AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 22, 2004
REGISTRATION NO. _________
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GLOBETEL COMMUNICATIONS CORP.
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(Exact name of registrant as specified in its charter)
Delaware 88-0292161
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9050 Pines Blvd. Suite 110
Pembroke Pines, FL 33024
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(Address of principal executive offices)
Stock Grants
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(Full title of the plan)
Timothy M. Huff
Chief Executive Officer
9050 Pines Blvd. Suite 110
Pembroke Pines, FL 33024
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(Name and address of agent for service)
(954) 241-0590
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(Telephone number, including area code, of agent for service)
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With copies of correspondence to:
Jonathan D. Leinwand, Esq.
12955 Biscayne Blvd., Suite 402
North Miami, FL 33181
(305) 981-4524
CALCULATION OF REGISTRATION FEE
============================= ===================== ====================== ===================== =====================
Proposed maximum Proposed
Title of securities Amount to be offering price maximum aggregate Amount of
to be registered registered per share (1) offering price (1) registration fee
.............................. ..................... ...................... ..................... .....................
Common stock,
$.00001 par value 18,166,190 $0.096 $1,743,954.24 $220.95
Common stock
$.00001 par value 6,500,000 $0.096 624,000.00 79.06
Total 24,666,190 $2,367,954.24 $300.01
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(1) Estimated pursuant to Rule 457(c) solely for the purposes of calculating
amount of the registration fee; computed, pursuant to Rule 457(c) and (h), upon
the basis of the average of the high and low prices of the Common Stock as
quoted on the Over the Counter Bulletin Board on July 20, 2004.
(2) Amount of the registration fee was calculated pursuant to Section 6(b) of
the Securities Act, and was determined by multiplying the aggregate offering
amount by 0.00012670.
REOFFER/RESALE PROSPECTUS
GLOBETEL COMMUNICATIONS CORP.
18,166,190 SHARES COMMON STOCK ($.00001 PAR VALUE)
This prospectus is being used in connection with the reoffer or resale
from time to time of up to 18,166,190 shares of our common stock by Timothy M.
Huff, Mitchell A. Siegel, Thomas Y. Jimenez, Vivian Manevich and John A.
Coniglio (named under the caption and hereafter referred to as "Selling
Shareholders"). The Selling Shareholders acquired the common stock as
compensation for employment and/or providing services to GlobeTel.
The Selling Shareholders may sell the common stock from time to time in
one or more transactions (which may involve one or more block transactions) in
sales occurring in the public market, in privately negotiated transactions
(including sales pursuant to pledges), or in a combination of such transactions.
Each sale may be made either at market prices prevailing at the time of such
sale, at negotiated prices or at fixed prices, which may be changed. Some or all
of the shares of common stock may be sold through brokers acting on behalf of
the Selling Shareholders or to dealers for resale by such dealers; and in
connection with such sales, such brokers or dealers may receive compensation in
the form of discounts, fees or commissions from the Selling Shareholders and/or
the purchasers of the shares for whom they may act as broker or agent (which
discounts, fees or commissions may be in excess of those customary in the type
of transaction involved). However, any shares of common stock covered by this
prospectus that qualify for sale pursuant to Rule 144 under the Securities Act
of 1933, as amended, may be sold under Rule 144 rather than pursuant to this
prospectus.
All expenses of registration incurred in connection with this offering
are being borne by us, but all brokerage commissions and other selling expenses
incurred by the Selling Shareholders will be borne by them. The shares of common
stock are being sold by the Selling Shareholders acting as principal for his own
account. We will not be entitled to any of the proceeds from such sales.
The Selling Shareholders and any dealer acting in connection with the
offering of any of the common stock or any broker executing selling orders on
behalf of the Selling Shareholders may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, as amended. In such event, any profit on
the sale of any or all of the shares by them and any discounts or concessions
received by any such brokers or dealers may be deemed to be underwriting
discounts and commissions under the Securities Act of 1933, as amended.
Our common stock is quoted on the OTC Electronic Bulletin Board under
the symbol "GTEL." On July 20, 2004, the closing price of the common stock as
reported on the OTC Electronic Bulletin Board was $0.096 per share.
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Investing in our common stock involves a high degree of risk. See "Risk
Factors" beginning on page 9 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is July 20, 2004
TABLE OF CONTENTS
Page
Available Information.........................................................4
Incorporation of Certain Documents by Reference...............................5
The Company...................................................................6
Risk Factors.................................................................10
Use of Proceeds..............................................................13
Selling Shareholders.........................................................13
Plan of Distribution.........................................................13
Legal Matters................................................................15
Information Required in the Registration Statement...........................16
Indemnification of Directors and Officers....................................16
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Our principal executive offices are located at 9050 Pines Blvd., Suite
110, Pembroke Pines, Florida 33024, and our telephone number is (954) 241-0590.
The information in our web site is not incorporated by reference into this
prospectus. Any reference in this prospectus to "we" or "our" is a reference to
GlobeTel.
The information in this prospectus is accurate only as of the date of
this prospectus, regardless of the time of delivery of this prospectus. You
should assume that the information appearing in this prospectus is accurate as
of the date on the front cover of the prospectus.
AVAILABLE INFORMATION
We are subject to the information and periodic reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In
accordance with the Exchange Act, we file reports, proxy statements, and other
information with the Securities and Exchange Commission (the "Commission"). This
prospectus does not contain all of the information set forth in the registration
statement to which it relates, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. Statements contained in this
prospectus concerning the provisions of any document are not necessarily
complete and, in each instance, reference is hereby made to the copy of the
document filed as an exhibit to the registration statement.
