As filed with the Securities and Exchange Commission on ^ September 6, 1996.
Registration No. 33-85998
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. ^ 3
TO
REGISTRATION STATEMENT ON FORM SB-2
ON
FORM S-3
Under
THE SECURITIES ACT OF 1933
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-^ 3698386
(State of Incorporation) (I.R.S. Employer ^ Identification Number)
40 Elmont Road
Elmont, New York 11003
(516) 326-1940
(Address and telephone number of principal executive offices)
Shelly Finkel
Chairman of the Board
Global Telecommunication Solutions, Inc.
40 Elmont Road
Elmont, New York 11003
(516) 326-1940
(Name, address and telephone number of agent for service)
Copies to:
David Alan Miller, Esq.
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016
(212) 818-8800
(212) 818-8881 - Telecopy
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this ^ form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box: |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
<PAGE>
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
---------------------------
CROSS REFERENCE SHEET
---------------------------
Form S-3 Caption or Location
Item Number and Heading in Prospectus
- ----------------------- -------------------
1. Forepart of the Registration Statement and Outside Front Cover Page
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Inside Front Cover Page
Pages of Prospectus
3. Summary Information and Risk Factors Prospectus Summary; Risk
Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Outside Front Cover Page;
Selling ^ Securityholders;
Plan of Distribution
6. Dilution Not Applicable
7. Selling Security Holders Selling ^ Securityholders;
Plan of Distribution
8. Plan of Distribution Outside Front Cover Page;
Selling ^ Securityholders;
Plan of Distribution
9. Description of Securities to be Registered Not Applicable
10. Interest of Named Experts and Counsel Experts
11. Material Changes Prospectus Summary
12. Incorporation of Certain Information by Incorporation of Certain
Reference Documents by Reference
13. Disclosure of Commission Position ^ Selling Securityholders
on Indemnification for Securities
Act Liabilities
ii
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED ^ SEPTEMBER 6, 1996
PROSPECTUS
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
3,241,678 Shares of Common Stock and
383,000 Redeemable Common Stock Purchase Warrants
This Prospectus relates to the issuance by Global Telecommunication
Solutions, Inc. ("Company") of up to 2,941,678 shares of Common Stock, par value
$.01 per share, upon the exercise of outstanding Redeemable Common Stock
Purchase Warrants ("Warrants"). Each Warrant entitles the holder thereof to
purchase one share of Common Stock for $4.00, subject to adjustment in certain
circumstances, at any time through and including December 14, 1999. The Warrants
are redeemable by the Company, with the consent of Whale Securities Co., L.P.,
the underwriter ("Whale" or "Underwriter") of its initial public offering
("IPO") consummated in December 1994, upon notice of not less than 30 days, at a
price of $.10 per Warrant, provided the closing bid quotation of the Common
Stock on all 20 trading days ending on the third day prior to the day on which
the Company gives notice has been at least 187.5% of the then effective exercise
price of the Warrants (currently $7.50, subject to adjustment). See "Description
of Securities."
This Prospectus also relates to the offer and sale by (i) Mr. Norton
Herrick ("Herrick") of up to 233,000 of the aforementioned Warrants ("Herrick's
Warrants") and (ii) the Underwriter and its designees of up to 150,000 shares of
Common Stock ("Underwriter's Stock") ^ and 150,000 Warrants ("Underwriter's
Warrants") issuable to the Underwriter and its designees upon exercise of a
certain option ("Underwriter's Option") granted to the Underwriter in connection
with the IPO. The Underwriter's Option is exercisable at any time through
December 14, 1999 to purchase each share of Common Stock for $8.05 and/or each
Underwriter's Warrant for $.161. Herrick and the Underwriter and its designees
will be referred to herein as the "Selling Securityholders" and Herrick's
Warrants, the Underwriter's Stock and the Underwriter's Warrants will be
collectively referred to herein as the "Selling Securityholders' Securities."
This Prospectus also relates to the issuance by the Company of up to
150,000 shares of Common Stock upon the exercise of the Underwriter's Warrants.
The Company will not derive any proceeds from the sale by the Selling
Securityholders of any of the Selling Securityholders' Securities. See "Selling
Securityholders." The Company will derive net proceeds of approximately
$11,700,000 upon exercise of all of the Warrants, including Herrick's Warrants
and the Underwriter's Warrants, after payment of costs of this offering
($50,000) and the 5% warrant solicitation fee payable to the Underwriter
($618,336, assuming that such fee is payable with respect to all such Warrants).
Additionally, the Company will receive $1,231,650 upon exercise, in full, of the
Underwriter's Option. All proceeds derived by the Company will be used for
working capital and general corporate purposes.
The principal market for trading of the Common Stock and the Warrants is
the Nasdaq SmallCap Market under the symbols GTST and GTSTW, respectively. On ^
September 5, 1996, the last sale price for the Common Stock was ^ $3.1875 and
for the Warrants was ^ $1.25 as reported by the Nasdaq SmallCap Market. The
Common Stock and the Warrants also are listed on the Boston Stock Exchange under
the symbols GTL and GTLW, respectively.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE ^ 10.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION ^ PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION ^ TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is ___________, 1996.
<PAGE>
No person is authorized in connection with any offering made hereby to give any
information or to make any representation not contained in this Prospectus, and
if given or made, such information or representation must not be relied upon as
having been authorized by the Company. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any security other than the
Common Stock offered hereby, nor does it constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby to any
person in any jurisdiction in which it is unlawful to make such an offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create any implication that the
information contained herein is correct as of any date subsequent to the date
hereof.
TABLE OF CONTENTS
Page
TABLE OF CONTENTS...................................................... 2
AVAILABLE INFORMATION.................................................. 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................ 3
PROSPECTUS SUMMARY..................................................... 4
RISK FACTORS........................................................... ^ 10
USE OF PROCEEDS........................................................ ^ 17
SELLING SECURITYHOLDERS................................................ ^ 17
PLAN OF DISTRIBUTION................................................... ^ 19
LEGAL MATTERS.......................................................... ^ 20
EXPERTS................................................................ ^ 20
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files ^ reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). ^ Copies of such
information, reports, proxy statements and other information filed ^ by the
Company under the Exchange Act may be ^ examined without charge at the ^ public
reference facilities of the Commission ^, Judiciary Plaza, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 ^, as well as at the ^ following Regional
Offices: 7 World Trade Center, Suite 1300, New York, New York 10048^; and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60611. Copies ^ also can be obtained ^ at prescribed rates ^ from the
Commission's Public Reference Section, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. In addition, all reports filed by the Company via the
Commission's Electronic Data Gathering and Retrieval System (EDGAR) can be
obtained from the Commission's Internet Web Site located at http://www.sec.gov.
The Common Stock and the Warrants are traded on the Nasdaq SmallCap Market
(Symbols: GTST and GTSTW), and such reports, proxy statements and other
information concerning the Company also can be inspected at the offices of the
Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C. 20006. The Common
Stock and Warrants also are listed on ^ the Boston Stock Exchange (Symbols GTL
and GTLW) and information concerning the Company can be inspected and copied at
^ the Boston Stock Exchange, Inc., One Boston Place, Boston, Massachusetts
02108.
This Prospectus constitutes a part of a Registration Statement on Form
S-3 filed by the Company with the Commission under the Securities Act of 1933,
as amended (the "Securities Act"), as Post-Effective Amendment No. ^ 3 to the
Company's Registration Statement on Form SB-2 (No.33-85998) (herein, together
with all amendments and exhibits, referred to as the "Registration Statement").
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and its Common Stock and Warrants, reference is hereby
made to the Registration Statement. Statements contained herein concerning the
provisions of any document are not necessarily complete, and in each instance
reference is made to the copy of such document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which are on file with the Commission (Exchange
Act File No. 1-13478) are incorporated in this Prospectus by reference and made
a part hereof:
(a) Annual Report on Form 10-KSB of the Company for the year ended
December 31, 1995 and amendment thereto on Form 10-KSB/A, filed
September 6, 1996;
(b) Current Report of the Company on Form 8-K for merger filed on
March 15, 1996, and ^ amendments thereto on Form 8-K/A, filed on
May 10, 1996 ^ and September 6, 1996, respectively;
(c) Quarterly Report on Form 10-QSB of the Company for the three
months ended March 31, 1996 and amendment thereto on Form
10-QSB/A, filed September 6, 1996;
(d) Quarterly Report on Form 10-QSB of the Company for the three
months ended June 30, 1996; and
(e) Proxy Statement dated July 11, 1996.
The Company's Registration Statement on Form 8-A (which contains
descriptions of the Company's Common Stock and Warrants), which was declared
effective by the ^ Commission on December 14, 1994, is also incorporated in this
Prospectus by reference and made a part hereof.
