U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (Fee Required)
For the quarterly period ended June 30, 1996
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (No Fee Required)
For the transition period from __________ to
Commission file number 0-15818
GLOBAL TELEMEDIA INTERNATIONAL, INC.
f/k/a Phoenix Advanced Technologies, Inc.
(Name of small business issuer in its charter)
FLORIDA 64-0708107
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1121 Alderman Drive, Suite 200, Alpharetta, Georgia 30202
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (770) 667-6088
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No __
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes ____ No ___
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practical date 13,618,897 shares of Common
Stock as of July 15, 1996.
Transitional Small Business Disclosure Format (Check One): Yes __ No X
<PAGE>
Global Telemedia International, Inc.
and Subsidiaries
Quarterly Report on Form 10-QSB
For Quarter Ended June 30, 1996
INDEX
Page
Consolidated Balance Sheet as of June 30, 1996.,.......................... 1
Consolidated Income Statement for the Three and Six
Months ended June 30, 1996 and June 30, 1995......................... 2
Consolidated Statements of Cash Flows for the Six
Months ended June 30, 1996 and June 30, 1995......................... 3
Consolidated Statements of Shareholders' Equity for the
Three and Six Months ended June 30, 1996............................. 4
Notes to Consolidated Financial Statements................................ 5
Part I - Item 2. Management's Discussion and Analysis of Financial
Condition, Liquidity and Capital Resources,
and Results of Operations........................... 12
Part II - Item 1. Legal Proceedings....................................... 15
Part II - Item 5. Other Information....................................... 15
Part II - Item 6. Exhibits and Reports on Form 8-K........................ 16
Signatures................................................................ 25
<PAGE>
Global Telemedia International, Inc.
and Subsidiaries
Consolidated Balance Sheet
June 30, 1996
(Unaudited)
ASSETS
[S] [C]
Current assets
Cash $ 477,910
Accounts receivable 435
Due from stockholders 27,129
Inventory 91,238
Other current assets 263,261
-------------
Total Current assets 859,973
Property and equipment, net of accumulated depreciation
of $80,623 161,288
-------------
Total Assets $ 1,021,261
=============
LIABILITIES AND STOCKHOLDERS' EQUITY DEFICIENCY
Current liabilities
Accounts payable $ 404,887
Accrued expenses 120,357
Notes and interest payable 1,580,151
Due to stockholder 60,000
-------------
Total Current liabilities 2,165,395
Other long term liabilities 277,855
Stockholders' equity
Common stock, $.004 par value, authorized 25,000,000 shares;
issued and outstanding 13,618,897 54,459
Additional paid-in capital 779,982
Accumulated deficit (2,256,430)
-------------
Total Stockholders' equity (1,421,989)
-------------
Total Liability and Stockholders' Equity $ 1,021,261
=============
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Global Telemedia International, Inc.
and Subsidiaries
Consolidated Income Statement
(Unaudited)
Three Months ended June 30 Six Months ended June 30
1996 1995 1996 1995
[S] [C] [C] [C] [C]
Revenues:
Communication and
marketing
services $ 262,142 $ 1,362,433 $ 596,784 $ 2,742,732
Product sales 3,144 0 8,267 4,946
------------ ------------ ------------ ------------
Total revenues 265,286 1,362,433 605,051 2,742,732
Operating expenses:
Communication
and marketing
services 278,668 1,104,379 487,750 2,166,035
Cost of products sold 60,253 0 94,191 2,846
General and
administrative 861,013 853,583 1,630,671 2,154,532
------------ ------------ ------------ ------------
Total operating
expenses 1,199,934 1,957,962 2,212,612 4,323,413
------------ ------------ ------------ ------------
Operating (loss) (934,648) (595,529) (1,607,561) (1,575,735)
------------ ------------ ------------ ------------
Other income (expenses):
Interest expense (27,576) (8,396) (34,413) (28,234)
Interest income 1,073 0 1,304 0
Other income 11,331 26,590 18,750 312,053
------------ ------------ ------------ ------------
Net loss $ (949,820) $ (577,335) $(1,621,920) $(1,291,916)
============ ============ ============ ============
Net loss per share (0.08) (0.11) (0.15) (0.22)
============ ============ ============ ============
Weighted average
number of shares
and share equivalents
outstanding 12,264,848 5,237,399 11,128,106 5,784,118
============ ============ ============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Global Telemedia International, Inc.
and Subsidiaries
Consolidated Statement of Cash Flows
(Unaudited)
Six months ended June 30
1996 1995
[S] [C] [C]
Cash flows from operating activities
Net (Loss) $ (1,621,920) $ (1,291,916)
------------- -------------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 16,044 194,161
Stock issued for services 191,615 -
Changes in assets and liabilities:
Decrease (increase) in:
Receivables and amounts due
from stockholders (22,264) (198,300)
Inventories (52,144) 36,703
Other current assets (174,265) (45,288)
Increase (decrease) in:
Accounts payable and accrued
expenses 179,214 407,802
Amounts due to stockholders (56,485) -
------------- -------------
Total adjustments 81,715 395,077
------------- -------------
Net cash used in operating activities (1,540,205) (896,838)
------------- -------------
Cash flows from investing activities
Acquisition on property and equipment (43,589) (82,710)
------------- -------------
Net cash used in investing activities (43,589) (82,710)
------------- -------------
Cash flows from financing activities
Payments on notes payable 0 (495,619)
Borrowings on notes payable 1,500,000 0
Proceeds from issuance of common stock 368,728 1,242,155
------------- -------------
Net cash provided by financing activities 1,868,728 746,536
------------- -------------
Net increase (decrease) in cash & cash
equivalents 284,934 (233,012)
Cash at beginning of period 192,976 32,248
------------- -------------
Cash and cash equivalents at end of period $ 477,910 $ (200,764)
------------- -------------
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ - $ (28,234)
============= =============
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Global Telemedia International, Inc.
