As filed with the Securities and Exchange Commission on ^ January 22, 1999.
Registration No. 333-68577
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)
10 Stow Road, Suite 200
Marlton, NJ 08053
(609) 797-3434
(Address and telephone number of principal executive offices)
Shelly Finkel
Chairman of the Board
Global Telecommunication Solutions, Inc.
10 Stow Road, Suite 200
Marlton, New Jersey 08053
(609) 797-3434
(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 - Facsimile
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, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(b) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
<PAGE>
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.
<PAGE>
The information in this prospectus is incomplete and may be changed. The ^
selling securityholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and is not soliciting an
offer to buy these securities in any state where the offer or sale of these
securities is not permitted.
Subject to Completion, dated ^ January 22, 1999
PROSPECTUS
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
^ 3,528,592 Shares of Common Stock
This prospectus relates to up to ^ 3,528,592 shares of common stock^
of Global Telecommunication Solutions, Inc., a Delaware corporation^, that may
be offered for resale for the account of certain holders of ^ our securities ^
as set forth in this prospectus under the heading "Selling Securityholders."
^ All of the shares offered by this prospectus are offered on behalf
of the respective ^ selling securityholders, and may be offered or sold at any
time. ^ We will not receive any of the proceeds from the sale of these
securities ^. Of the ^ 3,528,592 shares offered ^, 658,573 shares are issuable
upon exercise of ^ options and warrants. If all of these securities are
exercised, ^ we will receive up to ^ $4,480,011 in gross proceeds. All proceeds
^ that we receive, if any, will be used for working capital and general
corporate purposes.
^ We are responsible for all costs, expenses and fees incurred in
registering the shares offered by this prospectus, which are estimated to be ^
$60,000. The selling securityholders will pay all brokerage commissions and
discounts attributable to the sale of the shares.
^ Our common stock is traded on the OTC Bulletin Board under the
symbol GTST. On ^ January 20, 1999, the last reported sale price of ^ our common
stock was ^ $1.50. Our common stock also is listed on the Boston Stock Exchange
under the symbol GTL.
^ Investing in the common stock involves certain risks. See "Risk
Factors" beginning on page 3.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or passed
upon the adequacy or accuracy of this prospectus. Any representation to the
contrary is a criminal offense.
The date of this ^ prospectus is ___________ __, 1999.
<PAGE>
You should rely only on the information contained or incorporated by
reference in this prospectus ^. We have not authorized anyone to ^ provide you ^
with different information. ^ We are not making an offer of these securities in
any state where the offer is not permitted. You should not assume that the
information in this prospectus is accurate as of any date other than the date on
the front page of this prospectus.
TABLE OF CONTENTS
Page
^Risk Factors 3
Business Summary 9
Recent Developments 9
Use of Proceeds 10
Selling Securityholders 11
Plan of Distribution 15
Legal Matters 15
Experts 16
Where You Can Find More Information 16
2
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RISK FACTORS
Past and Probable Future Losses -- We have a history of losses and expect that
losses will continue in the future.
Since our inception, we have incurred significant losses, including
net losses of $1,946,526, $2,970,121, $6,920,222 and $25,535,939 for the years
ended December 31, 1994, 1995, 1996 and 1997. The net loss for 1997 included an
impairment loss of approximately $13 million in connection with the reduction of
goodwill to its estimated fair value arising from ^ our acquisition of Global
Link Telecom Corporation in 1996. In addition, ^ we incurred a net loss of
$12,216,185 for the nine months ended September 30, 1998 and ^ have continued to
incur losses at a comparable rate since September 30, 1998. ^ We currently
project that we will continue to generate operating losses and negative cash
flow from operations ^ at least through the first quarter of 1999. We cannot
assure you that we will ever achieve (or, if achieved, maintain) profitability.
Need for Additional Financing -- We need to obtain financing in order to
continue our operations.
As of September 30, 1998, ^ we had an accumulated deficit of
$50,158,628 and a working capital deficit of $21,132,536. Our cash balance at
December 31, 1998 was approximately $1,500,000. It was necessary for us to raise
capital on numerous occasions since January 1, 1998 to satisfy our obligations
as they ^ became due. To that end, ^ we have (1) completed ^ two private
placements which generated aggregate net proceeds of approximately ^ $2,985,000
($1,250,000 of which was used to repay promissory notes) and (2) converted
$6,415,250 of debt into 7,083,075 shares of our common stock. We believe that
the proceeds from these private placements and the conversions of debt into
equity will enable us to continue our operations through the first quarter of
1999. ^ Thereafter, we will need to obtain additional financing ^. We currently
do not have any arrangements with respect to, or sources of, additional
financing ^. We cannot assure you that additional financing will be available ^,
or if available, that we will be able to obtain it on acceptable terms.
^ Competition -- We operate our business in a highly competitive industry. Many
of our competitors are more established and have significantly greater
resources.
^ The prepaid phone card segment of the telecommunications services
industry is intensely competitive, rapidly evolving and subject to constant
technological change. Analysts estimate that the number of prepaid phone card
companies has increased from approximately 75 in 1994 to more than 400 companies
in 1997. ^ Our prepaid phone cards compete with any medium by which a consumer
places a telephone call away from the home or office, including credit calling
cards, collect calling services, hotel telephones, public pay telephones and
other long distance services. Many of these products and services are marketed
by well-established, successful companies that possess greater financial,
marketing, distribution, personnel and other resources ^. Using these resources
^, these companies ^ can implement extensive advertising and promotional
campaigns, both generally and in response to specific marketing efforts by
competitors, to enter into new markets rapidly and to introduce new products and
services. Competitors with greater financial resources ^ also may be able to
provide more attractive incentive packages to retailers to encourage them to
carry products that compete with ^ our products. ^ We cannot assure you that we
will be able to compete ^ effectively in our markets.
Dependence on Long Distance Carriers ^ -- We rely in large part on long distance
carriers with whom we have business arrangements. Our success depends on the
abilities of these parties to provide reliable services to us.
We depend on a small number of domestic and international long
distance carriers to provide ^ our card users access to cost-effective long
distance service. ^ We have agreements ^ with these carriers ^ to acquire large
volumes of long distance service for resale through ^ our switching facilities.
Failure to ^ maintain continuous access to transmission facilities and long
distance networks would ^ materially adversely affect our business, including
possibly requiring ^ us to significantly curtail or cease ^ our operations.
Carriers frequently experience ^ equipment failures and service interruptions^,
which could adversely affect customer confidence, ^ our business operations and
^ our reputation. Further, because ^ we deduct minutes from ^ our cards at fixed
per-minute rates, any service interruption that forces ^ us to re-route calling
traffic through ^ more expensive carriers could have a material adverse effect
on ^ our operating margins. Any increases in rates charged by our carriers also
could have a material adverse effect on our operating margins. Our carrier
agreement with Sprint requires ^ us to satisfy certain minimum monthly usage
requirements to receive the most favorable pricing available under the
agreement. Failure to meet these minimum requirements would obligate ^ us to pay
underutilization charges, which could ^ materially adversely affect our
operations.
