UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933
GLOBETEL COMMUNICATIONS CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 88-0292161
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
9050 PINES BLVD., SUITE 110
PEMBROKE PINES, FL 33024
(954) 241-0590
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Timothy M. Huff, Chief Executive Officer
9050 PINES BLVD., SUITE 110
PEMBROKE PINES, FL 33024
(954) 241-0590
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
From time to time after this registration statement becomes effective.
(Approximate date of commencement of proposed sale to the public)
with copy to:
Jonathan Leinwand, Esq.
Jonathan D. Leinwand, P.A.
9050 Pines Blvd., Suite 110
Pembroke Pines, FL 33024
(954) 252-4265
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box.
CALCULATION OF REGISTRATION FEE
========================================================================================================
--------------------------------------------------------------------------------------------------------
Proposed Proposed
Amount to Maximum Maximum Amount of
Title of Securities be Offering Price Aggregate Registration
to be Registered Registered(1) Per Share(2) Offering Price(2) Fee
Common Stock, .00001 par value 4,953,894 $3.35 $16,595,544.90 $1,775.72
Common Stock, .00001 par value 5,045,453 $2.50 $11,931,815.00 $ 1349.66
Total 9,999,347 $23,969,777.42 $3,125.38
========================================================================================================
(1) Pursuant to Rule 416 under the Securities Act this registration statement
also covers such additional shares as may hereafter be offered or issued to
prevent dilution resulting from stock splits, stock dividends, recapitalizations
or certain other capital adjustments.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act. The price per share and
aggregate offering price are based on the average of the high and low prices of
the registrant's common stock on November 22, 2005, as reported on the American
Stock Exchange.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(A), MAY DETERMINE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING SHAREHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
Subject To Completion, Dated November 28, 2005
Prospectus
9,999,347 SHARES
COMMON STOCK
----------------
Up to 9,999,347 shares (the "Shares") of common stock of GlobeTel
Communications Corp. are being offered by certain Investors (the "Investors')
who purchased common shares and may exercise warrants, as more fully described
below, into shares of Globetel common stock.
On August 31, 2005, the company entered into a subscription agreement with
Steelhead Investments LTD, Nite Capital LP, and SRG Capital LLC whereby these
investors are purchasing a total $4,500,000 in 5% convertible notes, with 3 year
Class A Warrants to purchase up to an additional $6,818,181 in common stock of
the Registrant. Additionally, the placement agent, Westor Capital Group, Inc.,
received 272,727 warrants at a purchase price of $2.50 per share.
Under the funding arrangement, the promissory notes are convertible into
common stock of the Company at $1.65 per share. Prior to any notice of
conversion the Company has the right to redeem the note at a premium for cash,
subject to a 5-day right to convert by the investor. The notes amortize at 12.5%
per quarter payable each quarter in cash or common shares.
The Investors will receive one Class A Warrant to purchase one share of
common stock for each share that the notes would be convertible into had they
been converted on the closing date (August 31, 2005) (a total of 2,727,273
shares). The per share exercise price of the Warrants is $2.50.
The terms of the subscription agreement with the Investors calls for the
registration of the shares underlying the convertible notes and warrants plus an
additional number of shares equal to and additional 75% of the underlying shares
to ensure that a sufficient number of shares are available for conversion under
all contingencies.
Additionally, we have entered into agreements with Daniyel Erdberg and ISG
Jet LLC, whereby we have agreed to register 133,334 and 81,168 shares
respectively.
We will not receive any of the proceeds of any sales of the stock
registered pursuant to this registration statement.
Our common stock is currently listed on the American Stock Exchange. Our
trading symbol is "GTE".
----------------
The purchase of the securities offered through this prospectus involves a
high degree of risk. See section entitled "Risk Factors" on pages 4-7.
