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
For the quarterly period ended September 30, 1999
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from __________ to _______
Commission file number 0-15818
GLOBAL TELEMEDIA INTERNATIONAL, INC.
(Name of small business issuer in its charter)
DELAWARE 64-0708107
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4675 MacArthur Court, Suite 420, Newport Beach, California, 92660
(Address of principal executive offices)
Issuer's telephone number (949) 253-9588
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 stock, as of the latest practical date. 75,000,000 Common Stock as of
May 17, 1999
Transitional Small Business Disclosure Format (Check One): Yes No X
--- ---
<TABLE>
<CAPTION>
GLOBAL TELEMEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-QSB
FOR QUARTER ENDED SEPTEMBER 30, 1999
INDEX
Page
----
<S> <C>
Consolidated Balance Sheet as of September 30, 1999. . . . . . . . . . . . 1
Consolidated Income Statements for the Three and Nine
Months ended September 30, 1999 and September 30, 1998. . . . . . . . . . 2
Consolidated Statements of Cash Flows for the Nine
Months ended September 30, 1999 and September 30, 1998. . . . . . . . . . 3
Consolidated Statements of Shareholders' Equity for the
Nine Months ended September 30, 1999 . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . 5
PART I Item 1. Summary of Significant Accounting Policies. . . . . . . . . 6
Item 2, Property Plant & Equipment.
Item 3. Fair value of Financial Instruments . . . . . . . . . . . . 7
Item 4. Commitments and Litigation
Item 5. Business Combinations, Acquisitions, Goodwill. . .. . . . . 8
PART II Financial Information,
Item 1. Management's Discussion and Analysis or plan of operations . 9
Item 2. Results of Operations, . . . . . . . . . . . . . . . . . . . 10
Item 3. Liquidity and Capital Resources. . . . . . . . . . . . . . . 11
Item 4. Other Income
Item 5. Year 2000 Compliance
PART III Item 1. Submission of Matters to a Vote of Security Holders . . . 11
Item 2. Other Information
Item 3. Exhibits
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GLOBAL TELEMEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
SEPTEMBER 30, 1999
--------------------
<S> <C>
ASSETS
------
Current Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,296
Accounts receivable, net of allowance of $301,463. . . . . . . . . . . . 150,043
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 920,036
--------------------
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . 1,079,375
Property, plant and equipment, net of accumulated depreciation of $635,873 6,237,862
Goodwill, net of accumulated amortization of $396,034. . . . . . . . . . . 31,405,142
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,580
--------------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,725,959
====================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
Overdraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 98,209
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,634,653
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,069,315
Current portion of capital lease obligation. . . . . . . . . . . . . . . 12,790
Notes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,416,500
--------------------
Total Current Liabilities. . . . . . . . . . . . . . . . . . . . . . . 26,231,467
Long-Term Liabilities
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,616,975
Long-term capital lease obligation, net of current portion . . . . . . . 15,654
--------------------
Total Long-Term Liabilities. . . . . . . . . . . . . . . . . . . . . . 2,632,629
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 28,864,096
StockholdersEquity
Common stock, $.004 par value, authorized 75,000,000 shares; . . . . . . 299,758
issued and outstanding 75,000,000
Preferred stock, series A $.004 par value, authorized 75,000,000 shares; 16
issued and outstanding 4,000
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . 16,992,244
Deposit on future stock subscription . . . . . . . . . . . . . . . . . . 146,000
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . (5,729,624)
Cumulative translation adjustments . . . . . . . . . . . . . . . . . . . (1,846,531)
--------------------
Total StockholdersEquity . . . . . . . . . . . . . . . . . . . . . . . 9,861,863
--------------------
TOTAL LIABILITY AND STOCKHOLDERSEQUITY . . . . . . . . . . . . . . . . . . $ 38,725,959
====================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE>
<TABLE>
<CAPTION>
GLOBAL TELEMEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
TOTAL REVENUES: . . . . . . . . . . . . $ 102,415 $ 236,247 $ 222,415 $ 240,526
------------ ------------ ------------ ------------
COST OF GOODS SOLD. . . . . . . . . . . 42,500 - 92,500 -
------------ ------------ ------------ ------------
GROSS PROFIT. . . . . . . . . . . . . . 59,915 236,247 129,915 240,526
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Communication and Marketing Services. 125,000 180,471 125,000 185,866
Selling, General and Administrative . 442,196 997,106 1,436,328 2,389,033
------------ ------------ ------------ ------------
Total Operating Expenses. . . . . . 567,196 1,177,577 1,561,328 2,574,899
------------ ------------ ------------ ------------
Operating (Loss). . . . . . . . . . (507,281) (941,330) (1,431,413) (2,334,373)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSES):
