U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
/X/ Annual report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended July 31, 1998
/ / Transition report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ______ to ________
Commission file number 0-23491
GLOBAL MEDIA CORPORATION
_____________________________________________________________________________
(Name of Small Business Issuer in its Charter)
Nevada 91-1842480
______________________________________________________________________________
(State of Incorporation) (IRS Employer ID No.)
83 Victoria Crescent
Nanaimo, BC, Canada V9R 5B9
_____________________________________________________________________________
(Address of Principle Executive Offices) (ZIP Code)
(250) 716-9949
_________________________________
Issuers Telephone Number, Including Area Code
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange
On Which Registered
______________________ _______________________
______________________ _______________________
______________________ _______________________
Securities registered under Section 12 (g) of the Exchange Act:
Common Stock
______________________
(Title of Class)
Check whether issuer:
(1) filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 12 months (or for such shorter period that
the registrant was required to file such reports), YES /X/ NO / /
and
(2) has been subject to such filing requirements for the past 90 days.
YES /X/ NO/ /
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this form 10-KSB. / /
State issuer's revenues for its most recent fiscal year.
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked prices of such common equity, as
of a specified date within the past 60 days. (See definition of affiliate in
Rule 12b-2 of the Exchange Act.)
Note. If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate
market value of the common equity held by non-affiliates on the basis of
reasonable assumptions, if the assumptions are stated.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the last practicable date. 19,890,831
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe
them and identify the part of Form 10-KSB (e.g., Part I, Part II, etc.) Into
which the document is incorporated:
(1) any annual report to security holders
(2) any proxy or information statement; and
(3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities
Act of 1933 ("Securities Act").
The listed documents should be clearly described for identification purposes
(e.g., annual report to security holders for fiscal year ended December 24,
1990).
Transitional Small Business Disclosure Format (check one): YES / / NO/X/
<PAGE>
PART I
ITEM 1. BUSINESS
This Annual Report on Form 10-K and the documents incorporated herein by
reference contain forward-looking statements based on current expectations,
estimates and projections about Global Media Corp.'s ("the Company")
industry, management's beliefs and certain assumptions made by management. All
statements, trends, analyses and other information contained in this report
relative to trends in net sales, gross margin, anticipated expense levels,
liquidity and capital resources, as well as other statements, including, but
not limited to, words such as "anticipate," "believe," "plan," "estimate,"
"expect," "seek" and "intend," and other similar expressions, constitute
forward-looking statements. These forward-looking statements involve risks and
uncertainties, and actual results may differ materially from those anticipated
or expressed in such statements. Potential risks and uncertainties include,
among others, those set forth under "Overview," "Liquidity and Capital
Resources," and "Additional Factors That May Affect Future Results" included
in this "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and in the "Risk Factors" section. Particular attention
should be paid to the cautionary statements involving the Company's limited
operating history, the unpredictability of its future revenues, the
unpredictable and evolving nature of its business model, the intensely
competitive online commerce and entertainment products retail industries and
the risks associated with capacity constraints, systems development,
management of growth, acquisitions, any new products and international or
domestic business expansion. Except as required by law, the Company
undertakes no obligation to update any forward-looking statement, whether as a
result of new information, future events or otherwise. Readers, however,
should carefully review the factors set forth in other reports or documents
that the Company files from time to time with the Securities and Exchange
Commission (the "SEC").
OVERVIEW
Global Media is in the process of developing a web site and associated
licensing program to sell music CDs, video cassettes, DVDs, books, magazine
subscriptions and other entertainment products via a series of Internet web
sites. The Company also plans to be a major participant in the newest method
of music and video distribution via direct Internet download. Global Media
will strive to offer its customers compelling value through innovative use of
technology, broad selection, high-quality content, a high level of customer
service and personalized services. The Company will offer a catalogue of more
than 250,000 CDs, 150,000 movie video cassettes, 30,000 DVDs, 100,000 digital
audio files and 2 million book titles, easy-to-use search and browse features,
e-mail services, personalized shopping services, Web-based credit card payment
and direct shipping to customers. Operating as an online retailer, Global
Media will have virtually unlimited online shelf space and will offer
customers a vast selection through an efficient search-and-retrieval
interface. Operating as a wholesaler to the Company's licensees, Global
Media will be able to achieve faster market penetration and increased sales.
The Company believes that as its user base grows, it will not only be able to
increase revenues from sales of its main product lines but also through
related merchandise, advertising and sponsorship programs.
Global Media Corp. 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. The Company's
principal corporate offices are located in Nanaimo, British Columbia, Canada.
The Company's common stock is listed on the Over the Counter Electronic
Bulletin Board (OTC:BB) under the symbol "GLMC".
THE GLOBAL MEDIA COMMUNICATIONS CENTER
The Company has built a 25 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 integrated
Internet call center. The call center is capable of simultaneously providing
real-time online customer service and information as well as traditional,
phone-based call center services. The center was originally used for
accepting incoming phone calls, faxes and e-mails 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 were seeking
information on behalf of client companies. As such, the call center is
integrated with a sophisticated back end database and customer management
system.
This communication center is now being used to manage Global Media's own
investor relations as well as managing development and marketing of the
Company's corporate web site, including its affiliate and licensing programs.
The communication center will continue to be used to manage the Company's
investor relations and will co-ordinate marketing and customer service of the
entertainment and sales web site as well as communication with the Company's
projected thousands of affiliates and hundreds of licensees.
WESTCOAST WIRELESS CABLE - DISCONTINUED OPERATIONS
Following a decision by the Canadian Federal Court of Appeal in November,
1997, prohibiting the sale of US based satellite and programming services in
Canada, the management of Westcoast Wireless decided to withdraw from the home
satellite business. The home satellite business includes all operations of
Westcoast Wireless.
THE GLOBAL MEDIA WEB SITE
Global Media will strive to offer an online shopping experience that involves
visual, audio and literary entertainment, discovery and fulfilment for its
customers. The Company believes that the sale of various entertainment
products and services over the World Wide Internet, ("the Web"), can offer
attractive benefits to consumers including: greater selection, convenience,
ease-of-use, competitive pricing, depth of content and information and
personalization. Customers entering the Global Media web site will be able to
do much more than order CDs, videos, books and other products. They will also
be able to purchase gift certificates, conduct targeted searches, browse
editorial content, enter contests, read and post reviews, register for
personalized services, check order status and more. The key components of
Global Media's 'non sales' offerings will include browsing, searching, reviews
and content, online community and personalization.
BROWSING
The Global Media site will offer visitors a variety of features arranged in a
simple, easy-to-use fashion intended to enhance product search, entertainment
and information value. Users who have provided personal data will view
features directly related to their interests.
SEARCHING
A primary feature of the Global Media web site will be its interactive,
searchable catalogue of more than 2 million entertainment products. The
Company will provide a selection of search tools to find products based on
title, subject, artist (music, film or literary), keyword, publication date or
ISBN. The Company has licensing agreements for catalogue and other
information from third parties.
REVIEWS AND CONTENT
Global Media will offer numerous forms of content to entertain and engage
readers, enhance the customer's shopping experience and encourage purchases.
