As filed with the Securities and Exchange Commission on ^ February 7, 1997.
Registration No. 333-19005
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
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)
5697 Rising Sun Avenue
Philadelphia, PA 19120
(215) 342-7700
(Address and telephone number of principal executive offices)
Shelly Finkel
Chairman of the Board
Global Telecommunication Solutions, Inc.
5697 Rising Sun Avenue
Philadelphia, PA 19120
(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. |_|
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
Proposed Maximum
Maximum Aggregate
Title of Each Class of Amount to be Offering Price Offering Amount Of
Securities to be Registered Registered(1) Per ^ Unit(2) ^ Price(3) Registration Fee
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 2,522 $4.125 $10,403.25 $3.15 ^
TOTAL FEE................................................................................................^ $3.15
============================================
<FN>
(1) Represents 2,522 additional shares of Common Stock to be registered for
resale on this Registration Statement. The Registrant previously paid a
$3,399.24 registration fee to register for resale 3,200,000 shares
underlying warrants issued in connection with a private placement
consummated by the Company in December 1996 and 18,868 shares of Common
Stock.
^(2) Based upon the market price of the Common Stock, as reported by The Nasdaq
Stock Market, on ^ February 5, 1997, in accordance with Rule 457(c)
promulgated under the Securities Act of 1933, as amended ^("Securities
Act").
^(3) The proposed maximum aggregate offering price, based upon the market price
of the Common Stock, as reported by The Nasdaq Stock Market, on ^ February
5, 1997, in accordance with Rules 457(c) under the Securities Act.
</FN>
</TABLE>
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
PRELIMINARY PROSPECTUS DATED ^ FEBRUARY 7, 1997
SUBJECT TO COMPLETION
PROSPECTUS
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
^ 3,221,390 Shares of Common Stock
This Prospectus relates to up to ^ 3,221,390 shares ("Shares") of
Common Stock, par value $.01 per share, of Global Telecommunication Solutions,
Inc. ("Company" or "GTS") that may be offered for resale for the account of
certain securities holders ("Selling Securityholders") of the Company as set
forth herein under the heading "Selling Securityholders."
Of the ^ 3,221,390 shares being offered for resale by the Selling
Securityholders, (i) ^ 21,390 shares are currently outstanding, (ii) 3,000,000
shares are issuable upon exercise of the Common Stock Purchase Warrants
("Warrants") issued in connection with a private placement consummated by the
Company in December 1996 ("December 1996 Private Placement"), (iii) 150,000
shares are issuable upon exercise of Warrants issued to Whale Securities Co.,
L.P. ("Whale") as a finder's fee in connection with the December 1996 Private
Placement and (iv) 50,000 shares are issuable upon exercise of Warrants issued
to Graubard Mollen & Miller in payment of certain legal fees and expenses.
All of the Shares are being offered hereby for the respective accounts
of the Selling Securityholders. No period of time has been fixed within which
the securities covered by this Prospectus may be offered or sold. The Company
will not receive any of the proceeds from the sale of the Shares by the Selling
Securityholders. Of the ^ 3,221,390 shares offered hereby, 3,200,000 shares are
issuable upon exercise of the Warrants. If such securities are fully exercised,
the Company will receive up to an aggregate of $8,000,000 in gross proceeds. All
proceeds received by the Company, if any, will be used for working capital and
general corporate purposes. See "Use of Proceeds" and "Selling Securityholders."
All costs, expenses and fees in connection with the registration of the
Shares offered by this Prospectus will be borne by the Company. Such expenses
are estimated to be $30,000. Brokerage commissions and discounts, if any,
attributable to the sale of the Shares for the account of Selling
Securityholders will be borne by them.
The principal market for trading of the Common Stock and the Company's
publicly-traded warrants ("Public Warrants") is the Nasdaq SmallCap Market under
the symbols GTST and GTSTW, respectively. On ^ February 5, 1997, the last sale
price for the Common Stock was ^ $4-1/8 and for the Public Warrants was ^ $1-3/8
as reported by the Nasdaq SmallCap Market. The Common Stock and the Public
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 9.
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 ^ February __, 1997.