All documents filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this Offering shall be deemed to be
incorporated by reference in this Prospectus and shall be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated by reference in this Prospectus and filed with the Commission prior
to the date of this Prospectus shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein, or
in any other subsequently filed document which is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the foregoing documents incorporated herein by reference (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents). Written or telephone requests
should be directed to the Company at 40 Elmont Road, Elmont, New York 11003,
Attention: Investor Relations (telephone number: (516) 326-1940).
3
<PAGE>
PROSPECTUS SUMMARY
The information set forth below is qualified in its entirety by the
information set forth in those documents incorporated herein by reference.
Certain of the information contained in this summary and elsewhere in this
Prospectus are forward-looking statements. For a discussion of important factors
that could cause actual results to differ materially from the forward-looking
statements, see "Risk Factors."
The Company
General
Global Telecommunication Solutions, Inc. and its subsidiaries ("Company"
or "GTS") ^ design, develop and ^ market prepaid phone cards featuring licensed,
promotional and standard graphics. The Company markets its prepaid phone cards
as a convenient alternative to credit calling cards and conventional coin or
collect long distance calls. The Company also provides card user access to long
distance service through its switching facilities and long distance network
arrangements. The Company's phone cards are designed to promote a high level of
consumer awareness and appeal by combining creative graphic designs and
widely-recognized concepts, characters and/or images with long distance service
features and ancillary advertising and promotional benefits, such as broadcast
messaging, voice mail, foreign language instruction, customized information and
advertising, celebrity and character voices and customized greetings.
Recent Events
Acquisition of Global Link
The Company acquired Global Link Teleco Corporation ("Global Link") by
merging (the "Merger") the Company's wholly-owned subsidiary, Link Acquisition
Corp., with and into Global Link, with Global Link surviving the Merger as a
wholly-owned subsidiary of the Company. The Merger was effective March 1, 1996.
The purchase price paid for Global Link was approximately $11,500,000. Global
Link is engaged in the marketing and selling of prepaid phone cards through its
retail phone centers in the New York City metropolitan area and in South Miami
Beach, Florida, and a diverse wholesale distribution network.
Global Link markets its prepaid phone cards through various wholesale
distributors and retailers, including supermarkets, convenience stores, travel
agents and tour wholesalers, to consumers seeking economical and convenient long
distance services and to international travelers for use in the United States
and abroad. Global Link also markets its prepaid phone cards to corporations
seeking phone cards for promotional use, internal use or sale to the
corporations' customers.
Global Link's retail phone centers are brightly lit environments located
in urban shopping areas having a high volume of pedestrian traffic. Each retail
phone center has a street level store front offering high and easy
accessibility. These retail phone centers provide two primary functions: (i) to
sell Global Link's phone cards and (ii) to enable the customers to place
telephone calls and pay for those calls with the phone card. Other services,
including money transfers, mailbox rentals, photocopying, may also be provided
at some of Global Link's retail phone centers. Such other services, however, do
not and are not expected to constitute a material part of the retail phone
centers' business. Global Link currently operates 12 retail phone centers in
Brooklyn and Queens, New York and South Miami Beach, Florida.
The following pro forma combined statement of operations (unaudited)
combines on a purchase basis of accounting, the statements of operations of the
Company and Global Link for the ^ six months ended ^ June 30, 1996. The pro
forma statement of operations gives effect to the acquisition of Global Link as
if it occurred at the beginning of the year.
4
<PAGE>
The pro forma combined statement of operations is not necessarily
indicative of future operating results and should not be used as a forecast of
future operations. This pro forma combined financial statement should be read in
conjunction with the notes to the pro forma combined financial statements and
the historical financial statements of both companies. The Global Link Teleco
Corporation statement of operations includes the operating data for the period
from January 1, 1996 to the date of the Merger.
<TABLE>
<CAPTION>
Six Months Ended June 30, 1996 - Unaudited
---------------------------------------------------------------
Global Global Link
Telecommunication Teleco ^ Pro Forma
Solutions, Inc. Corporation Adjustments Pro Forma
<S> <C> <C> <C> <C>
Net ^ sales...................... $4,596,356 $1,363,030 -- $5,959,386
Cost of ^ sales.................. 3,387,048 925,405 -- 4,312,453
Gross profit................... 1,209,308 437,625 -- 1,646,933
Operating ^ expenses............. 4,155,411 1,090,957 134,090(a) 5,380,458
Operating ^ loss................. (2,946,103) (653,332) (134,090) (3,733,525)
Other income (expense):
Interest income................ 41,154 255 -- 41,409
Interest expense............... ^(87,508) ^(119,476) 84,597(b) (122,387)
^ Other........................ ^ 5,600 2,800 -- 8,400
Loss before income ^ taxes.. (2,986,857) (769,753) (49,493) (3,806,103)
Provision for income taxes....... -- -- -- --
^ Net loss for ^ period..... (2,986,857) (769,753) (49,493) (3,806,103)
Net loss per ^ share............. $(.75)
Weighted average common shares
^ outstanding................. 5,080,383(c)
</TABLE>
- --------------------------
(1) Basis of Presentation
The acquisition of Global Link is accounted for as a purchase and, in
accordance with generally accepted accounting principles, the purchase
price is allocated to the assets and liabilities of Global Link based on
their fair values at the date of acquisition.
(2) Pro Forma Adjustments and Assumptions
The pro forma combined financial statements of the Company and Global
Link give effect to the following pro forma adjustments and assumptions:
(a) To record the amortization of goodwill on a straight-line basis
over 15 years and to eliminate amortization of the predecessor's
goodwill.
(b) To eliminate interest expense on amounts due to Peoples Telephone
Company, Inc. ("Peoples"), which were adjusted as a result of an
agreement pursuant to which Peoples accepted $1,050,000 ($550,000 of
which was paid on the merger date and $500,000 plus interest at the
rate of 8% per annum^) and 52,805 shares of the Company's Common Stock
in full satisfaction of all amounts due Peoples other than $954,630 of
accounts payable. As a result of the agreement with Peoples, Global
Link reduced its liabilities and the goodwill associated with the
purchase from Peoples by approximately $5,053,000. No gain or loss was
recognized by Global Link with respect to this adjustment. The total
cost of the acquisition, including estimated acquisition costs of
$450,000 and the 52,805 shares, was approximately $11.5 million and
resulted in goodwill of approximately $18.9 million.
5
<PAGE>
(c) Represents the weighted average common shares ^ for the period
assuming the 1,771,123 shares of the Company's Common Stock issued
in connection with the merger were issued on January 1, 1996.
Private Placement
In May 1996, the Company consummated a private placement ("May 1996
Private Placement") from which the Company derived gross proceeds of $3,000,000
through the sale of 30 units ("Units "), each consisting of 20,000 shares of
Common Stock and 40,000 common stock purchase warrants ("Warrants"). The
Warrants are identical to the publicly-traded Warrants of the Company listed on
the Nasdaq SmallCap Market under the symbol "GTSTW" and on the Boston Stock
Exchange under the symbol "GTLW." The ^ Company has agreed, however, that,
notwithstanding the terms of its publicly-traded Warrants, each of the Warrants
sold in the May 1996 Private Placement ^ is not redeemable by the Company until
it is (i) registered for public sale under the Securities Act and (ii)
transferred by the original purchasers thereof. ^ The per Unit offering price
was $100,000, which price was determined by arms' length negotiations between
the Company and Whale based on an assessment of the prospects for the industry
in which the Company competes, the Company's management and capital structure,
and the prevailing market prices of the publicly-traded Common Stock and
Warrants with a discount taken due to the private nature of the transaction. It
is anticipated that the proceeds of the May 1996 Private Placement will be used
for working capital and general corporate purposes.
Whale served as the placement agent in connection with the May 1996
Private Placement and received a commission equal to 10% of the gross proceeds
from the sale of the Units (except that there was no ^ commission paid with
respect to 2-1/2 Units sold to certain purchasers) and a $15,000 nonaccountable
expense allowance. Whale also received warrants ("Placement Agent Warrants") to
purchase three Units (up to 60,000 shares of Common Stock and 120,000 Warrants),
at an exercise price of $100,000 per Unit, exercisable ^ until May 10, 2001.
The Company has agreed to prepare and file with the Securities and
Exchange Commission, no later than June 30, 1996, and to use its best efforts to
cause to become effective, by September 30, 1996, a registration statement
covering the shares of Common Stock and Warrants and the shares of Common Stock
underlying such Warrants sold in the May 1996 Private Placement (collectively,
the "Registrable Securities"). Such registration statement was filed by the
Company on June 26, 1996 and declared effective on September __, 1996. Once such
registration statement is effective, the Company also has agreed to use its best
efforts to maintain the effectiveness of the registration statement until the
earlier of (i) the date that all of the Registrable Securities have been
publicly sold, or (ii) the date that the holders thereof may freely trade the
Registrable Securities without registration under the Securities Act, under Rule
144(k) or otherwise. The Company shall bear all fees and expenses incurred in
the preparation and filing of the registration statement.
