Filed pursuant to Rule 424(b)(3)
File No. 333-41096
[GLOBAL TECHNOLOGIES, LTD. LOGO]
SECOND SUPPLEMENT DATED MAY 2, 2001 TO
PROSPECTUS DATED AUGUST 16, 2000
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PLEASE READ THIS SECOND SUPPLEMENT IN CONJUNCTION WITH THE PROSPECTUS DATED
AUGUST 16, 2000, WHICH WAS FILED AS PART OF OUR AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT ON FORM S-3 (REGISTRATION NO. 333-41096) FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ON AUGUST 15, 2000 AND DECLARED EFFECTIVE ON
AUGUST 16, 2000 (THE "ORIGINAL PROSPECTUS") AND SUPPLEMENTED BY THE FIRST
SUPPLEMENT TO THE ORIGINAL PROSPECTUS DATED SEPTEMBER 5, 2000 (THE "FIRST
SUPPLEMENT").
A copy of the Original Prospectus and the First Supplement are attached to this
Second Supplement.
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This Second Supplement (the "Second Supplement") modifies, supplements and
amends the Original Prospectus and the First Supplement with respect to the
offer and sale of shares of our Class A Common Stock by the selling stockholders
named in the Original Prospectus.
AN OVERVIEW OF OUR BUSINESS
Global Technologies, Ltd. is a technology incubator that invests in,
develops and manages emerging growth companies in the networking solutions,
interactive information and entertainment systems, e-commerce,
telecommunications and gaming industries.
We currently hold common stock and convertible preferred stock representing
approximately 70% of the outstanding common stock of The Network Connection,
Inc. on a fully converted basis. On March 24, 2001, The Network Connection filed
a voluntary petition for relief under Chapter 11 of Title 11 of the United
States Code with the United States Bankruptcy Court for the Eastern District of
Pennsylvania in Philadelphia. The Network Connection continues to maintain its
assets, operate its business and manage its affairs as a debtor-in-possession
pursuant to the provisions of the Bankruptcy Code. The Network Connection is
publicly traded on the Nasdaq SmallCap Market under the ticker symbol "TNCX,"
though trading has been halted as a result of the filing of The Network
Connection's bankruptcy petition. While trading is halted, the ticker symbol of
The Network Connection has been changed to "TNCXQ." The Network Connection has
developed broadband entertainment, information and e-commerce systems for the
"away-from-home" marketplace. The Network Connection recently reduced its
operations to focus its efforts on the operations of TNCi UK Ltd., a company
incorporated under the laws of England and Wales. TNCi UK's system
(ProjecTRAINbow(TM)) provides passenger trains with an information and
entertainment platform.
To permit TNCi UK to fund ongoing operations and avoid insolvency and
receivership, on March 9, 2001, we acquired 600 cumulative redeemable preferred
shares of TNCi UK. We have committed to pay $600,000 for the TNCi UK preferred
shares, $198,000 of which was paid to TNCi UK to date. The remainder of the
purchase price is evidenced by a 9% note payable through August 6, 2001. Prior
to this transaction, TNCi UK was a wholly owned subsidiary of the Network
Connection. The 600 TNCi UK preferred shares acquired by us represent 60% of the
outstanding voting equity of TNCi UK. The Network Connection holds the remaining
40% of the outstanding voting equity of TNCi UK through its ownership of
ordinary shares.
We also currently hold approximately 592,100 shares of common stock
representing approximately 2.8% of the outstanding common stock of US Wireless
Corporation based on the number of outstanding shares of US Wireless common
stock on February 5, 2001. US Wireless is publicly traded on the Nasdaq National
Market under the ticker symbol "USWC". US Wireless develops high-performance,
network-based location systems (known as the RadioCamera system) designed to
enable wireless carriers, the intelligent transportation systems and telematics
industry and others to provide value-added, location-based services and
applications, including: enhanced 911, live-navigation assistance, enhanced 411,
traffic data and asset and vehicle tracking.