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In February 1998, Access Telecom, Inc.^ ceased providing
telecommunications services for the prepaid phone cards that it had sold to each
of ^ Networks and Centerpiece prior to and after we acquired these companies,
despite receiving payment for substantially all of these services. To offset the
loss of service for these phone cards, ^ we purchased approximately $2 million
of telecommunications services from other providers through December ^ 31, 1998.
Although ^ we are pursuing recovery of all losses from Access Telecom, ^ we
cannot assure you that we will be successful.
Dependence on Major Customers; Non-recurring Revenues^ -- We depend heavily on a
small number of traditional phone card customers, the loss of any of which could
have a material adverse effect on ^ our operations.
We depend heavily on a small number of traditional phone card
customers. One of these customers was responsible for approximately 14.0% and
9.9% of ^ our net sales for the year ended December 31, 1997 and the nine months
ended September 30, 1998, respectively. In addition, sales of promotional cards
to business customers usually generate non-recurring revenues. For the year
ended December 31, 1997 and the nine months ended September 30, 1998,
approximately 10.2% and less than 1%, respectively, of ^ our net sales were
derived from sales of promotional cards to a limited number of these customers.
Rapid Technological Change and Product Obsolescence -- We must respond to the
rapid changes in technology, services and standards which characterize our
industry.
The telecommunication services industry is ^ subject to rapid
technological change, frequent new product and service introductions^ and
evolving industry standards. ^ We believe that our future success will depend
largely ^ on our ability to anticipate or adapt to such changes and to offer, on
a timely basis, services that meet these evolving standards. We expect our
competitors to develop and introduce new products and services, and enhancements
to existing products and services. New telecommunications technology, including
personal communication services and voice communication over the Internet, may
reduce demand for long distance services, including prepaid phone cards. ^ We
cannot ^ assure you that ^ we will respond successfully to these or other
technological changes, evolving industry standards or to new products and
services offered by ^ our current and future competitors.
^ Dependence on Manufacturer of Switching Facilities ^ -- We rely on the
manufacturer of our switching facilities to provide us with effective, reliable
equipment.
NACT Telecommunications, Inc. manufactures our switching platforms,
licenses software to ^ us and provides technical support and platform
maintenance. Termination of ^ our agreements with this manufacturer could
materially adversely affect ^ our business until other arrangements were
secured. ^ We cannot ^ assure you that ^ we could make similar arrangements with
other switch manufacturers. ^ Our operations depend upon the protection of ^ our
equipment and data at ^ our switching facilities against damage caused by fire,
power loss, technical failures, unauthorized intrusion, natural disasters,
sabotage and other events. ^ We cannot assure you that such an event will not
result in a service outage ^ which could have a material adverse effect on ^ our
business. Although ^ we maintain business interruption insurance providing for
aggregate coverage of approximately ^ $1 million per occurrence, ^ we cannot
assure you that we will be able to maintain this insurance, that ^ it will
continue to be available at reasonable prices, that this insurance ^ will cover
all such losses or that ^ it will be sufficient to compensate ^ us for losses
experienced ^ if we are unable to provide services.
4
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Unauthorized Access to Services.
^ We have experienced unauthorized access to ^ our switching services
by unauthorized disclosure of ^ personal identification numbers and unauthorized
activation of prepaid phone cards^. As a result, we have been unable to recover
the long distance service and switching charges associated with the use of such
^ numbers and cards. Any unauthorized access to ^ our services for a prolonged
period of time could have a material adverse effect on ^ our operations.
^ Regulatory Compliance and Approval -- We are subject to extensive federal and
state rules and regulations. These rules and regulations could change at any
time in an unpredictable manner, which could have a material impact on our
activities and operating results.
Long distance telecommunications services are subject to regulation
by the Federal Communications Commission ^ and ^ state regulatory authorities. ^
These authorities impose regulations governing the rates, terms and conditions
for interstate and intrastate telecommunications services. ^ We also are subject
to Federal Trade Commission regulation and other federal and state laws relating
to the promotion, advertising, labeling and packaging of ^ our products. ^ We
have obtained, or ^ are in the process of obtaining, all licenses, tariffs and
approvals necessary ^ to conduct ^ our business. ^ We cannot assure you,
however, that ^ we will be able to obtain required licenses or approvals in the
future or that ^ federal or state regulatory authorities will not require ^ us
to comply with more stringent regulatory requirements. New statutes and
regulations could require ^ us to alter methods of operation, at costs which
could be material, or otherwise limit the types of services ^ we offer.
Many states regulate prepaid phone card providers by requiring them
to apply for certification. While ^ we either ^ have obtained or ^ applied for
certification in Florida, New York, California, Texas and New Jersey (where ^ we
conduct a substantial part of ^ our business), ^ we cannot guarantee that state
regulators will grant ^ us all required authorizations. Many states, including
Florida, California and Texas, have implemented or are considering implementing
other rules that specifically regulate prepaid phone card providers. ^ We cannot
assure you that the implementation of these rules will not materially adversely
affect ^ our operations.
In September 1996, the FCC adopted new rules governing the pay
telephone industry that^ established a means ^ to compensate pay telephone
service providers ^ for every ^ call completed from their pay telephones,
including calls that utilize toll-free access and access codes ("Dial Around
Compensation"). ^ In July 1997, a federal appeals court upheld the FCC's
determination that interexchange carriers must compensate pay telephone
providers for "dial around" calls. However, the court found that the FCC's
method of setting compensation was unjustified and ^ remanded the compensation
plan back to the FCC for further consideration. In October 1997, the FCC ^
issued a revised compensation plan requiring interexchange carriers to
compensate pay telephone providers $0.284 for each completed "dial around" call.
In May 1998, the court determined that the $0.284 per-call amount was unlawful
and again remanded the compensation plan back to the FCC for further ^
consideration. Notwithstanding the foregoing, the court ruled that interexchange
carriers must compensate pay telephone providers $0.284 for each "dial around"
call until the FCC revises its compensation plan.
In October 1997, the FCC issued an order waiving, until March 1998,
certain obligations of ^ local exchange carriers^ to provide resellers (such as
Global) with the information necessary to determine whether a call originated
from a pay telephone. The FCC extended this waiver to October 1998. This is
problematic to us because while we are still responsible for Dial Around
Compensation, we cannot pass these charges through to our phone card users
unless we know that the call originated from a pay telephone at the time the
call was placed. While we believe that we have adequately accrued for potential
obligations related to Dial Around Compensation, it is possible that the FCC may
enact regulations concerning Dial Around Compensation ^ which could result in ^
material liabilities.
^ In May ^ 1997, the FCC issued an order to ^ preserve and advance
universal telephone service^. The order requires all telecommunications carriers
providing interstate telecommunications services to contribute to ^ a fund.
Contributions will be assessed based upon intrastate, interstate and
international "end-user" gross telecommunications revenue effective January 1,
1998. Although the FCC has not yet finally determined the contribution
assessment rate, ^ we estimate that the assessment could be as much as 4% of
such revenue for the calendar year 1998, and could increase or decrease in
subsequent years. While ^ we believe that we have adequately ^ accrued for ^ our
contribution to ^ this fund, it is possible that the FCC may enact ^ regulations
concerning the ^ fund which could result in additional material liabilities.
