GLOBAL TECHNOLOGIES LTD, 10QSB, 2000-11-14

GLOBAL TECHNOLOGIES LTD
10QSB, 2000-11-14
RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT

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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-QSB

----------

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarter ended September 30, 2000

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ______ to ______

COMMISSION FILE NO. 0-25668

GLOBAL TECHNOLOGIES, LTD.
-----------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)

Delaware 86-0970492
------------------------------- ----------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation of Organization) Identification Number)

1811 Chestnut Street, Suite 120
Philadelphia, Pennsylvania 19103
----------------------------------------
(Address of Principal Executive Offices)

(215) 972-8191
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.

Yes [X] No [ ]

State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.

CLASS OUTSTANDING AT NOVEMBER 10, 2000
----- --------------------------------
Class A Common Stock, $.01 par value 10,725,489 shares
Class B Common Stock, $.01 par value -0- shares

Transitional Small Business Disclosure Format

Yes [ ] No [X]

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<PAGE>
GLOBAL TECHNOLOGIES, LTD.
AND SUBSIDIARIES

INDEX

PAGE
----
PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Condensed Consolidated Balance Sheets as of September 30 , 2000
(unaudited) and June 30, 2000..........................................3

Condensed Consolidated Statements of Operations for the Three Months
Ended September 30, 2000 and 1999 (unaudited)..........................4

Condensed Consolidated Statements of Cash Flows for the Three Months
Ended September 30, 2000 and 1999 (unaudited)..........................5

Notes to Condensed Consolidated Financial Statements...................6

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................16

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.....................................................21

Item 2. Changes in Securities.................................................23

Item 6. Exhibits and Reports on Form 8-K......................................25

SIGNATURES....................................................................26

2
<PAGE>
GLOBAL TECHNOLOGIES, LTD.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
ASSETS 2000 2000
------------- -------------
<S> <C> <C>
(UNAUDITED)
Current assets:
Cash and cash equivalents $ 188,487 $ 3,761,301
Restricted cash 764,594 766,748
Investment securities 47,625,000 64,125,000
Accounts receivable 82,584 55,951
Prepaid expenses 577,053 846,957
Deferred tax asset 17,842,072 24,439,131
Other current assets 1,028,449 2,204,803
------------- -------------
Total current assets 68,108,239 96,199,891

Investments 75,000 75,000
Note receivable from related party 117,612 117,612
Property and equipment, net of accumulated depreciation
of $2,392,314 and $1,747,418, respectively 17,715,600 17,222,957
Intangibles, net of accumulated amortization
of $1,419,705 and $987,534, respectively 6,265,785 6,697,955
Other assets 1,161,334 1,412,516
------------- -------------

Total assets $ 93,443,570 $ 121,725,931
============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable $ 10,835,288 $ 9,956,182
Accrued liabilities 4,313,431 3,516,012
Accrued product warranties 141,614 141,796
Notes payable 7,500,170 6,314,129
Notes payable to related parties 2,170,000 800,000
------------- -------------
Total current liabilities 24,960,503 20,728,119
Notes payable 2,000,000 4,000,000
Accrued litigation settlement 833,333 875,000
------------- -------------
Total liabilities 27,793,836 25,603,119
------------- -------------

Minority interest -- --

Stockholders' equity:
Series C 5% Convertible preferred stock, 1,000
shares designated, 1,000 and zero shares issued
and outstanding, respectively (liquidation
preference of $ 10,187,415) 10 10
Class A common stock, one vote per share, par value $0.01
per share, 40,000,000 shares authorized; 10,700,060 and
10,395,075 shares issued and outstanding, respectively 107,001 103,952
Additional paid-in capital 139,076,194 135,358,848
Accumulated other comprehensive income:
Unrealized gain on investments 44,587,731 61,087,731
Unrealized tax benefit of NOL carryforward 17,842,072 24,439,131
Loss on foreign currency translation (1,634,586) (1,369,104)
Accumulated deficit (134,328,688) (123,497,756)
------------- -------------
Total stockholders' equity 65,649,734 96,122,812
------------- -------------

Total liabilities and stockholders' equity $ 93,443,570 $ 121,725,931
============= =============
</TABLE>

See accompanying notes to consolidated financial statements.

3
<PAGE>
GLOBAL TECHNOLOGIES, LTD.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED SEPTEMBER 30,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenue:
Equipment sales $ 42,735 $ 5,550,560
Service income 126,586 59,827
------------ ------------
169,321 5,610,387
------------ ------------
Costs and expenses:
Cost of equipment sales 10,803 3,420,381
Cost of service income 114,434 8,580
General and administrative expenses 7,645,908 2,472,890
Non-cash compensation expense 197,904 85,000
Special charge 1,900,000 --
Amortization of intangibles 432,171 184,141
------------ ------------
10,301,220 6,170,992
------------ ------------

Operating loss (10,131,899) (560,605)

Other:
Interest expense (2,247,729) (8,651)
Interest income 25,434 303,838
Equity in loss of nonconsolidated affiliates -- (152,576)
Other income 354 13,408
------------ ------------
Net loss before minority interest and
extraordinary item (12,353,840) (404,586)

Minority interest 545,328 (94,529)
------------ ------------

Net loss before extraordinary item $(11,808,512) $ (499,115)

Extraordinary gain on extinguishment of debt 977,580 --
------------ ------------

Net loss (10,830,932) (499,115)

Cumulative dividend on preferred stock (166,878) (60,000)
------------ ------------

Net loss attributable to common shareholders $(10,997,810) $ (559,115)
============ ============

Net loss per share: basic and diluted $ (1.05) $ (0.06)
============ ============

Weighted average shares outstanding:
basic and diluted 10,523,487 8,751,993
============ ============
</TABLE>

See accompanying notes to consolidated financial statements.

4
<PAGE>
GLOBAL TECHNOLOGIES, LTD.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED SEPTEMBER 30,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(10,830,932) $ (499,115)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,077,066 325,066
Equity in loss of nonconsolidated affiliate -- 152,576
Special Charge 1,900,000 --
(Gain) Loss applicable to minority interest (545,238) 94,529
Gain on extinguishment of debt (977,580) --
Loss on sale of assets held for sale -- 4,506
Non-cash compensation expense 197,904 85,000
Non-cash expenses 1,828,867 --
Loss on disposals of property and equipment 19,584 --
Changes in assets and liabilities, net of acquisition:
Increase in accounts receivable (26,633) (4,985,178)
Increase in inventories -- (1,584,708)
Decrease in prepaid expenses, other current assets
and other assets 1,274,013 54,608
Increase in accounts payable 985,184 2,822,053
Increase (decrease) in accrued liabilities 716,450 (187,919)
Increase in deferred revenue -- 789,577
Increase (decrease) in accrued product warranties (182) 144,750
Decrease in accrued litigation settlement (41,667) --
------------ ------------
Net cash used in operating activities $ (4,423,164) $ (2,784,255)
------------ ------------
Cash flows from investing activities:
Maturities of investment securities -- 1,450,079
Purchases of investment securities -- (1,489,085)
Sales of investment securities -- 469,005
Investments in affiliates -- (387,534)
Payments received on related party note receivable -- 1,000
Deposists on property and equipment -- (2,800,000)
Purchases of property and equipment (1,445,077) (123,572)
Proceeds from sale of assets held for sale -- 395,494
Decrease (Increase) in restricted cash 2,154 36,084
Payments to purchase Series A, D and E notes -- (555,000)
------------ ------------
Net cash used in investing activities $ (1,442,923) $ (3,003,529)
------------ ------------
Cash flows from financing activities:
Issuance of Series E Preferred Stock 908,749 --
Advances from related party 1,370,000 --
Redemption of Secured Convertible Notes (2,201,000) --
Net borrowings under Secured Credit Facility 637,519 --
Payments on notes payable (1,478) (476,265)
Advances under equity purchase agreement 1,609,487 --
------------ ------------
Net cash provided by (used in) financing activites $ 2,323,277 $ (476,265)
------------ ------------

Effect of exchange rate on cash and cash equivalents (30,004) --
------------ ------------

Net decrease in cash and cash equivalents (3,572,814) (6,264,049)

Cash and cash equivalents at beginning of period 3,761,301 15,521,275
------------ ------------

Cash and cash equivalents at end of period $ 188,487 $ 9,257,226
============ ============
</TABLE>

See accompanying notes to consolidated financial statements.

