GlobalNet Corporation Announces $14 Million Preferred Stock Cancellation;
Additional $1.2 Million Funding Received Common Shareholder Dilution Covered
by Equity Concessions from Majority Shareholder
THE WOODLANDS, Texas, Nov 2, 2004 (BUSINESS WIRE) -- GlobalNet Corporation
(OTCBB: GLBT) (www.gbne.net), a major provider of international
telecommunications services, today announced that it had consummated a
transaction whereby its major shareholder Growth Enterprise Fund, S.A. (GEF) has
surrendered to the Company for cancellation 100,000 shares of Series A
Convertible Preferred Stock, which represents all of the Company's outstanding
preferred stock. The preferred stock is valued at over $14 million and was
redeemable monthly for cash payments totaling $250,000 or 156,250,000 shares of
common stock, which the Company has been making since January 1, 2004. The
cancellation represents a monthly cash savings for the Company of $250,000 and a
total cash savings of over $14,000,000. It eliminates the need for the Company
to reserve 8,750,000,000 common shares as collateral for payment, and eradicates
the chance of further common shareholder dilution due to the convertibility of
the outstanding preferred stock into common stock.
The Company also announced that it has received an additional $1.2 million
investment from an institutional investor. The new investment is in form of
convertible notes bearing a nominal interest rate of 12% per annum and mature
two years from issuance. The notes are convertible into shares of the Company's
common stock at a rate equal to the lower of $0.0016 per share or 40% of a
floating conversion price determined by the 20 trading days immediately prior to
the conversion.
With this latest tranche, institutional investors have invested approximately
$6,185,000 in convertible debt in the Company in the last two years. At the
current market price for the Company's common stock, full conversion of the
institutional investors would result in the Company issuing approximately 3.7
billion shares to the funds. To effectively eliminate the dilution to the public
shareholders that would result from the conversion, GEF last week surrendered to
the Company 3.5 billion of its common shares of the Company for immediate
cancellation. This surrender immediately reduces GEF's percentage common share
ownership from approximately 76% to approximately 56% and brings the total
outstanding common stock to approximately 4.2 billion shares from 7.6 billion
shares. Over 85% of the Company's outstanding common stock is held in
certificate form and is tradable only under the "dribble out" provisions of SEC
Rule 144.
In commenting on the transactions, Mark T. Wood, Chairman and Chief Executive
Officer of the Company, stated: "We are pleased to report these developments,
which reflect a substantial improvement in GlobalNet's financial condition. The
cancellation of the $14 million of Series A Convertible Preferred Stock, which
represents over half of our remaining debt, provides GlobalNet with substantial
cash flow benefits. This combined with a 40% reduction in our outstanding common
stock and new institutional investments reflects the confidence our majority
shareholder and institutional investors have in our future prospects. We now
look forward to executing against our revised business model."
About GlobalNet Corporation
GlobalNet Corporation is one of the top ten U.S. service providers of outbound
traffic to Latin America and counts among its customers more than 30 Tier 1 and
Tier 2 carriers. GlobalNet provides international voice, data, fax and Internet
services on a wholesale basis over a private IP network to international
carriers and other communication service providers in the United States and
internationally. GlobalNet's state-of-the-art IP network, utilizing the
convergence of voice and data networking, offers customers economical pricing,
global reach and an intelligent platform that guarantees fast delivery of
value-added services and applications. More information may be obtained from our
website at gbne.net.
SOURCE: GlobalNet Corporation
CONTACT: GlobalNet Corporation
Mark T. Wood, 630-652-1300
investors@gbne.net
or
Osprey Partners
Mike Mulshine, 732-292-0982
osprey57@optonline.net
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