5
<PAGE>
In May 1996, the Federal Reserve Board published proposed rules
governing "stored value cards" with a maximum value of $100 or more. If the
rules are adopted and ^ we permit more than $100 to be credited to ^ our prepaid
phone cards, ^ we would become subject to the new requirements, including those
related to the provision of transaction receipts and limitation of consumers'
responsibility for unauthorized transactions. Currently, virtually all of ^ our
prepaid phone cards have a maximum value of $100 or less.
Possible Federal Excise Tax and State Sales and Use Tax Liabilities^ -- We may
be subject to material state sales and use tax liabilities.
The Internal Revenue Service and most state taxing authorities
believe that the sale of long distance services through prepaid phone cards is a
taxable event. In November 1997, Congress enacted legislation ^ specifically ^
addressing the application of the 3% federal telecommunications excise tax to ^
sales of prepaid phone cards. Accordingly, ^ we have been paying the tax and
filing federal excise tax returns^ since that time. We believe that the sale of
prepaid phone cards is subject to state sales and use taxes. However, taxation
of prepaid phone cards is evolving and has not been specifically addressed in
certain states in which ^ we do business. ^ We have not filed any state sales
and use tax returns ^ or remitted any such taxes to state taxing authorities.
While ^ we believe that ^ we have adequately ^ accrued for such taxes and
related compliance costs, it is possible that certain states may enact
legislation or interpret current laws in a manner that could result in
additional material tax liabilities^.
Year 2000 Compliance^ -- Computer programs and microprocessors that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000, or not recognize the date at all, which could result in
major system failures or miscalculations.
We have reviewed our critical computer systems and other
computer-based operational equipment to identify how the ^ year 2000 problem
will impact us. We have contacted our computer-based systems suppliers and ^
have received written confirmation from ^ them that ^ our critical computer
software and hardware is ^ year 2000 compliant. ^ We estimate that the costs of
^ our internal year 2000 compliance ^ will be less than $100,000, which is not
expected to be material to ^ our financial position, cash flow or results of
operations.
As part of ^ our year 2000 compliance review, ^ we are in the process
of contacting ^ our primary vendors and customers to determine the extent to
which ^ we are vulnerable to those third parties' failure to ^ be year 2000
compliant. We cannot assure you that the systems of the companies on which ^ our
business relies will be timely converted or that failure to convert by another
company will not have a material adverse effect on ^ our operations.
^ We believe that the risks associated with the ^ year 2000 ^ problem
primarily relate to the failure of ^ our suppliers and key customers to timely
address their ^ year 2000 issues. Such failure could ^ disrupt our daily
operations significantly. While ^ we believe that ^ our year 2000 compliance
review procedures will adequately address ^ our internal ^ year 2000 issues,
until ^ we receive responses from ^ our significant vendors and customers, the
overall risks associated with the ^ year 2000 ^ problem remain difficult to ^
describe and quantify^ accurately, and we cannot assure you that the year 2000
problem will not have a material adverse effect on ^ our business, operating
results and financial position.
^ We currently ^ have not implemented a ^ year 2000 contingency plan.
^ We intend to devote the resources necessary to assure that ^ year 2000
compliance issues are resolved. ^ We plan to develop and implement a contingency
plan by the end of April 1999 ^ if our year 2000 compliance initiatives,
particularly those that relate to third parties, fall behind schedule.
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Risks Associated With Delisting of Securities from the Boston Stock Exchange --
If we are delisted from the Boston Stock Exchange, an investor will find it much
more difficult to dispose of our securities.
In September 1998, our common stock and publicly-traded warrants were
delisted from the Nasdaq SmallCap Market. Our securities currently are traded on
the Boston Stock Exchange and the OTC Bulletin Board. An investor may find it
more difficult to dispose of our securities since the delisting from Nasdaq. If
our common stock was delisted from trading on the Boston Stock Exchange, it
would fall into the category of "penny stock" (generally, an equity security not
quoted on Nasdaq or traded on a national securities exchange that has a market
price of less than $5.00 per share). Prior to any penny stock transaction,
broker-dealers must deliver a disclosure schedule explaining the penny stock
market and the associated risks. Broker-dealers who sell penny stocks to persons
other than established customers and accredited investors (generally
institutions) also are subject to various sales practice requirements. For these
types of transactions, the broker-dealer must make a special suitability
determination for the purchaser and obtain the purchaser's prior written consent
to the transaction. These additional burdensome requirements imposed upon
broker-dealers may discourage them from trading our securities, which could
severely limit liquidity and the ability of holders to sell such securities in
the secondary market.
Possible Inability to Recognize Deferred Revenue -- Certain states may prohibit
us from recognizing the portion of deferred revenue remaining upon the
expiration of cards with unused calling time.
^ The sale of long distance telecommunications 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 to be "abandoned property" and must be remitted to the
state. Although ^ we are not aware of any case in which these laws have been
applied to the sale of prepaid phone cards, and ^ we do not believe that such
laws are applicable, ^ if such laws are deemed to be applicable, ^ we may be
unable to recognize the portion of ^ our deferred revenue remaining upon the
expiration of ^ cards with unused calling time. In this event, ^ we may be
required to deliver such amounts to certain states in accordance with these
laws, which could have a material adverse effect on ^ our operations. For the
year ended December 31, 1997 and the nine months ended September 30, 1998,
approximately 7% and 8%, respectively, of ^ our net sales were derived from the
recognition of deferred revenue upon card expiration or, in the case of
promotional cards, during the period the program is executed.
Goodwill Recoverability^ -- We may be required to take an additional write-down
or write-off of goodwill in the future, which could materially affect our
financial statements.
The assessment of goodwill recoverability, which is heavily dependent
on projected financial information and the goodwill amortization period, are
significant accounting estimates as contemplated by the American Institute of
Certified Public Accountants' Statement of Position 94-6, "Disclosure of Certain
Significant Risks and Uncertainties." ^ We operate in an industry ^ that is
rapidly evolving and extremely competitive and ^ we continue to generate
significant net losses and negative cash flow. It is reasonably possible that ^
our accounting estimates ^ of the useful life and ultimate recoverability of
goodwill could change in the near term and that the effect of such changes on
the financial statements could be material. While ^ we currently ^ believe that
the recorded amount of goodwill was appropriate at September 30, 1998, ^ we
cannot assure you that our future results will confirm this assessment or that
an additional write-down or write-off of goodwill will not be required in the
future.
Reliance on Key Personnel -- We need to hire and retain qualified personnel to
operate our growing business.
Our ^ success is largely dependent on the personal efforts of Shelly
Finkel, ^ our Chairman of the Board, Randolph Cherkas, ^ our President, and
other key personnel. The loss of ^ Mr. Finkel's or Mr. Cherkas's services could
have a material adverse effect on ^ our business and prospects. ^ Mr. Finkel's
employment agreement ^ requires him to devote only 50% of his business time to ^
our business. In addition, ^ we have experienced significant turnover with
respect to ^ our executive officers. To ^ implement and manage ^ our growth^
successfully, we are dependent upon, among other things, recruiting and
retaining qualified management, marketing, sales, technical and creative
personnel with experience in ^ our business. We cannot assure you that we will
be able to hire or retain necessary personnel.
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^ Litigation.