and Subsidiaries
Consolidated Statement of Shareholders' Equity
<TABLE>
<CAPTION>
Additional Common Stock Total
Common Stock Issued Paid-In Issued for Shareholders'
Shares Par Value Capital Future Services Deficit Equity
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 9,937,991 $ 39,735 $ 197,363 $ - $ (634,510) $ (397,412)
Sale of Stock 115,500 462 58,196 - - 58,658
Shares Issued to Consultants 169,000 676 7,774 - - 8,450
Compensation Earned 525,000 2,100 24,150 - - 26,250
Net Loss - - - - (672,100) (672,100)
----------- ---------- ---------- ------------- ------------- -------------
Balance, March 31, 1996 10,747,491 $ 42,973 $ 287,483 $ - $ (1,206,610) $ (976,154)
Sale of Stock 12,000 48 5,952 - - 6,000
Shares Issued in connection with
settlement 929,406 3,718 52,767 - - 56,485
Shares Issued to Consultants 1,530,000 6,120 70,380 (37,000) - 76,500
Compensation earned 50,000 200 2,300 - - 7,500
Exercise of warrants 350,000 1,400 361,100 - - 362,500
Net Loss - - - - (949,820) (949,820)
----------- ---------- ---------- ------------- ------------- -------------
Balance, June 30, 1996 13,618,897 $ 54,459 $ 779,982 $ (37,000) $ (2,256,430) $ (1,421,989)
=========== ========== ========== ============= ============= =============
The accompanying notes are an intergral part of these consolidated financial statements.
</TABLE>
<PAGE>
Global Telemedia International, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1. Organization and Nature of Business
Description of Business and Operations
Global TeleMedia International, Inc. f/k/a Phoenix Advanced Technology, Inc.
(the "Company" or "GTMI") was incorporated in the State of Florida in December
1984. The Company is primarily engaged in the marketing of information and
telecommunications services, which include but are not limited to residential
and commercial long distance, prepaid calling cards, interactive voice mail
and other enhanced voice recognition services. The Company primarily
utilitizes independent representatives to market its long distance service to
residential and small business subscribers, throughout the United States.
Since providing these services, the Company has utilized network switching and
transmissions facilities provided by other companies, however, the Company is
in process of implementing a Nationwide Enhanced Services Platform called
"Workhorse". Workhorse will enable the Company to offer many of its
information and telecommunication services directly to its customers instead
of outsourcing these services as well as introducing new services.
While implementing Workhorse, the Company is in the process of being licensed
as a certified telecommunications carrier. At present, the Company is
authorized to act as a certified telecommunications carrier in 30 states, is
pending approval in 7 states, and is preparing to file for approval in the
remaining states during the third quarter. Additionally, the Company has
obtained its FCC Interstate license and FCC 214 International Tariff. Carrier
status allows the Company to deal directly with its underlying carriers and
will allow the Company to provide better service to its customers at a lower
cost to the Company. In the past the Company was required to process its
provisioning and billing for the customers of the telecommunications
subsidiaries through such providers who were unable to provide service in a
satisfactory or timely fashion.
The Company anticipates that it will acquire carrier status by late third
quarter 1996. However, there can be no assurances to this effect. Until the
Company acquires carrier status, the Company will act as a marketing agent for
a variety of long distance service providers for which it is compensated on a
monthly basis for total billable minutes carried by the specific provider.
Additionally, in the event that the Company reaches its targeted carrier
status, the Company intends to enter into agreements with various underlying
carriers. These agreements are typically for terms ranging from one to three
years and are typically renewable for like terms. Such agreements would
provide the Company with access to inter-exchange networks at rates which are
typically discounted and vary with monthly traffic generated on each network.
Such agreements will likely obligate the Company to guarantee certain minimum
monthly usage commitments. Payment terms typically range from net 15 days to
net 45 days.
The Company also licenses certain nutritional products which the Company
expects to provide a nominal amount of revenue.
Marketing Activities
While the Company has greatly expanded its telecommunications personnel
capabilities, its core strength is still its unique marketing skills. The
Company's business plan is three pronged. The first is through internal
growth led by its network marketing channel, Vision 21. The second prong is
its direct agency program, which segues into its third prong, an aggressive
mergers and acquisitions program. The Company believes that in the
telecommunications industry, especially the second tier, there exists a strong
consolidation opportunity. The full deployment of the Company's nationwide
switching network will establish the Company as a reliable wholesale carrier
as well as a premier enhanced service provider. This status opens up an
additional marketing channel previously unavailable to the Company, the
wholesale carrier business.
The Company's long distance service is sold primarily by independent
representatives located throughout the United States under the Company's
wholly owned subsidiary, Vision 21. Vision 21 markets the Company's products
and services via network marketing through Independent Communications
Representatives (ICRs), Qualified Communications Representatives (QCRs), and
Field Instructors (FIs). The Company believes that this method of distribution
to the marketplace is effective in both building and retaining customer
loyalty due to the fact that customers are acquired by "relationship selling"
whereby customers acquired are generally from the independent agent's "warm
market" or immediate center of influence (i.e., friends, relatives, etc.).
Further, the Company recognizes that this is an efficient and cost-effective
method of acquiring marketshare. The Company relies strongly on this
"relationship selling" method of acquiring customers, and therefore, it is
not subjected to significant advertising costs and overhead for salaries and
related expenses.
Additionally, the Company markets through its direct agency network.
Individuals and companies either with or without telecommunications experience
go to the marketplace through the Company's personally customized products and
services. These independent agencies provide the Company with a patchwork
quilt of conventional and non-conventional marketing niches. The Company not
only gains penetration in areas it may or may not have identified internally,
but also benefits by orchestrating this large sales force at no direct
marketing cost to the Company. Each agency funds their own business and
marketing plan and the Company's responsibility lies in the areas of
administrative support.
The Company has created sales and marketing literature and merchandise that
educates the sales agents about the programs and products the Company offers.
The Company's literature and merchandise also aid the agents in recruiting
customers and other agents. The sales agents may purchase the literature and
merchandise to aid them in their sales efforts. These literature sales to
agents additionally serve as a revenue source for the Company.
Interim Information
The accompanying unaudited condensed consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries. All
intercompany accounts and transactions have been eliminated in consolidation.
