U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number 1-13478
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
--------------------------------------------
(Name of Small Business Issuer in Its charter)
Delaware 13-3698386
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
317 Madison Avenue, Suite 807, New York, New York 10017
- ------------------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(212) 697-6131
----------------
(Issuer's Telephone Number, Including Area Code)
10 Stow Road, Suite 200, Marlton, New Jersey 08053
---------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X[ No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. As of May 10, 2000, the issuer had
outstanding 15,561,841 shares of Common Stock, par value $.01 per share.
<PAGE>
GLOBAL TELECOMMUNICATION SOLUTIONS, INC. AND SUBSIDIARIES
Page
Part I. Financial Information
Item I. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets - March 31, 2000
(unaudited) and December 31, 1999.............................. 3
Condensed Consolidated Statements of Operations - Three
months ended March 31, 2000 and 1999 (unaudited)............... 4
Condensed Consolidated Statements of Cash Flows - Three
months ended March 31, 2000 and 1999 (unaudited)............... 5
Notes to Condensed Consolidated Financial Statements............. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................11
Part II..Other Information
Item 2. Changes in Securities and Use of Proceeds...............13
Item 6. Exhibits and Reports on Form 8-K........................13
Signatures.......................................................14
2
<PAGE>
<TABLE>
<CAPTION>
GLOBAL TELECOMMUNICATION SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
---------------------------------------
2000 1999
------------------ ------------------
Assets
Current assets:
<S> <C> <C>
Cash $ 57,926 $ 302,067
Other assets 41,640 44,635
------------------ ------------------
Total current assets 99,566 346,702
Investment in and advances to affiliate 179,390 140,502
Property and equipment, net - 26,640
Assets of liquidating subsidiaries 1,221,918 3,705,832
------------------ ------------------
$ 1,500,874 $ 4,219,676
================== ==================
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable $ 1,046,817 $ 1,053,612
Accrued license fee 1,221,979 1,221,979
Accrued earn-out to related party 1,200,000 1,200,000
Other accrued expenses 1,295,213 1,302,026
------------------ ------------------
Total current liabilities 4,764,009 4,777,617
Other liabilities:
Notes payable to related party - 628,815
Liquidating subsidiaries' liabilities subject to compromise - third parties 20,646,190 23,716,888
------------------ ------------------
25,410,199 29,123,320
Commitments and Contingencies
Stockholders' Equity (Deficit)
Preferred stock - $.01 par value, authorized 1,000,000 shares;
none issued and outstanding - -
Common stock, $.01 par value, authorized 35,000,000 shares;
issued and outstanding 15,497,632 and 14,727,882 154,976 147,278
Additional paid-in capital 56,854,365 56,233,248
Accumulated deficit (80,871,888) (81,237,392)
Accumulated other comprehensive income 23,089 23,089
Less: Treasury stock, 47,891 shares (69,867) (69,867)
------------------ ------------------
Total stockholders' equity (deficit) (23,909,325) (24,903,644)
------------------ ------------------
$ 1,500,874 $ 4,219,676
================== ==================
The accompanying notes are an integral part of these condensed consolidated financial statements
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
GLOBAL TELECOMMUNICATION SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
-------------------------------------
2000 1999
---------------- -----------------
<S> <C> <C>
General and administrative expenses $ 199,528 $ 398,990
Depreciation and amortization - 4,287
---------------- -----------------
Operating loss (199,528) (403,277)
Equity in net loss from affiliate (26,029) -
---------------- -----------------
Loss from continuing operations (225,557) (403,277)
---------------- -----------------
Discontinued operations:
Loss from discontinued operations (1,017,745) (1,182,556)
Gain on disposal of discontinued operations 1,608,806 -
---------------- -----------------
591,061 (1,182,556)
---------------- -----------------
Income (loss) before extraordinary item 365,504 (1,585,833)
Extraordinary loss on conversion of debt - (1,420,172)
---------------- -----------------
Net income (loss) $ 365,504 $(3,006,005)
================ =================
Primary income (loss) per share:
Loss from continuing operations $ (0.01) $ (0.03)
Income (loss) from discontinued operations 0.04 (0.09)
Extraordinary loss on conversion of debt - (0.10)
---------------- -----------------
