As filed with the Securities and Exchange Commission on March 17,July 10, 2000
Registration No.: 333-___________333-________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GLOBAL TECHNOLOGIES, LTD.
(Exact Name of Registrant as specified in its Charter)
Delaware 86-0970492
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification Number)
The Belgravia, 1811 Chestnut Street, Suite 120, Philadelphia, PA 19103
(215) 972-8191
(Address, including Zip Code, and Telephone Number, including Area Code,
of Registrant's Principal Executive Offices)
S. Lance Silver, General Counsel
Global Technologies, Ltd.
The Belgravia, 1811 Chestnut Street, Suite 120, Philadelphia, PA 19103
Telephone: (215) 972-8191
(Name and Address, including Zip Code and Telephone Number,
including Area Code, of Agent for Service)
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Copies of all communications to:
Richard P. Jaffe, Esquire
Mesirov Gelman Jaffe CramerSchnader Harrison Segal & Jamieson,Lewis LLP
1735 Market Street, 38th Floor
Philadelphia, PA 19103-7598
Telephone: (215) 994-1037994-1046 Telefax: (215) 994-1111
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after this Registration Statement becomes effective.
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: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 the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
================================================================================
CALCULATION OF REGISTRATION FEE
===========================================================================================================================================================================================
Proposed Maximum Proposed Maximum Amount of
Title of Securities Amount to be Maximum Offering price perMaximum Aggregate Offering Registration
Toto be Registered Registered price per Share(3) price(3)Offering Price(3) Fee(4)
- ----------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Class A Common Stock,
$0.01 par value 1,402,585(1) $17.88 $25,078,219.80 $6,620.65250,000(1) $5.96875 $1,492,187.50 $393.94
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Class A Common Stock
256,250(2) $17.88 $4,581,750.00 $1,209.58$0.01 par value 20,000(2) $5.96875 $ 119,375 $ 31.52
- ----------------------------------------------------------------------------------------------
Class A Common Stock 191,397 $17.88 $3,422,178.36 $903.46
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total $8,733.69
==============================================================================================$425.46
=============================================================================================
(1) The registrant is registering for resale by certain selling
stockholders (i) 125,0000 shares of Class A Common Stock that may be
acquired by such selling stockholders upon the conversion, redemption
or payment of certain Series C Convertible Preferred
Stocksecured convertible notes of the registrant and
upon the redemption of such notes and (ii) 125,000 shares of Class A
Common Stock that may be acquired by such selling stockholders upon
exercise of certain callable warrants of the registrant.registrant issued in connection
with a partial redemption of such notes. Pursuant to Rule 416 of the
Securities Act of 1933, as amended, this registration statement also
registers such additional number of shares of registrant's Class A
Common Stock as may become issuable upon any such conversion, payment,
redemption or exercise of the warrants as a result of stock splits, stock dividends and
similar transactions.
(2) The registrant is registering for resale by certain selling
stockholders shares of Class A Common Stock that may be acquired by
such selling stockholders upon exercise of certain warrants of the
registrant. Pursuant to Rule 416 of the Securities Act of 1933, as
amended, this registration statement also registers such additional
number of shares of registrant's Class A Common Stock as may become
issuable upon exercise of the warrants as a result of stock splits,
stock dividends and similar transactions.
(3) Estimated solely for the purpose of computing the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended.
The proposed maximum offering price per share is based upon the average
of the high and low sales prices of the Class A Common Stock as quoted
on the Nasdaq National Market System as of the close of trading on March 14,July
5, 2000.
(4) Calculated by multiplying the aggregate offering amount by .000264.
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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 or until the registration statement shall become
effective on such date as the SEC acting pursuant to said Section 8(a), may
determine.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 17,JULY 10, 2000
PROSPECTUS
GLOBAL TECHNOLOGIES, LTD.
1,850,232270,000 SHARES
CLASS A COMMON STOCK
This Prospectus relates to the offer for sale from time to time of up to
1,850,232270,000 shares of Class A Common Stock, par value $0.01 per share, of Global
Technologies, Ltd., a Delaware corporation, by some of our(i) stockholders who hold secured
convertible notes and warrants issued in some cases, hold Series C Convertible Preferred Stockconnection with a partial redemption of
such notes and (ii) other stockholders who received warrants of the
company.company in connection with the issuance of such notes. Although we would receive
certain benefits from the conversion of the Series C Convertible Preferred Stocknotes and possiblywould receive exercise
proceeds from the exercise of the warrants, we will not receive any of the
proceeds from the resale of these shares by the selling stockholders. For more
information on the selling stockholders, the Series C Convertible Preferred Stocknotes and the warrants, please see
"Selling Stockholders"Security Holders" beginning on Page 21.22.
Global's Class A Common Stock is traded on the Nasdaq National Market under
the symbol "GTLL." The closing sale price of our Class A Common Stock as
reported by the Nasdaq National Market on March 10,July 5, 2000 was $21$5.9375 per share.
PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN
FACTORS YOU SHOULD CONSIDER IN CONNECTION WITH ANY DECISION TO PURCHASE SHARES
IN THIS OFFERING.
The selling stockholders may sell the shares of Class A Common Stock
described in this prospectus in public or private transactions, on or off the
Nasdaq National Market, at prevailing market prices, or at privately negotiated
prices. The selling stockholders may sell shares directly to purchasers or
through brokers or dealers. Brokers or dealers may receive compensation in the
form of discounts, concessions or commissions from the selling stockholders. For
more information on how the shares may be distributed, please see "Plan of
Distribution" beginning on Page 24.25.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED ON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is _____________,__________ __, 2000.
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS..............................RISKS........................... 4
AN OVERVIEW OF OUR BUSINESS..................................................BUSINESS............................................... 5
RISK FACTORS.................................................................FACTORS.............................................................. 6
RISKS PARTICULAR TO GLOBAL...................................................GLOBAL................................................ 6
RISKS PARTICULAR TO OUR PARTNER COMPANIES.................................... 15COMPANIES................................. 16
USE OF PROCEEDS.............................................................. 21PROCEEDS........................................................... 22
SELLING STOCKHOLDERS......................................................... 21SECURITY HOLDERS.................................................. 22
PLAN OF DISTRIBUTION.........................................................DISTRIBUTION...................................................... 24
DISCLOSURE OF THE SEC'S POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES.................................................LIABILITIES............................................... 25
EXPERTS......................................................................LEGAL MATTERS............................................................. 26
EXPERTS................................................................... 27
2
Throughout this prospectus, "Global Technologies," "Global," "we," "us,"
and "our," and other possessive and other derivations thereof, refer to Global
Technologies, Ltd. and its consolidated subsidiaries, unless the context
otherwise requires. All trademarks and trade names appearing in this prospectus
are the property of Global, unless otherwise indicated.
This prospectus is part of a registration statement we filed with the SEC.
Global may amend or supplement this prospectus from time to time by filing
amendments or supplements as required. Please read this entire prospectus and
any amendments or supplements carefully before making your investment decision
to purchase shares in this offering. You should rely only on the information
provided in, and incorporated by reference into, this prospectus. You should not
assume that the information in this prospectus is accurate as of any date other
than the date on the front of the document. 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.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any such documents that we have
filed. You may do so at the Commission's public reference room, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. These documents
are also available at the following Regional Office: 7 World Trade Center, Suite
1300, New York, New York 10048. Please call the Commission at 1-800-SEC-0330 for
further information on the public reference rooms.
Our SEC filings are also available to the public on the Commission's web
site at http://www.sec.gov. Our web site can be found at http://www.gtll.com.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" into this registration
statement some of the information we have already filed with the SEC. As a
result, we can disclose important information to you by referring you to those
documents. These incorporated documents contain important business and financial
information about us that is not contained in or delivered with this prospectus.
The information incorporated by reference is considered to be part of this
prospectus. Moreover, later information filed with the SEC by us in the future
will update and supersede this information and similarly be considered to be a
part of this prospectus. We incorporate by reference the documents listed below,
all filings made by us with the SEC under Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 after the date of the initial registration
statement, as amended, and prior to effectiveness of the registration statement,
and any future filings made by us with the SEC under Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934:
* Our Annual Report on Form 10-KSB for the fiscal year ended October
31, 1998.
* Our Quarterly Report on Form 10-QSB for the fiscal quarter ended
January 31, 1999.
* Our Current Report on Form 8-K filed on June 1, 1999.
* Our Quarterly Report on Form 10-QSB for the fiscal quarter ended
April 30, 1999.
* Our Amended Current Report on Form 8-K filed on August 2, 1999.
3
* Our Definitive Proxy Statement filed August 17, 1999.
3
* Our Current Report on Form 8-K filed on August 31, 1999.
* Our Definitive Proxy Statement filed September 16, 1999.
* Our Transition Report on Form 10-KSB for the transition period ended
June 30, 1999.
* Our Quarterly Report on Form 10-QSB for the fiscal quarter ended
September 30, 1999.
* Our Quarterly Report on Form 10-QSB for the fiscal quarter ended
December 31, 1999.
* Our Two Amended Quarterly Reports on Form 10-QSB for the fiscal
quarter ended December 31, 1999.
* Our Current Report on Form 8-K filed on February 28, 2000.
* Our Quarterly Report on Form 10-QSB for the fiscal quarter ended
March 31, 2000.
* Our Definitive Proxy Statement filed April 17, 2000.
* The description of the Class A Common Stock as set forth in Global'sour
registration statement on Form 8-A filed with the SEC on December 31,
1994, as amended by Global'sour registration statement on Form 8-A/A filed
with the SEC on March 8, 1995, and any other amendments or reports
thereto filed with the SEC for the purpose of updating such
description.
We will provide, without charge, to each person to whom a prospectus is
delivered, a copy of these documents that are incorporated by reference into,
but not delivered with, this prospectus. You may request a copy of these filings
by writing or telephoning us at the following address:
S. Lance Silver, General Counsel
Global Technologies, Ltd.
The Belgravia, 1811 Chestnut Street, Suite 120 Philadelphia, PA
19103 Telephone number: 215-972-8191
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This prospectus, and certain information incorporated herein by reference,
include "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. This Actact provides a "safe harbor" for
forward-looking statements to encourage companies to provide prospective
information about themselves so long as they identify these statements as
forward-looking and provide meaningful cautionary statements identifying
important factors that could cause actual results to differ from the projected
results.
All statements other than statements of historical fact we make in this
prospectus or in any document incorporated by reference are forward-looking. In
particular, the statements herein, and in the incorporated information,
regarding our future results of operations or financial position are
forward-looking statements. In some cases, you can identify forward-looking
4
statements by terminology such as "may," "will," "should," "expect," "plan,"
"anticipate," "believe," "estimate," "predict," "potential," or "continue" or
the negative of such terms or other comparable terminology.