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Rule 10-01 of
Regulation S-X promulgated by the Securities and Exchange Commission. Such
financial statements do not include all disclosures required by generally
accepted accounting principles for annual financial statement reporting
purposes. However, there has been no material change in the information
disclosed in the consolidated financial statements included in the Company's
Form 10-K for the year ended December 31, 1995, except as disclosed herein.
Accordingly, the information contained herein should be read in conjunction
with the consolidated financial statements and related disclosures contained
in the Company's Form 10-K for the year ended December 31, 1995. The
accompanying financial statements reflect, in the opinion of management, all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation of the interim periods presented.
The periods presented are the three and six months ended June 30, 1996 and
1995, respectively. Certain reclassifications have been made to the prior
year financial statements to conform to the current year presentation.
2. Summary of Significant Accounting Policies
Cash and Cash Equivalents
For financial reporting purposes, cash and cash equivalents includes cash on
hand and highly liquid money market investments.
Property and Equipment
Property and equipment, including items financed through capital leases, are
recorded at cost, and depreciated using the straight-line method over the
estimated useful lives of the assets, commencing when the assets are installed
or placed in service. The estimated useful lives are ten years for furniture
and fixtures, seven years for office equipment, and five years for computer
equipment. The cost of installed equipment includes expenditures for
installation. Assets recorded under capital leases and leasehold improvements
are amortized over the shorter of their useful lives or the term of the
related lease.
Inventory
Inventory consists of promotional and training materials used in the Vision 21
marketing program.
Stock-Based Compensation
In October 1995, the Financial Accounting Standards issued SFAS 123
"Accounting for Stock Based Compensation," which the Company elected to adopt
as of January 1, 1995. Under SFAS 123, the Company recognizes compensation
expense for all stock-based compensation, using a fair value methodology.
Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109
"Accounting for Income Taxes" which requires that deferred income tax expenses
be provided based upon estimated future tax effects of differences between the
carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes calculated based upon provisions
of enacted tax laws.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles (GAAP) requires management to make
estimates and assumptions that effect the reported amounts of assets,
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 may differ from these estimates.
Net Loss Per Share
Net loss per share is based on the weighted average number of common shares
outstanding during each period. Common stock equivalents include stock
appreciation and warrants. For 1996 and 1995, common stock equivalents were
not considered in the calculation of net loss per share as they were
anti-dilutive.
3. Other Current Assets
Other current assets consist of the following at June 30, 1996:
[S] [C]
Deposit for purchase of building................................... $ 100,000
Prepaid debt financing, net of accumulated amortization............ 100,685
Prepaid consulting (through issuance of stock)..................... 37,000
Other miscellaneous deposits....................................... 25,576
---------
$ 263,261
=========
4. Notes Payable
Notes payable consist of the following at June 30, 1996:
[S] [C]
Current:
18 % note payable, due on demand.................................. $ 273,468
Various floating rate notes, due on demand........................ 250,000
8% convertible debentures, due 1997............................... 1,000,000
----------
$1,523,468
==========
[S] [C]
Long-term:
10% convertible debentures, due 1998............................. $ 250,000
===========
On April 3, 1996, the Company sold $2,500,000 of 10% convertible debentures to
a group of investors, of which $250,000 has been received to date. The
convertible debentures are payable in full two years from the date of sale.
Holders of the convertible debentures may convert principal and accrued
interest all or in part into Common Stock after April 1996.
On April 11, 1996 the Company entered into a letter of intent with CAM-NET
Communications Network, Inc. (CAM-NET), whereby CAM-NET agrees to make a
tender offer for the Company's common stock if certain performance conditions
are met. The letter of intent is subject to final negotiations and approval
of the companies board of directors and the Company's shareholders. During
April, 1996 the Company sold $250,000 of various floating rate notes to
CAM-NET Communications. These notes are payable on demand and have been
secured by the Company's rights under a long distance service agreement
entered into in the prior year.
On June 14, 1996, the Company sold $1,000,000 of 8% convertible debentures to
a group of investors. The convertible debentures are payable in full one year
from the date of sale and may be paid in cash or in common stock. Holders of
the convertible debentures may convert principal and accrued interest all or
in part after 45 days from funding.
5. Due to stockholder
Due to stockholders include an 18% note for $50,000 and an 18% note for
$10,000, both of these notes are due on demand. None of the foregoing
stockholders have sufficient management influences to be characterized as
"related parties."
6. Fair value of financial Instruments
Certain note payables and due to stockholders amounts are due on demand;
however the Company does not have the funds needed to settle these amounts
currently. As a result, the Company is unable to estimate the timing and
ultimate form of their settlement. It is believed that if the current holders
were to sell such instruments to other parties, the sales price would be
substantially less that the carrying value.
7. Leases
The Company leases certain office equipment and office space under operating
leases. The Company's office space lease contains a provision to acquire
title to the building or upon exercise of a provision to extend the lease for
another six months. The monthly lease payment is $12,500 and the Company has
extended the lease and the closing on the purchase to August 31, 1996. The
purchase price noted in the purchase agreement is $2,500,000.
The Company has also entered into a capital lease agreement for certain
equipment. Short term capital lease obligations equaled $6,116 while long
term capital lease obligations equaled $27,855 at June 30, 1995.
8. License Agreement
On January 23, 1995 the Company licensed its former food products business,
sold the inventory and assigned the rights to the distribution network used in
the sale of the products. The contract provides for various royalties based
on type of sale and product. The agreement also has provisions for minimum
quarterly royalties beginning the third quarter of 1995 and continuing for
seven quarters. During the first quarter of 1995, the Company recognized the
initial $275,000 license fee as all the initial services required under the
terms of the agreement were performed.
9. Foreclosure Loss
In connection with an agreement to sell restricted stock, the Company entered
into a loan agreement with the potential investor. The loan was secured by
the Company's list of customers on a certain long-distance carrier and certain
other assets. The loan agreement required the Company to maintain its NASDAQ
listing until the closing of the stock sale agreement. Prior to the closing
date, the Company was delisted from NASDAQ and was, therefore, in default of
the loan agreement. As part of the foreclosure proceedings, the Company
agreed to transfer all the shares of stock of its subsidiary, Global
TeleMedia, Inc. In addition, the Company transferred certain other assets not
included among the assets of the subsidiary but which were also pledged as
security.
