CONSOLIDATED PROFORMA FINANCIAL STATEMENTS
DECEMBER 31, 1998
<PAGE>
C O N T E N T S
<TABLE>
<S> <C>
Consolidated Proforma Balance Sheet............................................................................. 3
Consolidated Statement of Operations............................................................................ 5
Summary of Assumptions and Disclosures.......................................................................... 6
</TABLE>
<PAGE>
GLOBAL TELEPHONE COMMUNICATIONS INC.
Consolidated Proforma Balance Sheet
December 31, 1998
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
Global Regent Proforma
Telephone Planet City Webworks Luck Adjustments
Communications Graphics Multimedia Holdings Increase Proforma
Inc. Corporation Corporation Limited (Decrease) Consolidated
---------------- ------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash $ 22,695 $ - $ 25,250 $ 13,825 $ - $ 61,770
Accounts receivable, net - - 9,718 710 - 10,428
Marketable securities - - 94,157 - - 94,157
Prepaid expenses 30,000 92 - - - 30,092
Loans to officers - - 19,104 - - 19,104
---------------- ------------- ------------- -------------- ------------- -------------
Total Current Assets 52,695 92 148,229 14,535 - 215,551
---------------- ------------- ------------- -------------- ------------- -------------
FIXED ASSETS, NET 5,357 154,057 6,514 854 - 166,782
---------------- ------------- ------------- -------------- ------------- -------------
OTHER ASSETS
Intercompany loans 439,464 - - - (439,464) -
Notes receivable - - - 90,464 - 90,464
---------------- ------------- ------------- -------------- ------------- -------------
Total Other Assets 439,464 - - 90,464 (439,464) 90,464
---------------- ------------- ------------- -------------- ------------- -------------
TOTAL ASSETS $ 497,516 $ 154,149 $ 154,743 $ 105,853 $ (439,464) $ 472,797
================ ============= ============= ============== ============= =============
</TABLE>
See Summary of Assumptions and Disclosures.
3
<PAGE>
GLOBAL TELEPHONE COMMUNICATIONS INC.
Consolidated Proforma Balance Sheet (Continued)
December 31, 1998
(Unaudited)
LIABILITIES AND STOCKHOLDERS= EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Global Regent Proforma
Telephone Planet City Webworks Luck Adjustments
Communications Graphics Multimedia Holdings Increase Proforma
Inc. Corporation Corporation Limited (Decrease) Consolidated
---------------- ------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT LIABILITIES
Bank overdraft $ - $ 46,680 $ - $ - $ - $ 46,680
Accounts payable - 19 6,697 - 25,000 31,716
Accrued expenses 2,180 - - 451 - 2,631
Payable - stockholders 30,000 277,886 168,235 129,990 (439,464) 166,647
Notes payable 229,664 147,091 53,595 - - 430,350
---------------- ------------- ------------- ------------- -------------- -------------
Total Current Liabilities 261,844 471,676 228,527 130,441 (414,464) 678,024
---------------- ------------- ------------- ------------- -------------- -------------
LONG-TERM DEBT
Notes payable - less current
portion - 11,660 - - - 11,660
---------------- ------------- ------------- ------------- -------------- -------------
Total Long-Term Debt - 11,660 - - - 11,660
---------------- ------------- ------------- ------------- -------------- -------------
TOTAL LIABILITIES 261,844 483,336 228,527 130,441 (414,464) 689,684
---------------- ------------- ------------- ------------- -------------- -------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 25,000,000
shares authorized of $0.001
par value, 12,245,935 shares
issued and outstanding 5,296 - - - 6,950 12,246
Additional paid-in capital 1,595,588 68 75 1,292 (460,944) 1,136,079
Accumulated deficit (1,365,212) (329,255) (73,859) (25,880) 428,994 (1,365,212)
---------------- ------------- ------------- ------------- -------------- -------------
Total Stockholders' Equity 235,672 (329,187) (73,784) (24,588) (25,000) (216,887)
---------------- ------------- ------------- ------------- -------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS
EQUITY (DEFICIT) $ 497,516 $ 154,149 $ 154,743 $ 105,853 $ (439,464) $ 472,797
================ ============= ============= ============= ============== =============
</TABLE>
See Summary of Assumptions and Disclosures.
4
<PAGE>
GLOBAL TELEPHONE COMMUNICATIONS INC.
Consolidated Statement of Operations
For the Year Ended December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Global Regent Proforma
Telephone Planet City Webworks Luck Adjustments
Communications Graphics Multimedia Holdings Increase Proforma
Inc. Corporation Corporation Limited (Decrease) Consolidated
---------------- ------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES $ - $ 149,723 $ 120,544 $ - $ - $ 270,267
---------------- ------------- ------------- ------------- -------------- -------------
OPERATING EXPENSES
Depreciation and amortization - 92,709 3,613 - - 96,322
General and administrative 234,196 55,638 286,305 24,846 - 600,985
---------------- ------------- ------------- ------------- -------------- -------------
Total Operating Expenses 234,196 148,347 289,918 24,846 - 697,307
---------------- ------------- ------------- ------------- -------------- -------------
OPERATING (LOSS) INCOME (234,196) 1,376 (169,374) (24,846) - (427,040)
---------------- ------------- ------------- ------------- -------------- -------------
OTHER INCOME (EXPENSES)
Gamon marketable securities - - 184,392 - - 184,392
Interest income 4,705 - - - - 4,705
Interest expense - (32,074) (1,103) - - (33,177)
---------------- ------------- ------------- ------------- -------------- -------------
Total Other Income
(Expenses) 4,705 (32,074) 183,289 - - 155,920
---------------- ------------- ------------- ------------- -------------- -------------
LOSS BEFORE INCOME
TAXES (229,491) (30,698) 13,915 (24,846) - (271,120)
INCOME TAXES - - - - - -
---------------- ------------- ------------- ------------- -------------- -------------
NET (LOSS) INCOME $ (229,491) $ (30,698) $ 13,915 $ (24,846) $ - $ (271,120)
================ ============= ============= ============= ============== =============
</TABLE>
See Summary of Assumptions and Disclosures.
5
<PAGE>
GLOBAL TELEPHONE COMMUNICATIONS INC.
Summary of Assumptions and Disclosures
NOTE 1 - ORGANIZATION AND HISTORY
a. Organization
Global Telephone Communications Inc. (the Company) was
incorporated on March 10, 1970 for the purpose of raising capital
to develop and possibly mine certain oil and mineral deposits. The
Company was unable to raise development money and the Company=s
operations ceased and the mineral deposits were abandoned.
On March 24, 1998, the Company changed its domicile from the State
of Utah to the State of Nevada.
On February 9, 1998, the Company acquired all the issued and
outstanding shares of an operating multimedia company, Planet City
Graphics Corporation (Planet City), a private company incorporated
under the laws of British Columbia, Canada, having its office in
Vancouver, B.C. The Company issued a total of 1,500,000 common
shares in exchange for all the issued and outstanding shares of
Planet City. There was no cash consideration and the Company
accounted for the acquisition of all the shares of Planet City as
a purchase and an acquisition of a wholly-owned subsidiary. There
was no adjustment to the carrying value of the assets or
liabilities of Planet City.
On February 9, 1998, the Company acquired all the issued and
outstanding shares of an operating multimedia company, Webworks
Multimedia Corporation (Webworks), a private company incorporated
under the laws of British Columbia, Canada, having its office in
Vancouver, B.C. The Company issued a total of 500,000 common
shares in exchange for all the issued and outstanding shares of
Webworks. There was no cash consideration and the Company
accounted for the acquisition of all the shares as a purchase and
an acquisition of a wholly-owned subsidiary. There was no
adjustment to the carrying value of the assets or liabilities of
Webworks.
On April 16, 1998, the Company entered into a Share Exchange
Agreement with Regent Luck Holdings Limited (Regent), a Hong Kong
corporation, with offices in Hong Kong, whereby the Company
acquired all the issued and outstanding shares of Regent by
issuing and exchanging 4,950,000 shares of the Company to the
shareholders of Regent.
Regent has a ninety percent (90%) ownership and interest in a
Joint Venture Company, Shenzhen Global Net Computer Information
Co. Ltd., organized under the laws of The Peoples Republic of
China, with Shenzhen Newsnet Co. Ltd.
Shenzhen Newsnet Co. Ltd. has obtained the Telecommunications
Business Operation Approval (No. GDSZ P90007) which allows it to
carry out Computer Information Internet Service.
Shenzhen Newsnet Co. Ltd. and the Joint Venture Company, Shenzhen
Global Net Computer Information Co. Ltd. had entered into an
Exclusive Agency Agreement for Shenzhen Global Net Computer
Information Co. Ltd. to act as exclusive agents to conduct all
telecommunications and internet business and services in
Shenzhen, Guangdong Province, PRC.