Primary income (loss) per share $ 0.03 $ (0.22)
================ =================
Weighted average shares outstanding - primary 14,440,946 13,903,091
================ =================
The accompanying notes are an integral part of these condensed consolidated financial statements
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
GLOBAL TELECOMMUNICATION SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
March 31,
--------------------------------------
2000 1999
----------------- -----------------
Operating activities:
<S> <C> <C>
Net income (loss) $ 365,504 $(3,006,005)
Adjustment to reconcile net loss to net cash used in operating activities:
Loss from discontinued operations 1,017,745 1,182,556
Depreciation and amortization - 4,287
Amortization of deferred compensation - 6,102
Amortization of deferred financing charges - 4,995
Loss on debt conversion - 1,420,172
Gain on sale of fixed assets (1,608,806) -
Loss from equity investment 26,029
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable - -
Other assets 29,635 (17,343)
Accounts payable (6,795) 339,012
Accrued license fees - 127,632
Accrued note and earn-out to related party - (534,056)
Accrued expenses (6,813) 63,484
----------------- -----------------
Cash used by continuing operating activities (183,501) (409,164)
Cash used by discontinued operating activities - (392,787)
----------------- -----------------
Cash (used) by operating activities (183,501) (801,951)
----------------- -----------------
Investing activities:
Advances to affiliate (60,640) -
----------------- -----------------
Net cash (used) by financing activities (60,640) -
----------------- -----------------
Net change in cash (244,141) (801,951)
Cash, beginning of year 302,067 1,604,166
----------------- -----------------
Cash, end of year $ 57,926 $ 802,215
================= =================
Supplemental disclosures:
Fair value of common stock issued upon note conversion $ - $ 3,944,922
================= =================
Conversion of note payable to related party into common stock $ 628,815 $ -
================= =================
The accompanying notes are an integral part of these condensed consolidated financial statements
</TABLE>
5
<PAGE>
GLOBAL TELECOMMUNICATION SOLUTIONS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2000
(unaudited)
(1) Business and Basis of Presentation
Business
Global Telecommunication Solutions, Inc. (the "Company") was
incorporated on December 23, 1992 and historically, through certain
subsidiaries, was engaged in the marketing and distribution of prepaid phone
cards. As a result of the Company's subsidiaries long history of losses in the
prepaid phone card business, coupled with an increasingly competitive
environment, the Company's Board of Directors adopted a plan to discontinue and
sell the prepaid phone card business. To facilitate the possible sale of the
phone card assets, these subsidiaries filed voluntary petitions with the U.S.
Bankruptcy Court for the District of Delaware ("Court") under Chapter 11 of the
U.S. Bankruptcy Code on October 28, 1999. The subsidiaries of the Company that
filed for Court protection are Global Link Telecom Corporation, GTS Holding
Corp., Inc., TelTime, Inc., Network Services System, Inc., Network Services
System, L.P., GTS Marketing, Inc., Global Telecommunication Solutions, L.P.,
Networks Around the World, Inc. and Centerpiece Communications, Inc.
(collectively the "Debtors"). On January 31, 2000, the Debtors entered into an
agreement to sell their fixed assets to J D Services, Inc. ("J D Services") (See
below.)
The Company's financial statements have been prepared in accordance
with the American Institute of Certified Public Accountants Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization ("SOP 90-7.")"
The Debtors have been operating their business as debtors-in-possession subject
to the jurisdiction of the Court.
As a result of the Company's decision to sell its phone card business
and the subsequent voluntary filing by certain of the Company's subsidiaries
under Chapter 11 of the U.S. Bankruptcy Code, the operations of that business
are presented herein as discontinued operations and the assets and liabilities
of the filing subsidiaries have been aggregated in the accompanying balance
sheets.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB and
Item 310(b) of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three months ended
March 31, 2000 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000.
(2) Going Concern
At March 31, 2000 the Company, excluding the assets and liabilities
relating to the Debtors, had cash of $58,000 and a working capital deficit of
$4.7 million. Subsequent to March 31, 2000, the Company continues to generate
negative cash losses from operations.