Included in the consolidated statement of loss are the operating results of a
foreclosed subsidiary (which are substantially all revenues of the Company)
for period January 1, through June 30, 1995 as follows:
1995
[S] [C]
Sales $ 2,747,678
Costs and expenses (4,323,413)
-------------
Loss from operating $ (1,575,735)
=============
Since the Company remains in the business of marketing long distance telephone
services, the foregoing does not qualify as the disposal of a business segment.
In connection with the foreclosure of its interest in the subsidiary, the
acquiring entity made a claim that the Company did not transfer all the assets
required under the terms of the security agreement. Subsequent to December
31, 1995, the parties reached a tentative settlement of approximately $100,000.
However, the final settlement has not been approved by the parties as the
Internal Revenue Service placed a levy on any payments from the Company to the
acquiring entity as a result of the acquiring entities failure to pay payroll
tax liabilities. Due to the uncertainty of the ultimate outcome, no amounts
have been provided for in the Company's consolidated financial statements as
of June 30, 1996.
10. Corporate Readjustment
In view of significant changes in the Company's marketing and other operating
practices, and its management, the Board of Directors of the parent and its
wholly-owned subsidiaries approved at a special meeting on April 12, 1996 a
corporate readjustment of stockholders' equity accounts as of October 1, 1995,
effected in accordance with accounting principles applicable to
quasi-reorganizations. Under Florida law (the state of incorporation of the
parent), this action does not require shareholder approval. The adjustment
was effected by offsetting the accumulated deficit as of September 30, 1995,
of $13,188,000 against additional paid-in capital.
Because the carrying amounts of the Company's assets and liabilities
approximate their fair or net realizable values, no further valuation
adjustments were necessary in connection with the readjustment.
11. Commitments
The Company has employment agreements with certain officers and key employees,
which expire at various times through 2000.
The Company has sold or granted warrants to acquire common stock at various
times and under various agreements at prices that approximated or exceeded
fair value of the date of issue. These warrants range in exercise prices from
$1.25 to $3.75.
The Company's long distance and marketing activities are subject to certain
federal and state regulations. The Company is involved in various regulatory
matters as well as lawsuits incidental to its business. In the opinion of
management, these regulatory matters and lawsuits in the aggregate will not
have a material adverse effect on the Company's financial position or the
results of operations of future periods.
12. Subsequent Events
On July 15, 1996, the Company executed an agreement to purchase for
approximately $2.6 million, equipment necessary for the Company's nationwide
Enhanced Services Platform. The Company plans to complete the first phase of
implementation during the forth quarter with the second phase scheduled for
completion during 1997.
On July 31, 1996, the Company received $1 million from a group of investors
and signed an agreement to receive an additional $4 to $9 million at the
Company's option. In exchange for this funding, the Company will issue
convertible debentures which if not converted, are payable in full in common
stock, two years from the date of sale. Holders of the convertible debentures
may convert principal and accrued interest after 45 days from funding.
<PAGE>
PART I. Financial Information
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
FINANCIAL POSITION
The Company's cash and cash equivalents increased $284,937 during the six
months ended June 30, 1996. Principal sources of funds consisted of (i)
borrowings on notes payable ($1,500,000) and (ii) proceeds from the issuance
of common stock ($368,728). The primary uses of funds consisted of (i)
operating activities ($1,540,205) and (ii) costs associated with additions to
property and equipment ($43,589).
During the second quarter, the Company developed a new marketing video and
improved various marketing literature and merchandise for the Vision 21
independent representatives. Based on the Company's positive feedback on
these new products, inventories of these items were increased during the end
of the second quarter. This resulted in an increase in inventory of $52,144.
The increase in other assets primarily reflect (i) a $100,000 deposit for the
Company's office space, which will be applied to the down payment when the
Company exercises its option to purchase the building and (ii) capitalization
of $100,000 of debt financing costs associated with the issuance of a
$1,000,000, 8% convertible debenture.
The increase in accounts payable reflects the Company's ability to effectively
manage its working capital.
The increase in notes payable and accrued interest represents the issuance of
various demand notes and convertible debentures totaling $1,500,000. During
the six months ended June 30, 1996, the Company received $368,728 from the
issuance of common stock. The majority of these proceeds were received from
the conversion of various warrants at prices ranging from $.50 to $1.25 per
share. These funds have been used for working capital purposes and for
improvement of the Company's liquidity position as of June 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company has incurred losses from operations since its inception. These
losses and the acquisition of products, property, equipment, patent rights and
other companies has been funded almost exclusively through the sale of common
stock, warrants and limited partnership units (which were sold during its
start-up period, prior to its initial public offering and later converted
into Company common stock).
While its operating and development expenses have exceeded operating revenues
since the commencement of its telecommunication business, Management of the
Company has taken various steps for long term growth, profitability, and
increase shareholder value. Although the implementation of any program has
been adversely impacted through June 30, 1996 by the lack of capital resources
and liquidity, Management is seeking to elevate itself to carrier status which
should increase margins with little additional expenditures. In addition, on
July 31, 1996, the Company signed an agreement to provide additional funding
of up to $10,000,000. In the event the Company completes this funding,
Management believes the Company will have adequate capital resources for
implementing its long term strategic plan which includes implementing a
Nationwide Enhanced Services Platform, entering into strategic alliances with
complimentary companies offering unique technologies, and aggressively
pursuing certain acquisitions which will improve the Company's long term
growth and profitability. However, there can be no assurances that such
funding will be completed or that the business of the Company will ever
achieve profitable operations.
RESULTS OF OPERATIONS
The Company seeks to manage its business to enhance long-term growth and
shareholder value. The Company also seeks to utilize financial leverage and
cash flow generated from operations to support capital expenditures and
possible future acquisitions. The Company intends to be an acquirer of new
technologies that would (i) result in an acceptable rate of return on such
long term investments and (ii) provide adequate opportunity to effectively
implement the Company's operating strategies.
Operating (loss)
The decrease in communication and marketing services and total operating
expenses for the six months ended June 30, 1996 compared to the prior year,
resulted primarily from the foreclosure loss of the Company's previously owned
subsidiary. In the prior year, this subsidiary represented substantially all
the revenues and expenses of the Company. Subsequent to this foreclosure, the
Company has been actively attempting to expand its customer base through
promotional activities and new product development.