We also own a lottery network, consisting of a central computer system and
approximately 2,200 terminals that connect to the central system via wireless
technology. We are currently evaluating alternative uses for the lottery
network, including contributing network assets and management expertise into
joint ventures established to provide lottery and related games in the United
Kingdom or selling the equipment comprising the lottery network. There is no
assurance that a transaction will be consummated or any lottery operations
commenced or that we will be successful in selling the equipment.
We also hold 1,499,900 shares of common stock of, representing an
approximately 14% equity interest in, Shop4Cash.com, Inc., a privately held,
cash-incentive, Internet shopping portal with a base of affiliated merchants. As
of March 30, 2001, Shop4Cash had been unable to obtain additional financing to
continue its operations. As a result, we wrote off our total investment of
$174,990.
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BANKRUPTCY FILING BY THE NETWORK CONNECTION
On March 24, 2001, The Network Connection filed a voluntary petition for
relief under Chapter 11 of Title 11 of the United States Code (the Bankruptcy
Code) with the United States Bankruptcy Court for the Eastern District of
Pennsylvania in Philadelphia. The Network Connection continues to maintain its
assets, operate its business and manage its affairs as a debtor-in-possession
pursuant to the provisions of the Bankruptcy Code.
On March 7, 2001, The Network Connection, of which we own approximately
70%, announced that it had re-evaluated certain aspects of its business and
would be focusing its efforts on the operations of TNCi UK which seeks to
provide information and entertainment platforms to long-haul passenger rail
operators and discontinuing its cruise ship and education and corporate training
operations and suspending its hotel operations. This decision was based on
management's determination that the passenger rail market is the business
opportunity with the greatest upside potential and on The Network Connection's
limited financial resources. Specifically, in connection with these actions, The
Network Connection:
* Wrote off all of the intangible assets on its balance sheet, which
consisted of goodwill and certain intellectual property, for a total
write off of approximately $5.8 million.
* Wrote down the value of certain of its fixed assets, consisting
primarily of installed interactive entertainment systems at hotel
properties, for a total write down of approximately $3.3 million.
* Wrote down the value of its investment in TNCi UK by approximately
$900,000 to reflect its 40% net equity interest therein, as described
below.
In response to (a) TNCi UK's English directors' letter of March 2, 2001
explaining their obligation to put TNCi UK into voluntary receivership by March
9, 2001 in the absence of a commitment for funding by that date and (b) our and
The Network Connection's inability to raise money for TNCi UK from outside
sources, we purchased 600 cumulative redeemable preferred shares of TNCi UK for
a commitment to fund $600,000 by August 6, 2001 ($198,000 of this commitment had
been funded to date). The preferred shares issued to us represent 60% of the
outstanding voting equity securities of TNCi UK. The Network Connection holds
the remaining 40% of the outstanding voting equity securities of TNCi UK.
We have determined that our investment in The Network Connection has no
value and we will be writing off our investment in The Network Connection, which
is carried on our books at approximately $10 million. This write off will result
in our no longer having to record approximately $2 million in net liabilities
(total assets minus total liabilities) attributable to The Network Connection on
our books. The bankruptcy filing will jeopardize our ability to recover any of
the $3.8 million we have outstanding to The Network Connection pursuant to our
revolving credit facility, $200,000 in inter-company advances to The Network
Connection, and $400,000 and $200,000 of interest and dividends receivable,
respectively, from The Network Connection. The write off described above and our
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inability to collect the sums owing to us from The Network Connection will
likely have a material adverse effect on our financial condition.