4
Forward-looking statements reflect our current expectations and are
inherently uncertain. For these statements, we claim the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. You should understand that future events, in
addition to those discussed elsewhere in this prospectus, particularly under
"Risk Factors," and also in other filings made by us with the Securities and
Exchange Commission, could affect our future operations and cause our results to
differ materially from those expressed in our forward-looking statements. The
cautionary statements made in this prospectus and in the incorporated
information should be read as being applicable to all related forward-looking
statements contained in this prospectus and the incorporated information.
AN OVERVIEW OF OUR BUSINESS
We are a technology incubator that invests in, develops and manages
emerging growth companies in the e-commerce, Internet, networking solutions,
information and entertainment systems, telecommunications and gaming industries.
We currently hold common stock and convertible preferred stock representing
approximately 81%80% of the outstanding common stock of The Network Connection,
Inc. on a fully converted basis. The Network Connection is publicly-tradedpublicly traded on
the Nasdaq SmallCap Market under the ticker symbol "TNCX." The Network
Connection designs, manufactures, markets, installs and maintains advanced,
high-end, high-performance computer servers and interactive, broad-bandprovides an Internet information and video and audio entertainment
systems, includingsystem for the procurementaway-from-home market and provisionhas expertise in providing content,
e-commerce and connectivity for communities of the content available through these systems.people in hotels, cruise ships,
trains and corporate training centers. The Network Connection's systems are
marketed primarilydesigned to hoteldeliver to users a personal, on-demand, full-motion video and time-share propertiesaudio
experience via high performance networks in trains (TrainView(TM)), cruise ships
(CruiseView(TM)) and hotels (InnView(TM)), cruise
lines (CruiseView(TM)), educational systems (EduView(R))as well as the education and
corporate training departments,markets (EduView(R)). This is achieved by the use of TNCi's
family of Cheetah(R) video servers and long-haul passenger train manufacturers and operators
(TrainView(TM)).transPORTAL tools.
We also hold convertible preferred3,000,000 shares of common stock representing approximately
15%14% of the outstanding common stock of U.S. Wireless Corporation based on a fully converted
basis.the
number of outstanding shares of U.S. Wireless common stock disclosed in its
annual report filed with the Securities and Exchange Commission on June 26,
2000. U.S. Wireless is publicly-tradedpublicly traded on the Nasdaq SmallCapNational Market under the
ticker symbol "USWC." U.S. Wireless has developed proprietary network-based
wireless location technology designed to enable wireless carriers and others to
provide their customers with location-based services and applications. These
services include enhanced 411 and 911 services, live navigation assistance,
asset and vehicle tracking, intelligent transportation systems, location
sensitive billing and network management systems. U.S. Wireless' RadioCamera(TM)
location system is a geographic location system that pinpoints the locations of
mobile telephone subscribers within a wireless network. The RadioCamera(TM)
system measures the radio frequency pattern or the phase (i.e., the timing and
the amplitude path) of all the radio frequency signals from a caller to a single
cell site.
We also hold 27.5% of InterLottoInter Lotto (UK) Limited, a United Kingdom company
that is licensed to operate lotteries on behalf of charities in Great Britain.
GTL Management Limited, onea wholly owned subsidiary of Global's wholly-owned subsidiaries,Global, has an
5
exclusive
contract with Inter Lotto to provide management services in connection with the
operation of these lotteries. It is anticipated that theThe UK lottery, called "The Daily Number," will bewas
officially launched on or about March 27,April 4, 2000.
We expect that Daily Number lottery tickets initially will be available through
approximately 3,500 terminals located in the Northeast and Northwest regions of
Great Britain, encompassing the Manchester, Liverpool and Yorkshire areas. In
addition, we plan to utilize the Internet as a vehicle for lottery play for UK
residents and product sales beginning in the second half of calendar year 2000.
Our other holdings includealso hold an approximately 4% equity interest in Shop4Cash.com, Inc., a
privately held, cash-incentive, Internet shopping portal with a growing base of
approximately 250 affiliated merchants, and a 24.5%
equity interest in Donativos S.A. de C.V., a company that has developed and is
operating a gaming center in Monterrey, Mexico. We are currently assessing exit
strategies with respect to the Donativos investment.merchants.
5
RISK FACTORS
Making an investment in the Class A Common Stock of Global Technologies,
Ltd. is highly speculative and involves a high degree of risk. Before making an
investment, you should be aware of the following risk factors and should review
carefully the financial and other information about Globalus provided or incorporated
into this prospectus.
RISKS PARTICULAR TO GLOBAL
WE PLAN TO SELL OR FURTHER BORROW AGAINST SOME OF OUR INVESTMENTS TO MEET OUR
FINANCIAL OBLIGATIONS OVER THE NEXT 90 DAYS AND THERE IS RISK THAT WE MAY NOT BE
ABLE TO DO SO AT TIMES OR PRICES NECESSARY TO MEET THESE OBLIGATIONS.
As of March 10,July 5, 2000, we have a purchase commitmenthad an obligation of approximately $6.5$2.8 million forin
connection with the purchase of the hardware and software that will serveserves as the
network operating center of the on-line lottery system that we are currently
developinghave deployed in
the United Kingdom. The amount of this commitment includesKingdom, and the terminals that will be installed in the retail outlets wherethrough which lottery players
will be able to purchase
lottery tickets. We also have obligations for
approximately an additional $4.2 million to other vendors, primarily advertising
and promotional firms, in connection withIn addition, we currently anticipate that our lottery project.project
will require approximately $300,000 per month in the three month period ending
September 30, 2000 to continue operations.
We are also obligated to lend The Network Connection up to $5.0 million
pursuant to a revolving credit facility agreement. As of March 10,July 5, 2000, The
Network Connection had drawn $880,000$5.0 against this line of credit.credit, of which we
converted $1.85 million of the outstanding balance under the facility into
1,233,333 shares of The Network Connection common stock, leaving an outstanding
balance of $3.15 million. The Network Connection has recently received orders to
install its InnView(TM) interactive information and entertainment system in threefour
hotels. Absent alternative sources
of financing for The Network Connection recently entered into a $12.0 million equity
purchase agreement contemplating purchases of its common stock by an investor.
If The Network Connection does not obtain any proceeds from purchases, it will
likely continue to draw on the credit facility with us to finance the production
of some or all of the equipment necessary for such installations, as well as to
cover other commitments and operating expenses. 6
The lottery equipment purchase
commitmentobligation and related expenses,losses that we expect to fund, together with projected draws
under theThe Network Connection credit facility and other operating expenses,
exceed the sum of our currently available cash, and cash equivalents and short-term investmentscurrently
remaining available credit under the line of credit with Merrill Lynch, which
were $2.2sum totaled $1.3 million as of March 10, 2000.July 7, 2000 (after the redemption of the
convertible secured notes discussed below).
Although we recently obtained $10.0 million in equity financing from the
issuance of our Series C Convertible Preferred Stock, obtained a $10 million
line of credit facility with Merrill Lynch, which has been secured with a pledge
of one million of our shares of common stock of U.S. Wireless, and obtained $4.0
million from the issuance of convertible notes secured by the pledge of an
additional one million of our shares of common stock of U.S. Wireless (of which
we redeemed $2.0 million of the principal amount on July 7, 2000 for a total
redemption cost of approximately $2.2 million and the issuance of warrants
described below), we plan to sell or further borrow against some of our
investments to cover our financial obligations and to continue to execute on our
business strategy of investing in, developing and managing emerging growth
companies in the e-commerce, Internet, networking solutions, information and
entertainment systems, telecommunications and gaming industries. In this regard,
we entered into a collateral loan agreement on June 28, 2000 relating to a loan
of $16.0 million against a pledge of the third million of our three million
shares of U.S. Wireless common stock. We expect funding to occur on or about
6
July 12, 2000 (a more detailed discussion of this transaction is set forth three
risk factors below). We provide no assurance that funding will occur as
scheduled in connection with this loan or that we will be able to sell theseor borrow
against other of our assets at the planned times or for the prices necessary to meet theseour
financial obligations in a timely manner.or to take advantage of investment or acquisition
opportunities consistent with our business strategy. Failure to do so may
force us toprevent or delay the roll-outfurther development of our lottery project, business and/or cause us to default
under the credit facility. A delay of the lottery project or failurefacility to provide The Network Connection with fundsConnection. Such failure, delay and/or
default would have a material adverse effect on the growth of our lottery project,business, The
Network Connection,Connection's and our financial condition, and may subject us to legal
liability.
ONE MILLION OF OUR SHARES OF COMMON STOCK OF U.S. WIRELESS CORPORATION, WHICH WE
HAVE PLEDGED TO SECURE THE MERRILL LYNCH CREDIT FACILITY, MAY BE LIQUIDATED TO
SATISFY OUR OBLIGATIONS TO MERRILL LYNCH AND COULD ALSO RESULT IN ADVERSE TAX
CONSEQUENCES.
On April 5, 2000, we entered into a line of credit facility with Merrill
Lynch in which Merrill Lynch agreed to advance up to $10.0 million based upon a
percentage of the value of securities pledged as collateral to secure amounts
drawn under the line of credit. Principal amounts borrowed under the line,
together with accrued interest at an annual rate equal to the London Inter-bank
Offer Rate (LIBOR) plus 1.25%, are payable upon demand by Merrill Lynch. As of
July 5, 2000, we had an outstanding balance of $6.8 million under the Merrill
Lynch line of credit facility. To secure such borrowing, we have pledged
1,000,000 of our shares of common stock of U.S. Wireless to Merrill Lynch.
If the amount owed under the Merrill Lynch credit facility at any time
exceeds 35% of the market value of the shares of U.S. Wireless pledged to
Merrill Lynch, we will be subject to a maintenance call which would require us
to pledge additional securities which are acceptable to Merrill Lynch as
collateral or require us to reduce the outstanding balance owed under the
Merrill Lynch credit facility through payment in cash. We provide no assurance
that we would have sufficient additional collateral or funds necessary to pay
outstanding amounts owed under the Merrill Lynch credit facility in the event of
a maintenance call or upon demand for payment by Merrill Lynch, the failure of
either of which would result in the liquidation of our shares of U.S. Wireless
pledged to Merrill Lynch to satisfy outstanding obligations under the Merrill
Lynch credit facility, adverse tax consequences resulting from such liquidation,
and a material adverse effect on our financial condition.