Communication and marketing service expenses as a percentage of communication
and marketing service revenue were 81.7% compared to 79.0% for the six months
ended June 30, 1996 and 1995, respectively. This increase in expenses as a
percentage of revenue is primarily due to the decrease in monthly minute
volume which results in higher long distance carrier charges. The Company
anticipates an improvement in these ratios as additional volume is generated
through internal growth and customer base acquisitions.
The increase in costs of products sold reflects the costs associated with the
development of a new marketing video and improvement of various marketing
literature and merchandise for the Vision 21 independent representatives. The
Company has elected to expense the design and development costs associated
with producing these new products as there can be no assurance that these
costs will be recovered from the sale of these items.
General and administrative costs decreased $523,861 for the six months ended
June 30, 1996 compared to the same period in the prior year, as the Company
has been effectively monitoring its overhead costs during the development of
its new customer base.
Other income (expenses)
On January 28, 1995 the Company entered into a license agreement with L&M
Group, Inc. under which L&M purchased the Company's inventory of the food and
nutritional products sold by the Company at the Company's cost and received
from the Company the exclusive right to sell those products world-wide. In
consideration of the license granted by the Company, L&M paid the Company cash
in the amount of $275,000 for the rights to distribute and market these
products. This one time fee was recorded as other income during the six months
ended June 30, 1995. Royalty income received during the six months ended June
30, 1996 totaled $18,750.
Interest expense increase for the six months ended June 30, 1996 compared to
1995 due to increases in notes payable.
<PAGE>
PART II
Item 1. Legal Proceedings
On May 8, 1996, an action was filed in the United States District Court,
Northern District of Oklahoma against the Company by Worldcom Network
Services, Inc., d/b/a WilTel alleging breach of contract. On July 23, 1996,
a pending settlement has been reached between the parties whereby WilTel will
file a dismissal of the action and GTMI and WilTel will enter into a services
agreement whereby WilTel will provide GTMI with telecommunications services.
On June 8, 1996, an action was filed against the Company in the Superior Court
of Fulton County, Georgia by a former employee, John L. Walsh, alleging breach
of contract. The Company has filed answer, defenses and a counterclaim
against Mr. Walsh for breach of contract, breach of fiduciary duty, action for
tortuous interference with employment relations and violations of trade
secrets. While the Company can make no assurances as to the outcome, the
Company intends to vigorously defend its position, pursue recovery of its
claim, and anticipates a favorable resolution.
Item 5. Other Information
On July 15, 1996, the Company executed an agreement with IEX Corporation to
purchase for approximately $2.6 million, equipment necessary for the Company's
implementation of a three phased nationwide Enhanced Services Platform,
"Workhorse". The Workhorse Platform will allow the Company to offer in-house
an array of services, including but not limited to; enhanced 800, enhanced
debit card, enhanced travel card, international callback, locator service,
follow me service, and various interactive voice response services. The
underlying software includes a powerful patented rules engine that enables
users to develop unique call processing applications with simple "point and
click" service building tools. This rules engine allows configuration of
specific call processing for specific clients to allow highly customized
services. Service creation tools will enable the user to develop completely
integrated rules that include the special interactive voice recognition
scripts, switching platform logic, and call processing logic to offer a wide
array of enhanced services. The Company believes this integrated service
creation facility is unique in the industry, and will set the standard for
other enhanced telecommunication services. The Company will utilize a portion
of the funding obtained from a group of investors to purchase the Workhorse
Enhanced Services Platform. The Company plans to complete the first phase of
implementation by the end of the third quarter with the second and third
phases scheduled for completion by year end.
On July 31, 1996, the Company received $1 million from a group of investors
and signed an agreement to receive an additional $4 to $9 million at the
Company's option. In exchange for this funding, the Company will issue
convertible debentures which if not converted, are payable in full in common
stock, two years from the date of sale. Holders of the convertible debentures
may convert principal and accrued interest after 45 days from funding.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10) Material Contracts
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement"), effective as of July 15, 1996 (the
"Effective Date"), is entered into by and between IEX Corporation, a Nevada
corporation ("IEX"), and Global Telemedia International, Inc., a Florida
corporation ("Customer" or "GTMI").
WHEREAS, Customer desires to purchase and license from IEX, and IEX is willing
to sell and license to Customer, the hardware (the "Hardware"), software (the
"Software") and the installation, training, engineering and support services
(the "Services") from time to time specified in a purchase order delivered by
Customer to IEX, all in accordance with and subject to the terms and
conditions contained herein.
NOW, THEREFORE, IEX and Customer hereby agree as follows:
1. TERM. The term of this Agreement will commence on the Effective Date and
end on the third anniversary of the Effective Date, unless earlier terminated
or further extended in accordance with the provisions hereof. This Agreement
will automatically be extended for successive one-year term unless either
party provides to the other party a written notice of termination at least
three (3) months prior to the expiration of the then existing term.
2. PURCHASE ORDERS. During the term of this Agreement, Customer may place
orders for the Hardware and Software (collectively, the "Product") only in
writing on standard purchase order forms (the "Purchase Orders") provided or
approved by IEX from time to time. Each Purchase Order must specify (i) the
quantity of each Product that Customer desires to purchase or license, and
(ii) the date or dates, and place or places, requested for delivery.
Placement of a Purchase Order will not bind IEX until the Purchase Order is
accepted in writing by a duly authorized representative of IEX and any term
or condition set forth in any Purchase Order or other document submitted is
inconsistent with this Agreement or IEX's written acceptance will be of no
force or effect.
3. INITIAL PURCHASE ORDER. Upon execution of this Agreement, Customer will
issue a Purchase Order to IEX for (i) the purchase of the Hardware components
of the Product, and (ii) the license of the Software components of the
Product, each as more fully described on Exhibit A hereto and in accordance
with and subject to the terms and conditions of this Agreement.