The Network Connection common stock was listed for trading on the Nasdaq
SmallCap Market under the symbol "TNCX", although trading is currently halted
and its ticker symbol is currently "TNCXQ". The Network Connection does not
currently satisfy certain continued listing standards of the Nasdaq SmallCap
Market. A listed company may be delisted if it fails to maintain minimum levels
of stockholders' equity, shares publicly held, bid price, number of stockholders
or aggregate market value, or if it violates other aspects of its listing
agreement. The current state of the company makes it extremely difficult for it
to regain compliance with the Nasdaq SmallCap Market continued listing standards
and raises a substantial likelihood that its common stock may be delisted. In
connection with The Network Connection's bankruptcy filing, trading in its
common stock was halted on March 26, 2001 by Nasdaq pending its receipt and
review of further information from The Network Connection regarding the
bankruptcy. On April 10, 2001, The Network Connection provided the information
requested to Nasdaq. To date, The Network Connection has not been notified by
Nasdaq of the status of its review. In addition, The Network Connection received
a letter dated December 22, 2000 from Nasdaq noting that it received a "going
concern" opinion from its independent auditors and stating concern that it may
not be able to sustain compliance with the continued listing requirements of The
Nasdaq SmallCap Stock Market. On January 11, 2001, The Network Connection
submitted to Nasdaq a letter and other materials as requested by Nasdaq in
response to this letter detailing its plan and timetable to address the specific
items which its independent auditors to issue the "going concern" opinion and
for obtaining the extensive funding needed to fund operations over the next 12
months. To date, The Network Connection has not received a response from Nasdaq
regarding its submission.
If The Network Connection common stock is delisted, public trading, if any,
would thereafter be conducted in the over-the-counter market in the so-called
"pink sheets," or on the NASD's "Electronic Bulletin Board." Public trading of
The Network Connection's common stock is currently halted on Nasdaq and we do
not know when, if ever, it will resume. As a result, it currently is, and if
delisted would continue to be , more difficult to dispose of, or even to obtain
quotations as to the price of, The Network Connection common stock and the
price, if any, offered for its common stock may be substantially reduced.
FOR MORE INFORMATION RELATING TO THE BANKRUPTCY PETITION FILING BY AND
OTHER RECENT EVENTS INVOLVING THE NETWORK CONNECTION, PLEASE REFER TO OUR
CURRENT REPORTS ON FORM 8-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
MARCH 8, 2001, MARCH 20, 2001, AND APRIL 5, 2001.
WE HAVE RECEIVED LETTERS FROM NASDAQ REGARDING OUR FAILURE TO
MEET MAINTENANCE STANDARDS.
We received a letter dated March 1, 2001 from Nasdaq stating that, based on
our Form 10-QSB filed for the period ended December 31, 2000, the staff of
Nasdaq determined that we no longer met the minimum $4,000,000 net tangible
assets continued listing requirement of The Nasdaq National Market. On March 23,
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2001, we submitted to Nasdaq a letter and other materials as requested by Nasdaq
in response to this letter detailing our plan and timetable to achieve and
sustain compliance with all Nasdaq National Market listing requirements. To
date, we have not received a response from Nasdaq regarding our submission.
We also received a letter dated April 5, 2001 from Nasdaq stating that our
Class A common stock had failed to maintain a minimum bid price of $1.00 over
the preceding 30 consecutive trading days and as a result was not in compliance
with the Nasdaq National Market maintenance standards. The letter states that if
at any time before July 5, 2001, the bid price of our Class A common stock is at
least $1.00 for a minimum of 10 consecutive trading days, Nasdaq staff will
determine if we comply with the maintenance standard. If we are unable to
demonstrate compliance with this maintenance standard on or before July 5, 2001,
our Class A common stock will be delisted, subject to our right to appeal to a
Nasdaq Listing Qualifications Panel. The letter notes that we may be delisted
before July 5, 2001 for failure to maintain compliance with any other listing
requirement for which we are currently on notice or which occurs in that period.
Our Class A common stock is listed for trading on the Nasdaq National
Market under the symbol "GTLL". A listed company may be delisted if it fails to
maintain minimum levels of stockholders' equity, shares publicly held, bid
price, number of stockholders or aggregate market value, or if it violates other
aspects of its listing agreement. We currently do not satisfy certain continued
listing standards. We are seeking additional capital and attempting to effect
other equity transactions to, among other things, increase our net tangible
assets. There can be no assurance that we will be able to raise this additional
capital, or if we are able to raise additional capital it will be on terms
satisfactory to us, or to effect other equity transactions currently under
consideration. If we fail to satisfy the criteria for continued listing, our
Class A common stock may be delisted.