Market Overview
The markets for prepaid phone cards have grown in recent years. Advances
in long distance telephone services, coupled with the convenience and features
of prepaid phone cards, have resulted in demand for and increasing use of phone
cards for various business and personal reasons. The number of prepaid phone
cards sold as collectors' items in worldwide markets has also increased and
prepaid phone cards have become popular with large corporations for internal use
and in connection with marketing, advertising and promotional activities.
Although the markets for prepaid phone cards in Europe and Japan have matured,
markets in the United States are emerging and are largely undeveloped. According
to industry sources, domestic prepaid phone card sales were approximately $75
million in 1993 and grew to approximately $500 million in 1995.
6
<PAGE>
Two types of prepaid phone card technologies are currently used in the
United States. Most domestic prepaid phone cards, including the Company's cards,
utilize a remote memory technology, which permits users to place domestic and
international calls from any touch-tone phone by calling a toll-free 800 number
and entering a PIN number printed on the back of the card. By contrast, "smart"
card technology utilizes computer chips, magnetic strips or optical readers
incorporated into the cards which must be swiped or inserted through a
specially-designed device incorporated into the telephone. Smart card technology
requires the replacement of standard telephones with telephones that have
mechanisms capable of reading such cards. Smart card technology is currently in
widespread commercial use in Europe and Japan and has been introduced in the
United States on a limited basis ^ by companies such as NYNEX Corporation
("NYNEX"), a leading regional telephone company. In order for smart card
technology to become a viable option for a calling card company in any
particular area, all or substantially all of the public pay telephones in that
area must have the technology to accept and read the smart cards. Accordingly,
NYNEX might be able to utilize smart card technology ^ as a viable economic
alternative to remote memory technology in areas, such as New York City, in
which NYNEX owns and operates a significant number of its own public pay
telephones (and thus, controls the technology), but currently the Company could
not. However, smart card technology may be a viable alternative in a "closed"
environment in which the Company would have access to each of the consumers
which would utilize the public telephone system in such environment and in which
there was only one public pay telephone provider. Examples of closed
environments include colleges, universities and entertainment facilities.
Notwithstanding the foregoing, the Company may choose not to implement smart
card technology at all if the Company determines that its prepaid calling cards
are not being primarily utilized from public pay telephones. Moreover, in the
event the Company chooses to implement smart card technology, it may not replace
its remote memory technology entirely because many of the Company's customers
utilize its prepaid phone cards from telephones other than public pay
telephones. Unlike smart cards, the Company's prepaid phone cards may be
utilized from any touch-tone telephone.
Strategy
The Company is pursuing a growth strategy to capitalize on its early
entrance into the emerging and expanding markets for prepaid phone cards in the
United States and Canada, and on the marketability of the licensed concepts
featured on many of the Company's cards. Significant components of the Company's
strategy include: (i) increasing demand for phone cards by expanding retail
distribution to enhance market penetration and utilizing popular concepts,
images and graphics licensed to the Company on its prepaid phone cards to
heighten consumer interest; (ii) encouraging corporations to use the Company's
phone cards for internal use and in connection with their marketing, advertising
and promotional activities; (iii) expanding the Company's international network
of distributors to market the Company's phone cards overseas; (iv) creating and
marketing interactive applications which can be accessed by using the Company's
phone cards; (v) pursuing the acquisition of companies that fit within the
Company's business strategy and which can, through economies of scale, improve
the Company's operating margins (although, as of the date of this Prospectus,
the Company has no agreements, understandings or commitments with respect
thereto); and (vi) maintaining the Company's retail phone center operations. The
Company also intends to continue development of multi-functional debit card
applications for entities such as colleges, sporting arenas and theme parks
which can be used by consumers to make small item purchases offered at and sold
by such entities, as well as for placing long distance telephone calls. The
Company seeks to develop the components of its strategy both internally and,
where appropriate, through joint venture arrangements. There can be no assurance
that the Company's strategy will be successful.
Corporate Background
GTS and Global Link were incorporated under the laws of the State of
Delaware in December 1992 and March 1994, respectively. The Company's principal
executive offices are located at 40 Elmont Road, Elmont, New York 11003 and its
7
<PAGE>
telephone number is (516) 326-1940. Global Link's offices are located at 5697
Rising Sun Avenue, Philadelphia, Pennsylvania 19120 and its telephone number is
(215) 342-7700.
The Offering
Securities offered by the Company... 3,091,678 shares of Common Stock(1)
Securities offered by
Selling Securityholders........... 383,000 Warrants
150,000 shares of Common Stock
Risk Factors........................ ^ The securities offered hereby ^ are
speculative and involve a high degree
of risk, including, among others, the
Company's limited operating history
and revenues; significant and continuing
losses; accumulated and working capital
deficits; the recent acquisition of
Global Link; significant outstanding
indebtedness and security interests; the
relative infancy of the prepaid calling
card industry and the uncertainty of
market acceptance of phone cards; and the
risks associated with marketing strategy
and rapid expansion. See "Risk Factors."
Nasdaq SmallCap Market Symbols..... Common Stock: GTST
Warrants: GTSTW
Boston Stock Exchange Symbols...... Common Stock: GTL
Warrants: GTLW
Use of Proceeds.................... The Company will derive net proceeds of
approximately $11,700,000 upon exercise
of all of the Warrants, including
Herrick's Warrants and the Underwriter's
Warrants, and $1,231,650 upon exercise of
the Underwriter's Option. The Company
intends to use any such proceeds for
working capital and general corporate
purposes. The Company will not derive any
proceeds from the sale by the Selling
Securityholders of any of the Selling
Securityholders' Securities. See "Use
of Proceeds."
(1) Represents shares issuable upon exercise of the outstanding Warrants,
including Herrick's Warrants, and the shares issuable upon exercise of the
Underwriter's Warrants. See "Selling Securityholders."
8
<PAGE>
Outstanding Securities
Common Stock. As of ^ September 5, 1996, there were ^ 5,512,801 shares
of Common Stock outstanding. Upon the completion of this offering, assuming the
exercise of the Underwriter's Option and all of the Warrants, but without giving
effect to the exercise of other outstanding warrants and options, there will be
9,954,479 shares of Common Stock outstanding.
Warrants. As of ^ September 5, 1996, there were outstanding 4,141,678
Warrants, each of which entitles the holder thereof to purchase one share of
Common Stock for $4.00 through December 14, 1999. Additionally, the Company may
issue up to 150,000 Warrants upon exercise of the Underwriter's Option. The
Company may call the Warrants for redemption, with the consent of the
Underwriter, at $.10 per Warrant in whole or in part at any time prior to
expiration upon not less than 30 days' prior written notice, if the closing bid
quotation of the Common Stock, as quoted by the Nasdaq SmallCap Market, on all
20 trading days ending on the third day prior to the day on which the Company
gives notice, has been at least 187.5% of the then effective exercise price of
the Warrants (currently $7.50, subject to adjustment).
9
<PAGE>
RISK FACTORS
The securities offered hereby are speculative and involve a high degree
of risk. Each prospective investor should carefully consider the following risk
factors before making an investment decision.
Limited Operating History and Revenues; Significant and Continuing
Losses; Accumulated and Working Capital Deficits. The Company was organized in
December 1992 and Global Link was incorporated in March 1994. Accordingly, the
Company has a limited operating history upon which an evaluation of its future
performance and prospects can be made. The Company's prospects must be
considered in light of the risks, expenses, delays, problems and difficulties
frequently encountered in the establishment of a new business in an emerging and
evolving industry characterized by intense competition, which are described
further below. Since inception, the Company has generated limited revenues and
has incurred significant losses, including losses of $1,946,526 and $2,970,121,
respectively, for the years ended December 31, 1994 and 1995 and Global Link has
generated only limited revenues and has incurred significant losses since its
inception, including losses of $548,340 and $4,563,401 for the years ended
December 31, 1994 and 1995. Assuming the Company's acquisition of Global Link ^
occurred on January 1, 1995, on an unaudited combined pro forma basis, giving
effect to the financial results of Global Link, the Company would have incurred
a net loss of $7,765,915 for the year ended December 31, 1995. For the ^ six
months ended ^ June 30, 1996, assuming that the acquisition ^ occurred on
January 1, 1996, on an unaudited combined pro forma basis, the Company would
have incurred a net loss of ^ $3,806,103. Inasmuch as the Company will continue
to have a high level of operating expenses and will be required to make
significant up-front expenditures in connection with its continuing expansion
(including salaries of executive, creative, sales, marketing and other
personnel), the Company anticipates that losses will continue until such time,
if ever, as the Company is able to generate sufficient revenues to finance its
operations and the costs of continuing expansion. There can be no assurance that
the Company will be able to generate significant revenues or achieve profitable
operations. Moreover, as of ^ June 30, 1996, the Company had an accumulated
deficit of ^ $8,473,139 and a working capital deficit of ^ $5,020,645.