The Company's website will allow users to view current entertainment news
related to its various product lines, reviews, artist biographies and lists of
their works, historical and educational information in the areas of music,
film and books. Visitors will also be able to hear and view recording and
video samples. Customers will be encouraged to write and post their own
reviews or pose questions through interactive forums.
ONLINE COMMUNITY
By creating an online community, the Company hopes to promote loyalty and
repeat purchases by providing customers with an inviting and familiar
experience that will encourage them to return frequently to the site and to
interact with other users. Global Media will invite music, film and book fans
as well as artists and other industry members to post reviews, sponsor
competitions and provide various forums for discussion.
PERSONALIZATION
Global Media will continually seek to personalize its product and service
offerings. Personalization features may include greeting customers by name,
providing recommendations and displaying promotions and editorial content
based on customers' individual preferences. Global Media believes that
personalization of a customers' shopping experience at the Company's web site
will be an important element of the value proposition it offers to
customers.
AVAILABILITY AND FULFILMENT
Many of the Company's products will be available for shipment within 24 hours,
others will be available within 48 to 72 hours and the remainder will
generally available within four to six weeks. In the future, the Company
plans to offer certain out-of-print titles which may be available in one to
three months. Global Media will contract packaging and shipping through its
various suppliers. One such arrangement, with Baker & Taylor, has already
been announced. Customers will be able to select from a variety of delivery
options, including overnight and various international shipping options. The
Company will use e-mail to notify customers of order status under various
conditions. The digital audio files sold by the Company will be delivered
instantly over the Internet. Global Media will seek to provide rapid and
reliable fulfilment of customer orders and will continually seek to improve
its speed of availability and fulfilment.
LICENSING
Global Media will license use of its back end database and secure transaction
processing, ordering and fulfilment systems to third party Internet marketers.
This will allow companies without sufficient development expertise or funding
to use an existing system to target various niche markets. For an up front
charge and ongoing revenue sharing, companies will be able to license unique
front end web sites running off Global Media's back end. This licensing
program differs from the affiliate program, which will also be offered by
Global Media, in that the entire purchase experience occurs within the
licensee's front end with all the back end database and transaction processing
systems being managed by Global Media.
With Global Media's licensing program, everyone from small Internet start-ups
to major "bricks and mortar" retailers will be able to have their own online
entertainment sales web site. Global Media will provide these businesses with
a unique front-end web site which may either be targeted to niche or broad-
based markets. The entire purchasers' experience will happen completely
within the licensee's site, allowing them to build their own brand name.
Global Media will manage the entire back-end system including inventory,
packaging, shipping, database management, and transaction processing.
Based on the individual agreement, licensees may also license Global Media's
editorial content, including general interest entertainment articles, CD and
movie reviews, etcetera. This will allow businesses to quickly enter the
online entertainment retailing market without undergoing the significant time
and expenditure involved in developing a sophisticated back-end system.
Licenses will be available for an up-front cost with ongoing revenue sharing.
MARKETING AND PROMOTION
The Company will seek to expand its customer base through multiple marketing
channels which include: (i) pursuing an aggressive marketing campaign using a
combination of online and traditional media publicity; (ii) establishing
strategic alliances with traditional content and major Internet content and
service providers; (iii) entering into linking arrangements with other Web
sites; (iv) using direct marketing techniques to target new and existing
customers with personalized communications; and (v) promotion of its affiliate
and licensing programs.
CUSTOMER SERVICE
The Company believes that its ability to establish and maintain long-term
relationships with its customers and encourage repeat visits and purchases
will depend, in part, on the strength of its customer support and service
operations and staff. The Company will seek to achieve frequent communication
with and feedback from its customers to continually improve the Global Media
site and services. The Company will offer a number of e-mail addresses to
enable customers to request information and to encourage feedback and
suggestions. The Company will use its existing communication center
facilities to maintain contact with customers, affiliates and licensees.
TECHNOLOGY
The Company is assembling an array of site management, search, customer
interaction, catalogue and inventory database management, transaction-
processing and fulfilment services and systems. These will use a combination
of the Company's own proprietary technologies and commercially available,
licensed technologies. The Company's current strategy is to focus its
development efforts on creating and enhancing the web site as well as the
affiliate and licensee programs. The Company will continue to aggregate and
license the use of entertainment content, products and services.
The Company will use a set of applications for accepting and validating
customer orders, organizing, placing and managing orders with suppliers and
managing shipment of product to customers based on various ordering criteria.
The Company's transaction-processing systems will be able to handle millions
of items, a number of different availability statuses, gift-wrapping requests
and multiple shipment methods and allow the customer to choose whether to
receive single or several shipments based on availability. These applications
will also manage the process of accepting, authorizing and charging customer
credit cards. The majority of these applications can either be commercially
licensed or exist as part of the systems of the Company's fulfilment partners.
Due to the highly automated nature of the systems being put in place, only a
small group of systems administrators and network managers will be required to
monitor and operate the Company's Web site, network operations and
transaction-processing systems. The continued uninterrupted operation of the
Company's web site and transaction-processing systems will be essential to its
business and the businesses of its licensees. The Company will use the
services of multiple Internet service providers to obtain connectivity to the
Internet over multiple dedicated lines.
PARTNERSHIPS
Global Media has agreements with Muze Inc., Baker & Taylor and Liquid Audio.
Muze Inc. is the leading independent source of digital information about
music, books and movies. Muze's music and home video content will be the
database source for the Global Media web site. Baker & Taylor will manage all
packaging, shipping and returns of CDs, videos and DVDs sold through Global
Media's web site. Operating worldwide, Baker & Taylor distributes a wide
range of products, including books, video, audio, software, and related
services to retail stores and libraries. The company has 11 inventory
distribution centers across the United Sates. Liquid Audio's technology
allows consumers to preview and purchase CD-quality music over the Internet,
while ensuring copyright protection and tracking royalties.
As part of its growth strategy, the Company seeks to establish strategic
alliances with global on-line, music and media companies to attract additional
users to, and increase brand awareness of, the Company's websites. These
include network television operators, cable and satellite operators as well as
radio networks. These types of partnerships not only bring credibility and
financial backing but have access to leverage existing viewers to a sales web
site. The Company is also seeking partnerships with large Internet portals,
search engines and chat lines.
FAULT TOLERANCE
The Company will operate a 24-hour a day, seven-day a week computing facility.
The Company's website architecture will use redundant servers and RAID
(redundant array of independent drives) storage systems so that downtime due
to system outages or maintenance needs are minimized. The Company will deploy
an architecture in which all components of the on-line systems are redundant,
allowing continuous operation even in the event of occasional
component failures.
SECURITY
The Company will employ a combination of proprietary and commercially
available firewalls to keep its Internet connections secure. The Company plans
to implement standardized electronic transaction mechanisms (such as Secure
Electronic Transaction technology, the standard being developed by major
credit card companies) as they become commercially available.