5
<PAGE>
GLOBAL TECHNOLOGIES, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

PART I. FINANCIAL INFORMATION

BASIS OF PRESENTATION

(1) PRINCIPLES OF CONSOLIDATION

Global Technologies, Ltd. and its wholly-owned subsidiaries: GTL Subco,
Inc., GTL Lottoco, Inc., GTL Investments, GlobalTech Holdings Limited, GTL
Management Limited ("GTL Management"), GTL Leasing Limited, Lottery Sales
Company Limited, Interactive Flight Technologies (Gibraltar) Limited, GlobalTec
Networks, LLC and MTJ Corp.; and its majority-owned and controlled subsidiary,
The Network Connection, Inc. ("TNCi") are referred to hereinafter as "Global" or
the "Company". The ownership interest of minority shareholders in TNCi is
recorded as "minority interest" on the accompanying consolidated financial
statements. All significant intercompany accounts and transactions have been
eliminated.

The equity method of accounting is used for the Company's 50% or less owned
affiliates over which the Company has the ability to exercise significant
influence. The amount by which the Company's carrying value exceeds its share of
the underlying net assets of equity affiliates is amortized over five years on a
straight-line basis which adjusts the Company's share of the affiliates earnings
or losses.

All other investments for which the Company does not have the ability to
exercise significant influence are accounted for under the cost method of
accounting.

The Company continually evaluates investments for indications of impairment
based on the market value of each investment relative to cost, financial
condition, near-term prospects of the investment, and other relative factors. If
an impairment is determined, the carrying value is adjusted to fair value.

The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles, pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in consolidated financial
statements have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, the accompanying condensed
consolidated financial statements reflect all adjustments (consisting of normal
recurring accruals) which are necessary for a fair presentation of the results
for the interim periods presented. It is suggested that these condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto for the year ended June 30, 2000,
included in the Company's Annual Report on Form 10-KSB/A.

The results of operations for the three months ended September 30, 2000 are
not necessarily indicative of the results to be expected for the entire fiscal
year.

(2) USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements. Additionally, such estimates and assumptions affect the
reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.

6
<PAGE>
(3) STOCK DIVIDEND

On January 5, 2000, the Board of Directors approved a three-for-two stock
split to be effected by way of a stock dividend of one share for each two shares
of the Company's Class A Common Stock held by stockholders of record as of the
close of business February 15, 2000. The dividend was paid on February 29, 2000;
fractional shares were paid out in cash. All references to the number of common
shares, per share amounts and stock option data elsewhere in the consolidated
financial statements and related footnotes have been restated as appropriate to
reflect the effect of the stock dividend for all periods presented prior to the
stock dividend.

(4) INVESTMENT SECURITIES

Investments are classified according to the applicable accounting method at
September 30, 2000 and June 30, 2000. Market value reflects the price of
publicly traded securities at the close of business at the respective dates.
Unrealized gain reflects the excess of market value over carrying value of
publicly traded securities classified as available for sale.

The following summarizes the Company's current portion of investments by
type at:

GROSS GROSS
UNREALIZED UNREALIZED
AMORTIZED HOLDING HOLDING FAIR
COST GAINS LOSSES VALUE
----------- ----------- --------- -----------
SEPTEMBER 30, 2000
Available-for-sale:
Corporate equity
securities $ 3,037,269 $44,587,731 $ -- $47,625,000
=========== =========== ========= ===========
JUNE 30, 2000
Available-for-sale:
Corporate equity
securities $ 3,037,269 $61,087,731 $ -- $64,125,000
=========== =========== ========= ===========

Corporate equity securities consist of 3,000,000 shares of U.S. Wireless
Corporation ("U.S. Wireless") Common Stock.

The following summarizes the Company's non-current investments at:

SEPTEMBER 30, JUNE 30,
2000 2000
------- -------
Equity Affiliates (Approx. voting %)
Shop-4-Cash.com, Inc. (4%) $75,000 $75,000
------- -------
Total Non-Current Investments $75,000 $75,000
======= =======

On August 18, 2000 the Company transferred its equity interest in Inter
Lotto (UK) Limited ("Inter Lotto") back to existing shareholders of Inter Lotto
in exchange for a nominal cash amount, the termination of the existing Operating
Agreement with GTL Management, the continued use of the Inter Lotto lottery
license through December 31, 2000 and the repayment of certain Value Added Tax
rebates owed to GTL Management. As such, the Company wrote off its investment in
Inter Lotto of $684,685 as of June 30, 2000, consisting of working capital
advances, notes receivable and capitalized acquisition costs.

7
<PAGE>
In July 2000, Shop4Cash.com, Inc. ("Shop4Cash") decided to implement
certain changes to its existing business model in order to create additional
value for its merchant base. In September 2000, Shop4Cash signed a letter of
intent for the purpose of merging with an on-line credit card services provider.
This anticipated merger would create an e-commerce platform servicing both
consumers and the Shop4Cash merchant base. The post-merger entity would offer
merchants on-line credit card processing and transaction services in addition to
the existing services of the Shop4Cash website. In addition, Shop4Cash obtained
additional financing for working capital purposes of $300,000 through the
issuance of common stock to a group of its current stockholders, which includes
the Company. On October 11, 2000, the Company purchased an additional 999,900
shares of common stock from Shop4Cash for $99,990. As a result, the Company's
total investment currently represents approximately 4% of the outstanding common
stock of Shop4Cash.

(5) IMPAIRMENT OF LONG-LIVED ASSETS

The Company evaluates the potential impairment of long-lived assets in
accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." In cases where undiscounted
expected future cash flows are less than the carrying value, an impairment loss
is recognized to reduce the carrying value of the asset to its estimated fair
value.

On August 18, 2000, the Company transferred its equity interest in Inter
Lotto back to the existing shareholders of Inter Lotto and terminated the
Operating Agreement between GTL Management and Inter Lotto. The Company is
entitled to use the Inter Lotto lottery license through December 31, 2000, and
has been evaluating strategic alternatives for the use of the lottery network.
The network consists of a central computer system and approximately 3,600 gaming
terminals, of which 3,000 were previously installed at third-party retailer
locations and remotely connected to the central system via wireless equipment.
In October 2000, the Company ceased operating lotteries on behalf of Inter Lotto
and began to shut down the network of lottery terminals to reduce costs. As of
November 10, 2000, all terminals have been deinstalled and warehoused. The base
cost of the system was approximately $12.3 million, of which approximately $2.9
million had yet to be paid as of September 30, 2000.

The Company is currently negotiating an agreement for the use of the
lottery network with a joint venture seeking to establish and run an on-line
lottery in a foreign country. The Company expects to receive as consideration an
upfront cash payment, continuing rental payments for the equipment and a
percentage of future lottery revenues generated by the joint venture. Management
expects the upfront cash payment and future cash flows will be in excess of the
carrying costs of the assets. Therefore, the Company has not recorded an
impairment loss to adjust the carrying value of the equipment. The Company will
continue to assess the expected future cash flows and evaluate any potential
impairment. Any impairment loss may have a material effect on the financial
statements in the future.

(6) NOTES PAYABLE

Notes payable consists of the following:

SEPTEMBER 30, JUNE 30,
2000 2000
----------- -----------
Secured Credit Facility due on demand, interest at
LIBOR plus 1.25% $ 6,946,904 $ 6,309,385
Secured Convertible Notes due December 7, 2001,
interest at 6%, convertible into common
stock of the Company 2,000,000 4,000,000
Notes payable due September 25, 2001, interest
at 8 %, convertible into common stock of TNCi 550,000 --
Notes payable due in varying installments through
2000, interest ranging from 6.9% to 11%
collateralized by vehicles 3,266 4,744
----------- -----------
Total 9,500,170 10,314,129
Less current portion 7,500,170 6,314,129
----------- -----------
$ 2,000,000 $ 4,000,000
=========== ===========

8
<PAGE>
(a) SECURED CREDIT FACILITY

On April 5, 2000, the Company entered into a line of credit facility with
Merrill Lynch in which Merrill Lynch agreed to advance up to $10.0 million based
upon a percentage of the value of securities pledged as collateral to secure
amounts drawn under the line of credit (the "Secured Credit Facility").
Principal amounts borrowed under the line, together with accrued interest at an
annual rate equal to the London Inter-Bank Offer Rate (LIBOR) (6.811% at
September 30, 2000) plus 1.25%, are payable upon demand by Merrill Lynch. To
secure such borrowing, the Company has pledged to Merrill Lynch 1,000,000 shares
of common stock of U.S. Wireless held by the Company.

If the amount owed under the Secured Credit Facility at any time exceeds
35% of the market value of the shares of common stock of U.S. Wireless pledged
to Merrill Lynch, the Company will be subject to a maintenance call which would
require the Company to pledge additional securities which are acceptable to
Merrill Lynch as collateral or require the Company to reduce the outstanding
balance owed under the Secured Credit Facility through payment in cash.
Beginning on May 24, 2000, Merrill Lynch issued a series of maintenance calls
requiring a reduction in the balance owed of approximately $900,000. The final
maintenance calls were subsequently satisfied by a pledge of additional
collateral with a market value of approximately $1.6 million, pledged for the
benefit of the Company by Irwin L. Gross, the Company's Chairman and Chief
Executive Officer. As of June 30, 2000, the market value of the shares of common
stock of U.S. Wireless was sufficient to maintain the outstanding balance owed
under the Secured Credit Facility, and Mr. Gross' collateral was released.