ANOTHER ONE MILLION OF OUR SHARES OF COMMON STOCK OF U.S. WIRELESS
CORPORATION, WHICH WE HAVE PLEDGED TO SECURE THE SECURED CONVERTIBLE NOTES, MAY
BE LIQUIDATED TO SATISFY OUR OBLIGATIONS TO THE HOLDERS OF THE NOTES AND COULD
ALSO RESULT IN ADVERSE TAX CONSEQUENCES.
On June 8, 2000, we issued $4.0 million of secured convertible notes to
Advantage Fund II Ltd. and Koch Investment Group, Ltd. The notes bear interest
at 6% per annum and mature on December 7, 2001. The notes are convertible into
shares of our Class A Common Stock at a conversion rate of two dollars per
share, subject to customary adjustments. To secure such borrowing, we pledged
1,000,000 of our shares of common stock of U.S. Wireless to the holders of the
notes. One event of default under the notes occurs if U.S. Wireless common stock
trades at less than $5.00 per share at any time during each of five trading days
(which need not be consecutive) within any consecutive 30-day period and certain
other conditions are met. A default by us under the notes would allow the
7
holders to accelerate our repayment obligations. Our failure to repay on an
accelerated basis in a default situation could result in the liquidation of our
shares of U.S. Wireless pledged in connection with the issuance of the notes to
satisfy outstanding obligations under the notes, adverse tax consequences
resulting from such liquidation, and a material adverse effect on our financial
condition. On July 7, 2000, we redeemed $2.0 million of the principal amount of
these notes. The notes require that in connection with such redemption we issue
warrants for 125,000 shares, in the aggregate, of our Class A Common Stock to
the holders of the notes. These warrants have a four-year term and an exercise
price of $4.00 per share. For a more detailed discussion of this transaction,
see "Selling Security Holders" on page 22 below.
THE THIRD MILLION OF OUR THREE MILLION SHARES OF COMMON STOCK OF U.S.
WIRELESS CORPORATION, WHICH WE HAVE AGREED TO PLEDGE TO SECURE A $16.0 MILLION
LOAN, MAY BE LIQUIDATED TO SATISFY OUR OBLIGATIONS TO THE LENDERS AND COULD ALSO
RESULT IN ADVERSE TAX CONSEQUENCES.
On June 28, 2000, we entered into a collateral loan agreement in connection
with a $16.0 million loan from an institutional lender. This loan is to be
funded on or about July 12, 2000, at which time we will issue a promissory note
to the lender in the amount of $16.0 million. The loan bears interest at LIBOR
plus 1% per annum, payable quarterly in arrears, and matures on June 27, 2002.
We currently contemplate using the proceeds of this loan for potential
acquisitions, working capital and other corporate purposes. To secure such
borrowing, we have agreed to pledge 1,000,000 of our shares of common stock of
U.S. Wireless to the lender. A default by us on any of our obligations under the
collateral loan agreement or promissory note, could result in the liquidation of
our shares of U.S. Wireless pledged as security for the loan to satisfy
outstanding loan obligations, adverse tax consequences resulting from such
liquidation, and a material adverse effect on our financial condition.
OUR PARTNER COMPANIES ARE GROWING RAPIDLY AND WE MAY HAVE DIFFICULTY ASSISTING
THEM MANAGE THEIR GROWTH.
Our partner companies have grown, and we expect them to continue to grow
rapidly. This growth requires our partner companies to:
* hire new employees;
* aggressively advertise and promote their products and services;
* modify and expand the current array of products and services offered;
and
* push product into new markets where we believe that significant
market share and profitability may be achieved.
Such growth is placing a strain on the limited resources of our partner
companies and the limited resources we can allocate to assist them. The funds
required to support this growth may require us to forego acquisition
opportunities that would otherwise be consistent with our business strategy of
investing in, developing and managing emerging growth companies in the
e-commerce, Internet, networking solutions, information and entertainment
systems, telecommunications and gaming industries.
8
WE ARE A DEFENDANT IN A MULTI-DISTRICT CLASS ACTION LAWSUIT THAT IF DECIDED
ADVERSELY TO US COULD RESULT IN A LOSS OF OUR ASSETS.
The business strategy under former management was the development,
assembly, installation and operation of computer-based, in-flight entertainment
networks that provided passengers the opportunity to view movies, play computer
games and gamble, (wherewhere legally permissible)permissible, through an in-seat video
touch-screen. The main contract with respect to that entertainment network was
with Swissair. On September 2, 1998, Swissair flight 111 crashed. The aircraft
involved in the crash was a McDonnell Douglas MD-11 equipped with the
entertainment network developed by former management. A large number of claims
have been filed by the families of the victims of the crash. These claims have
been consolidated into a multi-district class action litigation in which we,
together with Swissair, Boeing, DuPont and a number of other companies, are a
defendant. Our aviation insurer is defending us in the action. We have $10.0
million in insurance coverage related to the action. We also have an umbrella
7
policy for an additional $10.0 million in coverage; however, we are currently
litigating the applicability of this policy to the action. If we do not settle
the multi-district litigation within our policy limits, or if we are found
liable for an amount in excess of these limits, our business would be adversely
affected. If found liable for an amount substantially in excess of the limits of
our coverage, we could lose all of our assets.
WE HAVE A LIMITED OPERATING HISTORY UPON WHICH YOU MAY EVALUATE US.
We were formed in February 1994. Until May 1998, we were engaged in the
business of development, assembly, installation and operation of computer-based,
in-flight entertainment networks, at which time former management decided to
exit that business and to pursue opportunities in the dry-cleaning industry. In
September 1998, the former board of directors of Global was removedresigned from office and
was replaced by our current board. The current board then appointed a new
management team and put together our current business strategy of investing in,
developing and managing emerging growth companies in the e-commerce, Internet,
networking solutions, information and entertainment systems, telecommunications
and gaming industries.
We have a limited operating history under our new business strategy and new
management on which you will be able to evaluate our business and prospects.
Each of our partner companies is in the early stage of its development. Our
business and prospects must be considered in light of the risk, expense and
difficulties frequently encountered by companies in early stages of development,
particularly companies in new and rapidly evolving markets such as e-commerce,
Internet, networking solutions and telecommunications. If we are unable to
effectively allocate our resources and help grow existing partner companies, we
may be unable to execute our business strategy and our stock price may be
adversely affected.
OUR BUSINESS DEPENDS ENTIRELY ON THE PERFORMANCE OF OUR PARTNER COMPANIES, WHICH
IS UNCERTAIN.
We own interests in and help our partner companies operate their respective
businesses. Each of our partner companies is engaged in a different operating
business, and consequently is subject to a set of risks particular to its
business. Material risks relating to our partner companies are set forth below
under "Risks Particular to our Partner Companies." If our partner companies do
not succeed, the value of our investments in such companies and our stock price
could decline.
9
Our $32.6$158.4 million in total assets as of DecemberMarch 31, 19992000 included
approximately $27.5$129.3 million of assets of our consolidated subsidiaries and
investments in our other partner companies. The carrying value of our partner
company ownership interests includes our original acquisition cost and the
effect of accounting for certain of our partner companies under the equity
method of accounting. The carrying value of our partner companies will be
impaired and decrease if one or more of our partner companies do not succeed.
TheAlso, the carrying value of our partner companiesinvestment in U.S. Wireless is marked to market,
and, therefore, a decline in its market price will impact our financial
position. Our other publicly traded investment, The Network Connection, is not
marked to market. Asmarket, and, as such, a decline in the market value of one of our publicly-traded partner companies maythat company
will not impact our financial position by not more than the carrying value of the partner
company.position. However, such a decline would likely
affect our stock price.
8
WE HAVE A HISTORY OF LOSSES AND EXPECT CONTINUED LOSSES IN THE FORESEEABLE
FUTURE.
For the quarterquarters ended March 31, 2000, December 31, 1999 we lost approximately $6 million.
For the quarter endedand September 30,
1999 we lost approximately $9.3 million, $6.0 million and $0.5 million.
Thismillion,
respectively. The September quarter loss included a profit from the
approximately $5.3 million sale by The Network Connection of 195 Cheetah(TM)
multimedia video servers to schools in Georgia. Without the effect of this gain
on our net results we would have incurred significantly greater losses for that
quarter. We changed our fiscal year end from October 31 to June 30. For the
eight-month transition period ended June 30, 1999 we lost $2.4 million. In
addition, under prior management, we incurred net losses of $7.3 million in 1998
and $51$51.0 million in 1997. Excluding the effect of any future non-operating
gains, we expect to continue to incur losses for the foreseeable future and, if
we ever have profits, we may not be able to sustain them.
We expect to have a significant net loss for the quarter ended March 31,June 30,
2000. Our expenses will increase as we continue to implement our business model.
Specifically, expenses will increase:
* in the event we hire additional employees and lease more office space
to broaden our partner company support capabilities.capabilities;
* in connection with the continued developmentoperation of our UK lottery project,
which will require significant expenditures for the hiring of
additional qualified management personnel to operate and grow the
lottery, for progress payments
under the purchase agreement for the equipment that comprises the
infrastructure of the lottery, and for payments to the advertisingcompany that
manages and promotion ofmaintains the lottery.infrastructure;
* with respect to The Network Connection, in the event that it
continues to draw on the credit facility for funds to hire additional
management personnel and to finance production and installation of
its systems and other operating expenses.expenses;
* as we explore acquisition opportunities and alliances with other
companies.companies; and
* as we facilitate business arrangements among our partner companies.
Expenses are also expected to increase due to the potential effect of
goodwill amortization and other charges resulting from potential future
acquisitions. If any of these and other expenses are not accompanied by
increased revenue, our losses will be greater than we anticipate.
910
OUR REVENUES ARE SUBSTANTIALLY DEPENDENT ON OUR OPERATING SUBSIDIARIES.
Our consolidated financial statements include our accounts and the accounts
of our wholly-owned subsidiaries:
* GlobalTech Holdings Limited
* GTL Management Limited
* Interactive Flight Technologies (Gibraltar) Limited
* GTL Lottoco, Inc.
* GTL Subco, Inc.
* GTL Investments
* GTL Leasing Limited
* Lottery Sales Company Limited
* MTJ Corp.
and our majority-owned and controlled subsidiary, The Network Connection, and
its wholly-owned subsidiary TNCi UK Limited. The ownership interest of minority
shareholders in The Network Connection are recorded as "minority interest" on
our condensed consolidated financial statements. We generally would not
consolidate with our results of operations the results of operations of a
partner company in which we held less than a 50% voting interest and otherwise
did not maintain management control.
For the quarters ended March 31, 2000, December 31 and September 30, 1999,
the revenues of The Network Connection represented 100% of our total revenues,
and for the eight-month transition period ended June 30, 1999, revenues from The
Network Connection represented approximately 61% of our revenues.