If our Class A common stock is delisted and we do not then qualify for a
listing on a stock exchange or for quotation on the Nasdaq SmallCap Market,
public trading, if any, would thereafter be conducted in the over-the-counter
market in the so-called "pink sheets," or on the NASD's "Electronic Bulletin
Board." In this event, it may be more difficult to dispose of, or even to obtain
quotations as to the price of, our Class A common stock and the price, if any,
offered for our Class A common stock may be substantially reduced.
If our common stock is delisted from trading on the Nasdaq National Market
and we do not then qualify for a listing on a qualified stock exchange or for
quotation in the Nasdaq SmallCap Market, and the market price of our common
stock is less than $5.00 per share, subject to certain exceptions, trading in
our common stock would be subject to the requirements of Rule 15g-9 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Under this rule, broker/dealers who recommend such securities to persons other
than established customers and accredited investors (generally institutions or
high-net worth individuals) must make a special written suitability
determination for the purchaser and receive the purchaser's written agreement to
a transaction prior to sale. The requirements of Rule 15g-9, if applicable, may
affect the ability of broker/dealers to sell our securities and may also affect
the ability of purchasers in this offering to sell their shares in the secondary
market.
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The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 (the
"Penny Stock Rule") also requires additional disclosure in connection with any
trades involving a stock defined as penny stock (any non-Nasdaq equity security
that has a market price or exercise price of less than $5.00 per share, subject
to certain exceptions). Unless exempt, the rules require the delivery, prior to
any transaction involving a penny stock, of a disclosure schedule prepared by
the SEC explaining important concepts involving the penny stock market, the
nature of such market, terms used in such market, the broker/dealer's duties to
the customer, a toll-free telephone number for inquiries about the
broker/dealer's disciplinary history and the customer's rights and remedies in
case of fraud or abuse in the sale. Disclosure must also be made about
commissions payable to both the broker/dealer and the registered representative,
and current quotations for the securities. Finally, monthly statements must be
sent disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stocks.
FINANCIAL CONSULTING AGREEMENT
We have entered into a financial consulting agreement with Equilink Capital
Partners, LLC effective March 22, 2001, whereby we engaged Equilink to provide
financial consulting services to us for a period of two years following that
date. This financial consulting agreement provides that, in addition to the
financial consulting services to be performed by Equilink, Equilink and certain
of its affiliates shall purchase, in the aggregate, 1,700,000 shares of Class A
common stock. The financial consulting agreement provides that the parties agree
that the sum of the value of the services to be rendered thereunder and
aggregate purchase price paid for the shares issued pursuant to the financial
consulting agreement is equal to the greater of the book value or market value
of those shares on the date of issuance. We intend to file a registration
statement to register the shares of Class A common stock issued pursuant to the
Financial Consulting Agreement.
FINANCIAL ADVISORY AND CONSULTING AGREEMENT
We have entered into a financial advisory and consulting agreement as of
April l2, 2001 with Equilink and National Securities Corporation wherein
Equilink engages National as its advisor to aid Equilink in providing us with
consulting services under the financial consulting agreement with Equilink. The
term of the financial advisory and consulting agreement is until April 12, 2002.
In consideration for its services, we issued a warrant to National exercisable
for five years for 100,000 shares of Class A common stock for an exercise price
of $1.00 per share. We also agree to pay customary fees and compensation to
National if Equilink desires National to provide merger/acquisition advice
relating to us and we consummate a business combination during the term of the
financial advisory and consulting agreement. National may terminate the
financial advisory and consulting agreement upon 5 days notice upon certain
adverse changes to Equilink's or our business, misrepresentations by Equilink or
us as to our business or breaches by Equilink or us of the financial advisory
and consulting agreement. National may retain its warrant upon any such
termination and receive compensation for services rendered. We and Equilink
agree to indemnify National for any liabilities arising out of its engagement,
subject to certain exceptions. We intend to file a registration statement to
register the shares of Class A common stock issuable upon the exercise of the
warrant issued pursuant to the financial advisory and consulting agreement.