Interest Expense. . . . . . . . . . . (83,509) (59,507) (367,798) (172,065)
Other Income (Note 4) . . . . . . . . 720,495 - 807,588 510,000
------------ ------------ ------------ ------------
NET INCOME (LOSS) . . . . . . . . . . . $ 129,705 $(1,000,837) $ (991,623) $(1,996,438)
============ ============ ============ ============
NET INCOME (LOSS) PER SHARE . . . . . . $ 0.00 $ (0.03) $ (0.02) $ (0.07)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING . . . . . . . . . . . . . 75,000,000 33,512,065 62,190,338 29,183,452
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
<TABLE>
<CAPTION>
GLOBAL TELEMEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss). . . . . . . . . . . . . . . . . . . $ (991,623) $(1,996,438)
------------ ------------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization . . . . . . . . 466,608 581,191
Bad debt. . . . . . . . . . . . . . . . . . . - (192,991)
Stock issued for services . . . . . . . . . . 39,000 435,126
(Increase) in:
Receivables . . . . . . . . . . . . . . . . . (37,643) -
Other current assets. . . . . . . . . . . . . (44,896) (460,294)
Increase (decrease) in:
Notes payable . . . . . . . . . . . . . . . . (849,400) -
Accounts payable and accrued expenses . . . . 195,773 280,385
------------ ------------
Total adjustments . . . . . . . . . . . . . . (230,558) 643,417
------------ ------------
Net cash used by operating activities . . . . . (1,222,181) (1,353,021)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment. - -
Security deposit. . . . . . . . . . . . . . . (3,580) -
------------ ------------
Net cash used in investing activities . . . . . (3,580) -
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on notes payable . . . . . . . . . - (547,379)
Shares issued in settlement of liabilities. . 916,160 1,458,483
Proceeds from issuance of stock subscription. 146,000
Proceeds from issuance of common stock. . . . 172,897 441,917
------------ ------------
Net Cash Provided by Financing Activities . . . 1,235,057 1,353,021
------------ ------------
Net Increase in Cash. . . . . . . . . . . . . . 9,296 -
Cash at Beginning of Period. . . . . . . . . . - -
------------ ------------
Cash at End of Period . . . . . . . . . . . . . $ 9,296 $ -
------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
3
<PAGE>
<TABLE>
<CAPTION>
GLOBAL TELEMEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERSEQUITY
GLOBAL TELEMEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERSEQUITY
SEPTEMBER 30, 1999
(UNAUDITED)
Deposit on Preferred Additional Cumulative
Common Stock Issued Future Stock Stock Issued Paid-in Translation
Shares Par Value subscription Shares Par Value Capital Adjustment
---------- ---------- ------------- --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998. . . . 41,792,740 $ 166,929 $ - $ 7,555,478
Shares Issued to Consultants. . . 268,168 1,073 37,927
Sale of Stock . . . . . . . . . . 533,333 2,133 52,367
Conversion of Note Payable. . . . 2,810,620 11,242 904,918
Net Loss. . . . . . . . . . . . . - - -
---------- ---------- ------------- --------- ---------- ----------- -------------
Balance, March 31, 1999 . . . . . 45,404,861 $ 181,377 0 $ - $ 8,550,690
========== ========== ============= ========= ========== =========== =============
Shares Issued to Bentley House. . 29,595,139 $ 118,381 4,000 $ 16
Net Loss
Bentley House Reverse Acquisition
Consolidation . . . . . . . . . 8,441,554 (1,846,531)
---------- ---------- ------------- --------- ---------- ----------- -------------
Balance, June 30, 1999. . . . . . 75,000,000 $ 299,758 4,000 $ 16 $16,992,244 $ (1,846,531)
========== ========== ============= ========= ========== =========== =============
Deposit on future stock
subscription. . . . . . . . . . $ 146,000
Net Income
Balance, September 30, 1999 . . . 75,000,000 $ 299,758 $ 146,000 4,000 $ 16 $16,992,244 $ (1,846,531)
========== ========== ============= ========= ========== =========== =============
Total
Shareholders'
Deficit Equity
------------- ---------------
<S> <C> <C>
Balance, December 31, 1998. . . . $(32,592,093) $ (24,869,686)
Shares Issued to Consultants. . . - 39,000
Sale of Stock . . . . . . . . . . - 54,500
Conversion of Note Payable. . . . - 916,160
Net Loss. . . . . . . . . . . . . (534,546) (534,546)
------------- ---------------
Balance, March 31, 1999 . . . . . $(33,126,639) $ (24,394,572)
============= ===============
Shares Issued to Bentley House 118,397
Net Loss. . . . . . . . . . . . . (586,783) (586,783)
Bentley House Reverse Acquisition
Consolidation . . . . . . . . . 27,854,093 34,449,116
------------- ---------------
Balance, June 30, 1999. . . . . . $ (5,859,329) $ 9,586,158
============= ===============
Deposit on future stock
subscription. . . . . . . . . . $ 146,000
Net Income. . . . . . . . . . . . $ 129,705 129,705
------------- ---------------
Balance, September 30, 1999 . . . $ (5,729,624) $ 9,861,863
============= ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
4
<PAGE>
GLOBAL TELEMEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1999
(UNAUDITED)
5
<PAGE>
PART 1 ITEM 1
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of the Company and
its wholly owned subsidiaries, as well as less than majority owned entity which
it controls. Significant inter-company accounts and transactions have been
eliminated in consolidation.
