U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
GLOBAL MEDIA CORPORATION
(Name of Small Business Issuer in its Charter)
Nevada 91-1842480
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
83 Victoria Crescent
Nanaimo, BC, Canada V9R 5B9
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (250) 716-9949
SECURITIES TO BE REGISTERED UNDER SECTION 12(b) OF THE ACT:
None
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Title of each class Name of each exchange on
to be so registered which each class to be registered
Common Stock OTC Electronic Bulletin Board
Total Number of Pages:
Index to Exhibits Appears on Page: 26 Page: 1
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Except for the historical information contained herein, the matters set
forth in this registration statement are forward looking statements within
the meaning of the "safe harbour" provisions of the Private Securities
Litigation Reform Act of 1995. These forward looking statements are
subject to risk and uncertainties that may cause actual results to differ
materially. These forward looking statements speak only as of the date
hereof and the Company disclaims any intent or obligation to update these
forward looking statements.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) BUSINESS DEVELOPMENT
Global Media Corp. (the "Company") was incorporated on April 8, 1997,
pursuant to the laws of the State of Nevada for the purpose of acquiring
and developing profitable communications projects to increase shareholder
wealth. On May 20, 1997, the Company acquired one hundred percent of the
shares of the satellite service provider Westcoast Wireless Cable Ltd., a
British Columbia corporation ("Westcoast"). The shareholder of Westcoast,
Michael Metcalfe, received 8,000,000 shares of the Company and U.S.
$100,000.00. In exchange the Company received all of the common stock of
Westcoast. Prior to this acquisition, the Company maintained assets
consisting of US$ 100,000 generated by the sale of 10 million shares of
common stock at $.01 each. Subsequent to its organization, the Company has
raised $555,416.00 from investors in private transactions exempted from the
registration provisions of the Securities Act of 1933, in reliance upon
Regulation D, Rule 504 (see Item 10, Recent Sales of Unregistered
Securities). The Company, including its subsidiary, employs 22 people full
time. The Company maintains a web site at http://www.gmcorp.net and its
"e-mail" address is [email protected].
Westcoast Wireless Cable Ltd.
____________________________
Michael Metcalfe was the founder, sole director and owner of Westcoast
Wireless Cable Ltd. The Company was organized as a British Columbia
corporation in May 1994 for the purpose of selling direct-to-home satellite
hardware and programming services primarily in Western Canada. Westcoast
Wireless Cable Ltd. has approximately 3,000 customers with over $3.9
million in sales since inception with the growth of approximately 100 new
customers a month. The approximate amount of sales for the fiscal year
ended July 31, 1997 was $1,618,000.
On September 19, 1997, a contract was entered into among Westcoast Wireless
Cable Ltd. and Express Serve Inc. to install Express Vu satellite systems
in certain areas of the lower mainland of Vancouver, Canada as well as on
Vancouver Island.
Prior to Express Vu's contract, Westcoast sold satellite hardware and
programming services including Cancom programming. Cancom is one of
Canada's largest providers of licensed Canadian content satellite
programming. This represented the focus of the Company since inception.
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(b) BUSINESS OF THE ISSUER
Global Media Corp. is a high tech information and communications
corporation. It is in the business of acquiring and developing profitable
communications projects to increase shareholder wealth. The Corporation
has recently acquired the business of Westcoast Wireless Cable which is in
the business of selling direct-to-home satellite hardware and programming
services in Western Canada.
Westcoast Wireless Cable
________________________
Westcoast Wireless Cable Ltd. (Westcoast) is in the business of selling
direct to home satellite equipment, installation, programming and
warranties in the western Canadian cable market. Westcoast is a value
added reseller of direct-to-home satellite hardware and programming
services. The two main product lines are the Express Vu and Star Choice
systems. Use of these systems requires consumers to purchase hardware such
as a satellite dish and a translator apparatus and programming packages
which are sold on an annual subscription basis, usually accompanied by an
installation contract. Westcoast also sells extended warranty and service
contracts.
Westcoast was recently selected as a distributor for Express Vu and Star
Choice, Canadian Radio and Television Commission ("CRTC") approved Canadian
satellite programming services. Westcoast has signed distribution
contracts with both services. Westcoast has also secured the rights to
install Express Vu satellite systems in certain areas of the lower mainland
of Vancouver, Canada as well as on Vancouver Island. These areas represent
a population base of approximately 1.6 million individuals and over 450,000
homes. There are less than five other companies with similar licenses,
none of which have as large a geographic area as Westcoast.
Products are warehoused and distributed from the Company's offices in
Aldergrove, BC, Canada. Sales and installation teams are coordinated from
the Nanaimo office. Westcoast's hardware is acquired locally through
Beamscope Communications, ("Beamscope") the national Canadian distributor
of all Express Vu products. Beamscope is a large wholesale to retail
supplier of IBM, Compaq and NEC hardware as well as various software
products. Westcoast has been dealing with Beamscope for over one year.
Westcoast and Beamscope do not have a written supply agreement, but in
its relationship with Beamscope, Westcoast has not encountered equipment
shortages or credit problems. Computerized inventory systems have ensured
sufficient hardware stock consistently.
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Marketing is currently via standard tele-marketing to book sales
appointments and by the use of flyers and print advertising. The Company
also has a site on the Internet's World Wide Web. Westcoast has been
approached by distributors of satellite services to assist in co-op
advertising and marketing.
Global Media Corp.
___________________________
Global Media Corp. is building and plans to operate a 100 station call
center in Nanaimo Canada. Using a network of servers, Internet lines,
computers, phones and contact management software, the call center is
envisioned to operate as a completely Internet-integrated call center. The
Company plans to integrate Internet and telephone communication,
simultaneously providing real-time online customer service and information
dissemination as well as traditional, phone based, call center services.
Global Media Corp.s' call center is planned to manage and track thousands
of daily inbound and outbound calls as well as facsimiles, e-mail and live,
real time Internet discussions. The existing infrastructure also allows
the center to be easily expanded to include real time video and audio
communication over the Internet. Management believes that as band-width
increases and compression technology improves, this will be the next form
of online customer service. Global Media Corp. will generate revenue by
contracting out the services of its call center to other Global Media
subsidiaries as well as companies in various industries who use
tele-marketing and telephone based customer services on either a complete
out-source or an over-flow basis.
The center is planned to handle large volumes of both inbound and outbound
calls as well as inbound and outbound information over the Internet. The
call center is planned to service a wide variety of businesses requiring
the management and dissemination of information over a wide geographic area
over multiple mediums. Some of these may include overflow toll-free order
taking or information dissemination, tele-marketing of goods and services,
telephone campaigns for charitable or for-profit endeavors. Global may
also provide investor relation services such as accepting in bound calls
for information and assisting with sophisticated investor contacts on
behalf of third party issuers. Subscribers pay based on a flat fee, by
commission, or per hour for use of these services.
Global Media began customizing its contact management software and
developing its contact database in July 1997. The first stage of
development, allowing the Company to begin operations with up to 20
stations was, completed in September 1997.
(c) INDUSTRY OVERVIEW AND COMPETITION
Westcoast Wireless Cable
________________________
Televisions are presently in the vast majority of Canadian homes; no trend
seems to be present today which could negatively affect this. The
potential market for Westcoast's products and services is close to the
number of households in British Columbia --
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approximately 1.6 million. The introduction of personal satellite cable
systems such as those sold and serviced by Westcoast represent the only
alternative delivery medium (to wired cable) of certain television
stations. Based on the results of the introduction of similar systems into
the United States, Westcoast believes that the sales of personal satellite
cable systems will continue to gain in popularity over the next two years.
Management believes a significant opportunity exists in the commercial sale
of such systems to large, multi-unit dwellings such as apartment and
condominium buildings. These type of sales provide larger initial hardware
and continuous revenue streams from all units which subscribe. A portion
of this revenue goes to the building owner providing them with an incentive
to choose Westcoast. Westcoast will seek a significant position in this
market as more personal and commercial residences convert from analog to
digital receiving of television signals.
There are many other distributors of these products and services. Westcoast
also competes for the public's monthly expenditures on such entertainment
opportunities as movie theaters, sporting events and other recreational
time endeavors. Westcoast cannot estimate how these competing industries
may grow and to what extent such growth would decrease Westcoast's revenue.
Global Media Corp. Call Center
______________________________
With the Internet increasingly becoming the first medium of interaction
between the consumer and corporations, customer service and interaction
will also need to be carried out through this medium. The phone however
continues to provide the most powerful, direct method of connecting to
geographically dispersed individuals on a one-to-one basis.
There are many call centers across North America providing inbound and
outbound services for various industries. Global Media Corp. also will
compete for corporate promotion budgets in such areas as direct mail and
print advertising.
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(d) RESEARCH AND DEVELOPMENT
Global Media Corp. Call Center
______________________________
The Company has plans to build and operate a 100 station call center in
Nanaimo, BC, Canada. Using a network of servers, Internet lines,
computers, phones and contact management software, the center is designed
to operate as a completely Internet integrated call center. The call
center is planned to be capable of simultaneously providing real time
online customer service and information as well as traditional, phone
based, call center services. Research and development will be ongoing to
ensure that the Company continues to be able to offer state of the art,
Internet integrated call center services. Management estimates that an
additional $250,000 will be required over the next twelve months. The
Company may seek to obtain this financing through a registered or exempt
securities offering or through debt financing if favorable terms may be
obtained.
(e) REGULATORY BACKGROUND
The Canadian Radio Telecommunications Corporation (CRTC) regulates the
distribution of programming to the Canadian Television market. Westcoast
Wireless Cable's Express Vu and Star Choice products are fully CRTC
approved and licensed. The radio and communications act mandates that
these two services are the only services of their type that can be sold
presently in Canada.
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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(a) RESULTS OF OPERATIONS
The Company currently derives its revenue principally from hardware and
programming sales of its personal cable satellite systems. The satellite
industry has gone through some dramatic changes over the last year.
Increasing competition has continued to put downward pressure on both
retail and gross margin.
On November 26, 1997, the Canadian Federal Court of Appeal, with cross-
country jurisdiction and the second highest Canadian court, upheld a ruling
that it is illegal to import and sell U.S. Direct to Home (DTH) satellite
dishes as well as the unauthorized U.S. programming received and decoded
by the dishes, anywhere in Canada.
Beginning in fiscal 1998, accounting is segmented among Global Media and
Westcoast.