In July and August 2000, Merrill Lynch issued another series of maintenance
calls requiring a reduction in the balance owed of approximately $1.2 million.
The maintenance calls were subsequently secured by pledges of additional
collateral with a total market value of approximately $2.7 million, pledged by
Mr. Gross for the benefit of the Company.

In connection with the pledges of his collateral to meet the maintenance
calls, Mr. Gross was granted warrants to purchase 553,978 shares of the
Company's Class A Common Stock based upon the amount of collateral pledged and
the closing market price of the stock on the date of each pledge. The Company
recorded non-cash interest expense of $1,070,527 for the quarter ended September
30, 2000 related to the estimated fair value of the warrants granted for the
collateral pledges after June 30, 2000.

As of November 10, 2000, the outstanding balance of the Secured Credit
Facility was approximately $6.7 million. Approximately $15.1 million of U.S.
Wireless common stock and $2.3 million of Mr. Gross' collateral remain pledged
to Merrill Lynch to secure the credit facility.

(b) SECURED CONVERTIBLE NOTES

On June 8, 2000, the Company issued $4.0 million of secured convertible
notes to Advantage Fund II Ltd. and Koch Investment Group, Ltd. (the "Secured
Convertible Notes"). The notes bear interest at 6% per annum and mature on
December 7, 2001. The notes are convertible into shares of the Company's Class A
Common Stock at a conversion price of $2.00 per share, subject to customary
adjustments. To secure such borrowing, the Company pledged 1,000,000 shares of
common stock of U.S. Wireless to the holders of the notes. An event of default
under the notes occurs if U.S. Wireless common stock trades at less than $5.00
per share at any time during each of five trading days (which need not be
consecutive) within any consecutive 30-day period and certain other conditions
are met. A default under the notes would allow the holders to accelerate
repayment of the notes. The failure to repay on an accelerated basis in a
default situation could result in the liquidation of the pledged shares of U.S.
Wireless Common Stock.

At the date of issuance, the conversion rate of the Secured Convertible
Notes was lower than the market price of the Company's stock at issuance, and as
such the notes have an embedded beneficial conversion feature. The Secured
Convertible Notes can be converted at any time prior to redemption. Therefore,

9
<PAGE>
the Company recorded a non-cash interest expense of $4.0 million for the year
ended June 30, 2000 related to the beneficial conversion feature.

On July 7, 2000, the Company redeemed $2.0 million of the principal amount
of the Secured Convertible Notes. In connection with this redemption, the
lenders released to the Company 500,000 shares of U.S. Wireless common stock
previously held as collateral. The notes require that in connection with such
redemption the Company issue warrants for 125,000 shares, in the aggregate, of
its Class A Common Stock to the holders of the notes. These warrants have a
four-year term and an exercise price of $4.00 per share. The Company recorded an
extraordinary gain on the extinguishment of debt of $977,580 related to the
redemption of the Secured Notes.

On October 5, 2000, the Company redeemed $1.0 million of the principal
amount of the Secured Convertible Notes for cash of $1.2 million plus the
issuance of 62,500 shares of the Company's Class A Common Stock, as required
under the notes. As a result of the redemption, the lenders released to the
Company 250,000 shares of U.S. Wireless common stock previously held as
collateral. The Company will record an extraordinary gain on the extinguishment
of debt of approximately $515,000 for the second fiscal quarter ended December
31, 2000.

On October 25, 2000, the remaining $1.0 million of principal amount of the
Secured Convertible Notes was converted into 500,000 shares of the company's
Class A Common Stock. As a result of the conversion the lenders released the
final 250,000 shares of U.S. Wireless common stock previously held as
collateral.

(6) NOTES PAYABLE TO RELATED PARTY

In May and June 2000, The Gross Charitable Unit Trust and The Gross
Charitable Annuity Trust (together the "Trusts") advanced a total of $800,000 to
TNCi for working capital purposes. An additional $250,000 was advanced to TNCi
in July 2000. On September 12, 2000, the advances to TNCi were converted into
two promissory notes, each in the amount of $525,000, issued to each Trust by
TNCi. The notes mature on December 31, 2000 and bear interest at an annual rate
of 9.0%. The Trusts are controlled by the Company's Chairman and Chief Executive
Officer, Irwin L. Gross. On September 28, 2000, the Trusts advanced $250,000 to
TNCi resulting in a total outstanding balance of $1,300,000 as of September 30,
2000.

In August and September 2000 the Trusts also advanced a total of $800,000
to Global for working capital purposes. On September 22, 2000, the advances were
converted into two promissory notes, each in the amount of $400,000, issued to
each Trust by Global. The notes mature on December 31, 2000 and bear interest at
an annual rate of 9.0%.

In connection with the execution of the promissory notes, each Trust was
granted warrants to purchase 99,159 shares of the Company's Class A Common Stock
and 155,780 shares of TNCi Common Stock based upon the amount advanced and the
closing market price of each stock on the date of each advance. The Company
recorded non-cash charges to interest expense totaling $1,809,986 related to the
estimated fair value of the warrants granted for the quarter ended September 30,
2000.

(7) RELATED PARTY INVESTMENT IN SUBSIDIARY

On October 16, 2000, an officer of TNCi purchased 500,000 units of TNCi,
consisting of 500,000 shares of TNCi common stock and warrants to purchase
166,667 shares of TNCi common stock. The purchase price was $2.00 per unit,
which was the closing market price of TNCi common stock on such date. The
warrants have an exercise price of $3.50 per share and a term of four-years.
Aggregate consideration to TNCi was $1.0 million, which was paid in installments
in August and September 2000.

10
<PAGE>
(8) WARRANTS

In connection with the execution of the promissory notes issued to the
Trusts by TNCi, each Trust was granted warrants to purchase 155,780 shares of
TNCi's common stock based upon the amount advanced and the closing market price
of TNCi's common stock on the date of each advance. The warrants have exercise
prices equal to the closing price of TNCi's common stock on the date of the
relevant advance and a term of five years from such date. For the fiscal year
ended June 30, 2000, the Company recorded deferred financing costs of $1,047,000
related to the estimated fair value of the warrants, of which $137,000 and
$444,000 has been amortized as a non-cash charge to interest expense in the year
ended June 30, 2000 and the quarter ended September 30, 2000, respectively.

In connection with the execution of the promissory notes issued to the
Trusts by Global, each Trust was granted warrants to purchase 99,159 shares of
the Company's Class A Common Stock based upon the amount advanced and the
closing market price of the Company's Class A Common Stock on the date of each
advance. The warrants have exercise prices equal to the closing price of the
Company's Common Stock on the date of the relevant advance and a term of five
years from such date. The Company recorded deferred financing costs of $762,986
related to the estimated fair value of the warrants, of which $190,747 has been
amortized as a non-cash charge to interest expense for the quarter ended
September 30, 2000.

In connection with the pledges of his collateral to meet maintenance calls
on the Company's Secured Credit Facility issued by Merrill Lynch, Mr. Gross was
granted warrants to purchase 553,978 shares of the Company's Class A Common
Stock based upon the amount of collateral pledged and the closing market price
of the stock on the date of each pledge. The warrants have exercise prices equal
to the closing price of the Company's Class A Common Stock on the date of the
relevant pledge and a term of the five years from such date. The Company
recorded non-cash interest expense of $1,070,527 for the quarter ended September
30, 2000 related to the estimated fair value of the warrants granted for the
collateral pledges after June 30, 2000.

(9) COMMITMENTS AND CONTINGENCIES

(a) LITIGATION

FIDELITY AND GUARANTY INSURANCE COMPANY V. INTERACTIVE FLIGHT TECHNOLOGIES,
INC., United States District Court for the District of Minnesota, CV No. 99-410.
This is a reformation action in which one of the Company's insurers is seeking
to reform an umbrella policy in the amount of $10.0 million to include an
exclusion for completed products for policies issued for years 1997-98 and
1998-99. Such exclusion would preclude claims made by the estates of victims of
the crash of Swissair Flight No. 111 on September 2, 1998. The insurer recently
filed a motion for summary judgment, which was heard before the United States
District Court for the District of Minnesota on September 12, 2000. On October
24, 2000, the Court ruled in favor of the insurer. Global is filing a motion to
alter or amend the ruling. The umbrella policy at issue in this suit is in
addition to the $10.0 million in aviation insurance coverage that Global
currently has in place.