PROPERTY, PLANT AND EQUIPMENT
Purchased property and equipment 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, five
years for computer equipment, ten years for transportation equipment, twenty
years for machinery, twenty years for improvements, and thirty years for plant
construction costs. The cost of installed equipment includes expenditures for
installation. Capital Leases are recorded at lower of fair market value or the
present value of future minimum lease payment. Assets recorded under capital
leases and leasehold improvements are depreciated over the shorter of their
useful lives or the term of the related lease.
ITEM 2. DESCRIPTION OF PROPERTIES.
a) In August 1999, the Company entered into a two year operating lease at
4675 MacArthur Court, Suite 420, Newport Beach, CA 92660. The monthly
rental is $3,448 and the lease is with an unaffiliated third party. The
Company has built an office/factory complex, located in the tax and duty
free zone of Davao City in the Philippines. The eight-acre compound
contains a three-acre facility to manufacture furniture. This secure
compound totals 8 acres with 3 acres under roof. This eight million
dollar two story facility houses the Company's Pacific corporate offices
and manufacturing facility. The facility manufactures and exports high
quality hotel and resort furniture.
b) The Company has an 8.5 acre telephone pole manufacturing facility BHFC
CREOSOTING Inc. purchased in 1998 and located in Butuan City,
Philippines. It features a private loading pier and shipside facilities.
This facility was built and has been in operation since 1976. It
manufactures telephone poles primarily for the Philippine government.
c) The Company has a 50% interest in Bunsaco Inc. a former Mitsui sawmill in
Butuan City, which is fully licensed and operating. Round logs are
transported from the plantation to this mill which processes the logs
into boards. The sawmill sells the boards to the local market and
supplies the furniture factory.
GOODWILL
Purchased goodwill is recorded at cost, and amortized using the straight-line
method over the estimated useful life of forty years.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued SFAS 123
"Accounting for Stock Based Compensation," which the Company elected to adopt as
of January 1, 1996. Under SFAS 123, the Company recognizes compensation expense
for all stock-based compensation, using a fair value methodology. This policy
is consistent with the company's prior accounting.
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.
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-KSB for the
year ended December 31, 1998, 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-KSB for the year ended December 31, 1997 and December 31, 1998. 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 nine months ended September 30, 1999 and
1998, respectively. Certain reclassifications have been made to the financial
statements for prior periods to conform to the current year presentation. These
reclassifications have no effect on the net income for any of the periods.
2. NOTES PAYABLE
Notes payable consist of the following at September 30, 1999
<TABLE>
<CAPTION>
<S> <C>
Current:
Various demand notes, interest rates 7% -12%. . . . . . . . . . . $ 625,500
Floating rate convertible debentures, due August 15, 1998 . . . . 4,416,000
Floating rate notes, due on demand. . . . . . . . . . . . . . . . 375,000
----------
$5,416,500
==========
Long-term
- --------------------------------------------------------------------
Mortgage on Philippine Plant, prevailing interest rates, due 2001. $2,616,975
- -------------------------------------------------------------------- ==========
</TABLE>
6
<PAGE>
3. FAIR VALUE OF FINANCIAL INSTRUMENTS
Significant financial instruments consist of accounts payable, notes payable,
or accrued expenses that are either demand or due through 1999. The Company is
negotiating with two New York based investment banks for funds required to
settle these amounts. As a result, the Company is unable to estimate the timing
and ultimate form of the settlement of these liabilities. It believes that if
the current holders were to sell such instruments to other parties, the sales
price would be substantially less than the carrying value.