Recent Acquisition of Global Link. The Company only recently acquired
Global Link and has not fully integrated Global Link's operations into the
Company's operations. Although the Company anticipates that its acquisition of
Global Link will improve economies of scale, the Company will be required to
expend a significant amount of time and resources to integrate such operations.
In addition, as a result of the Merger, the Company significantly increased the
size and scope of its operations. Management has no experience in managing an
entity with operations as diverse and expansive as the Company's. There can be
no assurance that the Company will be able to successfully integrate Global
Link's operations into the Company's operations or for the Company to achieve
increased economies of scale.
Significant Outstanding Indebtedness; Security Interests. In connection
with the acquisition of Global Link, the Company assumed ^ approximately
$10,719,000 of indebtedness of Global Link, including $2,800,000 aggregate
principal amount of certain outstanding convertible debentures of Global Link
("Convertible Debentures"), payments due from Global Link to Peoples Telephone
Company, Inc. ("Peoples") of $1,050,000, approximately $955,000 of other
indebtedness owed to Peoples, Global Link's accounts payable and accrued
expenses which aggregated ^ approximately $3,916,000 and Global Link's deferred
^ revenue of approximately ^ $1,998,000. At June 30, 1996, total indebtedness of
the Company ^ and Global Link aggregated approximately $15,286,000, of which
$5,441,000 represented deferred revenue. Events of default under the Convertible
Debentures include, among others, failure to pay certain other indebtedness of
the Company or Global Link in an aggregate principal amount of $250,000 or more
and failure by the Company or Global Link to observe or perform any covenant
under the agreements relating to the Convertible Debentures. The Convertible
Debentures are secured by a lien on substantially all of the assets of Global
Link. In the event of a violation or other default by Global Link of its
obligations under the Convertible Debentures or the securities purchase
agreement relating to such Convertible Debentures, the holders of the
Convertible Debentures could declare the Convertible Debentures to be due and
payable and, in certain cases, foreclose on Global Link's assets. Moreover, to
10
<PAGE>
the extent that Global Link's assets continue to secure the Convertible
Debentures, such assets will not be available to secure additional indebtedness,
which may adversely affect the Company's ability to borrow in the future.
New Industry; Uncertainty of Market Acceptance. The prepaid phone card
industry is an emerging business characterized by an increasing and substantial
number of new market entrants who have introduced or are developing an array of
new products and services. Each of these entrants is seeking to position its
products and services as the preferred method for accessing long distance
telephone services, including providing enhanced service features and ancillary
advertising and promotional benefits. As is typically the case in an emerging
industry, demand and market acceptance for newly introduced products and
services are subject to a high level of uncertainty. The Company has limited
marketing experience and limited financial, personnel and other resources to
undertake extensive marketing activities. The Company's success depends in large
part on its ability to attract large corporations to advertise and promote their
products and services using the Company's prepaid phone cards, and also will be
dependent on the level of acceptance and usage by consumers. Because demand by
large corporations, advertisers and marketers, retailers and consumers may be
interrelated, any lack or lessening of demand by any one of these could
adversely affect market acceptance for the Company's products and services. In
light of the relatively small, undeveloped and emerging markets for prepaid
phone cards, there can be no assurance that substantial markets will develop for
prepaid phone cards or that the Company will be able to meet its current
marketing objectives, succeed in positioning its cards and services as a
preferred method for accessing long distance telephone service or achieve
significant market acceptance for its products.
Risks Associated with Marketing Strategy and Rapid Expansion . Although
the Company is pursuing a strategy of growth and seeks to expand its
distribution capabilities to achieve greater penetration in new and emerging
markets, the Company has achieved only limited growth to date. The success of
the Company's expansion is dependent on, among other things, the Company's
ability to establish additional distribution arrangements targeting several
market segments, including retail, promotional and corporate markets; hire and
retain skilled management, financial, marketing, creative and other personnel;
and successfully manage growth (including monitoring operations, controlling
costs and maintaining effective quality, inventory and service controls). The
Company is substantially dependent on the efforts of its distributors' marketing
efforts and the popularity and sales of their products. Although the Company
believes its marketing and distribution relationships are satisfactory, these
arrangements are generally not embodied in written agreements having specific
terms and can be terminated at any time. The Company also may seek to expand its
operations through the possible acquisition of companies in businesses which the
Company believes are compatible with its business. There can be no assurance
that the Company will be able to successfully implement its business strategy or
otherwise expand its operations, or that the Company will ultimately effect any
acquisition or successfully integrate into its operations any business which it
may acquire.
Possible Need for Additional Financing. The Company has been and will be
dependent on the proceeds of its IPO and the May 1996 Private Placement to
implement its plan of expansion and to finance its working capital requirements.
The Company anticipates, based on currently proposed plans and assumptions
relating to its operations (including the costs associated with its proposed
expansion), that the proceeds of the May 1996 Private Placement, together with
projected cash flow from operations, will be sufficient to satisfy its
anticipated cash requirements during 1996. In the event that the Company's plans
change or its assumptions change or prove to be inaccurate or if cash flow
proves to be insufficient to fund the Company's operations after 1996 (due to
unanticipated expenses, delays, problems, difficulties or otherwise), the
Company would be required to seek additional financing or curtail its expansion
activities. The Company may determine, depending upon the opportunities
available to it, to seek additional debt or equity financing to fund the cost of
continuing expansion. To the extent that the Company finances an acquisition
with a combination of cash and equity securities, any such issuance of equity
securities would result in dilution to the interests of the Company's ^
securityholders. Additionally, to the extent that the Company incurs
indebtedness or issues debt securities in connection with any acquisition, the
Company will be subject to risks associated with incurring substantial
indebtedness, including the risks that interest rates may fluctuate and cash
11
<PAGE>
flow may be insufficient to pay principal and interest on any such indebtedness.
The Company has no current arrangements with respect to, or sources of,
additional financing, and it is not anticipated that existing ^ securityholders
will provide any portion of the Company's future financing requirements. There
can be no assurance that the Company will achieve cash flow from operations
sufficient to satisfy its working capital requirements, or at all, or that
additional financing will be available to the Company on commercially reasonable
terms, or at all.
Dependence on Third-Party License Arrangements; Certain License
Limitations; Non-Recurring Revenues. To date, a substantial portion of the
Company's revenues have been derived from sales of prepaid phone cards featuring
the graphics of a limited number of licensors pursuant to short-term,
non-exclusive license agreements, a decline in the sale of which would have a
material adverse effect on the Company. Sales of phone cards featuring licensed
graphics accounted for approximately 46.7% and 37.3%, respectively, of the
Company's revenues for the years ended December 31, 1994 and 1995. Sales of
cards featuring graphics licensed from Marvel Entertainment Group, Inc.
accounted for approximately 19% of the Company's revenues for the year ended
December 31, 1995. These license agreements generally require the Company to
make advance payments and pay guaranteed minimum royalties. Failure by the
Company to satisfy its obligations under license agreements may result in
modification of the terms, or termination, of the relevant agreement, which
could have a material adverse effect on the Company. The Company's success may
depend upon its licensors' ability to maintain the marketability and consumer
recognition of names, images, likenesses, characters, logos and emblems, and on
the Company's ability to identify and obtain additional licenses for currently
popular graphics upon termination of existing licenses or in the absence of
continuing sales under existing licenses. There can be no assurance that the
Company will have the ability to satisfy all of its obligations under the
license agreements, that any such license agreements will be renewed or result
in profitable operations or that the Company will be able to obtain additional
license agreements on favorable terms. In addition, for the years ended December
31, 1994 and 1995, approximately 10.2% and 25.2%, respectively, of the Company's
revenues were derived from sales of promotional cards to a limited number of
customers, all of which sales are non-recurring in nature. There can be no
assurance that the Company will not remain largely dependent on non-recurring
sales of promotional cards to a limited customer base for a significant portion
of its revenues.
Intense Competition. The Company faces intense competition in the
marketing and sale of its products and services. The Company's prepaid phone
cards and long distance services compete for consumer recognition with other
prepaid phone cards, credit calling cards and long distance telephone services
which have achieved significant international, national and regional consumer
loyalty. Many of these products and services are marketed by companies which are
well-established, have reputations for success in the development and sale of
products and services and have significantly greater financial, marketing,
distribution, personnel and other resources than the Company, thereby permitting
such companies to implement extensive advertising and promotional campaigns,
both generally and in response to efforts by additional competitors to enter
into new markets and introduce new products and services. Certain of these
competitors, including American Telephone & Telegraph Company ("AT&T"), MCI
Telecommunications Corporation ("MCI") and Sprint Corporation ("Sprint"),
dominate the telecommunications industry and have the financial resources to
enable them to withstand substantial price competition, which is expected to
increase significantly. These and other large telephone companies, as well as
retailers ^, have also entered or have announced their intention to enter into
the prepaid phone card segment of the industry. In addition, because the prepaid
phone card segment of the industry has no substantial barriers to entry,
competition from smaller competitors in the Company's target markets is also
expected to continue to increase significantly. Since most of the Company's
licenses are non-exclusive and certain of its licenses are limited in scope, the
Company's licensors may also license the same or other graphics to the Company's
competitors, which could adversely affect the marketability of the Company's
licensed graphic cards. Moreover, to the extent that the Company's cards are
marketed as promotional or collectors' items, such cards will also compete with
other products produced as promotional giveaways and sold as collectibles. There
can be no assurance that the Company will be able to compete successfully in its
markets.