SWISSAIR/MDL-1269, IN REGARDS TO AN AIR CRASH NEAR PEGGY'S COVE, NOVA
SCOTIA. This multi-district litigation, which is being overseen by the United
States District Court for the Eastern Division of Pennsylvania, relates to the
crash of Swissair Flight No. 111 on September 2, 1998. The Swissair MD-11
aircraft involved in the crash was equipped with an entertainment network system
that had been sold to Swissair by Global's predecessor company, Interactive
Flight Technologies, Inc. Estates of the victims of the crash have filed
lawsuits throughout the United States against Swissair, Boeing, Dupont and
various other parties, including Global and TNCi, which has been named in some
of the lawsuits filed on a successor liability theory. TNCi and Global deny all
liability for the crash. TNCi and Global are being defended by Global's aviation
insurer.

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states that the relief sought is "possibly the equivalent of CHF 342,000,000 -
in a currency to be designated by the court; each plus 5% interest with effect
from September 3, 1998; legal costs and a participation to the legal fees (of
the plaintiff) to be paid by the defendant."

BRYAN R. CARR V. THE NETWORK CONNECTION, INC. AND GLOBAL TECHNOLOGIES,
LTD., Superior Court of Georgia, Civil Action No. 99-CV-1307. Bryan R. Carr,
TNCi's former Chief Operating and Financial Officer and a former Director, filed
a claim on November 24, 1999 alleging a breach of his employment agreement with
TNCi. Mr. Carr claims that he is entitled to the present value of his base
salary through October 31, 2001, a share of any "bonus pool," the value of his
stock options and accrued vacation time. TNCi and Global filed a motion to
compel arbitration of the claims pursuant to an arbitration provision in the
employment agreement and to stay the State Court action pending the arbitration
proceeding. The Company's motion was granted on August 9, 2000. On November 7,
2000, Mr. Carr filed his claim for arbitration in Georgia.

In September of 1999, the Company filed a lawsuit against Barington Capital
Group, L.P. in Maricopa County Superior Court, Arizona, seeking a declaratory
judgment that no sums were owed to Barington pursuant to a one-year Financial
Advisory Service Agreement dated October 21, 1998. In October 1999, Barington
filed a lawsuit on the same contract in the Supreme Court of the State of New
York, County of New York, Index No. 99-6041606, captioned BARINGTON CAPITAL
GROUP, L.P. V. INTERACTIVE FLIGHT TECHNOLOGIES, INC., alleging that Barington is
owed $1,750,471 in connection with services alleged to have been performed
pursuant to the Financial Advisory Service Agreement. The Company filed a motion
to dismiss or stay Barington's New York action, pending resolution of the
Arizona action. The court granted a stay. In the interim, there have been
several attempts by Barington to have the Arizona action dismissed based on
jurisdictional grounds. As a result, on or about September 15, 2000, the stay in
Barington's New York action was lifted after the New York Court determined that
there were still jurisdictional issues pending in the Arizona action. On or
about October 16, 2000, the Company renewed its request to the New York Court to
dismiss or continue the stay on the ground that the Arizona action was still
active. The New York Court has not yet ruled on the Company's recent request.

GLOBAL TECHNOLOGIES, LTD. V. XCEL CAPITAL, LLC, United States District
Court for the Eastern District of Pennsylvania, Case No. 00-CV-505. On January
27, 2000, the Company filed an action against XCEL Capital, LLC ("XCEL") for
specific performance and breach of contract. In the action, the Company sought
to compel XCEL to tender 75,000 shares (pre-stock split) of Global Class A
Common Stock to the Company at $4.75 per share in accordance with XCEL's
obligations pursuant to a put/call agreement entered into between the parties on
August 12, 1999. XCEL filed counterclaims. On September 14, 2000, the Company
settled the action by agreeing to issue an additional 25,000 shares to XCEL and
to register such shares for resale (subject to certain restrictions on the
volume and timing of sales) by October 31, 2000. The February 2000 stock
dividend was not issued, and no money was paid, to XCEL.

A suit captioned LODGENET ENTERTAINMENT CORPORATION V. THE NETWORK
CONNECTION, INC. was filed April 5, 2000 in the Circuit Court for the Second
Judicial Circuit of the State of South Dakota. The action arose out of TNCi's
hiring of Theodore P. Racz, a former LodgeNet Entertainment Corporation
employee, as its Senior Vice President of the Hotels & Hospitality division.
LodgeNet alleged tortious interference with contract and tortious interference
with business relationships. LodgeNet sought to prohibit Mr. Racz from being
employed by TNCi, as well as damages, and fees and costs. On August 30, 2000,
this case was voluntarily dismissed without prejudice by LodgeNet because there
was no jurisdiction in South Dakota.

A suit captioned AVNET, INC. V. THE NETWORK CONNECTION, INC., was filed May
17, 2000 in Maricopa County Superior Court, CV2000-009416. The suit relates to
invoices for inventory purchased by The Network Connection in late 1998 and
early 1999. Avnet, Inc. seeks payment of the invoices, interest and legal fees.
The aggregate amount of relief sought by Avnet is approximately $900,000. The
Network Connection has not paid for the inventory purchased primarily for the
following reasons: (i) the inventory purchased did not meet specifications and
thus was not accepted by its customer, and (ii) The Network Connection was
pursuing a separate warranty claim against Avnet regarding certain other
inventory purchased from Avnet. On October 11, 2000, The Network Connection won
a jury verdict of $1.8 million in the warranty suit. The Network Connection has

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applied to the court for fees and costs of approximately $290,000 plus
pre-judgement interest, which, if granted, would be in addition to any jury
verdict awarded. The court is expected to enter its final judgment in December
2000. The Network Connection expects payment in December subject to the
defendants not appealing the ruling.

The Company is subject to other lawsuits and claims arising in the ordinary
course of its business. In the Company's opinion, as of September 30, 2000, the
effect of such matters will not have a material adverse effect on the Company's
results of operations and financial position.

(b) CARNIVAL AGREEMENT

In September 1998, the Company entered into a Turnkey Agreement (the
"Carnival Agreement") with Carnival Corporation ("Carnival") for the purchase,
installation and maintenance of its advanced cabin entertainment and management
system for the cruise industry ("CruiseView(TM)") on a minimum of one Carnival
Cruise Lines ship. In December 1998, Carnival ordered the installation of
CruiseView(TM) on one Carnival Cruise Lines "Fantasy" class ship, which has been
in operational use since August 1999. In August 1999, Carnival ordered the
installation of CruiseView(TM) on one Carnival Cruise Lines "Destiny" class ship
which was in operational use from October 1999 through March 2000

On September 25, 2000, the Company entered into a Master Settlement
Agreement and Mutual Release with Carnival (the "Settlement Agreement"). The
Settlement Agreement specifies that the Company and Carnival agree: (i) to
terminate the Carnival Agreement; (ii) to negotiate in good faith to enter into
a new agreement for purchase, installation and maintenance of CruiseView(TM);
(iii) that the Company will issue to Carnival a one-year convertible note
payable in the principal amount of $550,000; (iv) to mutually release each party
from any prior claims; and (v) the Company shall retain ownership of any and all
equipment (other than wiring and switching equipment installed for networking
purposes which Carnival purchased and paid in full pursuant to the Carnival
Agreement) installed on any Carnival ship.

Pursuant to the Settlement Agreement, the Company and Carnival continue
discussions with respect to a new agreement which would cover the installation
of the Company's latest CruiseView(TM) technology on the "Fantasy" class ship
discussed above, and contractual terms more favorable to the Company than the
Carnival Agreement, including a longer-term and multiple ship arrangement. The
Company believes its new technology improves the Company's ability to create
multiple new content and commerce-based revenue streams, and to establish a
business relationship providing appropriate returns to each partner. There is no
assurance that the Company will be successful in securing a new, more favorable
long-term contract with Carnival. Notwithstanding the above, the Company
continues to operate its CruiseView(TM) system aboard one Carnival Fantasy class
ship on a month-to-month basis and will continue to do so as long as the
economics are beneficial to the Company and Carnival.

In September 1999, GTL Leasing Limited entered into an agreement with
International Lottery & Totalizator Systems, Inc., a California corporation
("ILTS"), to purchase an on-line lottery system for the operation of the Inter
Lotto lotteries. The base value of the lottery system being purchased from ILTS
was $12.3 million, of which approximately $2.9 million had yet to be paid as of
September 30, 2000. The outstanding balance accrues interest at a rate of 1.5%
per month. On October 4, 2000, the Company paid $2.0 million to ILTS for the
equipment, including accrued interest of $200,341. Approximately $1.1 million of
accounts payable to ILTS relating to the purchase agreement remains outstanding
as of November 10, 2000.

