SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to
the Securities Exchange Act of 1934
For the fiscal year ended June 30, 1998
Commission file number 0-013313
GS TELECOM LIMITED
(Exact name of registrant as specified in its charter)
Former Name: Teleconferencing Systems International, Inc.
Colorado 36-3296861
(State of incorporation) (I.R.S. Employer
Identification No.)
First Floor Hampton House, 20 Albert Embankment, London, England,
U.K. SE17TJ
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(44) 171 587 3687
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: None
Name of each exchange on which registered: N/A
Securities registered pursuant to Section 12(g) of the Act:
Title of each class: Common No Par Value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days.
Yes X No
------- --------
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and no disclosure will be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. X
-----
<PAGE>
State issuer's revenues for its most recent fiscal year.
Transitional Small Business Disclosure Format:
Yes X No
------ -------
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of June 30, 1998: $9,810,512 based upon the bid price of $2.00.
Number of outstanding shares of the registrant's no par value common stock, as
of June 30, 1998: 16,828,220.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part
of this Form 10-K which the document is incorporated: (1) Any annual report to
security holders - None; (2) Any proxy or information statement - None; (3) Any
prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933
- - None.
<PAGE>
PART 1
Item 1. Business
GS Telecom Limited, formerly Teleconferencing Systems International, Inc. (the
Company) was incorporated in Colorado on December 19, 1983.
Teleconferencing Systems International, Inc. (Company or TSI), a Colorado
corporation, was incorporated on December 19, 1983, to design, manufacture, and
market a wireless audio teleconferencing system called the TSI Conferencer.
The company became a dealer for Coherent ConferenceMaster Systems in 1991.
Coherent's product was a feature rich small room system. For approximately a two
year period, Coherent ConferenceMaster Systems provided sales revenue for the
company. With the evolution of small room systems available in the industry,
another small room system appear in 1993, the Polycom Sound Station. The Company
became a dealer for the Polycom Sound Station sold the system in 1994. At fiscal
year end 1995, the Company ceased all sales operations.
During 1991 and 1992, TSI developed a version of the wired TSI Conferencer
System, the Court/Line system, to provide an audio interface to multi-tract tape
recorders, and sound systems which are present in most courtrooms. Sales were
made during 1993 and 1994 fiscal years to both Federal and State Courts in
various locations throughout the country. Due to competition in the market and
new systems introduction, the Company's business declined dramatically in 1995,
and the Company ceased active operations.
On April 30, 1997, the Company acquired 100% of the common stock of Wilding
Services, Inc. to be a wholly owned subsidiary for $1.00 and assumption of
approximately $200 in filing fees. On June 29, 1997, the Company Board of
Directors elected to spin off in a share distribution pro-rata to its
shareholders Wilding Services, Inc. together with the outdated inventory rights
to an anticipated contract to sell equipment to Bell South, and Wilding
Services, Inc. agreed to and subsequently issued a promissory note for $140,000
to the Company to secure payment of any debts of the Company which might be
asserted as a result of its prior operations. The Board resolution provided
shareholders of the Company were to receive one share of stock of Wilding for
each 50 shares of the Company owned by such shareholder. The resolution has
never been submitted to shareholders for approval, although for accounting
purposes it was treated as effective June 29, 1997.
On January 6, 1998, the Board of Directors changed the corporation name to GS
Telecom Limited and approved a 150 to one reverse split of the issued and
outstanding common shares of the Company. All share and per share amounts have
been retroactively restated in the accompanying financial statements to reflect
the effect of the reverse stock slit.
<PAGE>
Activities of the company since June 30, 1995 until November 15, 1997 were
primarily liquidation of operating assets and settlement of obligations to
creditors and employees as previously reported. On November 15, 1997, the
Company acquired an Isle of Man Company (GST), also named GS Telecom Limited,
by issuance of a $150,000 convertible note payable.
The acquired subsidiary had net liabilities of $544,268. The note payable was
subsequently converted to 14,500,000 shares of common stock, which was issued to
the acquired company stockholders.
The assets of the subsidiary, GST, also included Associated Power Industries
Limited (API), a designer and manufacturer of energy savings systems. GST owns
50% of API and has an option to acquire the remaining 50% ownership interest for
three years.
GST also owned two subsidiary companies both of which were wholly owned:
Guardian Smart Systems Limited (GSS) whose business is to design and market
domestic energy savings and home management systems and Total Energy Controls
(Commercial) Limited (TECC) whose business was to market and install energy
savings devices for commercial installations such as offices, apartment blocks,
nursing homes, small care centers, car showrooms, etc.
Substantially all intercompany transactions have been eliminated in the
accompanying consolidated financial statements.
Due to a combination of factors including lack of working capital none of these
companies was successful in establishing their businesses commercially and the
above two wholly owned subsidiaries were effectively closed down at June 30,
1998. All trading was ceased and all staff terminated shortly thereafter in
accordance with their contracts. All amounts of obligations incurred as a result
of all of these unsuccessful commercial operations have been reflected in the
attached accounts under closing down costs of $140,099.
In addition, the Directors consider it prudent to provide fully for possible
loss on the investment in API and for goodwill cost of the subsidiaries closed
down.
At the date of this report there remains the obligation to discharge the
accounts payable and other payables of the three companies; GST and the two
wholly owned subsidiaries, which it is planned, will be done through funds
raised by new share subscriptions. Originally this capital was scheduled to be
raised under the Financial Services Agreement signed with djLimited on June 15,
1997.
<PAGE>
Pursuant to this Agreement an amount of $376,500 was raised on November 20, 1997
for working capital by a Private Placement of 8% Convertible Loan Notes, due
September 30, 2000. An additional $63,500 has been subscribed but not paid. The
transaction was accomplished to foreign investors pursuant to Regulation S.
Subsequently this Agreement was terminated by GST on August 12, 1998.