Westcoast-Satellite For the Five Months Ended
December 31, 1997 December 31, 1996
Sales 513,193 845,831
Commissions Earned 11,554 9,949
Cost of Sales 339,991 362,143
Commission Paid 134,145 346,589
Gross Margin 50,611 147,048
Net Income (Loss) (116,114) (21,069)
Global Media Call Center For the Five Months Ended
December 31, 1997
Sales 113,914
Other Income 540
Gross Margin 114,454
Expenses 170,716
Net Income (Loss) (56,262)
Consolidated For the Five Months Ended
December 31, 1997 December 31, 1996
Sales 627,647 845,831
Commissions Earned 11,554 9,949
Cost of Sales 339,991 362,143
Commission Paid 134,145 346,589
Gross Margin 165,065 147,048
Net Income (Loss) (172,376) (21,069)
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Westcoast-Satellite
___________________
Retail prices dropped by an average of 50% during 1997. This is the
primary cause behind the 39% decrease in sales for the five months ended
December 31, 1997, compared to the same period last year. Following the
Supreme Court decision, Westcoast was restricted to selling only Canadian
satellite hardware and programming services. The products and services
which the Supreme Court prohibited represented a significant portion of
Westcoast's sales. This was the other major contributing factor to the
sales decline.
The costs of dishes also decreased during this period, though not as much
as the decrease in the average sales package price. This resulted in gross
margin decreasing to 10% of sales for the five months ended December 31,
1997, from 17.4% for the same period last year. Net income (loss) decreased
by $95,045 for a loss of $116,114 for the five months ended December 31,
1997, compared to a loss of $21,069 for the five months ended December 31,
1996. This was primarily due to the decrease in both the average sales
price and sales volume.
There have been many changes recently in the Canadian satellite industry
including the entry of a second competitor, Express Vu, providing hardware
and programming. Prior to September 1997 there was only one Canadian
company, Star Choice, providing hardware and programming to distributors
such as Westcoast. The Canadian market has been slow to accept the
Canadian product. Westcoast continues to pursue the Canadian market
including participating aggressively in the conversion program of
subscribers with recently prohibited dishes (formerly known as the "grey
market") to the new "white market" products. Management expects the
acceptance of the Canadian product to increase as the availability of "grey
market" products continues to decrease. Management also believes that as
this acceptance increases, opportunities will be available to pursue the
potentially lucrative commercial market for dishes and programming
including apartment and condominium complexes. With its expertise in the
market, Westcoast is well positioned to take advantage of this opportunity.
Global Media Call Center
________________________
Global Media is proceeding to develop and expand its Nanaimo call center.
Revenue is primarily generated by accepting incoming phone calls and making
a limited amount of outbound phone calls to and from members of the
financial community including stock brokers, analysts and sophisticated
investors who are seeking information on behalf of client companies. The
call center is also being used by Westcoast in its sales campaigns.
Management believes that the call center will continue to represent a
growing part of Global Media's total revenues. As the call center expands,
management expects to benefit significantly from increasing economies of
scale.
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Revenue for the first five months of operations, ending December 31, 1997,
was $114,454. Net loss was $56,262.
Consolidated
____________
Overall, sales for the five months ending December 31, 1997, decreased by
25.8% to 627,647 compared to 845,831 for the five months ending December
31, 1996. The sales decrease is primarily due to the fore mentioned
changes in Westcoast. Despite the decrease in sales, commissions earned
increased by 16.1% due largely to Westcoast's use of another, different,
finance company to provide purchase financing to customers. This financier
pays higher commission rates to Westcoast.
Advertising and marketing decreased by 60.0% to 2,794 for the five months
ending December 31, 1997 compared to 6,978 for the same period last year.
This was primarily due to a significant reduction in trade magazine and
other printed advertising related to U.S. dish sales and corresponding
market uncertainty regarding the impending court decision. Westcoast's
marketing focus shifted from printed advertising to telemarketing in
conjunction with the development of the call center. Amortization
increased by 719% to $9,674 for the five months ending December 31, 1997
compared to 1,181 for the five months ending December 31, 1996. This was
due to the increase in capital assets which were purchased for the call
center. Bad Debts increased by $30,484 to $35,122, primarily related to
a doubtful account of the call center, for the five months ended December
31, 1997 compared to $4,638 for the five months ending December 31, 1996,
primarily related to doubtful Westcoast programming accounts. Foreign
exchange expense for the five months ended December 31, 1997 was $7,136
relating to foreign exchange adjustment due to the purchase of call center
equipment in Canadian dollars.
Professional fees increased by $55,578 to $64,676 for the five months
ending December 31, 1997 compared to $9,098 for the same period last year. This
was primarily related to audit and legal fees related to completion of this
registration statement. Office and miscellaneous expenses decreased by
11.7% to $70,609 for the five months ending December 31, 1997 compared to
$79,979 for the same period last year. This was primarily due to a
reduction in the cost of producing printed flyers used in advertising.
Travel expense increased by 32% to $13,953 for the five months ending
December 31, 1997 compared to 10,567 for the previous period. This was
primarily due to the increased travel requirements of having two offices in
two different cities. Wages and benefits increased by $76,165 to $123,220 for
the five months ending December 31, 1997 compared to $47,055 for the same
period last year. The bulk of this increase was related to wages for call
center staff which did not exist in the previous period. Westcoast wages
and benefits also increased due to increased telemarketing staff and
additional staff related to training sales staff on the Canadian products.
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(b) STATEMENT OF EARNINGS DATA
For the Five
Months Ended For Year Ended
December 31, 1997 July 31, 1997 July 31, 1996
Sales 623,647 1,617,528 1,745,061
Gross Margin 165,065 260,689 446,702
Net Income (loss) (172,376) (108,999) 35,886
Balance Sheet Data
For the Five
Months Ended For Year Ended
December 31, 1997 July 31, 1997 July 31, 1996
Current Assets 230,322 274,892 177,092
Capital Assets 152,563 20,566 11,420
_______ _______ -------
Total Assets 382,885 295,458 188,512
Current Liabilities 204,198 208,863 174,433
Deferred Revenue 0 12,062 0
_______ _______ -------
Total Liabilities 204,198 220,925 174,433
The Company's revenue decreased 7.3% to $1,617,528 for the year ended July
31, 1997 compared to $1,745,061 for the year ended July 31, 1996. The
decline was primarily due to a decrease in prices in the satellite
hardware, which averaged 25%. More units were sold in fiscal 1997 (850 units)
than in fiscal 1996 (758 units). Gross margin also decreased to $260,689 for
the year ended July 31, 1997 from $446,702 for the year ended July 31, 1996.
This was again due to decreases in retail prices which were not completely
offset by increases in unit sales. Gross margin as a percentage of sales also
decreased to 16.1% for the year ended July 31, 1997 from 25.6% for the year
ended July 31, 1996. This was also due to a decrease in retail prices.
Selling and general administrative expense decreased 7.7% to $369,688
(22.9% of sales) for the year ended July 31, 1997 from $400,462 (22.9% of
sales) for the year ended July 31, 1996. The dollar value decrease was due
to increased internal efficiencies.
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(c) LIQUIDITY AND CAPITAL RESOURCES
Five Months Ended December 31, 1997
The Company expects to meet its short term cash requirements through cash
generated from operations and its ling term cash requirements through
equity financing.
Cash Flow Data Five Months Ended December 31, 1997
Operating Activities Consolidated Westcoast Global Media
(Call Center)
Net Income (Loss) for
the year: (172,376) (116,114) (56,262)
Services settled through
share Issue 50,449 -- 50,449
Amortization: 9,674 2,608 7,066
Deferred revenue: (12,062) (12,062) --
-------- ------- ------
(124,315) (125,568) 1,253
Changes in non-cash operating
working capital
Accounts Receivable: ( 8,992) 39,316 (48,308)
Inventory: ( 2,668) ( 2,668) --
Prepaid Expenses: ( 18,582) ( 1,775) (16,807)
Accounts payable
& accrued liabilities: 26,030 ( 8,498) 34,528
Taxes payable: ( 6,844) ( 6,844) --
Advances from shareholder: ( 23,851) ( 21,561) (2,290)
Advances to/from
affiliated companies: 2,446 2,446 --
------- ------- -------
Cash provided by (used in)
operating activities: (156,776) (118,305) ( 38,471)
------- ------- -------
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Cash flow from operations for the five months ended December 31, 1997, was
a net outflow of $156,776 including a net loss of $172,376 and amortization
of $9,674 due to a larger asset base. There was a net increase in Accounts
Receivable of $8,992 stemming from an increase in Global Media's Call
Center receivables of $48,308, offset by a decrease in Westcoast
receivables of $39,316. The Westcoast decrease was primarily due to
decreased sales volume and better review procedures. Prepaid expenses
increased by $18,582 primarily due to prepaid rent for the Nanaimo
property. Advances from shareholder were reduced by $21,561 for Westcoast
and decreased by $2,290 for the Call Center. Advances to/from affiliated
companies increased by $2,446. Deferred revenue decreased by $12,062 due
to a warranty reserve that has been absorbed into income for this period as
the warranty is no longer required.
Purchase of Capital Assets totalled $141,671 for the period. This
represented purchases of office equipment for Westcoast totalling $4,295 as
well as significant capital expenditures toward the Global Media call
center infra-structure totalling $137,376. These expenditures were
represented by: office equipment ($8,253); leasehold improvements ($3,883);
computer hardware ($37,890); software ($12,799) and call center development
expenses of $74,546 which included wiring for telephones and computers,
configuration of database and fax servers and other costs directly related
to call center infra-structure.
Net cash provided by financing was $221,267 for the five months ended
December 31, 1997. This financing was provided by the sale of share
subscriptions.
The Company has no legal contingencies.
Year Ended July 31, 1997
________________________
Global Medial initially relied on advances from shareholders and cash
generated from operations to meet its working capital requirements. As the
Company established its creditworthiness it was able to increase inventory
using lines of credit and can additionally offer consumer lines of credit
through the National Bank of Canada.
The cash flow from operations for the year ended July 31, 1997 was a net
outflow of $68,378 including a net loss of ($108,999), a net decrease in
accounts receivable of $47,216, a net decrease in inventory and prepaid
expenses of $20,832 and a net payout of accounts payable and other
liabilities of $43,446. Deferred revenue increased by $12,062. Net income
was negative primarily due to increased expenses related to SEC filing
costs and costs related to incorporation, legal fees and organizational
overhead. Rent also increased significantly due to expansion of Westcoast
Wireless Cable and setup of operations for Global Media's planned for call
center. The net cash generated by changes in non-cash operating working
capital was a cash inflow of $36,664.
For the year ended July 31, 1997, net cash generated from investing
activities was $5,097. The main source of this cash was a collection of a
loan receivable in the amount of $18,306. Purchase of capital assets
totaled $13,209 and mainly consisted of new computer equipment and
software.