SCALABILITY
The structure of the Company's current hardware and software as well as that
which will be built and acquired in the process of development of the web site
will be built upon a distributed transaction processing model which allows
software to be distributed among multiple parallel servers. This architecture
allows the Company to scale by either adding new servers or increasing the
capacity of existing servers. In the rapidly changing Internet environment,
the ability to update the application system to stay current with new
technologies is important. The system's template technology and modular
database design will allow the addition or replacement of server-based
applications such as multimedia formats and delivery systems, additional EDI-
based fulfilment partners and search and retrieval engines. This architecture
will also enable low-cost, rapid deployment of additional websites.
THE ONLINE ENTERTAINMENT INDUSTRY
World-wide online entertainment sales, and the related retail industry
including CD's, video and event ticket sales will be worth in excess of $200
million in 1998, (Jupiter Communications - "Jupiter"). According to Jupiter,
total on-line music revenues, which include pre-recorded music sales, music
related merchandising, advertising and concert ticketing, are expected to grow
to $2.8 billion by the year 2002, up from an estimated $22.5 million in 1996
and $71.0 million in 1997. The number of online shoppers is growing at a rate
of close to 50% per annum. There are currently 16 million 'e-shoppers' online.
Conservative estimates expect this number to exceed 33 million in 2000 and 61
million in 2002 (source: Jupiter).
Music CDs, digital audio files and movie videos will represent a major portion
of the Company's revenue. The Company believes that substantial growth
opportunities exist in these industries. The multimedia features available
through the Internet, including audio, video and graphics, make it an ideal
medium for promoting, marketing and selling music, video and related
merchandise. Potential purchasers can preview their purchases by listening to
high-quality sound samples, viewing text and video clips and searching from an
extensive catalogue of available titles. The Internet and current
technologies also allow users to digitally download music in a compressed
format to a personal computer ("PC") and store it on a CD using a read/write
CD-ROM drive. Because the Internet is a highly interactive medium and user
responses can be tracked, the Company believes that advertisers will become
increasingly attracted to opportunities to focus their marketing efforts on
specific user groups and individuals.
The Company believes that Internet-based retailers have certain advantages
over traditional retail channels. Traditional retail stores limit the amount
of inventory they carry and tend to focus on carrying a greater percentage of
hit releases. According to Jupiter, 80% of unit sales at traditional retail
stores come from only 20% of available titles. The Company believes that
traditional retail stores do not have the same capability to track individual
customer purchases and demographic data for use in direct marketing programs
and in developing a one-to-one relationship with the consumer. Internet-based
stores can operate 24-hours a day, seven days a week, and are not limited by
geographic boundaries.
COMPETITION
The online commerce market, particularly over the Web, is new, rapidly
evolving and intensely competitive. In addition, the retail music and video
industries are intensely competitive. The Company's current or potential
competitors include (i) various online CDs and videotape vendors and retailers
of other products such as books, including entrants into narrow specialty
niches, (ii) a number of indirect competitors that specialize in online
commerce or derive a substantial portion of their revenues from online
commerce, through which retailers other than the Company may offer products,
and (iii) publishers, distributors and retail vendors of, music, videos and
other products, including Virgin Records, Blockbuster and other large
specialty entertainment and integrated media corporations, many of which
possess significant brand awareness, sales volume and customer bases.
The Company expects that competition in the Internet and online commerce
markets will intensify in the future. For example, as various Internet market
segments obtain large, loyal customer bases, participants in those segments
may seek to leverage their market power to the detriment of participants in
other market segments. In addition, new technologies and the expansion of
existing technologies may increase the competitive pressures on online
retailers, including the Company. For example, "shopping agent" technologies
will permit customers to quickly compare the Company's prices with those of
its competitors. Competitive pressures created by any one of the Company's
competitors, or by the Company's competitors collectively, could have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations.
EMPLOYEES
As of July 31, 1998, the Company employed 15 full-time employees. None of its
employees were represented by a labour union, and the Company considers its
employee relations to be good. Competition for qualified personnel in the
Company's industry is intense, particularly for software development and other
technical staff. Global Media believes that its future success will depend in
part on its continued ability to attract, hire and retain qualified personnel.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
In addition to other information in this Annual Report on Form 10-K SB, the
following important factors should be carefully considered in evaluating the
Company and its business because such factors currently have a significant
impact or may have a significant impact on the Company's business, prospects,
financial condition and results of operations.
Limited Operating History; Anticipated Losses
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. While the Company has
experience selling entertainment related products as well as using the
Internet to sell such products, it has not yet launched its new entertainment
and sales web site. Accordingly, the Company has a limited operating history
on which to base an evaluation of its business and prospects. The Company's
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered by companies in their early stage of
development, particularly companies in new and rapidly evolving markets such
as online commerce. Such risks for the Company include, but are not limited
to, an evolving and unpredictable business model and the management of growth.
To address these risks, the Company must, among other things, develop and
increase its customer base, implement and successfully execute its business
and marketing strategy, continue to develop and upgrade its technology and
transaction-processing systems, develop and improve its Web site, provide
superior customer service and order fulfilment, respond to competitive
developments and attract, retain and motivate qualified personnel. There can
be no assurance that the Company will be successful in addressing such risks,
and the failure to do so could have a material adverse effect on the Company's
business, prospects, financial condition and results of operations. The
Company has experienced losses over the past two years and expects to continue
to suffer losses into the foreseeable future as it builds its brand name and
affiliate and licensing programs.
FUNDING REQUIREMENTS
Presently, the Company has limited resources and additional capital investment
will be required to allow the Company to complete its business plan. An
additional $ 200,000 will be required to complete the site. Once the Web site
is operational, additional funding will be required to launch and market the
site, to market the licensee and affiliate programs and to hire additional
staff.
Unpredictability Of Future Revenues; Potential Fluctuations In Quarterly
Operating Results; Seasonality
As a result of the Company's limited operating history and the emerging nature
of the markets in which it competes, the Company is unable to accurately
forecast its revenues. Sales and operating results will depend on the volume
of, timing of and ability to fulfill orders received, which are difficult to
forecast. The Company may not be unable to adjust spending in a timely manner
to compensate for any unexpected revenue shortfall. Accordingly, any
significant shortfall in revenues in relation to the Company's planned
expenditures would have an immediate adverse effect on the Company's business,
prospects, financial condition and results of operations. Further, as a
strategic response to changes in the competitive environment, the Company may
from time to time make certain pricing, service, marketing or acquisition
decisions that could have a material adverse effect on its business,
prospects, financial condition and results of operations.
The Company expects to experience significant fluctuations in its future
quarterly operating results due to a variety of factors, many of which are
outside the Company's control. Factors that may adversely affect the
Company's operating results include, among others, (1) the Company's ability
to retain existing customers, attract new customers at a steady rate and
maintain customer satisfaction, (2) the Company's ability to maintain gross
margins in its existing business and in future product lines and markets, (3)
the development, announcement or introduction of new sites, services and
products by the Company and its competitors, (4) price competition or higher
wholesale prices in the industry, (5) the level of use of the Internet and
online services and increasing consumer acceptance of the Internet and other
online services for the purchase of products such as those offered by the
Company, (6) the Company's ability to upgrade and develop its systems and
infrastructure, (7) the Company's ability to attract new personnel in a timely
and effective manner, (8) the level of traffic on the Company's Web site, (9)
technical difficulties, system downtime or Internet brownouts, (10) the amount
and timing of operating costs and capital expenditures relating to expansion
of the Company's business, operations and infrastructure, (11) the number of
popular music and video selections and other products introduced during the
period, (12) the level of merchandise returns experienced by the Company, (13)
governmental regulation and taxation policies, (14) disruptions in service by
common carriers due to strikes or otherwise, and (15) general economic
conditions and economic conditions specific to the Internet, online commerce
and the music and video industries.