At March 10,July 5, 2000, we owned approximately 81%80% of the aggregate voting
interests of The Network Connection. If our voting ownership of any of our
operating subsidiaries, particularly The Network Connection, were to decrease
below 50% and we did not maintain management control, we would most likely not
continue to consolidate their results of operations with our results of
operations. While this would affect our earnings per share only to the extent of
our ownership change, the presentation of our consolidated statement of
operations and balance sheet would change dramatically. In addition,
fluctuations and decreases in the revenues of any of our subsidiaries,
particularly The Network Connection, will have a correlative effect on our
revenues.
11
WE MAY NOT HAVE OPPORTUNITIES TO ACQUIRE INTERESTS IN ADDITIONAL COMPANIES.
We may be unable to identify companies that complement our strategy. Even
if we identify a company that complements our strategy, we may be unable to
acquire an interest in the company for many reasons, including:
10
* failure to agree on the terms of the acquisition;
* incompatibility between our management and management of the company;
* competition from other potential acquirers; and
* lack of capital resources needed to acquire an interest in the
company.
If we cannot acquire interests in additional companies, our strategy to
build a network of technology partner companies that will enhance shareholderstockholder
value may not succeed.
WE MAY BE UNABLE TO MANAGE NEWLY ACQUIRED PARTNER COMPANIES.
We plan to continue to acquire interests in e-commerce, Internet,
telecommunications, networking solutions and gaming companies to complement our
business strategy. Any additional acquisitions will likely place strain on our
limited resources and our ability to manage our partner companies. Risks related
to future acquisitions include:
* disruption in our ongoing support of our partner companies,
distracting our management and other resources and making it
difficult to maintain our standards, controls and procedures;
* acquisition of interests in companies in markets in which we have
little experience; and
* increased debt or issuance of equity securities to fund future
acquisitions, which may be dilutive to existing shareholders.stockholders.
OUR SUCCESS DEPENDS UPON OUR SENIOR MANAGEMENT AND THE KEY PERSONNEL OF OUR
PARTNER COMPANIES.
Our success depends upon the continued employment of and performance by our
senior management, particularly our Chairman and Chief Executive Officer, Irwin
L. Gross, and the key personnel of our partner companies. It could have a
material adverse effect on us if our senior management team do not continue
their relationships with us, or if our partner companies are unable to hire and
retain a sufficient number of qualified management, professional, technical and
marketing personnel.
THE MARKET PRICE FOR OUR STOCK IS AND WILL LIKELY CONTINUE TO BE VOLATILE.
The market price for our stock has been volatile and has fluctuated
significantly to date. The trading price of our stock is likely to continue to
be highly volatile. In addition, the stock market in general and the market for
technology companies in particular, have experienced extreme price and volume
fluctuations. These broad market and industry factors may materially and
adversely affect the market price of our common stock, regardless of our actual
operating performance. In the past, following periods of volatility in the
market price of a company's securities, securities class-action litigation has
12
often been instituted against such companies. Such litigation, if instituted,
could result in substantial costs and a diversion of management's attention and
resources, which would have a material adverse effect on our business, financial
condition and results of operations.
11
FLUCTUATIONS IN OUR QUARTERLY RESULTS WILL LIKELY CAUSE FLUCTUATIONS IN OUR
STOCK PRICE.
We expect that our quarterly results will fluctuate significantly due to
many factors, including:
* the operating results of our operating subsidiaries;
* changes in equity, losses or income and amortization of goodwill
related to the acquisition or divestiture of interests in partner
companies;
* changes in our methods of accounting for our partner company
interests, which may result from changes in our ownership percentages
of our partner companies;
* changes in the market price of our investment in U.S. Wireless, which
is marked to market;
* sales of equity securities by our partner companies, which could
cause us to recognize gains or losses under applicable accounting
rules;
* the pace of development or a decline in growth of the markets in
which our partner companies operate and competition with respect to
the technologies, products and services offered by our partner
companies;
* exchange rate fluctuations, to the extent that we generate revenues
from foreign operations;
* intense competition from other potential acquirers of prospective
partner companies, which could increase our cost of acquiring
interests in additional companies; and
* our ability effectively to manage our growth and the growth of our
partner companies.
If our operating results in one or more quarters do not meet securities
analysts' or your expectations, the price of our stock could decrease. In
addition, we expect that the price of our common stock will fluctuate in
response to announcements by us or our competitors with respect to acquisitions,
divestitures and other corporate developments.
WE MAY HAVE TO BUY, SELL OR RETAIN ASSETS WHEN WE WOULD OTHERWISE NOT WISH TO IN
ORDER TO AVOID REGISTRATION UNDER THE INVESTMENT COMPANY ACT OF 1940.
Generally, a company may be required to register under the Investment
Company Act and comply with significant restrictions if its investment
securities exceed 40% of the company's total assets, or if it holds itself out
as being primarily engaged in the business of investing, reinvesting or trading
in securities. A company is generally not required to register under the
Investment Company Act if less than 45% of its total assets consist of, and less
than 45% of its net income is derived from, securities (otherother than government
securities and securities of majority-owned subsidiaries and companies primarily
controlled by it).
12it.
13
We believe that we are not an investment company, as that term is defined
under the Investment Company Act, because our non-operating subsidiariesinterests in partner companies
that are not majority owned or primarily controlled by us make up less than 45%
of our total assets and net income. It is not feasible for us to register as an
investment company because the Investment Company Act regulations are
inconsistent with our strategy of acquiring interests in, developing, operating
and managing our partner companies. As the values of our currently held
investment and non-investment securities change, and if we acquire additional
investment securities, it is possible that we could be subject to regulation
under the Investment Company Act. If that were to happen, we could ask for
exemptive relief from the Securities and Exchange Commission. We are also able
to rely once every three years on a one-year temporary exemption from the
registration requirements of the Investment Company Act. If we were not able to
obtain exemptive relief and the one-year temporary exemption were no longer
available, we might need to take certain actions to avoid regulation under the
Investment Company Act. We might be compelled to acquire additional income or
loss generating assets that we might not otherwise have acquired, be forced to
forego opportunities to acquire interests in companies that would be important
to our strategy or be forced to forego the sale of minority interests we would
otherwise want to sell. In addition, we might need to sell some assets
considered to be investment securities, including interests in partner
companies. Any of these actions could adversely affect our business.
WE MAY BE UNABLE TO OBTAIN MAXIMUM VALUE FOR OUR PARTNER COMPANY INTERESTS.
We have significant positions in our partner companies. While we do not
anticipate selling significant portions of our investments in our partner
companies in the foreseeable future, if we were to divest all or part of an
investment in a partner company, we may not receive maximum value for this
position. For partner companies with publicly-tradedpublicly traded stock, we may be unable to
sell our interest, or portions thereof, at then-quoted market prices.
Furthermore, for those partner companies that do not have publicly-tradedpublicly traded stock,
the realizable value of our interests may ultimately prove to be lower than the
carrying value currently reflected in our consolidated financial statements.
OUR GLOBAL PRESENCE EXPOSES US TO CULTURAL DIFFERENCES, CURRENCY FLUCTUATIONS
AND POLITICAL INSTABILITY.
We have invested in foreign operations and may consider additional projects
outside the United States. Our international presence exposes us to several
risks, including the following:
* CULTURAL DIFFERENCES. In transacting business in foreign countries,
we seek to partner with entities from those countries and to hire
professional consultants to help us determine whether products and
services we propose to offer will be accepted by the people who live
there. This process does not, however, ensure acceptance. Our failure
to choose acceptable products and services to offer abroad will have
an adverse effect on our business.
1314
* CURRENCY FLUCTUATIONS. When we purchase interests in non-United
States partner companies for cash, we will likely have to pay for the
interests using the currency of the country where the prospective
partner company is located. Similarly, although it is our intention
to act as a long-term partner to our partner companies, if we sold an
interest in a non-United States partner company we might receive
foreign currency. To the extent that we transact in foreign
currencies, fluctuations in the relative value of these currencies
and the United States dollar may adversely impact our financial
results.
* COMPLIANCE WITH LAWS. We are subject to the laws of the UK, with
respect to our lottery project, and of Mexico, with respect to our
entertainment center project, and may become subject to the laws
and regulations of other foreign countries in the future. These laws
are different than those of the United States and we are less
familiar with them. We must go to the expense of hiring legal counsel
in each foreign country in which we operate to comply with their laws
and regulations. The laws of these foreign countries may change at
any time, which would likely require us to incur additional legal
expenses to comply with such changes, or could even force us to
discontinue operations.
* POLITICAL INSTABILITY. We have, and may in the future purchase,
interests in foreign partner companies that are located, or transact
business in, parts of the world that experience political
instability. Political instability may have an adverse impact on the
subject country's economy, and may limit or eliminate a partner
company's ability to conduct business.
IF WE DO NOT HAVE ENOUGH SHARES AUTHORIZED OR DO NOT OBTAIN SHAREHOLDERSTOCKHOLDER APPROVAL
FOR THE ISSUANCE OF CLASS A COMMON STOCK UPON CONVERSION OF OUR SERIES C
CONVERTIBLE PREFERRED STOCK AND/OR SECURED CONVERTIBLE NOTES IN EXCESS OF
19.999% OF OUR OUTSTANDING CLASS A COMMON STOCK, WE MAY BE FORCED TO REDEEM THE
SERIES C CONVERTIBLE PREFERRED STOCK AND/OR THE SECURED CONVERTIBLE NOTES FROM
THE HOLDERS.
Pursuant to the terms of the convertible preferred stock purchase agreement
that we entered to with Advantage Fund II Ltd. and Koch Investment Group Ltd. on
February 16, 2000, in the event of a "triggering event," as defined in the
Certificate of Designations, relating to the Series C Convertible Preferred
Stock, such as if we do not have enough shares of Class A Common Stock
authorized for issuance upon conversion of the Preferred Stock or do not obtain
shareholderstockholder approval for the issuance of Class A Common Stock upon conversion of
our Series C Convertible Preferred Stock held by these investors in excess of
19.999% of the outstanding shares of Class A Common Stock immediately prior to
consummation of the sale of the Series C Convertible Preferred Stock as required
under the Nasdaq listing rules and regulations, we may be forced to redeem the
Series C Convertible Preferred Stock from them. We may not have the resources
available to do so. As of March 10,July 5, 2000 the Series C Convertible Preferred 14
Stock
represented only approximately 5%6% of our common stockClass A Common Stock on a fully converted
basis. If we were required to redeem the Series C Convertible Preferred Stock,
it could have a material adverse effect on our business. The same risks are
present in the event that we default on our obligations under the private
placement purchase agreement that we entered into with, or the secured
convertible notes that we issued to, Advantage and Koch on June 8, 2000. As of
July 7, 2000, after the redemption of $2 million of the secured convertible
notes, the remaining secured convertible notes represented approximately 9.5% of
our Class A Common Stock on a fully converted basis. For a more detailed
discussion of this transaction, see "Selling Security Holders" on page 22 below.
