August 21, 2003..Letter to Shareholders,
August 21, 2003
To Our Valued Shareholders,
Personally, I hope this finds you and your families well in this very unique time in our history. Much has and is taking place on the national and international scene. Personal security and guaranties we once took for granted are now viewed in a different light.
I will address several important issues and ones that have been of concern by virtue of e-mail and phone contacts to our staff and me. Of course, we are concerned with any and everything connected with the company but we cannot keep you aware of the daily activities, as we need to run your company.
Even though we moved several of our key staff members to Miami earlier in the year, as well as my own family, we have had little time to enjoy the environment as it has taken our combined resources, time and energies to build the company.
We will endeavor to more communicative in the future about the status and activities of GlobeTel Communications Corp (GTEL), and hopefully, in the near future, will have others assisting us in getting information to our shareholders and the public.
As you are aware, the SB-2 was withdrawn. The SB-2 was to register 60 million shares. One basic purpose was to have unrestricted stock for resale in order to pay off loans for $ 500,000. The note holders for the $ 500,000 have agreed to accept payment of the note for approximately 22 million shares of 144 stock being held by the escrow agent.
There were also other two notes, totaling $ 250,000, that were not part of the SB-2 and are collateralized by 30 million shares. These notes will be satisfied by the end of August.
The end result is that the notes will have been satisfied and 38 million shares will be returned to GlobeTel's treasury, the outstanding share balance will be reduced by 38 million shares, to be reflected in the third quarter filing. There will also be additional shares returned to treasury when the two notes totaling $ 250,000 are satisfied.
Now, a topic of concern by us all, IP World, Ltd. (IPW). We entered into the initial agreements, as we believed it was good for GTEL and it was done for several reasons. First, in redesigning ADGI/GTEL last year, we needed a partner in Asia and at the time IPW offered some distinct advantages. IPW was represented as being a couple of months away from listing, which our due diligence, at the time, confirmed. Both Charterhouse and I knew and had dealt with some of the key parties involved in IPW so we believed all was in order. The original agreement was constructed to be tri-lateral with IPW acquiring six (6) networks from Charterhouse and then Charterhouse contracting with GTEL to build the networks. IPW was to receive twenty-five percent (25%) of the profits of any traffic that GTEL sent over the networks, but GTEL had no obligation to send their traffic over the six networks.
Since GTEL was going to be a shareholder in IPW, we would have a definite incentive to run traffic over the networks to enhance our asset in IPW stock, this being mutually beneficial as to the potential growth for both companies.
Unexpectedly, a problem arose. Charterhouse elected to transfer its shares in IPW to another Charterhouse entity in Malaysia for reasons of operations and time zone considerations. Under their agreement with IPW, Charterhouse had this right but the Australian Securities and Investment Commission (ASIC), the SEC comparable of Australia, viewed this as a change of more than twenty percent (20%) of the company to another party. They ruled that this exchange must be approved by the shareholders of IPW. IPW, over the next several months, tried to show that the two companies were in fact the same, but could not convince the ASIC. During this period and time delay, other issues surfaced with IPW. GTEL’s agreement for compensation with Charterhouse to deliver the six networks was based on “cash and/or tradable securities”. This was not a stipulation in the IPW/Charterhouse agreement. This caused additional concerns with the ASIC as to how it viewed IPW’s control over the process and the networks.
GTEL and IPW then began to reconstruct the agreements to make the transaction a more direct relationship. This new agreement was to have been presented to the upcoming IPW shareholder’s Annual General Meeting (AGM) for their approval to replace the agreement of June of 2002. The delay in relisting of IPW also caused substantial creditor issues. IPW has been placed in liquidation proceedings by three of the creditors and a court appointed representative is to decide if indeed a majority of the creditors will agree on terms of settlement. IPW has over $ 1.5 million AUS in debt. Under Australian law, if terms cannot be reached with a majority of the creditors, then the company will sell all of its assets to satisfy the creditors. This can be a good thing for IPW and GTEL as IPW has the opportunity to settle with all of its creditors at one time and clean up its balance sheet. With this scenario, IPW will come out of liquidation and proceed to relist without distraction. The AGM is to be held around the end of September. After the AGM, there are approximately fourteen (14) days to clear other outstanding issues with the ASIC and Australian Stock Exchange (ASX) for relisting.
We have given notice to Charterhouse that all issues concerning IPW must be cleared by the third quarter filing for GTEL or we will call for a default on agreements with Charterhouse and seek restitution and payment under the agreements between GTEL and Charterhouse. We do not believe this will happen and still believe the end result will be good for GTEL. This is but one of many things that are in motion and either IPW becomes a solid asset or something to handle but we are moving on and rapidly on other fronts.
Another exciting venture for GTEL is the Magic Money Card, which allows credit/debit card transactions and prepaid calling. Since our announcement that the technology has finished the testing process and the product/service is ready for release, we have been literally bombarded with companies desiring access to the platform. Over the next 30 days, we will be announcing the agreements and contracts with companies and partners in Mexico, Poland, Australia, China and Brazil. With the money remittance feature and the prepaid calling combined into one card, this offers the ability and potential to dwarf our previous projections for a predominately telecom related business. The Magic Money Card is to be distributed in the United States beginning October 1, 2003.
As I’ve previously stated, we have embarked upon a three-year plan. We are within that plan even though we have had some unexpected delays and made some changes due to new opportunities.
I will reiterate our three-year plan:
YEAR ONE
Reconstruction of ADGI into GTEL - accomplished
Substantial increased revenues and profits - accomplished
From the best previous financial year of $ 3 million in revenues and a $ 1.2 million loss to $ 12 million in a revenue run rate for 2003 and with substantial profits.
Projections and goals set and accomplished
YEAR TWO
Our goals are not to compete in highly competitive markets but to use our knowledge, opportunities and international contacts to deploy telecom and especially non-telecom products in high tech methods in markets and situations with high potential margins. With deregulation, there are fertile grounds and markets to use technology to reach billions of people and to offer a range of services such as international calling, credit cards, debit cards, video services, data and last mile solutions. To deploy these services and products takes a substantial investment and funding. This is our current phase and with funding secured, we can accelerate our projects and launch new programs, which will propel the company to another level.
I’m sure you have seen many companies focus on termination traffic, have large and increasing revenues but with steadily shrinking margins and losses. We are not in the business of intentionally losing money.
Our goals for year two include securing adequate funding and setting the stage to move to another exchange.
YEAR THREE
This is the year “it all comes together” – the stock, company structure and market support. This is by no means to say that we will not pay attention to these issues before year three. We do not want to have a false start and want to make sure the company and its projects, ventures, management, partners, support personnel and needed consultants are all in place as we want to be assured of continuing an upward climb with the proper momentum for sustained investor confidence.
Our long term loyal shareholders and management have been very patient. Our management team has either received minimum and some even no cash compensation, as we all are into this endeavor for the equity appreciation. I believe we all realize that good things, especially in these times, do not happen quickly and without hard work, long hours and perseverance.
If you call the office and do not get an immediate response for me or others please realize we are very busy and working for our mutual good and best interests plus several of our management team have an increased travel schedule over the next few months.
Please feel free to forward any questions or comments to shareholder@globetel.net. Subject to the disclosure rules under which GTEL operates as a public entity, we will post questions and answers on the GTEL web site shareholder’s page. This is an elective service of the company and we will not answers questions that will violate disclosure rules or questions or that are in the realm of the company’s proprietary information.
We at GTEL are excited, encouraged and look forward to the coming days.
Thank You
Sincerely,
Timothy M. Huff
Chief Executive Officer