6
<PAGE>
GLOBAL TELEPHONE COMMUNICATIONS INC.
Summary of Assumptions and Disclosures
NOTE 1 - ORGANIZATION AND HISTORY (Continued)
a. Organization (Continued)
The Company accounted for the acquisition of all the shares of
Regent as a purchase and an acquisition of a wholly-owned
subsidiary. There was no adjustment to the carrying value of the
assets or liabilities of Regent.
b. Recapitalization
1. Record the purchase of Planet City Graphics Corporation
through the issuance of 1,500,000 shares of common stock:
<TABLE>
<S> <C>
Common stock $ 1,500
Additional paid-in capital (1,500)
----------------
Total $ -
================
</TABLE>
2. Record the purchase of Webworks Multimedia Corporation through
the issuance of 500,000 shares of common stock:
<TABLE>
<S> <C>
Common stock $ 500
Additional paid-in capital (500)
----------------
Total $ -
================
</TABLE>
3. Record the purchase of Regent Luck Holdings Limited through
the issuance of 4,950,000 shares of common stock:
<TABLE>
<S> <C>
Common stock $ 4,950
Additional paid-in capital (4,950)
----------------
Total $ -
================
</TABLE>
4. Record the estimated costs of the mergers:
<TABLE>
<S> <C>
Accounts payable $ 25,000
Additional paid-in capital (25,000)
----------------
Total $ -
================
</TABLE>
5. Eliminate the accumulated deficits of the acquired companies:
<TABLE>
<S> <C>
Additional paid-in capital $ (428,994)
Deficit accumulated during the development stage 428,994
----------------
Total $ -
================
</TABLE>
7
<PAGE>
EXHIBIT FS-5
PLANET CITY GRAPHICS CORPORATION
FINANCIAL STATEMENTS DECEMBER 31, 1998
<PAGE>
PLANET CITY GRAPHICS CORPORATION
FINANCIAL STATEMENTS
DECEMBER 31, 1998
<PAGE>
C O N T E N T S
<TABLE>
<S> <C>
Independent Auditors' Report............................................................................ 3
Balance Sheet........................................................................................... 4
Statement of Operations................................................................................. 6
Statement of Stockholders' Equity (Deficit)............................................................. 7
Statement of Cash Flows................................................................................. 8
Notes to the Financial Statements....................................................................... 9
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Planet City Graphics Corporation
Vancouver, British Columbia
We have audited the accompanying balance sheets of Planet City Graphics
Corporation as of December 31, 1998 and the related statements of operations,
stockholders' equity, and cash flows for the year ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Planet City Graphics
Corporation as of December 31, 1998 and the results of its operations and its
cash flows for the year ended December 31, 1998 in conformity with generally
accepted accounting principles.
Jones, Jensen & Company
Salt Lake City, Utah
July 8, 1999
<PAGE>
PLANET CITY GRAPHICS CORPORATION
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
December 31,
1998
-----------------
<S> <C>
CURRENT ASSETS
Security deposit $ 80
-----------------
Total Current Assets 80
-----------------
PROPERTY AND EQUIPMENT (Note 2)
Computer equipment 251,868
Computer software 21,897
Furniture and fixtures 27,827
Less: accumulated depreciation (162,267)
-----------------
Total Property and Equipment 139,325
-----------------
TOTAL ASSETS $ 139,405
=================
</TABLE>
The accompanying notes are an integral part of these
financial statements.
4
<PAGE>
PLANET CITY GRAPHICS CORPORATION
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
December 31,
1998
-----------------
<S> <C>
CURRENT LIABILITIES
Accounts payable $ 16
Accrued interest (Note 6) 5,664
Cash overdraft 40,593
Current portion of long-term lease (Note 3) 57,107
Notes payable - Global Telephone (Note 4) 158,282
Notes payable - related parties (Note 4) 83,368
-----------------
Total Current Liabilities 345,030
=================
LONG-TERM DEBT
Lease obligations - long term (Note 3) 10,139
Notes payable (Note 6) 70,803
-----------------
Total Long-term Debt 80,942
-----------------
TOTAL LIABILITIES 425,972
-----------------
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock 1,000,000 shares authorized, no par value
901 shares issued and outstanding 59
Accumulated deficit (286,626)
-----------------
Total Stockholders' Equity (Deficit) (286,567)
-----------------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) $ 139,405
=================
</TABLE>
The accompanying notes are an integral part of these
financial statements.
5
<PAGE>
PLANET CITY GRAPHICS CORPORATION
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year
Ended
December 31,
1998
-----------------
<S> <C>
REVENUES $ 97,649
-----------------
EXPENSES
General and administrative 20,832
Depreciation 55,107
-----------------
Total Expenses 75,939
-----------------
OPERATING INCOME 21,710
-----------------
OTHER (EXPENSE)
Interest expense (26,583)
Loss on disposal of assets (15,454)
-----------------
Total Other (Expense) (42,037)
-----------------
NET LOSS $ (20,327)
=================
BASIC LOSS PER SHARE $ (22.56)
=================
</TABLE>
The accompanying notes are an integral part of these
financial statements.
6
<PAGE>
PLANET CITY GRAPHICS CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock
-------------------------------- Accumulated
Shares Amount Deficit
--------------- --------------- ---------------
<S> <C> <C> <C>
Balance, December 31, 1997 901 $ 59 $ (266,299)
Net loss for year ended December 31, 1998 - - (20,327)
--------------- --------------- ---------------
Balance, December 31, 1998 901 $ 59 $ (286,626)
=============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
7
<PAGE>
PLANET CITY GRAPHICS CORPORATION
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Year
Ended
December 31,
1998
-----------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (20,327)
Adjustments to reconcile net (loss) to net cash flows
from operating activities:
Depreciation expense 55,107
Loss on disposal of assets 15,454
Changes in operating assets and liabilities:
(Increase) decrease in prepaid expenses (79)
Increase (decrease) in accounts payable (5,454)
Increase (decrease) in bank overdraft (9,890)
Increase (decrease) in accrued interest 5,664
-----------------
Net Cash Provided by Operating Activities 40,475
-----------------
CASH FLOWS FROM INVESTING ACTIVITIES -
-----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable - Global Telephone 158,282
Proceeds from notes payable - affiliates 83,368
Proceeds from notes payable 2,544
Payments on notes payable - shareholder (137,602)
Payments on notes payable - affiliates (95,410)
Payments on lease obligations (51,657)
-----------------
Net Cash (Used) by Financing Activities (40,475)
-----------------
NET INCREASE (DECREASE) IN CASH -
CASH AT BEGINNING OF PERIOD -
-----------------
CASH AT END OF PERIOD $ -
=================
CASH PAID DURING THE PERIOD FOR:
Interest $ 20,919
Income taxes $ -
</TABLE>
The accompanying notes are an integral part of these
financial statements.
8
<PAGE>
PLANET CITY GRAPHICS CORPORATION
Notes to the Financial Statements
December 31, 1998
NOTE 1 - HISTORY AND ORGANIZATION
Planet City Graphics Corporation (the Company) was incorporated
under the laws of British Columbia, Canada and has offices in
Vancouver, British Columbia.
On February 9, 1998, the Company was acquired by Global Telephone
Communication, Inc. (Global), a Utah corporation, whereby Global
acquired all of the Company's issued and outstanding shares for
1,500,000 shares of Global's common stock. There was no cash
consideration and Global accounted for the acquisition of all the
shares of the Company as a purchase and an acquisition of a wholly
owned subsidiary. There was no adjustment to the carrying value of
the assets or liabilities of the Company.
The company operates primarily in the printing and publishing
industry.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31 year
end.
b. Provision for Taxes
At December 31, 1998, the Company had net operating loss
carryforwards of approximately $286,000 that may be offset against
future taxable income through 2013. No tax benefit has been
reported in the financial statements because the Company believes
that there is a 50% chance the net operating loss carryforwards
will expire unused, therefore the potential tax benefits of the
loss carryforwards are offset by a valuation allowance of the same
amount.
c. Cash Equivalents
The Company considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents.
d. Basic Loss Per Share
The computation of basic loss per share of common stock is based on
the weighted average number of shares outstanding at the date of
the financial statements. Fully diluted net loss per common share
is not materially different from basic loss per share.
9
<PAGE>
PLANET CITY GRAPHICS CORPORATION
Notes to the Financial Statements
December 31, 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
f. Property and Equipment
Property and equipment are stated at cost. Expenditures for
ordinary maintenance and repairs are charged to operations as
incurred. Major additions and improvements are capitalized.
