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GlobeTel still choking



April 23, 2007 – Comments (0)

Great PR (and by great, I mean horrible, but unsurprising) from our AMEX-booted, SEC-investigated friends in the "float tested" wireless blimp/not really Russian WiMax. See if you can figure out where the stank is:

GlobeTel Communications Corp. (Pink Sheets: GTEM) announced that as of today, it has received $750,000 in additional funds from existing investors... Full exercise of all warrants issued in conjunction with this round of funding would generate $900,000 in proceeds for the Company. The exercise price of the warrants had been adjusted from their original exercise price.

Here's what the PR didn't mention, but the 8K does:

GlobeTel Communications Corp. (the "Company") has agreed with the investors in its August 2005 Convertible Note placement to reprice the exercise price associated with their warrants to $.20 per share and to increase the number of shares issuable upon exercise of such warrants 1.5 times the original amount of warrants issued. [emphasis mine]

Wondering what the original price was for those warrants? Of course you are. Well, the latest 10K(A) filed in the fall of 2006 says this of August 2005 convertibles:

The Investors also received one Class A Warrant to purchase one share of common stock for each share that the notes would be convertible into had they been converted on the closing date (August 31, 2005) (a total of 2,727,273 shares). The per share exercise price of the Warrants is $2.50... [emphasis mine]

In other words, this serial cash-burning stock promortion scheme found yet another lifeline, diluting the heck out of shareholders via warrants, the price of which was ratcheted back to less than 10% of what they originally signed on for. It's also a very hefty discount to the real trading price of these all-but-worthless stubs.

Get ready for the PR. My guess is whoever bought these is going to be looking for an exit strategy. And I'm also pretty sure the cash-strapped PR machine at GlobeTel isn't in much of a position to demure. And no, new web sites ain't going to be enough.


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