The registration statement described above, its exhibits, and the
reports, proxy statements, and other information filed by us with the Commission
can be inspected and copied at the public reference facilities maintained by the
Commission at the Commission's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may obtain information on the operation of the
Public Reference Room by calling the Commission at 1-800-SEC-0330. Copies of
such material may be obtained by mail at prescribed rates from the Commission's
Public Reference Section at its principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such material may also be accessed at the Commission's
home page or the Internet at http:/www.sec.gov. The Commission maintains a web
site, the address of which is http:/www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants, including
Innovative, that file electronically with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission pursuant to the
Exchange Act are incorporated herein by reference:
(1) The Registrant's Annual Report on Form l0-KSB for the fiscal year
ended December, 31, 2003.
(2) All other reports filed by the Registrant with the Commission pursuant
to Section 13(a) or Section 15(d) of the Exchange Act since the end of the
fiscal year covered by the Registrant's Annual Report referred to above; and
(3) The description of the Common Stock of the Registrant contained in the
Registrant's Registration Statement.
All documents filed by the Registrant with the Commission pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of this Registration Statement and prior to the filing of a post-effective
amendment hereto which indicates that all securities offered have been sold or
which deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference, or contained in this prospectus, shall be
deemed to be modified or superseded for purposes of this prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified shall not
be deemed to constitute a part of this prospectus except as so modified, and any
statement so superseded shall not be deemed to constitute a part of this
prospectus.
We will provide without charge to each person to whom a copy of this prospectus
is delivered, upon the written or oral request of such person, a copy of any or
all documents incorporated by reference into this prospectus except the exhibits
to such documents (unless such exhibits are specifically incorporated by
reference in such documents). Requests for such copies should be directed to
Investor Relations, 9050 Pines Blvd., Suite 110, Pembroke Pines, FL 33024.
THE COMPANY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN
THIS PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE.
GlobeTel Communications Corp. (GlobeTel), a Delaware corporation established in
July 2002, is engaged in the business of providing telecommunication services,
primarily involving Internet telephony using Voice over Internet Protocol
("VoIP") equipment.
GlobeTel is authorized to issue up to 1,500,000,000 shares of Common Stock, par
value $0.00001 per share, and 10,000,000 shares of Preferred Stock, par value
$0.001. The preferred stock is a so-called "blank check" preferred, meaning that
its terms such as dividends, liquidation and other preferences, are to be fixed
by our Board of Directors at the time of issuance.
We were previously a wholly-owned subsidiary of American Diversified Group, Inc.
(ADGI). At a special meeting of stockholders of ADGI held on July 24, 2002, the
stockholders of ADGI approved a plan (the "Plan") for the exchange of all
outstanding shares of ADGI for an equal number of shares of GlobeTel.
ADGI was incorporated under the laws of the State of Nevada as Terra West Homes,
Inc. on January 16, 1979. On March 15, 1995, its name was changed to "American
Diversified Group, Inc." During the period ended July 24, 2002, ADGI's business
activities included (i) sale of telecommunication services primarily involving
Internet telephony using VoIP through its Global Transmedia Communications
Corporation subsidiary ("Global"), and (ii) wide area network and local area
network services provided through its NCI Telecom, Inc. subsidiary ("NCI").
Global Transmedia was acquired by ADGI on February 19, 2000, and NCI was
acquired on June 29, 2000. During 2002, Global and NCI were merged with and into
ADGI, with ADGI as the surviving corporation.
When ADGI exchanged all of its outstanding shares of common stock for GlobeTel
common stock, ADGI became a wholly-owned subsidiary of GlobeTel and GlobeTel
began conducting the business formerly conducted by ADGI. Therefore, the
financial statements of ADGI in this report should be regarded as the financial
statements of GlobeTel and any references to ADGI throughout this report shall
be construed to apply to GlobeTel, if applicable.
Business of GlobeTel
Internet Telephony
Our business is the transmission of telephone calls using Internet facilities.
The transmission method is called VoIP, which stands for Voice over Internet
Protocol.
Internet Protocol or IP, is not ideal for voice transmission. The "protocol"
defines the means by which digital transmissions are broken into small pieces,
called "packets," and the packets are sent to, or received from, the desired
location. IP does not require that the packets all take the same path through
the Internet, or that they arrive in the same sequence in which they were sent.
When they do arrive, they are reassembled in correct order and presented to the
user. The users see this when browsing the Internet, as the "thermometer" on the
browser shows the packets arriving until all are present and the Web page is
presented. This process of reassembling out-of-order packets is called
"buffering."
Applying buffering to VoIP calls results in an unacceptable delay between the
time the "sender" speaks and the time the "receiver" hears what's been spoken.
It's been compared to two-way radio transmissions between the earth and the
moon, where radio waves take more than a second to reach their destination. The
earthbound speaker speaks for, say, 3 seconds, and 1.5 seconds after he stops,
his speech begins to be heard on the moon. The listener requires 3 seconds to
hear what was said, and makes his reply. 1.5 seconds later the reply begins to
be heard on earth. The speaker has waited 1.5 plus 3 plus 1.5 seconds, a total
of six seconds, to hear the reply. The delay while VoIP packets are reassembled
in correct order produces exactly the same sort of delay.
The VoIP solution to this problem is simple in theory but hard to put into
practice. The solution is simply to have the transmitted sequence of packets all
follow the same path through the Internet so that they arrive in the same
sequence in which they were transmitted. This eliminates the need for buffering
and allows VoIP telephone conversations to take place just as they do on wired
telephones.