In September 1999, GTL Management entered into an eight-year facilities
management agreement with ILTS to provide operational and technology support for
the system. Under this agreement, GTL Management pays ILTS a management fee of
$72,000 per week, plus additional amounts based on the number of installed
terminals (there are currently no installed terminals) and sales volumes, upon
the commencement of ticket sales through the system. Approximately $1,025,000
had yet to be paid as of September 30, 2000 for services provided under this
agreement. In October 2000, the Company ceased operating lotteries on behalf of

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Inter Lotto and began de-installing and warehousing the lottery terminals to
reduce costs. ILTS has since stopped providing facilities management services to
GTL Management. Approximately $900,000 of accounts payable to ILTS relating to
the facilities management agreement remains outstanding as of November 10, 2000.

In connection with the deinstallation of the lottery terminals, the Company
entered into an agreement in principle with ILTS. Under the agreement in
principle, the Company will pay $2.1 million in cash to ILTS and return 375
lottery terminals to ILTS. All claims under the purchase and facilities
management agreements or otherwise will be mutually released. Under the
agreement in principle, the Company is required to pay cash of $1.1 million and
the remainder by December 27, 2000. The Company recorded a special charge of
$1,900,000 as of September 30, 2000 to reserve for the termination agreement
payments, write-off capitalized installation costs and accrue for deinstallation
of the terminals.

Global has guaranteed the obligations of GTL Leasing Limited and GTL
Management under these agreements.

(10) COMPREHENSIVE LOSS

Comprehensive income encompasses net income and "other comprehensive
income", which includes all other non-owner transactions and events, which
change stockholders' equity. The Company recognized comprehensive loss as
follows:

THREE MONTHS
ENDED SEPTEMBER 30,
-------------------------------
2000 1999
------------ ------------
Net loss $(10,830,932) $ (449,115)
Net unrealized loss on
investment securities (16,500,000) (1,415)
Tax benefit of NOL carryforward (6,597,059)
Unrealized loss on foreign --
currency translation (265,482)
------------ ------------
Comprehensive loss $(34,193,473) $ (450,530)
============ ============

(11) OPERATING SEGMENTS

In 1998, the Company adopted SFAS 131, which requires the reporting of
operating segments using the "management approach" versus the "industry
approach" previously required. The Company's reportable segments consist of TNCi
and general corporate operations. TNCi is a provider of broadband entertainment,
information and e-commerce systems for the "away-from-home" marketplace, which
encompasses hotels, cruise ships and long-haul passenger trains, as well as
schools, training facilities and institutions. TNCi's fully-interactive,
all-digital and high speed information and entertainment platforms are designed
to provide consumers and students Internet and e-mail access with such
customizable services as on-demand films, videos and music, video games and
casino gaming, tour and reservation information, as well as IP telephony,
courseware and lectures, and other Internet-based content and commerce
applications. General corporate operations consist of developing and operating
of affiliate companies, most of which are engaged in telecommunications,
e-commerce, networking solutions and gaming.

The following summarizes information related to the Company's segments. All
significant inter-segment activity has been eliminated. Assets are the owned or
allocated assets used by each operating segment.

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THREE MONTHS
ENDED SEPTEMBER 30,
--------------------------------
2000 1999
------------ ------------
Revenue
TNCi $ 55,236 $ 5,610,387
Other 114,085 --
------------ ------------
$ 169,321 $ 5,610,387
Gross profit(a)
TNCi $ (46,325) $ 2,181,246
Other 90,409 --
------------ ------------
$ 44,084 $ 2,181,246
Operating income (loss)
TNCi $ (4,462,037) $ 517,635
Other (5,669,862) (1,078,240)
------------ ------------
$(10,131,899) $ (560,605)
General corporate operations
Equity in loss of non-
consolidated affiliate $ -- $ (152,576)
Net interest (2,222,295) 295,187
Other income (expenses) 354 13,408
Minority interest 545,328 (94,529)
Extraordinary gain 977,580 --
------------ ------------

Net loss $(10,830,932) $ (499,115)

Total assets
TNCi $ 13,010,939 $ 19,137,090
General corporate 80,432,631 22,478,454
------------ ------------

Total Assets $ 93,443,570 $ 41,615,544
============ ============

(a) Gross profit is the difference between Revenue and Cost of Revenue in the
consolidated statement of operations.

(12) SUBSEQUENT EVENTS

(a) SECURED CREDIT FACILITY

As of November 10, 2000 the Company has repaid $250,000, net of new
borrowings, of the Secured Credit Facility leaving an outstanding balance of
approximately $6.7 million. In connection with the net repayment, Merrill Lynch
released $500,000 of the collateral pledged by Mr. Gross. As of November 10,
2000, Mr. Gross has pledged collateral with a market value of approximately $2.3
million to secure the facility.

(b) SECURED CONVERTIBLE NOTES

On October 3, 2000, the Company issued $7.0 million of secured convertible
notes to Advantage Fund II Ltd. and Koch Investment Group, Ltd. The notes bear
interest at 8% per annum and are convertible after 120 days into shares of the
Company's Class A Common Stock at a 20% discount to market, and after 150 days
into shares of U.S. Wireless common stock also at a 20% discount to market. The
Company is obligated to register the Class A Common Stock into which the notes
are convertible. To secure such borrowing, the Company pledged 866,538 shares of
U.S. Wireless common stock to the holders of the notes. The Company can redeem
the secured convertible notes at any time for a premium.

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In connection with this issuance, on October 5, 2000, the Company redeemed
$1.0 million of the principal amount of the Secured Convertible Notes for cash
of $1.2 million plus the issuance of 62,500 shares of the Company's Class A
Common Stock, as required under such notes. As a result of the redemption, the
note holders released to the Company 250,000 shares of U.S. Wireless common
stock previously held as collateral.

On October 25, 2000, the remaining $1.0 million of principal amount of the
Secured Convertible Notes was converted into 500,000 shares of the company's
Class A Common Stock. As a result of the conversion, the lenders released the
final 250,000 shares of U.S. Wireless common stock previously held as
collateral.

In October 2000, the Company decided to cease operating lotteries on behalf
of Inter Lotto and began de-installing and warehousing the lottery terminals. In
connection therewith, the Company entered into an agreement in principle with
ILTS. Under the agreement in principle, the Company will pay $2.1 million in
cash to ILTS and return 375 lottery terminals to ILTS. All claims under the
purchase and facilities management agreements or otherwise will be mutually
released. Under the agreement in principle, the Company is required to pay cash
of $1.1 million and the remainder by December 27, 2000. The Company recorded a
special charge of $1,900,000 as of September 30, 2000 to reserve for the
termination agreement payments, write-off capitalized installation costs and
accrue for deinstallation of the terminals.

ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of
operations should be read together with the consolidated financial statements
and the related notes included in another part of this report and which are
deemed to be incorporated into this section. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from those anticipated in those forward-looking
statements as a result of certain factors, including, but not limited to, those
set forth under and included in other portions of this report. See
"Forward-Looking Statements" on Page 21.

DESCRIPTION OF BUSINESS

Global Technologies, Ltd. is a technology incubator that invests in,
develops and manages emerging growth companies in the networking solutions,
interactive information and entertainment systems, e-commerce,
telecommunications and gaming industries.

We currently hold common stock and convertible preferred stock representing
approximately 77% of the outstanding common stock of The Network Connection,
Inc. on a fully converted basis. The Network Connection is publicly traded on
the NASDAQ SmallCap Market under the ticker symbol "TNCX."

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TNCi is a provider of broadband entertainment, information and e-commerce
systems for the "away-from-home" marketplace, which encompasses hotels, cruise
ships and long-haul passenger trains, as well as schools, training facilities
and institutions. TNCi's fully-interactive, all-digital and high speed
information and entertainment platforms are designed to provide consumers and
students Internet and e-mail access with such customizable services as on-demand
films, videos and music, video games and casino gaming, tour and reservation
information, as well as IP telephony, courseware and lectures, and other
Internet-based content and commerce applications. TNCi has developed specific
systems for the hospitality market (InnView(TM)), the cruise ship industry
(CruiseView(TM)), the long haul passenger train market (Projectrainbow(TM)), as
well as for corporate training and educational institutions (EduView(R)). These
systems provide "away from home" industries with technology solutions for the
information and entertainment needs of today's "connected" marketplace.

We also hold 3,000,000 shares of common stock representing approximately
14.2% of the outstanding common stock of U.S. Wireless Corporation, based on the
number of outstanding shares of U.S. Wireless common stock on June 30, 2000.
U.S. Wireless is publicly traded on the NASDAQ National Market under the ticker
symbol "USWC".

U.S. Wireless provides mobile location and traffic-related information to
wireless carriers, Internet providers, public safety and
transportation/telematics companies. U.S. Wireless is building a national
location network and has announced plans to roll out traffic and transportation
services in San Diego, CA, Washington, D.C., Hampton Roads, VA, and the Greater
San Francisco, CA bay area. The company's network is based on its award-winning
RadioCamera(TM) pattern matching positioning technology that pinpoints the
location of cellular callers to enable the delivery of mobile services that rely
on location, including life saving emergency 911 caller location, live traffic
and traveler information, navigation assistance, localized directory assistance,
and vehicle and asset tracking.