EXECUTIVE OFFECERS AND DIRECTORS OF THE REGISTRANT
The following sets forth certain information regarding the executive officers
of the Company as of July 31, 1998.
MICHAEL METCALFE ([email protected]) Age 42 - Chairman of the Board,
President.
October 1991 - April 1994 - Starscan Communications
(Director of Sales and Marketing)
May 1994 - Present - Westcoast Wireless Cable - Global Media
Mr. Metcalfe founded Westcoast Wireless Cable and Global Media. 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.
ROBERT FULLER ([email protected]) Age 37 - Chief Executive Officer,
Director.
1983-1989 - Ernst & Young Chartered Accountants
Manager - Entrepreneurial Division
1990-1997 - Promark Construction Co. Inc. - Officer & Director
1991 - Present - Lifestyle Health & Fitness Centers - Officer & Director
1994 - 1997 - Bamfield Trails Resorts - Officer & Director
June 1997 - Present - Global Media Corp.
Mr. Fuller is a Chartered Accountant and received his Bachelor of
Commerce degree from the University of British Columbia in accounting
and management information systems. Since leaving Ernst & Young, Mr.
Fuller has been involved in the creation, development and strategic
planning of various businesses. These have included development of real
estate, construction of large condominiums, shopping centers and motels
as well as development and operation of fitness centers, motel/hotel
resorts and pubs. Mr. Fuller has been responsible for financing and
investor relations on many multi-million dollar real estate projects.
WINSTON V. BARTA ([email protected]) Age 27 - Vice President, Secretary,
Director
June 1995 - April 1996 - Motion Works Group, VSE: MWG
(Senior Account Executive)
July 1996 - July 1997 - Starnet Communications OTC:BB SNMM
(VP Marketing)
September 1997 - Present - Global Media
Mr. Barta has a Bachelors degree in Marketing and Administrative
Management from Concordia University in Montreal and an M.B.A. in
Marketing from Simon Fraser University in Vancouver. Mr. Barta brings
a combination of both traditional and Internet marketing expertise. Mr.
Barta also has public company experience in the areas of marketing and
investor relations.
DENNIS MORGAN (age 40), Director.
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.
May 1996 - September 1997. TKO Resources Inc. (Director).
May 1990 - October 1996. Salus Resource Corp. (President and CEO).
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.
ITEM 2. PROPERTIES
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.
ITEM 3. LEGAL PROCEEDINGS
There are no legal proceedings to report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted for a vote of stockholders of the Company during the
fourth quarter of the year ended July 31, 1998.
<PAGE>
Part II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
At the Company's year end, July 31, 1998, there was no market for the
Company's common stock. Subsequent to year end, the common stock has been
traded on the NASD Over the Counter Bulletin Board (OTC:BB) under the symbol
GLMC since August 24, 1998. As of July 31, 1998, there were 19,890,831 shares
of common stock outstanding, held by approximately 55 holders of record.
DIVIDENDS
The Company has never declared or paid cash dividends on its common stock.
The Company currently intends to retain all future earnings to finance future
growth and, therefore, does not anticipate paying any cash dividends in the
foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES
During the past year, prior to becoming a reporting company, the Registrant
sold securities which were not registered under the Securities Act of 1933, as
amended, as set forth below. At that time, 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.
The total amount of securities sold in the past year were 442,534 sold at
$0.50 each for a total of $221,267. There have been no sale of securities
since the company went public on August 24, 1998.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Global Media is a publicly traded company on the NASD Over the Counter
Bulletin Board (OTC:BB). The Company's trading symbol is GLMC. The Company
will specialize in the use of technology and the integration of sophisticated
multi-media communications. Thus, enabling the Company to be on the leading
edge of marketing and distribution of entertainment products over the
Internet. The Company is developing a web site to sell music CDs, video
cassettes, DVDs, books, magazine subscriptions and other entertainment
products via a series of Internet web sites. The Company also plans to be a
major participant in the newest method of music and video distribution via
direct Internet download.
Global Media will strive to offer an online shopping experience that involves
visual, audio and literary entertainment, discovery and fulfilment for its
customers. The Company plans to operate an entertaining, sophisticated and
comprehensive online entertainment product distribution network. The main
business strategy will focus on the acquisition of market share. The Company
believes that the principal competitive factors in its market are brand
recognition, selection, personalized services, convenience, price,
accessibility, customer service, quality of search tools, quality of editorial
and other site content, and reliability and speed of fulfilment. Other
competitive elements include the breadth of entertainment content offered, the
utility of the site as an entertainment destination versus a simple retail
outlet, personalization of the web page to suit each customer's needs and
licensing the Company's back end to other web sites who will sell the
Company's product.
In order to gain increased market share, Global Media will license use of its
back end database and secure transaction processing, ordering and fulfilment
systems to third party Internet marketers. This will allow companies without
sufficient development expertise or funding to use an existing system to
target various niche markets. For an up front charge and ongoing revenue
sharing, companies will be able to license unique front end web sites running
off Global Media's back end.
Global Media has agreements with Muze Inc., Baker & Taylor and Liquid Audio.
Muze Inc. is the leading independent source of digital information about
music, books and movies, to include Muze's music and home video content and
will be the database source for the web site. Baker & Taylor will manage all
packaging, shipping and returns of CDs, videos and DVDs sold through Global
Media's web site. Operating worldwide, Baker & Taylor distributes a wide
range of products, including books, video, audio, software, and related
services to retail stores and libraries. The company has 11 inventory
distribution centers across the United Sates. Liquid Audio's technology
allows consumers to preview and purchase CD-quality music over the Internet,
while ensuring copyright protection and tracking royalties.
As part of its growth strategy, the Company seeks to establish strategic
alliances with global on-line, music and media companies to attract additional
users to, and increase brand awareness of, the Company's websites. These
include network television operators, cable and satellite operators as well as
radio networks. These types of partnerships not only bring credibility and
financial backing but have access to leverage existing viewers to a sales web
site. The Company is also seeking partnerships with large Internet portals,
search engines and chat.
Global Media has assembled a strong management team with relevant experience
and a stake in the Company's success.
<PAGE>
RESULTS OF OPERATIONS
NET REVENUES
Revenues of $ 326,279, ( 1997 - $ Nil) were generated by the call center from
third parties contracts to disseminate information via the telephone, fax and
internet. Using the Company's integrated telephony network and contact
management database, the call center was contracted by various public
companies to distribute information to their selected groups of shareholders
and brokers and to handle all incoming calls.
