SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) March 5, 2001
Global Technologies, Ltd.
(Exact Name of Registrant as specified in its charter)
Delaware 0-25668 86-0970492
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
The Belgravia, 1811 Chestnut Street, Suite 120, Philadelphia, PA 19103
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (215) 972-8191
(Former Name or Former Address, if Changed Since Last Report)
INFORMATION TO BE INCLUDED IN THIS REPORT
ITEM 2. DISPOSITION OF ASSETS
On March 7, 2001, The Network Connection, Inc., a Georgia corporation
("TNCi") and a majority-owned subsidiary of Global Technologies, Ltd., a
Delaware Corporation (the "Registrant"), announced that it had re-evaluated
certain aspects of its business and would be focusing its efforts on the
operations of TNCi UK Ltd., a company incorporated under the laws of England and
Wales ("TNCi UK"), and discontinuing and suspending its domestic operations. As
explained in the Current Report on Form 8-K filed by TNCi on March 7, 2001, TNCi
has discontinued its education and corporate training operations, suspended its
hotel operations and is focusing on train operations.
In connection with this discontinuance and suspension of domestic
operations, TNCi has determined it necessary to write off all of the intangible
assets on its balance sheet, which consisted of goodwill and certain
intellectual property. The amount to be written off is approximately $5.8
million. In addition, based on the impairment of certain fixed assets of TNCi,
consisting primarily of installed interactive entertainment systems at hotel
properties, resulting from the determination to suspend hotel operations, TNCi
has written down the value of these assets as reflected on its balance sheet by
approximately $3.3 million.
On March 2, 2001, TNCi UK's English directors provided a letter to TNCi's
Chairman expressing their concerns regarding the solvency of TNCi UK, and
explaining that under English law statutory directors can be personally and
criminally liable for operating a company that is insolvent, i.e., that such
directors have an obligation to put an entity the solvency of which is
questionable into a voluntary dissolution. The letter explained that unless
funding was received by March 9, 2001, they were going to put TNCi UK into
receivership.
The Registrant and TNCi have been pursuing capital from many third party
sources to finance the operations of TNCi UK. These efforts included retaining
Dawnay Day Corporate Finance Limited ("Dawnay Day"), a reputable London-based
investment bank, to find investors for TNCi UK. After an extensive search and
repeated reductions of TNCi UK's valuation, Dawnay Day has been unable to secure
an investment.
To permit TNCi UK to fund ongoing operations and avoid insolvency and
receivership, on March 9, 2001, the Registrant acquired 600 cumulative
redeemable preferred shares of TNCi UK (the "Preferred Shares"). The Registrant
has committed to pay $600,000 for the Preferred Shares, $50,000 of which was
paid to TNCi UK through March 15, 2001. The remainder of the purchase price is
evidenced by a 9% note payable over the next 150 days.
The Preferred Shares have a 9% cumulative dividend payable in cash or
in-kind, and each Preferred Share has a liquidation preference and redemption
price of $1,000, is convertible into one ordinary share and votes as if it were
an ordinary share. The Preferred Shares have customary anti-dilution protection.
Prior to this transaction, TNCi UK was a wholly owned subsidiary of TNCi,
of which the Registrant currently owns approximately 70%. The 600 Preferred
Shares acquired by the Registered represent 60% of the outstanding voting equity
of TNCi UK. TNCi now holds the remaining 40% of the outstanding voting equity of
TNCi UK through its ownership of ordinary shares.
In connection with this transaction, TNCi converted approximately $1.4
million (as of February 28, 2001) of inter-company advances to TNCI UK on its
balance sheet into equity. Subsequently, TNCi wrote down the value of its
investment in TNCi UK by approximately $900,000 to reflect its 40% net equity
interest in TNCi UK.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Listed below are certain financial statements, pro forma financial
information and exhibits filed as part of this Report on Form 8-K:
a. FINANCIAL STATEMENTS:
None.
b. PRO FORMA FINANCIAL INFORMATION:
GLOBAL TECHNOLOGIES, LTD. AND SUBSIDIARIES
PRO FORMA FINANCIAL INFORMATION
The following pro forma unaudited financial information presents the
Registrant's pro forma condensed consolidated balance sheet as of December 31,
2000 and the Registrant's pro forma condensed consolidated statements of
operations for the fiscal year ended June 30, 2000 and the six months ended
December 31, 2000. The pro forma unaudited financial information gives effect to
(i) the acquisition of 600 cumulative redeemable preference shares of TNCi UK,
representing 60%, of the equity of TNCi UK, (ii) the conversion of approximately
$1.4 million (as of February 28, 2001) of inter-company advances of TNCi to TNCi
UK into equity representing the remaining 40% of the equity of TNCi UK, and
(iii) the discontinuance and suspension of domestic operations of TNCi,
including the write off all of the intangible assets on its balance sheet,
consisting of goodwill and certain intellectual property, and the impairment of
certain fixed assets of TNCi, consisting primarily of installed interactive
entertainment systems at hotel properties. The pro forma adjustments were
recorded as if they had occurred, for purposes of the pro forma unaudited
condensed consolidated balance sheet, as of December 31, 2000 and, for purposes
of the pro forma unaudited condensed consolidated statements of operations, as
of the beginning of the respective periods presented.