The difficulty is that, without special arrangements, the public Internet cannot
be used in a manner that avoids buffering. IP was designed for data, not voice
transmissions. Data transmissions are not seriously impacted by buffering, as
you notice when you view a Web page. Sometimes it snaps right up, other times
there are waits of a few seconds. How long it takes depends on the volume of
data traffic over the multiple paths that the different IP packets take in their
trip from sender to receiver. If one path is congested, IP quickly routes some
packets via another, less congested path. The resulting buffering time is not a
serious inconvenience for data, but is a real problem for voice transmissions.
Networks
To provide our services without buffering delays, we arrange with licensed
communications carriers in each desired country to place electronic equipment,
called a "hub," on the carrier's premises. The hub is connected to the regular
telephone network in that country. We maintain similar hubs in New York City,
Miami and Los Angeles in the United States. The hubs are connected by one of two
kinds of network, either of which allows VoIP packets to be received in the same
order they were transmitted, avoiding any buffering.
The first method, used when we first establish service to a new country and
traffic volume is relatively low, is to create a "virtual" network connection
between the two hubs. Virtual networks have been described as "tunnels" through
the Internet. These "tunnels" create "reserved" Internet bandwidth that is used
only by the parties at the ends of the "tunnel," so there is no congestion
caused by other Internet users sending and receiving traffic through the
"tunnel."
A virtual network is limited as to the amount of traffic it can handle. When the
limit begins to be approached, we make arrangements with one of several major
Internet service providers who maintain a physical connection between the United
States and the desired country, in the form of a leased high-speed line. Leased
lines have much greater traffic-carrying capacity than virtual networks. We
connect our hubs to the leased line at both ends and are immediately able to
handle a greater volume of calls than the virtual network allows. At present we
have virtual networks serving callers in Venezuela, the United Kingdom,
Australia, China, Philippines and Malaysia and physical networks serving
customers in Hong Kong, Brazil and Mexico. Within each country served, depending
on traffic volume within the country, we may establish subsidiary hubs in other
major cities, fed from the principal hub.
Enhanced Services Platform
Our Enhanced Services Platform, or ESP, is a proprietary software package that
runs on our hubs and provides a group of enhanced messaging features to users of
our networks. These services include:
o Call waiting, call forwarding, conference calling, voice mail;
o Voice to e-mail. This feature permits customers to dial a local number
and have e-mail messages in his or her e-mail inbox read aloud by the
ESP, over the phone. Customers may also dictate a reply over the phone,
which the ESP will record and transmit to the e-mail sender as a voice
attachment to a reply message.
o "Follow me" service. This feature allows customers to "program" the ESP
to have calls forwarded to another location. o Fax service. This
feature allows customers to send and receive faxes from their phones
over our facilities.
o Calling card services. These allow customers to use pre-paid calling
cards purchased from a Web site or from a local vendor to place calls
over our facilities. After obtaining a calling card and getting a
personal identification number (PIN), customers dial their local access
number and enter their PIN to place calls.
A number of the features provided by the ESP mirror services that are available
to persons using regular telephone lines, but that are not generally available
for VoIP calls.
International Customers -- Purchase and Resale of Telephony Minutes
Because calls to other countries must terminate at the called residential or
business telephone number, which can be reached only through the facilities of
an authorized local telephone carrier, we enter into an agreement with an
established international telephone carrier as our "partner" in each of the
countries we serve, usually the same carrier that hosts our hub in that country.
Under these agreements, we purchase a bulk "package" of minutes that we are
entitled to use for calls between the United States and the countries in
question. We then resell these minutes at a profit to individual and business
customers. Most of our customers either prepay for these minutes or post letters
of credit with our bank securing their transaction, by means of prepaid calling
cards which are issued by the local carrier, who collects the revenue and
divides it with us. The revenue retained by the carrier pays for our bulk
purchase of minutes.
Stored Value Cards
In late 2003, we began offering a new international telecommunications and
financial services program which we call the Magic Money Card Program
("Program"). The Magic Money Card is a true stored value debit card offering
prepaid long distance and international calling services along with a host of
non-telephony services in each country that it is offered. We developed the
Magic Money Card as a stored value product to sell into specific ethnic
communities in the United States which connects them with their families in
their home countries. We provide them with such stored value services as
inexpensive prepaid calling services, money remittance services, electronic
banking services and a full complement of debit card services that are offered
anywhere the Maestro and Cirrus logos are found, which covers over 20 million
merchants and 1 million ATMs around the world.
At the moment, our programs are geared towards the ethnic communities of Latin
Americans and Asians living in the U.S. and tying them to their home countries.
One of our key goals is to tap into the multi-billion dollar money remittance
market while providing all of the other financial and non-financial services not
commonly available to these ethnic groups and not found in competitors'
programs.
The Magic Money Card services are available to our cardholders in all of the
countries that are registered on our network. We are able to issue Magic Money
Cards to each cardholder in their respective country and cardholders are able to
link services and features with other cardholders. Additionally, with our
telephone networks and international carrier agreements, we are able to offer
them access to our calling network through each local carrier participating in
the Program.