The Holders of these Notes have the option to convert one hundred percent (100%)
of the original principal amount of the Note issued to the Holder at any time
after the 120th day following the date of issue, into shares of the Company's
Common Stock at a conversion price equal to the lower of the $2 per share or at
twenty-five percent (25%) less than the average closing bid price of the
Company's Common Stock for the five (5) consecutive trading days ending on the
trading day immediately preceding the date thereof. Notwithstanding the
foregoing, if, after the effectiveness of the Registration Statement or if an
exemption is available from registration, the closing bid price of the Company's
Common Stock reaches four dollars for the five (5) consecutive trading days
ending on the trading day immediately preceding the date thereof, the Company
shall have the option of forcing conversion up to Fifty Percent (50%) of the
original principal amount of the Notes originally issued to the Holder, and, if,
after such effectiveness, the closing bid price of the Company's Common Stock
reaches eight dollars, the Company shall thereafter have the option of forcing
conversion up to One Hundred Percent (100%) of the original principal amount of
the Notes issued to the Holder. The notes were called in default in August 1998,
but on December 16, 1998, a written extension was agreed between noteholders and
the Company.
The Company has recently redefined its focus as a high-tech development and
marketing company, engaged in identifying, developing, and marketing innovative
technology. Historically, the Company had focused primarily on the development,
sale and installation of ecological energy saving technology through its
subsidiaries and associate companies. However, the new management of the Company
recognized that its development program lagged behind competitors' advances, and
during the fourth quarter of 1998, new management commenced a restructuring
process which culminated on January 6, 1999, at which time GS Telecom embarked
upon negotiations for the strategic acquisition of targeted technologies with a
view to developing technology for the telecommunication and e-commerce business
sectors.
During the fourth quarter of 1998 and the first quarter of 1999, the Company's
management reorganized and effected negotiations to make a number of
acquisitions subsequent to the securement of private financing in order to
increase the technology base, acquire high-tech products with short term sales
revenue capability and create an infrastructure capable of handling the
unification of the acquired technologies toward the objective of operating a
unique and proprietary high-tech telecommunication and e-commerce network on a
world-wide basis.
<PAGE>
The Company's long term objectives via a series of strategic resolutions are:
(1) Interests in API and the wholly-owned subsidiaries, GSS and TECC are to be
sold and all legally incurred debt of the wholly owned subsidiaries repaid. This
will facilitate an undiluted focus on the business objective of the Company,
which is the development of a proprietary and licensed telecommunication and
e-commerce network;
(2) The facilitation of an underwriting of the Company's securities--to
facilitate technology acquisition, growth and expansion;
(3) The investment in organizational and expansion costs by the Company in its
new investments --providing the Company with a secure base to grow its revenues
from this point forward;
(4) The implementation of an aggressive Internet platform for the direct
offering of the Company's future products and services to end users --this
allows the current infrastructure to evolve into a fully integrated direct
access Internet network; and
(5) The issuance of territorial/industry sector exclusive and non-exclusive
licenses for select Company technologies and products.
Status of Products
None:
Competition
None.
Raw Materials
None.
Customer Dependence
None.
Patents, Trademarks, and Licenses
None.
Government Approval.
None pending.
<PAGE>
Governmental Regulations
None.
The Company has not been involved in any bankruptcy, receivership, or similar
proceeding during its existence.
Research and Development
The Company spent $0 on research and development activities during the fiscal
years ended June 30, 1997 and 1998.
Environmental Regulations
Compliance with federal, state, and local provisions regulating the discharge of
the materials into the environment does not have any material effect on the
capital expenditures, earnings, and competitive position of the Company.
Employees
Effective as of June 30, 1998, as a result of the dismissal of all employees of
the subsidiaries, the Company had no employees. As a result of contract terms,
certain employees were paid up to September 1998.
On February 19, 1998 and on March 31, 1998, the Company received and accepted a
loan of $212,400 repayable on demand.
In July 1998, Mr. David Innes resigned as Chairman, President, and Chief
Executive and remained as a Director until October 1998.
Mr. Gordon Bliss acted as Chairman, President, and Chief Executive until October
1998 when he resigned.
Mr. Marshall Kaye acted as a Director until July 1998 when he resigned.
Dr. Steven Gillam, appointed in October 1998, is currently Chairman, President,
and Chief Executive.
Mr. Andrew Castle appointed in October 1998, is currently a Director.
Mr. Gary Botha, currently a Director, was appointed in July 1998.
Ms. Joslin Bennett, currently a Director was appointed in January 1998.
<PAGE>
Item 2. Property
The Company does not have any formal offices at year end. During the
year ended June 30, 1998 records were maintained and mail received at
33 Great James Street, London WC1N 3HB. Records are now maintained and
mail received at First Floor Hampton House, 20 Albert Embankment,
London, England, U.K. SE1 7TJ. The company owns no real property.
Item 3. Legal Proceedings
The Company is a party to no pending legal proceedings, nor is its
property subject to such proceedings, at June 30, 1998.
Item 4. Submission of Matters to a Vote of Security
Holders
On January 6, 1998, the Company submitted a proposal to shareholders
for a reverse split of the issued and outstanding shares on the basis
of one new share for each 150 shares issued and outstanding. The
proposal was approved by the shareholders. Also, at such date, the
shareholders approved a name change to GS Telecom, Limited.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
As of the date of this report, management knows of no trading or
quotation of the Company's common stock. The range of high and low bid
quotations for each fiscal quarter since the last report, as reported
by the National Quotation Bureau Incorporated, was as follows:
Year Ended June 30, 1998 High Low
First quarter .00 .00
Second quarter .00 .00
Third quarter 2.00 .00
Fourth quarter 2.87 2.00
Year Ended June 30, 1997 High Low
First quarter * *
Second quarter * *
Third quarter * *
Fourth quarter * *
<PAGE>
Year Ended June 30, 1996 High Low
First quarter * *
Second quarter * *
Third quarter * *
Fourth quarter * *
* No quotations reported
The above quotations reflect inter-dealer prices, without retail
mark-up, mark-down, or commission and may not necessarily represent
actual transactions.
As of June 30, 1998, there were 400 (approximately) record holders of
the Company's common Stock.
The Company has not declared or paid any cash dividends on its common
stock and does not anticipate paying dividends for the foreseeable
future.
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Condition and Changes in Financial
Condition
Operations were conducted, in the fiscal year ended June 30, 1998, which
resulted in a loss for the year, after write-offs and closing down costs, of
($1,753,524).
The Company at year end had no capital, no cash, and other assets of $20,247.
Current liabilities exceeded assets by $1,565,641. The Company at year end was
totally illiquid and needed cash infusions from shareholders to provide capital,
or loans from any sources.
