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 June 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
--- ---
<PAGE>
<TABLE>
<CAPTION>
GLOBAL TELEMEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-QSB
FOR QUARTER ENDED JUNE 30, 1999
INDEX
Page
----
<S> <C>
Consolidated Balance Sheet as of June 30, 1999 . . . . . . . . . . . . 1
Consolidated Income Statements for the Three and Six
Months ended June 30, 1999 and June 30, 1998. . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows for the Six
Months ended June 30, 1999 and June 30, 1998. . . . . . . . . . . . . 3
Consolidated Statements of Shareholders' Equity for the
Six Months ended June 30, 1999. . . . . . . . . . . . . . . . . . . . 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 4. Submission of Matters to a Vote of Security Holders . 18
Part II - Item 6. Exhibits. . . . . . . . . . . . . . . . . . . . . . . 18
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GLOBAL TELEMEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
JUNE 30, 1999
---------------
<S> <C>
ASSETS
------
Current Assets
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,181
Accounts receivable, net of Allowance of $301,463 . . . . . . . . . . . . 150,043
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 955,304
---------------
Total Current Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 1,115,528
Property, Plant and equipment, net of accumulated depreciation of $602,177. 6,271,557
Goodwill, net of accumulated amortization of $198,017 . . . . . . . . . . . 31,603,159
---------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,990,244
===============
LIABILITIES AND STOCKHOLDERS' EQUITY DEFICIENCY
-----------------------------------------------
Current Liabilities
Overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 98,209
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,637,154
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,010,654
Current portion of Capital Lease Obligation . . . . . . . . . . . . . . . 12,790
Notes Payable (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . 5,416,500
---------------
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . 26,175,307
Long-Term Liabilities
Mortgage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,616,975
Long-Term Capital Lease Obligation, net of current portion. . . . . . . . 16,310
---------------
Total Long-Term Liabilities . . . . . . . . . . . . . . . . . . . . . . 2,633,285
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,808,592
StockholdersEquity Deficiency
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. . . . . . . . . . . . . . . . . . . -
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,263,835)
Cumulative Translation Adjustments. . . . . . . . . . . . . . . . . . . . (1,846,531)
---------------
Total StockholdersEquity Deficiency . . . . . . . . . . . . . . . . . . 10,181,652
---------------
TOTAL LIABILITY AND STOCKHOLDERSEQUITY DEFICIENCY . . . . . . . . . . . . . $ 38,990,244
===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
GLOBAL TELEMEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
TOTAL REVENUES: . . . . . . . . . . . . $ 120,000 $ - $ 120,000 $ 4,279
------------ ------------ ------------ ------------
COST OF GOODS SOLD. . . . . . . . . . . 50,000 - 50,000 -
------------ ------------ ------------ ------------
GROSS PROFIT. . . . . . . . . . . . . . 70,000 - 70,000 4,279
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Communication and Marketing Services. - - - 5,395
Selling, General and Administrative . 522,334 765,070 994,132 1,391,927
------------ ------------ ------------ ------------
Total Operating Expenses. . . . . . 522,334 765,070 994,132 1,397,322
------------ ------------ ------------ ------------
Operating (Loss). . . . . . . . . . (452,334) (765,070) (924,132) (1,393,043)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSES):
Interest Expense. . . . . . . . . . . (221,542) (62,972) (284,289) (112,558)
Other Income (Note 5) . . . . . . . . 87,093 500,000 87,093 510,000
------------ ------------ ------------ ------------
NET LOSS. . . . . . . . . . . . . . . . $ (586,783) $ (328,042) $(1,121,328) $ (995,601)
============ ============ ============ ============
NET LOSS PER SHARE. . . . . . . . . . . $ (0.01) $ (0.01) $ (0.02) $ (0.04)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING . . . . . . . . . . . . . 75,000,000 29,739,273 62,190,338 27,264,490
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
GLOBAL TELEMEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30
1999 1998
------------ ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss). . . . . . . . . . . . . . . . . . . $(1,121,328) $(995,601)
------------ ----------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization . . . . . . . . 234,896 442,991
Stock issued for services . . . . . . . . . . 39,000 724,015
Decrease (increase) in:
Receivables . . . . . . . . . . . . . . . . . (180,043) (96,555)
Other current assets. . . . . . . . . . . . . 30,372 (425,607)
Increase (decrease) in:
Notes payable . . . . . . . . . . . . . . . . (850,000)
Accounts payable and accrued expenses . . . . 768,227 75,681
------------ ----------
Total adjustments . . . . . . . . . . . . . . 42,452 720,525
------------ ----------
Net cash used by operating activities . . . . . (1,078,876) (275,076)
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment. - -
Acquisition of property and equipment . . . . - -
------------ ----------
Net cash used in investing activities . . . . . - -