To connect these overseas network "spokes" to the main "hub" of the Program in
the United States, we enter into relationships with local banks to act as a
depository for the cardholder's funds in the U.S. and provide us with a bank
identification number (BIN) with MasterCard to issue domestic Magic Money Cards
to be registered on our network ("BIN Bank Program"). The BIN Bank Program
proposal is fee based whereby the bank will act as a depository for Magic Money
Card cardholder's funds, receiving the benefits of these deposits while
receiving a monthly fee from us for each active Magic Money Card cardholder in
the U.S. and, independently, the bank will receive a portion of the fees
collected by MasterCard for each service rendered to Magic Money Card
cardholders. There are no administrative services required or expenses incurred
by the bank nor are there any financial risks as we and our in-country partners
will be providing all of the MasterCard processing services. We, along with our
in-country partners, will be providing customer service to the Magic Money Card
cardholders.
For example, one of our major market is Mexico. We have a carrier services
agreement and are providing prepaid calling services to one of the licensed
Mexican telephone companies. Our program is able to connect Mexicans working in
the U.S. with their families in Mexico providing an inexpensive way for families
to stay in touch and for Mexican workers in this country to send money home to
their families. We have developed the same business relationships in Venezuela,
Brazil and Colombia. In Asia, we are forming relationships with banks and
carriers in the Philippines, Hong Kong, Australia, and the U.K.
Super Hubs(TM)
Our strategic plan is to install a worldwide VoIP network, which will consist of
regional centers, which we refer to as VoIP International Super Hubs(TM), or
simply Super Hubs(TM), strategically located around the world. Each Super
Hub(TM) controls network activity regionally, for example in South America or in
East Asia, and is connected directly to a United States point of presence (PoP).
We have consolidated our operations to focus on the Super Hub(TM) and our
enhanced services platform to market to maturing foreign markets, utilizing VoIP
technology. Further, we have limited our activities in some markets to focus on
opportunities with greater margins. VoIP technology continues to be the most
cost effective and efficient alternative to traditional circuit switching
technology.
Each Super Hub(TM) will be interconnected and equipped with our enhanced
services platform to provide one-stop shopping for quality voice communications,
e-mail, voicemail, faxing, etc. The Super Hub(TM), with the enhanced services
platform, makes the network unique in its design. It will not be built on the
conventional, hub-and-spoke connection but will instead follow a high
connectivity, multi-route design only available by using VoIP.
In April 2004 we completed the purchase of certain assets of Sanswire
Technologies and formed a new subsidiary, Sanswire Networks LLC.
Sanswire is developing a National Wireless Broadband Network utilizing
high-altitude airships called Stratellites that will be used to provide wireless
voice, video, and data services. A Stratellite is similar to a satellite, but is
stationed in the stratosphere rather than in orbit. At an altitude of only 13
miles, each Stratellite will have clear line-of-site to an entire major
metropolitan area and should allow subscribers to easily communicate in "both
directions" using readily available wireless devices. Each Stratellite will be
powered by a series of solar powered hybrid electric motors and other
regenerative fuel cell technologies.
In addition to Sanswire's National Wireless Broadband Network, proposed
telecommunications uses include cellular, 3G/4G mobile, MMDS, paging, fixed
wireless telephony, HDTV and others.
We strongly believe that we will be able to use the Stratellites as the most
efficient and cost-effective means of interconnecting our Super Hubs(TM).
However, the technology for the Stratellites is new and we do not know if all of
this technology can and will be developed for commercial use.
Competitive Business Conditions
The telecommunications industry is highly competitive, rapidly evolving and
subject to constant technological change and to intense marketing by different
providers of functionally similar services. Since there are few, if any,
substantial barriers to entry, except in those markets that have not been
subject to governmental deregulation, we expect that new competitors are likely
to enter our markets. Most, if not all, of our competitors are significantly
larger and have substantially greater market presence and longer operating
history as well as greater financial, technical, operational, marketing,
personnel and other resources than we do. Our use of VoIP technology and
proprietary enhanced services platform enables us to provide customers with
competitive pricing for their telecommunications needs. Nevertheless, there can
be no assurance that we will be able to successfully compete with major carriers
including other VoIP telephony providers and traditional phone companies, in
present and prospective markets. These markets include Mexico, Brazil,
Venezuela, Colombia, Australia, the Philippines Hong Kong and Malaysia.
GlobeTel's business strategy is to provide competitive pricing to small to
mid-sized businesses and individuals to increase our customer base and we are
pursuing large multi-national corporations which operate in a number of our
markets. We are dependent upon local independent affiliates or associates
partners in each market for sales and marketing, customer service and technical
support to terminate and originate our IP telephony services. This marketing
strategy should minimize our dependency on any single market and/or group of
customers and lessen our costs and expedite our entry into markets. There can be
no assurance that we will be able to successfully compete in our present and
prospective markets.
Sources and Availability of Hardware and Software
All equipment used by GlobeTel is provided by major suppliers and is readily
available. Software to operate the network is commercially available from
software suppliers and equipment suppliers, and GlobeTel has developed in-house
proprietary software for network applications and new telecommunications
products. We are not dependent upon any supplier of hardware or software. We use
equipment from major telecommunication equipment manufacturers such as Cisco,
Motorola and Newbridge Networks, among others.
Regulatory Matters
Carriers seeking to provide international telecommunication services are
required by Section 214 of the Telecommunications Act to obtain authorization
from the Federal Communications Commission to provide those services. We have
applied for and obtained the required authorization.
Our operations in foreign countries must comply with applicable local laws in
each country we serve. The communications carrier with which we "partner" in
each country is licensed to handle international call traffic, and takes
responsibility for all local law compliance. For that reason we do not believe
that compliance with foreign laws will affect our operations or require us to
incur any significant expense.