4. DELIVERY AND TITLE. Subject to IEX's acceptance of a Purchase Order and,
where applicable, the completion of any development work ("Development Work")
as set forth in Section 14 hereof, IEX will make commercially reasonable
efforts to secure delivery to Customer of the Product on or before the date or
dates set forth on the Purchase Order. IEX will deliver the Products F.O.B.
IEX's factory, such delivery to be made to a carrier or freight forwarder
selected by IEX unless otherwise specified by Customer. Unless otherwise
mutually agreed in writing by the parties, title, possession and risk of loss
to the Hardware will pass to the Customer upon placement with a carrier for
delivery. IEX will not be liable for any delay in performance, delivery or
shipment, or for any damages suffered by Customer by reason thereof, if caused
by or in any manner arising from any cause beyond the reasonable control of
IEX.
5. SITE PREPARATION AND INSTALLATION. The Customer, at its expense, will be
responsible for preparing and maintaining the site at which the Product will
be installed in accordance with IEX's Installation Guide.
6. PAYMENTS. The amounts to be paid by Customer to IEX for the Product and
the Services, and the schedule for the payment of such amounts, will be as set
forth in each Purchase Order accepted by IEX. Except as otherwise provided
below or in a particular Purchase Order, all payments will be due within
thirty (30) days of date of invoice:
(a) The total amounts payable with respect to a Product asdescribed
in a Purchase Order, including the training and installation charges
associated with that Product, will be due and payable as follows:
(1) 50% due upon acceptance of Purchase Order;
(2) 25% due upon delivery and installation of the Product; and
(3) 25% due 30 days after delivery and installation of the Product.
(b) All charges for engineering services will be payable within
thirty days after receipt of an invoice therefor, which will be
provided on a monthly basis.
(c) All charges for support services will be payable on the first
day of each quarter for when the support services are to be
provided by IEX.
(d) IEX may monitor and audit the Product to verify that Customer
is paying to IEX the correct amounts due hereunder.
Discount will be in effect for a period of one year based on the purchase
volume of the immediately preceding year.
All amounts not paid when due hereunder will thereafter bear interest until
paid at a rate equal to the lesser of one and one-half percent (1-1/2%) per
month and the highest rate allowed by applicable law.
7. OUT OF POCKET EXPENSES. Except as may be expressly provided on a
particular Purchase Order accepted by IEX upon proper documentation or except
as provided in Section 10 of this Agreement, Customer will reimburse IEX for
all travel and travel related expenses incurred by IEX in connection with the
performance of services under this Agreement.
8. TAXES AND SHIPPING CHARGES. Subject to any valid exemption documentation
that Customer presents to IEX, all taxes, import and export duties, sales, use
privilege, value-added, excise or similar taxes, duties or assessments,
shipping, handling, insurance, brokerage and related charges pertaining to the
Product and any Development Work purchased by Customer hereunder, other than
taxes computed on the basis of the net income of IEX, will be paid by Customer.
9. SECURITY INTEREST. IEX will retain, and Customer hereby grants, a security
interest in the Product which will secure the performance by Customer of its
payment obligations hereunder and, in addition to all other rights and
remedies IEX may possess, shut-down, and have all rights, powers and remedies
available to a secured party under the Uniform Commercial Code. At the
request of IEX, Customer will execute any documents necessary to grant to IEX
the security interest provided in this Section and will execute any filings
necessary to perfect such security interest. Security interest in the Product
is associated with each Purchase Order individually and will be released upon
fulfillment of the payment obligation of that purchase order.
10. PRODUCT WARRANTY. IEX warrants that upon delivery of the Hardware,
Customer will have good and marketable title to the Hardware. In addition,
IEX warrants that, for a period of one year from the date of acceptance of the
Product, the Product will substantially conform to the applicable specifications
as outlined in Exhibit A and attachments A.1 and A.2. IEX's sole liability and
Customer's sole remedy for a breach of this performance warranty is the
requirement that IEX either, at its option and expense, (i) correct any
deviation from such specifications causing a malfunction, or (ii) replace the
Product or any portion or part thereof with a conforming Product or portion or
part thereof. All warranty work must be completed by IEX within 60 days
following written receipt of notice from GTMI that warranty work is required.
Customer will be responsible for maintaining the telecommunication lines and
equipment at its site necessary for IEX to perform remote diagnostics and
repair of the Product.
11. EXCLUSIONS TO PRODUCT WARRANTY. The performance warranty described in
Section 10 above will not apply if (i) Customer fails to provide IEX with
written notification of the nonconformity within the warranty period,
including a sufficient description and complete documentation of the
nonconformity such that the nonconformity may be duplicated in the Product on
the systems at IEX offices, (ii) the Customer has failed to perform its
obligations as set forth herein, (iii) the Product is used in a manner not
authorized or approved by IEX, (iv) any modification or attempted modification
of the Product is made by any party other than IEX, or (v) the nonconformity
was due to abuse, accident, neglect, misuse, incorrect installation or a
change or error made or caused by Customer. In the event a repair is required
as a result of (i) through (v) above, IEX will repair the Product and Customer
will pay to IEX, in addition to any out-of-pocket expenses incurred by IEX in
connection therewith, a service fee in accordance with IEX's standard schedule
therefor.
12. NO ENCUMBRANCES. IEX warrants and represents that it has the legal right
to sell the Hardware and license the Software in accordance with the terms and
conditions hereof and that there are no claims, liens or encumbrances on such
legal right.
13. DISCLAIMER. EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT, IEX MAKES
NO OTHER WARRANTIES, EITHER EXPRESS OR IMPLIED, AS TO THE PRODUCT, ANY
DEVELOPMENT WORK, OR ANY OTHER MATTER WHATSOEVER, AND ALL OTHER WARRANTIES,
INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE
ARE EXPRESSLY DISCLAIMS AND EXCLUDED. IEX does not warrant that the Software
will be error-free or uninterrupted. In no event will IEX be liable for
incidental, indirect, special, loss of profits or data, or consequential
damages of any kind caused or alleged to be caused directly or indirectly by
the Product or the Development Work. IEX's aggregate liability for damages to
Customer or others resulting from use of, the Product, or provision by.