------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on notes payable . . . . . . . . . - (10,173)
Shares issued in settlement of liabilities. . 916,160 31,539
Proceeds from issuance of common stock. . . . 172,897 290,000
------------ ----------
Net Cash Provided by Financing Activities . . . 1,089,057 311,366
------------ ----------
Net Increase in Cash. . . . . . . . . . . . . . 10,181 36,290
Cash at Beginning of Period. . . . . . . . . . - -
------------ ----------
Cash at End of Period . . . . . . . . . . . . . $ 10,181 $ 36,290
------------ ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
<TABLE>
<CAPTION>
GLOBAL TELEMEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERSEQUITY
GLOBAL TELEMEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERSEQUITY
JUNE 30, 1999
(UNAUDITED)
Common Stock Additional Cumulative
Issued Preferred Stock Issued Paid-in Translation
Shares Par Value Shares Par Value Capital Adjustment
---------- ---------- --------- ------------- ----------- -------------
<S> <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)
========== ========== ========= ============= =========== =============
Total
Shareholders'
Deficit Equity
------------- ---------------
<S> <C> <C>
Balance, December 31, 1998. . . . . . . . . . . $(31,996,598) $ (24,274,191)
Shares Issued to Consultants. . . . . . . . . . - 39,000
Sale of Stock . . . . . . . . . . . . . . . . . - 54,500
Conversion of Note Payable. . . . . . . . . . . - 916,160
Net Loss. . . . . . . . . . . . . . . . . . . . (534,547) (534,547)
------------- ---------------
Balance, March 31, 1999 . . . . . . . . . . . . $(32,531,145) $ (23,799,078)
============= ===============
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. . . . . . . . . . . . . $ (5,263,835) $ 10,181,652
============= ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
GLOBAL TELEMEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1999
(UNAUDITED)
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 intercompany 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.
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.
Significant estimates in the financial statements include the assumption the
Company will continue as a going concern. The assumption could change in the
near term.
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 six months ended June 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 June 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. . . . . . . . . . . . . . . . 250,000
----------
$5,291,500
==========
Long-term
- --------------------------------------------------------------------
Mortgage on Philippine Plant, prevailing interest rates, due 2001. $2,616,975
- -------------------------------------------------------------------- ==========
</TABLE>
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 bankers 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.
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 by 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, as security for the judgment, in accordance with the consent
order. New management is negotiating for a favorable settlement following which
it will recover the 250,000 shares held in escrow.
<PAGE>
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 Company was successful in
reaching a compromise settlement of this action, its inability to make payment
of the settlement amount in January 1998 resulted in a summary judgment against
the Company for $250,000.
RBB/Khalifa Litigation. See Form 10-KSB filed April 15, 1999 for a complete
- -----------------------
discussion of this matter. On July 29, 1998, the court affirmed its November 20,
1997 order that the Company issue 2,496,761 shares of stock to the plaintiffs.
The Company has instructed the transfer agent to issue the shares and the
transfer agent has issued the shares. The terms of the convertible debentures
provide that as of August 15, 1998, the balance of the notes automatically
convert, including accrued and unpaid interest, into approximately 13.6 million
shares of common stock,. However, the litigation continues in progress and the
issues related to the automatic conversion of the convertible debentures and
other claims for damages remain the subject of the litigation. New management
has offered a staggered repayment plan in cash to settle this matter.
Trident Litigation. See Form 10-KSB filed April 15, 1999 for a complete
- -------------------
discussion of this matter. As of March 1, 1999, the Company has entered into
discussions with Trident in an effort to settle the litigation. Trident has
offered a cash settlement to resolve this matter
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
settlement of all issues remaining in this case. Trial on the merits of this
case has been postponed and not yet rescheduled.
Southern Signatures LitigationThere 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. New management proposed a
structured payment in settlement of this 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 13 installments of $25,000, beginning May 1, 1999, with a thirty-day
grace period. Management has offered a bank instrument in settlement of this
matter.
<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, 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 revalued 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. As such, the Company will report financial
information on a consolidated basis prospectively, and will not include
comparative proforma financial information in these notes as they will provide
little or no relevant information.