Effect of Existing or Probable Governmental Regulations
In February 1997, the United States and approximately seventy (70) other
countries of the World Trade Organization (WTO) signed an agreement committing
to open their telecommunications markets to competition and foreign ownership
beginning in January 1998. These countries account for approximately 90% of
world telecommunications traffic. The WTO agreement provides us and all
companies in our industry with significant opportunities to compete in markets
where access was previously either denied or extremely limited. However, the
right to offer telecommunications services is subject to governmental
regulations and therefore our ability to establish ourselves in prospective
markets is subject to the actions of the telecommunications authorities in each
country. In the event that new regulations are adopted that limit the ability of
companies such as ourselves to offer VoIP telephony services and other services,
we could be materially adversely affected.
Risk Factors
An investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below and the other information in this
prospectus and any other filings we may make with the United States Securities
and Exchange Commission in the future before investing in our common stock. If
any of the following risks occur, our business, operating results and financial
condition could be seriously harmed. The trading price of our common stock could
decline due to any of these risks, and you may lose all or part of your
investment. An investment in our common stock may involve additional risks and
uncertainties not described below.
We Face Intense Competition And May Be Unable To Compete Successfully With Our
Competitors.
The telecommunications industry is highly competitive, rapidly evolving and
subject to constant technological change and to intense marketing by different
providers of functionally similar services. There are many companies in the
United States and in Canada engaged in the sale of telecommunication services.
Since there are few, if any, substantial barriers to entry, except in those
markets that have not been subject to governmental deregulation, we expect that
new competitors are likely to enter our markets. Most, if not all, of our
competitors are significantly larger and have substantially greater market
presence and longer operating history as well as greater financial, research and
development, manufacturing, technical, operational, marketing, personnel and
other resources than us.
Our use of VOIP technology should enable us to provide customers with
competitive pricing for their telecommunications needs. Nevertheless, there can
be no assurance that we will be able to successfully compete with major carriers
including other VOIP telephony providers and traditional phone companies, in
present and prospective markets. These markets include Venezuela, Mexico,
Brazil, the Caribbean, Malaysia and Australia. In particular, we do not know
what level of growth to expect in the telecommunications industry, and
particularly in those Voice over Internet Protocol markets in which GlobeTel
operated..
Our business strategy is to provide competitive pricing from small to mid-sized
businesses and individuals to increase our customer base and pursuing large
multi-national corporations which operate in a number of our markets. We are
dependent upon local independent affiliates or partners in each market for sales
and marketing, customer service and technical support to terminate and originate
our IP telephony services. This marketing strategy should minimize our
dependency on any single market and/or group of customers and lessen our costs
and expedite our entry into markets. There can be no assurance that we will be
able to successfully compete in our present and prospective markets.
Our competition also includes large telecommunications equipment manufacturers
as well as small independent value added resellers/integrators in each market,
which includes every major city in the United States. All of the large
telecommunications equipment manufacturers that compete with us are
significantly larger, have substantially greater market presence and longer
operating history as well as greater financial, technical, operational,
marketing, personnel and other resources than we do.
If We are Unable to Collect Receivables from Our Two Largest Customers, Our
Assets, Revenues and Cash Flow will be Adversely Affected.
The vast majority of our revenues and assets are dependent upon two of our
customers, IP World, Ltd. and Global VoIP. While we believe that our receivables
from both IP World, Ltd. and Global VoIP are collectible, the inability to
collect these receivables, should it happen, would materially adversely affect
our assets, revenues and cash flow in the future. The value of one particular
asset, 51,000,000 shares of IP World stock we have a right to receive, is
subject to fluctuation as the quoted price changes. We believe that those shares
will shortly be listed on the Australian Stock Exchange, but we cannot predict
when that will occur nor can we predict the price at which those shares will
trade if so listed.
Issuance of Additional Shares Will Have a Dilutive Effect on Holdings of
Existing Stockholders.
We presently have no commitments, understandings or agreements requiring the
issuance of additional shares of Common Stock or any shares of Preferred Stock
other than pursuant to this prospectus, nor do we presently contemplate issuing
any. We could, however, issue some or all of our authorized but unissued shares,
and in some cases we could do that without stockholder approval, diluting the
holdings of existing stockholders. Existing shareholders will experience
significant dilution from our sale of shares upon the conversion of the
convertible debentures to stock and under the Equity Line of Credit, if drawn
upon. Also, issuance of additional shares could under some circumstances make
more difficult, or frustrate, a hostile takeover of GlobeTel.
We Depend On Our Intellectual Property, And If We Are Unable To Protect Our
Intellectual Property, We May Be Unable To Compete And Our Business May Fail.
Our products rely on our proprietary technology, and we expect that future
technological advancements made by us will be critical to sustain market
acceptance of our products. Therefore, we believe that the protection of our
intellectual property rights is, and will continue to be, important to the
success of our business. Consequently, our ability to compete effectively will
depend, in part, on our ability to protect our proprietary technology, system
designs and manufacturing processes. Unauthorized parties may attempt to copy or
otherwise obtain and use our products or technology. Monitoring unauthorized use
of our intellectual property is difficult, and we cannot be certain that the
steps we may take will prevent unauthorized use of our technology. In addition,
the measures we undertake may not be sufficient to adequately protect our
proprietary technology and may not preclude competitors from independently
developing products with functionality or features similar to those of our
product.
We have obtained an authority as an international telecommunications carrier
under Section 214 of the Communications Act by the Federal Communications
Commission. Our practice has been to enter into relationships with established
licensed carriers in each market, as opposed to becoming a licensed carrier
ourselves.
Our Future Plans Could Be Harmed If We Are Unable To Attract Or Retain Key
Personnel.