At March 31, 2000 substantially all the Company's current liabilities
relate to indebtedness incurred in connection with the discontinued phone card
business. These liabilities were incurred by the Company rather than the
Debtors, and are due to less than 10 entities. The Company is currently
negotiating with the various parties in an effort to reach settlements regarding
the amounts due. The Company is attempting to settle these liabilities on
favorable terms to the Company.
6
<PAGE>
The Company's ability to continue in operation and execute its new
business plan is subject to various factors including, but not limited to,
resolving its aforementioned outstanding liabilities, and raising additional
capital. Management of the Company cannot presently predict the outcome of these
matters and there can be no assurance that the Company will be successful in any
of these endeavors.
The accompanying condensed consolidated financial statements have been
prepared on a going concern basis which contemplates the realization of assets
and the settlement of liabilities and commitments in the normal course of
business.
(3) Loss Per Share
For the three months ended March 31, 2000 and 1999 income (loss) per
share is computed by dividing the net income (loss) by the weighted average
number of shares of Common Stock. For the three months ended March 31, 2000
fully diluted income (loss) per share has not been presented to include the
effect of Common Stock equivalents since the impact is insignificant. For the
three months ended March 31, 1999, common stock equivalents are excluded from
the income (loss) per share calculation because the effect would be
antidilutive.
(4) Reclassifications
Certain reclassifications have been made to the 1999 condensed
consolidated financial statements to conform to the 2000 presentation.
(5) Debtors Sale of Assets and Discontinued Operations
On January 31, 2000, the Debtors entered into an agreement ("Purchase
Agreement") to sell substantially all of their assets to J D Services. The sale
transaction was consummated effective April 1, 2000 pursuant to an order of the
Court. Under the terms of the Purchase Agreement, J D Services will pay an
aggregate of $2.1 million as follows: (i) forgiveness of $750,000
debtor-in-possession financing previously provided to the Debtors and (ii)
assumption of Debtor's obligations to provide telecommunications services to
previously activated phone cards "Deferred Liability." The Purchase Agreement
also provides that should the Deferred Liability be less than $1.35 million, the
Debtors shall be due the difference ("True-up Amount".) As a result of this
sale, the Debtors realized a gain of $1,608,806.
A condition of the Purchase Agreement required that certain agreements,
including non-compete agreements among the Company, Debtors and Messrs. Cherkas
and Liguori be assigned to J D Services. These agreements with Messrs. Cherkas
and Liguori were entered into in connection with the Company's acquisition of
Networks Around the World, Inc. ("NATW") in February 1998. To accomplish this
assignment, defaults by the Company and the Debtors under the various agreements
had to be cured. With respect to Messrs. Cherkas and Liguori, the Company and
Debtors entered into an Agreement Regarding The Assignment of Contacts, Cure
Amounts and Related Matters on March 7, 2000, which was approved by the Court on
March 22, 2000 ("Assignment Agreement".) Under the terms of the Assignment
Agreement, the Company, on May 3, 2000, paid Mr. Liguori $15,000 in unpaid
bonuses due him and delivered to him 50,000 shares of Common Stock. Also on May
3, 2000, the Company paid Mr. Cherkas $94,000; $64,000 for accrued but unpaid
salary and $30,000 for reimbursement of legal fees. As provided by the
Assignment Agreement, the Debtors paid Mr. Liguori on May 3, 2000, $110,000 in
payment of the note, and related interest, issued in connection with the
acquisition of NATW.
With respect to approximately $1.2 million due Mr. Cherkas under an
earn-out agreement entered into in connection with the NATW acquisition ("Earn
Out"), under the Assignment Agreement he has agreed to release the Company and
Debtors if he receives a minimum payment of $700,000 by October 7, 2000, paid as
discussed below. To the extent he does not receive the minimum payment of
$700,000, the amount due him by the Company shall be $1.2 million, less any
payments he receives under the Assignment Agreement.
7
<PAGE>
The Assignment Agreement provides that Mr. Cherkas shall receive the
following amounts, if any:
o The True-up Amount not to exceed $500,000
o 70% of the amount of the Debtors' available cash remaining
after deduction of amounts for unpaid accrued administrative
expenses.
o At the election of the Company, an amount equal to the
difference between $700,000 and the amounts otherwise paid him
under the Assignment Agreement.