12
<PAGE>
Consumer Preferences and Industry Trends; Possible Technological and
Product Obsolescence. The telecommunications industry is characterized by
frequent introduction of new products and services, and is subject to changing
consumer preferences and industry trends, which may adversely affect the
Company's ability to plan for future design, development and marketing of its
products and services. Additionally, the Company's current licensing
arrangements consist principally of comic book characters and sports-related
images, which are subject to relatively frequent and rapid changes in consumer
tastes and preferences. The markets for the telecommunications products and
services are also characterized by rapidly changing technology and evolving
industry standards, often resulting in product obsolescence or short product
life cycles. The proliferation of new telecommunications technologies, including
personal communication services, cellular telephone products and services and
prepaid phone cards employing alternative technologies, may reduce demand for
prepaid phone cards generally as well as for phone cards employing the Company's
remote memory technology. NYNEX ^ has installed telephone equipment in New York
City employing "smart" card technology. Unlike the Company, NYNEX is able to
utilize smart card technology in areas, such as New York City, in which NYNEX
owns and operates a significant number of its own public pay telephones (and
thus, controls the technology). Such technology could be perceived as a more
convenient method of accessing long distance service than remote memory
technology. The proliferation and widespread commercial use of telephone
equipment employing such technology could materially adversely affect demand for
the Company's prepaid phone cards. The Company's success will depend on the
Company's ability to anticipate and respond to these and other factors affecting
the industry, including new products and services which may be introduced. There
can be no assurance that the Company will be able to anticipate and respond to
changing consumer preferences and industry trends or that competitors will not
develop and commercialize new technologies or products that render the Company's
products and services obsolete or less marketable.
Dependence on Third-Party Long Distance Carriers; Possible Service
Interruptions and Equipment Failures; Unauthorized Access to Services. The
Company is currently dependent on a limited number of domestic and international
long distance carriers to provide access to long distance telephone service on a
cost-effective basis. The Company has entered into interconnect agreements or
arrangements with long distance carriers, pursuant to which the Company leases
phone lines and transmission facilities necessary to transmit consumer calls.
Although the Company believes that it currently has sufficient access to
transmission facilities and long distance networks on favorable terms and
believes that its relationships with its carriers are satisfactory, any increase
in the rates charged by carriers would materially adversely affect the Company's
operating margins. Failure to obtain continuing access to such facilities and
networks would also have a material adverse effect on the Company, including
possibly requiring the Company to significantly curtail or cease its operations.
In addition, the Company's operations require that its switching facilities and
its carriers' long distance networks operate on a continuous basis. It is not
atypical for telephone carriers and switching facilities to experience service
interruptions and equipment failures which could last for a significant period
of time. It is possible that the Company's switching facilities and its
carriers' long distance networks may from time to time experience service
interruptions or equipment failures. Service interruptions and equipment
failures resulting in material delays would adversely affect consumer confidence
as well as the Company's business operations and reputation. The Company and
Global Link have in the past experienced unauthorized access to their switching
services by unauthorized disclosure of a pin number and unauthorized activation
of prepaid phone cards, respectively, which have resulted in the Company and
Global Link being unable to recover the long distance service and switching
charges associated with such calls. Continued unauthorized access to the
Company's services could have a material adverse effect on the Company's
operations.
Regulatory Factors. Long distance telecommunications services are
subject to regulation by the Federal Communications Commission (the "FCC") and
by state regulatory authorities. Among other things, these regulatory
authorities impose regulations governing the rates, terms and conditions for
interstate and intrastate telecommunications services. Changes in existing laws
and regulations, particularly the ^ Telecommunications Act of 1996 (the
"Telecommunications Act"), which allows for all providers of telecommunications
services to participate in all aspects of the telecommunications market, may
have a significant impact on the Company's activities and on the Company's
operating results. The Company believes that it is in substantial compliance
with all material laws, rules and regulations governing its operations and has
13
<PAGE>
obtained, or is in the process of obtaining, all licenses, tariffs and approvals
necessary for the conduct of its business. There can be no assurance, however,
that the Company will be able to obtain required licenses or approvals in the
future or that the FCC or state regulatory authorities will not require the
Company to comply with more stringent regulatory requirements. Conformance of
the Company's operations with of new statutes and regulations and expansion of
the Company's operations into new geographic markets could require the Company
to alter methods of operation, at costs which could be substantial, or otherwise
limit the types of services offered by the Company. There can be no assurance
that the Company will be able to comply with additional applicable laws,
regulations and licensing requirements. The Company is also subject to Federal
Trade Commission regulation and other federal and state laws relating to the
promotion, advertising, labeling and packaging of its products.
On June 6, 1996, the FCC issued a Notice of Proposed Rulemaking
("NPRM"), pursuant to which it proposed to adopt new rules governing the pay
telephone industry, as directed by the Telecommunications Act. This proposed
rulemaking requires the FCC to establish a means by which all pay telephone
service providers are to be compensated for interstate and intrastate calls
originated from their pay telephones, including calls which utilize "800" toll
free access. If adopted, such rules may require phone card companies utilizing
800 toll free telephone numbers to access their networks to pay a "set use fee"
for each call originating from a pay telephone. The Company's prepaid phone
cards utilize an 800 number to access the Company's switched network. The
promulgation of the rules proposed by the NPRM has not been effectuated and such
proposal has been, and is expected to continue to be, the subject of numerous
comments by members of the telecommunications industry and others. Consequently,
there can be no assurance that the NPRM will result in the adoption of rules
consistent with the form initially proposed in the NPRM, or that such rules will
be adopted at all. Until such rules are actually adopted, the rules currently in
existence remain in effect, which rules do not require the Company to pay set
use fees. If new rules are adopted which require the Company to pay such fees,
it could have a material adverse effect on the Company.
Possible Inability to Recognize Deferred Revenue; Possibility of Phone
Cards Expiring Unsold. The sale of long distance telephone service through
prepaid phone cards may be subject to "escheat" laws in various states. These
laws generally provide that payments or deposits received in advance or in
anticipation of the provision of utility (including telephone) services that
remain unclaimed for a specific period of time after the termination of such
services are deemed "abandoned property" and must be submitted to the state.
Although the Company is not aware of any case in which such laws have been
applied to the sale of prepaid phone cards, and does not believe that such laws
are applicable, in the event that such laws are deemed applicable, the Company
may be unable to recognize a portion of its deferred revenue remaining upon the
expiration of phone cards with unused calling time. In such event, the Company
may be required to deliver such amounts to certain states in accordance with
these laws, which could have a material adverse effect on the Company. In
addition, substantially all of the Company's prepaid phone cards have an
expiration date (generally 12 to 18 months after issuance or 12 months after
last use). To the extent that the Company is unable to sell any phone cards
prior to their expiration date, the Company will no longer be able to sell such
phone cards and will be required to write off the printing and production costs
associated with such cards.
Locations of Retail Phone Centers. The Company currently operates twelve
retail phone centers located in the New York City metropolitan area and in South
Miami Beach, Florida. The Company has no experience in opening or operating
phone centers in other areas. The Company's retail phone centers are located
primarily in low-income, urban areas, some of which may have high crime rates.
Although the Company believes that it has taken sufficient steps to provide
adequate security at its retail phone center locations, including the
installation of bullet-proof barriers at customer service counters, armored car
collection of cash receipts, on-site lock boxes and brightly lit, street visible
store layouts, there can be no assurance that incidents of crime will not
interfere with the Company's operations at such locations.
Taxes. The sale of long distance services through the use of prepaid
phone cards has been deemed a taxable event by the Internal Revenue Service (the
"IRS") and most state taxing authorities. The IRS ^ recently established a task
14
<PAGE>
force to determine the application of the 3% federal telecommunications excise
tax (the "Telecommunications Excise Tax") to the sale and provision of long
distance services through prepaid phone cards. ^ The IRS' policy, if different
than the Company's policy, could materially affect the Company's ^ operations.
Additionally, the Company believes that the sale of long distance services
through prepaid phone cards is also subject to state sales and use taxes.
However, most state taxing authorities have not established clear policies on
the application of the sales and use taxes to the provision of long distance
services through prepaid phone cards. While the Company reasonably believes it
is accurately accruing for the expense of state sales and use taxes on its
financial statements, there can be no assurance that a state taxing authority
will concur with the Company's method of determining the sales and use taxes
payable.