Depreciation is computed using the straight-line method over
estimated useful lives as follows
<TABLE>
<S> <C>
Furniture and fixtures 7 years
Computer equipment 5 years
Computer software 3 years
</TABLE>
Depreciation expense for the year ended December 31, 1998 was
$55,107.
g. Advertising
The Company follows the policy of charging the costs of advertising
to expense as incurred.
NOTE 3 - LEASES
All non-cancelable leases with an initial term greater than one
year have been categorized as capital leases in conformity with the
definitions in Financial Accounting Standards Board Statement No.
13, AAccounting for Leases@.
<TABLE>
<CAPTION>
Period Ended Capital
December 31, Leases
------------ -------------------
<S> <C>
1999 $ 57,107
2000 10,139
2001 -
2002 -
Later years -
-------------------
Total minimum lease payments $ 67,246
===================
</TABLE>
10
<PAGE>
PLANET CITY GRAPHICS CORPORATION
Notes to the Financial Statements
December 31, 1998
NOTE 4 - RELATED PARTY TRANSACTIONS
During the year ended December 31, 1998, Global made advances to
the Company totaling $158,282. The notes do not bear interest, are
unsecured and are due on demand.
During the year ended December 31, 1998, certain related companies
made advances to the Company totaling $83,368. The notes do not
bear interest, are unsecured and are due on demand.
At December 31, 1997, the Company had notes payable a shareholder
of the Company totaling $137,602. During the year ended December
31, 1998, these notes were repaid by the Company.
At December 31, 1997, the Company had notes payable to certain
related companies totaling $95,410. During the year ended December
31, 1998, these notes were repaid by the Company.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases its offices under a lease agreement accounted
for as an operating lease. Real estate taxes, insurance and
maintenance expenses are obligations of the Company.
NOTE 6 - NOTES PAYABLE
The Company has notes payable to various individuals and companies.
These notes bear interest at 8% per annum, are unsecured and are
due upon demand. At December 31, 1998, the total amount payable on
these notes was $70,803 with accrued interest of $5,664.
11
<PAGE>
EXHIBIT FS-6
WEBWORKS MULTIMEDIA CORPORATION
FINANCIAL STATEMENTS DECEMBER 31, 1998
<PAGE>
WEBWORKS MULTIMEDIA CORPORATION
FINANCIAL STATEMENTS
DECEMBER 31, 1998
<PAGE>
C O N T E N T S
<TABLE>
<S> <C>
Independent Auditors Report............................................................................. 3
Balance Sheet........................................................................................... 4
Statement of Operations................................................................................. 5
Statement of Stockholders= Equity (Deficit)............................................................. 6
Statement of Cash Flows................................................................................. 7
Notes to the Financial Statements....................................................................... 8
</TABLE>
<PAGE>
INDEPENDENT AUDITORS= REPORT
The Board of Directors
Webworks Multimedia Corporation
Vancouver, British Columbia, Canada
We have audited the accompanying balance sheet of Webworks Multimedia
Corporation as of December 31, 1998 and the related statements of operations,
stockholders' equity (deficit), and cash flows for the year ended December 31,
1998. These financial statements are the responsibility of the Company=s
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Webworks Multimedia Corporation
as of December 31, 1998 and the results of its operations and its cash flows for
the year ended December 31, 1998 in conformity with generally accepted
accounting principles.
Jones, Jensen & Company
Salt Lake City, Utah
July 8, 1999
<PAGE>
WEBWORKS MULTIMEDIA CORPORATION
Balance Sheet
ASSETS
<TABLE>
<CAPTION>
December 31,
1998
-----------------
<S> <C>
CURRENT ASSETS
Cash $ 21,958
Accounts receivable 16,613
Marketable securities 81,878
Loans to officers 5,218
-----------------
Total Current Assets 125,667
PROPERTY AND EQUIPMENT (Note 2)
Furniture and equipment 686
Computer hardware 12,455
Computer software 1,679
Less: accumulated depreciation (9,156)
-----------------
Total Property and Equipment 5,664
TOTAL ASSETS $ 131,331
=================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 5,823
Notes payable - Global Telephone (Note 3) 143,064
Notes payable 46,606
-----------------
Total Current Liabilities 195,493
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock 10,000 shares authorized, no par value
100 shares issued and outstanding 65
Accumulated deficit (64,227)
Total Stockholders' Equity (Deficit) (64,162)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 131,331
=================
</TABLE>
The accompanying notes are an integral part of these
financial statements.
4
<PAGE>
WEBWORKS MULTIMEDIA CORPORATION
Statement of Operations
<TABLE>
<CAPTION>
For the
Year Ended
December 31,
1998
-----------------
<S> <C>
REVENUES $ 78,619
-----------------
EXPENSES
General and administrative 186,728
Depreciation expense 2,356
Total Expenses 189,084
LOSS FROM OPERATIONS (110,465)
OTHER INCOME (EXPENSE)
Gain on marketable securities 120,260
Interest expense (719)
Total Other Income (Expense) 119,541
NET INCOME $ 9,076
=================
BASIC EARNINGS PER SHARE $ 90.76
=================
</TABLE>
The accompanying notes are an integral part of these
financial statements.
5
<PAGE>
WEBWORKS MULTIMEDIA CORPORATION
Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock Additional
-------------------------------- Paid-In Accumulated
Shares Amount Capital Deficit
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Balance, December 31, 1997 100 $ 65 $ - $ (73,303)
Net income for the year ended
December 31, 1998 - - - 9,076
--------------- --------------- --------------- ----------------
Balance, December 31, 1998 100 $ 65 $ - $ (64,227)
=============== =============== =============== ================
</TABLE>
The accompanying notes are an integral part of these
financial statements.
6
<PAGE>
WEBWORKS MULTIMEDIA CORPORATION
Statement of Cash Flows
<TABLE>
<CAPTION>
For the
Year Ended
December 31,
1998
-----------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 9,076
Adjustments to reconcile net (loss) to net cash flows
from operating activities:
Depreciation expense 2,356 Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (16,613)
(Increase) decrease in other assets (87,095)
Increase (decrease) in accounts payable 5,366
-----------------
Net Cash (Used) by Operating Activities (86,910)
-----------------
CASH FLOWS FROM INVESTING ACTIVITIES -
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable - Global Telephone 146,297
Payments on notes payable - shareholders and related parties (38,870)
Net Cash Provided by Financing Activities 107,427
-----------------
NET INCREASE (DECREASE) IN CASH 20,517
CASH AT BEGINNING OF PERIOD 1,441
CASH AT END OF PERIOD $ 21,958
=================
CASH PAID DURING THE PERIOD FOR:
Interest $ 719
Income taxes $ -
</TABLE>
The accompanying notes are an integral part of these
financial statements.
7
<PAGE>
WEBWORKS MULTIMEDIA CORPORATION
Notes to the Financial Statements
December 31, 1998
NOTE 1 - HISTORY AND ORGANIZATION
Webworks Multimedia Corporation is a private company incorporated
under the laws of British Columbia, Canada. On February 9, 1998,
Global Telephone Communication, Inc. (Global) acquired all of the
issued and outstanding shares of the Company. Global issued
500,000 shares of its common stock to the Company's shareholders
in exchange for all issued and outstanding shares of the Company.
There was no cash consideration and the acquisition of all the
share by Global was accounted for as a purchase and an acquisition
of a wholly-owned subsidiary. There was no adjustment to the
carrying value of the assets or liabilities of the Company.
The Company operates in the computer multimedia and internet
industry.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31 year
end.
b. Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
c. Basic Earnings Per Share
The computation of basic earnings per share of common stock is
based on the weighted average number of shares outstanding at the
date of the financial statements. Fully diluted net earnings per
common share is not materially different from basic earnings per
share.
d. Provisions for Taxes
At December 31, 1998, the Company had net operating loss
carryforwards of approximately $64,000 that may be offset against
future taxable income through 2013. No tax benefit has been
reported in the financial statements because the Company believes
that there is a 50% chance the net operating loss carryforwards
will expire unused, therefore, the potential tax benefits of the
loss carryforwards are offset by a valuation allowance of the same
amount.
e. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
8
<PAGE>
WEBWORKS MULTIMEDIA CORPORATION
Notes to the Financial Statements
December 31, 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
f. Property and Equipment
Property and equipment are stated at cost. Expenditures for small
tools, ordinary maintenance and repairs are charged to operations
as incurred. Major additions and improvements are capitalized.
Depreciation is computed using the straight-line method over
estimated useful lives as follows:
<TABLE>
<S> <C>
Furniture and equipment 5 years
Computer equipment 3 years
Computer software 3 years
</TABLE>
Depreciation expense for the year ended December 31, 1998 was
$2,356.
g. Marketable Securities
Marketable securities represent shares of stock which are
classified as trading securities and are carried at market value.