No underwriter or person has been engaged to facilitate the sale of shares
of common stock in this offering. The Securities being registered on this
Registration Statement are to be offered on a delayed or continual basis
pursuant to Rule 415 under the Securities Act of 1933. The offering will
terminate for the Securities registered hereby 24 months after the accompanying
registration statement is declared effective by the Securities and Exchange
Commission.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY 1
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 2
RISK FACTORS 3
USE OF PROCEEDS 6
SELLING SHAREHOLDERS 6
PLAN OF DISTRIBUTION 8
LEGAL MATTERS 10
DESCRIPTION OF SECURITIES TO BE REGISTERED 10
EXPERTS 10
WHERE YOU CAN FIND MORE INFORMATION ABOUT THE COMPANY
AND THIS OFFERING 11
COMMISSIONS POSITION ON INDEMNIFICATION 12
This prospectus is part of a registration statement we filed with the
Securities and Exchange Commission, or the SEC. You should rely only on the
information we have provided or incorporated by reference in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. The selling shareholders are offering to sell, and
seeking offers to buy, shares of our common stock only in jurisdictions where it
is lawful to do so. You should assume that the information in this prospectus is
accurate only as of the date on the front of the document and that any
information we have incorporated by reference is accurate only as of the date of
the document incorporated by reference, regardless of the time of delivery of
this prospectus or any sale of our common stock.
The Date Of This Prospectus Is November 28, 2005
PROSPECTUS SUMMARY
All references in this prospectus to "we", "us", "ours" and "GlobeTel" are
intended to refer to GlobeTel Communications Corp.
This summary highlights selected information from this registration
statement. It does not contain all of the information that may be important to
you. You should carefully read the entire document and the other documents
referred to in this registration statement. Together, these documents will give
you all the information that investors should consider before investing in our
common stock.
Our Business
We are a telecommunications company with a broad and expanding range of both
current and contemplated services, product lines, and projects as described
below. Our core products and services are: telephony services that include
international wholesale carrier traffic, networks, enhanced services - prepaid
calling services and IP Telephony. Our non-telephony products and services
include: Stored Value Card Programs and outsourced stored value services for the
international banking community. Our Super Hub(TM) network is currently in
development and it is our intention to deploy the Stratellites as the most
efficient and cost effective means of interconnecting the Super Hub(TM) network
Corporate Information
We were incorporated under the laws of the State of Nevada as Terra West
Homes, Inc. on January 16, 1979. On March 15, 1995, our name was changed to
"American Diversified Group, Inc." ("ADGI"). During the year ended December 31,
2001, our 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 through its NCI Telecom, Inc. subsidiary ("NCI"). As
of July 1, 2002, Global and NCI were merged into the Company.
On July 24, 2002, the Company's stockholders approved a plan for the
exchange of all outstanding shares of ADGI for an equal number of shares of
GlobeTel Communications Corp. ("GlobeTel"). Prior to that approval, GlobeTel was
a wholly owned Delaware corporate subsidiary of ADGI. Subsequently, ADGI was
merged into GlobeTel, which is now conducting the business formerly conducted by
ADGI. Our principal executive offices are located at 9050 Pines Blvd., Suite
110, Pembroke Pines, Florida 33024, and our telephone number is (954) 241-0590.
OFFERING SUMMARY
Offering Price: Prevailing market price
Securities Being Offered: 9,999,347 shares of common stock. Including an
additional number of shares equal to 75% of the
underlying the investors' shares to ensure that a
sufficient number of shares are available for
conversion under all contingencies.
Securities Outstanding 81,429,401 shares of common stock were issued
Prior to the Offering: and outstanding as of the date of this prospectus.
Use of Proceeds: We will not receive any proceeds from the sale of
the shares offered herein. Any proceeds we receive
from the exercise of warrants, the underlying
shares for which being registered herein, will be
used for working capital purposes.
1
FORWARD-LOOKING STATEMENTS
This registration statement contains, and incorporates by reference, some
forward-looking statements about our financial condition, results of operation
and business. These are not historical facts. They include expressions about our
o confidence,
o strategies and expressions about earnings,
o new and existing programs and services,
o relationships,
o opportunities,
o technology, and
o market conditions.
You can identify these statements by looking for
o terms like "expect," believe" or "anticipate," or
o expressions of confidence like "strong" or "on-going," or
o similar expressions or statements that are variations of the above
terms.
These forward-looking statements involve certain risks and uncertainties.