Results of Operations For Year Ended June 30, 1998 Compared to Year Ended June
30, 1997
General and administrative for the years ended June 30, 1998 and 1997 were
$826,397 and $18,441 respectively. Losses on operations before other items were
($895,611) in 1998 and ($12,302) in 1997.
Other items were written off in the financial statements because the businesses
have been discontinued as follows:
Provision for Loss on the Investment in API ($242,447)
Write off of Goodwill or excess of purchase
price over book value of assets acquired
in purchase of GST ($475,367)
Provision for Discontinued Operations
subsidiaries ($140,099)
<PAGE>
Revenues for the year ended June 30, 1998 were $12,409 compared to revenues for
the same period in 1997 of $6,139.
The net loss for the year ended June 30, 1998 was ($1,753,524) after the written
off items of ($857,913). For the year ended June 30, 1997 the net income was
$134,203 after $146,545 of extraordinary income.
Loss per share for year ended June 30, 1998 was ($.110) and ($.216) per share,
before and after the write-offs respectively, compared to ($.04) and 0.0 cents
per share for the year ended June 30, 1997.
The management of the Company does not believe that inflation has had any
material effect on the Company during the year ended June 30, 1998.
Y2K Compliance
At June 30, 1998, the Company had no systems which would be affected by a Y2K
problem, which had not been previously corrected in software.
Results of Operations for Year Ended June 30, 1997 Compared to June
30, 1996
The Company ceased teleconferencing sales operations in June 1995. Small
collections of income occurred in the year ended June 30, 1997 in the amount of
$6,139, which compared to revenues for the year ended June 30, 1996, of $50,327.
This amounted to a decrease of 88% in revenues.
The Company had a cost of sales of $0 for the year ended June 30, 1997, compared
to cost of sales of $4,343 in year ended June 30, 1996. General and
administrative for the years ended June 30, 1997 and 1996 were $6,441 and $9,787
respectively.
The operating losses for years ended June 30, 1997 and 1996 were ($302) and
($3,803), respectively. Total losses before extraordinary items were ($12,302)
in 1997 and ($11,684) in 1996. The net income for the year ended June 30, 1997
was $134,243 after extraordinary income of $146,545 due primarily to settlement
and extinguishment of trade and related party obligations. For the year ended
June 30, 1996, the net loss was ($5,904) after $5,780 of miscellaneous income.
Loss per share for year ended June 30, 1997 was $0 per share, compared to
approximately $0 per share for year ended June 30, 1996, before and after
extraordinary items.
The Company had cash of $204 at June 30, 1997 and no other liquid assets.
<PAGE>
During the course of the fiscal year ended June 30, 1997, the company's
outstanding debt level decreased to $0 from $141,502 in fiscal year ended June
30, 1996 due to spin off of possible future business contracts, assets, and
liabilities into a subsidiary, Wilding Services, Inc.
Working capital decreased from $204 at June 30,1996 to a deficit of ($1,565,641)
at June 30, 1997.
Capital Resources
None.
The Company had no known material commitments for capital expenditures at June
30, 1998 other than accounts payable and notes coming due. The Company has no
additional plans, agreements, or commitments concerning any transaction which
would require the Company to use a significant amount of capital. The Company
had no sources of capital at year end.
Item 7. Financial Statements and Supplementary Data
Please refer to pages F-1 through F-11.
Item 8. Changes in and Disagreements on Accounting and
Financial Disclosure
In connection with audits of two most recent fiscal years and any interim period
preceding resignation, no disagreements exist with any former accountant on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope of procedure, which disagreements if not resolved to the
satisfaction of the former accountant would have caused him to make reference in
connection with his report to the subject matter of the disagreement(s).
The audit report by Oatley Bystrom and Hansen for the years ended June 30, 1998
and 1997, contained an opinion which included a paragraph discussing
uncertainties related to continuation of the Registrant as a going concern.
The principal accountants' reports on the financial statements for any of the
past two years contained no adverse opinion or a disclaimer of opinion nor was
qualified as to uncertainty, audit scope, or accounting principles except for
the going concern qualification specified above.
<PAGE>
PART III
Item 9. Directors and Executive Officers of the
Registrant and Compliance with Section 16(a)
The directors and executive officers of the Company as of date of this
report, are as follows:
Name Age Position
Dr. Steven Gillam* 46 Chairman of the Board,
President, and Chief Executive
Officer
Andrew Castle* 47 Director
Joslin Bennett 49 Director
Gary Botha* 57 Director
David Innes 63 Former Chairman, President, and
Chief Executive (resigned
October 1998)
Gordon Bliss 54 Director (resigned October
1998)
Marshall Kaye 73 Director (resigned July 1998)
* Appointed after June 30, 1998
The term of office of each director and executive officer ends at, or
immediately after, the next annual meeting of shareholders of the Company.
Except as otherwise indicated, no organization by which any director or officer
has been previously employed is an affiliate, parent or subsidiary of the
Company.
Management Experience
David Innes, age 63, is a fellow of the Institute of Chartered Accountants in
England and Wales. He qualified in 1957. He was a director of ABACA Group, PLC
from 1990-1992. From 1992 until 1996, he orchestrated and co-managed the
privatization of Elit Ruhagyar Rt, a Hungarian clothing manufacturer. He is the
Chairman of his own management consultant company, AKS Management Services,
Ltd., since 1975. He was Director and Chief Executive of GS Telecom Ltd.
from June, 1997 to July 1998.
Marshall Kaye, age 73, obtained a degree in Physics in 1943 and studied toward a
further degree in Economics at Oxford University. Mr. Kaye has been the Chairman
of Cadmus Newsletters, Ltd. in England, publishers of Parliamentary and European
government
<PAGE>
specialized newsletters from 1987 to present. He has been Chairman of Rodney
Deitch Associates (England) since 1987, government relations consultant. In
1995, Mr. Kaye became Chairman of Advanced Valve Technologies in England, a
composite value manufacturer. From 1985 to 1991, he was Chairman G.H. Zeal, Ltd.
in England, a manufacturer of thermometers and scientific instruments.
Gordon Bliss, age 54 was appointed to the Board of Directors in May 1998. Mr.
Bliss received his management training and experience with Smith & Nephew and
Brown & Polson and subsequently worked in the financial services industry for
nearly 30 years. In 1992 he joined C.E Heath Plc. the international brokerage as
Senior Consultant. In 1997 he joined Heywood Collins as a Financial Services
Advisor.