From time to time, we are involved in litigation incidental to ^ our
business. Such litigation can be expensive and time consuming to prosecute or
defend and could cause ^ our customers to delay or cancel purchase orders until
such lawsuits are resolved. ^ We believe that ^ our pending litigation matters,
in the aggregate, could have a material adverse effect on ^ our operating
results and financial condition if resolved against ^ us.
^ Effect of Outstanding Warrants, Options and Other Convertible Securities ^ --
The exercise or conversion of these securities into common stock will dilute the
percentage ownership of our other stockholders. The sale of such common stock in
the open market could adversely affect the market price of our common stock.
As of December 31, 1998, there were outstanding options, warrants and
other convertible securities to purchase an aggregate of 7,361,139 shares of our
common stock and more options will be granted in the future under our employee
benefit plan. Substantially all of the shares of common stock underlying such
securities ^ are or will be registered for resale under the Securities Act. ^
The exercise or conversion of outstanding stock options, warrants^ or other
convertible securities ^ will dilute the percentage ownership of ^ our other
stockholders ^. In addition, any sales in the public market of ^ shares of our
common stock issuable upon the exercise or conversion of such stock options,
warrants or convertible securities ^, or the perception that such sales could
occur, may adversely affect the prevailing market price ^ of our common stock.
^ Future Sales -- The sale of a large number of newly issued shares of our
common stock in the open market could adversely affect the market price of our
common stock.
Substantially all of our currently 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 from the registration requirements. In
response to our recent conversion offers, holders of our debt securities
recently converted or are in the process of converting these debt securities
into approximately 7,000,000 shares of our common stock. These newly issued
shares also have been registered for sale under the Securities Act or are
eligible for sale under an exemption from the registration requirements. Any
sales in the public market of these shares of our common stock, or the
perception that such sales could occur, may adversely affect the prevailing
market price of our common stock.
Absence of Dividends.
We have never declared or paid dividends on ^ our common stock and ^
do not intend to pay dividends in the foreseeable future. The payment of
dividends in the future will be at the discretion of ^ our Board of Directors.
^ Anti-Takeover Provisions^ -- Certain provisions of our certificate of
incorporation could have effects that conflict with the interests of our
stockholders.
Certain provisions of our certificate of incorporation could make it
more difficult for a third party to acquire control of us, even if such change
in control would be beneficial to our stockholders. For example, our certificate
of incorporation allows us to issue preferred stock without stockholder
approval. Our certificate of incorporation also provides for a board of
directors divided into three classes, each of which generally serves for a term
of three years, with only one class of directors being elected in each year. In
addition, certain "anti-takeover" provisions of the Delaware General Corporation
Law^ may restrict the ability of ^ our stockholders to authorize a merger,
business combination or change of control ^.
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^ BUSINESS SUMMARY
^ Global is a facilities-based provider of prepaid phone cards that ^
allow users to access reliable, convenient and cost-effective domestic and
international telecommunications services. ^ We market (1) traditional prepaid
phone cards^ to consumers through distributors and retail establishments, such
as convenience stores, supermarkets, drug stores and mass merchandisers ^ and
(2) custom-designed promotional phone cards ^ directly to businesses to enhance
the marketing of their products and services^. We seek to provide reliable
service and support to our prepaid phone card customers by combining experience
with innovation and technology.
^ Global was incorporated in Delaware in December 1992. ^ Our
principal executive offices are located at 10 Stow Road, Suite 200, Marlton, New
Jersey 08053 and ^ our telephone number is (609) 797-3434.
RECENT DEVELOPMENTS
^ Debenture Conversion. In December 1998, we offered holders of
$2,562,250 aggregate principal amount of debentures the opportunity to convert
their debentures into shares of our common stock at a conversion rate of $0.80
per share. Holders of $2,362,250 aggregate principal amount of debentures have
converted their debentures into 2,952,813 shares of our common stock.
^ Note Conversion. In December 1998, holders of $3,050,000 principal
amount of promissory notes converted their notes into an aggregate of 3,170,912
shares of our common stock. Certain of the note holders also exchanged 666,667
common stock purchase warrants for an aggregate of 146,342 shares of our common
stock. Among the holders were Shelly Finkel, our Chairman of the Board ($50,000
of notes and 16,667 warrants) and limited partnerships in which Barry
Rubenstein, a principal stockholder, is either a general partner or an officer
and member of a limited liability company that is a general partner ($2,400,000
of notes and 466,666 warrants). Certain of the investors forgave interest of
approximately $14,000 due on the notes.
Centerpiece Conversion. In November 1998, J. Mark Rubenstein ^(no
relation to Barry Rubenstein, described above) resigned as a director and
officer of ^ Global. Mr. Rubenstein was the former shareholder of ^ Centerpiece
who joined ^ Global in February 1998 when ^ we acquired Centerpiece. In
connection with his departure ^ and in full satisfaction of ^ his and ^ Global's
obligations to each other, ^ Mr. Rubenstein sold to certain ^ purchasers
(including Shelly Finkel, our Chairman of the Board ^, Michael Hoppman, our
Chief Financial Officer ^ and Barry Rubenstein and Eli Oxenhorn, principal
stockholders^) an aggregate of 353,393 shares of our common stock and the
$1,000,000 ^ principal amount promissory note previously issued ^ to him in the
^ Centerpiece merger for an aggregate purchase price of $575,000. ^ Mr.
Rubenstein also contributed back to ^ us 47,891 shares of our common stock with
a fair market value of $69,867 in consideration of $298,364 that he owed to ^ us
relating to Access Telecom. The reserve for the loss on the settlement of
$229,497 was provided for in ^ our financial statements for the nine months
ended September 30, 1998. After the group of investors purchased the note and
shares from Mr. Rubenstein, they accepted our offer to convert the principal
amount of the note into 813,008 shares of our ^ common stock at a conversion
rate of $1.23 per share^. The purchasers forgave interest of $60,000 due on the
^ note.
Private Placement. In October 1998, ^ we consummated ^ a private
placement from which ^ we derived net proceeds of $1,846,750 through the sale of
1,198,000 shares of our common stock ^ at a purchase price of $1.625 per share.
^ We used a portion of the proceeds to repay $1,250,000 aggregate principal
amount of promissory notes ^ plus interest ^ issued in ^ a private placement
consummated in April 1998 ^.
Nasdaq Delisting. ^ In September ^ 1998, Nasdaq notified ^ us that ^
our securities were delisted from the Nasdaq SmallCap Market at the close of
business on such date for failure to meet the Nasdaq listing maintenance
requirements. ^ Our securities currently ^ are traded on the Boston Stock
Exchange and the OTC Bulletin Board.
9
<PAGE>
^ New President. Randolph Cherkas, our Chief Operating Officer and a
director since February 1998, became President as of September 1, 1998. In
February 1994, Mr. Cherkas founded ^ Networks and served as its President until
February 1998, when ^ we acquired ^ Networks. From July 1993 to February 1994,
Mr. Cherkas served as an account executive for Network Equipment Technologies, a
company that designs and sells network solutions to Fortune 500 companies. From
July 1984 to July 1993, Mr. Cherkas served as an account executive for IBM. Mr.
Cherkas's employment agreement provides for a term through December 31, 2000,
for a base annual salary of $180,000 (subject to annual increases and bonuses at
the discretion of the Board of Directors) and for options to purchase 50,000
shares at an exercise price of $6.375, which vest in two equal installments ^ in
February ^ 1999 and ^ 2000.