Any change in market value from period to period will be included
in earnings.
There are no unrealized gains or losses in either trading
securities at December 31, 1998.
h. Advertising
The Company follows the policy of charging the costs of
advertising to expense as incurred.
NOTE 3 - RELATED PARTY TRANSACTIONS
As of December 31, 1997, the Company was owed $3,233 by Global.
During the year ended December 31, 1998, Global made advances
totaling $146,297 to the Company. As of December 31, 1998, the net
amount due to Global from the Company was $143,064. The amounts
advanced do not bear interest, are unsecured and are due upon
demand.
9
<PAGE>
EXHIBIT FS-7
REGENT LUCK HOLDINGS LIMITED
FINANCIAL STATEMENTS DECEMBER 31, 1998
<PAGE>
REGENT LUCK HOLDINGS LIMITED
FINANCIAL STATEMENTS
DECEMBER 31, 1998
<PAGE>
C O N T E N T S
<TABLE>
<S> <C>
Independent Auditors= Report............................................................................ 3
Balance Sheet........................................................................................... 4
Statement of Operations................................................................................. 5
Statement of Stockholders= Equity (Deficit)............................................................. 6
Statement of Cash Flows................................................................................. 7
Notes to the Financial Statements....................................................................... 8
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Regent Luck Holdings Limited
Vancouver, B.C. Canada
We have audited the accompanying balance sheets of Regent Luck Holdings Limited
as of December 31, 1998 and the related statements of operations, stockholders'
equity, and cash flows for the year ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Regent Luck Holdings Limited as
of December 31, 1998 and the results of its operations and its cash flows for
the year ended December 31, 1998 in conformity with generally accepted
accounting principles.
Jones, Jensen & Company
Salt Lake City, Utah
July 8, 1999
<PAGE>
REGENT LUCK HOLDINGS LIMITED
Balance Sheet
ASSETS
<TABLE>
<CAPTION>
December 31,
1998
<S> <C>
CURRENT ASSETS
Cash $ 13,825
Accounts receivable 710
-----------------
Total Current Assets 14,535
PROPERTY AND EQUIPMENT (Note 2)
Equipment 854
Less: accumulated depreciation (8)
Total Property and Equipment 846
OTHER ASSETS
Investment in Shenzhen Global Net Computer Information Co. Ltd. -
-----------------
Total Other Assets -
TOTAL ASSETS $ 15,381
=================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 452
Notes payable - Global Telephone (Note 3) 129,990
-----------------
Total Current Liabilities 130,442
COMMITMENTS AND CONTINGENCIES (Note 4)
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock 10,000 shares authorized, no par value,
10,000 shares issued and outstanding 1,292
Accumulated deficit (116,353)
Total Stockholders' Equity (Deficit) (115,061)
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) $ 15,381
=================
</TABLE>
The accompanying notes are an integral part of these
financial statements.
4
<PAGE>
REGENT LUCK HOLDINGS LIMITED
Statement of Operations
<TABLE>
<CAPTION>
For the
Year Ended
December 31,
1998
-----------------
<S> <C>
REVENUES $ -
-----------------
EXPENSES
General and administrative 116,345
Depreciation 8
Total Expenses 116,353
NET LOSS $ (116,353)
=================
BASIC LOSS PER SHARE $ (11.64)
=================
</TABLE>
The accompanying notes are an integral part of these
financial statements.
5
<PAGE>
REGENT LUCK HOLDINGS LIMITED
Statement of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Common Stock Additional
-------------------------------- Paid-In Accumulated
Shares Amount Capital Deficit
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Balance, December 31, 1997 10,000 $ 1,292 $ - $ -
Net loss for the year ended
December 31, 1998 - - - (116,353)
--------------- --------------- --------------- ----------------
Balance, December 31, 1998 10,000 $ 1,292 $ - $ (116,353)
=============== =============== =============== ================
</TABLE>
The accompanying notes are an integral part of these
financial statements.
6
<PAGE>
REGENT LUCK HOLDINGS LIMITED
Statement of Cash Flows
<TABLE>
<CAPTION>
For the
Year Ended
December 31,
1998
-----------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (116,353)
Adjustments to reconcile net (loss) to net cash flows
from operating activities:
Depreciation expense 8 Changes in operating assets and liabilities:
Increase (decrease) in accounts receivable (710)
(Increase) decrease in accounts payable 452
Net Cash (Used) by Operating Activities (116,603)
-----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (854)
Net Cash (Used) by Investing Activities (854)
-----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable - Global Telephone 129,990
-----------------
Net Cash Provided by Financing Activities 129,990
-----------------
NET INCREASE (DECREASE) IN CASH 12,533
CASH AT BEGINNING OF PERIOD 1,292
CASH AT END OF PERIOD $ 13,825
=================
CASH PAID DURING THE PERIOD FOR:
Interest $ -
Income taxes $ -
</TABLE>
The accompanying notes are an integral part of these
financial statements.
7
<PAGE>
REGENT LUCK HOLDINGS LIMITED
Notes to the Financial Statements
December 31, 1998
NOTE 1 - HISTORY AND ORGANIZATION
Regent Luck Holdings Limited (the Company) was incorporated in Hong
Kong on December 18, 1996.
On April 16, 1998, the Company entered into a Share Exchange
Agreement with Global Telecommunications, Inc. (Global), a Utah
corporation, with offices in Vancouver, British Columbia, whereby
Global acquired all the issued and outstanding shares of the
Company by issuing and exchanging 4,950,000 shares of Global to the
shareholders of the Company.
The Company has a ninety percent (90%) ownership and interest in a
joint venture company, Shenzhen Global Net Computer Information Co.
Ltd., organized under the laws of The Peoples Republic of China,
with Shenzhen Newsnet Co. Ltd.
Shenzhen Newsnet Co. Ltd. has obtained the Telecommunications
Business Operation Approval (No. GDSZ P90007) which allows it to
carry out computer information internet service.
Shenzhen Newsnet Co. Ltd. and the joint venture company, Shenzhen
Global Net Computer Information Co. Ltd. had entered into an
exclusive agency agreement for Shenzhen Global Net Computer
Information Co. Ltd. to act as exclusive agents to conduct all
telecommunications and internet business and services in
Shenzhen, Guangdong Province, PRC.
As part of the Share Exchange Agreement, Global agreed to provide
funds as capital for the joint venture in the amount of $1,300,000.
As of the year end, Global has provided $90,465 to the joint
venture through the Company.
Global accounted for the acquisition of all the shares of the
Company as a purchase and the Company's accounts are consolidated
in the accompanying financial statements.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31 year
end.
b. Cash Equivalents
The Company considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents.
8
<PAGE>
REGENT LUCK HOLDINGS LIMITED
Notes to the Financial Statements
December 31, 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
c. Basic Loss Per Share
The computation of basic loss per share of common stock is based on
the weighted average number of shares outstanding at the date of
the financial statements. Fully diluted net loss per common share
is not materially different from basic loss per share.
d. Provision for Taxes
At December 31, 1998, the Company had net operating loss
carryforwards of approximately $25,000 that may be offset against
future taxable income through 2013. No tax benefit has been
reported in the financial statements because the Company believes
that there is a 50% chance the net operating loss carryforwards
will expire unused, therefore the potential tax benefits of the
loss carryforwards are offset by a valuation allowance of the same
amount.
e. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
f. Property and Equipment
Property and equipment are stated at cost. Expenditures for small
tools, ordinary maintenance and repairs are charged to operations
as incurred. Major additions and improvements are capitalized.
Depreciation is computed using the straight-line method over
estimated useful lives as follows
<TABLE>
<S> <C>
Equipment 5 years
</TABLE>
Depreciation expense for the year ended December 31, 1998 was $8.
g. Advertising
The Company follows the policy of charging the costs of advertising
to expense as incurred.
9
<PAGE>
REGENT LUCK HOLDINGS LIMITED
Notes to the Financial Statements
December 31, 1998
NOTE 3 - RELATED PARTY TRANSACTIONS
During 1998, the Company=s parent company, Global, made advances to
the Company totaling $129,990. The notes do not bear interest, are
unsecured and are due on demand.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
As a part of the Share Exchange Agreement (Note 1), Global agreed
to provide funds as capital for the joint venture company Shenzhen
Global Net Computer Information Co. Ltd. in the amount of
$1,300,000. As of the year end, Global has provided $90,465 to the
joint venture through the Company.