4. COMMITMENTS AND LITIGATION
The Company has employment agreements with certain officers and key employees,
which expire at various times through 2005. Resignation of the former officers
and key employees resulted in the cancellation of all previous employment
agreements.
Trident Litigation. On October 8, l997, the Company filed a complaint in the
- -------------------
Superior Court of Fulton County, State of Georgia (Civil Action #E-62102)
against Trident Communications Corp., Wail H. Alkhatib and Daniel G. Kuttab
(collectively, "Trident") alleging breach of contract, both oral and written,
fraud, unjust enrichment, and detrimental reliance among its counts. On June
9, 1999, the Company settled pursuant to which Trident has paid $112,400.00 to
the Company, and 950,000 of Trident's shares were recovered by the Company.
Walsh Litigation. The Company proposed a settlement to the plaintiff. As of July
- ----------------
7, 1998, the Company entered into a settlement agreement for $120,000 payable in
6 equal monthly installments beginning July 7, 1998. The August payment was due
and payable on August 13, 1998. The failure to make this payment resulted in a
$330,000 judgment, and delivery by the escrow agent of 250,000 shares of GTMI
common stock. New management has reached a new settlement, paid a cash deposit
with the balance of $200,000 plus $100,000 in common stock to be paid following
the shareholders meeting. Following full payment the Company will recover the
250,000 shares held in escrow.
RBB Bank-Khalifa Litigation. On or about July 30 1996 and August 28, 1996, the
- ----------------------------
Company issued the aggregate par principal amount of $6,683,333 of certain 3%
Convertible Debentures, due August 15, 1998 (the "Debentures"), as follows: (i)
RBB Bank Aktiengesselschaft ("RBB Bank") ($4,000,000), (ii) Mohammed Ghaus
Khalifa ("Khalifa") ($1,333,333), and (iii) Canadian Imperial Bank of Commerce
("CIBC") ($1,350,000) (collectively, the "Debenture holders"). The Company
has finalized a negotiated settlement of these disagreements providing for the
payment of $1,000,000 to Khalifa, and $3,417,667 to RBB Bank over a period of 6
months commencing after the shareholders meeting. The settlement calls for
conversions every 45 days, at market rate in either cash, or stock at the
Company's choice.
Southern Signatures Litigation. There have been no new developments in this
- --------------------------------
matter since the Company filed its Form 10-KSB on April 15, 1999, which
contains a complete discussion of this matter. Southern Signatures was seeking
$250,000 in payments. New management proposed a settlement of $75,000, in 3
installments commencing December 1st 1999. The company has received written
acceptance of this offer
WorldCom Litigation. See Form 10-KSB filed April 15, 1999 for a complete
- --------------------
discussion of this matter. Trial on the merits of this case has been postponed
and not yet rescheduled. The Company has proposed a settlement of all issues
remaining in this case. On February 5, 1999, the Company entered into a
mediation with the intent to settle all the issues. The company has proposed
a cash settlement to resolve that matter.
K&S International Communications, Ltd. Arbitration. The Company is involved in
- ----------------------------------------------------
an arbitration proceeding with Extelcom Corporation (a/k/a K&S International
Communications, Ltd."K&S") with respect to a former agreement under which each
party was to provide services to the other. The Company believed that
Extelcom's claims were without substantial merit. Based upon a technical
default, an award was entered against the Company in May 1998 for $2.5 million.
While the Company was prepared to petition the court in Miami Florida to vacate
the award based on the grounds that it was erroneously entered, management
believed that the award might not be overturned. Therefore, on April 1, 1999,
the Company entered into a settlement agreement with K&S for $325,000, to be
paid in installments of which $25,000 was paid on November 17, 1999.
CAM-NET Litigation. On February 20, 1997, a complaint was filed by CAM-NET
- -------------------
Communications Network, Inc. ("CN") in federal court for the Northern District
of Georgia, (197-CV-0448). The complaint sought recovery on two promissory
notes in the total principal amount of $250,000, together with interest thereon
to February 17, 1997 of $21,071.70, additional interest to date of payment,
attorney's fees, costs and expenses. Although the previous management was
successful in reaching a compromise settlement of this action, its inability
to make payment resulted in a summary judgment against the Company for
$250,000. New Management has proposed a cash settlement in this matter.