15
WE FACE GENERAL RISKS RELATED TO DOING BUSINESS THAT ARE BEYOND OUR CONTROL.
Our success will depend in part on certain factors that are beyond our
control and that cannot clearly be predicted at this time. These factors include
general economic conditions, both nationally and internationally, changes in tax
laws, fluctuating operating expenses, changes in governmental regulations,
changes in technology, and trade laws.
RISKS PARTICULAR TO OUR PARTNER COMPANIES
FLUCTUATION IN THE PRICE OF THE COMMON STOCK OF OUR PUBLICLY-TRADEDPUBLICLY TRADED PARTNER
COMPANIES COULD AFFECT THE PRICE OF OUR STOCKSTOCK.
The Network Connection and U.S. Wireless are our two publicly-tradedpublicly traded
partner companies. The price of their common stock has been highly volatile. The
market value of our holdings in these partner companies changes with these
fluctuations. Fluctuations in the price of The Network Connection's and U.S.
Wireless' common stock are likely to affect the price of our Class A Common
Stock.
THE NETWORK CONNECTION. The price of The Network Connection's common stock
may fluctuate in response to announcements by it or its competitors regarding
sales of products and services, product enhancements and other corporate
developments. The Network Connection's results of operations, and accordingly
the price of its common stock, may be adversely affected by the following
factors:
* the company's ability to implement its new business strategy, which
requires obtaining and expending a great deal of capital to develop
compelling content and new applications for its interactive
entertainment and information technologies, and to penetrate new
markets;
* the company's ability to integrate, retain and manage the new
management team that it has put in place to lead it in the
implementation of its new business strategy;
* the company's ability to generate revenues from the markets in which
it is currently operating, such as the academic, cruise ship and hotel
markets, and to do so on a profitable basis;
* the company's ability to procure and provide desirable content
through its interactive entertainment and information systems; and
* the company's ability to negotiate more favorable termsfavorably resolve its issues with Carnival
Cruise Lines forrelating to recovery by Carnival of amounts paid to the
company, recorded as deferred revenue, the company's recovery of its
inventory costs, potential warranty/de-installation obligations,
discussions with respect to a new agreement between the company and
Carnival which would cover the installation of the company's latest
CruiseView(TM) technology on a Carnival ship and operation of its CruiseView(TM)
system pursuantcontractual terms
more favorable to the existingcompany than the previous agreement with
Carnival, including a longer-term and multiple ship arrangement.
While the company is optimistic about the discussions, there is no
assurance that it will be successful in reaching a mutually
satisfactory resolution of these issues and in securing a new, more
favorable long term contract with Carnival.
1516
U.S. WIRELESS. U.S. Wireless currently has no revenues because it is in the
process of developing networks to support its proprietary wireless location
technology, RadioCamera(TM), which is designed to enable wireless carriers and
others to provide their customers with location-based services and applications.
The companyU.S. Wireless developed its RadioCamera(TM)technology to capitalize on the
market that it expects to develop in response to the Federal Communication
Commission's mandate, which requires geolocation of mobile phone subscribers
dialing 911. The price of U.S. Wireless' common stock may be adversely affected
by the following factors:
* additional mandates or other legislation or regulation negatively
affecting the FCC mandate;
* the development of the market for wireless location technologies,
which currently is almost completely dependent upon the FCC mandate;
* results of the testing of its RadioCamera (TM) RadioCamera(TM)wireless
location-technology;
* the company'sU.S.Wireless' ability to build out a nationwide network to allow for
use of the RadioCamera (TM) system on a nationwide basis, (whichwhich will
require substantial capital commitment);commitment, and developing additional
applications and offerings of value-added services in connection with
the RadioCamera(TM) technology;
* the level of acceptance of the company'sU.S. Wireless' RadioCamera(TM)technology
as a solution to the FCC mandate and of any additional services the
company develops for use in connection with that technology;
* announcements by the companyU.S. Wireless or its competitors with respect to
system and service enhancements, strategic and other agreements, and
other corporate developments;
* competitors' abilities to develop and implement their systems in
response to the FCC mandate, and the level of acceptance of
competitors' systems, in the event that any are developed and
implemented; and
* the company'sU.S. Wireless' ability to obtain the financing necessary for it to
carry out its business plan.
An additional factor that may affect the volatility of the stock price of
either of our publicly-tradedpublicly traded partner companies is the extent to which there are
outstanding shares available for resale and derivative securities outstanding
that could convert to shares available for resale. The sale of a significant
number of shares of either of our publicly-tradedpublicly traded partner companies into the
market could cause a decrease in the price per share of that partner company.
THE NETWORK CONNECTION HAS A HISTORY OF LOSSES AND EXPECTS CONTINUED LOSSES.
The Network Connection generated revenues of $11.1 million and $18.8
million for the fiscal years ended October 31, 1997 and 1998, respectively, and
realized net losses for those years of $53.2 million and $7.2 million,
respectively. For the eight-month transition period ended June 30, 1999, The
Network Connection generated revenues of $0.9 million, and realized net income
of $2.3 million (thismillion. This net income was due entirely to reversal of prior accruals).accruals.
17
For the sixnine months ended DecemberMarch 31, 1999,2000, The Network Connection
16
generated
revenues of $5.7 million on which it realized a net loss of $1.4$4.3 million. Almost
all of the revenues generated in the nine months ended March 31, 2000 came from
the sale of 195 Cheetah(R) video servers in connection with the Georgia
Metropolitan Regional Education Services Agency (MRESA) Net 2000 project.
Without these sales, The Network Connection would have had a loss of $3.4$6.3
million for the six months
ended December 31, 1999.that period. As of DecemberMarch 31, 1999,2000, The Network Connection's
accumulated deficit was $84.4$87.4 million and working capital was $1.9$0.1 million.
Prior management of The Network Connection entered into an agreement with
Carnival Cruise Lines, which obligatesobligated The Network Connection to install
CruiseView(TM) systems on all ships designated by Carnival through December
2002. Since the installation of the CruiseView(TM) system on two Carnival cruise
ships, and beginning in the quarter ended March 31, 2000, the Network Connection
experienced costs in excess of those recoverable under the Carnival agreement.
Given these costs, and ongoing technical issues, The Network Connection has already installed systems on twonotified
Carnival ships.of its desire to renegotiate their agreement. During these discussions,
Carnival notified The costNetwork Connection in a letter dated April 24, 2000 that
it sought to terminate the agreement and sought to assert certain remedies
thereunder. The Network Connection and Carnival are in discussions seeking to
resolve issues under the agreement regarding recovery of building and installing CruiseView(TM) systems onamounts paid by
Carnival ships pursuant to that agreement may exceed therecorded as deferred revenue, The Network Connection
can earn under the agreement. Revenue is derived from up-front payments received
byConnection's recovery of its
inventory costs, potential warranty/de-installation obligations and other
matters. Concurrently, The Network Connection when it installsand Carnival are in discussions
with respect to a new agreement that would cover the systeminstallation of the latest
CruiseView(TM) technology on a Carnival ship, and payments received
thereafter through a revenue share agreement. If Carnival requests thatcontractual terms more
favorable to The Network Connection buildthan the previous agreement, including a
longer-term and install CruiseView(TM) systems on additional ships
under the agreement, The Network Connection could lose money, which would have a
negative effect on its working capital.multiple ship arrangement. While The Network Connection is
currently
endeavoring to renegotiateoptimistic about the terms of the agreement with Carnival, but givesdiscussions, there is no assurance that it will be
successful in doing so. In January, 2000 The
Network Connection received notice fromreaching a mutually satisfactory resolution of the Carnival that it desires that The
Network Connection installissues
and in securing a CruiseView(TM) system on a third Carnival ship;
however, The Network Connection has not yet received the required deposit and
has not taken any action toward the third ship installation.new, more favorable long-term contract with Carnival.
The Network Connection has received only threefour orders for installation of
its InnView(TM) system.
We do not believe that The Network Connection's sales to date are
sufficient to determine whether there is meaningful demand for its products. The
Network Connection intends to continue to devote significant resources to its
sales and marketing efforts in an effort to promote interest in its products.
There is no assurance that The Network Connection will be successful with these
efforts or that significant market demand for its products will ever develop.
DELISTING OF THE COMMON STOCK OF THE NETWORK CONNECTION FROM TRADING ON THE
NASDAQ SMALLCAP MARKET WOULD REDUCE THE MARKETABILITY OF OUR HOLDINGS IN THE
NETWORK CONNECITON.
The Network Connection common stock is listed for trading on the Nasdaq
SmallCap Market under the symbol "TNCX." 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. At March 31, 2000 The Network Connection
did not satisfy the minimum level of net tangible assets required to be listed
($2.0 million), nor did The Network Connection have sufficient non-affiliate
market capitalization ($35.0 million) or net income ($500,000 for two of the
past three years). The Network Connection is seeking additional capital and
attempting to effect other equity transactions to, among other things, increase
its net tangible assets to at least the minimum level required. There can be no
18
assurance that it will be able to raise this additional capital, or if it is
able to raise additional capital, that such capital will be on terms
satisfactory to it, or to effect other equity transactions currently under
consideration. If The Network Connection fails to satisfy the criteria for
continued listing, its common stock may be delisted.
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." In this event, it
may 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. A decline in the market value of
The Network Connection will not impact our financial position. However, such a
decline would likely affect our stock price.
MANY OF OUR PARTNER COMPANIES OPERATE IN MARKETS CHARACTERIZED BY RAPID
TECHNOLOGICAL CHANGE.
The markets in which many of our partner companies operate are
characterized by rapid technological change, frequent new product and service
introductions and evolving industry standards. Significant technological changes
could render their existing technologies, products and services obsolete. Growth
and intense competition in the networking solutions, telecommunications and
e-commerce markets exacerbate these conditions. If our technology-oriented
partner companies are unable to successfully respond to these developments or do
not respond in a cost-effective way, our business, financial condition and
operating results could be adversely affected. To be successful, these partner
companies must adapt to their rapidly changing markets by continually improving
the responsiveness, services and features of their products and services and by
developing new features to meet the needs of their customers. Our success will
depend, in part, on the abilities of our partner companies to enhance their
existing products and services and develop new offerings and technology that
17
address the needs of their customers. Our technology-oriented partner companies
will also need to respond to technological advances and emerging industry
standards in a cost-effective and timely manner.