We also own an operating center and approximately 3,600 terminals that
connect to the operating center via wireless technology. GTL Management Limited,
one of our wholly owned United Kingdom subsidiaries, previously operated
lotteries on behalf of charities in Great Britain in conjunction with Inter
Lotto (UK) Limited (which maintains the license to operate lotteries), using
this system. Prior to August 18, 2000, we owned 27.5% of Inter Lotto, but have
terminated our relationship with that entity. In connection with the
termination, we received approximately (pound)750,000, transferred our shares of
Inter Lotto to three of its other shareholders and entered into an arrangement
pursuant to which we would have access to Inter Lotto's lottery license through
December 31, 2000.

In October 2000, we ceased all lottery operations and began deinstalling
and warehousing terminals. As of November 10, 2000, all terminals were currently
warehoused. In addition, we are currently negotiating an agreement for the use
of our lottery network with a joint venture through which it is anticipated that
an on-line lottery in a foreign country will be operated. We anticipate that we
will receive an upfront cash payment, equipment rental revenue and a percentage
of any revenue generated by the joint venture from lottery operations. There is
no assurance that a transaction will be consummated or any lottery operations
commenced. Through our UK presence, we are also continuing to develop on-line,
Internet-based lottery and related games for UK residents.

As of November 10, 2000, we also hold 1,499,900 shares of common stock of,
representing an approximately 4% equity interest in, Shop4Cash.com, Inc., a
privately held, cash-incentive, Internet shopping portal with a growing base of
approximately 250 affiliated merchants. Shop4Cash has recently determined to
expand the scope of its existing business model to offer merchants on-line
credit card processing and transaction services in addition to the existing
services of the Shop4Cash website. Shop4Cash expects that these additional
services will create additional value for both consumers and businesses by
facilitating the flow of consumers from the Shop4Cash website to the merchants'
virtual storefronts.

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RESULTS OF OPERATIONS

REVENUE.

Revenue for the quarter ended September 30, 2000 was $169,321, a decrease
of $5,441,066 (or 97%) compared to revenue of $5,610,387 for the comparable
quarter ended September 30, 1999. Equipment sales of $42,735 generated during
the quarter ended September 30, 2000 were principally from the sale of servers
and spare equipment parts to educational institutions. Equipment sales of
$5,550,560 during the quarter ended September 30, 1999 were principally from the
sale of 195 of The Network Connection's Cheetah(R) video servers in connection
with the Georgia Metropolitan Regional Education Services Agency Net 2000
project.

Service income of $126,586 generated during the quarter ended September 30,
2000 resulted from the lottery operations in the U.K. of $114,085 and from our
share of revenue generated by installed interactive entertainment systems of
$12,501. Service income of $59,827 generated during the quarter ended September
30, 1999, was principally from design services performed for a potential
interactive entertainment system customer.

COST OF SALES.

Cost of equipment sales and service income for the quarter ended September
30, 2000 were $125,237, a decrease of $3,303,724 (or 96%) compared to cost of
sales and service income of $3,428,961 for the comparable quarter ended
September 30, 1999. Cost of equipment sales of $10,803 for the quarter ended
September 30, 2000 is comprised principally of costs associated with the server
sales to educational institutions. Cost of equipment sales of $3,420,381 for the
quarter ended September 30, 1999 was comprised of material costs and estimated
warranty costs associated with the 195 Cheetah(R) video servers for the Georgia
schools project.

Cost of service income of $114,434 for the quarter ended September 30, 2000
is comprised of video content costs of $90,758 for interactive entertainment
system customers and U.K. lottery costs of $23,676. We expect that the video
content costs as a percentage of the associated service income will decrease
over time as The Network Connection's installed base of systems grows. The cost
of service income of $8,580 for the comparable quarter of the prior fiscal year
is comprised of miscellaneous costs for design services performed for an
interactive entertainment customer.

GENERAL AND ADMINISTRATIVE.

General and administrative expenses for the quarter ended September 30,
2000 were $7,645,908, an increase of $5,173,018 (or 209%) compared to general
and administrative expenses of $2,472,890 for the corresponding quarter ended
September 30, 1999. Significant components of general and administrative
expenses include payroll costs, legal and professional fees, marketing and
advertising costs, and depreciation expense. The increase in expenses in the
current quarter is principally attributable to increases in facilities costs and
payroll expenses of The Network Connection related to additional offices and
increased personnel levels, and increases in payroll expenses, marketing costs,
legal and professional fees and depreciation expenses of GTL Management related
to the UK lottery operation launched in April 2000.

NON-CASH COMPENSATION.

Non-cash compensation expense of $197,904 in the quarter ended September
30, 2000 is related to the issuance of warrants and common stock for financial
advisory services. Non-cash compensation expense of $85,000 for the quarter
ended September 30, 1999 resulted from a former employee's severance package.

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<PAGE>
SPECIAL CHARGES.

Special charges of $1,900,000 for the quarter ended September 30, 2000
relates to the deinstallation of the lottery terminals in the U.K. and the
termination of the facilities management agreement with ILTS.

AMORTIZATION OF INTANGIBLES.

Amortization expense for the quarter ended September 30, 2000 was $432,171,
an increase of $248,030 (or 135%) compared to amortization expense of $184,141
for the three months ended September 30, 1999. The increase in intangible
amortization in the current quarter is due to a revision made effective May 1,
2000 to our estimate of the remaining useful life of goodwill from ten years to
five years as a result of economic events which occurred during the previous
fiscal year.

INTEREST EXPENSE.

Interest expense was $2,247,729 for quarter ended September 30, 2000
compared to $8,651 for the quarter ended September 30, 1999. The increase in
interest expense for the current quarter is principally attributable to non-cash
interest expenses of $1,711,293 related to warrants issued in connection with
cash advances and pledges of collateral, interest accrued on the outstanding
balance of the ILTS purchase commitment of $200,341, and increased debt levels
compared to the prior fiscal quarter.

INTEREST INCOME.

Interest income was $25,434 for the quarter ended September 30, 2000
compared to $303,838 for the quarter ended September 30, 1999. The decrease in
interest income for the current quarter is attributable to the lower average
cash balance during the quarter ended September 30, 2000 compared to the
comparable period ended September 30, 1999.

EQUITY INTERESTS.

For the quarter ended September 30, 2000, we did not record any equity
interest in losses of affiliates, compared to $67,925 and $84,651 we recorded
for Inter Lotto and Donativos S.A. de C.V. respectively for the quarter ended
September 30, 1999. On August 18, 2000 we transferred our equity interest in
Inter Lotto to three of the original shareholders of Inter Lotto and wrote of
our investment as of June 30, 2000. We sold our equity interest in Donativos in
May 2000.

OTHER INCOME.

Other income for the quarter ended September 30, 2000 was $354 compared to
$13,408 for the quarter ended September 30, 1999. Other income in the current
quarter resulted from the sale of scrapped inventory parts to employees. Other
income in the quarter ended September 30, 2000 principally resulted from net
gains (partially offset by net losses) from the sale of certain assets, and
sublet income from the sublease of office space.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2000, we had cash and cash equivalents, and short-term
investments of approximately $47.8 million, of which approximately $47.6 million
represents our investment in U.S. Wireless, which is classified as an investment
available for sale and carried at fair market value. The carrying value of this
investment is subject to future fluctuations in the market price of U.S.
Wireless common stock. As of November 10, 2000, the price per share of U.S.
Wireless common stock was $15.0625, resulting in a fair market value of $45.2
million.

During the quarter ended September 30, 2000, we used $4.4 million of cash
for operating activities, an increase of $1.6 million from the $2.8 million of
cash used for the quarter ended September 30, 1999. The cash used in operations

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during the quarter ended September 30, 2000 resulted primarily from the net
loss, partially offset by depreciation and amortization expenses, the
extraordinary gain on debt extinguishments, and non-cash interest and
compensation expenses, decreases in other current assets, and increases in
accounts payable and accrued liabilities. The cash utilized in operations during
the three months ended September 30, 1999 resulted primarily from increases in
accounts receivable and inventories, partially offset by increases in accounts
payable and deferred revenue.

Cash flows used in investing activities were $1.4 million during the
quarter ended September 30, 2000, a decrease of $1.6 million from the $3.0
million of cash used for the quarter ended September 30, 1999. The decrease in
cash used resulted primarily from the lack of deposits on and purchases of
lottery equipment partially offset by purchases of equipment used for
installations of interactive entertainment system in hotel properties.

