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Form 8-K for GLOBALNET CORP
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8-Apr-2008
Unregistered Sale of Equity Securities, Financial Statements and Exhibits
Item 3.02 Unregistered Sales of Equity Securities
GlobalNet Corporation (the "Company") entered into a Securities Purchase Agreement (the "Agreement") with New Millennium Capital Partners II, LLC ( "Buyer") on March 31, 2008 for the sale of (i) $85,000 in callable secured convertible notes (the "Notes") and (ii) stock purchase warrants (the "Warrants") to buy an aggregate of 10,000,000 shares of our common stock. Pursuant to the terms of the Agreement, the Company and the Buyer closed on the sale and purchase of the Notes and the Warrants on March 31, 2008. Funding occurred April 2, 2008.
The Company will use the proceeds for two business purposes. The first is to work toward completing our 2005 audit and the filing of our 2005 10KSB. Following that, management will work toward completing our 2006 audit. Secondly, the Company will seek business opportunities in areas outside the telecommunications sector. These may include asset acquisitions and or private companies for consideration as a reverse merger opportunity.
The Notes bear interest at 8%, mature three years from the date of issuance, and are convertible into our common stock, at the Buyer's option, at a conversion price, equal to the lower of (i) $0.03 or (ii) 15% of the average of the three lowest intraday trading prices for our common stock during the 20 trading days before, but not including, the conversion date (the "Variable Conversion Price"). As of April 2, 2008, the average of the three lowest intraday trading prices for our common stock during the preceding 20 trading days as reported on the Over-The-Counter Bulletin Board was $.0001 and, therefore, the Variable Conversion Price for the secured convertible notes was $.000015. Based on this conversion price, the Notes issued under the Agreement in the amount of $85,000, excluding interest, are convertible into 5,666,666,667 shares of our common stock.
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The Company's Articles of Incorporation currently allow for issuance of a maximum of 20,000,000,000 shares of common stock. Currently, the Company has approximately 12,507,000,000 shares outstanding, leaving an unissued balance of authorized shares that is not sufficient to service the maximum requirements of all of its convertible securities. In the event we are unable to obtain an increase in our authorized common stock, we will be required to repay the convertible debenture and we will be subject to penalties associated with such failure to deliver shares of common stock upon conversion of the debentures as well as prepayment penalties. In addition, the Buyer and the other investors that participated in our previous financing have a secured lien on all of our assets and intellectual property and would be entitled to foreclose on our assets and intellectual property. In the event that the foregoing were to occur, significant adverse consequences to the Company would be reasonably anticipated. Although no notice of default has been received from the Buyer or the other prior investors, all previous notes with the Buyer and with the other prior investors are in default under numerous covenants.
We may prepay the Notes in the event that no event of default exists, there are a sufficient number of shares available for conversion of the Notes and the market price is at or below $0.10 per share. The full principal amount of the Notes is due upon default under the terms of the Notes.
The Warrants are exercisable until seven years from the date of issuance at an exercise price of $0.0001 per share. In addition, the exercise price of the Warrants is adjusted in the event we issue common stock at a price below market.
The Buyer has contractually agreed to restrict their ability to convert the Notes and exercise the Warrants and receive shares of our common stock such that the number of shares of the Company common stock held by a Buyer and its affiliates after such conversion or exercise does not exceed 4.9% of the Company's then issued and outstanding shares of common stock.
As of the date hereof, the Company is obligated on the Notes issued to the Buyer in connection with this offering. The Notes are a debt obligation arising other than in the ordinary course of business, which constitute a direct financial obligation of the Company. Certain of the Company's debt instruments originated in periods prior to April 2006; accordingly, such debt instruments may be converted to common stock, which may be sold pursuant to Rule 144(k). The Previous Notes are also convertible at the Variable Conversion Price.
The Notes and the Warrants were offered and sold to the Buyer in a private placement transaction made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933 and Rule 506 promulgated thereunder. Each Buyer is an accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933.
The Company does not currently have a defined funding source, and in the absence of a funding agreement, the Company does not have sufficient funds to resume operations. The Company anticipates continuing discussions regarding additional short-term funding possibilities with its investors. However, there is no assurance that additional funding from the investors will be available, or available on terms and conditions acceptable to the Company.
Item 9.01 Financial Statements and Exhibits
Exhibit No. Description
4.1 Securities Purchase Agreement, dated March 31, 2008 by and between the
Company and New Millennium Capital Partners II, LLC
4.2 Form of Callable Secured Convertible Note, dated March 31, 2008
4.3 Form of Stock Purchase Warrant, dated March 31, 2008
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