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Net cash provided by financing activities was $169,068 for the year ended
July 31, 1997. The major source of financing was the sale of share
subscriptions of $283,700 which was offset by dividend payments of
$114,632. Of this amount, $14,632 was paid by Westcoast Wireless in 1997,
prior to Westcoast's acquisition by Global. As Westcoast had no losses as
stated on its unadjusted financial statements, this dividend was lawful
under Nevada law.
With regard to the remaining $100,000, see Note 1 to Global Media's
Consolidated Financial Statements, INFRA. The dividend is described there
as a "deemed" dividend, as opposed to a "declared" dividend. A deemed
dividend is used to effect share swaps. It was used here to enable Global
to acquire Westcoast's shares.
Major investments in research and development of new businesses have been
made since the year ended July 31, 1997. New computer equipment and
software has been purchased for development of the Global Media call
center, now located at Global Media's Nanaimo offices. Management expects
this to be a major source of revenue for the Company. Global Media will
seek a unique market niche in the expanding call center industry by being
on the leading edge of computer, telephone and Internet integration.
Year Ended July 31, 1996
________________________
The cash flow from operations for the year ended July 31, 1996 were $45,256
including a net income of $35,886 and amortization of $1,917. The net cash
provided by changes in non-cash operating working capital was $7,453.
For the year ended July 31, 1996, net cash used for investing activities
was $28,024. This included the purchase of capital assets, $9,652 (mainly
consisting of purchases of office furniture and equipment and computer
equipment) and the creation of a loan receivable of $18,372 to a
shareholder.
Net cash used in financing activities was $6,318 for the year ended
July 31, 1996. The major use of financing was a decrease in bank
indebtedness.
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(d) IMPACT OF INFLATION
The Company believes that inflation has not had a material affect on its
past business.
(e) THE YEAR 2000 ISSUE
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without
considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous
results by or at the Year 2000. The Year 2000 issue affects virtually all
companies and organizations.
Although many companies must undertake major projects to address the Year
2000 Issue, Management has undertaken to ensure that the Company's
associated computer fields were designed and constructed to receive and
manipulate four digit integers instead of only two.
The initial expenses for development of Global Media's call center have
already been incorporated into it's development expense. Westcoast's
computer system has been upgraded to address the Year 2000 Issue. As a
result, no additional costs are expected to be incurred.
ITEM 3. DESCRIPTION OF PROPERTY
Global Media occupies 5,717 square feet of commercial space at 83 Victoria
Crescent, Nanaimo, British Columbia, Canada. This facility houses all of
Global Media Communications, operations including the call center and
administration. Global Media leases the space for a term of five years
with an option to renew for two additional terms of five years. The
Nanaimo lease began on October 1, 1997, with an annual rent of $31,972.
Global Media also occupies 1,800 square feet of commercial space at Unit
No. 29 337 - 262 St., Aldergrove, British Columbia, Canada. Global leases
this space on a month to month term. Total monthly rent is currently
averaging $841. This lease began on October 1, 1996. This facility houses
all of Westcoast Wireless warehousing of equipment and administration.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Title of Class Name and Address Amount and Nature % of
of Beneficial Owner of Beneficial Owner Class
Common Stock Michael Metcalfe 16,130,000 (1) 80.7%
29-3347 262nd Street
Aldergrove, BC
Canada V4W 2X2
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(1) This amount includes shares owned by Michael Metcalfe, individually,
(14,000,000 shares), his mother, Dorothy Metcalfe, individually, (330,000
shares), Eustace Bennet Metcalfe, his father, individually, (900,000
shares) and his sister, Michelle Metcalfe-MacFarlane, individually,
(900,000 shares). Michael Metcalfe disclaims beneficial ownership of the
shares owned by Dorothy Metcalfe, Eustace Bennet Metcalfe and Michelle
Metcalfe-MacFarlane.
(b) SECURITY OWNERSHIP OF MANAGEMENT
Title of Class Name and Address Amount and Nature % of
of Beneficial Owner of Beneficial Owner Class
Common Stock Michael Metcalfe 16,130,000 (1) 80.7%
29-3347 262nd Street
Aldergrove, BC
Canada V4W 2X2
Common Stock Robert Fuller 1,668,000 (2) 08.4%
3218 Shorewater Drive
Nanaimo, BC V9T 5W9
Common Stock Winston V. Barta -0- 0%
3289 Oak St., No. 1
Vancouver, BC V6H 2L4
Common Stock Peter Roberts -0- 0%
601-154 Promenade Drive
Nanaimo, BC V9R 6YR
Common Stock Jack MacDonald 50,000 .2%
1904-1111 Beach Ave.
Vancouver, B.C. V6E 1T9
Common Stock All Officers and 17,848,000 89.3%
Directors as a Group
(1) This amount includes shares owned by Michael Metcalfe, individually,
(14,000,000 shares), his mother, Dorothy Metcalfe, individually, (330,000
shares), his father, Eustace Bennet Metcalfe, individually, (900,000
shares) and his sister, Michelle Metcalfe-MacFarlane, individually,
(900,000 shares). Michael Metcalfe disclaims beneficial ownership of the
shares owned by Dorothy Metcalfe, Eustace Bennet Metcalfe and Michelle
Metcalfe-MacFarlane.
(2) This amount includes shares owned by Robert Fuller, individually,
(1,288,000 shares), his wife, Jasmine Fuller, individually, (200,000
shares). David Fuller and Joan Fuller (owners of 180,000 shares) are
Robert Fuller's parents. Robert Fuller disclaims beneficial ownership of
David and Joan Fuller's shares.
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<PAGE>
(c) CHANGES IN CONTROL
There are no arrangements which may result in a change in control of the
issuer.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
(a) DIRECTORS AND EXECUTIVE OFFICERS
The following are the names, positions, municipalities of residence and
relevant backgrounds of key personnel of the Company.
MICHAEL METCALFE (Age 41), Chairman of the Board, President.
April 1997 - Present - Global Media.
Mr. Metcalfe has served as President, the Chairman of the Board and as
a director since April 15, 1997. He shall serve his term of office as
a director until the next election by shareholders.
May 1994 - Present - Westcoast Wireless Cable - Global Media Mr.
Metcalfe founded Westcoast Wireless Cable and Global Media. Prior
thereto, Mr. Metcalfe spent 15 years in the entertainment industry
including film production, distribution, finance and marketing. Mr.
Metcalfe brings a powerful vision of the entertainment industry and
the convergence of the various mediums.
October 1991 - April 1994 - Starscan Communications Ltd. (Director of
Sales and Marketing). Starscan sold and serviced C-Band satellite
hardware systems. It is no longer in business. The company was
located in Kelowana, B.C. It had 25 employees and averaged
approximately $1.5 million in sales per year.
ROBERT FULLER (Age 36), Chief Executive Officer, Director.
June 1997 - Present - Global Media. Mr. Fuller has served as a
director since June 15, 1997. He shall serve his term of office as a
director until the next election by shareholders.
May 1990 - June 1997 - Promark Construction Co. Inc. (President).
This Nanaimo, B.C. company is a general contractor specializing in
multi-unit residential construction including condominiums and
townhomes.
1983 - 1989 - Ernst & Young
-16-
<PAGE>
Mr. Fuller served as a manager in the entrepreneurial services branch
in the accounting firm of Ernst & Young.
Mr. Fuller is a Chartered Accountant and received his Bachelor
Commerce degree from the University of British Columbia in 1985.
WINSTON V. BARTA (Age 26), VP Marketing and Business Development, Director.
September 1997 - Present - Global Media
Mr. Barta shall serve as a director until the next election by
shareholders,. He has served as director since September 15, 1997.
July 1996 - July 1997 - Starnet Communications Canada (VP Marketing).
This company develops, markets and manages multi-media online
interactive content and software for the Internet.
June 1995 - April 1996 - Motion Works Group (Senior Account
Executive). This company specializes in producing multi-media CD-ROMs
for children and younger consumers.
September 1993 - June 1995 - Simon Fraser University M.B.A.
(Marketing).
1992 - Concordia University in Montreal;
Bachelors Degree in Marketing and Administrative Management.
DENNIS MORGAN (age 40), Director.
Mr. Morgan shall serve his term of office as a director until the next
election by shareholders. He has served as a director since April 15,
1997.
June 1988 - Present. Via-Sat Data Systems Inc. (Vice President and
Project Engineer).
Mr. Morgan, P.Eng., graduated from the University of Waterloo with a
B.Sc. in Civil Engineering in 1981. Since that time Mr. Morgan has
worked in the water resource sector of two large hydro utilities;
Ontario Hydro and B.C. Hydro. For the last nine years Mr. Morgan has
served as Vice President of Via-Sat Data Systems Inc. of North
Vancouver.
JACK D. MACDONALD (age 68), Director.
Mr. MacDonald shall serve his term of office as a director
-17-
<PAGE>
until the next election by shareholders. He has served as a director
since November 17, 1997.
May 1996 - September 1997. TKO Resources Inc. (Director).
May 1990 - October 1996. Salus Resource Corp. (President and Chief
Executive Officer). Mr. MacDonald became a director in May 1990 of
Salus' predecessor, Arapahoe Mining Corp. and served as its President
and Chief Executive Officer from September 1991 to May 1996. Arapahoe
Mining Corp. became Salus Resource Corp. in May 1996, and became
Brandon Gold Corp. in October 1996.
(b) SIGNIFICANT EMPLOYEES
PETER ROBERTS (age 46), VP Operations.
August 1997 - Present - Global Media
May 1996 - July 1997 - Island Wireless Cable (President)
June 1982 - April 1996 - American President Lines (Western Canadian
Manager)
Mr. Roberts has over 15 years of senior management experience.
He worked in the container shipping industry for twenty years and was
employed by two of the largest shipping companies in North America;
American President Lines and Sealand Containers. Mr. Roberts has
managed a staff of 30 persons and has been responsible for annual
marketing budgets in excess of $10 million dollars.
(c) FAMILY RELATIONSHIPS
There are no family relationships to report.
(d) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
There are no legal proceedings to report other than a single action
involving Robert Fuller arising out of his membership on the board of
directors of an unaffiliated company. An action filed in small claims
court against the unaffiliated company names Mr. Fuller as a defendant as
well. The action is entitled MICHAEL AND SHERRY FANTILO V. 392012 B.C.
LTD., CYRIL BUBALO AND ROBERT FULLER, No. C 17627, Provincial Court of
British Columbia (Small Claims). The action was filed August 26, 1997, and
arises out of a contract to purchase a townhome. Mr. Fuller denies the
allegations of the complaint as they pertain to him. He is vigorously
defending the action.