7
<PAGE>
5. BUSINESS COMBINATION
Bentley House Furniture Company Acquisition. On April 2, 1999, the Company
- -----------------------------------------------
closed an agreement to acquire Bentley House Furniture Company ("BHFC"), a
Philippine holding company with interests in: telecommunications; agriculture;
mining; timber exports; and furniture manufacturing. BHFC has significant
housing construction contracts with the Philippine Government, which include
exclusive supply of Internet, CableTV and telecommunications for one million
Government houses to be constructed over the next 25 years. Pending Hotel
contracts in Australia and the Philippines as well as government housing
contracts, telecommunication, and reforestation projects should result in an
excess of US$120,000,000 of net income over the life of the contracts. BHFC
has significant Government contracts for forestry land development, which
include all environmental certifications, harvesting permits and title to the
standing timber. For proper entry into the books of the Company under US
GAAP, BHFC has engaged the international audit firm of KPMG to independently
value the timber assets following which the Company will make those assets
available for the purpose of establishing the credit facilities necessary
for the combined companies to realize their new joint business plan.
BHFC has existing facilities for the milling and finishing of raw timber as well
as a newly constructed "state of the art" furniture manufacturing facility,
designed and financed with the assistance of Sumitomo Corporation, with whom
BHFC has an international agreement. This 10-acre factory/office complex
includes the BHFC Asean Head office, and is believed by the management of BHFC
to be one of the largest and most modern furniture factories in the Philippines.
BHFC's equipment includes BACCI Italian shaping machines; high frequency
microwave wood bending machines and Italian automated heated spray booths. The
factory has a certified output capacity of 10,000 finished pieces per month. The
Company utilizes mahogany, teak and other hardwood timber from its plantations
to supply hotels and resorts under construction with timber and interior
furniture.
On April 2nd 1999, the Company closed its share exchange with the delivery of
99.8% of Bentley House Furniture Company stock to the escrow attorney. New
management has developed a schedule of resolutions for its present outstanding
debts and lawsuits. Following a shareholders meeting scheduled in the 4th
quarter 1999, the name of the corporation will be changed to "Bentley House
International Group, Inc." and there will be requested a change in its symbol to
"BHIG".
In the reverse acquisition the assets and liabilities of the legal acquirer
(GTMI) are re-valued to its fair market values. The purchase price is then
allocated to the assets and liabilities assumed by the accounting acquirer
(BHFC). The remaining difference resulting from the purchase price adjustments
and adjustments to the legal acquirer's (GTMI) capital structure is charged or
credited to paid-in capital.
At the date of the reverse acquisition, GTMI had negligible tangible assets and
approximately $26 million dollars of debt. The valuation of GTMI is therefore,
dependent on such intangible assets as the Company's marketing agreement with
CyberAir, its association and option to purchase UltraPulse, and its position
within the industry. BHFC used various methods to evaluate the technologies
offered by GTMI, namely the CyberAir's Photonic wireless, and UltraPulse's
broadband spread spectrum wireless. APB 16, Business Combinations, requires
that assets acquired for other than cash, including shares of stock issued,
should be stated at the fair value of the consideration given or the fair value
of the property acquired, whichever is more clearly evident. Management
established a value for goodwill at $31,801,176 by blending various methods
(i.e. present value of futures net cash flows discounted, discounted average
market value of shares exchanged, and book value of net assets). Goodwill is
then defined as the excess of the cost of a company over the sum of the
identifiable net assets (APB 17 Intangible Assets). Once BHFC had established a
value for goodwill, pursuant to FASB No. 201-A, Exposure Draft "Proposed
Statement of Financial Accounting Standards-Business Combinations and Intangible
Assets" requires Management to continually review goodwill for any impairment in
accordance with FASB Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. Management
recalculated the present value of future net cash flows discounted by the
assessed risk, and determined that value for goodwill is adequately supported
and fairly presented on the balance sheet.
ITEM 6. SUBSEQUENT EVENTS
On October 1st 1999, the Company closed its acquisition, via share exchange of
BentleyTel.com, Inc. a Nevada corporation. The Company exchanged 6,875 series
"A" preferred convertible shares for 55% of BentleyTel.com, Inc. BentleyTel.com
executed a letter of intent for a share exchange of its common shares for 100%
of Octa4 Pty. Ltd. (octa4.net.au), 100% of 3G communications Inc. (a Philippine
company which owns 26 mobile long distance portable calling facilities and
intends to deploy up to 100 units), and 100% of DynaSem Communications Sdn Bhd.