Actual results may differ materially from those predicted in the forward-looking
statements. This can happen because of uncertainties such as
o whether the transactions described in this registration statement
can be completed as planned,
o whether our existing management will continue in place,
o future economic conditions, and
o other risks described in this registration statement and in our
annual, quarterly and current reports that are incorporated into it
by reference.
Stockholders are cautioned not to place too much reliance on
forward-looking statements. We do not have any obligation to update any
forward-looking statements at any time.
2
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 majority of our revenues and assets are dependent upon three major
customers. While we believe that our receivables from our major customers are
collectible, the inability to collect these receivables, should it happen, would
materially adversely affect our assets, revenues and cash flow in the future.
Issuance of Additional Shares Will Have a Dilutive Effect on Holdings of
Existing Stockholders.
We presently have commitments to issue additional common shares as per the terms
of the four series of preference shares outstanding. Additionally, we have a
contingent commitment to issue an additional 200 million shares pursuant to our
agreement with Sanswire Technologies. Additionally, we could 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.
Also, issuance of additional shares could under some circumstances make more
difficult, or frustrate, a hostile takeover of GlobeTel.
3
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 64 full-time employees, including our executive officers. 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.
Additionally, we are reliant on a small number of people with in-depth knowledge
of our Stratellite project. It is not known what type of delays would ensue
should key members of the Stratellite team become unavailable.
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.
4
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.
5
USE OF PROCEEDS
The proceeds from the sale of the common stock offered pursuant to this
prospectus are solely for the accounts of the selling shareholders. We will not
receive any proceeds from the sale of these shares of common stock.
SELLING SHAREHOLDERS
On August 31, 2005, the company entered into a subscription agreement with
Steelhead Investments Ltd., Nite Capital LP, and SRG Capital LLC whereby these
investors are purchasing a total $4,500,000 in 5% convertible notes, with 3 year
Class A Warrants to purchase up to an additional $6,818,181 in common stock of
the Registrant.
Under the funding arrangement, the promissory notes are convertible into
common stock of the Company at $1.65 per share. Prior to any notice of
conversion the Company has the right to redeem the note at a premium for cash,
subject to a 5-day right to convert by the investor. The notes amortize at 12.5%
per quarter payable each quarter in cash or common shares.
The Investors will receive one Class A Warrant to purchase one share of
common stock for each that the notes would be convertible into had they been
converted on the closing date (August 31, 2005) (a total of 2,727,273 shares).
The per share exercise price of the Warrants is $2.50.
The Registrant has entered into a Registration Rights Agreement with the
investors and is obligated to register the shares purchased by Investors and the
shares underlying the Investors' warrants.
Additionally, we have entered into agreements with Daniyel Erdberg and ISG
Jet LLC, whereby we have agreed to register 133,334 and 81,168 shares
respectively.
The following table sets forth the name of each selling shareholder, the
number of shares owned by each of the respective selling shareholders, the
number of shares that may be offered under this prospectus and the number of
shares of our common stock owned by the selling shareholders after this offering
is completed. None of the selling shareholders has, or within the past three
years has had, any position, office or other material relationship with us. The
number of shares in the column "Number of Shares Being Offered" represents all
of the shares that a selling shareholder may offer under this prospectus. The
selling shareholders may sell some, all or none of their shares. We are unable
to determine the exact amount of shares that actually will be sold. The shares
offered by this prospectus may be offered from time to time by the selling
shareholders. We currently have no agreements, arrangements or understandings
with the selling shareholders regarding the sale of any of the shares.
Beneficial ownership is calculated in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person, shares of common stock subject to options or
warrants held by that person that are currently exercisable or become
exercisable within 60 days following November 25, 2005, are deemed outstanding.
Unless otherwise indicated, the persons and entities named in the table have
sole voting and investment power with respect to all shares beneficially owned,
subject to community property laws where applicable.
6
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Name Shares of Percent Number of Number of Shares Percent
Common Stock Ownership of Shares Being Owned After Ownership
Owned Prior to Shares Owned Offered Offering of Shares
Offering Prior to Owned
Offering After
Offering
-------------------------------------------------------------------------------------------------------------
Nite Capital LLC
(2)(3) 782,775 * 606,060 176,715 *
-------------------------------------------------------------------------------------------------------------
Steelhead
Investments, Ltd.