GENERAL AND ADMINISTRATIVE
The call center was developed and operational in 1998. One time costs
including consultants and hiring and training of staff were incurred in order
to begin operations. Ongoing costs including annual rent of a 6,000 square
foot facility, $ 49,000; staffing, $ 128,000; telephone $ 30,000; and other
overhead costs added to 1998 expenses. Also one time costs associated with
the process of going public were incurred in excess of $ 100,000, (1997 - $
49,386) during the year.
The costs of establishing the call center, a significant bad debt and the
costs of completing the going public process contributed to an increase in
general & administrative expenses to $ 522,585, ( 1997 72,214).
Advertising expense of $ 6,691, ( 1997 - $ Nil) consists of the cost of press
releases. Amortization increased to $ 29,973, ( 1997 $ Nil) as a result of
the purchase of computer equipment, development of the call center, leasehold
improvements and office furniture for the new location in Nanaimo, B.C.,
Canada. A bad debts expense of $ 76,942, ( 1997 - $Nil) was caused mainly
by a $ 70,000 receivable from a call center customer being deemed
uncollectable by management. A bad debt of this magnitude is not expected in
the future. Professional fees increased to $ 147,500, ( 1997 - $ 49,386),
due to legal and accounting costs associated with going public and consulting
fees to train call center staff. Office expenses increased to $ 98,379, (
1997 - $ 21,842) mainly as a result of rent and telephone costs associated
with the new call center facility. Travel expenses of $ 21,174, ( 1997 - $
Nil) were a result of management travel to the call center location during
development and travel associated with developing strategic alliances for the
e-commerce site. Wages and benefits increased to $ 128,406, ( 1997- 1,461)
since the call center began operation in Fiscal 1998. All wage expenses
related to personnel employed by the call center including secretarial and
managerial staff, approximately 15 people.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed it operations and capital expenditures primarily from
equity financing, loans from shareholders and affiliates and revenue generated
from the call center. As at July 31, 1998, the Company had a cash balance of
$ 14,996, (1997 - $ 121,890). The Company expects negative cash flow from
operations to continue for its foreseeable future, as it continues to develop
and market its operations. Inflation has not had any material effect on the
Company's operations.
Net cash utilized by operating activities for the year ended July 31, 1998 was
$157,280, (1997 - $68,378). This included a net loss of $472,674, (1997 - $
108,999), which was offset by items not requiring an outflow of funds
including amortization of $38,658, (1997 - $ 3,957 ) and services settled
through an issuance of shares for $50,449, (1997 - Nil ).
Cash provided by changes in operating working capital resulted from a decrease
in accounts receivable of $58,632 , (1997 - $ 47,216), and a decrease in
inventory of $13,477, (1997 - $20,233), (both due to the winding down of the
operations of Westcoast Wireless Cable); an increase in accounts payable and
accrued liabilities of $106,585, (1997 - $ 11,909); an increase in taxes
payable $21,230, (1997 - $ 5,034 ) and increases in advances from affiliated
companies of $52,997, (loans to affiliates in 1997 - $ 80,309 ). Cash used by
changes in operating working capital resulted from an increase of prepaid
expenses of $7,312, (decrease in 1997 - $599 ), relating to prepaid rent;
increase in income taxes recoverable of $2,439, (1997 - $ Nil ), due to
Canadian tax recovery; and a partial repayment of shareholder loan of $4,821,
(advance by shareholder in 1997 - $ 79,266).
Purchases of capital assets totaling $189,706, (1997 - $ 13,209), consisting
primarily of hardware and software purchased for the Nanaimo call center and
the cost of designing and installing the related infrastructure. Purchases
included office equipment of $9,065; leasehold improvements of $6,565;
computer equipment of $61,293; software of $21,208 and call center
infrastructure of $91,575.
Net cash provided by financing was $221,267, (1997 - $ 283,700). This
financing was provided by the sale of share subscriptions at $0.50 per share.
The Company expects to meet its short term capital and operational
requirements through shareholder and other secured loans expected to total
$500,000. The Company expects to meet it long term cash and operational
requirements through an equity financing.
DISCONTINUED OPERATIONS: WHOLLY OWNED SUBSIDIARY "WESTCOAST WIRELESS CABLE"
Following a decision by the Canadian Federal Court of Appeal in November,
1997, prohibiting the sale of US based satellite and programming services in
Canada, the management of Westcoast Wireless decided to withdraw from the home
satellite business. The home satellite business includes all operations of
Westcoast Wireless.
<PAGE>
The Subsidiary company has been accounted for as a discontinued operation, and
accordingly, its operations have been segregated in the accompanying
consolidated statements of earnings. A breakdown of revenue and expenses
follow:
1998 1997
_____ _____
Total Revenue $ 591,938 $ 1,637,732
Cost of sales $ 418,167 $ 755,446
Commission paid $ 133,934 $ 621,597
________ _________
Gross Margin $ 39,837 $ 260,689
General & Administrative expenses $ 324,887 $ 297,474
________ _________
Loss before provision
for income taxes $ 285,050 $ 36,785
Income tax recovery $ 8,682
Loss for the year $ 276,368
Revenue decreased substantially as a result of a decline in retail prices of
over 50% in the first half of the year combined with the company being
prohibited from selling US based products in Canada.
Cost of sales decreased as a result of two main factors. The average selling
price on US based systems decreased by over 50% without corresponding
decreases in the cost of the systems. Also, the higher cost of Canadian
systems and competition in the Canadian market produced gross margins of only
$ 50.00 per system. Commission decreased due to fewer satellite sales in the
year and lower commission rates as a result of shrinking margins.
General & administrative increased during the year. A considerable amount of
time and manpower, including hiring and training additional sales staff were
devoted to increasing the sales volume for the year. Unfortunately, the Court
ruling prohibiting the sale of US based systems in Canada negated this sales
effort. The satellite division had to incur additional costs in retraining the
existing sales staff for the Canadian system. Consequentially, wages and
benefit expense in the division increased to $150,931, ( 1997 - $ 42,673).
These additional costs contributed to an overall loss of $ 276,368, ( 1997
loss $ 36,785).
RISKS ASSOCIATED WITH THE YEAR 2000
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. In other words, date-
sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failures or miscalculations
causing disruptions of operations, including, among others, a temporary
inability to process transactions, send invoices or engage in similar normal
business activities.
The Company does not believe that it has material exposure to the Year 2000
issue with respect to its own information systems since its existing systems
correctly define the Year 2000. The Company intends to conduct an analysis in
1998 to determine the extent to which its major suppliers' systems (insofar as
they relate to the Company's business) are subject to the Year 2000 issue.
The Company is currently unable to predict the extent to which the Year 2000
issue will affect its suppliers, or the extent to which it would be vulnerable
to its suppliers' failure to remediate any Year 2000 issues on a timely basis.