14. DEVELOPMENT WORK. Upon the request of Customer pursuant to a Purchase
Order, IEX agrees to perform design and development work described in a
mutually agreeable requirements document and to use all commercially
reasonable efforts to perform such services within the time frame set forth
therein. The charges for Development Work will be as mutually agreed and
documented as part of a Purchase Order. All delivery times will commence and
run only upon receipt by IEX of any hardware, software, and documentation
which Customer is required by such schedule to provide to IEX, in good working
order and performing in accordance with the specifications therefor. Any
reasonable cost or expense incurred by IEX resulting from Customer's
failure to deliver and maintain such items as aforesaid shall be reimbursed
by Customer. Upon termination of this Agreement, all such items will be
returned to Customer.
15. SERVICES. Customer may obtain the installation, training, and engineering
services and subscribe to the support services described in any proposal
issued by IEX to Customer upon issuance of a Purchase Order and payment of the
fees described in the Purchase Order. If Customer elects to not obtain these
support services, IEX will have no obligation to provide any support services,
except as otherwise expressly provided during the warranty period.
16. DATA PROTECTION AND ACCESS. Customer assumes full responsibility to
backup and otherwise protect its data against loss, damage or destruction
before any support services are provided by IEX hereunder. Subject to
Customer's reasonable security procedures, Customer will permit IEX to access
any equipment executing the Software and will provide reasonable assistance
and facilities as requested by IEX in order for IEX to perform timely any
support services to be provided by IEX hereunder.
17. SOFTWARE LICENSE. IEX hereby grants to Customer a nonexclusive,
non-transferable license to use the object code of the Software components
of the Product in accordance with the following use provisions:
(a) The Software, including all updates, upgrades, enhancements,
and modifications thereto, and documentation therefor, is and will
remain the property of IEX or the third parties from which IEX has
obtained the Software and Customer will have no rights or
interests therein except as expressly granted pursuant to this
Agreement.
(b) The Software may only be accessed by employees of Customer
and may be used solely for Customer's internal business purposes.
(c) Customer will keep the Software and related documentation
confidential and will not disclose, sell, assign, license or
otherwise dispose of or commercially exploit any portion
thereof.
(d) Customer will not create any software which emulates or
performs substantially the same function as the Software.
The license granted pursuant to this Section 17 will survive the expiration
of this Agreement as long as Customer complies with the terms and conditions
of this Agreement, including without limitation, the provisions of this
Section 17.
18. ESCROW SOURCE CODE. Upon the request of Customer and at Customer's
expense, IEX will retain the source code version of the Software owned by IEX
(the "Source Code") with an escrow agent to be selected by IEX and will
maintain such Source Code current during the term of this Agreement. The
escrow agent will make the Source Code available to Customer upon (i) an
assignment by IEX for the benefit of creditors, (ii) the filing of a petition
in bankruptcy by IEX, (iii) the filing of creditors of IEX of a petition in
bankruptcy against IEX which is not stayed or dismissed within ninety (90),
days, or (iv) the appointment of a receiver for IEX. The escrow agent will
give written notice to IEX prior to delivering the Source Code to Customer and
the Source Code will be delivered to Customer subject to the following terms
and conditions:
(a) Customer will have no right to make copies of, or to
license or sublicense, the Source Code.
(b) Customer will keep the Source Code at a single location at
Customer's corporate headquarters and will have a right to use
only one (1) copy of the Source Code version, with the backup
copy to be permanently stored as required below.
(c) Customer's right to use the Source Code version will be strictly
limited to maintenance and support.
(d) Except when actually being utilized for its permitted purposes,
the Source Code will be kept in a highly restricted limited access
area with access thereto limited to designated personnel who have a
need to use the Source Code for the purposes permitted hereunder,
for the duration of time as necessary to complete such permitted
purpose.
(e) All designated personnel with access to the Source Code will (i) be
advised in writing of the trade secret and confidential nature of the
Source Code and IEX's proprietary interest therein and (ii)
previously have agreed to the provisions of this Section and have
executed a then currently effective employment agreement of
Customer providing equivalent protection to IEX.
(f) Customer will immediately return the Source Code version to IEX
or the escrow agent when the Customer no longer requires the
Source Code for support or maintenance purposes.
19. OWNERSHIP. IEX will own all inventions, ideas, discoveries, concepts,
information, techniques, know-how, computer interfaces, patents, copyrights,
trade secrets, trademarks and other intellectual and proprietary rights
contained in or relating to the Product or the Development Work, including all
modifications, enhancements and improvements thereto. Customer agrees to
exercise at least the same degree of care to safeguard the confidentiality of
such intellectual and proprietary rights as Customer would exercise to
safeguard the confidentiality of Customer's own confidential information.
Nothing contained in this Section 19 will be construed to grant to IEX any
right or license with respect to any intellectual and proprietary rights
contained in or relating to any work product developed and owned by Customer.
20. CONFIDENTIALITY. Except as otherwise provided in this Agreement, each
party agrees that all information of the other party acquired by it in the
course of, or as a result of, the performance of this Agreement shall be held in
confidence and shall not be disclosed to any other person, firm or corporation
without the prior written consent of such other party. The foregoing
restriction and obligation shall not apply to information generally available to
the public from other sources or information lawfully obtained from a third
party without restrictions against use or disclosure.
21. PROPRIETARY RIGHTS INDEMNIFICATION. Each party will indemnify the
other in accordance with the following:
(a) IEX agrees to indemnify Customer and hold it harmless from
damages incurred by Customer as a result of any claim by a
third party that the manufacture or sale of the Product, directly
infringes any United States patent or copyright of that third
party; provided that IEX is given prompt, written notice of
any such claim and retains the right to control and direct
the investigation, preparation, defense and settlement of
each such claim and provided further that Customer
shall fully, cooperate with IEX in connection with the
foregoing. IEX shall have no liability for any claim or
patent or copyright infringement to the extent such claim:
(1) Is based on Customer's or any other party's use
of the Product in combination with products or data
not authorized in writing by IEX.
(2) Results from any modification or attempted
modification of the Product by any party other
than IEX.
(3) Arises from use of any portion of the Product in
a system other than the system mutually agreed by
the parties.