(a Malaysian Technology training company located in Kuching, Malaysia, part of
the 'multi-media superhighway'). Octa4 is an Australian ISP who will provide
long-distance and international telecommunications through a new national
network. Octa4 also offers virtual ISP and VIOP (voice over the Internet) and
has an average growth rate of 120% annually over the past three years. 3G has a
three-year average growth rate of 100%. Dynasem has an average growth rate of
105% over the past three years.
BentleyTel.com has approved an exchange of 1,000,000 common shares with a Texas
company, NextGen Telcom , a high-tech marketing company which focuses on
building distribution systems for companies involved in domestic and
international long distance, prepaid phone cards, Internet access and website
design.
On October 27, 1999, the principals of the above companies, representing a
majority of the shareholders executed the share exchange agreement with
BentleyTel. Octa4, an Australian company and part of BIMP-EAGA Asian free-trade
Agreement (AFTA) has arranged for a ceremonial signing of the merger in
Parliament House in Darwin, Australia on the 23rd of November, 1999 before the
Minister of Asian Relations and Trade, the Honorable Daryl Manzin.
The Company, through its subsidiary BentleyTel.com intends to pursue the
utilization or marketing of the CyberAir technology to enhance the existing
services and increase their market-share and net profits of its subsidiaries.
UltraPulse Acquisition. The Company funded development money pursuant to a
- -----------------------
letter of intent dated May 11, 1998, with UltraPulse Communications Incorporated
("UCI") under which the Company will acquire 51% of the outstanding equity
securities of UCI. UCI is a privately held company that holds patents, and
patents-in-part from its principal shareholder, Terence W. Barrett, Ph.D., for
the development, production and marketing of wireless communications products
using a new form of ultrafast, extremely high data rate technology that will
permit, among other things, the following: 1) Wireless data rates in excess of
200 megabytes per second without compression; 2) the linkage of office,
educational and medical complex buildings with affordable wireless systems
comparable to current high data rate fiber-optic ATM or STM technology; 3)
reliable WAN, LAN and PBX communications which are minimally affected by
building structures and in limited power demonstration greater than 22
megabytes per second; and 4) size, weight, power and cost advantages
superior to competing technologies.
Following the Company's acquisition of BentleyTel.com, new management
re-negotiated with Dr. Terrence Barrett, Ph.D; President of UCI to acquire 85%
of UCI and its technology providing the technology was ready to deploy. New
Management including the Managing Director of BentleyTel.com (former Australian
University Physics and Communications lecturer) Felino Molina, board members and
two representatives of the Australian Department of Trade were invited to a
"live" demonstration of the UltraPulse technology at the former Honeywell test
and production facility in Washington DC.
Following the successful "live" demonstration, new management through
BentleyTel.com was able to formalize a share exchange agreement to acquire UCI
and its technology.
BentleyTel.com has agreed to finance the production of 50-100 units of UCI's
Broadband Spread-Spectrum technology for deployment in the Philippines. The
Company will convert its 26 portable calling stations into the first UltraPulse
wireless LAN system to be deployed in 1st quarter 2000.
CyberAir Marketing Agreement. In 1998, the Company provided development funds
- ----------------------------
and entered into an agreement to act as the "Primary Marketing Arm" of CyberAir
Communications Inc. (Cyber) (see 10QSB 9/30/98 and 10KSBA 4/15/99). Cyber is
developing an international network through a series of contracts and alliances
with various government agencies and global telecommunication companies. In the
first stage, the Company is scheduled to market US origination of both voice and
data long distance to Mexico, China, India and Pakistan. Due to it's recent
acquisition of BentleyTel.com, the Company intends to formally call on CyberAir
to provide its Photon service to BentleyTel for deployment in its Australian
network.
Utility Communications, Inc. The Company also entered into a license agreement
with Utility Communications, Inc., for its proprietary wireless technology. In
order to facilitate this technology, it is necessary to deploy a set-top box to
compliment the subscriber's television set. The Company through BentleyTel.com
will call for all technical information in order for the BentleyTel's Managing
Director, (former Australian University Physics and communications lecturer)
Felino Molina and prominent US Physicist Dr. Terrence Barrett Ph.D., to evaluate
the Utility Communications technology and systems.
