May 20, 2002
GLOBAL TELEPHONE COMMUNICATION INC /NV/ (GTCI.OB)
Quarterly Report (SEC form 10QSB)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
This report contains forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on management's beliefs and assumptions and current expectations, estimates and projections. Statements that are not historical facts are forward-looking statements. The words "anticipate," "believe," "could," "estimate," "expect," "project," "intend" and similar words are forward-looking statements. These statements are subject to certain risks, uncertainties and assumptions and related factors that could cause actual results to differ materially from those projected. Although we believe that these expectations, estimates and projections are reasonable, we can give no assurance that they will prove to be correct, and readers are cautioned not to place undue reliance on these forward-looking statements.
Results of Operations
During the period from January 1, 2002 to March 31, 2002 the Company was involved in business development activities. The Company is currently anticipating the closing of the merger with Sinobull Group and is completing its due diligence activities.
The assets of Sinobull include:
Financial Telecom Ltd (FTL), an 18-year old provider of financial data and information to banks and brokerage houses, located in Hong Kong. FTL is also a majority shareholder of Fintel Wireless Ltd, a financial paging network and wireless data operator; Hopeful Internet Technologies Ltd, owner of Sinobull Information Company (formerly known as Guo Mao) a 5-year old financial data and information provider to banks and brokerage houses, located in Shanghai, China; Tiandi Hulian Technologies Ltd, owner of the most popular financial portal in China, WWW.SINOBULL.COM; HC Financial TV Channel Ltd, a Shanghai-based TV production company with plan to launch a Financial TV channel in 2002.
Under the terms of the Letter of Intent, in exchange for all the issued and outstanding stock of Sinobull, we will issue to Sinobull's shareholders a number of shares of common stock constituting 76.32% of the total issued and outstanding capital stock of Global after the completion of the transaction. Sinobull will become a fully-owned subsidiary of Global. The closing of the acquisition is subject to certain conditions, including satisfactory completion of due diligence and execution of a definitive agreement and shareholder approval.
Subsequent to September 30, 2001, we reached a settlement with two major creditors, JE Matthew and EFO Holdings, to convert their loans into common shares of GTCI and into long-term notes.
LIQUIDITY AND CAPITAL RESOURCES
General and administrative (G&A) expenses were $60,395 for the three months ended March 31, as compared to $249,294 for the same period in 2001. We had a decrease in G&A expenses because the company reduced its overhead costs. During the first quarter of 2002, legal and accounting expenses totaled approximately $1,368, payroll costs totaled approximately $2,634, office expenses totaled approximately $3,979, finance charges totaled approximately $171,467, investor relations costs totaled approximately $0, consulting costs totaled approximately $50,053, travel and entertainment costs totaled approximately $0, rent totaled approximately $2,361. During the three months ended March 31, 2002 we raised an aggregate of $10,000 through issuance of Private Placement shares as compared to $0 for the same period in 2001. We used the proceeds of such financing transactions for working capital needs. Our current ratio at March 31, 2002 was (242%) compared to (161%) at March 31, 2001.
Our operating activities provided cash of approximately $1,114 for the three months ended March 31, 2002, compared to ($281,217) for the same period in 2001. During the three months ended March 31, 2002, we had operating losses before depreciation and amortization of approximately $99,770, compared to $315,282 for the same period in 2001. As a result of the above activities and our decreased operating costs, we experienced an increase in cash of $1,114 for the three months ended March 31, 2002.
Because of management's broad discretion with respect to the acquisition of assets, properties or businesses, GTCI may be deemed to be a growth oriented company. Although management intends to apply substantially all of the proceeds that it may receive through the issuance of stock or debt to suitable acquisitions and development of acquired companies, such proceeds will not otherwise be designated for any more specific purpose. We can provide no assurance that any allocation of such proceeds will allow it to achieve its business objectives. The continuation and development of our business is dependent upon socio-political factors such as China's entry into the World Trade Organization and the liberalization of foreign investment in China's Internet sector. There are inherent risks involved in operating in China, a region where commercial rules and regulations are still uncertain. The potential opening of the information technology/Internet sector to foreign participation will also mean an increase in competition from multinational telecommunications companies in China. The degree to which these factors may affect the Company's future operations and financial results is uncertain and will depend on the success of the management team in executing its business plan and carrying out an effective implementation of the core operations of our joint ventures.