-18-
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION
(a) SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
====================================================================================================
Securities
Other Restric- Underly-
Annual ted ing All
Name and Compen- Stock Options/ LTIP Other
Position Year Salary Bonus sation Award(s) SARs Payouts Compensation
(US$) ($) ($) ($) (#) ($) ($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael Metcalfe, 1997 54,446 0 0 0 0 0 0
President
Robert Fuller, 1997 0(1) 0 0 0 0 0 0
CEO
Winston V. Barta, 1997 0(1) 0 0 0 0 0 0
VP Marketing
Peter Roberts, 1997 0(1) 0 0 0 0 0 0
VP Operations
Jack Macdonald 1997 0(1) 0 0 0 0 0 0
Director
</TABLE>
(1) While no compensation has been paid to the Executives, a reasonable
value for the services rendered by each of them would be entered for the
services rendered during the period presented. However, because Global
Media was virtually inactive during fiscal year 1997, the reasonable value
of the contributed services is zero. Therefore, no significant value is
attributed to their contributed services.
(b) OPTION/SAR GRANTS IN LAST FISCAL YEAR (INDIVIDUAL GRANTS)
The Company has a Management Stock Option Plan, entitled the "Global Media
Corp. Stock Option Plan" (the "Plan"). Its purpose is to advance the
business and development of the Company and its shareholders by affording
to the employees, directors and officers of the Company the opportunity to
acquire a proprietary interest in the Company by the grant of Options to
such persons under the Plan's terms. By doing so the Company seeks to
motivate, retain and attract highly competent, motivated employees,
executive Officers and Directors to lead the Company.
The effective date of the Plan is April 8, 1997. Article 3 of the Plan
provides that the Board shall exercise its discretion in awarding Options
under the Plan, not to exceed 500,000 shares. The per share Option price
for the stock subject to each Option is US $.50 per share.
-19-
<PAGE>
All Options must be granted within ten years from the effective date of the
Plan. There is no express termination date for the Options, although the
Board may vote to terminate the Plan. Under the Plan, there have been no
Options granted.
(c) AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
There have been no exercises in the past fiscal year.
(d) LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
There are no long term incentive plans other than the Stock Option Plan.
(e) COMPENSATION OF DIRECTORS
1. Standard Arrangements
The members of the Company's Board of Directors are reimbursed for actual
expenses incurred in attending Board meetings.
2. Other Arrangements
There are no other arrangements.
(f) EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT, AND
CHANGE-IN-CONTROL ARRANGEMENTS
There are no written employment contracts or agreements in place among
management and any person.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's By-Laws include a provision regarding Related Party
Transactions which requires that each participant to such transaction
identify all direct and indirect interests to be derived as a result of the
Company's entering into the related transaction. A majority of the
disinterested members of the board of directors must approve any Related
Party Transaction.
On May 20, 1997, the Company acquired Westcoast Wireless Cable Ltd. a
British Columbia corporation ("WWC"). The shareholder of WWC, Michael
Metcalfe, received 8,000,000 shares of the Company and U.S. $100,000.00.
In exchange the Company received all of the common stock of WWC.
In 1997, Michael Metcalfe, the majority shareholder of the Company, loaned
$73,729 to the Company. This item is non-interest bearing and without a
specific term of repayment. There is no written agreement memorializing
the terms of this loan.
Also in 1997, the Company loaned to an unrelated company known as Global
Media Co. Canada $77,182. The sole owner of Global Media Co. Canada is
Michael Metcalfe. The terms of this item are non-interest bearing and
without a specific term of repayment. There is no written agreement
memorializing the terms of this loan.
-20-
<PAGE>
ITEM 8. LEGAL PROCEEDINGS
There is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending or, to the
knowledge of the Company, threatened, against or affecting the Company, or
any of its properties, business affairs or business prospects of the
Company.
ITEM 9. MARKET PRICE FOR REGISTRANT'S COMMON EQUITY AND OTHER SHAREHOLDER
MATTERS
(a) MARKET INFORMATION
The Company's stock is not listed for sale on any exchange or trading
medium. The Company intends to seek the listing of its Common Stock on the
OTC Electronic Bulletin Board upon the effectiveness of this Form 10-SB.
Until such time, there is no public market for the Company's Common Stock.
In April 1997, 10,000,000 shares were sold to individuals pursuant to Rule
504 of Regulation D. As permitted by Rule 504 certificates for these
securities were issued without restrictive legends. However, 6,000,000 of
these shares were purchased by Michael Metcalfe, one of the officers and a
director of the Registrant and may only be publicly sold pursuant to Rule
144. This was an private transaction pursuant to which all material
information as specified in Rule 502(b)(2) was made available to the
purchaser(s). Thus the exemptions from registration afforded by Rule 4(2)
and Rule 3(b) were available to the issuer. Mr. Metcalfe is also the
beneficial owner of an additional 8,330,000 shares which are restricted and
may only be sold pursuant to Rule 144.
In July of 1997, 1,000,000 shares were sold at $.01 per share to Robert
Fuller, an officer and a director of the Company. These shares are
restricted and may only be publicly sold pursuant to Rule 144.
(b) HOLDERS
There are 55 holders of the Company's Common Stock.
(c) DIVIDENDS
The Company has paid no dividends to date on its Common Stock. The Company
reserves the right to declare a dividend when operations merit.
-21-
<PAGE>
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, the Registrant sold securities which were not
registered under the Securities Act of 1933, as amended, as set forth
below. The total number of shares sold was 19,890,831 and the total
consideration received was US $552,401.
The Registrant was not a reporting company pursuant to the Securities
Exchange Act of 1934 nor was it a development stage company with no
business plan. Thus it was eligible to rely upon Rule 504. Moreover, Rule
504 was available to the registrant in that the Company sold less than
$1,000,000.00 worth of securities in the previous 12 month period and the
purchasers were unaffiliated investors. Further, Rule 504 does not require
the presentation of specified information prior to the sale of the
securities offered in reliance upon this rule. Nevertheless, these were
entirely private transactions pursuant to which all material information as
specified in Rule 502(b)(2) was made available to the purchaser(s). Thus
the exemptions from registration afforded by Rule 4(2) and Rule 3(b) were
available to the issuer.
<TABLE>
<CAPTION>
Name of Purchaser Date Security (1)(2) Price USD
- ----------------- ---- -------- --------------
<S> <C> <C> <C>
Simon (Wai Ho) Au 11/12/97 45,500 27,250
Mike Aussant 10/15/97 2,000 1,000
Barcan Estates 10/15/97 4,000 2,000
Michael Bennett 7/15/97 4,000 2,000
Roy Boyd 10/15/97 6,000 3,000
Dennis Brovarone(3) 11/6/97 8,000 services valued at 4,000
K. Allen Brown 11/5/97 2,000 1,000
Tom & Elaine
Christian 10/15/97 20,000 10,000
Karen J.
Christian and
David Skinner 10/15/97 8,000 4,000
David Cohen 8/15/97 42,898 rent valued at 21,449
-22-
<PAGE>
Denise Connolly 7/15/97 12,000 6,000
Josephine Cross 5/29/97 500,000 5000
Elaine Davies
& Lorraine Polson 11/12/97 8,000 4,000
Marvin Dyck 10/15/97 14,320 7,160
Patricia Endrizzi 10/15/97 5,000 2,500
Ron Fairall 5/29/97 10,000 100
Eric Fowles 11/24/97 1,000 500
Robert Fuller 7/15/97 1,000,000 10,000
288,000 144,000
Gary Ganz 7/15/97 11,400 5,700
9/3/97 4,320 2,160
10/15/97 35,800 call center design &
implementation work valued @
$17,900
Jerry & Rose Hale 11/12/97 20,000 10,000
John Hayes 10/15/97 26,000 13,000
Mitchell A. Hetman 11/12/97 25,700 12,850
Calvin & Darlene Kemp 11/12/97 10,000 5,000
Kierden Fishing Ltd. 11/5/97 20,000 10,000
Patricia Kirk 11/5/97 5,000 2,500
Peter Kozak 11/5/97 10,000 5,000
Krystyna Kwiaskowski 5/29/97 450,000 4,500
Elaine Lamb 10/15/97 5,000 2,500
Jack Macdonald 5/29/97 50,000 500
-23-
<PAGE>
Gil Manning &
June Manning, JT TEN 7/15/97 20,000 10,000
Dr. R.M. Marback, Inc. 11/5/97 20,000 10,000
Louis J. Martini 11/12/97 77,493 38,747
Douglas McClean 5/29/97 20,000 200
Mickey McGuire 11/5/97 25,000 12,500
Michael Metcalfe 5/25/97 6,000,000 60,000
9/2/97 8,000,000 Sale of WWC
Dorothy Metcalfe 5/29/97 930,000 9,300
Eustace Bennet Metcalfe 5/29/97 880,000 8,800
Michelle Metcalfe-
Macfarlane 5/29/97 900,000 9,000
Dennis Morgan 5/29/97 10,000 100
David L. Morris 9/3/97 4,000 2,000
Lee Odgers 10/15/97 2,000 1,000
Dide Olcay 10/15/97 4,000 2,000
Pacific Icon Inc. 10/15/97 7,000 3,500
Mark Quin 7/15/97 4,000 2,000
SFC Strategic 12/02/97 14,200 Services valued @ 7,100
Zeljko Simovic 11/12/97 4,000 2,000
Betty and
Frank Skinner 10/15/97 4,000 2,000
S.P. Plumb Line
Mech. Ltd. 11/5/97 10,000 5,000
Gerry Taylor 10/15/97 5,000 2,500
Verdun Thomson 7/15/97 4,000 2,000
Sharon Thomson 7/15/97 4,000 2,000
Peter H. Tulk, Sr. 10/15/97 6,000 3,000
-24-
<PAGE>
Ken W.H. Walking 10/15/97 20,000 10,000
Maureen Ward 9/3/97 7,200 3,600
Rebbeca Wellman 10/15/97 1,000 500
Neil Wensel 11/12/97 4,000 2,000
Julio Zilahi-Balogh 5/29/97 250,000 2,500
</TABLE>
(1) All securities are common stock. Except as noted in footnote 3, below,
all transactions were effected in reliance upon Rule 504 of Regulation D as
an exemption from the registration provisions of section 5 of the
Securities Act of 1933.