<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......................................................... 9
USE OF PROCEEDS..................................................... 16
SELLING SECURITYHOLDERS............................................. 17
PLAN OF DISTRIBUTION................................................ 19
LEGAL MATTERS....................................................... 19
EXPERTS ........................................................... 19
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission
("Commission") a Registration Statement on Form S-3 ("Registration Statement")
under the Securities Act of 1933, as amended ("Securities Act") with respect to
the Shares offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and exhibits thereto. For
further information with respect to the Company and the Shares, reference is
hereby made to the Registration Statement and exhibits. The statements contained
in this Prospectus as to the contents of any contract or other document filed as
an exhibit are not complete and the description of such contract or document is
qualified in its entirety by reference to such contract or document. The
Registration Statement, together with the exhibits, may be inspected at the
Commission's principal office in Washington, D.C. and copies may be obtained
upon payment of the fees prescribed by the Commission.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and in accordance therewith
files reports, proxy statements and other information with 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 can also 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 Public 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
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<PAGE>
offices of the Nasdaq SmallCap Market, 1735 K Street, N.W., Washington,
D.C. 20006. The Common Stock and Public 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.
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
with the Commission on September 6, 1996;
(b) Current Report of the Company on Form 8-K, dated March 1, 1996,
filed with the Commission on March 15, 1996, and amendments
thereto on Form 8-K/A, filed with the Commission on May 10, 1996
and September 6, 1996, respectively;
(c) Quarterly Report on Form 10-QSB of the Company for the quarter
ended March 31, 1996 and amendment thereto on Form 10-QSB/A,
filed with the Commission on September 6, 1996;
(d) Quarterly Report on Form 10-QSB of the Company for the quarter
ended June 30, 1996 and amendment thereto on Form 10-QSB/A, filed
with the Commission on September 27, 1996;
(e) Proxy Statement dated July 11, 1996; and
(f) Quarterly Report on Form 10-QSB of the Company for the quarter
ended September 30, 1996 and amendment thereto on Form 10-QSB/A,
filed with the Commission on November 20, 1996;
(g) Current Report of the Company on Form 8-K, dated December 20,
1996, filed with the Commission on December 26, 1996.
The Company's Registration Statement on Form 8-A (which contains
descriptions of the Company's Common Stock and Public 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 5697 Rising Sun Avenue, Philadelphia,
Pennsylvania 19120, Attention: Investor Relations
(telephone number: (215) 342-7700).
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<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. The Private Securities Litigation
Reform Act of 1995 provides a safe harbor for forward-looking statements. In
order to comply with the terms of the safe harbor, the Company notes that a
variety of factors could cause the Company's actual results and experience to
differ materially from the anticipated results or other expectations expressed
in the Company's 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
The Company and its subsidiaries 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.
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<PAGE>
May 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 Redeemable Common Stock Purchase Warrants ("May 1996
Warrants"). The May 1996 Warrants are identical to the Public 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 Public Warrants, each of the May 1996
Warrants 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 Common
Stock and Public Warrants, with a discount taken due to the private nature of
the transaction. The securities underlying the Units sold in the May 1996
Private Placement were registered for public resale by the holders thereof under
the Securities Act pursuant to a registration statement declared effective on
September 30, 1996.
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 27 1/2 of the 30 Units sold (no commission was 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 an option ("UPO") to purchase three Units, which Units are
identical to the Units sold in the May 1996 Private Placement, at an exercise
price of $100,000 per Unit, exercisable until May 10, 2001.
December 1996 Private Placement
In December 1996, the Company consummated the December 1996 Private
Placement from which the Company derived gross proceeds of $3,000,000 through
the sale of an aggregate of $3,000,000 of promissory notes ("Notes") and
3,000,000 Warrants. Each Warrant is exercisable at any time during the period
commencing March 1, 1997 and ending on November 27, 2001, at an initial exercise
price equal to $2.50 per share. The Notes are payable on the earlier of (i)
November 27, 1998 and (ii) the date on which the Company undergoes a "change in
control" in which any person other than an officer, director or 5% stockholder
acquires securities of the Company having 50% or more of the total voting power
of all of the Company's securities then outstanding ("Maturity Date"). No
interest will accrue on the Notes unless the Notes are not paid on or prior to
the Maturity Date, at which time the outstanding principal will immediately
begin to accrue interest at the rate of 12% per annum and the principal amount
outstanding and interest accrued thereon will become convertible, at the option
of the holders, into that number of shares of Common Stock equal to the
principal amount and interest being converted divided by the lesser of (i) $2.00
and (ii) 80% of the average of the closing bid prices of the Common Stock on the
five trading days ending on the date immediately following the date a holder
elects to convert. The Notes are not convertible unless the Notes are not paid
in full on the Maturity Date.