The failure of a major supplier subject to the Year 2000 issue to convert its
systems on a timely basis or a conversion that is incompatible with the
Company's systems could have a material adverse effect on the Company. In
addition, most of the purchases from the Company will be made with credit
cards, and the Company's operations may be materially adversely affected to
the extent its customers are unable to use their credit cards due to Year 2000
issues that are not rectified by their credit card providers. One further,
and more extreme, case may the failure of the communication mode, (telephone,
cable or satellite), over the internet which could significantly impact the
Company's ability to generate sales.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See exhibits listed in Item 13.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the Registrant's directors and executive officers called
for by Part III, Item 10, is set forth in Item 1 of Part I herein under the
caption "Directors and Executive Officers of the Registrant."
ITEM 10. EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Directors of the Company do not receive cash compensation for their services
as Directors or members of committees of the Board of Directors, but are
reimbursed for their reasonable expenses incurred in attending meetings of the
Board of Directors.
SUMMARY COMPENSATION TABLE
Securities
Underly-
Other Restric- ing All
Annual ted Options/ Other
Compen- Stock SARs LTIP Compen-
Name and Year Salary Bonus sation Award(s) Payouts sation
Principal (US$) ($) ($) ($) (#) ($) ($)
Position
_____________________________________________________________________________
Michael
Metcalfe
President,
Chairman
of the
Board 1998 $54,525 0 0 0 0 0 0
Robert
Fuller
CEO,
Director 1998 0 0 0 0 0 0 0
Winston
Barta
VP,
Secretary,
Director 1998 $27,056 0 0 0 0 0 0
(b) OPTION/SAR GRANTS IN LAST FISCAL YEAR (INDIVIDUAL GRANTS)
None
(c) AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
None
(d) LONG-TERM INCENTIVE PLANS AWARDS IN LAST FISCAL YEAR
None
(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 were no employment contracts among the Company and any of its
management at the end of the 1998 fiscal year.
(g) REPORT ON REPRICING OF OPTIONS/SARS
None
ITEM 11. 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
(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.
<PAGE>
(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 Shearwater Drive
Nanaimo, BC V9T 5W9
Common Stock Winston V. Barta -0- 0%
3289 Oak St., No. 1
Vancouver, BC V6H 2L4
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.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's consolidated statement of operations for the year ended July 31,
1998, includes the following related party transactions:
Wages and benefits expense of $81,747 [1997 - $45,565], to a shareholder and
spouse.
During the year ended July 31, 1998, the following capital asset additions
were purchased from related parties:
$32,909 [1997 - $nil] for call center development from shareholders of the
Company.
$2,454 [1997 - $nil] for call center development from an officer of the
Company
$5,709 [1997 - $nil] for office equipment, $4,171 [1997 - $nil] for leasehold
improvements and $12,170 [1997 - $nil] for call center development from a
company controlled by an officer of the Company.
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENTS OF THE REGISTRANT
(i) Consolidated Balance Sheets for years ended July 31, 1998 and 1997.
(ii) Consolidated Statements of Operations for years ended July 31,
1998 and 1997.
(iii) Consolidated Statements of Shareholders' Equity for years ended
July 31, 1998 and 1997.
(iv) Consolidated Statements of Cash Flows for years ended July 31, 1998
and 1997.
(b) The Registrant filed two reports on Form 8-K during the last quarter of
the period covered by this report. No financial statements were
included in these reports. The reports filed were as follows:
(i) On July 10, 1998, the Registrant reported that ir issued a press
release dated July 7, 1998 to announce that it is in the process of
acquiring new technologies to aid in the distribution of
entertainment based products including video tapes for home
viewing, music compact discs, books and magazine subscriptions.
This dissemination system uses the Internet to increase and enhance
its opportunities world-wide.
(ii) On July 14, 1998, the registrant reported that it issued a press
release dated July 10, 1998 to announce the formation of a wholly
owned subsidiary, Global Media Entertainment corporation, to act as
its own production facility to develop, produce, acquire and
distribute its own and other products, including films, videos,
Music CDs and magazines for worldwide distribution.
(c) EXHIBIT 27 - FINANCIAL DATA SCHEDULE
<PAGE>
REPORT OF INDEPENDENT AUDITORS
_____________________________________________________________________________
To the Board of Directors of
GLOBAL MEDIA CORP.
We have audited the accompanying consolidated balance sheets of Global Media
Corp. as at July 31, 1998 and 1997 and the consolidated statements of
operations, shareholders' equity (deficiency) and cash flows for the years
then ended. 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 auditing standards generally
accepted in the United States. Those standards require that we plan and
perform an audit to obtain reasonable assurance about 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. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the consolidated financial position of the company as
at July 31, 1998 and 1997 and the consolidated results of its operations and
its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States.
Vancouver, Canada,
October 23, 1998 (except as to Note 10 which is as of November 5, 1998).
By _____/s/_____________
Earnst & Young, L.L.P.
Chartered Accountants
<PAGE>
Exhibit (a)(i)
_____________________________________________________________________________
Global Media Corp.
CONSOLIDATED BALANCE SHEETS
_____________________________________________________________________________
As at July 31 (in US dollars)
1998 1997
$ $
_____________________________________________________________________________
ASSETS
Current
Cash 14,996 121,890
Accounts receivable, net of allowance
for doubtful accounts of $92,366
[1997 - $13,307] 206 58,838
Inventory 1,992 15,469
Prepaid expenses 8,229 917
Due from affiliated companies [note 4] 71,065 77,778
Income taxes recoverable [note 5] 2,439 -
_____________________________________________________________________________
98,927 274,892
Capital assets [notes 4 and 6] 172,635 20,566
_____________________________________________________________________________
271,562 295,458
_____________________________________________________________________________
_____________________________________________________________________________
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current
Accounts payable and accrued liabilities 201,234 94,649
Taxes payable 51,354 30,124
Due to affiliated company [note 4] 46,284 -
Due to shareholders [note 4] 79,269 84,090
_____________________________________________________________________________
378,141 208,863
Deferred revenue - 12,062
_____________________________________________________________________________
378,141 220,925
_____________________________________________________________________________
_____________________________________________________________________________
Shareholders' equity (deficiency)
Share capital [note 7] 11,892 11,059
Additional paid in capital [note 7] 543,525 128,641
Unissued share capital [note 7] - 144,001
Deficit (681,819) (209,145)
Cumulative translation adjustment 19,823 (23)
_____________________________________________________________________________
(106,579) 74,533
_____________________________________________________________________________
271,562 295,458
_____________________________________________________________________________
_____________________________________________________________________________
See accompanying notes
<PAGE>
Exhibit (a)(ii)
_____________________________________________________________________________
GLOBAL MEDIA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
_____________________________________________________________________________
Year ended July 31 (in US dollars)
1998 1997
$ $
_____________________________________________________________________________
Revenue
Sales 326,279 -
_____________________________________________________________________________
General and administrative expenses [note 4]
Advertising and marketing 6,691 -
Amortization 29,973 -
Bad debts 76,942 -
Bank charges, interest and financing fees 1,298 445
Foreign exchange 12,222 (920)
Professional fees 147,500 49,386
Office and miscellaneous 98,379 21,842
Travel 21,174 -
Wages and benefits 128,406 1,461
_____________________________________________________________________________
522,585 72,214
Loss from continuing operations
before and after provision for income taxes (196,306) (72,214)
_____________________________________________________________________________
Loss from operations of discontinued home satellite
business, less applicable income tax recovery
of $8,682 [1997 - $nil] [note 3] (276,368) (36,785)
_____________________________________________________________________________
Loss for the year (472,674) (108,999)
_____________________________________________________________________________
_____________________________________________________________________________
Loss per common share from continuing operations (0.01) (0.01)
Loss per common share from discontinued
operations (0.01) (0.00)
Loss per common share (0.02) (0.01)
_____________________________________________________________________________
_____________________________________________________________________________
See accompanying notes
<PAGE>
Exhibit (a)(iii)
_____________________________________________________________________________
GLOBAL MEDIA CORP.