OUR TECHNOLOGY ORIENTED PARTNER COMPANIES' PRODUCTS COULD EXPERIENCE TECHNICAL
DIFFICULTIES.
The products of our technology-oriented partner companies are highly
specialized and involve intricate technologies and electronic components that
may be subject to technical difficulties. These technical difficulties could
occur at any time as a result of component malfunction or some other reason.
Although our technology oriented partner companies generally utilize quality
control procedures and test products before marketing them, there is no
assurance that all defects will be identified. We believe that reliability will
be an important consideration for customers of our partner companies. Failure to
detect and prevent defects and design flaws in the products of these partner
companies could adversely affect our business, financial condition and operating
results.
THE SUCCESS OF OUR TECHNOLOGY-ORIENTED PARTNER COMPANIES IS DEPENDENT TO A LARGE
DEGREE ON THE ACCEPTANCE OF E-COMMERCE AS A MEANS OF DOING BUSINESS.
The success of our technology-oriented partner companies is dependent on
the continued growth of intranets and the Internet as media for commercial
transactions. The development of the e-commerce market is in its early stages.
19
If widespread commercial acceptance of e-commerce and use of the Internet does
not continue to develop, or if intranets and the Internet do not develop as
effective media for providing products and services, our technology-oriented
partner companies may not succeed.
A number of factors could impede acceptance of e-commerce and the Internet
as a medium for doing business, including:
* the unwillingness of businesses to shift from traditional processes
to intranet-based and/or Internet-based processes;
* the failure to continue the development of the necessary network
infrastructure for substantial growth in usage of the Internet;
* increased government regulation or taxation may adversely affect the
viability of intranets and the Internet as media for commercial
transactions; and
* the growth in bandwidth may not keep pace with the growth in on-line
traffic, which could result in slower response times for the users of
intranet-based and Internet-based commercial transactions.
18
THE UK LOTTERY PROJECT IS A START-UP VENTURE, HAS GENERATED NOINSIGNIFICANT
REVENUES SINCE LAUNCH, IS BASED ON A GAME NEVER TRIED IN THE UK, AND MUST
GENERATE SUFFICIENT CASH FLOW TO PAY A LARGE WEEKLY CONTRACTUAL OBLIGATION.
Our UK lottery project is a start-up venture. It began operations on March
27, 2000, and was officially launched on April 4, 2000 in conjunction with the
start of a media campaign. The UK lottery project has not begun operations,
has not generated anyinsignificant
revenues to date, and we do not expectcan give no assurance that it will ever generate
any
revenues, nor can we give any assurance that it ever will, until late in the
first half of calendar year 2000.meaningful revenues. Our partner companies involved in the lottery project are inhave
installed the processapproximately 3,500 terminals that complete Phase I of building the
foundation on whichproject, and continue to launchpromote the lottery business.and redistribute unproductive
terminals to other retail outlets in an effort to maximize ticket sales. The
lottery business and its prospects, therefore, must be considered in light of
the risk, expense and difficulties frequently encountered by companies in early
stages of development. In addition, the game on which the lottery will beis based has
never been offered in the UK. We therefore have no basis on which to determine
the level of acceptance, if any, that the game will achieve. If our lottery
partner companies are unsuccessful in carrying out any pre-launchpost-launch tasks, or, in
the event that the lottery does not achieve a significant degree of acceptance,
the business of our lottery partner companies would be materially adversely
affected, which, in turn, would have a material adverse effect on our business.
We currently anticipate that the lottery enterprise will require funding of
approximately $300,000 per month in the three month period ending September 30,
2000 to continue operations.
Additionally, GTL Management Limited, a subsidiary of ours, entered into an
agreement with International Lottery and Totalizator Systems, Inc. pursuant to
which International Lottery and Totalizator Systems will provide certain
facilities management services and technological support in connection with the
networking hardware, software and terminals that we, (throughthrough another subsidiary)subsidiary,
purchased from them and that will serve as the infrastructure of the lottery.
This agreement requires that we pay them $72,000 per week, plus additional
amounts based on any terminals in excess of 3,500 being installed and a
percentage of average daily sales. This obligation commences when, if ever,commenced on March 27, 2000
with the sale of the first ticket sales commence in connection with the lottery. The inability
of the lottery to generate revenues sufficient to cover this obligation would
adversely affect the business of our lottery partner companies.
WE HAVE WRITTEN OFF OUR LOAN TO OUR MEXICAN ENTERTAINMENT CENTER PARTNER COMPANY
AND MAY NOT RECEIVE ANY VALUE FOR THE SLOT MACHINES USED AT THE CENTER.
We provided funding to Donativos S.A. de C.V., the entity through which the
Mexican gaming center operation is carried out, in the form of a loan of
approximately $1.6 million to develop the center. We also purchased
approximately $900,000 worth of slot machines, which we in turn leased to
Donativos for use in the center. To date, we have received no payments on the
loan or in connection with the lease. In addition, our relationship with the
majority shareholder of Donativos, a Mexican national, has broken down. We have
written off our loan to Donativos and we are currently seeking to sell our 24.5%
equity interest in that company. It is unlikely that we will be able to find a
buyer for our equity interest in Donativos, and, if we do, very likely that any
amount we receive for the interest will be far less than the amount of our
investment. Additionally, we have become aware that the Loteria Nacionale, the
governmental agency that granted the majority shareholder of Donativos the
license to run the entertainment center, is scrutinizing the business. If the
Loteria takes away the license or otherwise shuts down the entertainment center,
it would be extremely unlikely that we will be able to find a buyer for our
1920
equity interest in Donativos, if at all. A closure would also make it more
difficult for us to repossess our slot machines, an action that we are currently
considering. If we decide to repossess the slot machines, we may not be
successful in doing so. In addition, the process of repossession may require
costly litigation in Mexico. Furthermore, in the event that we are successful in
repossessing the slot machines, the value, if any, we could receive from selling
them would be less than what we paid for them.
ALL OF OUR PARTNER COMPANIES COULD BE ADVERSELY AFFECTED BY COMPETITION IN THE
MARKETS IN WHICH THEY OPERATE.
The markets in which our partner companies operate are highly competitive.
Many of the competitors of our partner companies have longer operating histories
and significantly greater financial, technical, marketing and other resources
than they do. These competitors are therefore able to respond more quickly and
efficiently to new or changing opportunities, technologies and customer
requirements. For instance, with respect to our UK lottery project, the National
Lottery of the United Kingdom has been operating a weekly lottery for at least
five years and is extremely well funded. The National Lottery does not currently
operate a lottery game similar to the lottery we expect to offer, but it would
have a distinct competitive advantage if it chose and received the necessary
regulatory approval to do so. If our partner companies' products and services do
not achieve a significant level of acceptance in the marketplace, or their
competitors develop products and services rendering theirs obsolete, our partner
companies, and, in turn, we, would be adversely affected.
INTELLECTUAL PROPERTY ISSUES, GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES THAT
COULD AFFECT OUR PARTNER COMPANIES.
* INTELLECTUAL PROPERTY. Our partner companies utilize certain
proprietary technologies and other intellectual property that are
valuable to them. They protect this intellectual property in a
variety of ways, such as through patent, trademark and copyright law.
U.S. Wireless has filed 14 patent applications with the Patent &
Trademark Office and has received notices of allowance for two of
these applications. There is no assurance that any of the remaining
patents will be granted. In addition, our partner companies rely on
confidentiality agreements with key employees to prevent disclosure
of important intellectual property to third parties. There is no
assurance that any of these protections will prove sufficient to
prevent third parties from using our partner companies' intellectual
property either through legal or illegal means. Use by third parties
of intellectual property of one of our partner companies could
adversely affect that partner company's business. In addition, we
give no assurance that any particular aspect of any of our partner
companies' intellectual property will not be claimed to infringe the
intellectual property rights of a third party. Intellectual property
infringement litigation for or against any of our partner companies
would likely have an adverse effect on that partner company's
business.
20
* GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES. Our partner companies
are subject, both directly or indirectly, to various laws and
governmental regulations relating to their businesses. Our partner
companies that operate abroad are subject to the laws and regulations
of foreign countries with which we are not familiar. We believe that
our partner companies maintain compliance with these laws and
regulations, and that, while there is expense incurred in doing so,
these laws and regulations do not have a material impact on the
operations of our partner companies; however, as a result of rapid
technology growth and other related factors, laws and regulations may
be adopted which significantly impact our partner companies'
businesses, and, in turn, our business.
21
USE OF PROCEEDS
We will not receive any proceeds from the sale of the Class A Common Stock
offered pursuant to this prospectus by the selling stockholders. We may receive
exercise proceeds from the issuance of shares to the selling stockholders upon
exercise of the warrants held by certain of the selling stockholders, which
proceeds would be used for general working capital.
SELLING SECURITY HOLDERS
RECENT FINANCING.FINANCING
On February 16,June 8, 2000, Advantage Fund II Ltd. and Koch Investment Group Ltd.
purchased an aggregate of $10,000,000$4,000,000 of Series C 5% Convertible Preferred Stock
and warrantssecured convertible notes from Global Technologiesus in a
private placement transaction. Advantage and Koch received 600 and 400 shares, respectively, of preferred stocktwo notes each, which
may be converted into our Class A Common Stock. In addition,Stock at a conversion price of $2.00
per share, subject to customary anti-dilution adjustments. As described below,
Advantage
received warrants to acquire 60,555 shares of our Class A Common Stock and Koch received warrants in connection with a partial redemption of
the notes on July 7, 2000. Only a portion of the shares underlying the notes
that remain outstanding and all of the shares underlying the warrants issued in
connection with stock redemption are being offered pursuant to acquire 40,370 sharesthis prospectus
as more fully described below.
The notes mature on December 7, 2001 and bear interest at 6% per annum
payable at maturity or on conversion in cash or stock, but only if a
registration statement covering such stock has been filed and is effective.
Stock is valued for interest payment purposes at the average of our Class A Common Stock.the last sale
prices per share as reported by Nasdaq for each of the five days preceding the
date on which the interest payment is made. The notes are redeemable by us at
any time and from time to time, for a premium that increases with the length of
time that the notes are outstanding, and the issuance of warrants or stock, also
based on how long the notes are outstanding. We redeemed $2.0 million of the
aggregate principal amount of the notes on July 7, 2000 for a total redemption
cost of approximately $2.2 million and the issuance of certain warrants. The
warrants issued to Advantage and Kochin connection with the redemption are exercisable at $17.748 and
expire on February 15, 2005. The preferred stock carries a 5% cumulative
dividend payable quarterlyfor, in cash or Class A Common Stock. As of the
date of
this prospectus, the preferred stock is convertible intoaggregate, 125,000 shares of our Class A Common Stock at $17.748an exercise price of $4
per share. On or about November 17, 2000, and each three
months thereafter whileshare until July 7, 2004. The notes were secured by a pledge of 1,000,000 of
our shares of the preferredcommon stock of U.S. Wireless.