USE OF PROCEEDS
^ We will not receive any proceeds from the sale of the shares by the
^ selling securityholders. Of the ^ 3,528,592 shares offered hereby, an
aggregate of ^ 658,573 shares are issuable upon exercise of ^ options and
warrants. If these securities are fully exercised, ^ we will receive up to an
aggregate of ^ $4,480,011 in gross proceeds. However, the exercise price of
substantially all of these ^ securities is currently above the market price of
the common stock and, accordingly, it is unlikely that ^ we will receive any
proceeds from the exercise of these securities in the near term. All proceeds ^
that we receive, if any, will be used for working capital and general corporate
purposes. Pending application of the proceeds, ^ we intend to place the funds in
interest-bearing investments such as bank accounts, certificates of deposit and
United States government obligations.
10
<PAGE>
SELLING SECURITYHOLDERS
The following table provides certain information with respect to the
^ selling securityholders' beneficial ownership of ^ our common stock as of ^
January 1, ^ 1999, and as adjusted to give effect to the sale of all of the
shares offered hereby. See "Plan of Distribution." Except as otherwise
indicated, the number of shares reflected in the table has been determined in
accordance with Rule 13d-3 promulgated under the Exchange Act. Under this rule,
each ^ selling securityholder is deemed to own beneficially the number of shares
issuable upon exercise of warrants or options it holds that are exercisable
within 60 days from the date of this prospectus. For purposes of presentation,
it is assumed that the ^ selling securityholders will exercise all of the
warrants or options and then resell all of the shares received as a consequence
of such exercise. Unless otherwise indicated, each of the ^ selling
securityholders possesses sole voting and investment power with respect to the
securities shown.
<TABLE>
<CAPTION>
Before Offering After Offering
--------------- --------------
Number of Number of
Name (1) Number of Shares^ Percentage Shares Offered Shares^ Percentage
- ---------------------- ---------------- ---------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
GKN Securities Corp. 75,625 * 75,625 -- *
David M. Nussbaum ^ 56,493 * 20,625 ^ 35,868 *
Roger N. Gladstone 20,625 * 20,625 -- *
Robert Gladstone ^ 56,493 * 20,625 ^ 35,868 *
Barington Capital Group, L.P. 112,500 ^* 112,500 -- *
Randolph Cherkas ^ 443,721(2) 3.9% 405,387 38,334 *
Sheila Cherkas 2,000 * 2,000 -- *
Joseph Cherkas 1,000 * 1,000 -- *
Steven Leveson 1,000 * 1,000 -- *
Tony Jannetta 2,000 * 2,000 -- *
Nicholas Geanopulos 2,000 * 2,000 -- *
Albert Russo 2,000 * 2,000 -- *
Bruce Goldberg 2,000 * 2,000 -- *
Cindy Cherkas TTEE FBO 3,000 * 3,000 -- *
Andrew Cherkas
Cindy Cherkas TTEE FBO 3,000 * 3,000 -- *
Kathryn Cherkas
Frances Campagnola 3,000 * 3,000 -- *
Edward Iglesias 1,000 * 1,000 -- *
Basil Masso 1,000 * 1,000 -- *
Virginia DiEnna 1,000 * 1,000 -- *
Kulwant Singh 2,000 * 2,000 -- *
Edythe Ellin 2,000 * 2,000 -- *
Gary Liguori ^ 79,230(3) * 72,231 ^ 6,999 *
Pennsylvania Merchant Group Ltd. 130,000 ^ 1.1% 130,000 -- *
Wien Securities 100,000 ^* 100,000 -- *
Phillip Bloom ^ 25,710(4) * 7,143 18,567 *
Amir L. Ecker 14,286 * 14,286 -- *
Gerald J. Josephson 42,857 * 42,857 -- *
Losty Capital Management 14,286 * 14,286 -- *
Peter S. Rawlings 7,143 * 7,143 -- *
Jeffrey Rubinstein 14,286 * 14,286 -- *
Alan Silverman 27,143 * 7,143 20,000 *
Coutts (Jersey) Limited 379,121 ^ 3.3% 379,121 -- *
Donaldson, Lufkin & Jenrette 25,000 * 25,000 -- *
Securities Corp. Custodian FBO
Frank J. Campbell, III
Joanne Edwards 12,500 * 12,500 -- *
Joseph E. Gallo TTEE FBO 33,333 * 33,333 -- *
Stephanie A. Gallo 1987 Non-
exempt Family Trust
Joseph E. Gallo TTEE FBO Ernest 33,333 * 33,333 -- *
J. Gallo 1987 Non-exempt Family
Trust
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Before Offering After Offering
--------------- --------------
Number of Number of
Name (1) Number of Shares^ Percentage Shares Offered Shares^ Percentage
- ---------------------- ---------------- ---------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
Joseph E. Gallo TTEE FBO Joseph 33,334 * 33,334 -- *
C. Gallo 1987 Non-exempt
Family Trust
Irving L. Mazer, Esq. Special 5,000 * 5,000 -- *
Account
Irving L. Mazer, Esq. 15,000 * 15,000 -- *
Larry Martin 120,308 ^ 1.1% 120,308 -- *
Leonide Prince 12,500 * 12,500 -- *
Wheatley Partners, L.P. ^ 3,112,402(5) 27.0% 553,138 ^ 2,559,264 22.2%
Wheatley Foreign Partners, L.P. ^ 210,219(6) 1.9% 46,862 ^ 163,357 1.4%
David Corigliano ^ 20,285 * 20,285 __ *
Drummer Partners, L.P. 101,427 ^* 101,427 -- *
Shelly Finkel ^ 672,744(7) 5.9% 202,853 ^ 469,891 4.1%
Mary Ellen Grunther 20,285 * 20,285 -- *
Michael Hoppman ^ 49,785(8) * 20,285 ^ 29,500 *
David Jacobs 40,571 * 40,571 -- *
JEB Partners ^ 171,567(9) 1.5% 111,567 60,000 *
Eli Oxenhorn ^ 567,272(10) 5.0% 319,492 247,780 ^ 2.2%
Barry Rubenstein ^ 4,589,387(11) 39.3% 319,492 ^ 4,269,895 36.6%
Steven Schulman 10,144 * 10,144 -- *
</TABLE>
__________________________
* Less than 1%.
(1) ^ See the text following the footnotes for a description of certain
relationships between the selling securityholders and Global.
^(2) Includes 35,000 shares underlying currently exercisable options. Excludes
66,000 shares underlying options, 7,000 of which become exercisable in June
1999, 25,000 of which become exercisable in February 2000, 7,000 of which
become exercisable in each of December 1999 and December 2000 and 10,000 of
which become exercisable in each of ^ January 2000 and ^ 2001. Mr. Cherkas
is ^ our President and a director ^.
^(3) Includes 6,999 shares underlying currently exercisable options. Excludes
6,000 shares underlying options, ^ 3,000 of which become exercisable on
each of January 2000 and January 2001. Mr. Liguori is ^ one of our vice
presidents.
^(4) Includes 10,000 shares held jointly with Mr. Bloom's wife.