(2)(3)(4) 4,484,974 5.5% 4,242,424 242,550 *
-------------------------------------------------------------------------------------------------------------
SRG Capital LLC
(2)(3) 782,775 * 606,060 176,715 *
-------------------------------------------------------------------------------------------------------------
Westor Capital
Group Inc. (2)(3) 342,273 * 272,727 69,546 *
-------------------------------------------------------------------------------------------------------------
Daniyel Erdberg 133,334 * 133,334 0 *
-------------------------------------------------------------------------------------------------------------
ISG Jet LLC 81,168 * 81,168 81,168 *
-------------------------------------------------------------------------------------------------------------
* Less than 1% of the total issued and outstanding.
(1) The number of shares to be sold is less than the number being
registered as we are registering an extra number of shares to cover
contingent obligations contained in the Securities Purchase
Agreement with the Investors.
(2) The table below sets forth the natural person with sole or shared
voting and investment power with respect to all shares beneficially
owned, by a corporate or other entity:
---------------------------------------------------------------------------------------------
Beneficial Owner Natural Person having sole/shared voting/investment control
---------------------------------------------------------------------------------------------
Nite Capital LLC Keith Goodman
---------------------------------------------------------------------------------------------
Steelhead Investments, Ltd. HBK Investments L.P. may be deemed to have sole voting
and sole dispositive power over the shares held by
Steelhead Investments Ltd. pursuant to an Investment
Management Agreement between HBK Investments L.P. and
Steelhead Investments Ltd. Additionally, the following
individuals may be deemed to have control over HBK
Investments L.P.: Kenneth M. Hirsh, Laurence H.
Lebowitz, William E. Rose, David C. Haley and Jamiel A.
Akhtar.
---------------------------------------------------------------------------------------------
SRG Capital LLC Edwin Mecabe and Tai May Lee, authorized agents for SRG
Capital, LLC, have joint voting and investment control
over the securities held by SRG Capital, LLC. Edwin
Mecabe and Tai May Lee disclaim beneficial ownership of
these securities
---------------------------------------------------------------------------------------------
Westor Capital Group Richard Bach
---------------------------------------------------------------------------------------------
ISG Jet LLC Steven King, a consultant to the Company has control
over ISG Jet LLC. The selling shareholder chart does not
include any other shares over which Mr. King has
investment control in any other capacity.
---------------------------------------------------------------------------------------------
(3) The number of shares of Common Stock that may be acquired by these Investors
upon conversion of the Notes (or otherwise in respect hereof) shall be limited
to the extent necessary to insure that, following such conversion (or other
issuance), the total number of shares of Common Stock then beneficially owned by
such Subscriber and its affiliates and any other persons whose beneficial
ownership of Common Stock would be aggregated with the Subscriber's for purposes
of Section 13(d) of the 1934 Act, does not exceed 4.999% of the total number of
issued and outstanding shares of Common Stock (including for such purpose the
shares of Common Stock issuable upon such conversion).
(4) Comprised of (i) 5% convertible note in principal amount of $3.5mm
convertible into Common Stock at $1.65 per share, (ii) Class B warrant to
acquire 242,550 shares of Common Stock exercisable at $1.65 per share, and (iii)
Class A warrant to acquire 2,121,212 shares of Common Stock exercisable at $2.50
per share.