It is impossible to predict the amount of cash, if any, Mr. Cherkas
will receive under the Assignment Agreement and accordingly the Company could be
liable to Mr. Cherkas up to $1.2 million if he does not receive a minimum of
$700,000 from the Debtors and/or the Company by October 7, 2000. While proceeds
from the sales of assets of the Debtors may satisfy the Earn Out, since the
Company remains liable should the Debtors not satisfy the debt the entire amount
due Mr. Cherkas of $1.2 million is reflected as a liability of the Company on
its balance sheet and not the Debtors.
The Debtors have exclusive right, until May 25, 2000, to file with the
Court a plan of liquidation ("Plan"). Such period may be extended at the
discretion of the Court. Subject to certain exceptions in the Bankruptcy Code,
acceptance of a Plan requires approval of the Court and the affirmative vote
(i.e. more than 50% of the number and at least 66 2/3% of the dollar amount,
both with regard to claims actually voted) of each class of creditors and equity
holders of the Company, whose claims are impaired by the Plan. If the Debtors
fail to submit a Plan within the exclusive period prescribed or any extension
thereof, any creditor or equity holder will be free to file a Plan with the
Court and solicit acceptances thereof. Until the Plan is approved, the impact on
the Company of the Plan, if any, cannot be predicted. In addition should the
assets of the Debtors not be sufficient to pay administrative priority claims,
the Debtors would not be able to confirm a Plan and a trustee would be appointed
by the Court to administer the Debtors' estate.
Operating results from the discontinued operations of the Debtors for
each of the three months ended March 31, 2000 and 1999 is as follows:
2000 1999
----------------- -----------------
Net sales $ 3,259,959 $ 7,423,389
Cost of sales 3,242,223 6,644,873
----------------- -----------------
Gross Profit 17,736 778,516
Selling, general and
administrative expense 783,673 1,409,577
Depreciation and amortization 251,808 364,019
----------------- -----------------
Operating loss (1,017,745) (995,080)
Interest income - 14,338
Interest expense - (201,814)
----------------- -----------------
Net loss from discontinued
Operations $(1,017,745) $(1,182,556)
================= =================
8
<PAGE>
Summary balances sheets of the discontinued operations of the Debtors
is as follows:
March 31, December 31,
2000 1999
----------------- -----------------
Current assets:
Cash $ 279,905 $ 594,143
Accounts receivable, net 892,013 1,102,229
Inventory - 251,776
----------------- -----------------
Total current assets 1,171,918 1,948,148
Property and equipment, net - 1,707,684
Other assets, net 50,000 50,000
----------------- -----------------
Total assets of liquidating subsidiaries $ 1,221,918 $ 3,705,832
================= =================
Pre-petition current liabilities:
Accounts payable $ 8,975,322 $ 8,638,408
Accrued regulatory fees 5,836,021 5,836,021
Other accrued expenses 138,497 430,967
Deferred revenues - 1,963,797
Estimated sales tax liability 5,402,446 5,429,514
Notes payable to related party 110,000 110,000
----------------- -----------------
20,462,286 22,408,707
Post-petition administrative claims 183,904 1,308,181
----------------- -----------------
Total liquidating subsidiaries' liabilities
subject to compromise - third parties $ 20,646,190 $ 23,716,888
================= =================
(6) Debt Settlement
In connection with the NATW acquisition, the Company issued notes in
the aggregate amount of $1 million of which $900,000 were payable to Mr.
Cherkas. In December 1998, Mr. Cherkas preliminarily agreed to convert his note
into Common Stock. The conversion of the note into 769,750 shares of Common
Stock occurred in March 2000 after deducting from the note $376,185, which
represents a reimbursement to the Company of amounts due it under an indemnity
contained in the NATW merger agreement.
(7) Investment in Affiliates
On February 1, 2000, the Company exchanged its investments in its
recently formed subsidiaries Imagine Telecom, Inc. and TalkToGo.com, Inc. for a
44% interest in Enticent.com, Inc. ("Enticent"), also a startup entity. As a
result of the transaction the Company will be the largest shareholder of
Enticent, owning 44% of the outstanding shares. Accordingly the Company's
investment in Enticent is recorded on the equity basis.