If we develop a prototype that we believe is marketable, we will require a
significant increase in the number of employees. Our future success, therefore,
will depend, in part, on attracting and retaining additional qualified
management and technical personnel. We do not know whether we will be successful
in hiring or retaining qualified personnel. Our inability to hire qualified
personnel on a timely basis, or the departure of key employees, could harm our
expansion and commercialization plans.
We have at present 15 full-time employees, including our executive officers and
two consultants. We do not believe that we will have difficulty in hiring and
retaining qualified individuals in the field of Internet telephony, although the
market for skilled technical personnel is highly competitive.
We Are Dependent On Third Party Suppliers For The Development And Supply Of Key
Components For Our Products. If Those Suppliers Are Unable To Provide Sufficient
Components, Our Business Will Suffer.
Although all equipment used by us is provided by major suppliers and is readily
available, software to operate the network is commercially available from
software suppliers and equipment suppliers, and we have the technical expertise
and ability to develop in-house software as needed for network applications and
new telecommunications products, a current or future supplier's failure to
develop and supply components to us, or the quantity needed, will harm our
ability to manufacture our product. In addition, to the extent the processes
that our suppliers use to manufacture components are proprietary, we may be
unable to obtain comparable components from alternative suppliers. We use
equipment from all major telecommunication equipment manufacturers such as
Cisco, Motorola and Newbridge Networks, among others.
The Market Price of Our Equity Securities May Fluctuate.
The market price of our common stock may fluctuate significantly in response to
numerous factors, some of which are beyond our control, including the following:
o actual or anticipated fluctuations in our operating results;
o changes in market valuations of other technology companies,
particularly those that sell products used in telecommunication
services;
o announcements by us or our competitors of significant technical
innovations, acquisitions, strategic partnerships, joint
ventures or capital commitments;
o introduction of technologies or product enhancements that reduce the
need for VoIP systems;
o the loss of one or more key suppliers; and
o departures of key personnel.
Our Stock Price May Become Volatile Due To A Number Of Factors, Subjecting Us To
the Possibility of Litigation That May Be Costly And Drain Our Resources.
Our stock price may be volatile due to numerous factors, including those listed
above. In addition, the stock market has recently experienced extreme volatility
that often has been unrelated to the performance of particular companies. These
market fluctuations may cause our stock price to fall regardless of our
performance. In the past, companies that have experienced volatility in the
market price of their stock have been the subject of securities class action
litigation. Such litigation often results in substantial costs and a diversion
of management's attention and resources and, should we become involved in such
litigation, could harm our business, prospects, and results of operations or
financial condition.
Existing or Probable Governmental Regulations May Adversely Affect Our Business
In February 1997, the United States and approximately 70 other countries of the
World Trade Organization ("WTO") signed an agreement committing to open their
telecommunications markets to competition and foreign ownership beginning in
January 1998. These countries account for approximately 90% of world
telecommunications traffic. The WTO agreement provides us and all companies in
our industry with significant opportunities to compete in markets where access
was previously either denied or extremely limited. However, the right to offer
telecommunications services is subject to governmental regulations and therefore
our ability to establish ourselves in prospective markets is subject to the
actions of the telecommunications authorities in each country. In the event that
new regulations are adopted that limit the ability of companies such as us to
offer VOIP telephony services and other services, we could be materially
adversely affected.
We May be Subject To The "Penny Stock" Rules Which May Negatively Affect Your
Ability To Sell Our Securities Or The Price You Could Receive.
If we are subject to penny stock rules, your ability to sell our securities or
the price you receive may be adversely affected. The Securities and Exchange
Commission has adopted rules that regulate broker-dealer practices in connection
with transactions in "penny stocks." Penny stocks generally are equity
securities with a price of less than $5.00 per share (other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
system, provided that the system which provides current price and volume
information with respect to transactions in such securities). The penny stock
rules require broker-dealers to deliver, prior to any transaction in a penny
stock, certain information to their customers and to comply with other
requirements which may have the effect of reducing the level of trading activity
in a penny stock and make it more difficult to sell such stock.
USE OF PROCEEDS
This prospectus relates to shares of common stock being offered and
sold for the account of the Selling Shareholders. We will not receive any
proceeds from the sale of the common stock but will pay all expenses related to
the registration of the shares.
SELLING SHAREHOLDERS
The Selling Shareholders whose shares are covered by this prospectus
are our Chief Executive Officer, and Chief Financial Officer and a consultant.
The following table shows the name of the Selling Shareholders and the position
he has held with us during the past three years, the number of shares of our
common stock that he beneficially owned as of July 20, 2004, the number of
shares of common stock covered by this prospectus, and the number of shares of
common stock the Selling Shareholders will hold if he sells all of the shares
offered by this prospectus.