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PRIVATE EQUITY LINE OF CREDIT AGREEMENT
We have entered into a private equity line of credit agreement dated March
28, 2001 with Equilink Capital Partners, LLC. The private equity line of credit
agreement gives us certain rights in the two year investment period following
the effective date of a registration statement covering the shares issuable in
connection with the private equity line of credit and related warrants in
certain circumstances and on certain conditions to exercise a put right to
require Equilink to purchase shares of our Class A common stock and gives
Equilink the option, in the event we exercise our put right and under certain
conditions, to exercise a call right to require us to sell them additional
shares. The purchase price with respect to these shares is calculated with
respect to a discount to the then current market price. The investment period
terminates on the earlier of the date (i) 5,000,000 shares of our Class A common
stock are issued pursuant to our put rights under the private equity line of
credit agreement, subject to the 19.9% limitation discussed below, (ii) the
aggregate purchase price paid by Equilink to purchase shares pursuant to the
private equity line of credit agreement equals $25 million or (iii) the two year
investment period ends. In addition, warrants to purchase 400,000 shares of
Class A common stock, in the aggregate, were issued to Equilink and its
affiliate in connection with the private equity line of credit. These warrants
are exercisable over the next five years at a price of $1.00 per share, which
price may be adjusted from time to time under certain antidilution provisions.
We may not make any issuances of our Class A common stock in connection
with the private equity line of credit agreement and related warrants if that
issuance would result in the issuance of a number of shares in excess of 19.9%
of the number of shares of Class A common stock issued and outstanding on the
effective date of the private equity line of credit agreement unless we obtain
prior stockholder approval in accordance with Nasdaq rules.
Nasdaq has established certain rules regarding the issuance of "future
priced securities." These rules may apply to shares issued pursuant to the
private equity line of credit agreement we have entered into with Equilink
because the number of shares of our securities issuable pursuant to the private
equity line of credit agreement is based upon a future price of our securities
and may be less than the greater of book value or market value. Nasdaq's
concerns regarding these securities include the following:
Stockholders must approve significant issuances of listed securities at a
discount to market or book value. Nasdaq rules prohibit an issuer of listed
securities from issuing 20% or more of its outstanding capital stock at less
than the greater of book value or then current market value without obtaining
prior stockholder consent.
Nasdaq may terminate the listing of a security if necessary to prevent
fraudulent and manipulative acts and practices or to protect investors and the
public interest. With respect to future priced securities, Nasdaq has indicated
that it may delist a security if the returns with respect to the future priced
security become excessive compared to the returns being earned by public
investors in the issuer's securities.
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We did not obtain stockholder consent prior to entering into the private
equity line of credit agreement. We believe the private equity line of credit
agreement contains certain limitations on the number of shares of the Class A
common stock that may be issued under that agreement so that it does not violate
these Nasdaq rules.
We intend to file registration statements to register at least 5,400,000
shares of our Class A common stock issuable under the private equity line of
credit agreement and related warrants. Purchasers of Class A common stock could
experience substantial dilution of their investment as a result of purchases
under and other issuances relating to the private equity line of credit
agreement.
As previously described, we intend to file registration statements to
register the 1,700,000 shares of Class A common stock issued pursuant to the
financial consulting agreement, 100,000 shares of Class A common stock issuable
upon the exercise of the warrant issued pursuant to the financial advisory and
consulting agreement and at least 5,400,000 shares of Class A common stock
issuable pursuant to the private equity line of credit agreement and related
warrants. As of April 30, 2001, 1,598,178 shares of Class A common stock were
reserved for issuance upon conversion of our Series D preferred stock (described
below) and 225,925 shares of Class A common stock were reserved for issuance
upon the exercise of warrants held by Advantage and Koch described below. As of
April 30, 2001, approximately 1,957,175 shares of Class A common stock were
reserved for issuance upon exercise of our outstanding warrants and options
other than those previously described. At April 30, 2001, there were 13,388,012
shares of Class A common stock outstanding. Of these outstanding shares,
9,270,680 were freely tradable without restriction under the Securities Act
unless held by affiliates.