(8) Litigation
On February 7, 2000, Star Telecommunications Inc. ("Star") obtained a
judgment against the Company in the total amount of $233,557 in connection with
litigation styled Star Telecommunications, Inc. v. Global Telecommunications
Solutions, Inc., Case No. 01001478, in the Superior Court, State of California
County of Santa Barbara, Anacapa Division. Star brought an action against the
Company for failure to pay Star for
9
<PAGE>
international long-distance telecommunications services which Star provided to
the Company's operating subsidiaries under a Carrier Service Agreement entered
into between Star and the Company. The Company believes it has adequately
accrued for this liability.
On March 17, 1999, Gloria Diaz, Edward Ragar and Charles Ruggieri (all
former sales people for the Company's subsidiaries) commenced an action against
the Company in the Superior Court of New Jersey, Somerset County Law Division,
docket No. L-432-99 alleging that the Company owes them approximately $62,000 in
the aggregate for salary, commissions and reimbursement for business expenses.
The Company disputes these claims and is defending this matter. The Company
believes it has adequately accrued for this liability.
On December 3, 1999, MTS Communications, Inc. ("MTS") commenced an
action against the Company in the United States District for the District of New
Jersey. MTS claims that the Company owes it $368,697, together with interest, in
connection with operations of the Company's Canadian subsidiary. The Company
disputes MTS' claims and is defending this matter. The Company believes it has
adequately accrued for this liability.
The Company also is involved in litigation incidental to its business.
Such litigation can be expensive and time consuming to prosecute and defend. The
Company believes that these pending litigation matters, in the aggregate, could
have a material adverse effect on its operating results and financial condition
if resolved against the Company.
(9) Subsequent Event
In April 2000, the Company borrowed $125,000 from Mr. Shelly Finkel,
chairman and a principal shareholder of the Company at an interest rate of 8%
per annum. Subject to the negotiation of a definitive agreement, including
provisions regarding repayment and security for the loan, the Company borrowed
the money on a demand basis.
(10) New Accounting Pronouncements
In March 1999, the Financial Accounting Standards Board issued an
exposure draft, Accounting for Certain Transactions Involving Stock
Compensation. This exposure draft addresses the application of Accounting
Standards Board No. 25 to stock-based compensation granted to independent
contractors and independent members of an entity's board of directors, as well
as the accounting for option repricing and modification to the terms of a stock
option or award. The Company intends to review this exposure draft to determine
its impact on the Company's financial position and results of operations.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
When used in this filing and in future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases and in oral
statements made with the approval of an authorized executive officer of the
Company, the words or phrases "management believes," "the Company believes,"
"will likely result," "management expects" or "the Company expects," "will
continue," "is anticipated," "estimated" or similar expressions (including
confirmations by an authorized executive officer of the Company of any such
expressions made by a third party with respect to the Company) are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Readers are cautioned not to place
undue reliance on any such forward-looking statements, each of which speak only
as of the date made. Such statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. The Company
has no obligation to publicly release the results of any revisions which may be
made to any forward-looking statements to reflect anticipated or unanticipated
events or circumstances occurring after the date of such statements.
Results of Operations
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
Continuing Operations
The Company has no sales or cost of sales to report for the three
months ended March 31, 2000 and 1999 because of the discontinuance of the
Company's phone card business and because the results of operations of the
Company's investment in Enticent are reported on the equity method.
General and administrative expenses consist mainly of salaries and
professional fees. Salary expense during the three months ended March 31, 2000
declined from that which was reported in the similar period of 1999 as a result
of the decline in the number of employees. Salary expense in the three months
ended March 31, 2000 was further reduced as a result of the Debtors' reimbursing
the Company for service performed by the Company's employees on their behalf.
Such reimbursement will cease as the Debtors' operations wind-down. Professional
fees during the year 2000 period also declined from that reported in 1999 as a
result of a lower level of activity.
Equity in net loss from affiliate for the three months ended March 31,
2000 reflects the Company's share of the net loss of Enticent for that period.
Enticent began operations effectively in late 1999.
The per share loss from continuing operations decline in the three
months ended March 31, 2000 from that reported in the prior year as a result of
the aforementioned decline in general and administrative expenses.