8
<PAGE>
PART II. FINANCIAL INFORMATION
ITEM 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-QSB (THE "REPORT") MAY BE DEEMED TO
CONTAIN FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS IN THIS REPORT OR
HEREAFTER INCLUDED IN OTHER PUBLICLY AVAILABLE DOCUMENTS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"), REPORTS TO THE COMPANY'S
STOCKHOLDERS AND OTHER PUBLICLY AVAILABLE STATEMENTS ISSUED OR RELEASED BY THE
COMPANY INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH
COULD CAUSE THE COMPANY'S ACTUAL RESULTS, PERFORMANCE (FINANCIAL OR OPERATING)
OR ACHIEVEMENTS TO DIFFER FROM THE FUTURE RESULTS, PERFORMANCE (FINANCIAL OR
OPERATING) OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS. SUCH FUTURE RESULTS ARE BASED UPON MANAGEMENT'S BEST ESTIMATES
BASED UPON CURRENT CONDITIONS AND THE MOST RECENT RESULTS OF OPERATIONS. THESE
RISKS INCLUDE, BUT ARE NOT LIMITED TO, THE RISKS SET FORTH HEREIN, EACH OF
WHICH COULD ADVERSELY AFFECT THE COMPANY'S BUSINESS AND THE ACCURACY OF THE
FORWARD-LOOKING STATEMENTS CONTAINED HEREIN.
THIS REPORT, INCLUDING THE DISCLOSURES BELOW, CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND/OR UNCERTAINTIES. WHEN USED
HEREIN, THE TERMS "ANTICIPATES," "EXPECTS," "ESTIMATES," "BELIEVES" AND SIMILAR
EXPRESSIONS, AS THEY RELATE TO THE COMPANY OR ITS MANAGEMENT, ARE INTENDED TO
IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR
IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS.
9
<PAGE>
ITEM 2. RESULTS OF OPERATIONS
New management, in its first 6 months of operation has:
a) Implemented a successful plan to deal with the various legal and
financial issues, which had inhibited the Company's growth.
b) Retained the prestigious securities and finance Century City law-firm of
Tisdale & Nicholson, (Jeff Tisdale),
c) Retained the 13th largest Investor relations and marketing communications
firm in the USA, KCSA WorldWide (Bob Giordano), at 200 Second Avenue New
York,
d) Retained Investment Banking firm, The Malachi Group of 100 Wall Street
New York and 12 Piedmont Center Atlanta, (Peter Baxter),
e) Retained Atlanta Law-firm Hendrick & Hunter (Bob Hunter)
f) Acquired 55% of BentleyTel.com an international group of functioning
multi-million dollar earning telecommunications companies operating in
Australia, Philippines and Malaysia.
g) Executed a memorandum of agreement for the acquisition of 100% of
UltraPulse Communications Inc.
h) Approved terms for a $5 million dollar convertible redeemable 2-year
debenture with The Malachi Group.
i) Received pre-approval for $12 million in project debt financing from New
York financiers United Institutional Investments.
The Company seeks to manage its business to enhance long-term growth and
shareholder value. The Company also seeks to utilize financial leverage, debt
financing, and cash flow generated from operations to support capital
expenditures and technology implementation. The Company intends to develop
and market the 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.
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
OPERATING (LOSS)
Revenues for the three and nine months ended September 30, 1999 and September
30, 1998 decreased by $133,832 and $18,111 over the same periods of the prior
year. The revenue decreases were primarily associated with the suspension of
its wholesale carrier business, the restructuring by new management and the
focus on settling the various prior lawsuits. The Company has decided to
concentrate its efforts on deployment of its UCI Telecommunications technology
and development of new international retail products in addition to,
wood-product manufacturing, housing, and timber operations. The Company should
have revenues from Bentley House Furniture Company's new factory and
subsidiaries by the 4th quarter 1999.
In the fourth quarter of 1998, the subsidiary, Bentley House Furniture Company
opened its new facility in Davao City and exported its first trial order,
the Coronation throne and ceremonial tables of Crown Prince Bilah of Brunei.
However, BHFC management has been in the USA for the last 9 months to complete
the exchange with the Company, recruit new staff and develop new international
telecommunications products. BHFC has infused its reserved working capital into
these activities and retaining qualified legal counsel in Atlanta, Georgia and
Los Angeles, California in order to resolve the lawsuits and debts. As such, the
BHFC facility has been placed on standby; new orders are pending as soon as the
Company completes its shareholders meeting and the final restructuring of the
Company, which will result in the receipt of operating capital for the group.
General and administrative costs for the three and nine months ended September
30,1999 and 1998 decreased approximately $554,910 and $1,391,927, respectively
from the corresponding periods in 1998. At the close of the BHFC / GTMI share
exchange the Company has no income and no prospects. New management decided to
focus on resolving debt and legal issues prior to pursuing new projects and
embarking on additional acquisitions. New management believes that it has
accomplished its goals and pending contracts can now be executed.