(2) On all transactions depicted, no sales commission was paid by the
Company to Pacific Rim Investment Inc. pursuant to the April 8, 1997,
Offering Sales Agency Agreement. (See Exhibit 10(ii)). Pacific Rim
Investment Inc. is a corporation organized under the law of the Pacific
island nation Vanuatu. Pacific Rim has two principals. They are Geoffrey
Robert Gee and John Caldwell Malcolm.
With respect to the sales made, the Company or any of its affiliates relied
on Regulation D, Rule 504 and Section 4(2) of the Securities Act of 1933,
as amended as the exemption from the registration requirements of said Act.
(3) Mr. Brovarone is counsel to the Company and his shares were issued in
exchange for services rendered. David Cohen was issued shares in exchange
for office space that he provided to the Company for which he received no
other compensation. SFC Strategic was issued shares in exchange for
corporate organization and strategic planning services rendered.
These were entirely private transactions pursuant to which each purchaser
was provided access to all material information pertaining to the Company
in advance of the distribution of shares. These distributions were made in
reliance upon section 4 (2) of the Securities Act.
ITEM 11. DESCRIPTION OF SECURITIES
The authorized capital stock of Company consists of 200,000,000 shares of
common stock. Options in the amount of 500,000 shares at $.50 are
authorized. No warrants to acquire common stock have been authorized.
There are no outstanding obligations of the Company to repurchase, redeem
or otherwise acquire any shares of the Company's common stock.
The common stock carry no preemptive rights, are not convertible,
redeemable, assessable or entitled to the benefits of any sinking fund.
The common stock affords the holders no cumulative voting rights, and the
holders of a majority of the shares voting for the election of the
directors can elect all of the directors if they should choose to do so.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 11 of the Company's By-laws provides that every person who was or
is a party or is threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or a person for whom he is the
legal representative is or was a director or officer of the corporation or
is or was serving at the request of the corporation or for its benefit as
a director or officer of another corporation, or as its representative in
a partnership, joint venture, trust or other enterprise, shall be
-25-
<PAGE>
indemnified and held harmless to the fullest extent legally permissible
under the General Corporation Law of the State of Nevada against all
expenses, liability and loss (including attorney's fees, judgments, fines
and amounts paid or to be paid in settlement) reasonably incurred or
suffered by him in connection therewith.
ITEM 13. FINANCIAL STATEMENTS
The Financial Statements are set forth beneath Item 15, below, and include
audited financial statements for the fiscal years ended July 31, 1997, and
1996. Interim financial statements -- unaudited are included for the
interim periods ending December 31, 1997 and 1996.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
There have been no disagreements on accounting and financial disclosures
from the inception of the Company through the date of this Registration
Statement.
ITEM 15. INDEX TO EXHIBITS
2. (i)* Plan of Reorganization among Westcoast Wireless Cable and
Global Media Corp.
3. (i)* Global Media Corp. Articles of Incorporation
(ii)* Global Media Corp. By-laws
10. Material Contracts
(i)* Dealer Agreement among Star Choice and Westcoast Wireless;
(ii)* Offering Sales Agency Agreement among Global Media Corp. and
Pacific Rim Investment Inc.;
(iii)* Agent Agreement among Express Vu Inc. and Westcoast Wireless.
21. (i)* Subsidiaries of the Registrant
23. (i)* Consent of Auditors
(ii) Consent of Auditors
27. (i)* Financial Data Schedule for July 31, 1997
(ii) Financial Data Schedule for December 31, 1997
99. (i)* Global Media Corp. 1997 Directors and Officers Stock Option
Plan
* -- Previously submitted.
-26-
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
GLOBAL MEDIA CORP.
JULY 31, 1997
-27-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of
GLOBAL MEDIA CORP.
We have audited the consolidated balance sheets of GLOBAL MEDIA CORP. as at
July 31, 1997 and 1996 and the consolidated statements of income (loss),
retained earnings (deficit) and cash flows for each of the years in the
three year period ended July 31, 1997. These financial statements are the
responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the company as at July 31,
1997 and 1996 and the results of its operations and the changes in its
financial position for each of the years in the three year period ended
July 31, 1997 in accordance with accounting principles generally accepted
in the United States of America.
Vancouver, Canada, /s/ ERNST & YOUNG
November 20, 1997. Chartered Accountants
-28-
<PAGE>
GLOBAL MEDIA CORP.
CONSOLIDATED BALANCE SHEETS
As at July 31 (in US dollars)
1997 1996
$ $
- ----------------------------------------------------------------------------
ASSETS
CURRENT
Cash 121,890 15,905
Accounts receivable, net of allowance for
doubtful accounts of $13,307
[1996 - $4,058] 58,838 105,841
Inventory 15,469 35,628
Prepaid expenses 917 1,515
Advances to affiliated companies [NOTE 3] 77,778 -
Advances to shareholder [NOTE 3] 2,625 -
Loan receivable from shareholder [NOTE 3] - 18,203
- ----------------------------------------------------------------------------
277,517 177,092
Capital assets [NOTE 5] 20,566 11,420
- ----------------------------------------------------------------------------
298,083 188,512
============================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities 94,649 83,727
Accrued wages payable [NOTE 3] - 58,195
Taxes payable 30,124 25,195
Due to affiliated company [NOTE 3] - 1,872
Due to shareholder [NOTE 3] 86,715 5,444
- ----------------------------------------------------------------------------
211,488 174,433
Deferred revenue 12,062 -
- ----------------------------------------------------------------------------
223,550 174,433
- ----------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital [NOTE 6] 11,059 1
Capital in excess of par value [NOTE 6] 128,641 -
Unissued share capital [NOTE 6] 144,001 -
Retained earnings (deficit) (209,145) 14,486
Cumulative translation adjustment (23) (408)
- ----------------------------------------------------------------------------
74,533 14,079
- ----------------------------------------------------------------------------
298,083 188,512
============================================================================
SEE ACCOMPANYING NOTES
On behalf of the Board:
Director Director
-29-
<PAGE>
GLOBAL MEDIA CORP.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Years ended July 31 (in US dollars)
1997 1996 1995
$ $ $
- -----------------------------------------------------------------------------
REVENUE
Sales 1,617,528 1,745,061 552,003
Commission earned 20,204 10,154 64,250
- -----------------------------------------------------------------------------
1,637,732 1,755,215 616,253
Cost of sales 755,446 764,619 289,519
Commission paid 621,597 543,894 150,932
- -----------------------------------------------------------------------------
Gross margin 260,689 446,702 175,802
- -----------------------------------------------------------------------------
GENERAL AND ADMINISTRATIVE EXPENSES
[NOTE 3]
Advertising and marketing 22,452 100,485 61,906
Amortization 3,957 1,917 416
Bad debts 11,131 4,096 525
Bank charges, interest and
financing fees 15,766 38,734 12,085
Professional fees 63,003 7,888 2,004
Office and miscellaneous 180,597 90,438 58,300
Travel 26,088 16,880 6,294
Wages and benefits 46,694 140,024 35,831
- -----------------------------------------------------------------------------
369,688 400,462 177,361
- -----------------------------------------------------------------------------
Income (loss) before provision
for income taxes (108,999) 46,240 (1,559)
Income taxes [NOTE 4] - 10,354 -
NET INCOME (LOSS) FOR THE YEAR (108,999) 35,886 (1,559)
=============================================================================
SEE ACCOMPANYING NOTES
-30-
<PAGE>
GLOBAL MEDIA CORP.
CONSOLIDATED STATEMENTS OF
RETAINED EARNINGS (DEFICIT)
Years ended July 31 (in US dollars)
1997 1996 1995
$ $ $
- -----------------------------------------------------------------------------
BALANCE, BEGINNING OF YEAR 14,486 (21,400) (6,774)
Net income (loss) for the year (108,999) 35,886 (1,559)
- -----------------------------------------------------------------------------
(94,513) 14,486 (8,333)
Dividends declared and paid (114,632) - (13,067)
- -----------------------------------------------------------------------------
BALANCE, END OF YEAR (209,145) 14,486 (21,400)
=============================================================================
SEE ACCOMPANYING NOTES
-31-
<PAGE>
GLOBAL MEDIA CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended July 31 (in US dollars)
1997 1996 1995
$ $ $
- -----------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income (loss) for the year (108,999) 35,886 (1,559)
Items not requiring an outlay of
funds
Amortization 3,957 1,917 416
- -----------------------------------------------------------------------------
(105,042) 37,803 (1,143)
Changes in non-cash operating
working capital
Accounts receivable 47,116 (103,292) (3,495)
Inventory 20,233 (17,551) (18,203)
Prepaid expenses 599 (1,291) -
Accounts payable and accrued
liabilities 11,090 29,560 54,329
Accrued wages payable (58,527) 58,737 -
Taxes payable 5,034 12,728 12,551
Advances to/from shareholder 79,266 5,358 (6,993)
Advances to/from affiliated
companies (80,309) 23,204 (21,075)
Deferred revenue 12,162 - -
- -----------------------------------------------------------------------------
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (68,378) 45,256 15,971
- -----------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of capital assets (13,209) (9,652) (4,165)
Decrease (increase) in loan
receivable from shareholder 18,306 (18,372) -
- -----------------------------------------------------------------------------
CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 5,097 (28,024) (4,165)
- -----------------------------------------------------------------------------
FINANCING ACTIVITIES
Dividends (114,632) - (13,067)
Share subscriptions 283,700 - -
Increase (decrease) in bank
indebtedness - (6,318) 6,247
- -----------------------------------------------------------------------------
CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 169,068 (6,318) (6,820)
- -----------------------------------------------------------------------------
Effect of exchange rate changes
on cash 198 (143) 54
INCREASE IN CASH DURING THE YEAR 105,985 10,771 5,040
Cash, beginning of year 15,905 5,134 94
- -----------------------------------------------------------------------------
CASH, END OF YEAR 121,890 15,905 5,134
=============================================================================
CASH IS REPRESENTED BY:
Cash 121,890 15,905 -
Term deposits - - 5,134
- -----------------------------------------------------------------------------
121,890 15,905 5,134
=============================================================================
Interest - paid 357 - -
Income taxes paid 9,278 - -
=============================================================================
SEE ACCOMPANYING NOTES
-32-
<PAGE>
GLOBAL MEDIA CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
July 31, 1997 (in US dollars)
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
Global Media Corp. (the "Company") was incorporated on April 8, 1997 in the
State of Nevada and is engaged in providing internet-integrated call centre
services from its location in Nanaimo, Canada, and marketing of direct to
home satellite hardware and programming services to both commercial and
private individuals primarily in Western Canada. The Company did not
commence its internet-integrated call centre operation prior to July 31,
1997.