10
<PAGE>
EXHIBIT FS-8
PACIFIC ASSET INTERNATIONAL LIMITED
REPORTS AND FINANCIAL STATEMENTS
FOR THE PERIOD FROM 11TH JANUARY, 1999
(DATE OF INCORPORATION) TO 30TH SEPTEMBER, 1999
<PAGE>
PACIFIC ASSET INTERNATIONAL LIMITED
[LOGO]
REPORTS AND FINANCIAL STATEMENTS
FOR TIE PERIOD FROM 11TH JANUARY, 1999
(DATE OF INCORPORATION) TO 30TH SEPTEMBER, 1999
YIP LEUNG & SO
Certified Public Accountants
<PAGE>
PACIFIC ASSET INTERNATIONAL LIMITED
<TABLE>
<CAPTION>
CONTENTS PAGE(S)
<S> <C>
REPORT OF THE DIRECTORS 1
REPORT OF THE AUDITORS 2 - 3
PROFIT AND LOSS ACCOUNT 4
BALANCESHEET 5
NOTES TO THE FINANCIAL STATEMENTS 6 - 7
DETAILED PROFIT AND LOSS ACCOUNT
(FOR MANAGEMENT INFORMATION ONLY)
(EXPRESSED IN HONG KONG DOLLARS)
</TABLE>
<PAGE>
P.1
PACIFIC ASSET INTERNATIONAL LIMITED
REPORT OF THE DIRECTORS
The directors have pleasure in submitting their first annual report together
with the audited financial statements for the period from 11th January, 1999
(date of incorporation) to 30th September, 1999 .
PRINCIPAL ACTIVITY
The company is engaged in the business of setting up major internet business and
other businesses related to information technology and information management.
However, no business was concluded during the period.
FINANCIAL RESULTS
The results of the company for the period ended 30th September, 1999 and the
state of the company's affairs at that date are set out in the financial
statements on pages 4 to 7.
DIRECTORS
The directors during the period were :
Apex Management Limited (Appointed on 28th January, 1999)
Apex Directorate Limited (Appointed on 28th January, 1999)
Apex Secretarial Corporation (Appointed on 28th January, 1999)
All of the present directors shall remain in office for the ensuing year.
DIRECTORS' INTERESTS
No contracts of significance to which the company or its holding company was a
party and in which a director had a material interest subsisted at the end of
the period or at any time during the period.
At no time during the period was the company or its holding company a party to
any arrangements to enable the directors of the company to acquire benefits by
means of acquisition of shares in or debentures of the company or any other body
corporate.
AUDITORS
A resolution for the reappointment of Messrs. Yip Leung & So as auditors of the
company is to be proposed at the forthcoming annual general meeting.
BY ORDER OF THE BOARD
For and on behalf of
APEX DIRECTORATE LIMITED
/s/ [Illegible]
- --------------------------------------
AUTHORIZED SIGNATURE(S)
- --------------------------------------
CHAIRMAN Hong Kong: 9th November, 1999
<PAGE>
P.2
[LETTERHEAD]
REPORT OF THE AUDITORS
TO THE SHAREHOLDERS OF PACIFIC ASSET INTERNATIONAL LIMITED
(incorporated in Hong Kong with limited liability)
We have audited the financial statements on pages 4 to 7 which have been
prepared in accordance with accounting principles generally accepted in Hong
Kong.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The Companies Ordinance requires the directors to prepare financial statements
which give a true and fair view. In preparing financial statements which give a
true and fair view it is fundamental that appropriate accounting policies are
selected and applied consistently.
It is our responsibility to form an independent opinion, based on our audit, on
those statements and to report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Statements of Auditing Standards
issued by the Hong Kong Society of Accountants. An audit includes examination,
on a test basis, of evidence relevant to the amounts and disclosures in the
financial statements. It also includes an assessment of the significant
estimates and judgements made by the directors in the preparation of the
financial statements, and of whether the accounting policies are appropriate to
the company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance as to whether the financial
statements are free from material misstatement. In forming our opinion we also
evaluated the overall adequacy of the presentation of information in the
financial statements. We believe that our audit provides a reasonable basis for
our opinion.
FUNDAMENTAL UNCERTAINTY
In forming our opinion, we have considered the adequacy of the disclosures made
in the financial statements concerning the company's loss incurred after
taxation of HK$27,850. The financial statements have been prepared on a going
concern basis, the validity of which depends upon future funding being
available. The financial statements do not include any adjustment that would
result from a failure to obtain funding. Details of the circumstances relating
to this fundamental uncertainty are described in note 2. We consider that
appropriate estimates and disclosures have been made and our opinion is not
qualified in this respect.
<PAGE>
P.3
[LETTERHEAD]
REPORT OF THE AUDITORS
TO THE SHAREHOLDERS OF PACIFIC ASSET INTERNATIONAL MUTED
(incorporated in Hong Kong with LIMITED LIABILITY)
OPINION
In our opinion the financial statements give a true and fair view, in all
material respects, of the state of the company's affairs as at 30th September,
1999 and of its loss for the period then ended and have been properly prepared
in accordance with the Companies Ordinance.
/s/ Yip Leung & So
- ----------------------------
Yip Leung & So
Certified Public Accountants
Hong Kong: 9th November, 1999
<PAGE>
P.4
PACIFIC ASSET INTERNATIONAL LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE PERIOD FROM 11TH JANUARY, 1999
(DATE OF INCORPORATION) TO 30TH SEPTEMBER, 1999
<TABLE>
<CAPTION>
NOTE HK$
---- ---
<S> <C> <C>
TURNOVER -
========
LOSS BEFORE TAXATION 3 (20,850)
TAXATION 5 -
--------
LOSS AFTER TAXATION (20,850)
EXCEPTIONAL ITEM
Preliminary expenses written off (7,000)
--------
LOSS FOR THE PERIOD AND CARRIED FORWARD (27,850)
========
</TABLE>
The notes on pages 6 and 7 form part of these financial statements.
<PAGE>
P.5
PACIFIC ASSET INTERNATIONAL LIMITED
BALANCE SHEET AT 30TH SEPTEMBER, 1999
<TABLE>
<CAPTION>
NOTE HK$
---- ---
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable (19,350)
Accrual (8,500)
---------
(27,850)
=========
Representing :
SHARE CAPITAL 6 9,999
ACCUMULATED LOSSES. (27,850)
---------
(17,851)
AMOUNT DUE FROM SHAREHOLDERS (9,999)
---------
(27,850)
=========
</TABLE>
Approved by the board of directors on 9th November, 1999
For and on behalf of For and on behalf of
APEX DIRECTORATE LIMITED APEX SECRETARIAL CORPORATION
- ---------------------------- ------------------------------
Authorized Signature Authorized Signature
Director Director
The notes on pages 6 and 7 form part of these financial statements.
<PAGE>
P.6
PACIFIC ASSET INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
1. STATUS OF THE COMPANY
The company was incorporated in Hong Kong under the Companies Ordinance on 11th
January, 1999.
2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The company has received a letter of financial support from its immediate
holding company, Global Telephone Communications Inc. which has agreed to
provide further financial support to the company to maintain the company as a
going concern.
In view of this undertaking, the Board considers that it would still be
appropriate to prepare the financial statements for the period ended 30th
September, 1999 on a going concern basis,
3. LOSS BEFORE TAXATION
<TABLE>
<CAPTION>
HK$
-----
<S> <C>
Loss before taxation is arrived at after charging :
Auditors' remuneration 8,500
=====
</TABLE>
4. DIRECTORS' REMUNERATION
Remuneration of the directors disclosed pursuant to Section 161 of the
Companies Ordinance is as follows:
<TABLE>
<CAPTION>
HK$
-----
<S> <C>
Fees Nil
Other emoluments NIL
=====
</TABLE>
5. TAXATION
No provision for Hong Kong profits tax has been made as the company did not earn
income subject to Hong Kong profits tax.
<PAGE>
(For Management
PACIFIC ASSET INTERNATIONAL LIMITED Information Only)
- --------------------------------------------------------------------------------
P.7
PACIFIC ASSET INTERNATIONAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
6. SHARE CAPITAL
<TABLE>
<CAPTION>
<S> <C>
Authorised :
10,000 ordinary shares of HK$1 each 10,000
Issued and fully paid :
9,999 ordinary shares of HK$ I each 9,999
</TABLE>
The company was incorporated with an authorised share capital of HK$10,000
divided into 10,000 shares of HK$1 each. 9,999 shares were issued at par during
the period to provide for the initial capital of the company.
7. ULTIMATED HOLDING COMPANY
The directors consider that the ultimate holding company to be Global Telephone
Communication Inc. incorporated in Nevada, U.S.A.
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
6.11 Revenue Participation and Option
to Purchase Agreement
6.12 Mutual Rescission Agreement Between
Global Telephone Communication, Inc.
and Planet City Graphics Corp.