We are outstanding,obligated to register the conversion price will reset in accordance with the formula set forth in the
Certificateshares of Designations, Rights, Preferences and Limitations of Series C 5%
Convertible Preferred Stock of Global. The conversion price is also subject to
adjustment pursuant to the antidilution provisions set forth in such
certificate.
As long as our Class A Common Stock
is listed for trading on Nasdaq, we may
not issue onissuable upon any conversion, redemption or payment of the preferred stocknotes, as well as any
shares underlying the warrants issued in connection with the partial redemption
of such notes described above. The remaining principal amount of the notes is
currently convertible into, in the aggregate, 1,000,000 shares of our Class A
Common Stock. Pursuant to an agreement with Advantage and Koch entered into in
connection with the redemption described above, we are not currently registering
more than 19.999%125,000 of the outstandingshares of our Class A Common Stock immediately prior toissuable upon the
saleconversion, redemption or payment of the preferred
stock without obtaining prior stockholder approval in ordernotes because we intend to comply with
Nasdaq listing requirements. As an inducement to purchaseredeem the
preferred stock,
21
Irwin L. Gross, our Chairman and Chief Executive Officer, irrevocably agreed to
vote his shares in favor such approval, if necessary. Mr. Gross currently owns
approximately 20%remaining principal amount of the outstanding shares of Class A Common Stock.
Any shares of preferred stock outstanding three years fromnotes within the funding date
automatically convert into shares of Class A Common Stock at the then applicable
conversion price. The preferred stock is redeemable under certain circumstances
in which case additional warrants wouldnext 30 days. In connection
with any such redemption, we shall be issuedrequired to issue to the holders of the
preferred stock.
In addition,notes, in the aggregate, 125,000 shares of our Class A Common Stock, in which
case the shares to be sold in the offering by each of the holders of the notes
would represent the sum of the shares underlying the warrants discussed above
and the shares issued in connection with such redemption. If we fail to so
redeem the notes, we will amend this Registration Statement or file an
additional Registration Statement to include the estimated number of additional
shares of our Class A Common Stock issuable upon any conversion, redemption or
payment of the notes.
22
Neither holder of the preferred stocknotes or related warrants may not convert its
securitiesthem into or
exercise them for shares of our common stockClass A Common Stock if after the conversion or
exercise, such holders,holder, together with any of its affiliates, would beneficially
own over 4.999% of the outstanding shares of our common stock. This restriction
may be waived by each holder on not less than 61 days' notice to us.
SinceOn February 16, 2000, Advantage and Koch purchased $10 million of our
Series C 5% Convertible Preferred Stock. 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 numberconversion or payment of the notes more than 2,065,000
shares of our commonClass A Common Stock (approximately 19.999% of the outstanding
Class A Common Stock immediately prior to the sale of the notes) less any
shares of that stock issuable uponpreviously issued (i) on conversion of the preferred stock will change based upon fluctuations of the market price of
our common stock prior to a conversion, the actual number of shares of our
common stock that will be issued under the preferred stock, and consequently the
number of shares of our common stock that will be beneficially owned by
Advantage or Koch cannot be determined at this time. Because of this fluctuating
characteristic, we agreed to register a number of shares of our common stock
that exceeds the number of our shares of common stock currently beneficially
owned by Advantage or Koch. The number of shares of our common stock listed in
the table below as being beneficially ownedSeries C
Preferred Stock held by Advantage and Koch includesor (ii) the sharesexercise of warrants
received in connection with any redemption of such preferred stock at an
exercise price less than the closing sale price of a share of our common stock that are issuable to each of them, subject toClass A Common
Stock on February 15, 2000. The Class A Common Stock underlying the 4.999% limitation, upon conversion of their preferred stock and exercise of
their warrants. However, the 4.999% limitation wouldSeries C 5%
Convertible Preferred Stock is not prevent Advantage or
Koch from acquiring and selling in excess of 4.999% of our common stock through
a series of conversions and salesbeing offered under the preferred stock and acquisitions and
sales under the warrants.this prospectus.
Genesee International Inc., of which Mr. Donald R. Morken is the
controlling stockholder, has voting and investment power over the securities
beneficially owned by Advantage. Koch Industries, Inc., of which Messrs. Charles
Koch and David Koch are controlling stockholders, have voting and investment
power over the securities beneficially owned by Koch.
In connection with the February 2000 financing,issuance of the convertible secured notes, designees
of Reedland Capital Partners, a division of Financial West Group, received
warrants to purchase 50,000an aggregate of 20,000 shares of our common stock at
$17.835$5.8125 per share for itsReedland Capital Partners' role as sales agent. The 50,00020,000
shares underlying these warrants are also being offered to the public by means
of this prospectus.
SELLING STOCKHOLDERS.STOCKHOLDERS
The following table sets forth for each selling stockholder (i)(a) the name of
the selling stockholder, (ii)(b) the number of shares of our Class A Common Stock
owned by the selling stockholder before the offering (in some cases, as noted in
the footnotes to the table, some or all shares underlie convertible preferred
stock or warrants, and/or secured convertible notes held by the selling
stockholder), (iii)(c) the number of shares
22
of our Class A Common Stock offered by
the selling stockholder under this prospectus, (iv)(d) the number of shares of our
Class A Common Stock that will be owned by the selling stockholder assuming that
all shares of our Class A Common Stock registered hereby on that stockholder's
behalf are sold, and (v)(e) the percentage of our outstanding shares of Class A
Common Stock that those remaining shares will represent. Each of the selling
stockholders is a party to an agreement by which we agreed to register their
shares of our Class A Common Stock. Registration of these shares enables the
selling stockholders to sell the shares from time to time in any manner
described in "Plan of Distribution" below, but does not necessarily mean that
the selling stockholders will sell all or any of the shares.
23
PERCENTAGE OF
NUMBER OF SHARES OUTSTANDING CLASS A
NUMBER OF SHARES NUMBER OF BENEFICIALLYSHARES A COMMON STOCK
BENEFICIALLY BENEFICIALLY BENEFICIALLY
NAME OF OWNED BEFORE NUMBER OF SHARES TO BE OWNED AFTER BENEFICIALLY OWNED NAME OFAFTER
SELLING STOCKHOLDER BEFORE OFFERING BE SOLD IN OFFERING OFFERING AFTER OFFERING(2)
- --------------------------- --------------- ----------------------OFFERING (3)
------------------- -------- ------------------------------------ -------- ------------
Advantage Fund II, Ltd. (1)(3) 533,614 841,551521,612(1) 125,000(2) -0- *
Koch Investment Group Ltd. (1)(3) 533,614 561,034521,612(1) 125,000(2) -0- *
Sven JoestingRobert K. Schacter (4) 22,500 22,50047,600 13,600 -0- *
The Shaar Fund, Ltd. (5) 131,250 131,250Thomas J. Griesel (4) 11,900 3,400 -0- *
Emden Consulting Corp. (6) 37,500 37,500Financial West Group (4) 3,500 1,000 -0- *
Waterton Group, LLC (6) 37,500 37,500Donald & Co. Securities, Inc. (4) 2,100 600 -0- *
D.H. Blair Investment Banking (7) 37,650 17,850 19,800 *
Stanley S. Arkin (7) 124 124Andrew Reiser (4) 4,200 1,200 -0- *
Hyman L. Schaffer (7) 16 16 -0- *
Jeffrey M. Kaplan (7) 16 16 -0- *
Howard J. Kaplan (7) 10 10 -0- *
Mark S. Cohen (7) 10 10 -0- *
Robin Breittner (7) 379 379 -0- *
Brian L. Frank (7) 394 394 -0- *
Rachel Family Partnership (7)(11) 86,189 34,340 51,849 *
Gitel Family Partnership (7) 34,338 34,338 -0- *
Alfred S. Palagonia (7) 28,570 28,570 -0- *
Martin A. Bell (7)(9) 21,000 21,000 -0- *
Alison D. Brown (7) 300 300 -0- *
J. Morton Davis (7) 40,324 17,850 22,474 *
David Nachamie (7) 500 500 -0- *
Michael Siciliano (7) 500 500 -0- *
Brain A. Wasserman (7)(10) 10,500 10,500 -0- *
Kenton E. Wood (7) 2,000 2,000 -0- *
Steven R. Monte (7)Edward F. Duffy (4) 700 200 200 -0- *
Reedland Capital Partners (8) 50,000 50,000 -0- *
- ----------
* Less than 1%.
(1) Pursuant to the terms of our recent financing with Advantage and Koch, we
are obligated to include in the registration statement covering this
prospectus suchThe number of shares of our Common Stock listed as being beneficially owned
by Advantage and Koch includes the shares of our Class A Common Stock equalthat
are issuable to each of them, subject to the sum4.999% limitation described
above, upon conversion of (i) 200%their preferred stock, exercise of their warrants
and conversion, payment and/or redemption of their notes. However, the
4.999% limitation would not prevent Advantage or Koch from acquiring and
selling in excess of 4.999% of our common stock through a series of
conversions and sales under the preferred stock and acquisitions and sales
under the warrants, and conversions and sales of the notes.
(2) The number of shares to be sold in the offering by each of Advantage and
Koch represents (i) 62,500 shares issuable upon the conversion, payment
and/or redemption of the secured convertible notes that each of them
purchased from us on June 8, 2000 in the transaction described above in
"Recent Financing" and (ii) 62,500 shares issuable upon the exercise of the
warrants issued in connection with the partial redemption of the notes
described above in "Recent Financing". We currently intend to redeem the
remaining notes outstanding within 30 days in which event we would be
required to issue, in the aggregate, 125,000 shares of our Class A Common
Stock issuable upon
conversion in fullto the holders of the Series C Convertible Preferred Stock, assuming
fornotes in connection with such purposes that such preferredredemption, in
which case the 125,000 shares are outstanding for three
yearsto be sold in the offering by each of
Advantage and that such conversion occurred on March 17, 2000,Koch would represent the date of
filing of this registration statement with the Commission, and (ii) the
number of shares of Class A Common Stock issuable upon exercise in fullsum of the callableshares underlying the
warrants held bydiscussed above and the shares issued in connection with such
selling stockholders.
23
(2)redemption.
(3) Percentages are based on 10,674,42110,434,334 shares of Class A Common Stock
outstanding as of March 10,July 5, 2000.