------------------------- -------------------------- ---------------------- ------------------- ----------------------
Beneficial Ownership Beneficial Ownership
Selling Shareholders Position with the Company Before Offering Shares Offered After Offering
------------------------- -------------------------- ---------------------- ------------------- ----------------------
------------------------- -------------------------- ---------------------- ------------------- ----------------------
------------------------- -------------------------- ---------------------- ------------------- ----------------------
------------------------- -------------------------- ---------------------- ------------------- ----------------------
Timothy M. Huff Chief Executive Officer 26,744,467 7,732,000 19,012,467
------------------------- -------------------------- ---------------------- ------------------- ----------------------
------------------------- -------------------------- ---------------------- ------------------- ----------------------
Mitchell A. Siegel Chief Operating Officer 12,777,800 2,003,106 10,774,694
------------------------- -------------------------- ---------------------- ------------------- ----------------------
------------------------- -------------------------- ---------------------- ------------------- ----------------------
Thomas Y. Jimenez Chief Financial Officer 9,507,634 1,243,857 8,263,777
------------------------- -------------------------- ---------------------- ------------------- ----------------------
------------------------- -------------------------- ---------------------- ------------------- ----------------------
Vivian Manevich Controller 8,479,466 5,728,894 2,754,466
------------------------- -------------------------- ---------------------- ------------------- ----------------------
------------------------- -------------------------- ---------------------- ------------------- ----------------------
John A . Coniglio Consultant 1,458,333 1,458,333 -
------------------------- -------------------------- ---------------------- ------------------- ----------------------
PLAN OF DISTRIBUTION
The Selling Shareholders may, from time to time, sell any or all of the shares
being offered under this prospectus on OTC Bulletin Board or in private
transactions. The Selling Shareholders and its successors, including permitted
transferees, pledgees or donees or their successors, may sell the shares
directly to purchasers or through underwriters, broker-dealers or agents, who
may receive compensation in the form of discounts, concessions or commissions
from the Selling Shareholders or the purchasers.
The shares covered by this prospectus to be sold from time to time by the
Selling Shareholders may be sold in one or more transactions at fixed prices, at
prevailing market prices at the time of sale, at prices related to the
prevailing market prices, at varying prices determined at the time of sale, or
at negotiated prices. These sales may be affected in one or more of the
following transactions:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the applicable
exchange;
o privately negotiated transactions;
o short sales, which are contracts for the sale of shares of stock that
the seller does not own, or certificates for which are not within his
control, so as to be available for delivery at the time when, under
applicable rules, delivery must be made;
o transactions to cover short sales;
o broker-dealers may agree with the selling security holder to sell a
specified number of shares at a stipulated price per share;
o a combination of any of these methods of sale; or
o any other method permitted by applicable law.
In effecting sales, brokers or dealers engaged by the Selling Shareholders may
arrange for other brokers or dealers to participate. Brokers or dealers will
receive commissions or discounts from the Selling Shareholders in amounts to be
negotiated immediately prior
to the sale. These brokers or dealers and any other participating brokers or
dealers may be deemed to be "underwriters" within the meaning of the Securities
Act 1933 in connection with these sales. In addition, any securities covered by
this Prospectus that qualify for sale pursuant to Rule 144 may be sold under
Rule 144 rather than pursuant to this Prospectus.
CAPITALIZATION AND INDEBTEDNESS
The following table sets forth our capitalization as of June 30, 2004. Our
capitalization is presented:
o on an actual basis;
o on a pro forma basis to reflect the private sale of 18,166,190 common
shares of GlobeTel
As at June 30, 2004 Actual Pro Forma
Debt:
Current liabilities $ 4,960,344 $ 4,960,344
Total Debt $ 4,960,344 $ 4,960,344
Shareholders' equity:
Total shareholders' equity $ 3,550,861 $ 3,550,861
Total capitalization $ 8,511,205 $ 8,511,205
DESCRIPTION OF SECURITIES
General
We have authorized capital stock of 1.51 billion shares, of which 1.5 billion
shares are designated as common stock, $0.00001 par value and 10 million shares
are designated as preferred stock, $0.001 par value. The Preferred Stock is a
so-called "blank check" preferred, meaning that its terms such as dividends,
liquidation and other preferences, are to be fixed by our Board of Directors at
the time of issuance. As of the date of this prospectus, we have 773,261,419
shares of common stock issued and approximately 22,000 shareholders.
Common Stock
All shares are fully paid and non-assessable. All shares are equal to each
other with respect to voting, liquidation, and dividend rights. Special
shareholder meetings may be called by the Board of Directors, the Chairman of
the Board, the President or any Vice-President. Holders of shares are entitled
to one vote at any shareholder's meeting for each share they own as of the
record date set by the board of directors. Holders of shares are entitled to
receive such dividends as may be declared by the board of directors out of funds
legally available therefore, and upon liquidation are entitled to participate in
a distribution of assets available for such distribution to shareholders. There
are no conversion, preemptive, redemption or other subscription rights or
privileges with respect to any share, except for registration rights granted to
a certain number of shareholders. Reference is made to our certificate of
incorporation and bylaws as well as to the applicable statutes of the State of
Delaware for a more complete description of the rights and liabilities of
holders of shares. It should be noted that our bylaws may be amended by the
board of directors without notice to the shareholders. Our shares do not have
cumulative voting rights, which mean that the holders of more than fifty percent
(50%) of the shares voting for election of directors may elect all the directors
if they choose to do so. In such event, the holders of the remaining shares
aggregating less than fifty percent (50%) will not be able to elect directors.
Holders of our common stock have no pre-emptive rights, no conversion rights and
there are no redemption provisions applicable to our common stock.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. We
currently intend to retain future earnings, if any, to finance the expansion of
our business. As a result, we do not anticipate paying any cash dividends in the
foreseeable future. Our certificate of incorporation contains no provisions as
to dividends and distributions.
MARKET FOR REGISTRANT'S COMMON EQUITY
Our shares of common stock are quoted on the Over-the-Counter Bulletin Board
(OTCBB) quotation system under the symbol GTEL. As of July 20, 2004, there are
approximately 22 market makers in our common shares.
The following information sets forth the high and low bid price of our common
stock during fiscal 2003 and 2002 and was obtained from the National Quotation
Bureau. The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.