The Company intends to pursue the utilization or acquisition of the Ultra-Pulse
and CyberAir technology to enhance the existing services and increase their
market-share and net profits.
The Company's intends to actively pursue joint ventures with other
telecommunication companies in the fields of ISP (Internet Service Provider) and
wireless telecommunications. The focus of this will be the Asia-Pacific
countries where the calling costs are significantly higher than in the USA.
UltraPulse Acquisition. On May 11, 1998, the Company funded development money
- -----------------------
and entered into a letter of intent 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
155 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 can operate at rates greater than 10 megabytes per
second; and 4) size, weight, power and cost advantages superior to competing
technologies.
<PAGE>
The Company provided development capital to UCI and under a letter of Intent it
is established that the Company will provide financing to UCI in the amount of
$10 million on a deposit and performance based schedule to be presented
following the evaluation of the functioning technology. The agreement will be
subject to due diligence by both parties and the execution of the final
agreement. As part of the agreement, the Company will have a five-year option
to acquire the remaining 49% of the outstanding equity of UCI. No agreement was
ever signed , however New Management intends to meet with the Principal of
UltraPulse and evaluate the technology.
CyberAir Communications, Inc. The Company funded development money and entered
- -------------------------------
into an agreement to act as the primary marketing arm of CyberAir
Communications, Inc. ("Cyber"). Cyber is engaged in deploying an international
network through a series of favorable contracts and alliances with various
government agencies and global telecommunication companies. In the first stage,
the company is scheduled to market U.S. origination of both voice and data long
distance to Mexico, China, India and Pakistan. Cyber will be adding additional
countries as contracts are finalized.
Under an initial contract, beginning June 1999, GTMI expects to sell CyberAir
traffic, originating in the U.S. and terminating in Mexico. The Company will
examine the prospects of utilizing the wireless technologies in BIMP-EAGA
countries.
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 will need to capitalize
the completion of the set-top box customization as well as inventory and
marketing expenses. The Company will form a team of specialists to evaluate this
technology prior to any funding commitment.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. 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.
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, debt
financing, and cash flow generated from operations to support capital
expenditures and possible future acquisitions. 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 JUNE 30, 1999 AND 1998
OPERATING (LOSS)
Revenues for the three and six months ended June 30, 1999 and June 30, 1998 were
insignificant. The revenue decreases were primarily associated with decreased
levels of operations in the wholesale carrier business, the suspension of the
operations of the Company's Vision 21, Inc. The Company has decided to
concentrate its efforts on the three components of its wholesale operations: the
Telecommunications, Carrier Sales; and Satellite Services businesses,
wood-product manufacturing, housing and timber operations. The Company should
have revenues from Bentley House Furniture Company's new factory and
subsidiaries by 4th quarter 1999.
As of June 30, 1999, no revenues were being generated from the wholesale carrier
business. The Company is in the process of implementing third party strategic
relationships necessary to facilitate traffic under expected revenue contracts.
See footnote 5 to financial statements - Business Combinations.
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 to
Brunei. However, BHFC management has been in the USA for the last 9 months to
complete the exchange with the Company. BHFC has infused its reserved working
capital into the Company in an effort to resolve law suits and debts. Therefore,
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.
<PAGE>
General and administrative costs for the three and six months ended June 30,
decreased approximately $243,000 and $453,000 respectively from the
corresponding periods in 1998. The entire decrease during these periods of
1999, resulted from the Company's decision to scale back its operations until
meaningful revenue contracts can be signed and implemented. The merger between
BHFC is complete as is the construction of the new Davao City Factory Office
complex, pending contracts can now be executed.
The Company has also experienced unusually high levels of consulting and legal
expenses associated with financing matters and ongoing litigation, however the
settlement of the existing litigation by new management will result in a
dramatic decrease in legal fees and accounting expenses. The Company does not
anticipate incremental increases in general and administrative costs in
conjunction with anticipated future revenue growth.
Net loss from operations for the three and six months ended June 30, 1999 were
approximately $452,000 and $924,000 respectively and were significantly lower
than comparable 1998 periods. The entire decrease during these periods of 1999
resulted from the Company's operational scaleback in the current year.
OTHER INCOME (EXPENSES)
Interest expense for the three and six months ended June 30, 1999 was
approximately $222,000 and $284,000 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 continue to
explore 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.
LIQUIDITY AND CAPITAL RESOURCES
The Company's overdraft position increased to $98,209 at June 30, 1999 from an
overdraft position at December 31, 1998. The primary use of funds during the
three months ended June 30, 1999 consisted of operating activities.