Marcia Joslin Bennet, age 49, was appointed January 6, 1998 to the Board of
Directors. Ms. Bennet has taken courses in Commerce and Banking from the
University of Toronto and has taken courses from the Canadian Securities
Institute. From 1981 to 1994, she was a director and Executive Committee Member
of Gordon Capital Corporation. Since 1994, she has been Chairman and a Director
of Treleven, Ltd. of Bermuda. She has been a Registered Representative of the
NASD and is a Fellow in the Canadian Securities Institute.
Dr. Steven Gillam, age 46, became Chairman, President, CEO, and a Director of
the Company in October 1998. He has been Chairman of Jectabor Limited since
1987. He is founding director of North Derbyhire Doctors Limited. He has been a
practicing physician since 1979. He received his education with a Doctorate from
St. George's Hospital Medical School in London in 1975. He is Chairman of Manex
Entertainment, Manex Visual Effects, and Manex Studios businesses which he
co-founded since 1997.
Andrew Castle, age 46, became a Director of the Company in October 1998. He
received his education at Kings College with an LLB degree in 1975. He has been
Chief Executive of Manex Group since 1998. He acted as Acquisitions Director for
Grand Heritage Hotels Group in 1998. He has been a corporate consultant to Fox
Brooks Marshall, a Manchester U.K. law firm since 1993. Prior to 1993, he was a
practicing solicitor in the U.K. He has been a Director of Manchester Exchange
Trust LTD since 1998, a Director of Manchester Exchange Investment Company since
1998, a director of Manex Brokers, Ltd, and Manex Investments and Manex
Corporate Services since 1998.
Gary Botha, age 57, was appointed as a Director in July 1998. Mr. Botha received
his education in at Glenwood High School and Natal University with a degree in
Accountancy in 1963. He was a partner with Whinney Murray & Co., Chartered
Accountants (now Ernst & Young) from 1973 to 1977. From 1977 to 1982, he was
Finance Director of AW Galadari (Holdings) Limited of Dubai and Singapore. From
1983 to 1986, he was Chief Executive Officer of Asian Real Estate Development,
Inc. Since 1987, he has been a private business consultant in the U.K.
<PAGE>
Section 16(a) of the Securities Exchange Act of 1934, as amended (the Exchange
Act), requires the Company's officers and directors, and persons who own more
than 10% of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership of equity securities of the
Company with the Securities and Exchange Commission and NASDAQ. Officers,
directors and greater-than 10% shareholders are required by the Securities and
Exchange Commission regulation to furnish the Company with copies of all Section
16(a) filings.
1. The following people did not file any reports under Section 16(a)
during the most recent fiscal year:
a. David Innes President and Director (at June
30, 1998) - owner of more than
10% of the common stock
b. Gordon Bliss Director
c. Joslin Bennett Director
d. Marshall Kaye Director
2. For each person, listed by subparagraph letter above:
Number of late Number of Known failures
reports transactions not to file forms
reported on a
timely basis
a. 3 January 1998-1 Forms 3,4, and 5
b. 2 unknown Forms 3 and 5
c. 2 unknown Forms 3 and 5
d. 2 unknown Forms 3 and 5
Item 10. Executive Compensation
The Company accrued a total of $0 in compensation to the executive
officers as a group for services rendered to the Company in all capacities
during the fiscal year ended June 30, 1998. No one executive officer received,
or has accrued for his benefit, in excess of $60,000 for the year. No cash
bonuses were or are to be paid to such persons.
The Company does not have any employee incentive stock option plans.
There are no plans pursuant to which cash or non-cash compensation was
paid or distributed during the last fiscal year, or is proposed to be paid or
<PAGE>
distributed in the future, to the executive officers of the Company. No other
compensation not described above was paid or distributed during the last fiscal
year to the executive officers of the Company. There are no compensatory plans
or arrangements, with respect to any executive office of the Company, which
result or will result from the resignation, retirement or any other termination
of such individual's employment with the Company or from a change in control of
the Company or a change in the individual's responsibilities following a change
in control.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE OF EXECUTIVES
<S> <C> <C> <C> <C> <C> <C>
Annual Compensation Awards
Name and Year Salary Bonus Other Annual Restricted Securities
Principal ($) ($) Compensation Stock Underlying
Position ($) Award(s) Options/
($) SARs (#)
- -----------------------------------------------------------------------------------------------------------------------------------
David Innes, 1998 0 0 0 0 **
President(1)
---------------------------------------------------------------------------------------------------------------
1997 0 0 0 0 0
---------------------------------------------------------------------------------------------------------------
1996 0 0 0 0 0
</TABLE>
(1) Resigned as of October 1998.
** Restricted common stock shares totalling 2,912,228 (for himself, family and
affiliates) were issued for $.0103 per share in January 1998. (See Certain
Relationship and Related Transactions.)
Option/SAR Grants Table (None)
Aggregated Option/SAR Exercises in Last Fiscal Year an FY-End Option/SAR value
(None)
Long Term Incentive Plans - Awards in Last Fiscal Year (None)
DIRECTOR COMPENSATION FOR FISCAL YEAR ENDED JUNE 30, 1998
(Except for compensation of Officers who are also Directors which Compensation
is listed in Summary Compensation Table of Executives)
<PAGE>
<TABLE>
<CAPTION>
Cash Compensation Security Grants
<S> <C> <C> <C> <C> <C>
Meet Number of Number of
Annual -ing Consulting Shares Securities
Retainer Fees Fees/Other (#) Underlying
Name Fees ($) ($) Fees ($) Options/SARs(#)
- -----------------------------------------------------------------------------------------------------------------------------------
A. Director 0 0 0 4,255,399 0
David Innes (1)(2)
B. Director 0 0 0 24,736 0
Gordon Bliss
C. Director 0 0 0 0 0
Joslin Bennett
D. Director 0 0 0 0 0
Marshall Kaye 0 0 0 24,736 0
</TABLE>
Item 11. a. Security Ownership of Certain Beneficial
Owners and Management
(1) 1,057,015 were purchased at $.01 per share.
(2) 4,255,399 shares when combined with his beneficial ownership of CCS
Corporate Services, Ltd and CCS Secretaries, Ltd.