During the quarter ended September 30, 2000, cash provided by financing
activities was $2.3 million, an increase of $2.8 million from the $476,000 of
cash used in the quarter ended September 30, 1999. The increase in cash provided
in the current fiscal period resulted primarily from advances from related
parties, the issuance of preferred stock of The Network Connection, advances
under equity purchase agreements and net borrowings under the credit facility
with Merrill Lynch, partially offset by the redemption of secured convertible
notes issued to Advantage Fund II, Ltd. and Koch Investment Group, Ltd. in June
2000.

On October 3, 2000, we issued $7.0 million of secured convertible notes to
Advantage and Koch. The notes bear interest at 8% per annum and are convertible
after 120 days into shares of our Class A Common Stock at a 20% discount to
market (we are obligated to register these shares for resale), and after 150
days into shares of U.S. Wireless common stock also at a 20% discount to market.
To secure such borrowing, we pledged 866,538 shares of U.S. Wireless common
stock to the holders of the notes. We can redeem the secured convertible notes
at any time for a premium.

In connection with this issuance, on October 5, 2000, we redeemed $1.0
million of the principal amount of the secured convertible notes issued in June
2000 for cash of $1.2 million plus the issuance of 62,500 shares of the
Company's Class A Common Stock, as required under the notes. As a result of the
redemption, the note holders released to the Company 250,000 shares of U.S.
Wireless common stock previously held as collateral.

On October 25, 2000, the remaining $1.0 million of principal amount of the
secured convertible notes issued in June 2000 was converted into 500,000 shares
of our Class A Common Stock. As a result of the conversion, the lenders released
the final 250,000 shares of U.S. Wireless common stock previously held as
collateral.

On October 4, 2000, we paid $2.0 million of our outstanding purchase
commitment of $2.9 million to ILTS. The payment included $200,341 of interest
which we had accrued as of September 30, 2000.

As of November 10, 2000 we have repaid $250,000, net of new borrowings, of
the credit facility with Merrill Lynch leaving an outstanding balance of
approximately $6.7 million. In connection with certain repayments, Merrill Lynch
released $500,000 of the collateral pledged for our benefit by Mr. Gross. As of
November 10, 2000, Mr. Gross has pledged collateral with a market value of
approximately $2.3 million to secure the facility.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivatives Instruments and for Hedging Activities." ("SFAS
133"). SFAS No. 133 requires companies to record derivatives on the balance
sheet as assets and liabilities, measured at fair value. Gains and losses
resulting from changes in the values of those derivatives would be accounted for
in earnings. Depending on the use of the derivative and the satisfaction of
other requirements, special hedge accounting may apply. At June 30, 2000, we had
no freestanding derivative instruments in place and had no material amount of

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embedded derivative instruments. We adopted SFAS 133 on July 1, 2000. Based upon
our application of SFAS no. 133, its adoption had no materially adverse effect
on our consolidated financial statements.

INFLATION AND SEASONALITY

We do not believe that we are significantly impacted by inflation or that
our operations are seasonal in nature.

RISKS ASSOCIATED WITH YEAR 2000.

Many currently installed computer systems and software products were coded
to accept only two digit year entries in the date code field. Consequently,
subsequent to December 31, 1999, many of these systems became subject to failure
or malfunction. Although we are not aware of any material Year 2000 issues at
this time, Year 2000 problems may occur or be made known to us in the future.
Year 2000 issues may possibly affect software solutions developed by our
affiliate companies or third-party software incorporated into our solutions. Our
affiliate companies generally do not guarantee that the software licensed from
third-parties by their clients is Year 2000 compliant, but they sometimes
warrant that solutions developed by them are Year 2000 compliant.

FORWARD-LOOKING INFORMATION.

This Quarterly Report on Form 10-Q includes "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. This
act provides a "safe harbor" for forward-looking statements to encourage
companies to provide prospective information about themselves so long as they
identify these statements as forward-looking and provide meaningful cautionary
statements identifying important factors that could cause actual results to
differ from the projected results.

All statements other than statements of historical fact we make in this
Report are forward-looking. In particular, the statements herein regarding our
future results of operations or financial position are forward-looking
statements. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expect," "plan," "anticipate,"
"believe," "estimate," "predict," "potential," or "continue" or the negative of
such terms or other comparable terminology.

Forward-looking statements reflect our current expectations and are
inherently uncertain. For these statements, we claim the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. You should understand that future events, in
addition to those discussed elsewhere in this Report and also in other filings
made by us with the Securities and Exchange Commission, could affect our future
operations and cause our results to differ materially from those expressed in
our forward-looking statements. The cautionary statements made in this Report
should be read as being applicable to all related forward-looking statements
contained herein.

PART II. OTHER INFORMATION

ITEM 1 -- LEGAL PROCEEDINGS

FIDELITY AND GUARANTY INSURANCE COMPANY V. INTERACTIVE FLIGHT TECHNOLOGIES,
INC., United States District Court for the District of Minnesota, CV No. 99-410.
This is a reformation action in which one of the Company's insurers is seeking
to reform an umbrella policy in the amount of $10.0 million to include an
exclusion for completed products for policies issued for years 1997-98 and
1998-99. Such exclusion would preclude claims made by the estates of victims of
the crash of Swissair Flight No. 111 on September 2, 1998. The insurer recently
filed a motion for summary judgment, which was heard before the United States
District Court for the District of Minnesota on September 12, 2000. On October
24, 2000, the Court ruled in favor of the insurer. We are filing a motion to
alter or amend the ruling. The umbrella policy at issue of this suit is in
addition to the $10.0 million in aviation insurance coverage that Global
currently has in place.

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SWISSAIR/MDL-1269, IN REGARDS TO AN AIR CRASH NEAR PEGGY'S COVE, NOVA
SCOTIA. This multi-district litigation, which is being overseen by the United
States District Court for the Eastern Division of Pennsylvania, relates to the
crash of Swissair Flight No. 111 on September 2, 1998. The Swissair MD-11
aircraft involved in the crash was equipped with an entertainment network system
that had been sold to Swissair by our predecessor company, Interactive Flight
Technologies, Inc. Estates of the victims of the crash have filed lawsuits
throughout the United States against Swissair, Boeing, Dupont and various other
parties, including Global and The Network Connection, which has been named in
some of the lawsuits filed on a successor liability theory. The Network
Connection and Global deny all liability for the crash. The Network Connection
and Global are being defended by Global's aviation insurer.

On September 1, 1999, SAir Group invited the Company to participate in a
conciliation hearing before the Justice of the Peace in Kloten, Switzerland,
which is the customary manner in which civil litigation is initiated in
Switzerland. The document informing us of the proceeding states that the request
has been filed in connection with the crash of Swissair Flight 111 primarily in
order to avoid the expiration of any applicable statutes of limitations and to
reserve the right to pursue further claims. The document states that the relief
sought is "possibly the equivalent of CHF 342,000,000 - in a currency to be
designated by the court; each plus 5% interest with effect from September 3,
1998; legal costs and a participation to the legal fees (of the plaintiff) to be
paid by the defendant."

On May 6, 1999, a complaint captioned INTERACTIVE FLIGHT TECHNOLOGIES, INC.
V. SWISSAIR TRANSPORT COMPANY, LTD., et al., No. Civ. 99-0936PHXSMM, was filed
in the United States District Court for the District of Arizona. In this suit,
we are seeking payment by Swissair of $6,773,906 for sums owed by Swissair and
SR Technics to us for equipment and warranty contracts. We have also asserted
claims for business torts arising from the unjustified deactivation of the
entertainment network systems following the crash of Swissair Flight 111 in this
action. Swissair filed motions to dismiss the action alleging that the claims
asserted in our complaint are subject to resolution by arbitration. The motions
to dismiss were granted on March 31, 2000. We requested the District Court to
reconsider its ruling on the motions and such request was denied by the District
Court on May 25, 2000. We appealed both the March 31 and May 25 District Court
Orders to the United States Court of Appeals for the Ninth Circuit. Swissair
filed a motion to dismiss the appeal for lack of jurisdiction, which was granted
on September 18, 2000. We are arbitrating these claims in Switzerland.

BRYAN R. CARR V. THE NETWORK CONNECTION, INC. AND GLOBAL TECHNOLOGIES,
LTD., Superior Court of Georgia, Civil Action No. 99-CV-1307. Bryan R. Carr, The
Network Connection former Chief Operating and Financial Officer and a former
Director, filed a claim on November 24, 1999 alleging a breach of his employment
agreement with The Network Connection. Mr. Carr claims that he is entitled to
the present value of his base salary through October 31, 2001, a share of any
"bonus pool," the value of his stock options and accrued vacation time. The
Network Connection and Global filed a motion to compel arbitration of the claims
pursuant to an arbitration provision in the employment agreement and to stay the
State Court action pending the arbitration proceeding. Our motion was granted on
August 9, 2000. On November 7, 2000, Mr. Carr filed his claim for arbitration in
Georgia.