Dependence on Key Personnel. The success of the Company is largely
dependent on the personal efforts of Shelly Finkel, its Chairman of the Board,
Gary Wasserson, its Chief Executive Officer and other key personnel. Although
the Company has entered into employment agreements with Messrs. Finkel and
Wasserson, the loss of their services would have a material adverse effect on
the Company's business and prospects. The Company's employment agreement with
Mr. Finkel requires him to devote only 50% of his business time to the Company's
affairs. Both Messrs. Finkel and Wasserson's employment agreements contain a
provision prohibiting them from competing with the Company during the term of
employment and for a period of two years thereafter. In addition, in order to
successfully implement and manage its proposed expansion, the Company will be
dependent upon, among other things, the successful recruiting of qualified
management, marketing, sales and creative personnel with experience in business
activities conducted by the Company. Competition for the type of qualified
individuals sought by the Company is intense and there can be no assurance that
the Company will be able to retain existing employees or that it will be able to
find, attract and retain additional qualified personnel on acceptable terms.
Continuing Control by Management. Two groups of ^ securityholders of the
Company have entered into ^ a voting agreement pursuant to which each group has
agreed to vote for the other group's designees as directors of the Company. Such
^ securityholders, in the aggregate, own approximately 47.6% of the Company's
outstanding shares of Common Stock, without giving effect to the exercise of any
outstanding Warrants, options or convertible securities. Accordingly, such ^
securityholders acting together, are in a position to effectively control the
Company, including the election of all or a majority of the directors of the
Company.
No Dividends. The Company has never paid cash dividends on its Common
Stock and does not expect to pay cash dividends in the foreseeable future. The
Company intends to retain future earnings, if any, to finance the development
and expansion of its business. Certain covenants contained in documents relating
to Global Link's indebtedness currently prohibit the Company from declaring or
paying cash dividends.
Tax Loss Carryforwards. At December 31, 1995, the Company and Global
Link had net operating loss carryforwards ("NOLs") aggregating approximately
$5,167,000 and $4,985,000, respectively, to offset future taxable income. Under
Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"),
utilization of prior NOLs is limited after an ownership change, as defined in
such Section 382, to an amount equal to the value of the loss corporation's
outstanding stock immediately before the date of the ownership change,
multiplied by the federal long-term tax-exempt rate in effect during the month
that the ownership change occurred. As a result of the Merger, the Company and
Global Link ^ are subject to limitations on the use of ^ their NOLs as provided
under Section 382. Accordingly, there can be no assurance that a significant
amount of Global Link's existing NOLs will be available to the Company. In the
event that the Company achieves profitability, as to which there can be no
assurance, such limitation ^ will have the effect of increasing the Company's
tax liability and reducing the net income and available cash resources of the
Company in the future.
\
Litigation. The Company is involved from time to time in litigation
incidental to its business. Such litigation can be expensive and time consuming
to prosecute or defend and could have the effect of causing the Company's
customers to delay or cancel purchase orders until such lawsuits are resolved.
15
<PAGE>
Although the Company believes that none of its pending litigation matters,
individually or in the aggregate, will have a material adverse effect on the
Company's operating results or financial condition, there can be no assurance of
this.
Possible Delisting of Securities from Nasdaq System; Risks Associated
with Low-Priced Stocks. The Company's Common Stock and publicly-traded Warrants
are currently listed on Nasdaq. However, in order to continue to be listed on
Nasdaq, a company must maintain $2,000,000 in total assets, a $200,000 market
value of the public float and $1,000,000 in total capital and surplus. In
addition, continued inclusion requires two market makers and a minimum bid price
of $1.00 per share; provided, however, that if a company falls below such
minimum bid price, it will remain eligible for continued inclusion on Nasdaq if
the market value of the public float is at least $1,000,000 and the company has
$2,000,000 in capital and surplus. The failure to meet these maintenance
criteria in the future may result in the delisting of the Company's securities
from Nasdaq and trading, if any, in the company securities would thereafter be
conducted in the non-Nasdaq over-the-counter market. As a result of such
delisting, an investor may find it more difficult to dispose of, or to obtain
accurate quotations as to the market value of, the Company's securities. In
addition, if the Common Stock was to become delisted from trading on Nasdaq and
the trading price of the Common Stock was to fall below $5.00 per share, trading
in the Common Stock would also be subject to the requirements of certain rules
promulgated under the Exchange Act, which require additional disclosure by
broker-dealers in connection with any trades involving a stock defined as a
penny stock (generally, any non-Nasdaq equity security that has a market price
of less than $5.00 per share, subject to certain exceptions). Such rules require
the delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated therewith, and impose
various sales practice requirements on broker-dealers who sell penny stocks to
persons other than established customers and accredited investors (generally
institutions). For these types of transactions, the broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. The additional
burdens imposed upon broker-dealers by such requirements may discourage them
from effecting transactions in the Common Stock and Warrants, which could
severely limit the liquidity of the Common Stock and Warrants and the ability of
purchasers in this offering to sell the Common Stock and Warrants in the
secondary market.
Shares Eligible for Future Sale. Substantially all of the Company's
outstanding shares of Common Stock and Warrants have been or will be registered
for sale under the Securities Act or are eligible for sale under an exemption
therefrom. The possibility that substantial amounts of Common Stock or Warrants
may be sold in the public market may adversely affect prevailing market prices
for the Common Stock or the Warrants and could impair the Company's ability to
raise capital through the sale of its equity securities. The Company is
obligated to file a registration prior to June 30, 1996 with respect to (i) the
shares of Common Stock issued or issuable in connection with the acquisition of
Global Link, including shares issuable upon conversion of the debentures of
Global Link (906,682 shares) and the exercise of certain warrants owned by the
holders of such debentures (56,000 shares) and the shares of additional Common
Stock issued to Peoples Telephone Company, Inc. (52,805 shares), and (ii) the
600,000 shares of Common Stock and 1,200,000 Warrants issued in the May 1996
Private Placement (and the 1,200,000 shares of Common Stock issuable upon
exercise of such Warrants. Such registration statement was filed by the Company
on June 26, 1996 and declared effective on September __, 1996.
Outstanding Warrants, Options and Convertible Debentures; Potential
Adverse Effect on Market Price of Common Stock and Warrants. The Company has
4,141,678 Warrants outstanding, exercisable at a price of $4.00 per share.
Additionally, the Company has reserved an aggregate of 2,518,108 shares of
Common Stock for issuance upon exercise of other outstanding warrants, options
and conversion of the Convertible Debentures. To the extent that outstanding
options and warrants are exercised or Convertible Debentures are converted,
dilution of the percentage ownership of the Company's ^ securityholders will
occur, and any sales in the public market of the Common Stock underlying such
options, warrants and Convertible Debentures may adversely affect prevailing
market prices for the Common Stock and the Warrants. Moreover, the terms upon
which the Company will be able to obtain additional equity capital may be
adversely affected since the holders of outstanding options and warrants can be
16
<PAGE>
expected to exercise them at a time when the Company would, in all likelihood,
be able to obtain any needed capital on terms more favorable to the Company than
those provided in the outstanding options and warrants.
Possible Inability to Exercise Warrants. The Company intends to qualify
the sale of the Common Stock issuable upon exercise of the Warrants in a limited
number of states. Although certain exemptions in the securities laws of certain
states might permit Warrants to be transferred to purchasers in states other
than those in which the Warrants were initially qualified, the Company will be
prevented from issuing Common Stock in such other states upon the exercise of
the Warrants unless an exemption from qualification is available or unless the
issuance of Common Stock upon exercise of the Warrants is qualified. The Company
is under no obligation to seek, and may decide not to seek or may not be able to
obtain, qualification of the issuance of such Common Stock in all of the states
in which the ultimate purchasers of the Warrants reside. In such a case, the
Warrants held will expire and have no value if such Warrants cannot be sold.
Potential Adverse Effect of Redemption of Warrants. The Warrants may be
redeemed by the Company, with the consent of ^ Whale, upon notice of not less
than 30 days, at a price of $.10 per Warrant, provided the closing bid quotation
of the Common Stock on all 20 trading days ending on the third day prior to the
day on which the Company gives notice has been at least 187.5% of the then
effective exercise price of the Warrants (currently $7.50, subject to
adjustment). Redemption of the Warrants could force the holders to exercise the
Warrants and pay the exercise price at a time when it may be disadvantageous for
the holders to do so, to sell the Warrants at the then current market price when
they might otherwise wish to hold the Warrants or to accept the redemption
price, which is likely to be substantially less than the market value of the
Warrants at the time of redemption.
Authorization and Discretionary Issuance of Preferred Stock. The
Company's Certificate of Incorporation authorizes the issuance of "blank check"
preferred stock with such designations, rights and preferences as may be
determined from time to time by the Board of Directors. Accordingly, the Board
of Directors is empowered, without stockholder approval, to issue preferred
stock with dividend, liquidation, conversion, voting or other rights which could
adversely affect the voting power or other rights of the holders of the
Company's Common Stock. In the event of issuance, the preferred stock could be
utilized, under certain circumstances, as a method of discouraging, delaying or
preventing a change in control of the Company. Although the Company has no
present intention to issue any shares of its preferred stock, there can be no
assurance that the Company will not do so in the future.