GLOBAL ENTERS INTO SETTLEMENT AGREEMENT WITH ADVANTAGE AND KOCH
We recently entered into a settlement agreement with Advantage Fund II Ltd.
and Koch Investment Group, Ltd. Between February 2000 and October 2000,
Advantage and Koch made investments in Global totaling, in the aggregate, $21
million.
SERIES C 5% CONVERTIBLE STOCK TRANSACTIONS
The first investment by Advantage and Koch in Global occurred on February
16, 2000 when Advantage and Koch purchased an aggregate of $10 million of our
Series C 5% Convertible Preferred Stock and warrants to purchase Class A common
stock in a private placement transaction. Advantage and Koch received 600 and
400 shares, respectively, of Series C preferred stock convertible into our Class
A common stock. In addition, Advantage received warrants to acquire 60,555
shares of our Class A common stock and Koch received warrants to acquire 40,370
shares of our Class A common stock, which expire on February 15, 2005. Advantage
subsequently converted 50 shares of its Series C preferred stock into 100,365
shares of Class A common stock and resold 11,200 of these shares. Koch
subsequently converted 100 shares of Series C preferred stock into 199,772,
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shares of Class A common stock and resold these shares and also converted an
additional 50 shares of Series C preferred stock into 99,886 shares of Class A
common stock. As described below, the settlement agreement entered into among
us, Advantage and Koch provided for the exchange by Advantage and Koch of all
their shares of Series C preferred stock for shares of our Series D convertible
preferred stock.
As long as our Class A common stock is listed for trading on Nasdaq, we may
not issue on conversion of the Series C preferred stock, the Series D preferred
stock and exercise of the related warrants more than 19.999% of the outstanding
Class A Common Stock immediately prior to the sale of the Series C preferred
stock without obtaining prior stockholder approval in order to comply with
Nasdaq listing requirements. Prior to the exchange of all outstanding shares of
Series C preferred stock for Series D preferred stock, 200 shares of Series C
preferred stock had been converted into 400,023 shares of Class A common stock,
in the aggregate. The Series D preferred stock has a fixed conversion price so
that the maximum aggregate number of shares issuable upon the full conversion of
all of the 800 shares of Series D preferred stock is 1,598,178 shares. The
number of shares of Class A common stock issuable under the related warrants is
100,925 shares, so that the sum of these shares, those underlying the shares of
Series D preferred stock and those previously issued upon conversion of the
Series C preferred stock is 2,099,126 shares of Class A common stock which is
less than the limit previously set by this 19.999% limitation of 2,159,595
shares.
SECURED CONVERTIBLE NOTES TRANSACTION
On June 8, 2000, Advantage and Koch purchased an aggregate of $4 million of
secured convertible notes from us in a private placement transaction. We
subsequently redeemed $3 million of the aggregate principal amount of the notes
for a total redemption cost of approximately $3.4 million, the issuance of
certain warrants and the issuance to Advantage of, in the aggregate, 62,500
shares of our Class A common stock. Advantage subsequently resold the shares
issued to it in connection with the redemption. The warrants issued in
connection with the redemption are exercisable for, in the aggregate, 125,000
shares of our Class A common stock and expire on July 7, 2004. Koch converted
the remaining $1 million of the secured convertible notes into 500,000 shares of
our Class A common stock and subsequently resold these shares. Thus, these
secured convertible notes were satisfied in full and cancelled as of October 25,
2000.
As long as our Class A common stock is listed for trading on Nasdaq, we may
not, without obtaining prior stockholder approval in order to comply with Nasdaq
listing requirements, issue in connection with the conversion or redemption of
the notes and exercise of the related warrants more than 2,065,000 shares of our
Class A Common Stock (approximately 19.999% of the outstanding Class A Common
Stock immediately prior to the sale of the secured convertible notes). As of the
date hereof, the secured convertible notes have been redeemed or converted for,
in the aggregate, (a) warrants exercisable for 125,000 shares of Class A common
stock and (b) 562,500 shares of Class A common stock (all of these 562,500
shares have subsequently been resold).