^(5) Includes 235,000 shares underlying ^ publicly-traded warrants.
^(6) Includes 15,000 shares underlying ^ publicly-traded warrants.
^(7) Includes 133,334 shares underlying currently exercisable options and ^
30,873 shares underlying ^ publicly-traded warrants. Excludes 20,000 shares
underlying options, 10,000 of which become exercisable in each of ^ January
2000 and 2001. Mr. Finkel is our Chairman of the Board ^.
^(8) Includes ^ 29,500 shares underlying currently exercisable options. ^
Excludes 50,500 shares underlying options, ^ 12,500 of which vest in May
1999, 3,000 of which vest in June 1999, 10,000 of which vest in August
1999, 3,000 of which vest in each of December 1999 and December 2000, 7,000
of which vest in January 2000, 5,000 of which vest in August 2000 and 7,000
of which vest in January 2001. Mr. Hoppman is ^ one of our vice presidents
and our Chief Financial Officer ^.
12
<PAGE>
^(9) Includes 60,000 shares underlying currently exercisable options.
^(10)Includes 56,334 shares of common stock and 334 shares issuable upon
exercise of ^ publicly-traded warrants owned by Mr. Oxenhorn's children, of
which he disclaims beneficial ownership, 31,390 shares underlying ^
publicly-traded warrants and 108,334 shares underlying currently
exercisable options.
^(11)Includes 10,334 shares owned by The Marilyn and Barry Rubenstein Family
Foundation, a tax exempt organization of which Mr.Rubenstein is a trustee,
and 26,667 shares owned by Marilyn Rubenstein, Mr. Rubenstein's spouse. Mr.
Rubenstein disclaims beneficial ownership over all such shares. Also
includes ^ 110,623 shares owned by Seneca Ventures, a New York limited
partnership of which Mr. Rubenstein is a general partner. Also includes
306,246 shares (including 13,334 shares underlying ^ publicly-traded
warrants) owned by Woodland Partners, a New York general partnership of
which Mr. Rubenstein is a partner. Also includes ^ 185,623 shares owned by
the Woodland Venture Fund, a New York limited partnership of which Mr.
Rubenstein is a general partner. Also includes ^ 3,112,402 shares
(including 235,000 shares underlying ^ publicly-traded warrants) owned by
Wheatley Partners, L.P. ^ Also includes ^ 210,219 shares (including ^
15,000 shares underlying ^ publicly-traded warrants) owned by Wheatley
Foreign Partners, L.P. ^ Mr. Rubenstein is a member and officer of Wheatley
Partners LLC, a Delaware limited liability company which is the general
partner of Wheatley, and also a general partner of Wheatley Foreign. Mr.
Rubenstein disclaims beneficial ownership of the securities owned by Seneca
Ventures, Woodland Partners, Woodland Venture Fund, ^ Wheatley and Wheatley
Foreign except to the extent of his equity interest therein. Also includes
10,000 shares owned by the Rubenstein Family LP, a New York limited
partnership of which Mr. Rubenstein is a general partner. Also includes
68,057 shares owned individually by Barry Rubenstein, 103,333 shares held
in his IRA Rollover account, 18,057 shares underlying ^ publicly-traded
warrants and 108,334 shares issuable upon exercise of currently exercisable
options. ^
On July 9, 1997, ^ we consummated a public offering of 2,875,000
shares of our common stock. In connection with this offering, ^ we issued to GKN
Securities Corp. and its designees (including David M. Nussbaum, Roger N.
Gladstone, Robert Gladstone and Barington Capital Group, L.P.), options to
purchase an aggregate of 250,000 shares of our common stock until July 8, 2002
at an exercise price of $9.075 per share. David Nussbaum and Robert Gladstone
also participated in our December 1998 note conversion by converting $50,000
aggregate principal amount of promissory notes into an aggregate of 71,736
shares of our common stock.
On July 30, 1997, we ^ entered into a one-year consulting agreement
with ^ Pennsylvania Merchant Group, pursuant to which ^ Penn Merchant provided
financial public relations consulting services to ^ us. Under this agreement, ^
we paid ^ Penn Merchant a monthly fee of $25,000 and issued ^ Penn Merchant
warrants to purchase 100,000 shares until January 2001 at an exercise price of
$7.00 per share. In lieu of ^ paying cash compensation to Penn Merchant for
acting as placement agent of the October 1998 ^ private placement, we reduced
the exercise price of these warrants to $1.625 per share. Additionally, in
October 1998, ^ we issued to ^ Penn Merchant warrants to purchase an additional
30,000 shares at an exercise price of $1.625 per share in lieu of payment for
the balance of monthly fees owed to ^ Penn Merchant, which aggregated
approximately $78,000.
In February 1998, ^ we acquired, through a merger, all of the
outstanding capital stock of ^ Networks for a purchase price comprised of ^ the
following:
. $2,000,000 in cash^;
. an aggregate of 505,618 shares of our common stock (433,387 of which were
issued to Randolph Cherkas, ^ our President and 72,231 of which were issued
to Gary Liguori, ^ one of our vice presidents); and
. $1,000,000 aggregate principal amount of promissory notes, secured by
substantially all of ^ Networks's assets.
13
<PAGE>
^ In May 1998, Mr. Cherkas transferred an aggregate of 28,000 shares of our
common stock to the following persons, all of whom are listed in the table above
as selling securityholders:
Frances Campagnola Bruce Goldberg
Cindy Cherkas TTEE FBO Andrew Cherkas Edward Iglesias
Cindy Cherkas TTEE FBO Kathryn Cherkas Steven Leveson
Joseph Cherkas Tony Jannetta
Sheila Cherkas Basil Masso
Virginia DiEnna Albert Russo
Edythe Ellin Kulwant Singh
Nicholas Geanopulos
In April 1998, we entered into an agreement with Wien Securities
pursuant to which Wien agreed to purchase up to $2,000,000 of our securities at
a discount to the market price until December 31, 1998 upon our request. In
consideration of Wien's commitment, we issued to Wien warrants to purchase
100,000 shares at an exercise price of $7.50 per share. The warrants are
exercisable until April 13, 2001.
Also in April 1998, we consummated a private placement from which we
derived net proceeds of $1,135,000 through the sale of an aggregate of
$1,250,000 of promissory notes and warrants to purchase 178,573 shares of our
common stock. Each warrant is exercisable through April 6, 2001 at an initial
exercise price of $7.00 per share. The notes were repaid from the proceeds of
the October 1998 private placement. Penn Merchant served as the placement agent
in the April 1998 private placement and received a $100,000 commission and
$10,000 for reimbursement of expenses. The persons or entities listed below (and
also in the table above as selling securityholders) participated in the April
1998 private placement and received warrants:
Phillip Bloom Peter S. Rawlings
Amir L. Ecker Jeffrey Rubinstein
Gerald J. Josephson Alan Silverman
Losty Capital Management Coutts (Jersey) Limited
In October 1998, we consummated a private placement from which we
derived net proceeds of $1,846,750 through the sale of 1,198,000 shares at a
price of $1.625 per share. Penn Merchant served as the placement agent in this
financing. The persons or entities listed below (and also in the table above as
selling securityholders) participated in this private placement:
Coutts (Jersey) Limited Irving L. Mazer, Esq.