On May 20, 1997 the Company issued 8,000,000 common shares and paid
$100,000 in cash for all of the outstanding shares of Westcoast Wireless
Cable Ltd. ("Westcoast Wireless"), a company which markets direct to home
satellite hardware and programming services.
Westcoast Wireless is contracted as an agent for the sales of certain
satellite hardware and programming services, therefore the majority of the
purchases are sourced from a single supplier.
These financial statements reflect the continuity of interests of the
former shareholder of Westcoast Wireless, due to the continuation of common
control, and are prepared on the following basis:
In the consolidated balance sheet at July 31, 1996 the assets, liabilities
and retained earnings of the Company represent the assets, liabilities and
retained earnings of Westcoast Wireless at that date.
The consolidated statements of operations and retained earnings and cash
flows for the years ended July 31, 1995 and 1996 and for the period from
August 1, 1996 to May 20, 1997 (included in the results for the year ended
July 31, 1997) represent the results of operations and changes in financial
position of Westcoast Wireless during those periods.
References to "the Company" in these financial statements include Westcoast
Wireless (for events occurring prior to May 20, 1997).
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles in the United States of America.
2. SIGNIFICANT ACCOUNTING POLICIES
INVENTORY
Inventory is recorded at the lower of cost and net realizable value.
1
-33-
<PAGE>
GLOBAL MEDIA CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
July 31, 1997 (in US dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)
CAPITAL ASSETS AND AMORTIZATION
Capital assets are recorded at cost. Amortization has been calculated
using the methods and rates as follows, except in the year of acquisition
when one half of the rate is used.
Office furniture and equipment 20% declining balance
Software 20% declining balance
Computer equipment 30% declining balance
Leasehold improvements 5 year straight line
REVENUE RECOGNITION
Revenues are recorded at the time of installation for hardware sales, and
at contract inception for sales of programming.
Revenues from extended warranty contracts are recognized at contract
inception to the extent that the supplier is liable for repair work under
the warranty contract. To the extent that the Company is liable for repair
under the warranty contract, related revenues are deferred and are released
to income on a straight line basis over the period of the Company's
liability.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of the Company's foreign subsidiary, Westcoast
Wireless, are translated into US dollars at fiscal year end exchange rates.
Income and expense items are translated at average exchange rates
prevailing during the fiscal year. The resulting translation adjustments
are recorded as a separate component of shareholders' equity.
Monetary assets and liabilities of the Company denominated in a foreign
currency are translated at year end exchange rates. Other balances are
recorded at rates in effect on the dates of the transaction. Exchange
gains and losses arising are reflected in net income for the year.
2
-34-
<PAGE>
GLOBAL MEDIA CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
July 31, 1997 (in US dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires the Company's
management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and related notes to the
financial statements. Actual results may differ from those estimates.
3. RELATED PARTY TRANSACTIONS
1997 1996
$ $
- ----------------------------------------------------------------------------
Loan receivable from shareholder and spouse - 18,203
Advances to affiliated companies 77,778 -
Advances to shareholder 2,625 -
Due to affiliated company - (1,872)
Due to shareholder (86,715) (5,444)
Accrued wages payable to shareholder and
spouse - (58,195)
============================================================================
The loan receivable from the shareholder was non-interest bearing and was
fully repaid on January 31, 1997. The fair value of this loan approximates
carrying value.
Other related party balances are non-interest bearing and without specific
terms of repayment.
The affiliated companies are related to Global Media Corp. through common
control. The fair value of the balances are not determinable since they
have no fixed repayment terms.
During the years ended July 31, the Company's statement of income (loss)
includes the following related party transactions:
* advertising and marketing expense $nil [1996 - $73,421; 1995 -
$20,327], to a company related through common control.
* wages and benefits expense $45,565 [1996 - $147,752; 1995 - $33,859],
to shareholder and spouse.
* income from recharge of wages of $72,610 [1996 - $19,824; 1995 -
$nil], to a company related through common control
3
-35-
<PAGE>
GLOBAL MEDIA CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
July 31, 1997 (in US dollars)
4. INCOME TAXES
The actual income tax expense attributable to earnings for the years ended
July 31, 1997, 1996 and 1995 differed from the amounts computed by applying
combined statutory income tax rates to pretax earnings as a result of the
following:
1997 1996 1995
$ $ $
- -----------------------------------------------------------------------------
Tax provision at combined statutory
income tax rate of 22% - 10,173 -
Benefit of operating loss
carry forwards - (719) -
Other, net - 900 -
- -----------------------------------------------------------------------------
- (10,354) -
=============================================================================
At July 31, 1997 the Company had operating loss carry forwards available to
reduce future taxable income which expire in 2004 of $24,857. Deferred
taxation has not been recognized in respect of these amounts as their
future utilization does not meet the 'more likely than not' test prescribed
by Financial Accounting Standard No. 109.
5. CAPITAL ASSETS
ACCUMULATED NET BOOK
COST AMORTIZATION VALUE
$ $ $
- -----------------------------------------------------------------------------
1997
Office furniture and equipment 9,794 2,576 7,218
Computer equipment 8,814 2,187 6,627
Leasehold improvements 2,029 709 1,320
Software 6,001 600 5,401
- -----------------------------------------------------------------------------
26,638 6,072 20,566
=============================================================================
1996
Office furniture and equipment 8,917 1,439 7,478
Computer equipment 3,404 510 2,894
Leasehold improvements 1,415 367 1,048
- -----------------------------------------------------------------------------
13,736 2,316 11,420
=============================================================================
4
-36-
<PAGE>
GLOBAL MEDIA CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
July 31, 1997 (in US dollars)
6. SHARE CAPITAL
1997 1996 1995
# # #
- -----------------------------------------------------------------------------
AUTHORIZED
Common shares, par value of
$0.001 each 200,000,000 200,000,000 200,000,000
ISSUED
Common shares 11,059,400 8,000,000 8,000,000
=============================================================================
CAPITAL
IN EXCESS
NUMBER SHARE OF PAR
OF SHARES CAPITAL VALUE
# # #
- -----------------------------------------------------------------------------
Issued for cash at $0.01
per share 11,000,000 11,000 99,000
Issued for cash at $0.50
per share 59,400 59 29,641
- -----------------------------------------------------------------------------
11,059,400 11,059 128,641
=============================================================================
UNISSUED
NUMBER OF SHARE
SHARES CAPITAL
UNISSUED # $
- -----------------------------------------------------------------------------
Consideration for shares in
Westcoast Wireless [NOTE 1] 8,000,000 1
For cash at $0.50 per share 288,000 144,000
- -----------------------------------------------------------------------------
8,288,000 144,001
=============================================================================
The 8,000,000 shares issued in consideration for the shares in Westcoast
Wireless and 288,000 of the shares issued for cash of $0.50 per share were
issued subsequent to the balance sheet date. However legal agreements for
the issue of these shares were in place at July 31, 1997, therefore the
amounts have been recorded as unissued share capital at the balance sheet
date.
Since the balance sheet date, excluding the above, a further 571,333 common
shares have been issued for cash at $0.50 per share, and 42,898 common
shares have been issued in kind for rent of property at $0.50 per share.
5
-37-
<PAGE>
GLOBAL MEDIA CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
July 31, 1997 (in US dollars)
6. SHARE CAPITAL (CONT'D.)
Effective April 8, 1997 the company adopted, subject to shareholder
approval, the 1997 Directors and Officers Stock Option Plan (the "Plan").
The Plan is administered by the Board of Directors who have sole discretion
and authority to determine individuals eligible for awards under the Plan.
The Plan provides for issuance of a total of 500,000 options with an
exercise price of US$0.50 per share, within a period of 10 years from the
effective date. The conditions of exercise of each grant are determined
individually by the Board at the time of the grant. No stock options have
been granted as of the date of this Amendment No. 1.
6
-38-
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
GLOBAL MEDIA CORP.
For the five months ended December 31, 1997 and 1996
(both unaudited) and each of the years in the three
year period ended July 31, 1997
-39-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of
GLOBAL MEDIA CORP.
We have audited the consolidated balance sheets of GLOBAL MEDIA CORP. as at
July 31, 1997 and 1996 and the consolidated statements of income (loss),
retained earnings (deficit) and cash flows for each of the years in the
three year period ended July 31, 1997. These financial statements are the
responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the company as at July 31,
1997 and 1996 and the results of its operations and the changes in its
financial position for each of the years in the three year period ended
July 31, 1997 in accordance with accounting principles generally accepted
in the United States of America.
Vancouver, Canada,
November 20, 1997. Chartered Accountants
-40-
<PAGE>
GLOBAL MEDIA CORP.