In the event Customer is legally enjoined from using any
portion of the Product, IEX agrees to use all commercially
reasonable efforts to obtain the right for Customer to use
the Product as is provided for in this Agreement or to furnish
a non-infringing product substantially equivalent in function
to the infringing portion of the Product or to return a
pro-rata portion of the purchase price for the infringing portion
of the Product based upon a five year depreciation schedule.
The foregoing states the entire liability of IEX concerning
patent or copyright infringement.
(b) Customer agrees to indemnify IEX and hold it harmless from
damages incurred by IEX as a result of any claim by a third
party that the use of the Product directly infringes any United
States patent or copyright of that third party; provided that
Customer is given prompt, written notice of any such claim
and retains the right to control and direct the investigation,
preparation, defense and settlement of each such
claim and provided further that IEX shall fully cooperate with
Customer in connection with the foregoing.
22. MISCELLANEOUS.
(a) Either IEX or Customer may announce the general formation
of the relationship contemplated by this Agreement, including
using the other's name in general marketing materials; provided,
however, that the terms and conditions will not be disclosed
without the written consent of the other party except (i) as
required by law or governmental order, rule or regulation,
(ii) as may be necessary to assert rights hereunder or (iii)
as necessary to accountants, financial advisers or lenders.
(b) All notices, requests, demands, and other communications to be
given or delivered under or by reason of the provisions of this
Agreement shall be in writing and will be deemed given when
delivered personally against receipt, on the next business day
when sent by overnight Federal Express, Express Mail or similar
service and on the third business day after being mailed when
mailed by certified first class mail return receipt requested, to
each party at the address for that party set forth in the applicable
Purchase Order.
(c) Each party will be excused from performance under this
Agreement to the extent such party is prevented from so
performing as a result of any cause beyond its reasonable
control, including without limitation, delays caused by fire,
water, accident, earthquake, act of war, act of God, act of
the government or judiciary, shortage of raw materials, or
failure of performance by a third party.
(d) This Agreement and all of the provisions hereof will be binding
upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations
hereunder may be assigned by any party hereto without the
prior written consent of the other party.
(e) Whenever possible, each provision of this Agreement will be
interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held
to be prohibited by or invalid under applicable law, such
provision will be deemed restated to reflect the original intentions
of the parties as nearly as possible in accordance with applicable
law, and, if capable of substantial performance, the remaining
provisions of this Agreement will be enforced as if this Agreement
was entered into without the invalid provision.
(f) In the event attorneys' fees or other out-of-pocket costs are
incurred to secure performance of any of the obligations herein
provided for, or to establish damages for the breach thereof, or
to obtain any other appropriate relief, the prevailing party will
be entitled to recover reasonable attorneys' fees and out-of-
pocket costs incurred therein.
(g) This Agreement may be modified only by a written instrument
duly executed by or on behalf of each party hereto. No delay or
omission by either party hereto to exercise any right or power
hereunder will impair such right or power or be construed to be a
waiver thereof. A waiver by either of the parties hereto of any of
the obligations to be performed by the other or any breach thereof
will not be construed to be a waiver of any succeeding breach
thereof or of any other obligation herein contained.
(h) The laws of the State of Texas will govern all questions
concerning the construction, validity and interpretation of this
Agreement and the performance of the obligations imposed by
this Agreement.
(i) Any controversy, claim or dispute between the parties relating to
or arising out of this Agreement will be finally settled by arbitration
governed by the then current Commercial Arbitration Rules of the
American Arbitration Association strictly in accordance with the
terms of this Agreement. The arbitration will be conducted by a
neutral arbitrator. Each party will bear its own costs of the
arbitration and one-half of the arbitrator's costs.
(j) This Agreement, including each exhibit and schedule attached
hereto and referenced hereto and each Purchase Order issued by
Customer and accepted by IEX pursuant to this Agreement,
constitutes the entire agreement between the parties and supersedes
any and all prior or contemporaneous oral and written
communications, understandings or agreements relating to the
subject matter hereof. There are no warranties or representations
relied upon by either party other than those expressly provided
by the other party in this Agreement.
IN WITNESS WHEREOF, IEX and Customer have, by their duly authorized
representatives, executed this Agreement as of the Effective Date.
GLOBAL TELEMEDIA INTERNATIONAL, INC. IEX CORPORATION
By:_____________________________ By:______________________________
Title:__________________________ Title:____________________________
Address:________________________ Address: 2425 N. Central Expressway
Richardson, TX 75080
<PAGE>
(27) Financial Data Schedule
[S] [C]
Cash 477,909
Securities 0
Receivables 435
Allowances 0
Inventories 91,238
Current Assets 859,973
PP&E 241,910
Depreciation 80,623
Total Assets 1,021,259
Current Liabilities 2,165,395
Bonds 0
Common 54,459
Preferred Mandatory 0
Preferred 0
Other SE (1,476,449)
Total Liab and SE 1,021,259
Sales 8,267
Total Revenues 605,051
CGS 94,191
Total Costs 2,212,612
Other expenses 0
Loss provision 0
Interest expense 34,413
Income pretax (1,621,920)
Income tax 0
Income continuing (1,621,920)
Discontinued 0
Extraordinary 0
Changes 0
Net Income (1,621,920)
EPS primary (0.15)
EPS diluted (0.15)
<PAGE>
(b) Reports on Form 8-K
On June 11, 1996, the Company filed a Form 8-K to announce the (i) issuance of
$2,500,000 convertible debentures, of which $250,000 has been received to
date, (ii) settlement agreement with Mr. Neil Berman resolving outstanding
issues , including all of Mr. Berman's rights to obtain securities of the
Company, including its common stock, and (iii) Letter of Intent with
Telenational Communications, Ltd. ("Telenational") whereby the Company
proposed to purchase assets of Telenational, subject to completion of all
necessary due diligence. Upon completion of this due diligence, management
decided to terminate its' offer to purchase Telenational's assets and
accordingly is pursuing other strategic alliances and acquisitions.
<PAGE>
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
GLOBAL TELEMEDIA INTERNATIONAL, INC.
f/k/a PHOENIX ADVANCED TECHNOLOGY, INC.
(Registrant)
Date: August 9, 1996
________________________________
Roderick A. McClain, President & CEO