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SETTLEMENT AGREEMENT
On October 3, 2000, Advantage and Koch purchased an additional $7 million
of our secured convertible notes (the "October Notes"). These notes were secured
by a pledge of 866,538 shares of common stock of U.S. Wireless Corporation owned
by us. A dispute between us and Advantage and Koch arose regarding our
obligation under the terms of the stock pledge agreement executed and delivered
in connection with issuance of the October Notes to maintain collateral coverage
levels and, in the event that such coverage levels were not met, that we deliver
additional shares of our U.S. Wireless Corporation common stock so as to
maintain certain required collateral coverage.
Advantage and Koch ultimately filed a complaint and obtained a temporary
restraining order prohibiting us and our chairman and chief executive officer
from selling, conveying, pledging or otherwise transferring any shares of our
U.S. Wireless common stock until resolution of the matters covered in the
complaint and dissolution of the temporary restraining order.
Ultimately, we and Advantage and Koch agreed to resolve our differences
pursuant to a settlement agreement that provides in general for the following:
* We transferred ownership of an aggregate of 1,380,000 shares of our
U.S. Wireless common stock to Advantage and Koch in return for the
October Notes and related stock pledge agreement being deemed
satisfied in full and canceled.
* We exchanged one share of our newly authorized Series D convertible
preferred stock for each outstanding share of Series C preferred stock
then held by Advantage and Koch. Advantage and Koch exchanged 550 and
250 shares, respectively, of Series C preferred stock for Series D
preferred stock. This constituted all of the outstanding shares of
Series C preferred stock. The Series D preferred stock differs from
the terms of the Series C preferred stock in a number of respects. All
accrued and unpaid dividends on the Series C preferred stock were
cancelled pursuant to the settlement agreement. The Series D preferred
stock does not accrue dividends. The Series D preferred stock
conversion price per share of our Class A common stock is fixed at
$5.0057 and further adjustment of the conversion price is limited to
certain capital changes and distributions. As a result, the number of
shares of our Class A common stock issuable upon conversion of the
remaining 800 shares of Series D preferred stock is fixed at, in the
aggregate, 1,598,178 shares, subject to certain adjustment provisions
and limitations on conversions. The Series D preferred stock does not
have the automatic conversion of the Series C preferred stock, the
liquidation preference of the Series C preferred stock, the mandatory
redemption right of holders of our Series C preferred stock upon
certain triggering events and the requirement of the approval of the
holders of a majority of the then outstanding Series C preferred stock
for us to authorize or create any class of stock ranking senior or
pari passu to the Series C preferred stock or to increase our
authorized preferred stock. The other terms of the Series D preferred
stock are substantially similar to those of the Series C preferred
stock. Our Registration Statement No. 333-32772 is supplemented so
that, instead of registering for resale the number of shares of our
Class A common stock issuable upon conversion of our Series C
preferred stock previously registered thereby, such registration
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statement now registers for resale such number of shares of our Class
A common stock issuable upon conversion of our Series D preferred
stock. The Settlement Agreement provides that we register any
unregistered shares of Class A common stock underlying the Series D
preferred stock held by Advantage and Koch. Advantage and Koch agree
to vote all Class A common stock owned by them in accordance with the
instructions of our board of directors.
* We issued unsecured, non-convertible notes to Advantage (in the
principal amount of $4.8 million) and Koch (in the principal amount of
$3.2 million).
* The warrants held by Advantage and Koch have been re-priced so that
the exercise prices thereof equal $1.58, 115% of the closing bid price
on January 30, 2001.
* The complaint has been dismissed with prejudice and the temporary
restraining order has been dissolved.
* Advantage and Koch exchanged mutual releases with us.
FOR MORE INFORMATION RELATING TO THE SETTLEMENT AGREEMENT AMONG GLOBAL,
ADVANTAGE AND KOCH AND THE TRANSACTIONS CONTEMPLATED BY THE SETTLEMENT
AGREEMENT, PLEASE REFER TO OUR CURRENT REPORTS ON FORM 8-K FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 20, 2001 AND MAY 2, 2001.