The following table sets forth information, as of June 30, 1998, with
respect to the beneficial ownership of the Company's no par value common stock
by each person known by the Company to be the beneficial owner of more than five
percent of the outstanding common stock.
<PAGE>
<TABLE>
<CAPTION>
Stock Names and Address Beneficial Percent
Title of Class of Beneficial Owner Ownership of Class
<S> <C> <C> <C>
Common Investco(1) 5,738,546 34.1%
Bourne Concourse
Peel Street
Ramsey
Isle of Man IM8 1JJ
British Isles
Common Riyadh Trust Limited(2) 1,879,547 11.2%
2 New Road
Howth Summit
Howth
Ireland
Common CCS Corporate 1,696,900 10.1%
Services, LTD(3)
Bourne Concourse
Peel Street
Ramsey
Isle of Man IM8 1JJ
British Isles
Common CCS Secretaries, Ltd(4) 1,501,484 8.9%
Bourne Concourse
Peel Street
Ramsey
Isle of Man IM8 1JJ
British Isles
</TABLE>
(1) Beneficially owned by Investco represented by M.J. Stevenson, Trustee for a
group of non-U.S. Citizens.
(2) Beneficially owned by The Riyadh Trust Limited, represented M.J. Stevenson,
Trustee for numerous non-U.S. citizens.
(3) Beneficially owned by David Innes, Director, and Atul Sharma
(4) Beneficially owned by David Innes, Director
Beneficially owned by a number of Other Private Shareholders.
b. Security Ownership of Management (Continued)
The following table sets forth information, as of June 30, 1998, with
respect to the management ownership of the Company's no par value common stock
by the directors and officers of the Company, both individually and as a group.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Stock Names and Address Beneficial Percent
Title of Class of Beneficial Owner Ownership of Class
Common David Innes 1,057,015 6.2%
(Resigned 10/98) (4,255,399 shares or
Flat 2 Whitehall 25.2% when combined
9/11 Bloomsbury Square with shares shown in
London WC1A 2LP notes (3) & (4)
England in Item 11a above)
Common Gordon Bliss 24,736 0.14%
(Resigned 10/98)
11 Springs Gardens Court
79 Vauxhall Walk
London SE11 5HX
Common Joslin Bennett 0 0%
(Appointed 1/98)
Belair
21 Midelle Road
Warwick, Bermuda
WK 04
Common Marshall Kaye 24,736 0.14%
Hampton
Coombe Ridings
Kingston upon Thames
Surrey KT2 7JT
All Directors and Officers as a Group (four persons) 16.9%*
</TABLE>
* 25.48% when beneficial ownership of other entities by David Innes are
included.
Item 12. Certain Relationships and Related Transactions
The Company paid management fees to an entity owned by a
stockholder/director/officer of the Company, David Innes, totaling $0 for 1998
and $12,000 for fiscal year 1997.
The Company paid management fees to an entity owned by a
stockholder/director/officer of the Company totaling $12,000 in fiscal 1997.
Rent
During fiscal year 1998 and 1997, the Company rented no facilities from
affiliates.
Indebtedness of Management. No director or executive officer of the Company and
no associate of any such director or executive officer was indebted to the
Company at any time since the beginning of the Company's last fiscal year in an
amount in excess of $60,000.
<PAGE>
PART IV
Item 13. Exhibits and Reports on Form 8-K
The following documents are filed as part of this report:
1. Reports on Form 8-K: Incorporated by Reference to
filing dates:
July 8, 1997
July 14, 1997
November 14, 1997
January 16, 1998
January 22, 1998
2. Exhibits:
INDEX
Form 10-K
Regulation Consecutive
S-K Number Exhibit Page Number
3.1 Articles of Incorporation *Incorporated by reference to
Registration Statement
#2-87742-D
3.2 Bylaws *Incorporated by reference to
Registration Statement
#2-87742-D
3.3 Articles of Amendment to p. 21,22
Articles of Incorporation
27.1 Financial Data Schedule F-12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GS TELECOM, LIMITED
(Registrant)
Date: ______________
------------------------------------
__________________, Officer
Pursuant to the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
GS TELECOM, LIMITED
(Registrant)
Date: ______________
------------------------------------
Director
------------------------------------
Director
------------------------------------
Director
------------------------------------
Director
<PAGE>
OATLEY BYSTROM & HANSEN
A Professional Corporation of CPA's
6061 South Willow Drive, Suite 230
Greenwood Village, Colorado 80111
(303) 770-8383 o Fax (303) 721-6925
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
March 17, 1999
To the Board of Directors
GS Telecom Limited
Denver, Colorado
We have audited the accompanying consolidated balance sheet of GS Telecom
Limited as of June 30, 1998 and 1997, and the related consolidated statements of
operations, cash flows and changes in stockholders' equity (deficit) for the
years then ended. 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 did not audit the financial
statements of GST Limited, a wholly owned Isle of Man subsidiary, which
financial statements reflect all of the assets and revenues of the 1998
consolidated totals. Those financial statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to
the amounts included for GST Limited as of June 30, 1998 and for the year then
ended is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 accompanying consolidated financial statements referred to
above present fairly, in all material respects, the financial position of GS
Telecom Limited at June 30, 1998 and 1997, and the results of its operations and
its cash flows for the years then ended, in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been presented assuming
that the Company will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. As discussed in Note A to the financial statements, the Company has
incurred significant recurring losses and has substantial working capital and
stockholders' deficits as of June 30, 1998. At June 30, 1998, the Company had no
substantial product, services or properties and requires significant additional
financing to satisfy its outstanding obligations and commence operations. Unless
the Company successfully obtains suitable significant additional financing there
is substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also discussed in Note A. The
financial statements do not include any adjustments to reflect the possible
future effect on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.