This pro forma unaudited financial information does not purport to
represent what the Registrant's actual financial position and operating results
would have been had such events actually occurred on the aforementioned dates.
The pro forma unaudited financial information also does not purport to serve as
a forecast of the Registrant's financial position or results of operations for
any future periods.
The pro forma adjustments are based upon currently available information
that management believes is reasonable in the circumstances. This pro forma
financial information should be read in conjunction with the Registrant's
audited consolidated financial statements as of and for the fiscal year ended
June 30, 2000 and the unaudited condensed consolidated financial statements as
of and for the six months ended December 31, 2000 appearing in the Registrant's
form 10-QSB for the quarter then ended.
2
GLOBAL TECHNOLOGIES, LTD. AND SUBSIDIARIES
Pro Forma Condensed Consolidated Balance Sheet
as of December 31, 2000
(Unaudited)
PRO FORMA
AS REPORTED ADJUSTMENTS PRO FORMA
----------- ----------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 1,975,772 $ -- $ 1,975,772
Restricted cash 282,150 -- 282,150
Investments 9,670,937 -- 9,670,937
Deferred tax asset 2,973,190 -- 2,973,190
Other current assets 1,368,710 -- 1,368,710
------------- ----------- -------------
Total current assets 16,270,759 -- 16,270,759
Property and equipment, net 12,771,168 (3,344,897)(1) 9,426,271
Intangibles, net 5,833,615 (5,833,615)(2) --
Investments -- -- --
Other assets 166,216 -- 166,216
------------- ----------- -------------
Total assets $ 35,041,758 $(9,178,512) $ 25,863,246
============= =========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 8,097,715 -- 8,097,715
Accrued liabilities 2,551,786 -- 2,551,786
Advances from related parties 365,046 -- 365,046
Notes payable 9,917,294 -- 9,917,294
Notes payable to related parties 3,737,400 -- 3,737,400
------------- ----------- -------------
Total current liabilities 24,669,241 -- 24,669,241
Accrued litigation settlement 833,333 -- 833,333
------------- ----------- -------------
Total liabilities 25,502,574 -- 25,502,574
------------- ----------- -------------
Minority Interest -- 60,619(3) 60,619
Stockholders' equity (deficiency):
Series C preferred stock 10 -- 10
Common stock 112,626 -- 112,626
Additional paid-in capital 139,802,670 -- 139,802,670
Accumulated other comprehensive income 8,718,535 -- 8,718,535
Accumulated deficit (139,094,658) (9,178,512)(1)(2) (148,333,788)
-- (60,619)(3) --
------------- ----------- -------------
Total stockholders' equity (deficiency) 9,539,184 (9,239,130) 300,053
------------- ----------- -------------
Total liabilities and stockholders' equity (deficiency) $ 35,041,758 $(9,178,512) $ 25,863,246
============= =========== =============
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NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2000
1) To record the write down of equipment, primarily interactive entertainment
systems installed at hotel properties, to net realizable value.
2) To record the write-off of intangible assets, primarily goodwill.
3) To record the minority interest in the consolidated accounts of TNCi UK,
resulting from the Registrant's 74.3% ownership of TNCi as of December 31,
2000, which in turn owns 40% of TNCi UK.