LIQUIDITY
At December 31, 2000, we had cash and cash equivalents, and short-term
investments, of approximately $11.6 million, of which approximately $9.7 million
represented our investment in U.S. Wireless. At April 24, 2001, we had cash and
cash equivalents, and short-term investments of approximately $1.2 million,
substantially all of which represented our investment in 592,100 shares of
common stock of U.S. Wireless, which is classified as an investment available
for sale and carried at fair market value. As of April 30, 2001, the closing
price per share of U.S. Wireless common stock was $2.47. The carrying value of
this investment is subject to future fluctuations in the market price of U.S.
Wireless common stock.
At December 5, 2000, we owed an outstanding balance of approximately
$840,000 on our credit facility with Merrill Lynch, which was secured by a
pledge of 777,500 shares of our U.S. Wireless common stock and a $646,000
Treasury Bill pledged for our benefit by our Chairman and Chief Executive
Officer. From March 27, 2001 to April 24, 2001, we sold 185,400 of the pledged
shares of our U.S. Wireless common stock pursuant to an arrangement with Merrill
Lynch whereby half of the proceeds of such sales went to reduce the balance of
the credit facility and the remaining proceeds went to us. After applying the
proceeds of the vast majority of these sales in accordance with this
arrangement, we have reduced the outstanding balance of the credit facility to
$646,000 as of April 24, 2001. Merrill Lynch has tentatively agreed that once it
verifies that the outstanding balance of the credit facility is covered by the
value of the pledged Treasury Bill, it will release our remaining pledged shares
of U.S. Wireless common stock. Accordingly, further sales by us of our U.S.
Wireless common stock will inure solely to our benefit.
We have been selling, and expect to continue to sell, shares of U.S.
Wireless Corporation common stock to fund our operations. We are also seeking to
contribute certain lottery equipment consisting of a network operating center,
approximately 2,200 lottery terminals and approximately 3,000 radio pads to a
gaming venture, or to sell such equipment. As of December 31, 2000, we carried
these items on our books at $5.7 million, but give no assurance that we will be
successful in finding a venture to which to contribute them, or be able to sell
any of the equipment, or, if we do, that we will receive an amount equal to or
greater than book value. We anticipate that any proceeds from the sale of these
assets would be used to fund operations.
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Additionally, we have entered into a private equity line of credit
agreement with Equilink, as described above, pursuant to which we may have the
opportunity to raise up to $25.0 million through sales of our Class A common
stock, after certain conditions have been satisfied, including effectiveness of
a registration statement regarding the resale of any shares so sold and our
continued listing on any of the Nasdaq National Market, the Nasdaq SmallCap
Market or certain national exchanges. Based on the closing price of our stock on
April 26, 2001, assuming all the conditions to selling the maximum number of
shares of Class A common stock pursuant to puts under the private equity line of
credit agreement were satisfied, we would receive proceeds of approximately $1.5
million. We would only be able to receive proceeds of $25.0 million pursuant to
the private equity line of credit agreement in the event the market price of our
Class A common stock increased to $5.68 or greater.
We believe that we have sufficient cash and cash equivalents, and
short-term investments, to satisfy our cash requirements for the next five to
eight months, and, if we are able to generate proceeds from the sale of our
lottery equipment and/or pursuant to the private equity line of credit
agreement, that our cash requirements will be satisfied for the next 12 months.
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THIS SECOND SUPPLEMENT DOES NOT CONSTITUTE A COMPLETE PROSPECTUS AND SHALL NOT
BE CONSIDERED AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES
OF OUR CLASS A COMMON STOCK TO WHICH IT RELATES. REFERENCE IS MADE TO THE
ORIGINAL PROSPECTUS, AS SUPPLEMENTED BY THE FIRST SUPPLEMENT AND THIS SECOND
SUPPLEMENT, FOR INFORMATION WITH RESPECT TO GLOBAL AND THE SHARES OF CLASS A
COMMON STOCK OFFERED THEREBY.
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