USE OF PROCEEDS
^ If all of the Warrants, including Herrick's Warrants and the
Underwriter's Warrants, are exercised, the Company will derive net proceeds of
approximately $11,700,000, after payment of costs of this offering and the 5%
warrant solicitation fee payable to the Underwriter (assuming that such fee is
payable with respect to all of such Warrants). Additionally, the Company will
receive $1,231,650 upon exercise, in full, of the Underwriter's Option. However,
there can be no assurance as to when and if the Warrants will be exercised, and
accordingly, there can be no assurance that the Company will receive any
proceeds from the exercise of the Warrants. The Company intends to use any such
proceeds for working capital and general corporate purposes. The Company will
not derive any proceeds from the sale by the Selling Securityholders of any of
the Selling Securityholders' Securities.
SELLING SECURITYHOLDERS
The Company has agreed to register the resale of the Selling
Securityholders' Securities and to pay all expenses in connection therewith. An
aggregate of 383,000 Warrants and 150,000 shares of Common Stock may be offered
and sold pursuant to this Prospectus by the Selling Securityholders. None of the
Selling Securityholders has ever held any position or office with the Company or
17
<PAGE>
had any other material relationship with the Company, except as described below
in the footnotes. The Company will not receive any of the proceeds from the sale
of the Selling Securityholders' Securities by the Selling Securityholders. The
following table sets forth certain information with respect to the Selling
Securityholders:
<TABLE>
<CAPTION>
Beneficial Percentage
Beneficial Ownership Percentage Beneficial Common Beneficial Beneficial
Ownership Warrants of Beneficial Ownership Stock Ownership Ownership
of Warrants Being Warrants Ownership of Common Being of Common After Sale
Selling Prior to Registered After After Sale Stock Prior Registered Stock After (Common
Securityholder Sale(1) For Sale Sale(2) (Warrants)(2) to Sale(3) For Sale Sale Stock)
- -------------- --------- -------- --------- ------------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Norton Herrick(4).... 243,000 233,000 10,000 * 343,000 0 110,000 3.5%
William G. Walters(5) 41,597 41,597 -- -- 83,194 41,597 0 1.3%
Elliot J. Smith(5)... 29,298 29,298 -- -- 58,596 29,298 0 *
Estate of Howard D.
Harlow(5)........... 10,713 10,713 -- -- 21,426 10,713 0 *
James D. Whitten(5).. 1,035 1,035 -- -- 2,070 1,035 0 *
Nicholas Anari(5).... 1,051 1,051 -- -- 2,102 1,051 0 *
Cynthia
Buckwalter(5)........ 480 480 -- -- 960 480 0 *
Whale Securities
Co., ^ L.P.(5)(6)... 345,826 65,826 214,174 -- 411,652 65,826 280,000 4.8%
</TABLE>
- -----------------------^
* Less than 1%.
(1) To the best of the Company's knowledge, except as otherwise set forth
below, all of such securities are beneficially owned and sole
investment and voting power is held by the persons indicated. In
accordance with Rule 13d-3 under the Exchange Act, a person is deemed
to be the beneficial owner of a security for purposes of the Rule if
he or she has or shares voting power or investment power with respect
to the security or has the right to acquire ownership within sixty
days. As used herein, "voting power" is the power to vote or direct
the voting of securities voting rights and "investment power" is the
power to dispose of or direct the disposition of securities.
(2) Assumes all of the Warrants are sold by the Selling Securityholders.
(3) Includes the shares of Common Stock underlying the Warrants.
(4) Mr. Herrick participated in the Company's bridge financing conducted
in July 1994. See "Certain Transactions."
(5) Messrs. Walters, Smith, Harlow, Whitten and Anari and Ms. Buckwalter
were (and in some cases are) officers and/or partners of Whale and,
together with Whale, own the 150,000 Warrants being registered for
resale by Whale and its designees.
(6) Includes shares underlying 100,000 warrants issued to Whale in
consideration of certain investment banking services rendered to the
Company and 180,000 Warrants issued to Whale in connection with the
May 1996 Private Placement. All of the Warrants to purchase such
shares are held in the name of Whale Securities Co., L.P. for the
account of its equity owners and certain of its employees, pending
transferability of such warrants pursuant to the rules of the National
Association of Securities Dealers, Inc. Does not include options to
purchase an aggregate of 100,000 shares of Common Stock issued to
certain designees of Whale. Does not include shares held in Whale's
trading account.^ See "Plan of Distribution" for a description of
certain fees paid and securities issued to Whale by the Company.
18
<PAGE>
PLAN OF DISTRIBUTION
The Selling Securityholders' Securities may be offered and sold from
time to time as market conditions permit in the over-the-counter market, or
otherwise, at prices and terms then prevailing or at prices related to the
then-current market price, or in negotiated transactions. The Selling
Securityholders' Securities may be sold by one or more of the following methods,
without limitation: (i) a block trade in which a broker or dealer so engaged
will attempt to sell the shares as agent but may position and resell a portion
of the block as principal to facilitate the transaction; (ii) purchases by a
broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (iii) ordinary brokerage transactions and
transactions in which the broker solicits purchases; and (iv) transactions
between sellers and purchasers without a broker/dealer. In effecting sales,
brokers or dealers engaged by the Selling Securityholders may arrange for other
brokers or dealers to participate. Such brokers or dealers (which may include
Whale) may receive commissions or discounts from Selling Securityholders in
amounts to be negotiated. Such brokers and dealers and any other participating
brokers and dealers may be deemed to be "underwriters" within the meaning of the
Securities Act, in connection with such sales.
All costs, expenses and fees in connection with the registration of the
securities offered hereby will be borne by the Company. Brokerage commissions,
if any, attributable to the sale of such securities will be borne by the Selling
Securityholders.
The Company has agreed, in connection with the exercise of the Warrants
pursuant to solicitation, to pay to Whale for bona fide services provided a fee
of 5% of the exercise price for each Warrant exercised, provided, however, that
Whale will not be entitled to receive such compensation in Warrant exercise
transactions in which (i) the market price of the Common Stock at the time of
the exercise is lower than the exercise price of the Warrants; (ii) the Warrants
are held in any discretionary account; (iii) disclosure of compensation
arrangements is not made, in addition to the disclosure provided in this
Prospectus, in documents provided to holders of Warrants at the time of
exercise; (iv) the holder of the Warrants has not confirmed in writing that
Whale solicited such exercise; or (v) the transaction was in violation of Rule
10b-6 promulgated under the Exchange Act. In addition to soliciting, either
orally or in writing, the exercise of the Warrants, such services may also
include disseminating information, either orally or in writing, to the holders
of the Warrants about the Company or the market for the Company's securities,
and assisting in the processing of the exercise of the Warrants.
^ Whale served as the placement ^ agent in connection with the May 1996
Private Placement, ^ and received a commission equal to 10% of the ^ gross
proceeds from the sale of the Units ^(except that there was no commission paid
with respect ^ to 2-1/2 Units ^ sold to certain purchasers ^ introduced to the
Company ^ by entities other than Whale) and a $15,000 nonaccountable expense
allowance. ^ Whale also received Placement Agent Warrants to purchase ^ three
Units (up to 60,000 shares of Common Stock and 120,000 Warrants), at an exercise
price of $100,000 per Unit, exercisable ^ until May 10, 2001. The Company also
agreed to indemnify Whale against certain liabilities in connection with the
Offering under the Securities Act.
Whale acted as the underwriter in connection with the Company's IPO, in
which the Company raised approximately $7,650,000 of gross proceeds. In
connection with the IPO, the Company paid ^ to Whale 10% commissions and a 3%
nonaccountable expense allowance, granted Whale the Underwriter's Option to
purchase 150,000 shares of Common Stock and 150,000 Warrants, and granted Whale
certain other rights.
In April 1995, the Company issued to a designee of Whale five-year
warrants to purchase 50,000 shares of Common Stock at $5.00 per share in
consideration of Whale ^ granting the Company the right of first refusal to
pursue any prospective acquisition target in the phone card industry that Whale
identifies prior to February 1998. In October 1995, in further consideration of
such right of first refusal, the Company issued to another designee of Whale
five-year warrants to purchase 50,000 shares of Common Stock at $5.00 per share.