4
GLOBAL TECHNOLOGIES, LTD. AND SUBSIDIARIES
Pro Forma Condensed Consolidated Statement of Operations
for the fiscal year ended June 30, 2000
PRO FORMA
AS REPORTED ADJUSTMENTS PRO FORMA
------------ ------------ ------------
Revenue:
Equipment sales $ 6,983,787 $ -- $ 6,983,787
Service income 413,209 -- 413,209
------------ ------------ ------------
7,396,996 -- 7,396,996
------------ ------------ ------------
Costs and expenses:
Cost of equipment sales 4,867,519 -- 4,867,519
Cost of service income 148,221 -- 148,221
General and administrative expenses 21,166,771 (163,015)(2) 21,003,756
Amortization of intangibles 912,553 (912,553)(2) --
Expenses associated with investments 1,944,743 -- 1,944,743
Loss on impairment of assets -- 9,937,739 (1) 9,937,739
Special charges 2,156,205 2,156,205
------------ ------------ ------------
31,196,012 8,862,171 40,058,183
------------ ------------ ------------
Operating loss (23,799,016) (8,862,171) (32,661,187)
Other:
Interest expense (5,948,347) -- (5,948,347)
Interest income 655,194 -- 655,194
Equity in loss of non-consolidated affiliates (10,345,210) -- (10,345,210)
Other expense (14,339) -- (14,339)
------------ ------------ ------------
Loss before minority interest (39,451,718) (8,862,171) (48,313,889)
Minority interest 1,612,529 47,986 (3) 1,660,515
------------ ------------ ------------
Net Loss (37,839,189) (8,814,185) (46,653,374)
Cummulative dividend on preferred stock (187,415) -- (187,415)
Redemption of preferred stock 509,183 -- 509,183
------------ ------------ ------------
Net loss available to common stockholders (37,517,421) (8,814,185) (46,331,606)
============ ============ ============
Basic and diluted net loss per common share (3.81) (4.71)
============ ============
Weighted average number of shares outstanding 9,842,392 9,842,392
============ ============
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NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JUNE 30, 2000
1) To record the impairment losses on the write down of equipment, primarily
interactive entertainment systems installed at hotel properties, and the
write-off of intangible assets, primarily goodwill.
2) To eliminate the depreciation and amortization expenses associated with the
equipment write down and the intangible asset write-off.
3) To record the minority interest in the consolidated accounts of TNCi UK
resulting from the Registrant's 79% ownership of TNCi as of June 30, 2000,
which in turn owns 40% of TNCi UK.
6
GLOBAL TECHNOLOGIES, LTD. AND SUBSIDIARIES
Pro Forma Condensed Consolidated Statement of Operations
for the six months ended December 31, 2000
(Unaudited)
PRO FORMA
AS REPORTED ADJUSTMENTS PRO FORMA
------------ ------------ ------------
Equipment sales $ 59,186 $ -- $ 59,186
Service income 162,642 -- 162,642
------------ ------------ ------------
221,828 -- 221,828
------------ ------------ ------------
Costs and expenses:
Cost of equipment sales 43,632 -- 43,632
Cost of service income 157,932 -- 157,932
General and administrative expenses 13,745,189 (156,177)(2) 13,589,012
Amortization of intangibles 864,342 (864,342)(2) --
Loss on foreign currency exchange 46,643 -- 46,643
Loss on impairment of assets 3,053,497 10,042,854 (1) 13,096,351
Special charges 1,501,360 1,501,360
------------ ------------ ------------
19,412,595 9,022,335 28,434,930
------------ ------------ ------------
Operating loss (19,190,767) (9,022,335) (28,213,102)
Other:
Interest expense (4,278,659) -- (4,278,659)
Interest income 51,929 -- 51,929
Loss from write down of investment in affiliates (174,990)
Gain on sale of investments 4,159,582 -- 4,159,582
Gain on legal settlement 1,336,563 -- 1,336,563
Other income 21,901 -- 21,901
------------ ------------ ------------
Loss before minority interest and extraordinary item (18,074,441) (9,022,335) (26,921,786)
Minority interest 985,401 57,055 (3) 1,042,456
------------ ------------ ------------
Loss before extraordinary item (17,089,040) (8,965,280) (25,879,330)
Extraordinary gain on extinguishment of debt 1,492,138 -- 1,492,138
------------ ------------ ------------
Net Loss (15,596,902) (8,965,280) (24,387,192)
Cummulative dividend on preferred stock (340,936) -- (340,936)
Beneficial conversion on preferred stock (173,469) -- (173,469)
------------ ------------ ------------
Net loss available to common stockholders (16,111,307) (8,965,280) (24,901,597)
============ ============ ============
Basic and diluted net loss per common share (1.45) (2.24)
============ ============
Weighted average number of shares outstanding 11,112,465 11,112,465
============ ============
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NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2000
1) To record the impairment losses on the write down of equipment, primarily
interactive entertainment systems installed at hotel properties, and the
write-off of intangible assets, primarily goodwill.
2) To eliminate the depreciation and amortization expenses associated with the
equipment write down and the intangible asset write-off.
3) To record the minority interest in the consolidated accounts of TNCi UK
resulting from the Registrant's 74.3% ownership of TNCi as of December 31,
2001, which in turn owns 40% of TNCi UK.
c. EXHIBITS:
2.1 Articles of Association of TNCi UK Limited.
2.2 Application for Shares.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GLOBAL TECHNOLOGIES, LTD.
Dated: March 20, 2001 By: /s/ Irwin L. Gross
-----------------------------------
Name: Irwin L. Gross
Title: Chairman and
Chief Executive Officer
9
Index to Exhibits
No. Description
--- -----------
2.1 Articles of Association of TNCI UK LIMITED.*
2.2 Application for Shares.*
----------
* Filed herewith.
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