High Low
CALENDAR 2002
Quarter Ended March 31, $.0690 $.0185
Quarter Ended June 30, $.0530 $.0250
Quarter Ended September 30, $.0510 $.0250
Quarter Ended December 31, $.0500 $.0295
CALENDAR 2003
Quarter Ended March 31, $.0440 $.0200
Quarter Ended June 30, $.0290 $.0151
Quarter Ended September 30, $.0400 $.0190
Quarter Ended December 31, $.1310 $.0250
CALENDAR 2004
Quarter Ended March 31, $.1960 $.0500
Quarter Ended June 30 $.1300 $.0800
Legal Matters
The validity of the issuance of common shares which are offered in this
prospectus will be passed upon by Jonathan D. Leinwand, P.A.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The documents listed below are incorporated by reference in this Registration
Statement.
o Our latest annual report on Form 10-K filed pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") for the fiscal year ended December 31, 2003.
o All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the annual
report incorporated by reference herein pursuant to (a) above.
All documents filed by the Registrant pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date hereof and prior to the filing of a
post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference herein and to be a part hereof from the date of
filing of such documents.
Item 4. Description of Securities
Not Applicable.
Item 5. Interests of Named Experts and Counsel
None.
Item 6. Indemnification of Directors and Officers
Article NINTH of the Registrant's Certificate of Incorporation, provides:
The Registrant shall, to the fullest extent legally permissible under the
provisions of the General Corporation Law of State of Delaware, as the same may
be amended and supplemented, indemnify and hold harmless any and all persons
whom it shall power to indemnify under said provisions from and against all
liabilities (including expenses) imposed upon or reasonably incurred by him or
her in connection with any action, suit or other proceeding in which he or she
may be involved or with which he or she may be threatened, or other matters
referred to in or covered by said provisions both as to action in his or her
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director or
officer of the Registrant. Such indemnification provided shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any By-law, Agreement or Resolution adopted by the shareholders entitled to vote
thereon after notice.
Article EIGHTH of the Registrant's Certificate of Incorporation, provides:
No director of the Registrant shall be personally liable to the Registrant or
its stockholders for monetary damages for breach of fiduciary duty as a
director; provided, however, that nothing in this Article EIGHTH shall eliminate
or limit the liability of any director (i) for breach of the director's duty of
loyalty to the Registrant or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or knowing violation of law,
(iii) under Section 174 of the General Corporation Law of the State of Delaware,
or (iv) for any transaction from which the director derived an improper personal
benefit. Neither the amendment nor repeal of this Article EIGHTH, nor the
adoption of any provision of the Certificate of Incorporation inconsistent with
this Article EIGHTH, shall eliminate or reduce the effect of this Article EIGHTH
in respect of any matter occurring, or any cause of action, suit or claim that,
but for this Article EIGHTH, would accrue or arise, prior to such amendment,
repeal or adoption of an inconsistent provision.
Item 7. Exemption from Registration Claimed
For the shares being offered pursuant to the Reoffer Prospectus, the Registrant
claims an exemption pursuant to Section 4(2) of the Securities Act of 1933 as
amended.
Item 8. Exhibits
Exhibits
Number Document Description
5.1 Opinion of Jonathan D. Leinwand, P.A.
23.1 Consent of Consent of Dohan and Company, CPA's, P.A.
23.2 Consent of Jonathan D. Leinwand, P.A.
(contained in its opinion filed as Exhibit 5.1 hereto)
Item 9. Undertakings
(a) Rule 415 Offering.
GlobeTel hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(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 this 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 this 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) and 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 this Registration Statement or any
material change to such information in this Registration Statement;
provided, however, that the undertakings set forth in paragraphs (a)(1)(i) and
(a)(1)(ii) above do not apply if this 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 by us pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in this Registration statement.
(2) That, for the purpose of determining any liability under 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 as that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) Filings Incorporating Subsequent Exchange Act Documents by Reference.
GlobeTel hereby undertakes that, for the purposes of determining any liability
under the Securities Act of 1933, each filing of our annual report pursuant to
Section 13(a) or Section 15(b) 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.
(c) Indemnification for Liabilities.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of GlobeTel
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by GlobeTel of expense incurred or paid
by a director, officer or controlling person 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, we will, unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of an appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, GlobeTel
Communications Corp. certifies that it has reasonable grounds to believe that it
meets all the requirements for filing on Form S-8 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Pembroke Pines, Florida, on July 20, 2004.
GlobeTel Communications Corp.
By: /s/ Timothy M. Huff
----------------------------------
Timothy M. Huff
Chief Executive Officer/Director
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/ Przemyslaw L. Kostro
------------------------------------
Przemyslaw L. Kostro Chairman of the Board July 20, 2004
/s/ Timothy M. Huff Chief Executive Officer July 20, 2004
----------------------------- and Director
Timothy M. Huff
/s/ Thomas Y Jimenez Chief Financial Officer July 20, 2004
-----------------------------
Thomas Y. Jimenez
/s/ Jerrold R. Hinton
---------------------------------
Jerrold R. Hinton Director July 20, 2004
/s/ Mitchell A. Siegel
---------------------------------
Mitchell A. Siegel Director July 20, 2004
/s/ Leigh A. Coleman
-------------------------------
Leigh A. Coleman Director July 20, 2004
Exhibit Index
Exhibit Number Description
5.1 Opinion of Jonathan D. Leinwand, P.A.
23.1 Consent of Consent of Dohan and Company, CPA's, P.A.
23.2 Consent of Jonathan D. Leinwand, P.A. (contained in its opinion filed
as Exhibit 5.1 hereto)