In September of 1999, we filed a lawsuit against Barington Capital Group, L
P. in Maricopa County Superior Court, Arizona, seeking a declaratory judgment
that no sums were owed to Barington pursuant to a one-year Financial Advisory
Service Agreement dated October 21, 1998. In October 1999, Barington filed a
lawsuit on the same contract in the Supreme Court of the State of New York,
County of New York, Index No. 99-6041606, captioned BARINGTON CAPITAL GROUP,
L.P. V. INTERACTIVE FLIGHT TECHNOLOGIES, INC., alleging that Barington is owed
$1,750,471 in connection with services alleged to have been performed pursuant
to the Financial Advisory Service Agreement. We filed a motion to dismiss or
stay Barington's New York action, pending resolution of our Arizona action. The
court granted a stay. In the interim, there have been several attempts by
Barington to have our Arizona action dismissed based on jurisdictional grounds.
As a result, on or about September 15, 2000, the stay in Barington's New York
action was lifted after the New York Court determined that there were still
jurisdictional issues pending in our Arizona action. On or about October 16,
2000, we renewed our request to the New York Court to dismiss or continue the
stay on the ground that our Arizona action was still active. The New York Court
has not yet ruled on our recent request.

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GLOBAL TECHNOLOGIES, LTD. V. XCEL CAPITAL, LLC, United States District
Court for the Eastern District of Pennsylvania, Case No. 00-CV-505. On January
27, 2000, we filed an action against XCEL Capital, LLC ("XCEL") for specific
performance and breach of contract. In the action, we sought to compel XCEL to
tender 75,000 shares (pre-stock split) of Global Class A Common Stock to us at
$4.75 per share in accordance with XCEL's obligations pursuant to a put/call
agreement entered into between the parties on August 12, 1999. XCEL filed
counterclaims. On September 14, 2000, we settled the action by agreeing to issue
an additional 25,000 shares to XCEL and to register such shares for resale
(subject to certain restrictions on the volume and timing of sales) by October
31, 2000. The February 2000 stock dividend was not issued, and no money was
paid, to XCEL.

A suit captioned LODGENET ENTERTAINMENT CORPORATION V. THE NETWORK
CONNECTION, INC. was filed April 5, 2000 in the Circuit Court for the Second
Judicial Circuit of the State of South Dakota. The action arose out of The
Network Connection's hiring of Theodore P. Racz, a former LodgeNet Entertainment
Corporation employee, as its Senior Vice President of the Hotels & Hospitality
division. LodgeNet alleged tortious interference with contract and tortious
interference with business relationships. LodgeNet sought to prohibit Mr. Racz
from being employed by The Network Connection, as well as damages, and fees and
costs. On August 30, 2000, this case was voluntarily dismissed without prejudice
by LodgeNet because there was no jurisdiction in South Dakota.

We may be subject to other lawsuits and claims arising in the ordinary
course of our business. In our opinion, as of September 30, 2000, the effect of
such matters will not have a material adverse effect on our results of
operations and financial position.

ITEM 2 -- CHANGES IN SECURITIES

UNREGISTERED ISSUANCES

On August 3, 2000, The Network Connection issued 100 shares of its Series E
6% Convertible Preferred Stock to third party investors for net proceeds of
approximately $909,000. Beginning 180 days after the date of issue, each share
of this preferred stock is convertible into common stock at the lesser of $4.00
per share or a price based on the average market price of The Network Connection
common stock for the five consecutive trading days immediately preceding the
date of conversion. These securities were issued in a transaction exempt from
the registration provisions of the Securities Act of 1933, as amended, pursuant
to Section 4(2) thereof.

On August 2, 2000, upon receipt of notice of conversion from Global, The
Network Connection issued 5,000,000 shares of its common stock to Global upon
conversion of 826,447 shares of The Network Connection's Series D Preferred
Stock held by Global. These securities were issued in a transaction exempt from
the registration provisions of the Securities Act of 1933, as amended, pursuant
to Section 4(2) thereof.

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On September 12, 2000, the Board of Directors of The Network Connection
authorized the issuance of warrants to purchase 311,560 shares of The Network
Connection's common stock, which have been divided equally between two trusts
controlled by Irwin L. Gross, the Chairman and Chief Executive Officer of Global
and The Network Connection, as compensation for various working capital advances
made to The Network Connection from May 2000 through July 2000 totaling
$1,050,00. On September 12, 2000, The Network Connection's Board of Directors
also approved the conversion of these advances into promissory notes from The
Network Connection. The number of warrants issued for each advance was based
upon the amount advanced divided by the closing market price of The Network
Connection's common stock on the date of each advance. The warrants have
exercise prices equal to the closing market price of The Network Connection's
common stock on the date of the relevant advance and a term of five years from
such date. These securities were issued in a transaction exempt from the
registration provisions of the Securities Act of 1933, as amended, pursuant to
section 4(2) thereof.

In connection with termination and settlement agreements entered into on
July 31, 2000, we issued an aggregate, in August and September 2000, of 279,028
shares of our Class A Common Stock to two stockholders who were also former
directors/officers. In accordance with the agreements, we have previously
registered 192,166 of these shares. The remaining 86,862 were issued on
September 19, 2000 and will not be registered. These securities were issued in a
transaction exempt from the registration provisions of the Securities Act of
1933, as amended, pursuant to Section 4(2) thereof.

On September 22, 2000, the Board of Directors authorized the issuance of
warrants to purchase 198,318 shares of our Common Stock, which have been divided
equally between two trusts controlled by Irwin L. Gross, our Chairman and Chief
Executive Officer, as compensation for various working capital advances made to
us in August and September 2000 totaling $800,000. On September 22, 2000, our
Board of Directors also approved the conversion of these advances into
promissory notes from us. The number of warrants issued for each advance was
based upon the amount advanced divided by the closing market price of our Class
A Common Stock on the date of each advance. The warrants have exercise prices
equal to the closing market price of our Common Stock on the date of the
relevant advance and a term of five years from such date. These securities were
issued in a transaction exempt from the registration provisions of the
Securities Act of 1933, as amended, pursuant to section 4(2) thereof.

On September 22, 2000 the Board of Directors authorized the issuance of
warrants to purchase 553,978 shares of our Class A Common Stock to Irwin L.
Gross, our Chairman and Chief Executive Officer, as compensation for pledging
additional collateral to secure various maintenance calls by Merrill Lynch on
our credit facility. The number of warrants issued for each pledge is based upon
the amount advanced divided by the closing market price of our Class A Common
Stock on the date of each advance. The warrants have exercise prices equal to he
closing market price of our Common Stock on the date of the relevant advance and
a term of five years from such date. These securities were issued in a
transaction exempt from the registration provisions of the Securities Act of
1933, as amended, pursuant to section 4(2) thereof.

On October 16, 2000, an officer of TNCi purchased 500,000 units of TNCi,
consisting of 500,000 shares of TNCI common stock and warrants to purchase
166,667 shares of TNCi common stock. The purchase price was $2.00 per unit,
which was the closing market price of TNCi common stock on such date. The
warrants have an exercise price of 3.50 per share and a term of four-years. The
purchase price for these units was $1.0 million, which was paid to TNCi in
installments in August and September 2000. These securities were issued in a
transaction exempt from the registration provisions of the Securities Act of
1933, pursuant to Section 4(2) thereof.

ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K

The following Index to Exhibits lists the Exhibits filed as part of this
Quarterly Report on Form 10-QSB. Where so indicated, Exhibits which were
previously filed are incorporated by reference. Documents filed herewith are
denoted with an asterisk.

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(a) EXHIBITS

EXHIBIT NO. DESCRIPTION REFERENCE
----------- ----------- ---------
27 Financial Data Schedule *

----------
* Filed herewith

(b) REPORTS ON FORM 8-K

We filed two reports on Form 8-K during the relevant reporting period:

* On September 5, 2000 regarding the transfer of our interest in
Inter Lotto (UK) Limited and termination of an existing operating
agreement between us or our wholly-owned subsidiaries and Inter
Lotto to operate lotteries on behalf of charities in Great
Britain under Inter Lotto's External Lottery Manager's
Certificate.

* On October 20, 2000 regarding our recent issuance of $7.0 million
of secured convertible notes to Advantage and Koch.

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Dated: November 14, 2000 GLOBAL TECHNOLOGIES, LTD.

By: /s/ Irwin L. Gross
------------------------------------
Irwin L. Gross
Chief Executive Officer

By: /s/ Patrick J. Fodale
------------------------------------
Patrick J. Fodale
Chief Financial Officer

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INDEX OF EXHIBITS

EXHIBIT NO. DESCRIPTION REFERENCE
----------- ----------- ---------
27 Financial Data Schedule *

----------
* Filed herewith