OATLEY BYSTROM & HANSEN
F-1
STEIN RICHARDS
CHARTERED ACCOUNTANTS
10 London Mews, London, W2 1HY Tel: +44(0) 171 402 2176 Fax: +44(0) 171 724 4529
REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS
16th March 1999
To the Board of Directors
GS Telecom Limited
Denver, Colorado
We have audited the accompanying consolidated balance sheet of GST Limited (Isle
of Man) as of June 30, 1998 and the related consolidated statements of
operations, cash flows, and changes in stockholders' equity (deficit) for the
year then ended. 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
misstatements. 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 accompanying consolidated financial statements referred to
above present fairly, in all material respects, the financial position of GST
Limited (Isle of Man) at June 30, 1998 and the results of its operations and its
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been presented assuming
that the Company will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. As disclosed in the financial statements, the Company has incurred
significant recurring losses and has substantial working capital and
stockholders' deficits as of June 30, 1998. At June 30, 1998, the Company had no
substantial product, services or properties and requires significant additional
financing to satisfy its outstanding obligations and commence operations. Unless
the Company successfully obtains suitable significant additional financing there
is substantial doubt about the Company's ability to continue as a going concern.
Other than specific provisions included in the accounts, the financial
statements do not include any adjustments or reflect the possible future effect
on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the out come of this
uncertainty.
STEIN RICHARDS
Chartered Accountants
Registered Auditors
Martin Stein FCA Robert Nissen ACA
Registered to carry on audit work and authorised to carry on investment business
by the Institute of Chartered Accountants in England and Wales.
F-2
<PAGE>
<TABLE>
<CAPTION>
GS TELECOM LIMITED
CONSOLIDATED BALANCE SHEET
June 30,
1998 1997
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $- $ 204
Accounts receivable 3,938 -
Prepaid and other current assets 16,309 -
Total current assets $ 20,247 $ 204
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Convertible and demand notes payable $588,900 $ -
Accounts payable 695,519 -
Payable to affiliates and related parties 288,048 -
Accrued interest payable 23,712 -
Bank overdraft 1,378 -
Total current liabilities 1,597,557 -
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, no par value; 100 million shares authorized:
16,828,414 and 278,220 shares issued and outstanding,
respectively 1,137,357 966,857
Accumulated deficit (2,720,177) (966,653)
Foreign currency translation adjustments 5,510 -
Total stockholders' (deficit) (1,577,310) 204
Total liabilities and stockholders' equity (deficit) $20,247 $204
See accompanying notes
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GS TELECOM LIMITED
CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended June 30,
1998 1997
<S> <C> <C>
NET SALES $65,431 $6,139
COST OF SALES (134,645) -
Gross income (loss) (69,214) 6,139
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE 826,397 18,441
Loss from continuing operations (895,611) (12,302)
DISCONTINUED OPERATIONS:
Discontinued operations (140,099) -
Write-off investment in unconsolidated subsidiary (242,447) -
Write-off goodwill of consolidated subsidiaries (475,367) -
Loss from discontinued operations (857,913) -
Loss before extraordinary item (1,753,524) (12,302)
EXTRAORDINARY ITEM -
SETTLEMENT AND EXTINGUISHMENT OF TRADE DEBT
AND RELATED PARTY AMOUNTS PAYABLE - 146,545
NET INCOME (LOSS) $(1,753,524) $134,243
BASIC AND DILUTIVE NET INCOME (LOSS) PER SHARE:
(LOSS) FROM CONTINUING OPERATIONS $(0.11) $(0.04)
(LOSS) FROM DISCONTINUED OPERATIONS (0.11) -
EXTRAORDINARY ITEM - 0.52
NET INCOME (LOSS) PER SHARE $(0.22) $0.48
WEIGHTED AVERAGE SHARES OUTSTANDING 8,124,053 278,220
See accompanying notes.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GS TELECOM LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended June 30,
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(1,753,524) $134,243
Ad provided by operating activities
Write-off investment in unconsolidated subsidiary 242,447 -
Write-off goodwill of consolidated subsidiaries 475,367 -
Common stock issued for services 20,500 -
Depreciation and amortization 52,380 -
Changes in operating assets and liabilities:
Receivables (3,938) 576
Inventories - 5,851
Prepaid and other current assets (16,309) 196
Accounts payable 695,519 (120,795)
Accrued interest payable 23,712 -
Bank overdraft 1,378 -
Net cash flows from (used for) operating activities (262,468) 20,071
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (44,947) -
Investment in unconsolidated subsidiary (242,447) -
Investment in consolidated subsidiaries (332,800) -
Net cash flows (used for) investing activities (620,194) -
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from (repaid to) affiliates and related parties 288,048 (20,707)
Issuance of convertible and other notes payable 588,900 -
Net cash flows (used for) from financing activities 876,948 (20,707)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 5,510 -
NET INCREASE (DECREASE) IN CASH (204) (636)
CASH AT BEGINNING OF YEAR 204 840
CASH AT PERIOD END OF YEAR $- $204
SUPPLEMENTAL DISCLOSURES:
Net interest paid $24,119 $-
Non-cash investing and financing activities:
Note payable issued stockholders of acquired subsidiary 150,000 -
See accompanying notes.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GS TELECOM LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock Accumulated
Shares Amount Deficit
<S> <C> <C> <C>
Balances at July 1, 1996 278,220 $966,857 $(1,100,896)
Net income - - 134,243
Balances at June 30, 1997 278,220 966,857 (966,653)
Conversion of note payable issued to
stockholders of acquired subsidiary 14,500,000 150,000 -
Issuance of fractional shares from fiscal
1997 reverse stock split 194 - -
Stock issued for services 2,050,000 20,500 -
Net (loss) - - (1,753,524)
Balances at June 30, 1998 16,828,414 $1,137,357 $(2,720,177)
See accompanying notes.
F-6
</TABLE>
<PAGE>
GS Telecom Limited
Notes to Consolidated Financial Statements
Note A - Organization and Business
Organization and Nature of Business
- -----------------------------------
GS Telecom Limited, formerly Teleconferencing Systems International, Inc. (the
"Company") was incorporated in Colorado on December 19, 1983. Activities of the
Company from June 30, 1995 until November 15, 1997 were primarily liquidation of
operating assets and settlement of obligations owed creditors and employees as
previously reported.
On November 15, 1997, the Company acquired an Isle of Man company; also named GS
Telecom Limited (later changed to GST Limited - "GST"), by issuance of a
$150,000 convertible note payable. GST, the acquired subsidiary, had net
liabilities of $544,268. The note payable was subsequently converted into
14,500,000 shares of common stock and issued to the acquired company
stockholders, some of whom (David Innes) were related parties.
The assets of the GST subsidiary also included Associated Power Industries
Limited ("API"), an U.K. designer and manufacturer of energy savings systems.