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY (DEFICIENCY)
_____________________________________________________________________________
Year ended July 31 (in US dollars)
<TABLE>
<CAPTION>
Additional Unissued Retained Cumulative
Common stock paid-in share earnings translation
____________ capital capital (deficit) adjustment
Shares Amount
# $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C>
_______________________________________________________________________________________________
Balance, July 31, 1996 [note 7] - - - 1 14,486 (408)
Common shares issued for cash 11,059,400 11,059 128,641 - - -
Unissued common shares [note 7] - - - 144,000 - -
Movement on cumulative translation - - - - - 385
Loss for the year - - - - (108,999) -
Dividends declared and paid - - - - (114,632) -
_______________________________________________________________________________________________
Balance, July 31, 1997 11,059,400 11,059 128,641 144,001 (209,145) (23)
Common shares
issued for cash [note 7] 730,533 731 364,536 (144,000) - -
Common shares issued for other
than cash consideration:
Consideration for shares in
Westcoast Wireless
[notes 1 and 7] 8,000,000 1 - (1) - -
In kind services 100,898 101 50,348 - - -
Movement on cumulative
translation - - - - - 19,846
Loss for the year - - - - (472,674) -
_______________________________________________________________________________________________
Balance, July 31, 1998 19,890,831 11,892 543,525 - (681,819) 19,823
_______________________________________________________________________________________________
_______________________________________________________________________________________________
</TABLE>
See accompanying notes
<PAGE>
Exhibit (a)(iv)
_____________________________________________________________________________
GLOBAL MEDIA CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
_____________________________________________________________________________
Year ended July 31 (in US dollars)
1998 1997
$ $
_____________________________________________________________________________
OPERATING ACTIVITIES
Loss for the year (472,674) (108,999)
Items not requiring an outlay of funds
Amortization 38,658 3,957
Services settled through share issuance 50,449 -
Deferred revenue (12,062) 12,062
_____________________________________________________________________________
(395,629) (92,980)
Changes in non-cash operating working capital
Accounts receivable 58,632 47,216
Inventory 13,477 20,233
Prepaid expenses (7,312) 599
Income taxes recoverable (2,439) -
Accounts payable and accrued liabilities 106,585 11,090
Accrued wages payable - (58,527)
Taxes payable 21,230 5,034
Advances from (to) shareholder (4,821) 79,266
Advances from (to) affiliated companies 52,997 (80,309)
_____________________________________________________________________________
Cash used in operating activities (157,280) (68,378)
_____________________________________________________________________________
_____________________________________________________________________________
INVESTING ACTIVITIES
Purchase of capital assets (189,706) (13,209)
Decrease in loan receivable from shareholder - 18,306
_____________________________________________________________________________
Cash provided by (used in) investing activities (189,706) 5,097
_____________________________________________________________________________
_____________________________________________________________________________
FINANCING ACTIVITIES
Dividends - (114,632)
Share subscriptions 221,267 283,700
_____________________________________________________________________________
Cash provided by financing activities 221,267 169,068
_____________________________________________________________________________
_____________________________________________________________________________
Effect of exchange rate changes on cash 18,825 198
Increase (decrease) in cash during the year (106,894) 105,985
Cash, beginning of year 121,890 15,905
_____________________________________________________________________________
Cash, end of year 14,996 121,890
_____________________________________________________________________________
_____________________________________________________________________________
Interest - paid 9,180 357
Income taxes paid (recovered) (6,783) 10,354
_____________________________________________________________________________
_____________________________________________________________________________
See accompanying notes
<PAGE>
_____________________________________________________________________________
GLOBAL MEDIA CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
_____________________________________________________________________________
JULY 31, 1998 (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 center
services from its location in Nanaimo, Canada. Until the 4th quarter of 1998,
the Company was also engaged in the marketing of direct to home satellite
hardware and programming services to both commercial and private individuals
primarily in Western Canada [note 3]. The Company commenced its internet-
integrated call center in September, 1997. The Company is also in the process
of developing an electronic commerce web site for the distribution and
eventual downloading of music and video over the internet.
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 contracted for the sales of certain satellite hardware and
programming services, therefore the majority of the purchases were 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.
The consolidated statements of operations, shareholders' equity (deficiency),
and cash flows 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 cash flows 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.
<PAGE>
_____________________________________________________________________________
GLOBAL MEDIA CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
_____________________________________________________________________________
JULY 31, 1998 (in US dollars)
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION (cont'd.)
The Company has not yet achieved a profitable level of operations. The
Company's continued operation is dependent upon achieving a profitable level
of operations from its electronic commerce web site, scheduled to commence
operations in March 1999, and upon obtaining additional financing and the
continued support of the Company's shareholders [note 10], to fund both
current operations, and web site construction.
2. SIGNIFICANT ACCOUNTING POLICIES
Inventory
Inventory is recorded at the lower of 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 following methods and rates, except in the year of acquisition when one
half of the rate is used.
Call center infrastructure 3 year straight line
Office furniture and equipment 20% declining balance
Software 20% declining balance
Computer equipment 30% declining balance
Leasehold improvements 5 year straight line
<PAGE>
_____________________________________________________________________________
GLOBAL MEDIA CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
_____________________________________________________________________________
JULY 31, 1998 (in US dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.)
REVENUE RECOGNITION
Revenues from the call center are recognized on a straight line basis over the
term of the contract.
Revenues are recorded at the time of installation for hardware sales, and at
contract inception for sales of programming.
ADVERTISING AND MARKETING COSTS
Advertising and marketing costs are expensed as incurred.
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.
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.
<PAGE>
_____________________________________________________________________________
GLOBAL MEDIA CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
_____________________________________________________________________________
JULY 31, 1998 (in US dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.)
LOSS PER SHARE
The Company has adopted SFAS128, 'Earnings per share' in the current year on a
retroactive basis. There is no impact on previously reported loss per share
amounts.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued SFAS130, 'Reporting
comprehensive income', SFAS131, 'Disclosures about segments of an enterprise
and related information', SFAS132 'Employers' Disclosures about pensions and
other postretirement benefits' and SFAS133 'Accounting for derivative
instruments and hedging activities'. SFAS130, SFAS131 and SFAS132 are
effective for financial statements for fiscal years beginning after December
15, 1997. SFAS133 is effective for financial statements for fiscal years
beginning after June 15, 1999.