Special Account
Donaldson, Lufkin & Jenrette Securities Irving L. Mazer, Esq.
Corp. Custodian FBO Frank J. Campbell, III
Joanne Edwards Larry Martin
14
<PAGE>
Joseph E. Gallo TTEE FBO Stephanie Leonide Prince
A. Gallo 1987 Non-Exempt Family Trust
Joseph E. Gallo TTEE FBO Ernest J. Wheatley Partners, L.P.
Gallo 1987 Non-Exempt Family Trust
Joseph E. Gallo TTEE FBO Joseph C. Wheatley Foreign Partners, L.P.
Gallo 1987 Non-Exempt Family Trust
In November 1998, J. Mark Rubenstein sold to the purchasers listed
below (and also in the table above as selling securityholders) an aggregate of
353,393 shares of our common stock and a $1 million principal amount promissory
note for an aggregate purchase price of $575,000. We offered the purchasers the
opportunity to convert the promissory note they had purchased into shares of our
common stock at a conversion rate of $1.23 per share. The purchasers accepted
the conversion offer and converted the note into an aggregate of 813,008 shares
of our common stock. The purchasers were:
David Corigliano David Jacobs
Drummer Partners, L.P. JEB Partners
Shelly Finkel Eli Oxenhorn
Mary Ellen Grunther Barry Rubenstein
Michael Hoppman Steven Schulman
PLAN OF DISTRIBUTION
The shares offered by the ^ selling securityholders may be sold from
time to time in transactions (which may include block transactions) in the
over-the-counter market, in negotiated transactions, or a combination of such
methods of sale, at fixed prices which maybe changed, at market prices
prevailing at the time of sale, or at negotiated prices. None of the ^ selling
securityholders have entered into agreements, understandings or arrangements
with any underwriters or broker-dealers regarding the sale of their shares. The
^ selling securityholders may effect transactions by selling their shares
directly to purchasers or to or through broker-dealers (including GKN, Barington
Capital Group, L.P., ^ Penn Merchant, Wien and any of their successors), which
may act as agents or principals and receive in excess of customary commissions.
The ^ selling securityholders and any broker-dealers that act in connection with
the sale of the shares might be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act. The ^ selling securityholders may agree
to indemnify any agent, dealer or broker-dealer that participates in
transactions involving sales of the securities against certain liabilities,
including liabilities arising under the Securities Act.
^ We are responsible for all costs, expenses and fees incurred in
registering the shares offered hereby. The ^ selling securityholders are
responsible for brokerage commissions, if any, attributable to the sale of such
securities.
LEGAL MATTERS
The legality of the securities ^ offered hereby has been passed upon
by Graubard Mollen & Miller, New York, New York. Certain partners and employees
of Graubard Mollen & Miller own shares of our common stock. Graubard Mollen &
Miller participated with other investors in the December 1998 note conversion by
converting a $50,000 principal amount promissory note into 51,653 shares of our
common stock and exchanging 16,667 common stock purchase warrants for 3,659
shares of our common stock.
15
<PAGE>
LEGAL MATTERS
The legality of the securities ^ offered hereby has been passed upon
by Graubard Mollen & Miller, New York, New York. Certain partners and employees
of Graubard Mollen & Miller own shares of our common stock. Graubard Mollen &
Miller participated with other investors in the December 1998 note conversion by
converting a $50,000 principal amount promissory note into 51,653 shares of our
common stock and exchanging 16,667 common stock purchase warrants for 3,659
shares of our common stock.
15
<PAGE>
EXPERTS
The consolidated financial statements of Global Telecommunication
Solutions, Inc. and subsidiaries as of December 31, 1997 and 1996, and for the
years then ended have been incorporated by reference herein and in the
registration statement in reliance upon the report of KPMG LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. Our SEC filings are available to the public over
the Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information about the public reference room.
The SEC allows us to "incorporate by reference" the information we
file with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. This
prospectus incorporates by reference our documents listed below and any future
filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until all of the securities are sold.
. Current Report on Form 8-K/A dated February 6, 1998, filed on April 24,
1998;
. Annual Report on Form 10-KSB for the year ended December 31, 1997 and
amendment on Form 10-KSB/A, filed on April 15, 1998 and April 30, 1998,
respectively;
. Quarterly Report on Form 10-QSB for the quarter ended March 31, 1998, filed
on May 15, 1998;
. Proxy Statement dated June 5, 1998;
. Quarterly Report on Form 10-QSB for the quarter ended June 30, 1998, filed
on August 14, 1998;
. Quarterly Report on Form 10-QSB for the quarter ended September 30, 1998,
filed on November 23, 1998; and
. The description of our common stock that is contained in our Registration
Statement on Form 8-A, which was declared effective by the SEC on December
14, 1994.
Potential investors may obtain a copy of any of the agreements
summarized herein or any of our SEC filings without charge by written or oral
request directed to Global Telecommunication Solutions, Inc., Attention:
Secretary, 10 Stow Road, Suite 200, Marlton, New Jersey 08053, (609) 797-3434.
16
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution
The following is an itemized statement of the estimated amounts of
all expenses payable by the registrant in connection with the registration of
the common stock offered hereby, other than underwriting discounts and
commissions:
SEC filing fee $ 1,047.73
Boston Stock Exchange fee for listing additional shares 5,000.00
Legal fees and expenses ^ 35,000.00
Accounting fees and expenses 15,000.00
Miscellaneous 3,952.27
-----------
Total ^ $60,000.00
===========
ITEM 15. Indemnification of Directors and Officers
^ Our certificate of incorporation provides that all directors,
officers, employees and agents of the registrant shall be entitled to be
indemnified by ^ us 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 shall have power to 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 the person 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 the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person 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 the
person's 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 the person 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 the
person's conduct was unlawful.
(b) A corporation shall have power to 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
judgment in its favor by reason of the fact that the person 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
the person in connection with the defense or settlement of such action or suit
if the person acted in good faith and in a manner the person 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
II-1
<PAGE>
which such person shall have been adjudged to be liable 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 present or former director or officer 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, such person shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (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 present or
former director, officer, employee or agent is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made, with
respect to a person who is a director or officer at the time of such
determination, (1) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (2) by a
committee of such directors designated by majority vote of such directors, even
though less than a quorum, or (3) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (4)
by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit 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 such person is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by former directors and officers or other
employees and agents may be so paid upon such terms and conditions, if any, as
the corporation 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 such
person's 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 such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the corporation would have the power to
indemnify such person 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 such person would have with respect to
such constituent corporation if its separate existence had continued.
II-2
<PAGE>
(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 any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
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 and in a manner such person
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^ may be permitted to directors, officers, and controlling
persons of ^ Global pursuant to the foregoing provisions, or otherwise, ^ Global
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 ^ Global of expenses
incurred or paid by a director, officer or controlling person of ^ Global 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, ^ Global 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 Description
Number
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
3.5 H Certificate of Merger - ^ Networks into NATW Acquisition
Corp.
3.6 I Certificate of Merger - ^ Centerpiece into CCI Acquisition
Corp.
4.1 A Form of Common Stock Certificate
4.2 A Form of Redeemable Warrant Certificate
4.3 A Warrant Agreement between ^ Global and Whale Securities Co.,
L.P.
