GUANGZHOU, China, Jan. 6 /PRNewswire-Asia/ -- Guangzhou Global Telecom Inc. (OTC Bulletin Board: GZGT), a mobile phone handset, pre-paid calling card distributor and provider of value-added mobile services in China, wishes to address all shareholders and stakeholders on significant business activities at the company. Further to this, an 8-K was issued on 3rd November to report an amendment to the outstanding debentures issued to Enable Growth Partners LP, Pierce Diversified Strategy Master Fund LLC, and Enable Opportunity Partners LP. The company wishes to explain its content and implications.
First, the company wants to address the market weakness and continued downward pressure on Guangzhou Global’s stock price despite favourable reports on its profitability and operation expansions. "The global financial crisis that is playing out currently has caused sales and profits of retailers worldwide to deteriorate and no particular sector will be spared. We are of course concerned with the fundamental market conditions caused by the crisis, but cannot control the weak sentiment in this environment. In a business age where most organizations are in transition, either retrenching or downsizing, we are in fact expanding all the time and will continue our investments in business strategies and projects. At the same time, the company is seeking new potential investors in our shares which we believe are undervalued," explained CEO Li Yankuan.
CFO Richard Yan added, "We have been profitable for the past six months and will keep on generating healthy profits for as long as the current management is active and around. The current market environment may also be an opportunity for the company to acquire valuable assets to build long-term shareholder value."
Business Updates
As detailed in the previous review on Q3 financials, the company reported, for the fifth consecutive quarter, increasing revenues which signal a growing market presence in China. Additionally, the management has been swift in countering rising operating overheads amid record inflation in China by inventing cost reduction programs company-wide, not only in subsidiaries within China, but also its Singapore, Macau and Hong Kong offices. In this present economic environment, the company will concentrate mainly on its operations in China as the strong domestic demand will offset the external demand shocks caused by the global financial turmoil occurring in the rest of the world. The Chinese government is expected to stimulate domestic demand with fiscal and monetary policies to partially compensate for the weak export market.
With the company’s successful wholesale sales distribution model in China, the management is looking to increase the existing capabilities of its wholesale distribution points in Guangzhou and Beijing. The current lack of credit in the economy has caused several small wholesale distributors to go under and this offers an excellent opportunity to acquire "distressed assets".
Form 8-K announcing amendments to convertible debt obligations
On the 3rd of November, due to adverse market conditions and a continued downward slide in the company’s share price, Guangzhou Global decided to re-negotiate repayment terms with the holders of the currently outstanding Debentures and Warrants. Pursuant to the amended agreement, the Company proposed to remove the monthly interest and principal payments of the Debentures and compensate the holders with an increase of the annual interest rate to 18%. Guangzhou Global Telecom is fundamentally a small emerging public company where generated profits and liquid assets are constantly reinvested into its operations. As such, after months of projection and meticulous planning, the company came to the conclusion that it will be most prudent and financially efficient to bring backwards all debt obligations. This will allow the operations to constantly embark on its expansion path and utilize any available resources to the fullest.
In addition, the conversion prices of the Debentures and Warrants have been revised to the lower of $0.015 or 80% of the lowest closing bid price for the 20 trading days prior to conversion. In addition, the Debenture holders granted the company the ability to redeem the Debentures at anytime without penalty and felt this could ultimately support and help the company in its growth.
Further to this, the 8-K also revealed that the company will hold a shareholder’s meeting on or before January 15, 2009 to increase the number of authorized shares of common stock of the Company to at least 1,000,000,000. This motion will enable the company to accomplish several objectives, them being:
1. As the company is undertaking its expansion plans in China to invest or acquire valuable assets and companies, this will provide adequate "currency value" and leverage with which to embark on discussions with potential takeover target companies. The company hopes to attract viable organizations in an effort to increase Guangzhou Global’s market capitalization.
2. Provide adequate common stock for the potential redemption and conversion of the Debentures and Warrants by the holders respectively.
3. With this enlarged share capital, the company hopes to provide adequate market liquidity to potential and existing shareholders and also to increase the market volume.
Although the enlarged authorized share capital will potentially be dilutive for existing shareholders, the company believes and assures shareholders that any dilution will be offset by the benefits from an expanding set of operations and also upon the achievements of the above objectives.
The management wants this motion passed to continue being able to execute its strategies and plans for future growth and profitability.
CEO Li Yankuan adds, "I wish to remind shareholders that Guangzhou Global Telecom officers, management and directors are considered affiliates of the company and are restricted in their ability to trade in the company’s stock. Therefore, we want to assure shareholders that we remain committed to the long-term growth of the company and call for all potential and existing shareholders to also share the same commitment. The current economic environment is full of uncertainty and doubt and I trust this statement has provided all shareholders and stakeholders with additional information regarding key business initiatives at Guangzhou Global and towards building a stronger Guangzhou Global with solid future growth and profitability. I look forward to your support as we advance ahead."
About Guangzhou Global Telecom
Guangzhou Global Telecom, Inc. is a national mobile phone handset and
pre-paid calling card distributor and provider of mobile handset value-added services. Maintaining cooperative relationships with China Telecom, China Mobile and China Unicom, the Company seeks to become the largest sales and distribution center of mobile phones, mobile phone parts and prepaid mobile phone cards in China. GTL plans to introduce new software and services through an expanded network of regional and neighborhood service centers, shops and virtual stores. For details, please visit our website at http://www.guangzhouglobaltelecom.com .
Safe Harbor Statement
Certain statements made in the press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology. Such statements typically involve risks and uncertainties and may include financial projections or information regarding our future plans, objectives or performance. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including the risks associated with the effect of changing economic conditions in The People’s Republic of China, variations in cash flow, reliance on collaborative retail partners and on new product development, variations in new product development, risks associated with rapid technological change, and the potential of introduced or undetected flaws and defects in products, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time.
For more information, please contact:
Glenn Yang
Email: glennyang@guangzhouglobaltelecom.com
Tel: +86-139-2224-7039 or +65-9847-4716