Whale was paid a finder's fee in connection with the December 1996
Private Placement equal to 5% of the gross proceeds received by the Company
($150,000) and 150,000 Warrants. Additionally, Graubard Mollen & Miller received
$50,000 of Notes and 50,000 Warrants in payment of certain legal fees and
expenses.
Shelly Finkel, Chairman of the Board of Directors of the Company,
participated in the December 1996 Private Placement. See "Selling
Securityholders."
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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.
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. In 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
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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 5697 Rising Sun Avenue, Philadelphia,
Pennsylvania 19120 and its telephone number is (215) 342-7700.
The Offering
Securities offered by Selling
Securityholders........... ^ 3,221,390 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
Public Warrants: GTSTW
Boston Stock Exchange Symbols...... Common Stock: GTL
Public Warrants: GTLW
Use of Proceeds.............. The Company will not receive any of the proceeds
from the sale of the Shares by the Selling
Securityholders. Of the ^ 3,221,390 shares offered
hereby, 3,200,000 such securities are fully
exercised, the Company will proceeds. All proceeds
received by the Company, if any, will be used for
working capital and general corporate purposes.
See "Use of Proceeds" and "Selling Security-
holders."
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<PAGE>
Outstanding Securities
Common Stock. As of ^ February 5, 1997, there were ^ 5,564,632 shares of
Common Stock outstanding.
Public Warrants. As of ^ February 5, 1997, there were outstanding
4,141,678 Public 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 270,000 Public Warrants upon exercise of the UPO and an
option issued to Whale in connection with the Company's initial public offering
("IPO") consummated on December 14, 1994. The Public 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 Public Warrant, provided that 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 Public Warrants (currently $7.50, subject to
adjustment).
Warrants. As of ^ February 5, 1997, there were outstanding 3,200,000
Warrants, each of which entitles the holder thereof to purchase one share of
Common Stock for $2.50 at any time during the period commencing March 1, 1997
and ending on November 27, 2001. The Company has agreed to register the shares
underlying the Warrants for resale under the registration statement of which
this Prospectus forms a part. Once such registration statement is effective, the
Company has agreed to maintain the effectiveness of the registration statement
until all such shares are sold or until all such shares may be sold by the
holders thereof under Rule 144 of the Securities Act without volume limitations.
The Company shall bear all fees and expenses incurred in the preparation and
filing of the registration statement.
8
<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 nine
months ended September 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 $5,243,038. 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 September 30, 1996, the Company had an accumulated deficit of
$9,910,074 and a working capital deficit of $6,510,540.
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 convertible debentures ("Convertible Debentures") of Global
Link, 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 September 30, 1996, total indebtedness of the Company and Global
Link aggregated approximately $15,992,000, of which $5,926,000 represented
deferred revenue. Events of default under the Company's 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
9
<PAGE>
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 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, the May 1996 Private Placement and the
December 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
December 1996 Private Placement, together with projected cash flow from
operations, should be sufficient to satisfy its anticipated cash requirements
during 1997. However, there can be no assurance that this will be the case. 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 1997 (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
10
<PAGE>
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
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
11
<PAGE>
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.
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.
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<PAGE>
Regulatory Factors. Long distance telecommunications services are subject
to regulation by the Federal Communications Commission ("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
("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
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 ten
retail phone centers located in the New York City metropolitan area and in South
Miami Beach, Florida. The Company has
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<PAGE>
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 established a task 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 task force has not yet taken a formal
position on the application of the Telecommunications Excise Tax. The IRS'
policy, once established, if different than the Company's policy (which is to
accrue for the anticipated 3% tax), could materially affect the Company's
operations. Additionally, the Company believes that the sale of long distance
services through prepaid phone cards is subject to state sales and use taxes.