(3) The number(4) Designees of shares beneficially owned by Advantage and Koch respectively
represent the number of shares underlying their warrants plus the number of
shares underlying their Series C Convertible Preferred Stock. Advantage and
Koch may not convert their Series C Convertible Preferred Stock if doing so
would cause them to beneficially own more than 4.999% of the outstanding
shares of common stock on a fully converted basis. For a more detailed
discussion of this restriction, please read about our "Recent Financing"
above.
(4) Sven Joesting was issued his shares of our Class A Common Stock on July 28,
1999 as a fee for investment banking services provided to us.
(5) The Shaar Fund, Ltd. ownsReedland Capital Partners, which received warrants exercisable
for 131,250an aggregate of 20,000 shares of our Class A Common Stock at an
exercise price of $2.00$5.8125 per share. These
warrants expire on May 10, 2004.
(6) Each of Emden Consulting Corp. and Waterton Group, LLC owns warrants
exercisable for 37,500 shares of our Class A Common Stock at an exercise
price of $5.25 per share. These warrants expire on December 23, 2004. Each
of Emden and Waterton was issued these warrantsshare in consideration of certain financial
advisory services provided to us. (7) Each stockholder was issued shares upon the exercise of Unit Purchase
Options issued on March 6, 1995 in connection with the public offering of
2,800,000 Units. Each Unit consisted of one share Class A Common Stock and
two warrants exercisable into Class A Common Stock. The shares have
registration rights, and have not previously been registered.
(8) Reedland owns warrants exercisable for 50,000 shares of our Class A Common
Stock at an exercise price of $17.835 per share. These warrants expire on February 15, 2005. Reedland was issued these warrants in consideration of
certain financial advisory services provided to us.
(9) Mr. Bell disclaims beneficial ownership of 375,000 shares of Class A Common
Stock owned by First Lawrence Corp. of which he is an officer and minority
shareholder.
(10) Mr. Wasserman disclaims beneficial ownership of 375,000 shares of Class A
Common Stock owned by First Lawrence Corp. of which he is a minority
shareholder.
(11) Includes 51,849 shares reported in the Schedule 13G (Amendment No. 2) of
Ruki Renov filed October 25, 1999, as adjusted for our 3:2 stock dividend,
upon which we have relied in making this disclosure. Mrs. Renov controls
the Rachel Family Partnership.June 8, 2004.
PLAN OF DISTRIBUTION
The selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Class A 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 purchasers;
* 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;
24
* privately negotiated transactions;
24
* broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
* 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,or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser)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.
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 of 1933 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.
We are required to pay all fees and expenses incident to the registration
of the shares, including up to $7,500$15,000 of the fees and disbursements of counsel
to the selling stockholders. We have agreed to indemnify the selling
stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
DISCLOSURE OF THE SEC'S POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
Our bylaws provide that we will indemnify our directors, officers,
employees and agents to the fullest extent permitted by Delaware law. In
addition, our certificate of incorporation provides that, to the fullest extent
permitted by Delaware law, our directors will not be liable for monetary damages
for breach of the directors' fiduciary duty to us and our stockholders. This
provision of the certificate of incorporation does not eliminate the duty of
care. In appropriate circumstances, equitable remedies such as an injunction or
other forms of non-monetary relief are available under Delaware law. This
provision also does not affect a director's responsibilities under any other
laws, such as the federal securities laws.
Each director will continue to be subject to liability for:
* breach of the director's duty of loyalty to us;
* acts or omissions not in good faith or involving intentional
misconduct;
* knowing violations of law;
* any transaction from which the director derived an improper personal
benefit;
* improper transactions between the director and us; and
* improper distributions to stockholders and improper loans to
directors and officers.
25
In addition to the protections provided by our bylaws and certificate of
incorporation, we have entered into employment agreements with certain of our
executive officers that provide them with indemnity against expenses and losses
incurred in connection with certain with certain claims brought against them. We
maintain approximately $20.0 million of coverage under a directors' and
officers' liability insurance policy.
There is no pending litigation or proceeding involving a director or
officer as to which indemnification is being sought. We are not aware of any
pending or threatened litigation that may result in claims for indemnification
by any director or officer. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to our directors, officers and
control persons pursuant to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act of 1933, and is, therefore,
unenforceable.
LEGAL MATTERS
The validity of the shares being offered pursuant to this prospectus will
be passed upon for us by Schnader Harrison Segal & Lewis LLP, Philadelphia,
Pennsylvania.
EXPERTS
The consolidated financial statements of Global Technologies, Ltd. as of
June 30, 1999 and October 31, 1998, and for the transition period ended June 30,
1999 and each of the years in the two year period ended October 31, 1998 have
been incorporated by reference in this prospectus in reliance upon the report of
KPMG LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
----------
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by Globalus or the selling shareholders. This
prospectus does not constitute an offer to sell or a solicitation of an offer to
buy to any person in any jurisdiction in which such offer or solicitation would
be unlawful or to any person to whom it is unlawful. Neither the delivery of
this prospectus nor any offer or sale made hereunder shall, under any
circumstances, create any implication that there has been no change in theour
affairs of Global or that information contained herein is correct as of any time
subsequent to the date hereof.
26
PART II.II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses of the offering, which are to be borne by Global,us, are estimated as
follows:
SEC registration fee $ 8,733.69425.46
Legal services and expenses 25,000.0010,000.00
Accounting services 5,000.00
Miscellaneous 5,000.00
---------------------
Total $ 43,733.69
===========$20,425.46
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law, we have broad
powers to indemnify itsour directors and officers against liabilities they may
incur in such capacities, including liabilities under the Securities Act.
Our Certificate of Incorporation provides for the elimination of liability
for monetary damages for breach of the directors' fiduciary duty of care to us
and itsour stockholders. These provisions do not eliminate the directors' duty of
care and, in appropriate circumstances, equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Delaware law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to us, for acts or omissions not in good faith or
involving intentional misconduct, for knowing violations of law, for any
transaction from which the director derived an improper personal benefit, and
for payment of dividends or approval of stock repurchases or redemptions that
are unlawful under Delaware law. The provision does not affect a director's
responsibilities under any other laws, such as the federal securities laws or
state or federal environmental laws.
In addition to the protections provided by our bylaws and certificate of
incorporation, we have entered into employment agreements with certain of our
executive officers that provide them with indemnity against expenses and losses
incurred in connection with certain with certain claims brought against them. We maintain
approximately $20.0 million of coverage under a directors' and officers'
liability insurance policy.
II-1
ITEM 16. EXHIBITS
Exhibit No. Description
- ----------- -----------
4.1(4) Convertible Preferred Stock4.1* Private Placement Purchase Agreement among Registrant and the
Investors signatory thereto, dated as of February 16,June 8, 2000
4.2(4) Certificate4.2* Form of Designations, Rights, Preferences and LimitationsSecured Convertible Note issued to Investors
4.3* Form of Series C
4.3(4) Callable Warrant to be issued to holders of Series CSecured Convertible
Preferred StockNotes in the event of Global
4.4* Registration Rights Agreement dated February 16, 2000 between the
Registrant and the investors signatory thereto
4.5(1) Warrant Agreement, dated as of March 7, 1995 among the
Registrant, D.H. Blair and American Stock Transfer and Trust
Company
4.6(2) Amendment to March 7, 1995 Warrant Agreement entered into among
the Registrant, D.H.and American Stock Transfer and Trust Company
4.7(2) Warrant Agreement, dated as of October 24, 1996 among the
Registrant, D.H. Blair and American Stock Transfer and Trust
Company
4.8(2) Amendment to October 24, 1996 Warrant Agreement among the
Registrant, D.H. Blair and American Stock Transfer and Trust
Company
4.9(1) Form of Underwriter's Unit Purchase Option
4.10(3) Stock Purchase Warrant Issued to The Shaar Fund Ltd. dated May
10, 1999
4.11(3) Registration Rights Agreement dated May 6, 1999 between the
Registrant and The Shaar Fund Ltd.certain redemptions
5.1* Legal Opinion of Mesirov Gelman Jaffe CramerSchnader Harrison Segal & Jamieson,Lewis LLP
23.1* Consent of Mesirov Gelman Jaffe CramerSchnader Harrison Segal & Jamieson,Lewis LLP (included in legal
opinion filed as Exhibit 5.15.1)
23.2* Consent of KPMG LLP
- ----------
* Filed herewith
(1) Incorporated by reference from the Registrant's Registration Statement on
Form SB-2, Registration No. 33-86928.
(2) Incorporated by reference from the Registrant's Registration Statement on
Form S-3, Registration No. 333-14013.
(3) Incorporated by reference from the Registrant's Transition Report on Form
10-KSB for the transition period ended June 30, 1999, filed with the
Securities and Exchange Commission on October 28, 1999, File No. 0-25668.
(4) Incorporated by reference from the Registrant's Current Report on Form 8-K
dated February 16, 2000, filed with the Securities and Exchange Commission
on February 28, 2000, File No. 0-25668.
II-2herewith.
II-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 (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to
reflect in the prospectus any facts or events arising after the effective date
of 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; (iii) 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 clauses (1)(i) and (1)(ii) above do not apply if
the information required to be included in the post-effective amendment by those
paragraphs is contained in periodic reports filed 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.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of those securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered that remain unsold at the end of the
offering.
II-3II-2
SIGNATURES
Pursuant to 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 for filing on Form S-3 and has duly caused this registration
statementRegistration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Philadelphia,
Commonwealth of Pennsylvania on March
17,July 10, 2000.
GLOBAL TECHNOLOGIES, LTD.
Date: March 17,July 10, 2000 By: /s/ Irwin L. Gross
----------------------------------------------------------------------------------
Irwin L. Gross, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statementRegistration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Date:Date Signature and Title
- --------- -------------------
March 17,July 10, 2000 /s/ Irwin L. Gross
----------------------------------------------------------------------------------
Irwin L. Gross, Chief Executive Officer and
Chairman of the Board of Directors
(principal executive officer)
March 17,July 10, 2000 /s/ Patrick J. Fodale
----------------------------------------------------------------------------------
Patrick J. Fodale, Vice President and Chief
Financial Officer (principal financial and
accounting officer)
March 17,July 10, 2000 /s/ James W. Fox
-------------------------------------------
James W. Fox, President, Chief Operating
Officer and Director
July 10, 2000 /s/ Charles T. Condy
----------------------------------------------------------------------------------
Charles T. Condy, Director
March 17,July 10, 2000 /s/ M. Moshe Porat
----------------------------------------------------------------------------------
M. Moshe Porat, Director
March 17,July 10, 2000 /s/ Stephen Schachman
----------------------------------------------------------------------------------
Stephen Schachman, Director
II-4II-3