GST owns 50% of API with an option to acquire the remaining 50% ownership
interest for three years beginning September 1, 1998. The investment in API has
been accounted for using the equity method, since the Company had insufficient
board representation or other control attributes involving API. During year
ended June 30 1998, Management elected to write- off its investment in API,
$242,447, as a result of API's continued operating losses.
GST also has two U.K. wholly owned subsidiaries: Guardian Smart Systems Limited
("GSS") and Total Energy Controls (Commercial) Limited ("TECC"). GSS' business
is the design and marketing of domestic energy savings and home management
systems and TECC's business is to market and install commercial energy saving
devices. Mainly due to a lack of working capital, neither GSS nor TECC was
successful, and Management elected, effective June 30, 1998, to discontinue
operations. Accordingly, the Company has taken steps and adopted a plan to pay
obligations owed employees and others, resulting in an estimated loss from
discontinued operations of $140,099, and expensed un-amortized goodwill totaling
$475,367.
Going Concern Considerations
- ----------------------------
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern, which contemplates the realization of assets
and satisfaction of liabilities in the normal course of business. The Company
has incurred significant recurring losses and has substantial working capital
and stockholders' deficits as of June 30, 1998.
At June 30, 1998, the Company had no substantial product, services or properties
and required significant additional financing to satisfy outstanding obligations
and to commence operations. Management's plans to address these matters include
private placements of stock, obtaining short-term loans, and seeking suitable
joint venture relationships in technology and e-commerce fields of business.
F-7
<PAGE>
GS Telecom Limited
Notes to Consolidated Financial Statements
Unless the Company successfully obtains suitable significant additional
financing there is substantial doubt about the Company's ability to continue as
a going concern. The financial statements do not include any adjustments to
reflect the possible future effect on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of this uncertainty.
Since June 30, 1998 the Company has entered into an agreement to acquire for
common stock of the Company, software ownership interests in software and
special effects production companies (see Note I).
Note B - Summary of Significant Accounting Policies
Principles of Consolidation
- ---------------------------
The financial statements include the accounts of GS Telecom Limited, GST
Limited, Guardian Smart Systems Limited and Total Energy Controls (Commercial)
Limited. All significant inter-company transactions and balances have been
eliminated.
Use of Estimates
- ----------------
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Significant areas requiring the use of management estimates are accrual of costs
of discontinued operations, assessment of realization of goodwill and
investments, useful asset lives for depreciation and amortization, and valuation
of stock of issued for services and deferred tax benefits. Actual results
inevitably will differ from those estimates, and such differences may be
material to the financial statements.
Foreign Currency
- ----------------
The financial statements of the Company's non-U.S. subsidiaries are translated
into U.S. dollars using current rates of exchange, with gains or losses included
in the cumulative translation adjustment account in the stockholders' equity
section of the consolidated balance sheet. Revenues, costs and expenses
denominated in foreign functional currencies are translated at the weighted
average exchange rate for the period. Gains and losses on currency transactions
(denominated in currencies other than the local currency) are reflected in the
statement of consolidated operations.
F-8
<PAGE>
GS Telecom Limited
Notes to Consolidated Financial Statements
Revenue Recognition
- -------------------
Sales are recognized when products are shipped. Sales generally are on an open
account basis, subject to credit limits.
Property, Plant and Equipment
- -----------------------------
Property, equipment and vehicles are recorded at cost. Maintenance and
repair costs are charged to expense as incurred, and renewals and
improvements that extend the useful life of assets are capitalized.
Depreciation is computed using the straight-line method over the assets'
estimated useful lives as follows:
Equipment 4 years
Vehicles 4 years
Office equipment 4 years
On June 30, 1998, substantially all operations of the Company's subsidiaries
were discontinued and the remaining net costs of depreciable assets were charged
off. Accordingly, depreciation expense recorded in fiscal 1998 and 1997 was
$44,947 and none, respectively.
Goodwill
- --------
Goodwill arose from the acquisition of GST in fiscal 1998 for assumption of net
liabilities totaling $332,800 and issuance of a $150,000 convertible note
payable to stockholders of the subsidiary. Prior to June 30, 1998, goodwill was
being amortized over 40 years on a straight-line basis. As of June 30, 1998,
Management elected to discontinue the operations of GST, and accordingly,
write-off the $475,367 unamortized cost of the goodwill.
Income Taxes
- ------------
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," which incorporates the use of
the asset and liability approach of accounting for income taxes. The asset and
liability approach requires the recognition of deferred tax assets and
liabilities for the expected future consequences of temporary differences
between the financial reporting basis and tax basis of assets and liabilities
(see Note D).
Statement of Cash Flows Information & Supplemental Non-Cash Financing Activities
- --------------------------------------------------------------------------------
Cash and cash equivalents include cash and short-term investments with original
maturities of three months or less.
F-9
<PAGE>
GS Telecom Limited
Notes to Consolidated Financial Statements
Basic Earnings (Loss) Per Share
- -------------------------------
Basic earnings (loss) per share of common stock are computed using the weighted
average number of shares outstanding during each period. Diluted earnings per
share is computed on the basis of the average number of common shares
outstanding plus the dilutive effect of convertible notes payable.
The basic and the dilutive earnings per share are the same in fiscal 1998 since
the Company had a net loss and the inclusion of the effect of the convertible
notes issued in 1998 would be anti-dilutive.
Concentrations
- --------------
Substantially all operations of the Company were conducted in the U.K. in fiscal
1998.
Note C - Notes Payable
Unsecured 9% notes payable to an individual
dated February 19, 1998 and March 31, 1998,
payable on demand. $212,400
8% convertible notes payable issued November
20, 1997, due September 30, 2000. The notes
are classified as a current liability because
the Company has subsequently agreed to repay
the obligations upon receipt of anticipated
funding in fiscal 1999. 376,500
---------
$588,900
Note D - Income Taxes
As a result of the substantial change in ownership of the Company arising from
the issuance of 14.5 million shares of common stock in November 1997, the
Company's net operating loss carryforward became limited to the estimated value
of the stock issued. As of June 30, 1998 the accumulated net operating loss
carryforward totals approximately $150,000 that may be offset against future
taxable income, if any. The loss carryforward expires in varying amounts from
2003 through 2013.