However, most state taxing authorities have also not established formal policies
on the application of the sales and use taxes to the provision of long distance
services through prepaid phone cards. While the Company has not filed any
federal or state tax returns to report the Telecommunications Excise Tax or
state sales and use taxes, it believes it is accurately accruing for these
expenses on its financial statements (see Note 9 to the financial statements
incorporated by reference herein). However, there can be no assurance that the
IRS or a state taxing authority will concur with the Company's method of
determining the applicable 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.
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<PAGE>
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.
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 Public Warrants are currently
listed on The Nasdaq SmallCap Market ("Nasdaq"). On November 6, 1996, the Board
of Directors of The Nasdaq Stock Market, Inc. approved changes to the
maintenance requirements that companies listed on Nasdaq (such as the Company)
must meet in order to have their securities listed on Nasdaq. The failure to
meet such new requirements may result in the delisting of the Company's
securities from Nasdaq and trading, if any, in the Company's 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, which could severely limit the
liquidity of the Common Stock and the ability of purchasers in this offering to
sell the Common Stock in the secondary market.
Shares Eligible for Future Sale. Substantially all of the Company's
outstanding shares of Common Stock 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 may be sold in the
public market may adversely affect prevailing market prices for the Common Stock
and could impair the Company's ability to raise capital through the sale of its
equity securities.
Outstanding Warrants, Options and Convertible Debentures; Potential Adverse
Effect on Market Price of Common Stock and Warrants. The Company has 4,141,678
Public Warrants outstanding, exercisable at a price of $4.00 per share.
Additionally, as of the date of this Prospectus, the Company has reserved an
aggregate of ^ 6,082,863 shares of Common Stock for issuance upon exercise
15
<PAGE>
of the Warrants, other outstanding warrants and options and the conversion of
the Convertible Debentures.
To the extent that the Warrants and other 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 the Warrants, other options and
warrants and Convertible Debentures may adversely affect prevailing market
prices for the Common Stock and the Public Warrants. Moreover, the terms upon
which the Company will be able to obtain additional equity capital may be
adversely affected since the holders of the Warrants and other outstanding
options and warrants can be 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 Warrants and other
outstanding options and warrants.
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
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Securityholders. Of the ^ 3,221,390 shares offered hereby,
3,200,000 shares are issuable upon exercise of the Warrants. If such securities
are fully exercised, the Company will receive up to an aggregate of $8,000,000
in gross proceeds. 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. All
proceeds received by the Company, if any, will be used for working capital and
general corporate purposes. Pending application of the proceeds, the Company
intends to place the funds in interest-bearing investments such as bank
accounts, certificates of deposit and United States government obligations.
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SELLING SECURITYHOLDERS
Of the ^ 3,221,390 shares being offered for resale by the Selling
Securityholders, (i) ^ 21,390 shares are currently outstanding, (ii) 3,000,000
shares are issuable upon exercise of the Warrants issued in connection with the
December 1996 Private Placement, (iii) 150,000 shares are issuable upon exercise
of Warrants issued to Whale as a finder's fee in connection with the December
1996 Private Placement and (iv) 50,000 shares are issuable upon exercise of
Warrants issued to Graubard Mollen & Miller in consideration for rendering legal
services to the Company in connection with the December 1996 Private Placement.
Unless otherwise indicated in the footnotes hereto or otherwise in this
Prospectus, none of the Selling Securityholders has had a material relationship
with the Company within the past three years.
<TABLE>
<CAPTION>
Percentage
Beneficial Beneficial
Common Ownership of Ownership of
Beneficial Ownership Stock Being Common Common
of Common Stock Registered Stock Stock
Name(1) Prior to Sale(2) for Sale After Sale After Sale
- ------- ------------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Wheatley Partners, L.P. ............. 1,880,000 1,880,000 -- *
Wheatley Foreign Partners, L.P. ..... 120,000 120,000 -- *
Woodland Partners(3) ................ 305,000 200,000 105,000 1.9
Barry Fingerhut(4) .................. 200,000 200,000 -- *
Irwin Lieber(4) ..................... 200,000 200,000 -- *
Woodland Venture Fund ............... 109,000 100,000 9,000 *
Seneca Ventures ..................... 100,000 100,000 -- *
DISS Partners ....................... 100,000 100,000 -- *
Shelly Finkel(5) .................... 937,736 50,000 887,736 15.6
David Nussbaum ...................... 25,000 25,000 -- *
Roger Gladstone ..................... 25,000 25,000 -- *
Graubard Mollen & Miller(6) ......... 50,000 50,000 -- *
Whale Securities Co., L.P.(7) ....... 730,000 150,000 580,000 9.6
Laurence Sragow(8) .................. ^ 36,390 21,390 15,000 *
</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) Includes the shares of Common Stock issuable upon exercise of the Warrants.