7
PLAN OF DISTRIBUTION
The Selling Stockholders and any of their pledgees, donees, transferees,
assignees and successors-in-interest may, from time to time, sell any or all of
their shares of Common Stock on any stock exchange, market or trading facility
on which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The Selling Stockholders may use any one or more of
the following methods when selling shares:
* ordinary brokerage transactions and transactions in which the
broker-dealer solicits Investors;
* 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;
* purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
* an exchange distribution in accordance with the rules of the applicable
exchange;
* privately negotiated transactions;
* to cover short sales made after the date that this Registration Statement
is declared effective by the Commission;
* broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share;
* through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
* a combination of any such methods of sale; and
* any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
In connection with the sale of our common stock or interests therein, the
Selling Stockholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The Selling
Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
Upon the Company being notified in writing by a Selling Stockholder that
any material arrangement has been entered into with a broker-dealer for the sale
of Common Stock through a block trade, special offering, exchange distribution
or secondary distribution or a purchase by a broker or dealer, a supplement to
this prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of each such Selling Stockholder and of
the participating broker-dealer(s), (ii) the number of shares involved, (iii)
the price at which such the shares of Common Stock were sold, (iv)the
commissions paid or discounts or concessions allowed to such broker-dealer(s),
where applicable, (v) that such broker-dealer(s) did not conduct any
investigation to verify the information set out or incorporated by reference in
this prospectus, and (vi) other facts material to the transaction. In addition,
upon the Company being notified in writing by a Selling Stockholder that a donee
or pledge intends to sell shares of Common Stock, a supplement to this
prospectus will be filed if then required in accordance with applicable
securities law.
8
The Selling Stockholders also may transfer the shares of Common Stock in
other circumstances, in which case the transferees, pledgees or other successors
in interest will be the selling beneficial owners for purposes of this
prospectus.
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Discounts, concessions,
commissions and similar selling expenses, if any, that can be attributed to the
sale of Securities will be paid by the Selling Stockholder and/or the
purchasers. Each Selling Stockholder has represented and warranted to the
Company that it acquired the securities subject to this registration statement
in the ordinary course of such Selling Stockholder's business and, at the time
of its purchase of such securities such Selling Stockholder had no agreements or
understandings, directly or indirectly, with any person to distribute any such
securities.
There can be no assurance that any Selling Stockholder will sell any or
all of the shares of Common Stock registered pursuant to this Registration
Statement, of which this prospectus forms a part.
The Company has advised each Selling Stockholder that it may not use
shares registered on this Registration Statement to cover short sales of Common
Stock made prior to the date on which this Registration Statement shall have
been declared effective by the Commission. If a Selling Stockholder uses this
prospectus for any sale of the Common Stock, it will be subject to the
prospectus delivery requirements of the Securities Act. The Selling Stockholders
will be responsible to comply with the applicable provisions of the Securities
Act and Exchange Act, and the rules and regulations thereunder promulgated,
including, without limitation, Regulation M, as applicable to such Selling
Stockholders in connection with resales of their respective shares under this
Registration Statement.
The Company is required to pay all fees and expenses incident to the
registration of the shares, but the Company will not receive any proceeds from
the sale of the Common Stock. The Company and the Selling Stockholders have
agreed to indemnify each other against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Once sold under a Registration Statement, of which this prospectus forms a
part, the shares of Common Stock will be freely tradable in the hands of persons
other than the Company's affiliates."
9
Description of Securities to Registered
General
We have authorized capital stock of 150 million shares of common stock, $0.00001
par value. As of the date of this prospectus, we have 81,429,401 shares of
common stock issued and approximately 36,000 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.
LEGAL MATTERS
For the purpose of this offering, Jonathan D. Leinwand, P.A. is giving an
opinion of the validity of the common stock offered by this prospectus.
EXPERTS
The consolidated financial statements and management's assessment of the
effectiveness of internal control over financial reporting (which is included in
Management's Report on Internal Control over Financial Reporting) incorporated
in this prospectus by reference to the Annual Report on Form 10-KSB for the year
ended December 31, 2004 have been so incorporated in reliance on the report of
Dohan & Company, CPA's, P.A., an independent registered public accounting firm,
given on the authority of said firm as experts in auditing and accounting.
10
WHERE YOU CAN FIND MORE INFORMATION ABOUT THE COMPANY AND THIS OFFERING
You should rely only on the information provided or incorporated by
reference in this prospectus. We have authorized no one to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front of the document.