6.13 Mutual Rescission Agreement Between
Global Telephone Communication, Inc.
and Webworks Multimedia Corporation
6.14 Yamaha Promotional Calling Card Programme
6.15 First Continental Capital, L.P. Revenue
Participation Agreement
</TABLE>
<PAGE>
EXHIBIT 6.11
REVENUE PARTICIPATION AND OPTION
TO PURCHASE AGREEMENT
<PAGE>
3329K
REVENUE PARTICIPATION AND
OPTION TO PURCHASE AGREEMENT
THIS REVENUE PARTICIPATION AND OPTION TO PURCHASE AGREEMENT (the
"Agreement") is entered into and effective as of September 23, 1999, by and
between INTERNATIONAL COMMUNICATIONS ENTERPRISES LTD., a United Kingdom
corporation ("ICE") and GLOBAL TELEPHONE COMMUNICATION, INC. a Nevada
corporation ("GTC")
1. RECITALS
This Agreement is entered into with reference to and in contemplation of
the following facts, circumstances and representations:
1. ICE has entered into various agreements with First Telecom of
Hong Kong ("FT") to jointly participate in the development,
organization and termination of international phone, fax and data
traffic (collectively the "ICE/FT Venture").
2. GTC desires to make an investment in ICE for the purposes of
providing the financial resources necessary to assist ICE in carrying
out responsibilities resulting from the ICE/FT Venture and in
accordance with the terms and set forth herein.
2. TERMS AND CONDITIONS OF
REVENUE PARTICIPATION
2.1 AMOUNT OF INVESTMENT: GTC agrees to make investments in the total
amount of L150,000.
2.2 PERCENTAGE OF GROSS REVENUE PARTICIPATION: GTC shall receive
twenty five percent (25%) of the gross revenue due to ICE from all activities
generated by the ICE/FT Venture on a monthly basis. GTC shall receive this
percentage for a period of time beginning with the first month of revenue
generation and ending when ICE's revenue participation from the ICE/FT
Venture has exceeded L500,000 for 12 individual months, GTC's gross revenue
participation will decrease to twelve and one-half percent (12 1/2%) of the
gross revenue due to ICE from all activities generated by the ICE/FT Venture,
on a monthly basis, for the duration of the ICE/FT Venture.
PAGE 1 OF 3
<PAGE>
2.2 DISTRIBUTION OF GROSS REVENUE: The gross revenue shall be a
tri-party agreement between ICE, FT and GTC regarding the distribution of gross
revenue generated by the ICE/FT Venture that is to be approved by GTC.
2.3 GRANT OF STOCK OPTIONS: As additional consideration for the
investment by GTC pursuant to this Agreement, ICE hereby grants to GTC an
option to purchase ten percent (10%) of the common stock or common stock
equivalents of ICE on a fully diluted basis for the cash sum of L600,000. The
term of the option shall expire three (3) years from the date of execution of
its Agreement.
2.4 DUE DILIGENCE REQUIREMENTS: This Agreement is specifically
conditioned upon the satisfactory completion of due diligence by GTC, the
approval of the Board of Directors of GTC and the approval of the ICE
shareholders.
3. COOPERATION, ARBITRATION, INTERPRETATION
MODIFICATION AND ATTORNEY FEES
3.1 COOPERATION OF PARTIES: The parties further agree that they will do
all things necessary to accomplish and facilitate the purpose of this Agreement
and that they will sign and execute any and all documents necessary to bring
about and perfect the purposes of this Agreement.
3.2 ARBITRATION: The parties hereby submit all controversies, claims
and matters of difference arising out of this Agreement to arbitration in San
Diego, California according to the rules and practices of the American
Arbitration Association from time to time in force. This submission and
agreement to arbitrate shall be specifically enforceable. The Agreement shall
further be governed by the laws of the State of Nevada.
3.3 INTERPRETATION OF AGREEMENT: The parties agree that should any
provision of this Agreement be found to be ambiguous in any way, such ambiguity
shall not be resolved by construing such provisions or any part of or the
entire Agreement in favor of or against any party herein, but rather by
construing the terms of this Agreement fairly and reasonable in accordance with
their generally accepted meaning.
PAGE 2 OF 3
<PAGE>
3.4 MODIFICATION OF AGREEMENT: This Agreement may be amended or
modified in any way at any time by an instrument in writing stating the manner
in which it is amended or modified and signed by each of the parties hereto.
Any such writing amending or modifying this Agreement shall be attached to and
kept with this Agreement.
3.5 ATTORNEY FEES: If any legal action or any arbitration or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default or misrepresentation in connection with any of
the provisions of the Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs incurred in that
action or proceeding, in addition to any other relief to which it may be
entitled.
3.6 ENTIRE AGREEMENT: This Agreement constitutes the entire Agreement
and understanding of the parties hereto with respect to the matters herein set
forth, and all prior negotiations, writings and understandings relating to the
subject matter of this Agreement are merged herein and are superseded and
canceled by this Agreement.
3.7 COUNTERPARTS: This Agreement may be signed in one or more
counterparts.
3.8 FACSIMILE TRANSMISSION SIGNATURES: A signature received pursuant to
a facsimile transmission shall be sufficient to bind a party to this Agreement.
INTERNATIONAL
COMMUNICATIONS
ENTERPRISES, LTD.
DATED: September 23, 1999 BY: /s/ Leonard Goldstein
--------------------------
LEONARD GOLDSTEIN
Managing Director
GLOBAL TELEPHONE
COMMUNICATION INC.
DATED: September 23, 1999 BY: /s/ Terry Wong
--------------------------
TERRY WONG
President
PAGE 3 OF 3
<PAGE>
EXHIBIT 6.12
MUTUAL RESCISSION AGREEMENT BETWEEN
GLOBAL TELEPHONE COMMUNICATION, INC.
AND PLANET CITY GRAPHICS CORP.
<PAGE>
3329K
MUTUAL RESCISSION AGREEMENT
THIS MUTUAL RESCISSION AGREEMENT (the "Agreement") is entered into and
effective as of October 1, 1999 by and between CHARLES MALETTE, individually and
as the assignee of both RICHARD APPLEBY and JAMES GRIFFIN with all of these
parties being collectively referred to herein as the "SHAREHOLDERS" and GLOBAL
TELEPHONE COMMUNICATION, INC., a Nevada corporation ("GTC").
1. RECITALS
This Agreement is entered into with reference to and in contemplation of
the following facts, circumstances and representations:
1. The SHAREHOLDERS AND GTC had earlier entered in a Share Exchange
Agreement on or about February 9, 1998 (the "Exchange Agreement").
2. Pursuant to the Exchange Agreement, GTC issued a total of 1,500,000
shares of GTC common stock (the "GTC Shares") to the SHAREHOLDERS in
exchange for all of the shares of PLANET CITY GRAPHICS CORP ("PCG")
collectively owned by the SHAREHOLDERS which represented all of the
issued and outstanding shares of PCG (THE "PCG Shares").
3. All of the parties to this Agreement desire to rescind the Exchange
Agreement by mutual consent pursuant to the terms and conditions set
forth herein.
2. TERMS AND CONDITION OF RESCISSION
2.1 CONSENT TO RESCISSION: The parties hereby consent and agree to rescind
the Exchange Agreement subject to the below stated terms and conditions.
2.2 DISPOSITION OF CONSIDERATION RECEIVED BY GTC: GTC agrees to return the
PCG Shares to the SHAREHOLDERS.
PAGE 1 OF 3
<PAGE>
2.3 DISPOSITION OF CONSIDERATION RECEIVED BY SHAREHOLDERS: The SHAREHOLDERS
agree to return the GTC Shares to GTC.
2.4 SURRENDER OF RIGHTS: The parties mutually agree to forego all other
rights and benefits, if any, provided for in the Exchange Agreement as
consideration for the rescission of the Exchange Agreement.
3. COOPERATION, ARBITRATION, INTERPRETATION,
MODIFICATION AND ATTORNEY FEES
3.1 COOPERATION OF PARTIES: The parties further agree that they will do all
things necessary to accomplish and facilitate the purpose of this Agreement and
that they will sign and execute any and all documents necessary to bring about
and perfect the purposes of this Agreement.
3.2 ARBITRATION: The parties hereby submit all controversies, claims and
matters of difference arising out of this Agreement to arbitration in San Diego,
California according to the rules and practices of the American Arbitration
Association from time to time in force. This submission and agreement to
arbitrate shall be specifically enforceable. The Agreement shall further be
governed by the laws of the State of Nevada.