(3) Includes 105,000 shares of Common Stock beneficially owned by Woodland
Partners, a New York general partnership of which Barry Rubenstein is a
partner. 94,500 of such shares represent Mr. Rubenstein's equity interest
in such partnership. Barry Rubenstein is also a general partner of Seneca
Ventures and Woodland Venture Fund and is an officer and member of Wheatley
Partners, LLC, which is the general partner of Wheatley Partners, L.P. and
Wheatley Foreign Partners, L.P. Excludes shares beneficially owned by Mr.
Rubenstein as a result of his equity interests in such partnerships or
otherwise, including ^ 175,000 shares issuable upon exercise of currently
exercisable options granted to Mr. Rubenstein in connection with performing
certain consulting services for the Company.
(4) Does not include an aggregate of 2,000,000 shares of Common Stock
underlying Warrants that were purchased in the December 1996 Private
Placement by Wheatley Partners, L.P. (1,880,000 shares)
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and Wheatley Foreign Partners, L.P. (120,000 shares), Delaware limited
partnerships of which Wheatley Partners, LLC is the general partner.
Messrs. Fingerhut and Lieber are officers and members of Wheatley Partners,
LLC.
(5) Includes 50,000 shares of Common Stock issuable upon exercise of currently
exercisable options and an aggregate of 92,618 shares of Common Stock
issuable upon exercise of Public Warrants. Shelly Finkel is Chairman of the
Board of Directors of the Company.
(6) Graubard Mollen & Miller received 50,000 Warrants in payment of certain
legal fees and expenses.
(7) Does not include shares held in Whale's trading account. Includes shares
underlying 100,000 warrants issued to Whale in consideration of certain
investment banking services rendered to the Company. Also includes 60,000
shares of Common Stock and 120,000 shares of Common Stock underlying the
May 1996 Warrants issuable to Whale upon exercise of the UPO. Also includes
150,000 shares of Common Stock and 150,000 shares underlying Public
Warrants issuable to Whale pursuant to the warrant issued to Whale in
connection with the Company's IPO ("Underwriter's Warrant"). All of the
shares underlying the UPO and the Underwriter's Warrants 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.
(8) Includes ^ 21,390 shares issued by the Company to Mr. Sragow in connection
with a termination agreement, dated December ^ 17, 1996, entered into
between the Company and Mr. Sragow. Also includes 15,000 shares issuable
upon exercise of currently exercisable options. Does not include 5,000
shares underlying options which vest in October 1997.
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PLAN OF DISTRIBUTION
The Shares offered by the Selling Securityholders 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 Shares 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.
LEGAL MATTERS
The legality of the securities being offered hereby has been passed
upon by Graubard Mollen & Miller, New York, New York. Graubard Mollen & Miller
received $50,000 of Notes and 50,000 Warrants in payment of certain legal fees
and expenses.
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 and September 6, 1996, in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
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 and September 6, 1996, in reliance upon the report of Price Waterhouse LLP,
independent certified public accountants, included therein and upon authority of
such firm as experts in accounting and auditing.
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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:
SEC filing fee................................................... $3,402.39
Legal fees and expenses.......................................... 20,000.00
Accounting fees and expenses.......................................2,000.00
Miscellaneous..................................................... 4,597.61
-----------
Total................................................. $ 30,000.00
===========
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.
(a) 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.
(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 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
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to be 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.
(c) 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.
(d) 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.
(e) 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.
(f) 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.
(g) 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.
(h) 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.