In January 1996, the Company entered into a one-year consulting agreement with
Whale pursuant to which Whale and its designees will assist the Company in
developing, studying and evaluating financing and merger and acquisition
proposals. In consideration of such services, the Company issued to Whale and
its designees five-year warrants to purchase 200,000 shares of Common Stock at
$5.125 per share. The Company also paid a fee of $100,000 to Whale in
consideration of Whale's assistance in connection with the Company's evaluation
19
<PAGE>
of the acquisition of Global Link and agreed to pay Whale ^ additional
compensation of $150,000 in the event ^ an acquisition with a certain other
entity is consummated. As of the date of this Prospectus, the Company has no
agreements, understandings or commitments with respect to any prospective
acquisitions.
LEGAL MATTERS
The legality of the securities being offered hereby has been passed upon
by Graubard Mollen & Miller, New York, New York, general counsel to the Company.
EXPERTS
The consolidated financial statements of Global Telecommunication
Solutions, Inc. and subsidiaries as of December 31, 1995 and 1994, and for the
years then ended have been incorporated by reference herein from the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1995 in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, included therein, and upon the authority of such firm as experts in
accounting and auditing.
The financial statements of Global Link Teleco Corporation as of
December 31, 1995 and for the year then ended have been incorporated by
reference herein from the Company's Current Report on Form 8-K, filed March 15,
1996, and as thereafter amended on May 10, 1996, in reliance upon the report of
KPMG Peat Marwick LLP, independent ^ accountants, included therein and upon
authority of such firm as experts in accounting and auditing.
The financial statements of Global Link Teleco Corporation as of
December 31, 1994 and for the period from inception (March 28, 1994) to December
31, 1994 have been incorporated by reference herein from the Company's Current
Report on Form 8-K, filed March 15, 1996, and as thereafter amended on May 10,
1996, in reliance upon the report of Price Waterhouse LLP, independent ^
accountants, included therein and upon authority of such firm as experts in
accounting and auditing.
20
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution
The following is an itemized statement of the estimated amounts of all
expenses payable by the Registrant in connection with the registration of the
Common Stock offered hereby, other than underwriting discounts and commissions:
Legal fees and expenses................................. 25,000.00
Accounting fees and expenses............................ 6,000.00
Blue Sky Fees and Expenses.............................. ^ 10,000.00
Miscellaneous........................................... 9,000.00
Total........................................... $50,000.00
ITEM 15. Indemnification of Directors and Officers
The Company's Certificate of Incorporation provides that all directors,
officers, employees and agents of the Registrant shall be entitled to be
indemnified by the Company to the fullest extent permitted by law.
Section 145 of the Delaware General Corporation Law concerning
indemnification of officers, directors, employees and agents is set forth below.
"Section 145. Indemnification of officers, directors, employees and
agents; insurance.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(c) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgement in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
II - 1
<PAGE>
liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
(d) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(e) Any indemnification under sections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable, a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(f) Expenses incurred by an officer or director in defending a civil or
criminal action, suite or proceeding may be paid by the corporation in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer, to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the board of directors deems appropriate.
(g) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(h) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
(i) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(j) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
II - 2
<PAGE>
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith an in a manner he reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner "not opposed to
the best interests of the corporation" as referred to in this section.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers, and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director, officer
or controlling person of the Company in a successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to the court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
ITEM 16. Exhibits
The following exhibits noted with an asterisk (*), are hereby
incorporated by reference from the Company's Registration Statement on Form SB-2
(No. 33-85998) declared effective by the Securities and Exchange Commission on
December 14, 1994 and amended on August 8, 1995, by double asterisk (**), are
hereby incorporated by reference from the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1994, and triple asterisk (***), are hereby
incorporated by reference from the Company's Current Report on Form 8-K, filed
with the Securities and Exchange Commission on March 15, 1996.
Exhibit
Number Description
1.1* Underwriting Agreement between the Company and Whale
Securities Co., L.P., the underwriter of the Company's initial
public offering in December 1994.
3.1* Certificate of Incorporation
3.2* Amendment to Certificate of Incorporation
3.3* By-Laws
3.4*** Certificate of Merger of Merger Sub into Global Link
4.1* Form of Common Stock Certificate
4.2* Form of Warrant Certificate
4.3* Warrant Agreement
4.4* Underwriter's Warrant
4.5* Stock Option Agreement between the Company and Shelly Finkel
4.6* Stock Option Agreement between the Company and Paul Silverstein
II - 3
<PAGE>
Exhibit
Number Description
4.7* Stock Option Agreement between the Company and James Koplik
(originally exhibit no. 4.10 to the Company's Registration
Statement on Form SB-2 (No. 33-85998))
4.8** Stock Option Agreement between the Company and John McCabe
4.9 Placement Agent Warrant for May 1996 Private Placement
^(previously filed)
10.1* Sublease for 342 Madison Avenue, New York, New York
10.2* Sublease for additional space at 342 Madison Avenue, New York,
New York
10.3* Employment Agreement between the Company and Shelly Finkel
10.4* Employment Agreement between the Company and Paul Silverstein
10.5* Employment Agreement between the Company and Maria Bruzzese
10.6* 1994 Performance Equity Plan
10.7* Service Agreement between the Company and MCI Telecommunications
Corporation (originally exhibit no. 10.17 to the Company's
Registration Statement on Form SB-2 (No. 33-85998))
10.8* Service Agreement between the Company and Sprint Corporation
(originally exhibit no. 10.18 to the Company's Registration
Statement on Form SB-2 (No. 33-85998))
10.9* Service Agreement between Independent Properties Sales
Corporation ("IPSC") and Metromedia Communications Corporation
("Metromedia," which was later acquired by WorldCom)
(originally exhibit no. 10.19 to the Company's Registration
Statement on Form SB-2 (No. 33-85998))
10.10* Consent between IPSC and Metromedia allowing the assignment to
the Company of IPSC's right to receive services from Metromedia.
10.11** Employment Agreement between the Company and John McCabe
10.12** Consulting Agreement between the Company and Barry Rubenstein
10.13** Consulting Agreement between the Company and Eli Oxenhorn
10.14*** Merger Agreement by and among the Company, Merger Sub and
Global Link
10.15*** Directors Voting Agreement
10.16*** Peoples Agreement, together with the Company's Guaranty of
Peoples Second Payment
10.17*** Ancillary Agreement between Global Link and Peoples regarding
payment of the Peoples Accounts Receivable, together with
Holding Corp's Guaranty of such payment
II- 4
<PAGE>
Exhibit
Number Description
10.18*** Amended and Restated Securities Purchase Agreement
^
10.19*** The Company's Guaranty of Debentures
10.20*** Employment Agreement between the Company and Gary Wasserson
10.21*** Employment Agreement between the Company and David Tobin
10.22*** Stock Option Agreement between the Company and Gary Wasserson
10.23*** Stock Option Agreement between the Company and David Tobin
10.24* Sublease for space at 40 Elmont Road, Elmont, New York
(originally exhibit no. 10.14 to Post-Effective Amendment No. 1
to the Company's Registration Statement on Form SB-2
(No.33-85998))
10.25 Agency Agreement between the Company and Whale for May 1996
Private Placement ^ (previously filed)
10.26 Form of Subscription Agreement for May 1996 Private Placement
^(previously filed)
10.27 Form of Registration Rights Agreement for May 1996 Private
Placement ^(previously filed)
23.1 Consent KPMG Peat Marwick LLP (filed herewith)
23.2 Consent of Price Waterhouse LLP (filed herewith)
ITEM 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment ^ to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement^. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement ^ or any
material change to such information in the registration statement;
II - 5
<PAGE>
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply
if the registration statement is on Form S-3 ^, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy expressed in
the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II - 6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York on ^ September 5,
1996.
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
By: /s/ Shelly Finkel
------------------------------------
Shelly Finkel, Chairman of the Board
^
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Shelly Finkel Chairman of the Board ^ September 5, 1996
- ---------------------
Shelly Finkel
* Chief Executive Officer September 5, 1996
- --------------------- and ^ Director
Gary Wasserson
^* Director September 5, 1996
- ----------------------
Alan Kaufman
^* Director September 5, 1996
- ----------------------
Jack Tobin
^* President and ^ Director September 5, 1996
- ----------------------
John McCabe
* Director September 5, 1996
- ----------------------
^ Donald Ptalis
* Chief Financial Officer ^ September 5, 1996
- ---------------------- (and principal accounting
Maria Bruzzese officer)
*By: /s/ Shelly Finkel September 5, 1996
----------------------------------
Shelly Finkel, as Attorney-in-fact
II - 7
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Global Telecommunication Solutions, Inc. and subsidiaries
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
- -------------------------
KPMG PEAT MARWICK LLP
New York, New York
September 5, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Amendment No. 3 to Registration Statement on Form S-3
of Global Telecommunication Solutions, Inc. of our report dated December 12,
1995, except as to the merger described in Note 12, which is as of February 29,
1996, with respect to the financial statements of Global Link Teleco Corp.,
included in Global Telecommunication Solutions, Inc.'s Form 8-K/A Amendment No.
2 to Form 8-K to be filed September 6, 1996. We also consent to the reference to
us under the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania
September 4, 1996
<PAGE>