3.3 INTERPRETATION OF AGREEMENT: The parties agree that should any
provision of this Agreement be found to be ambiguous in any way, such ambiguity
shall not be resolved by construing such provisions or any part of or the entire
Agreement in favor of or against any party herein, but rather by construing the
terms of this Agreement fairly and reasonable in accordance with their generally
accepted meaning.
3.4 MODIFICATION OF AGREEMENT: This Agreement may be amended or modified in
any way at any time by an instrument in writing stating the manner in which it
is amended or modified and signed by each of the parties hereto. Any such
writing amending or modifying this Agreement shall be attached to and kept with
this Agreement.
3.5 ATTORNEY FEES: If any legal action or any arbitration or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default or misrepresentation in connection with any of
the provisions of the Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs incurred in that
action or proceeding, in addition to any other relief to which it may be
entitled.
PAGE 2 OF 3
<PAGE>
3.6 ENTIRE AGREEMENT: This Agreement constitutes the entire Agreement and
understanding of the parties hereto with respect to the matters herein set
forth, and all prior negotiations, writings and understandings relating to the
subject matter of this Agreement are merged herein and are superseded and
canceled by this Agreement.
3.7 COUNTERPARTS: This Agreement may be signed in one or more counterparts.
3.8 FACSIMILE TRANSMISSION SIGNATURES: A signature received pursuant to a
facsimile transmission shall be sufficient to bind a party to this Agreement.
SHAREHOLDERS
DATED: OCTOBER 1, 1998 BY: /s/ Charles Malette
-------------------------------
CHARLES MALETTE
Individually and as the assignee
OF RICHARD APPLEBY and
JAMES GRIFFIN
GLOBAL TELEPHONE
COMMUNINICATION, INC.
DATED: October 1, 1999 BY: /s/ Terry Wong
-------------------------------
TERRY WONG
President
PAGE 3 OF 3
<PAGE>
EXHIBIT 6.13
MUTUAL RECISSION AGREEMENT BETWEEN
GLOBAL TELEPHONE COMMUNICATION, INC.
AND WEBWORKS MULTIMEDIA CORPORATION
<PAGE>
3329K
MUTUAL RESCISSION AGREEMENT
THIS MUTUAL RESCISSION AGREEMENT (the "Agreement") is entered into and
effective as of October 1, 1999 by and between CHARLES MALETTE, as the
assignee of LANCE MORGINN (the "SHAREHOLDER") and GLOBAL TELEPHONE
COMMUNICATION, INC., a Nevada corporation ("GTC").
1. RECITALS
This Agreement is entered into with reference to and in contemplation
of the following facts, circumstances and representations:
1. The SHAREHOLDER and GTC had earlier entered in a
Share Exchange Agreement on or about February 9, 1998
(the "Exchange Agreement").
2. Pursuant to the Exchange Agreement, GTC issued a
total of 500,000 shares of GTC common stock (the
"GTC Shares") to the SHAREHOLDER in exchange for
all of the shares of WEBWORKS MULTIMEDIA CORPORATION
("WMC") owned by the SHAREHOLDER which represented
all of the issued and outstanding shares of WMC (the
"WMC Shares").
3. All of the parties to this Agreement desire to rescind
the Exchange Agreement by mutual consent pursuant to the
terms and conditions set forth herein.
2. TERMS AND CONDITION OF RESCISSION
2.1 CONSENT TO RESCISSION: The parties hereby consent and agree to
rescind the Exchange Agreement subject to the below stated terms and
conditions.
2.2 DISPOSITION OF CONSIDERATION RECEIVED BY GTC: GTC agrees to return
the WCM Shares to the Shareholder.
PAGE 1 of 3
<PAGE>
2.3 DISPOSITION OF CONSIDERATION RECEIVED BY SHAREHOLDER: The
SHAREHOLDER agrees to return the GTC Shares to GTC.
2.4 SURRENDER OF RIGHTS: The parties mutually agree to forego all other
rights and benefits, if any, provided for in the Exchange Agreement as
consideration for the rescission of the Exchange Agreement.
3. COOPERATION, ARBITRATION, INTERPRETATION,
MODIFICATION AND ATTORNEY FEES
3.1 COOPERATION OF PARTIES: The parties further agree that they will do
all things necessary to accomplish and facilitate the purpose of this
Agreement and that they will sign and execute any and all documents necessary
to bring about and perfect the purposes of this Agreement.
3.2 ARBITRATION: The parties hereby submit all controversies, claims
and matters of difference arising out of this Agreement to arbitration in
San Diego, California according to the rules and practices of the American
Arbitration Association from time to time in force. This submission and
agreement to arbitrate shall be specifically enforceable. The Agreement shall
further be governed by the laws of the State of Nevada.
3.3 INTERPRETATION OF AGREEMENT: The parties agree that should any
provision of this Agreement be found to be ambiguous in any way, such
ambiguity shall not be resolved by construing such provisions or any part of
or the entire Agreement in favor of or against any party herein, but rather
by construing the terms of this Agreement fairly and reasonable in accordance
with their generally accepted meaning.
3.4 MODIFICATION OF AGREEMENT: This Agreement may be amended or
modified in any way at any time by an instrument in writing stating the
manner in which it is amended or modified and signed by each of the parties
hereto. Any such writing amending or modifying this Agreement shall be
attached to and kept with this Agreement.
3.5 ATTORNEY FEES: If any legal action or any arbitration or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of the Agreement, the successful or prevailing party shall
be entitled to recover reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it may be
entitled.
PAGE 2 OF 3
<PAGE>
EXHIBIT 6.14
YAMAHA PROMOTIONAL CALLING CARD PROGRAMME
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Proposal For The
YAMAHA PROMOTIONAL CALLING CARD
PROGRAMME
Submitted to:
Dick van Beek
Vice President Europe
Yamaha Motors Europe Corp.
International Communications Enterprises Ltd.
STRICTLY CONFIDENTIAL
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INTERNATIONAL COMMUNICATIONS ENTERPRISES LTD. (ICE)
THE COMPANY
ICE Ltd. is a telecommunications solutions company based in London with U.S.
offices in 90 Park Avenue New York. We provide our clients with seamless
communication solutions through a single point of contact. We help our
customers to develop communication strategies that allow them to be better
competitors in the global market. We are acting as a catalyst for change in
the recently deregulated telecommunications markets across Europe and the
World.
SPORTS MARKETING GROUP
ICE Ltd. Sports Marketing group has been involved in creating and developing
promotional products and services to generate additional revenue streams in
and around competitive sports venues. We are involved with virtually every
major motor racing series in the world. The Sports Marketing Group continually
finds new and creative ways to increase sponsorship and revenue for the teams
we work with.
THE YAMAHA PROMOTIONAL CALLING CARD
ICE is involved in several projects involving National and International
Football programmes, Formula 1, and Grand Prix Motorcycle teams. We quickly
recognized that the Yamaha combination of superior fan/customer support and
advanced marketing and distribution represents a formula for success. There
is a demonstrable demand for Yamaha merchandise in Europe. The target market
for this program will be both the young fan and the established Yamaha
followers. A pricing structure to the series that will insure the price is
affordable to the young fan and to the older collector.
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THE YAMAHA PROMOTIONAL CALLING CARD
THE CONCEPT:
This promotional calling card will be a combination of a wonderful
merchandising product with brilliant images of the racing teams and riders, past
and present, representing great value for the Yamaha fan/consumer. It is
proposed that distribution utilises all the Yamaha outlets and dealers: The
Yamaha team Shops, The race circuits, Sponsor Outlets, all Yamaha Publications,
The Yamaha Web Site, etc.
In addition, ICE will research and recommend supplementary nonconflicting
outlets, e.g., newsagent chains, petrol stations, etc.
MARKETING PLAN:
Stage I. the Kick-Off
A. Introduce the cards at an appropriate race venue.
B. Set up sales booths and have life size displays of the Yamaha riders
with their individual calling cards.
C. The cards produced for Yamaha's Kick off event will be a limited
edition and highly collectable (10,000).
D. When the fans use the cards, they will hear a special greeting from a
team member thanking them for their support and promoting further
additions of their collectable card series.
E. The cards and packaging will promote the availability of cards in
other outlets.
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Stage II. Distribution Process of the Cards
A. ICE produces and ships 300,000 (non-activated) cards to the Yamaha
central distribution center. An initial allotment of cards is
distributed to the club shops and circulation department immediately.
Cards are activated for use upon notification to ICE of their
shipment.
B. Collateral merchandising material is produced to assist the point of
sale merchandising of the calling cards.
C. Promotional appearances are scheduled at key locations at which the
Yamaha riders will sign individual cards.
D. As new lots of cards are released central distribution centre
notifies ICE and the cards are activated.
E. Test selling cards in selected international markets, e.g., Japan,
China, Australia and the U.S.