The settlement of litigation and debt restructuring by new management has also
resulted in a dramatic decrease in legal fees and accounting fees. The Company
does not anticipate incremental increases in general and administrative costs
in conjunction with anticipated future revenue growth.
Net income and loss from operations for the three and nine months ended
September 30, 1999, were approximately $129,705 and ($991,623) respectively.
Losses were significantly lower than comparable 1998 periods. The entire
decrease in loss during these periods of 1999 resulted from the Company's
operational scale-back in the current year.
10
<PAGE>
ITEM 3. LIQUIDITY AND CAPITAL RESOURCES
The Company's overdraft position remained at $98,209 at September 1999; a result
of prior management's operational decisions. New management does not operate nor
does it have any plans to operate with an overdraft facility with its banks. The
primary use of funds during the three months ended September 30, 1999 consisted
of operating activities.
As of September 30, 1999, the Company had convertible debentures payable
totaling $4,416,000, accrued but unpaid expenses totaling $1,069,315 and
accounts payable totaling $19,634,653. A note payable due to K&S International
communications, Ltd., for $2.5 million was settled for $325,000. The first
installment of $25,000 was paid to the K&S on November 17, 1999.
Any increases in accounts payable and accrued expenses resulted substantially
from the Company's unpaid obligations for operating expenses. New management
has settled some and should settle all the remaining creditors by mid 2000. The
Company has received co-operation from the majority of creditors.
The Company has historically financed its operations principally through the
sale of equity and debt securities and through funds provided by operating
activities. New management is negotiating with financial institutions for
long-term loans backed by the assets of BHFC.
The successful completion of new management's development program and the
attainment of profitable operations will be financed though earnings from
operations and from pre-approved debt financing. New management is confident of
implementing its development activities and achieving a level of sales adequate
to support the Company's operations. Management believes that the Company can
sustain operations and growth under its new business plan.
ITEM 4. OTHER INCOME (EXPENSES)
Interest expense for the three and nine months ended September 30, 1999 was
approximately $83,509 and $367,798 respectively, and were significantly higher
than comparable 1998 periods. The increase was due to the addition of the
mortgage note on the Company's Davao City plant. The Company will now commit to
the most effective utilization of financial leverage as well as alternative
means of raising additional capital to enhance long-term growth and Maximize
shareholder value.
The quarter ended September 30, 1999; new management negotiated and settled
various debts resulting in a discharge of debt totaling $720,495.
ITEM 5. YEAR 2000 COMPLIANCE
The Company's administrative operations have been reviewed for Year 2000
Compliance. Normal upgrades will result in essential operations being Year 2000
compliant. Some remaining operations, such as non-essential personal computers
and non-financial software products, can be easily upgraded at nominal cost and
inconvenience. The Company has consulted an external consultant with respect to
the Company's internal accounting software system, and has been advised that the
cost of upgrading to a Year 2000 compliant system will be less than $500.
PART III. OTHER INFORMATION
ITEM 1. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 2. OTHER INFORMATION
None.
ITEM 3. EXHIBITS
Exhibit 27 - Financial Data Schedule
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.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GLOBAL TELEMEDIA INTERNATIONAL, INC.
------------------------------------
(Registrant)
Date: November 18, 1999 /s/ Jonathon Bentley-Stevens
------------------------------
Jonathon Bentley-Stevens, President/ CEO
Date: November 18, 1999 /s/ David Tang
------------------------------
David Tang, Chief Financial Officer
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 9296
<SECURITIES> 0
<RECEIVABLES> 451506
<ALLOWANCES> (301463)
<INVENTORY> 0
<CURRENT-ASSETS> 920036
<PP&E> 38678491
<DEPRECIATION> (1031907)
<TOTAL-ASSETS> 38725959
<CURRENT-LIABILITIES> 26231467
<BONDS> 2632629
0
16
<COMMON> 299758
<OTHER-SE> 9562089
<TOTAL-LIABILITY-AND-EQUITY> 38725959
<SALES> 222415
<TOTAL-REVENUES> 1030003
<CGS> 92500
<TOTAL-COSTS> 92500
<OTHER-EXPENSES> 1561328
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 367798
<INCOME-PRETAX> (991623)
<INCOME-TAX> 0
<INCOME-CONTINUING> (991623)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (991623)
<EPS-BASIC> (.00)
<EPS-DILUTED> (.00)
</TABLE>