^ 4.4 A Underwriter's Warrant issued to Whale
4.5 D Placement Agent Warrant dated May 10, 1996 issued to Whale
4.6 F Warrant Agreement dated April 15, 1995 between ^ Global and
Craig Shapiro
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4.7 F Warrant Agreement dated October 26, 1995 between ^ Global
and Frog Hollow Partners
4.8 F Warrant Agreement dated January 22, 1996 between ^ Global
and Whale
4.9 E Form of Subscription Agreement for December 1996 Private
Placement
4.10 E Form of Warrant issued in the December 1996 Private
Placement
4.11 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 ^ Global and Shelly Finkel
10.4 A Employment Agreement between ^ Global and Maria Bruzzese
10.5 A Stock Option Agreement between ^ Global and Shelly Finkel
10.6 A Stock Option Agreement between ^ Global and Paul Silverstein
10.7 A Stock Option Agreement between ^ Global and James Koplik
10.8 B Stock Option Agreement between ^ Global and John McCabe
10.9 A 1994 Performance Equity Plan
10.10 A Service Agreement between ^ Global and MCI
Telecommunications Corporation
10.11 A Service Agreement between ^ Global and Sprint Corporation
10.12 A Service Agreement between Independent Properties Sales
Corporation ^ and Metromedia Communications Corporation
^ 10.13 A Consent between ^ Independent Properties and Metromedia
allowing the assignment to ^ Global of ^ Independent
Properties's right to receive services from Metromedia
10.14 B Employment Agreement between ^ Global and John McCabe
10.15 B Consulting Agreement between ^ Global and Barry Rubenstein
10.16 B Consulting Agreement between ^ Global and Eli Oxenhorn
10.17 C Merger Agreement by and among ^ Global, Merger Sub and
Global Link
10.18 C Directors Voting Agreement
10.19 C Peoples Agreement, together with ^ Global's Guaranty of
Peoples Second Payment
10.20 C Ancillary Agreement between Global Link and Peoples
regarding payment of the Peoples Accounts Receivable,
together with Holding Corp's Guaranty of such payment
10.21 C Amended and Restated Securities Purchase Agreement
10.22 C ^ Global's Guaranty of Debentures
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10.23 C Employment Agreement between ^ Global and Gary Wasserson
10.24 C Employment Agreement between ^ Global and David Tobin
10.25 C Stock Option Agreement between ^ Global and Gary Wasserson
10.26 C Stock Option Agreement between ^ Global and David Tobin
10.27 A Sublease for space at 40 Elmont Road, Elmont, New York
10.28 D Form of Registration Rights Agreement for May 1996 Private
Placement
10.29 D Agency Agreement between ^ Global and Whale for May 1996
Private Placement
10.30 D Placement Agent Warrant Agreement for May 1996 Private
Placement
10.31 F Consulting Agreement dated January 22, 1996 between ^ Global
and Whale
10.32 F First Amendment to Peoples Agreement, dated August 14, 1996
10.33 F Second Amendment to Peoples Agreement, dated November 27,
1996
10.34 E Finder's fee agreement between ^ Global and Whale relating
to the December 1996 Private Placement
10.35 G Extension of Consulting Agreement between ^ Global and Barry
Rubenstein
10.36 G Extension of Consulting Agreement between ^ Global and Eli
Oxenhorn
10.37 H Merger Agreement by among ^ Global, NATW Acquisition Corp.,
^ Networks, Randolph Cherkas and Gary Liguori
10.38 H Employment Agreement between ^ Global and Randolph Cherkas
10.39 H Employment Agreement between ^ Global and Gary Liguori
10.40 I Merger Agreement by and among ^ Global, CCI Acquisition
Corp., CCI and J. Mark Rubenstein
10.41 I Employment Agreement between ^ Global and J. Mark Rubenstein
10.42 K Amendment to Employment Agreement between ^ Global and David
Tobin
10.43 K Amendment to Employment Agreement between ^ Global and Shelly
Finkel
10.44 K Amendment to Employment Agreement between ^ Global and Robert
Bogin
10.45 L Amendment to Employment Agreement between ^ Global and
David Tobin
10.46 L Amendment to Merger Agreement by and among ^ Global, CCI and
J. Mark Rubenstein
10.47 L Agreement between ^ Global and J. Mark Rubenstein
10.48 L Termination of Employment Agreement between ^ Global and
J. Mark Rubenstein
10.49 * Financial Consulting Agreement between ^ Global and ^ Penn
Merchant
21 J Subsidiaries of ^ Global
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23.1 ** Consent KPMG LLP
23.2 * Consent of Graubard Mollen & Miller (filed as part of Exhibit
5.1)
- -----------------------------
* Previously filed.
** Filed herewith.
A Incorporated by reference to ^ Global's Registration Statement on Form SB-2
(No. 33-85998).
B Incorporated by reference to ^ Global's Annual Report on Form 10-KSB for the
year ended December 31, 1994.
C Incorporated by reference to ^ Global's Current Report on Form 8-K, filed
with the ^ SEC on March 15, 1996.
D Incorporated by reference to Post-Effective Amendment No. 2 to ^ Global's
Registration Statement on Form SB-2 on Form S-3 (No. 33-85998).
E Incorporated by reference to ^ Global's Current Report on Form 8-K, filed
with the ^ SEC on December 26, 1996.
F Incorporated by reference to ^ Global's Registration Statement on Form S-3
(No. 333-19005).
G Incorporated by reference to ^ Global's Registration Statement on Form SB-2
(No. 333-25389).
H Incorporated by reference to ^ Global's Current Report on Form 8-K, filed
with the ^ SEC on February 23, 1998.
I Incorporated by reference to ^ Global's Current Report on Form 8-K filed with
the ^ SEC on February 23, 1998.
J Incorporated by reference to ^ Global's Annual Report on Form 10-KSB for the
year ended December 31, 1997.
K Incorporated by reference to ^ Global's Quarterly Report on Form 10-QSB for
the quarter ended June 30, 1998.
L Incorporated by reference to ^ Global's Quarterly Report on Form 10-QSB for
the quarter ended September 30, 1998.
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 20 percent 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 (a)(1)(i) and (a)(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.
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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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, 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 Marlton, State of New Jersey on ^ January 21, 1999.
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
By: /s/ Shelly Finkel
------------------------------------------
Shelly Finkel, Chairman of the Board
^
Pursuant to the requirements of the Securities Act of 1933, 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 ^ January 21, 1999
- --------------------------
Shelly Finkel
^* President and Director ^ January 21, 1999
- --------------------------
Randolph Cherkas
^* Director ^ January 21, 1999
- ------------------------
Alan Kaufman
^* Director ^ January 21, 1999
- -------------------------
Donald Ptalis
^* Director ^ January 21, 1999
- -------------------------
Jack Tobin
^* Chief Financial Officer January 21, 1999
- ------------------------- (and principal accounting
Michael Hoppman officer)
* /s/ Shelly Finkel
- -------------------------------------
Shelly Finkel as attorney-in-fact
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^ EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Global Telecommunication Solutions, Inc. and subsidiaries
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
- ----------------------
KPMG LLP
Philadelphia, Pennsylvania
^ January 21, 1999