(i) 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
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service as a director, officer, employee or agent of the corporation which
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
Exhibit
Number Description
3.1 A Certificate of Incorporation
3.2 A Amendment to Certificate of Incorporation
3.3 A By-Laws
3.4 C Certificate of Merger of Merger Sub into Global Link
4.1 A Form of Common Stock Certificate
4.2 A Form of Redeemable Warrant Certificate
4.3 A Warrant Agreement
4.4 A Underwriter's Warrant
4.5 A Stock Option Agreement between the Company and Shelly Finkel
4.6 A Stock Option Agreement between the Company and Paul Silverstein
4.7 A Stock Option Agreement between the Company and James Koplik
(Originally Exhibit 4.10 to the Company's Registration Statement
on Form SB-2 (No. 33-85998))
4.8 B Stock Option Agreement between the Company and John McCabe
4.9 D Placement Agent Warrant dated May 10, 1996 issued to Whale
Securities Co., L.P. ("Whale")
4.10 * Warrant Agreement dated April 15, 1995 between the Company
and Craig Shapiro
4.11 * Warrant Agreement dated October 26, 1995 between the Company
and Frog Hollow Partners
4.12 * Warrant Agreement dated January 22, 1996 between Company and
Whale
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Exhibit
Number Description
4.13 E Form of Subscription Agreement for December 1996 Private
Placement
4.14 E Form of Warrant issued in the December 1996 Private Placement
4.15 E Form of Promissory Note issued in the December 1996 Private
Placement
5.1 ** Opinion of Graubard Mollen & Miller (including consent)
10.1 A Sublease for 342 Madison Avenue, New York, New York
10.2 A Sublease for additional space at 342 Madison Avenue, New York,
New York
10.3 A Employment Agreement between the Company and Shelly Finkel
10.4 A Employment Agreement between the Company and Paul Silverstein
10.5 A Employment Agreement between the Company and Maria Bruzzese
10.6 A 1994 Performance Equity Plan
10.7 A Service Agreement between the Company and MCI
Telecommunications Corporation (Originally Exhibit 10.17 to the
Company's Registration Statement on Form SB-2 (No. 33-85998))
10.8 A Service Agreement between the Company and Sprint Corporation
(Originally Exhibit 10.18 to the Company's Registration
Statement on Form SB-2 (No. 33-85998))
10.9 A Service Agreement between Independent Properties Sales
Corporation ("IPSC") and Metromedia Communications Corporation
("Metromedia," which was later acquired by WorldCom)
(Originally Exhibit 10.19 to the Company's Registration Statement
on Form SB-2 (No. 33-85998))
10.10 A Consent between IPSC and Metromedia allowing the assignment to
the Company of IPSC's right to receive services from Metromedia.
10.11 B Employment Agreement between the Company and John McCabe
10.12 B Consulting Agreement between the Company and Barry Rubenstein
10.13 B Consulting Agreement between the Company and Eli Oxenhorn
10.14 C Merger Agreement by and among the Company, Merger Sub and
Global Link
10.15 C Directors Voting Agreement
10.16 C Peoples Agreement, together with the Company's Guaranty of
Peoples Second Payment
10.17 C Ancillary Agreement between Global Link and Peoples regarding
payment of the Peoples Accounts Receivable, together with
Holding Corp's Guaranty of such payment
10.18 C Amended and Restated Securities Purchase Agreement
10.19 C The Company's Guaranty of Debentures
10.20 C Employment Agreement between the Company and Gary Wasserson
10.21 C Employment Agreement between the Company and David Tobin
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Exhibit
Number Description
10.22 C Stock Option Agreement between the Company and Gary Wasserson
10.23 C Stock Option Agreement between the Company and David Tobin
10.24 A Sublease for space at 40 Elmont Road, Elmont, New York
(Originally Exhibit 10.14 to Post-Effective Amendment No. 1 to
the Company's Registration Statement on Form SB-2 (No.