Discontinued Operations
The loss from discontinued operations for the three months ended March
31, 2000 declined slightly from that reported in the similar period in the prior
year as a result of a decline in activity. The gain on disposal of discontinued
operations results from the sale of the Debtors' fixed assets to J D Services
effective March 31, 2000.
11
<PAGE>
Liquidity and Capital Resources
The Company has incurred significant losses and negative earnings
before interest, tax and depreciation and amortization during 1997, 1998 and
1999. As a result of the Company's long history of losses in the prepaid phone
card business, coupled with an increasingly competitive environment, the Company
elected to exit the prepaid phone card business. To accomplish this, the Debtors
filed voluntary petitions with the Court for the District of Delaware under
Chapter 11 of the Bankruptcy Code on October 28, 1999. The Debtors have sold
their fixed assets and intend to liquidate the remaining assets of the phone
card operations with the proceeds of such sale and liquidation to be distributed
to the Debtors' creditors pursuant to a liquidating plan of reorganization
At March 31, 2000, the Company, excluding the assets and liabilities
relating to the Debtors, had cash of $58,000 and a working capital deficit of
$4.7 million. At March 31, 2000 substantially all the Company's approximately
$4.8 million in current liabilities relate to indebtedness incurred in
connection with the discontinued phone card business. Because of contractual
obligations, these liabilities are the obligations of the Company rather than
the Debtors, and are due to less than 10 creditors. The Company is currently
negotiating with those parties in an effort to settle the amounts due at less
than the amount recorded on the balance sheet. In April 2000, the Company
borrowed $125,000 from Mr. Shelly Finkel, chairman and a principal shareholder
of the Company at an interest rate of 8% per annum. Subject to the negotiation
of a definitive agreement, including provisions regarding repayment and security
for the loan, the Company borrowed the money on a demand basis.
The Company's ability to continue in operation and execute its new
business plan is subject to various factors including, but not limited to,
resolving its aforementioned outstanding liabilities, and raising additional
capital. Management of the Company cannot presently predict the outcome of these
matters and there can be no assurance that the Company will be successful in any
of these endeavors or that Mr. Finkel will provide additional financing to the
Company.
The Company's financial statements have been prepared on a going
concern basis which contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. However, absent
the Company's ability to execute its plans to reduce its outstanding liabilities
and raise additional capital, the Company may be unable to continue as a going
concern, which could significantly impact the liquidation or settlement value of
its assets and liabilities.
At December 31, 1999, the Company had net operating loss carryforwards
("NOLs") exceeding $38.9 million available to offset future taxable income.
Under Section 382 of the Internal Revenue Code of 1986, as amended, utilization
of prior NOLs is limited after an ownership change, as defined in this section,
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. The Company is subject to limitations on the use of its NOLs as
provided pursuant to Section 382. Accordingly, there can be no assurance that a
significant amount of existing NOLs will be utilized by the Company.
12
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(c) Recent Sales of Unregistered Securities
During the quarter ended March 31, 2000 the Company made the following
sales of unregistered securities.
<TABLE>
<CAPTION>
If Option, Warrant
Consideration Received and Exemption or Convertible
Description of Underwriting or from Security, Terms of
Other Discounts to Market Price Registration Exercise or
Date of Sale Title of Security Number Sold Afforded to Purchasers Claimed Conversion
------------ ----------------- ----------- ---------------------- ------- ------------------
<S> <C> <C> <C> <C>
3/9/00 Common Stock 769,750 Conversion of notes payable to 4(2)
related party
3/10/00 Common Stock 10,000 In lieu of cash for litigation 4(2)
settlement
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Current Reports on Form 8-K
Current Report on Form 8-K, dated January 31, 2000, filed with the SEC
on March 6, 2000, relating to sale of assets by certain subsidiaries operating
under voluntary protection under chapter 11 of title 11 of the United States
Code in the United States Bankruptcy Court for the District of Delaware.
13
<PAGE>
SIGNATURES
In accordance with requirements of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: May 12, 2000
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
By: /s/ Lee R. Montellaro
--------------------------------------
Lee R. Montellaro, Vice President and
Principal Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 57,926
<SECURITIES> 0
<RECEIVABLES> 0
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154,976
0
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<NET-INCOME> (365,504)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