As of June 30, 1999, the Company had convertible debentures payable totaling
$4,416,000, accrued but unpaid expenses totaling $1,010,654 and accounts payable
totaling $19,637,154. The terms of the convertible debentures provide that as of
August 15, 1998, the convertible debentures automatically convert, including
accrued and unpaid interest, into approximately 13.6 million shares of common
stock, in accordance with the terms of the convertible debentures. However, the
convertible debentures are the subject of litigation currently in process, and
the issues related to the automatic conversion of the convertible debentures and
other claims for damages remains the subject of the litigation. New management
is negotiating a favorable settlement on terms considered manageable under the
new business plan. The plan should eliminate or substantially reduce the need
for the issuance of further stock to settle these debts.
The increase 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.
<PAGE>
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 assets of BHFC.
The successful completion of the New Management's development program and its
transition, ultimately, to the attainment of profitable operations is to be
financed from operations of the BHFC subsidiaries 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
corporate infrastructure. Management believes that the Company can sustain
operations and growth under its new business plan.
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.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Form 10-KSB filed April 15, 1999
The Company had employment agreements with certain officers and key employees,
which expire at various times through 2005. Due to the resignation of the
officers and directors of previous management all employment agreements and
stock options have been canceled.
Walsh Litigation. See Form 10-KSB filed April 15, 1999 for a complete discussion
- ----------------
of this matter. 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 by August 13, 1998. The failure to make this payment resulted in a
$330,000 judgement, and delivery by the escrow agent of 250,000 shares of GTMI
common stock, as security for the judgement, in accordance with the consent
order. New management is negotiating for a favorable settlement following which
it will recover the 250,000 shares held in escrow.
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 Company was successful in reaching a compromise settlement of this
action, its inability to make payment of the settlement amount in January 1998
resulted in a summary judgement against the Company for $250,000.
RBB/Khalifa Litigation. See Form 10-KSB filed April 15, 1999 for a complete
- -----------------------
discussion of this matter. On July 29, 1998, the court affirmed its November 20,
1997 order that the Company issues 2,496,761 shares of stock to the plaintiffs.
The Company has instructed the transfer agent to issue the shares and the
transfer agent has issued the shares. The terms of the convertible debentures
provide that as of August 15, 1998, the balance of the notes automatically
convert, including accrued and unpaid interest, into approximately 13.6 million
shares of common stock, However, the litigation continues in progress and the
issues related to the automatic conversion of the convertible debentures and
other claims for damages remain the subject of the litigation.
Trident Litigation. See Form 10-KSB filed April 15, 1999 for a complete
- -------------------
discussion of this matter. As of March 1, 1999, the Company has entered into
discussions with Trident in an effort to settle the litigation. Trident has
offered a cash settlement to resolve this matter
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.
<PAGE>
On February 5, 1999, the Company entered into mediation with the intent to
settle all the issues. The Company has proposed a settlement of all issues
remaining in this case. Trial on the merits of this case has been postponed and
not yet rescheduled.
Southern Signatures LitigationThere 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. New management proposed a
structured payment in settlement of this 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 13 installments of $25,000, beginning May 1, 1999, with a thirty-day
grace period. New management is re-negotiating and has offered a bank instrument
in settlement of this matter.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. 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.
GLOBAL TELEMEDIA INTERNATIONAL, INC.
------------------------------------
(Registrant)
/s/ Jonathon Bentley-Stevens
- ------------------------------
Jonathon Bentley-Stevens, CEO
Date: November 3, 1999
/s/ David Tang
- ----------------
David Tang, Chief Financial Officer
Date: November 3, 1999
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 10181
<SECURITIES> 0
<RECEIVABLES> 451506
<ALLOWANCES> (301463)
<INVENTORY> 0
<CURRENT-ASSETS> 955304
<PP&E> 38674910
<DEPRECIATION> (800194)
<TOTAL-ASSETS> 38990244
<CURRENT-LIABILITIES> 26175307
<BONDS> 2633285
0
16
<COMMON> 299758
<OTHER-SE> 9881878
<TOTAL-LIABILITY-AND-EQUITY> 38990244
<SALES> 120000
<TOTAL-REVENUES> 120000
<CGS> 50000
<TOTAL-COSTS> 50000
<OTHER-EXPENSES> 907039
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 284289
<INCOME-PRETAX> (1121328)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1121328)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1121328)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