F. A lottery promotional scheme that donates a % of the revenues to a
charity associated with Yamaha.
G. Lottery winners are announced on the Yamaha web page, insuring that
other promotional merchandise gets exposure.
POTENTIAL REVENUE
THE BUSINESS CASE:
If Yamaha is responsible for distribution of the cards, the Club will receive
25% of the face value. For example, L10 card - gross profit to Yamaha L2.50
(less VAT), L5 card- gross profit to team L1.25 (less VAT), L3 card gross
profit to team .75p (less VAT).
100,000/L10 CARDS SOLD, REVENUE TO TEAM = L 206,250
100,000/L 5 CARDS SOLD, REVENUE TO TEAM = L 103.125
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Co-operative Ventures
In the case of distribution through other outlets, Yamaha will receive 15% of
the face value of each card sold (less VAT) and the distributor of the cards
will receive 10%. The balance of the money on each card goes to card production,
the calls, network services and ICE.
PROPOSED TERMS AND CONDITIONS
Parties to this agreement will be Yamaha Motors Europe N.V. located at
koolhovenlaan 101 NC Schiphol-Rijk, 1117 ZN Schiphol, the Netherlands and
International Communications Enterprises Ltd. located at 212 Piccadilly
London WiV 9LD the U.K. Under the proposed agreement each party's
responsibilities will be as described below.
TERMS
A. Contract Start: 01 September 1999 Contract End: 31 December 2001.
B. Contract area: WorldWide.
C. Licensed Articles: Telephone Calling Cards.
D. License Fee: 25% of face value of each telephone card sold through the
Yamaha dealer network less applicable VAT (average 15%).
E. License fee: 15% the face value of each Yamaha telephone card sold through
the ICE distribution network, less VAT.
F. Yamaha shall purchase Pilot program orders in the following increments.
(50% L5 and 50% L10)
<TABLE>
<CAPTION>
November December January
<S> <C> <C> <C>
1. Germany 30,000 50,000 70,000
2. U.K. 20,000 30,000
3. France 15,000
4. Italy 15,000
5. Spain 20,000
</TABLE>
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G. Yamaha has the right to halt the programme after the pilot programme if the
sales performance is less than 70% of the above listed volumes by market.
Responsibilities:
YAMAHA
A. Authorise the use of the Yamaha's image on the calling card and
packaging.
B. Authorise the distribution of cards through Yamaha's 3000 dealer
locations across Europe.
C. Provide a recorded greeting the callers will hear when they use the
card.
D. Make the Yamaha riders available for meetings and promotional events
whenever possible.
E. Pre-approved use of the Yamaha riders and cycle images in this program.
F. Assist in developing distribution channels for the cards.
G. Purchase telephone cards for Yamaha corporate programs, to be promoted
via Yamaha's web pages and at the Grand Prix racing events.
INTERNATIONAL COMMUNICATIONS ENTERPRISES LTD. WILL:
A. Design, package, produce and deliver to distribution channel the
promotional cards, packaged and ready for distribution.
B. Provide the calling card services, free phone access #s, the Yamaha
personal greeting, pin code verifications, announcements for units
remaining and multi-lingual customer service.
C. Provide the network services to process and complete the calls made by our
calling card customers.
D. Take a primary role in the development of marketing plans to maximise the
performance of this program.
E. Activate cards on a lot by lot basis upon notification of their shipment
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From the central distribution centre.
F. Promote the development of additional channels for distribution of the
promotional cards (only with the approval of all parties).
G. Provide additional programs to generate revenue streams to enhance
sponsorship initiatives.
H. Attend regular meetings with Yamaha to review the marketing campaign and to
introduce additional promotional programmes.
/s/ [Illegible] 12/10/99 /s/ London 12/10/99
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Place, Date Place, Date
/s/ [Illegible] /s/ [Illegible]
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Signature, Signature,
Yamaha Motors Europe International Communications
Enterprises Ltd.
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EXHIBIT 6.15
FIRST CONTINENTAL CAPITAL, L.P.
REVENUE PARTICIPATION AGREEMENT
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EXHIBIT D
[LOGO] FIRST CONTINENTAL CAPITAL, L.P.
REVENUE PARTICIPATION AGREEMENT
THIS REVENUE PARTICIPATION AGREEMENT (the "Agreement") is entered into
and effective as of October 21, 1999, by and between INTERNATIONAL
COMMUNICATIONS ENTERPRISES, LTD., A United Kingdom corporation ("ICE") and
GLOBAL TELEPHONE COMMNICATION, INC, a Nevada corporation ("GTC").
1. RECITALS
This agreement is entered into with reference to and in contemplation
of the following facts, circumstances and representations:
1.1 ICE through its personal and business relationships, will enter
into agreements with various entities to provide "Promotional Pre Paid Calling
Card" services.
1.2 GTC desires to make an investment in ICE for the purposes of
providing the financial resources necessary to assist ICE in carrying out its
responsibilities resulting from any agreements to provide "Promotional
PrePaid Calling Card" services.
1.3 The present list of potential "Promotional Pre Paid Calling
Card" agreements include Max Biaggi, Pros Grand Prix, Yamaha Racing, Team
Green, Michael Schumacher, Bennetton and Repsol. It is recognized by both ICE
and GTC that this list will continue to grow with more opportunities as time
and success progress.
2. OPTIONS AND RIGHTS
2.1 AMOUNT OF OPTION - GTC agrees to invest L 30,000 for the option
and right to invest in all "Promotional Pre Paid Calling Card" agreements
entered into by ICE.
2.2 RIGHTS - GTC shall have the right to invest in every "Pre Paid
Calling Card" agreement entered into by ICE upon the investment of the option
amount listed above in paragraph 2.1.
3. TERMS AND CONDITIONS OF REVENUE PARTICIPATION
3.1 AMOUNT OF INVESTMENT - GTC agrees to invest L75,000 for each
"Promotional Pre Paid Calling Card" agreement entered into by ICE after a
review of the agreement, its financial projections and completion of general
"due diligence".
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3.2 PERCENTAGE OF GROSS REVENUE PARTICIPATION: GTC shall receive 50% of the
gross revenue generated from each investment until it has received 2 times
its amount invested. Then it shall receive 25% of gross revenue for as long
as the opportunity is in existence.
4. COOPERATION, ARBITRATION, INTERPRETATION
MODIFICTION AND ATTORNEY FEES
4.1 COOPERATION OF PARTIES: The parties further agree that they will do all
things necessary to accomplish and facilitate the purpose of this Agreement
and that they will sign and execute any and all documents necessary to
bring about and perfect the purposes of this Agreement.
4.2 ARBITRATION: The parties hereby submit all controversies, claims and
matters of difference arising out of this Agreement to arbitration in San
Diego, California according to the rules and practices of the American
Arbitration Association from time to time in force. This submission and
agreement to arbitrate shall be specifically enforceable. The Agreement
shall further be governed by the laws of the State of Nevada.
4.3 INTERPRETATION OF AGREEMENT: The parties agree that should any provision of
this Agreement be found to be ambiguous in any way, such ambiguity shall
not be resolved by construing such provisions or any part of or the entire
Agreement in favor of or against any party herein, but rather by construing
the terms of this Agreement fairly and reasonably in accordance with their
generally accepted meaning.
4.4 MODIFICATION OF AGREEMENT: This Agreement may be amended or modified in any
way at any time by an instrument in writing stating the manner in which it
is amended or modified and signed by each of the parties hereto. Any such
writing amending or modifying this Agreement shall be attached to and kept
with this Agreement.
4.5 ATTORNEY FEES: If any legal action or any arbitration or other proceeding
is brought for the enforcement of this Agreement, or because of any alleged
dispute, breach, default or misrepresentation in connection with any of the
provisions of the Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it may
be entitled.
4.6 ENTIRE AGREEMENT: This Agreement constitutes the entire Agreement and
understanding of the parties hereto with respect to the matters herein set
forth, and all prior negotiations, writings and understandings relating to
the subject matter of this Agreement are merged herein and are superseded
and canceled by this Agreement.
4.7 COUNTERPARTS: This Agreement may be signed in one or more counterparts.
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4.8 FACSIMILE TRANSMISSION SIGNATURES: A signature received pursuant to a
facsimile transmission shall be sufficient to bind a party to this
Agreement.
INTERNATIONAL
COMMUNICATIONS
ENTERPRISES, LTD.
Dated: October 21, 1999 By: /s/ Leonard Goldstein
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Leonard Goldstein
Managing Director-Chairman
GLOBAL TELEPHONE
COMMUNICATION INC.
Dated: October 21, 1999 By : /s/ Thomas C. Brandenburg
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Thomas C. Brandenburg
President & CEO