SFAS130 establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is
defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures,
SFAS130 requires that all items that are required to be recognized under
current accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as other
financial statements.
SFAS131, SFAS132 and SFAS133 currently have no impact on the Company.
<PAGE>
_____________________________________________________________________________
GLOBAL MEDIA CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
_____________________________________________________________________________
JULY 31, 1998 (in US dollars)
3. DISCONTINUED OPERATION
In November 1997, a decision was made by the Canadian Federal Court of Appeal
of, ruling that sale of US satellite and programming services in Canada was
not permitted. Following a period of trading in Canadian satellite and
programming services the management of Westcoast Wireless decided to withdraw
completely from the home satellite business in late fiscal 1998. The home
satellite business includes all operations of Westcoast Wireless.
This subsidiary company has been accounted for as a discontinued operation,
and accordingly, its operations have been segregated in the accompanying
consolidated statements of operations.
Revenues of the discontinued company for the year ended July 31, 1998 were
$591,938 [1997 - $1,617,528]. At July 31, 1998, net current liabilities of
the discontinued operation were $130,076 [1997 - $31,578] consisting
principally of accounts payable and balances due to shareholder. Net non-
current assets at July 31, 1998 were $15,352 [1997 - $8,504].
4. RELATED PARTY TRANSACTIONS
All related party balances as disclosed in the balance sheet are non-interest
bearing and without specific terms of repayment.
The affiliated companies are related to Global Media Corp. by virtue of
control by officers of the Company. The fair values of the balances are not
determinable since they have no fixed repayment terms.
The Company's consolidated statement of operations for the year ended July 31,
1998 includes the following related party transactions:
- wages and benefits expense of $81,747 [1997 - $45,565], to a
shareholder and spouse.
- income from recharge of wages of $nil [1997 - $72,610], to a company
related by virtue of control by an officer of the Company.
<PAGE>
_____________________________________________________________________________
GLOBAL MEDIA CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
_____________________________________________________________________________
JULY 31, 1998 (in US dollars)
4. RELATED PARTY TRANSACTIONS (cont'd.)
During the year ended July 31, 1998 the following capital asset additions were
purchased from related parties:
- $32,909 [1997 - $nil] for call center development from shareholders of
the Company.
- $2,454 [1997 - $nil] for call center development from an officer of the
Company.
- $5,709 [1997 - $nil] for office equipment, $4,171 [1997 - $nil] for
leasehold improvements and $12,170 [1997 - $nil] for call center
development from a company controlled by an officer of the Company.
5. INCOME TAXES
At July 31, 1998, the Company had a domestic net operating loss of $240,407
which will begin to expire in 2011, and foreign net operating loss
carryforwards of $250,671 which will expire in 2005. Utilization of these
carryforwards depends on the recognition of future taxable income.
For financial reporting purposes, a valuation allowance has been established
for all deferred tax assets due to the uncertainty of realization. As a
result of certain stock transactions, utilization of the Company's net
operating loss carryforwards may be subject to certain limitations in the
event that a change in ownership has occurred, as defined in Section 382 of
the Internal Revenue Code of 1986, as amended.
<PAGE>
_____________________________________________________________________________
GLOBAL MEDIA CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
_____________________________________________________________________________
JULY 31, 1998 (in US dollars)
5. INCOME TAXES (cont'd.)
Deferred tax assets reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities are as follows:
July 31,
1998
$
_____________________________________________________________________________
Deferred tax assets:
Net operating loss carryforwards 196,094
Tax vs. accounting value in fixed assets 5,431
Unrealized foreign exchange loss 4,155
_____________________________________________________________________________
Total gross deferred tax assets 205,680
Less valuation allowance (205,680)
Deferred tax liability -
_____________________________________________________________________________
Net deferred tax assets -
_____________________________________________________________________________
_____________________________________________________________________________
6. CAPITAL ASSETS
Accumulated Net Book
Cost Amortization Value
$ $ $
_____________________________________________________________________________
July 31, 1998
Office furniture and equipment 18,859 4,842 14,018
Computer equipment 70,107 13,117 56,990
Leasehold improvements 8,594 4,905 3,689
Call center infrastructure 91,575 17,325 74,250
Software 27,209 3,520 23,689
_____________________________________________________________________________
216,344 43,702 172,635
_____________________________________________________________________________
_____________________________________________________________________________
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
_____________________________________________________________________________
_____________________________________________________________________________
<PAGE>
_____________________________________________________________________________
GLOBAL MEDIA CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
_____________________________________________________________________________
JULY 31, 1998 (in US dollars)
7. SHARE CAPITAL
1998 1997
# #
_____________________________________________________________________________
Authorized
Common shares, par value $0.001 each 200,000,000 200,000,000
Issued
Common shares 19,890,831 11,059,400
Unissued common shares - 8,288,000
_____________________________________________________________________________
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 year ended July 31, 1998.
Effective April 8, 1997 the Company adopted 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, 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. During the current year, this plan was amended to
increase the number of options from 500,000 to 1,000,000 shares.
At July 31, 1998, no options were outstanding under the Plan.
8. SEGMENTED INFORMATION
The Company's business segment which derived revenue from the marketing of
direct to home satellite hardware and programming services, has been presented
as a discontinued operation in the current year [note 3].
The remaining segment of the business relates to call center services. The
Global Media call center provides 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 and comprises all continuing
operations of the Company.
<PAGE>
_____________________________________________________________________________
GLOBAL MEDIA CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
_____________________________________________________________________________
JULY 31, 1998 (in US dollars)
9. COMMITMENTS AND CONTINGENCIES
Global Media entered into a commercial lease for office space effective
October 1, 1997, and will pay a total of $52,939 per year until July 31, 2002.
10. SUBSEQUENT EVENT
On November 5, 1998, the Company entered into a loan agreement with Rolling
Oaks Enterprises, LLC allowing the Company to draw on a line of credit of up
to $500,000, repayable within one year. The interest rate on the credit
facility is 24% per annum, with an origination fee of 1% payable on the
receipt of funds.
The loan is collateralized by a first charge on all available fixed assets of
the Company, and 1,000,000 of common shares in the Company at a price of $1
per share currently in issue.
Since July 31, 1998, two principal shareholders of the Company have advanced
funds of $218,000 to the Company. The shareholder loans at July 31, 1998, and
advanced since the balance sheet date, have no fixed terms of repayment and
therefore are classified as current liabilities in the balance sheet.
However, the shareholders have indicated their intent to continue to support
the operations of the Company, and to not request repayment of the loans until
a profitable level of operations have been achieved.
In accordance with the requirements of the Securities Act of 1933, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GLOBAL MEDIA CORPORATION
By /s/ Michael Metcalfe
____________________
Michael Metcalfe,
President and Director
By /s/ Robert Fuller
____________________
Robert Fuller
CEO and Director
By /s/ Winston Barta
____________________
Winston Barta
V.P. of Marketing and Business Development
Director
By /s/ Dennis Morgan
____________________
Dennis Morgan
Director
By /s/ Jack D. MacDonald
____________________
Jack D. MacDonald
Director
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