33-85998))
10.25 D Form of Registration Rights Agreement for May 1996 Private
Placement
10.26 D Agency Agreement between the Company and Whale for May 1996
Private Placement
10.27 D Placement Agent Warrant Agreement for May 1996 Private Placement
10.28 * Consulting Agreement dated January 22, 1996 between the Company
and Whale
10.29 * First Amendment to Peoples Agreement, dated August 14, 1996
10.30 * Second Amendment to Peoples Agreement, dated November 27, 1996
10.31 E Finder's fee agreement between the Company and Whale Securities
Co., L.P. relating to the December 1996 Private Placement
23.1 ** Consent KPMG Peat Marwick LLP
23.2 ** Consent of Price Waterhouse LLP
23.3 ** Consent of Graubard Mollen & Miller (filed as part of Exhibit
5.1)
- ------------
* Previously filed.
** Filed herewith.
A Incorporated by reference to the Company's Registration Statement on Form
SB-2 (No. 33-85998).
B Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1994.
C Incorporated by reference to the Company's Current Report on Form 8-K,
filed with the Commission on March 15, 1996.
D Incorporated by reference to Post-Effective Amendment No. 2 to the
Company's Registration Statement on Form SB-2 on Form S-3 (No. 33-85998).
E Incorporated by reference to the Company's Current Report on Form 8-K,
filed with the Commission on December 26, 1996.
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:
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(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 a 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;
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.
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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 ^ February 6,
1997.
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 ^February 6, 1997
Shelly Finkel
* Chief Executive Officer ^February 6, 1997
Gary Wasserson and Director
* Director ^February 6, 1997
Alan Kaufman
* Director ^February 6, 1997
Jack Tobin
* President and Director ^February 6, 1997
John McCabe
* Director ^February 6, 1997
Donald Ptalis
* Chief Financial Officer ^February 6, 1997
Maria Bruzzese (and principal accounting
officer)
* By: /s/ Shelly Finkel
Shelly Finkel
Attorney-in-fact
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EXHIBIT 5.1
February 7, 1997
Global Telecommunication Solutions, Inc.
5697 Rising Sun Avenue
Philadelphia, PA 19120
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-3
("Registration Statement") filed by Global Telecommunication Solutions, Inc.
("Company") under the Securities Act of 1933, as amended ("Act"), with respect
to an aggregate of ^ 3,221,390 shares of common stock, par value $.01 per share
("Common Stock"), including (i) ^ 21,390 shares of Common Stock currently issued
and outstanding and owned by certain persons listed in the Registration
Statement as Selling Securityholders ("Selling Securityholders") and (ii)
3,200,000 shares of Common Stock to be issued by the Company to certain of the
Selling Securityholders upon exercise of the Common Stock Purchase Warrants
("Warrants") issued in the private placement consummated by the Company in
December 1996 ("Private Placement").
We have examined such documents and considered such legal
matters as we have deemed necessary and relevant as the basis for the opinion
set forth below. With respect to such examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as reproduced or certified copies, and the authenticity of the originals of
those latter documents. As to questions of fact material to this opinion, we
have, to the extent deemed appropriate, relied upon certain representations of
certain officers and employees of the Company.
Based upon the foregoing, it is our opinion that (i) the
shares of Common Stock currently outstanding and owned by certain of the Selling
Securityholders and being registered on the Registration Statement have been
duly authorized and legally issued, and are fully paid and non-assessable and
(ii) the shares of Common Stock being registered on the Registration Statement
to be issued by the Company to certain of the Selling Securityholders upon
exercise of the Warrants have been duly authorized and, when sold to the Selling
Securityholders and paid for in the manner provided in the Registration
Statement and the various agreements and instruments governing the Warrants of
the Selling Securityholders and the Company, will be legally issued, fully paid
and non-assessable.
In giving this opinion, we have assumed that all certificates
for the Company's shares of Common Stock have been or, prior to their issuance,
will be duly executed on behalf of the Company by the Company's transfer agent
and registered by the Company's registrar, if necessary, and will conform,
except as to denominations, to specimens which we have examined.
We hereby consent to the use of this opinion as an exhibit to
the Registration Statement, to the use of our name as your counsel, and to all
references made to us in the Registration Statement and in the Prospectus
forming a part thereof. In giving this consent, we do not hereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Act, or the rules and regulations promulgated thereunder.
Very truly yours,
/s/ Graubard Mollen & Miller
GRAUBARD MOLLEN & MILLER
<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
Philadelphia, Pennsylvania
^ February 7, 1997
<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. 1 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 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, PA
^ February 6, 1997
<PAGE>