We are a reporting company and we file annual, quarterly and current
reports, proxy statements and other information with the SEC. We have filed with
the SEC a resale registration statement on Form S-3 under the Securities Act to
register the shares of common stock offered by this prospectus. However, this
prospectus does not contain all of the information contained in the registration
statement and the exhibits and schedules to the registration statement. For
further information with respect to us and the securities offered under this
prospectus, we refer you to the registration statement and the exhibits and
schedules filed as a part of the registration statement. You may read and copy
the registration statement, as well as our reports, proxy statements and other
information, at the SEC's public reference rooms at 100 F Street, NE Washington,
DC 20549. You can request copies of these documents by contacting the SEC and
paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for
further information about the operation of the public reference rooms. Our SEC
filings are also available at the SEC's website at www.sec.gov.
The SEC allows us to "incorporate by reference" the information contained
in documents that we file with them, which means that we can disclose important
information to you by referring to those documents. The information incorporated
by reference is considered to be part of this prospectus. Information in this
prospectus supersedes information incorporated by reference that we filed with
the SEC prior to the date of this prospectus, while information that we file
later with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below, any filings we will make
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934, as amended, after the date we filed the registration statement of
which this prospectus is a part and before the effective date of the
registration statement and any future filings we will make with the SEC under
those sections.
The following documents filed with the SEC are incorporated by reference
in this prospectus:
1. Our Annual Report on Form 10-KSB for the year ended December 31, 2004,
filed on March 31, 2005;
2. Our Form 8-K filed on February 2, 2005;
3. Our Form 8-K dated filed on February 15, 2005;
4. Our Definitive Information Statement, filed on May 23, 2005;
5. Our Quarterly Reports on Form 10-Q for the quarter ended March 31, 2005,
filed on May 16, 2005; for the quarter ended June 30, 2005 filed on August
12; and for the quarter ended September 30, filed on November 11, 2005;
6. Our Form 8-K dated filed on May 16, 2005;
7. Our Form 8-K filed on May 25, 2005; and
8. The description of our common stock set forth in our Registration
Statement on Form 8-A, filed with the SEC on May 23, 2005.
9. Our Form 8-K filed on September 1, 2005;
10. Our Form 8-K filed on September 16, 2005; and
11. Our Form 8-K filed on October 11, 2005
11
We will furnish without charge to you, on written or oral request, a copy
of any or all of the documents incorporated by reference, including exhibits to
these documents. You should direct any requests for documents to Globetel
Communications Corp., 9050 Pines Blvd., Suite 110, Pembroke Pines, FL 33024.
Indemnification of Officers and Directors and Disclosure of Commission Position
on Indemnification for Securities Act Liabilities.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the small business
issuer 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 Act and is,
therefore, unenforceable.
12
GLOBETEL COMMUNCIATIONS CORP.
9,999,347 Shares of Common Stock
PROSPECTUS
November __,2005
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated costs of this offering are as follows:
Securities and Exchange Commission registration fee $ 2,637.32
Transfer Agent Fees (estimate) $ 150.00
Accounting fees and expenses (estimate) $ 1,500.00
Legal fees and expenses $ 5,000.00
Printing (estimate) $ 1,000.00
----------
$10,287.32
==========
Item 15. Indemnification of Officers and Directors
The Company's Certificate of Incorporation includes certain provisions
permitted pursuant to the Delaware General Corporation Law ("DGCL") whereby
officers and directors of the Company shall be indemnified against certain
liabilities to the Company or its shareholders. The Certificate of Incorporation
also limits to the fullest extent permitted by the DGCL a director's liability
to the Company or its stockholders for monetary damages for breach of fiduciary
duty of care as a director, including gross negligence, except liability for (i)
breach of the director's duty of loyalty to the Company or its shareholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or knowing violation of the laws, (iii) under Section 174 of the DGCL (relating
to unlawful payments of dividends or unlawful stock repurchases or redemptions)
or (iv) any transaction from which the director derives an improper personal
benefit. This provision of the Company's Certificate of Incorporation has no
effect on the availability of equitable remedies, such as injunction or
rescission. The Company believes that these provisions will facilitate the
Company's ability to continue to attract and retain qualified individuals to
serve as directors and officers of the Company.
Limitations on Liability of Directors.