CONSOLIDATED BALANCE SHEETS
(in US dollars)
AS AT AS AT JULY 31,
DECEMBER 31, -----------------------
1997 1997 1996
$ $ $
- -----------------------------------------------------------------------------
(unaudited)
ASSETS
CURRENT
Cash 49,524 121,890 15,905
Accounts receivable, net of
allowance for doubtful
accounts of $47,822 [July 31,
1997 - $13,307; July 31, 1996
- $4,058] [NOTE 7] 67,830 58,838 105,841
Inventory 18,137 15,469 35,628
Prepaid expenses 19,499 917 1,515
Advances to affiliated companies
[NOTE 3] 75,332 77,778 --
Loan receivable from shareholder
[NOTE 3] -- -- 18,203
- -----------------------------------------------------------------------------
230,322 274,892 177,092
Capital assets [NOTE 5] 152,563 20,566 11,420
- -----------------------------------------------------------------------------
382,885 295,458 188,512
- -----------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued
liabilities 120,679 94,649 83,727
Accrued wages payable to
shareholder and spouse [NOTE 3] -- -- 58,195
Taxes payable 23,280 30,124 25,195
Due to affiliated company [NOTE 3] -- -- 1,872
Due to shareholder [NOTE 3] 60,239 84,090 5,444
- -----------------------------------------------------------------------------
204,198 208,863 174,433
Deferred revenue -- 12,062 --
- -----------------------------------------------------------------------------
204,198 220,925 174,433
- -----------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital [NOTE 6] 11,892 11,059 --
Additional paid in capital [NOTE 6] 543,525 128,641 --
Unissued share capital [NOTE 6] -- 144,001 1
Retained earnings (deficit) (381,521) (209,145) 14,486
Cumulative translation adjustment 4,791 (23) (408)
- -----------------------------------------------------------------------------
178,687 74,533 14,079
- -----------------------------------------------------------------------------
382,885 295,458 188,512
- -----------------------------------------------------------------------------
SEE ACCOMPANYING NOTES
On behalf of the Board:
Director Director
-41-
<PAGE>
GLOBAL MEDIA CORP.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in US dollars)
<TABLE>
<CAPTION>
FIVE MONTHS ENDED
DECEMBER 31, YEARS ENDED JULY 31,
------------------- ----------------------------
1997 1996 1997 1996 1995
$ $ $ $ $
- -----------------------------------------------------------------------------
(unaudited)(unaudited)
<S> <C> <C> <C> <C> <C>
REVENUE
Sales 627,647 845,831 1,617,528 1,745,061 552,003
Commission earned 11,554 9,949 20,204 10,154 64,250
- -----------------------------------------------------------------------------
639,201 855,780 1,637,732 1,755,215 616,253
Cost of sales 339,991 362,143 755,446 764,619 289,519
Commission paid 134,145 346,589 621,597 543,894 150,932
- -----------------------------------------------------------------------------
Gross margin 165,065 147,048 260,689 446,702 175,802
- -----------------------------------------------------------------------------
GENERAL AND ADMINISTRATIVE
EXPENSES [NOTE 3]
Advertising and marketing 2,794 6,978 22,452 100,485 61,906
Amortization 9,674 1,181 3,957 1,917 416
Bad debts 35,122 4,638 11,131 4,096 525
Bank charges, interest and
financing fees 10,257 8,621 15,766 38,734 12,085
Foreign exchange 7,136 -- -- -- --
Professional fees 64,676 9,098 63,003 7,888 2,004
Office and miscellaneous 70,609 79,979 180,597 90,438 58,300
Travel 13,953 10,567 26,088 16,880 6,294
Wages and benefits 123,220 47,055 46,694 140,024 35,831
- -----------------------------------------------------------------------------
337,441 168,117 369,688 400,462 177,361
- -----------------------------------------------------------------------------
Income (loss) before
provision for income
taxes (172,376) (21,069) (108,999) 46,240 (1,559)
Income taxes [NOTE 4] -- -- -- 10,354 --
- -----------------------------------------------------------------------------
NET INCOME (LOSS) FOR
THE PERIOD (172,376) (21,069) (108,999) 35,886 (1,559)
- -----------------------------------------------------------------------------
NET INCOME (LOSS) PER
COMMON SHARE (0.01) (0.00) (0.01) 0.00 0.00
- ------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
-42-
<PAGE>
GLOBAL MEDIA CORP.
CONSOLIDATED STATEMENTS OF
RETAINED EARNINGS (DEFICIT)
(in US dollars)
<TABLE>
<CAPTION>
FIVE MONTHS ENDED
DECEMBER 31, YEARS ENDED JULY 31,
------------------- ----------------------------
1997 1996 1997 1996 1995
$ $ $ $ $
- -----------------------------------------------------------------------------
(unaudited)(unaudited)
<S> <C> <C> <C> <C> <C>
BALANCE, BEGINNING OF
PERIOD (209,145) 14,486 14,486 (21,400) (6,774)
Net income (loss) for
the period (172,376) (21,069) (108,999) 35,886 (1,559)
- -----------------------------------------------------------------------------
(381,521) (6,583) (94,513) 14,486 (8,333)
Dividends declared
and paid -- -- (114,632) -- (13,067)
- -----------------------------------------------------------------------------
BALANCE, END OF PERIOD (381,521) (6,583) (209,145) 14,486 (21,400)
- -----------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
-43-
<PAGE>
GLOBAL MEDIA CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in US dollars)
<TABLE>
<CAPTION>
FIVE MONTHS ENDED
DECEMBER 31, YEARS ENDED JULY 31,
------------------- ----------------------------
1997 1996 1997 1996 1995
$ $ $ $ $
- ----------------------------------------------------------------------------
(unaudited)(unaudited)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) for
the period (172,376) (12,204) (108,999) 35,886 (1,559)
Items not requiring an
outlay of funds
Amortization 9,674 1,181 3,957 1,917 416
Services settled through
share issuance 50,449 -- -- -- --
Deferred revenue (12,062) -- 12,062 -- --
- -----------------------------------------------------------------------------
(124,315) (11,023) (92,980) 37,803 (1,143)
Changes in non-cash operating
working capital
Accounts receivable (8,992) 58,428 47,216 (103,292) (3,495)
Inventory (2,668) 13,661 20,233 (17,551) (18,203)
Prepaid expenses (18,582) 469 599 (1,291) --
Accounts payable and
accrued liabilities 26,030 15 11,090 29,560 54,329
Accrued wages payable -- (37,351) (58,527) 58,737 --
Taxes payable (6,844) (19,027) 5,034 12,728 12,551
Advances from (repayments
to) shareholder (23,851) (26,638) 79,266 5,358 (6,993)
Advances to/from affiliated
companies 2,446 (619) (80,309) 23,204 (21,075)
- -----------------------------------------------------------------------------
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (144,714) (22,085) (80,440) 45,256 15,971
- -----------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of capital
assets (141,671) (7,317) (13,209) (9,652) (4,165)
Decrease (increase) in
loan receivable from
shareholder -- 18,203 18,306 (18,372) --
- -----------------------------------------------------------------------------
CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (141,671) 10,886 5,097 (28,024) (4,165)
- -----------------------------------------------------------------------------
FINANCING ACTIVITIES
Dividends -- -- (114,632) -- (13,067)
Share subscriptions 221,267 -- 283,700 -- --
Increase (decrease) in
bank indebtedness -- -- -- (6,318) 6,247
- -----------------------------------------------------------------------------
CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 221,267 -- 169,068 (6,318) (6,820)
- -----------------------------------------------------------------------------
Effect of exchange rate
changes on cash 4,814 887 198 (143) 54
INCREASE IN CASH DURING
THE PERIOD (72,366) (10,312) 105,985 10,771 5,040
Cash, beginning of period 121,890 15,905 15,905 5,134 94
- -----------------------------------------------------------------------------
CASH, END OF PERIOD 49,524 5,593 121,890 15,905 5,134
- -----------------------------------------------------------------------------
CASH IS REPRESENTED BY:
Cash 49,524 5,593 121,890 15,905 --
Term deposits -- -- -- -- 5,134
- -----------------------------------------------------------------------------
49,524 5,593 121,890 15,905 5,134
- -----------------------------------------------------------------------------
Interest - paid 3,069 -- 357 -- --
Income taxes paid -- -- 10,354 -- --
- -----------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
-44-
<PAGE>
GLOBAL MEDIA CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
All amounts as at December 31, 1997 and for the five
months ended December 31, 1997 and 1996 are unaudited. (in U.S. dollars)
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
Global Media Corp. (the "Company") was incorporated on April 8, 1997 in the
State of Nevada and is engaged in providing internet-integrated call Center
services from its location in Nanaimo, Canada, and marketing of direct to
home satellite hardware and programming services to both commercial and
private individuals primarily in Western Canada. The Company commenced its
internet-integrated call Center in September, 1997.
On May 20, 1997 the Company issued 8,000,000 common shares and paid
$100,000 in cash for all of the outstanding shares of Westcoast Wireless
Cable Ltd. ("Westcoast Wireless"), a company which markets direct to home
satellite hardware and programming services.
Westcoast Wireless contracts for the sales of certain satellite hardware
and programming services, therefore the majority of the purchases are
sourced from a single supplier.
These financial statements reflect the continuity of interests of the
former shareholder of Westcoast Wireless, due to the continuation of common
control, and are prepared on the following basis:
In the consolidated balance sheet at July 31, 1996 the assets, liabilities
and retained earnings of the Company represent the assets, liabilities and
retained earnings of Westcoast Wireless at that date.
The consolidated statements of income (loss), retained earnings (deficit),
and cash flows for the years ended July 31, 1995 and 1996 and for the
period from August 1, 1996 to May 20, 1997 (included in the results for the
year ended July 31, 1997) as well as the unaudited five month period ended
December 31, 1996 represent the results of operations and changes in
financial position of Westcoast Wireless during those periods.
References to "the Company" in these financial statements include Westcoast
Wireless (for events occurring prior to May 20, 1997).
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles in the United States of America.
1
-45-
<PAGE>
GLOBAL MEDIA CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
All amounts as at December 31, 1997 and for the five
months ended December 31, 1997 and 1996 are unaudited. (in U.S. dollars)
2. SIGNIFICANT ACCOUNTING POLICIES
INVENTORY
Inventory is recorded at the lower of actual cost, using the first in,
first out method, and net realizable value.
CAPITAL ASSETS AND AMORTIZATION
Capital assets are recorded at cost. Amortization has been calculated
using the methods and rates as follows, except in the year of acquisition
when one half of the rate is used.
Call Center infrastructure 20% declining balance
Office furniture and equipment 20% declining balance
Software 20% declining balance
Computer equipment 30% declining balance
Leasehold improvements 5 year straight line
REVENUE RECOGNITION
Revenues are recorded at the time of installation for hardware sales, and
at contract inception for sales of programming.
Revenues from the Call Center are recognized on a straight line basis over
the term of the contract.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of the Company's foreign subsidiary, Westcoast
Wireless, are translated into US dollars at fiscal period end exchange
rates. Income and expense items are translated at average exchange rates
prevailing during the fiscal period. The resulting translation adjustments
are recorded as a separate component of shareholders' equity.
Monetary assets and liabilities of the Company denominated in a foreign
currency are translated at period end exchange rates. Other balances are
recorded at rates in effect on the dates of the transaction. Exchange
gains and losses arising are reflected in net income for the period.
2
-46-
<PAGE>
GLOBAL MEDIA CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
All amounts as at December 31, 1997 and for the five
months ended December 31, 1997 and 1996 are unaudited. (in U.S. dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.)
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires the Company's
management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and related notes to the
financial statements. Actual results may differ from those estimates.
FINANCIAL INSTRUMENTS
The carrying values of the Company's financial instruments approximate fair
values, except as otherwise disclosed in the financial statements.
3. RELATED PARTY TRANSACTIONS
JULY 31,
DECEMBER 31, -----------------------
1997 1997 1996
$ $ $
- -----------------------------------------------------------------------------
(unaudited)
Loan receivable from shareholder
and spouse -- -- 18,203
Advances to affiliated companies 75,332 77,778 --
Due to affiliated company -- -- (1,872)
Due to shareholder (60,239) (84,090) (5,444)
Accrued wages payable to
shareholder and spouse -- -- (58,195)
- -----------------------------------------------------------------------------
The loan receivable from the shareholder was non-interest bearing and was
fully repaid on January 31, 1997.
Other related party balances are non-interest bearing and without specific
terms of repayment.
The affiliated companies are related to Global Media Corp. through common
control. The fair value of the balances are not determinable since they
have no fixed repayment terms.