A tax benefit has not been reported in the accompanying financial statements for
the operating loss carryforward because the Company is uncertain as to the
likelihood of utilization. Accordingly, the approximate tax benefit of $22,500
of the loss carryforward has been offset by a valuation allowance of the same
amount, a decrease of $87,500 in 1998.
Note E - Stockholders' Equity
Stock-Split
- -----------
On January 6, 1998, the board of directors approved a 150-to one reverse split
of the issued and outstanding common shares of the Company. All share and per
F-10
<PAGE>
GS Telecom Limited
Notes to Consolidated Financial Statements
share amounts have been retroactively restated in the accompanying financial
statements to reflect the effect of the reverse stock split.
Conversion of Note Payable
- --------------------------
On November 15, 1997, the Company acquired GST by issuance of a $150,000
convertible note payable to GST stockholders. On January 6, 1998, the $150,000
note payable was converted into 14,500,000 shares of common stock (approximately
$.01 per share).
Stock Issued for Services
- -------------------------
On February 10, 1998, the Company issued 2,050,000 shares of common stock
registered on Form S-8 to two individuals (holders of note payable from the
Company) for services related to the reorganization of the Company. The value of
the services were estimated at $20,500 ($.01 per share).
Convertible Notes Payable
- -------------------------
The convertible note holders have the option to convert the original principal
amount of the notes (a total of $376,500) into common stock at the lower of $2
per share or 75% of the average closing bid price of the stock for trading five
days prior exercise. Notwithstanding the foregoing, if, after the effectiveness
of a registration statement or if an exemption is available from registration,
the closing bid price of the common stock reaches $4 per share for five
consecutive trading days, the Company has the option to require conversion of up
to 50% of the original principal, and if the closing bid price reaches $8 per
share, the Company has the option of requiring conversion of all of the original
principal.
Note F - Related Party Transactions
The Company paid management fees to an entity owned by a
stockholder/director/officer of the Company totaling $12,000 in fiscal 1997.
Certain companies owned by David Innes, an officer and Director, and members of
his family and others, received stock by purchase and through note conversion
totaling 4,255,399 shares of the Company in 1998. The proporationate ownership
of the private companies holding the shares is not known and has not been
disclosed to the Company. Mr. Innes received shares as part of the note
conversion for the acquisition of GS Telecom of the Isle of Man.
Note G - Commitments
The Company leases its present office on a month-to-month basis at $1,000 per
month. Rental expense for offices and related facilities in fiscal 1998 and 1997
was $25,171 and none, respectively.
Note H - Fair Value of Financial Instruments
The carrying amounts for accounts receivable, accounts payable and accrued
expenses approximates fair value because of the short maturities of these
instruments. The fair value of notes payable approximates fair value because of
the market rate of interest on the debt.
The determinations of fair value discussed above are subjective in nature and
involve uncertainties and significant matters of judgment and do not include
income tax considerations. Therefore, the results cannot be determined with
precision and cannot be substantiated by comparison to independent market values
and may not be realized in actual sale or settlement of the instruments.
F-11
<PAGE>
GS Telecom Limited
Notes to Consolidated Financial Statements
Note I - Events Subsequent to June 30, 1998 (Unaudited)
In September 1998, the Company entered into a reverse merger agreement to
acquire Masstech, Inc., a Delaware corporation. Subsequently, the merger
agreement was modified to provide for the Masstech' software and intangible
property rights ("IPR") for $150,000 in the form of 6.6 million shares of common
stock of the Company (approximately $.23 per share). In addition, two principals
of Masstech, Dr. Steven Gillam and Mr. Andrew Castle, agreed to sell to the
Company for 48.4 million shares of common stock of the Company, their 15%
ownership interest in each of four companies involved in producing special
effects for the Hollywood film industry:
Manex Studios, LLC
Manex Visual Effects, LLC
Manex Entertainment, LLC
Mass Illusions, LLC
Subsequent to entering into the initial agreement, Dr. Gillam and Mr. Castle
have been appointed as members of management and directors of the Company. The
proposed transaction is yet not closed because "due diligence" has not been
entirely completed nor has contract restructuring.
Universal Syntropy Corporation, a California corporation wholly owned and
organized by the Company in fiscal 1999, is managing the commercialization of
the IPR discussed above. Universal Syntropy is located in Alameda, California
F-12
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
TELECONFERENCING SYSTEMS INTERNATIONAL, INC.
Pursuant to the provisions of the Colorado Corporation code,
Teleconferencing Systems International, Inc. adopts the following Articles of
Amendments to it Articles of Incorporation:
The following amendment to the Articles of Incorporation was authorized
on January 5, 1998, as prescribed by the Colorado Corporation Act, by a vote of
more than two thirds of the shareholders. The number of shares voted for the
amendment was sufficient for approval.
FIRST: The name of the Corporation is hereby changed to:
GS Telecom Limited
SECOND: The manner, if not set forth in such amendment, in which any
exchange, reclassification, or cancellation of issued shares provided for in the
amendment shall be effected, is as follows:
None.
THIRD: The manner in which such amendment effects a change in the amount of
stated capital as changed by such amendment, are as follows:
None.
Teleconferencing Systems International, Inc.
By:_________________________________________
President
Attest:_________________________
Secretary
STATE OF UTAH )
) ss.
COUNTY OF _____________ )
The foregoing Articles of Amendment to the Articles of Incorporation
was acknowledged before me by Robert Kropf as President of Teleconferencing
Systems International, Inc., a Colorado corporation, this ___ day of January,
1998.
My Commission expires: ___________________________
Notary Public
Address:
<PAGE>
STATE OF COLORADO )
) ss.
COUNTY OF JEFFERSON )
The foregoing Articles of Amendment to the Articles of Incorporation was
acknowledged before me by Michael A. Littman as Assistant Secretary of
Teleconferencing Systems International, Inc. a Colorado corporation, this 20th
day of January, 1998.
My Commission expires: 2/24/98 ___________________________
Notary Public
10200 W. 44th Ave., #400
Wheat Ridge, CO 80033
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 3,938
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,247
<CURRENT-LIABILITIES> 159,755
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (2,720,177)
<TOTAL-LIABILITY-AND-EQUITY> 20,247
<SALES> 65,431
<TOTAL-REVENUES> (69,214)
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 826,397
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (895,611)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> (857,913)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,753,524)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