Under Section 145 of the Delaware General Corporation Law, a corporation
may indemnify a director, officer, employee or agent of the corporation (or a
person who is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise) against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by the person if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. In the case of an action brought by or in the right of
a corporation, the corporation may indemnify a director, officer, employee or
agent of the corporation (or a person who is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise) against
expenses (including attorneys' fees) actually and reasonably incurred by him if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, except that no indemnification
may be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent a court finds that, in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses as the
court shall deem proper.
We have adopted a provision which requires us to indemnify and hold
harmless any person involved in any action, suit or proceeding because that
person is or was a director or officer of ours. This provision does not,
however, require us to indemnify an officer or director in a proceeding they
initiate without the authorization of our directors.
Insurance for Directors and Officers.
Under Delaware law, a corporation may obtain insurance on behalf of its
directors and officers against liabilities incurred by them in those capacities.
We have adopted a provision that permits us to maintain insurance to protect us
and our directors and officers against expenses, liabilities and losses whether
or not we would have the power to indemnify these persons under Delaware law. We
have in place directors' and officers' liability and company reimbursement
liability insurance policy.
Item 16. Exhibits
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.1 Certificate of Incorporation of GlobeTel Communications Corp.
(Incorporated by reference to filing on Form 8-A filed May 23, 2005)
3.2 By-Laws of GlobeTel Communications Corp. (Incorporated by reference to
filing on Form 8-A filed May 23, 2005)
4.1 Subscription Agreement with STEELHEAD Investments LTD (incorporated by
reference to our Form 8-K filed on September 1, 2005)
4.2 Convertible Note STEELHEAD Investments LTD (incorporated by reference to
our Form 8-K filed on September 1, 2005)
4.3 Class A Warrant STEELHEAD Investments LTD (incorporated by reference to
our Form 8-K filed on September 1, 2005)
4.4 Subscription Agreement with Nite Capital LP (incorporated by reference to
our Form 8-K filed on September 1, 2005)
4.5 Convertible Note Nite Capital LP (incorporated by reference to our Form
8-K filed on September 1, 2005)
4.6 Class A Warrant Nite Capital LP (incorporated by reference to our Form 8-K
filed on September 1, 2005)
4.7 Subscription Agreement with SRG Capital LLC (incorporated by reference to
our Form 8-K filed on September 1, 2005)
4.8 Convertible Note SRG Capital LLC (incorporated by reference to our Form
8-K filed on September 1, 2005)
4.9 Class A Warrant SRG Capital LLC (incorporated by reference to our Form 8-K
filed on September 1, 2005)
5.1 Opinion of Jonathan D. Leinwand, P.A.
23.1 Consent of Dohan and Company, CPA's, P.A.
23.2 Consent of Jonathan D. Leinwand, P.A. (included in Exhibit 5.1)
Item 17. Undertakings
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
a. To include any propectus required by section 10(a)(3) of the Securities
Act of 1933;
b. To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) 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% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
c. To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration
statement; Provided, however, That paragraphs (a)1(i) and (a)(1)(ii) of
this section do not apply if the registration statement is on Form S-3,
Form S-8 or Form F-3, and the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Commission by the registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
d. That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
2. To remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Pembroke
Pines, State of Florida on November 28, 2005.
GLOBETEL COMMUNICATIONS CORP.
REGISTRANT
/S/ TIMOTHY M. HUFF
-------------------
By Timothy M. Huff, Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated:
/s/ Timothy M. Huff November 28, 2005
---------------------------------
Timothy M. Huff, Chief Executive
Officer and Director
/s/ Thomas Y. Jimenez November 28, 2005
---------------------------------
Thomas Y. Jimenez, Chief
Financial Officer, Principal
Accounting )fficer
/s/ Laina Greene November 28, 2005
---------------------------------
Laina Greene, Director
/s/ Christopher Meyer November 28, 2005
---------------------------------
Christopher Meyer, Director
Chairman of the Board
/s/ Mitchell A. Siegel November 28, 2005
---------------------------------
Mitchell A. Siegel, Director
/s/ Kyle McMahan November 28, 2005
---------------------------------
Kyle McMahan, Director