Form 8-K for GLOBALNET CORP
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10-Jan-2007
Entry into a Material Definitive Agreement, Creation of a Direct Financial Obligat
Item 1.01 Entry Into a Material Definitive Agreement
Disposition of Indebtedness
On January 5, 2007, Globalnet Corporation. (the "Company") entered into an Asset Purchase Agreement, dated as of January 5, 2007, which was effective as of December 29, 2006 (the "Purchase Agreement") pursuant to which the Company sold certain of its assets relating to its iDialDirect operations to Dibz International, Inc. ("Dibz") in consideration for Dibz assuming $3,000,000 worth of indebtedness held by New Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC (the "Investors"). Furthermore, Dibz shall be entitled to use up to $50,000 worth of excess capacity services per month, on a non-cumulative basis, to be provided by the Company pursuant to an operating agreement entered into contemporaneously with the execution of the Purchase Agreement. Pursuant to the Purchase Agreement, the Company and Dibz acknowledged that Dibz shall retain a copy of the assets sold to Dibz. In the event either party shall make any modifications to this technology, such party shall retain the exclusive right to such modifications.
Contemporaneously with the execution of the Purchase Agreement, the Company entered into a three year operating agreement, dated as of January 5, 2007, which was effective as of December 29, 2006 (the "Operating Agreement") pursuant to which the Company agreed to provide Dibz with various services, including, but not limited to, access to certain excess capacity in the Company's telecom network and network operations as well as provide Dibz with technical support. In the event that the Company shall be unable to continue providing its services to Dibz, the Operating Agreement may be terminated by Dibz upon 30 day written notice, provided, however, that the Company shall give Dibz, if necessary, the ability to continue using the services for an additional 30 days after the date of termination in order to allow for a transition to another provider. In the event either the Company or Dibz is a party to any bankruptcy or insolvency proceeding, the Operating Agreement shall become null and void on the date of such filing with any bankruptcy court or other proceeding.
The Company is researching the accounting implications of this transaction. It is possible that the recording will include components of: gain on sale of assets; gain on extinguishment of debt; gain on extinguishment of derivative liabilities; and, deferred service obligations. It is currently anticipated that a valuation of the transferred assets or alternatively, the fair market value of the extinguished debt, will be obtained to assist in segregating and measuring likely components. Decisions regarding the ultimate measurement and timing of recordation are subject to further review and audit.
The current Chief Executive Officer of Dibz, Mr. Mark Wood, is a former executive officer of the Company. Mr. Wood is also a shareholder of the Company. Other arrangements between the Investors and Dibz may exist or be contemplated. Although the Company believes that these transactions do not constitute those of a "related party" nature, as defined, the reader should note that such relationships may have an impact on the valuation perceptions of the various parties to the Agreement.
Private Placement
To obtain funding for working capital, the Company entered into a Securities Purchase Agreement (the "Agreement") with AJW Offshore, Ltd. ("AJW") on January 5, 2007 for the sale of (i) $250,000 in a callable secured convertible note (the "AJW Note") and (ii) a stock purchase warrant (the "AJW Warrant") to buy 10,000,000 shares of our common stock. Pursuant to the terms of the Agreement, the Company and AJW closed on the sale and purchase of the AJW Note on January 5, 2007.
The AJW Note bears interest at 10%, matures three years from the date of issuance, and is convertible into our common stock, at AJW's option, at a . . .
Item 2.03 Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant
See "Private Placement" under Item 1.01
Item 5.02. Departure of Directors or Principal Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Schaftlein Appointment
On January 5, 2007, our Board of Directors appointed Mark Schaftlein as President of the Company. There is no understanding or arrangement between Mr. Shaftlein and any other person pursuant to which Mr. Shaftlein was selected as an executive officer. Mr. Shaftlein does not have any family relationship with any director, executive officer or person nominated or chosen by us to become a director or an executive officer. Mr. Schaftlein has not entered into any material plan, contract or arrangement in connection with his appointment as an executive officer. Mr. Shaftlein has been a member of our Board of Directors since June 2005.
Mr. Schaftlein also performs consulting services to the Company through Ocean Avenue Advisors, LLC. On January 8, 2007, the Board of Directors increased monthly fees paid to Mr. Schaftlein in this capacity from $5,000 per month to $7,000 per month, in recognition of Mr. Schaftein's additional duties as President of the Company.
Dunn Resignation
On January 7, 2007, Thomas Dunn resigned as chief financial officer of the Company. Although Mr. Dunn objected to the "Disposition of Indebtedness" set forth under Item 1.01, Mr. Dunn's resignation was primarily based upon long-standing and documented compensation and insurance issues, as well as a series of recent employment overtures to Mr. Dunn containing attractive features that the Company is financially unable to match. The Company and Mr. Dunn currently intend to enter into a consulting or non-officer employment relationship focused on assisting in audit related activities.
Item 8.01 Other Events
During November and early December 2006, collections from the Company's largest customer (the "Customer") failed to conform to previous practice and contractual terms. As a result, the Company significantly reduced sales to the Customer to reduce exposure. In December 2006, the Customer informed the Company that certain expected financing would not be consummated until January 2007, and that payments on account would be deferred until that date. The Company immediately suspended service to the Customer.
As a result of the foregoing, and due to the delay in full implementation of certain other marketing and capacity enhancement plans, the Company will not report the increase in fourth quarter 2006 revenue that it had previously expected.
As previously reported, the Company's cost reduction efforts involved the abandonment of certain infrastructure that was subject to long-term commitments. The Company has recently received demand letters from two infrastructure providers, and another demand letter from an unpaid unsecured traffic provider. The demand letters aggregate to approximately $1 million. The Company is in active negotiation with the other parties, seeking acceptable resolution of claims. However, additional unfavorable developments related to these claims would have a material adverse effect on the Company.
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Item 9.01 Financial Statements and Exhibits
Exhibit No. Description
4.1 Securities Purchase Agreement dated January 5, 2007 by and
between the Company and AJW Offshore, Ltd.
4.2 Callable Secured Convertible Note, dated January 5, 2007
4.3 Stock Purchase Warrant dated January 5, 2007
10.1 Asset Purchase Agreement, dated as of January 5, 2007, by and
between the Company and Dibz International, Inc.
10.2 Operating Agreement, dated as of January 5, 2007, by and between
the Company and Dibz International, Inc.
AI