3
-47-
<PAGE>
GLOBAL MEDIA CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
All amounts as at December 31, 1997 and for the five
months ended December 31, 1997 and 1996 are unaudited. (in U.S. dollars)
3. RELATED PARTY TRANSACTIONS (cont'd)
During the five months ended December 31, 1997, the Company's consolidated
statement of income (loss) includes the following related party
transactions:
* wages and benefits expense $35,705 [1996 - $25,029], to a shareholder
and spouse.
* income from recharge of wages $nil [1996 - $72,610], to a company
related through common control.
During the year ended July 31, 1997, the Company's consolidated statement of
income (loss) includes the following related party transactions:
* advertising and marketing expense $nil [1996 - $73,421; 1995 -
$20,327], to a company related through common control.
* wages and benefits expense $45,565 [1996 - $147,752; 1995 - $33,859],
to a shareholder and spouse.
* income from recharge of wages of $72,610 [1996 - $19,824; 1995 -
$nil], to a company related through common control.
4. INCOME TAXES
The actual income tax expense attributable to earnings for the years ended
July 31, 1997, 1996 and 1995 and the five month periods ended December 31,
1997 and 1996 differed from the amounts computed by applying combined
statutory income tax rates to pretax earnings as a result of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JULY 31,
------------------- ----------------------------
1997 1996 1997 1996 1995
$ $ $ $ $
- -----------------------------------------------------------------------------
(unaudited)(unaudited)
<S> <C> <C> <C> <C> <C>
Tax provision at combined
statutory income tax rate (37,923) (4,635) (16,694) 10,173 (343)
Benefit of operating loss
carryforwards -- -- -- (719) --
Other, net -- -- -- 900 --
Losses for which no tax
benefit has been
recognized 37,923 4,635 16,694 -- 343
- -----------------------------------------------------------------------------
-- -- -- 10,354 --
- -----------------------------------------------------------------------------
</TABLE>
At July 31, 1997 the Company had operating loss carryforwards available to
reduce future taxable income 2004 of $24,857 expires in 2004 and $25,297
expires in 2012. A deferred tax asset has not been recognized in respect of
these amounts as their future utilization does not meet the 'more likely than
not' test prescribed by Financial Accounting Standard No. 109.
4
-48-
<PAGE>
GLOBAL MEDIA CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
All amounts as at December 31, 1997 and for the five
months ended December 31, 1997 and 1996 are unaudited. (in U.S. dollars)
5. CAPITAL ASSETS
Accumulated Net Book
Cost Amortization Value
$ $ $
- -----------------------------------------------------------------------------
DECEMBER 31, 1997 (unaudited)
Office furniture and equipment 19,398 4,187 15,211
Computer equipment 46,757 5,297 41,460
Leasehold improvements 8,638 953 7,685
Call Center Infrastructure 74,546 3,106 71,440
Software 18,581 1,814 16,767
- -----------------------------------------------------------------------------
167,920 15,357 152,563
- -----------------------------------------------------------------------------
JULY 31, 1997
Office furniture and equipment 9,794 2,576 7,218
Computer equipment 8,814 2,187 6,627
Leasehold improvements 2,029 709 1,320
Software 6,001 600 5,401
- -----------------------------------------------------------------------------
26,638 6,072 20,566
- -----------------------------------------------------------------------------
JULY 31, 1996
Office furniture and equipment 8,917 1,439 7,478
Computer equipment 3,404 510 2,894
Leasehold improvements 1,415 367 1,048
- -----------------------------------------------------------------------------
13,736 2,316 11,420
- -----------------------------------------------------------------------------
5
-49-
<PAGE>
GLOBAL MEDIA CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
All amounts as at December 31, 1997 and for the five
months ended December 31, 1997 and 1996 are unaudited. (in U.S. dollars)
6. SHARE CAPITAL
December 31, July 31, July 31,
1997 1997 1996
# # #
- -----------------------------------------------------------------------------
AUTHORIZED
Common shares, par value
$0.001 each 200,000,000 200,000,000 200,000,000
ISSUED
Common shares 19,890,831 11,059,400 --
Unissued common shares -- 8,288,000 8,000,000
- -----------------------------------------------------------------------------
ISSUED ADDITIONAL
COMMON SHARE PAID IN
SHARES CAPITAL CAPITAL
# $ $
- -----------------------------------------------------------------------------
AT AUGUST 1, 1996
Common shares -- -- --
Common shares issued for cash 11,059,400 11,059 128,641
- -----------------------------------------------------------------------------
AT JULY 31, 1997
Common shares 11,059,400 11,059 128,641
Common shares issued for cash 730,533 731 364,536
Common shares issued for
other than cash consideration:
Consideration for shares in
Westcoast Wireless [NOTE 1] 8,000,000 1 --
In kind services 100,898 101 50,348
- -----------------------------------------------------------------------------
AT DECEMBER 31, 1997 (unaudited)
Common shares 19,890,831 11,892 543,525
- -----------------------------------------------------------------------------
As at July 31, 1997, 8,000,000 shares issued in consideration for the
shares in Westcoast Wireless and 288,000 of the shares issued for cash had
not been issued; however, legal agreements for the issue of these shares
were in place at July 31, 1997. The amounts were recorded as unissued
share capital of $1 and $144,000 respectively as at July 31, 1997. All of
these shares were issued in the five month period ended December 31, 1997.
6
-50-
<PAGE>
GLOBAL MEDIA CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
All amounts as at December 31, 1997 and for the five
months ended December 31, 1997 and 1996 are unaudited. (in U.S. dollars)
6. SHARE CAPITAL (cont'd.)
Effective April 8, 1997 the company adopted, subject to shareholder
approval, the 1997 Directors and Officers Stock Option Plan (the "Plan").
The Plan is administered by the Board of Directors who have sole discretion
and authority to determine individuals eligible for awards under the Plan.
The Plan provides for issuance of a total of 500,000 options with an
exercise price of US$0.50 per share, within a period of 10 years from the
effective date. The conditions of exercise of each grant are determined
individually by the Board at the time of the grant.
At December 31, 1997, no options were outstanding under the Plan.
7. SEGMENTED INFORMATION
The Company's business operations are grouped into two industry segments:
Satellite Sales & Service - Westcoast Wireless Cable
Principally the marketing of direct to home satellite hardware and
programming services to both commercial and private individuals primarily
in Western Canada. Westcoast Wireless Cable commenced operations in the
1995 fiscal year.
Call Center Services - Global Media Call Center
Principally in providing internet integrated call Center services to US
based clients from its location in Nanaimo, Canada. The Global Media Call
Center commenced operations in September of 1997.
Revenue of $90,000 for the Global Media Call Center was derived from a
single customer, Winchester Mining Corporation. At December 31, 1997,
$34,890 of the balance of accounts receivable was due from this customer.
7
-51-
<PAGE>
GLOBAL MEDIA CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
All amounts as at December 31, 1997 and for the five
months ended December 31, 1997 and 1996 are unaudited. (in U.S. dollars)
FIVE MONTHS ENDED
DECEMBER 31, 1997
----------------------------------------
Call Center Cable Total
$ $ $
- -----------------------------------------------------------------------------
(unaudited)
Total revenue 114,454 524,747 639,201
Net income (loss) (56,262) (116,114) (172,376)
Amortization 7,066 2,608 9,674
Identifiable assets 241,257 141,628 382,885
Capital expenditures 137,376 4,295 141,671
- -----------------------------------------------------------------------------
For previous periods, all balances related to Westcoast Wireless Cable.
8. COMMITMENTS AND CONTINGENCIES
(a) Global Media entered into a commercial lease for office space
effective October 1, 1997, and will pay a total of $31,972 per year
for the next five years ending September 30, 2002.
(b) Following a decision by the Federal Court of Appeal of Canada in
November 1997, with respect to the sale of US satellite and
programming services in Canada, the management of Westcoast Wireless
decided to withdraw from this business, and will not honor its
existing warranty agreements for such equipment. It is management's
opinion that fulfillment of the warranty agreements would involve the
Company transacting in illegal business, and that any liability
resulting from this decision will not have a significant adverse
effect on the future financial position or results of operations of
the Company.
8
-52-
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
Global Media Corporation
- ------------------------------------------------------------------
(Registrant)
Date May 15, 1998
--------------------------------------------------------------
By /s/ MICHAEL METCALFE
---------------------------------------------------------------
(Signature)
Michael Metcalfe, President, Secretary and Treasurer
- ------------------------------------------------------------------
(Type Name and Title)
(On behalf of the Registrant and as President, Secretary and Treasurer.)
/s/ MICHAEL METCALFE
- ------------------------------------------------------------------
Michael Metcalfe, Chairman, President, Secretary and Treasurer
Date May 15, 1998
--------------------------------------------------------------
/s/ ROBERT FULLER
- ------------------------------------------------------------------
Robert Fuller, Director, Chief Executive Officer
Date May 15, 1998
--------------------------------------------------------------
/s/ WINSTON V. BARTA
- ------------------------------------------------------------------
Winston V. Barta, Director, VP Marketing and Business Development
Date May 15, 1998
--------------------------------------------------------------
/s/ DENNIS MORGAN
- ------------------------------------------------------------------
Dennis Morgan, Director
Date May 15, 1998
--------------------------------------------------------------
/s/ JACK D. MCDONALD
- ------------------------------------------------------------------
Jack D. McDonald, Director
Date May 15, 1998
--------------------------------------------------------------
-53-
EXHIBIT 23(ii)
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We consent to the inclusion in Amendment No.1 to Form 10-SB, of Global
Media Corporation dated on or about May 15, 1998 of our audit report dated
November 20, 1997 with respect to the financial statements of Global Media
Corp. as at July 31, 1997 and July 31, 1996 and for the three year period
ended July 31, 1997.
/s/ ERNST & YOUNG
Vancouver, Canada
May 15, 1998 Chartered Accountants
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 49,324
<SECURITIES> 0
<RECEIVABLES> 67,830
<ALLOWANCES> 0
<INVENTORY> 18,137
<CURRENT-ASSETS> 230,322
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 382,885
<CURRENT-LIABILITIES> 204,198
<BONDS> 0
0
0
<COMMON> 555,417
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 382,885
<SALES> 627,647
<TOTAL-REVENUES> 639,201
<CGS> 0
<TOTAL-COSTS> 474,136
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,069
<INCOME-PRETAX> (172,376)
<INCOME-TAX> 0
<INCOME-CONTINUING> (172,376)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (172,376)
<EPS-PRIMARY> (0.010)
<EPS-DILUTED> (0.010)
</TABLE>
