<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
AMENDMENT NO. 1 TO
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1998
[] TRANSITION REPORT PURSUANT TO 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 CORP.
(Exact name of registrant as specified in its charter)
NEVADA 91-1842480
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
400 ROBSON STREET, VANCOUVER, BC, CANADA V6B 2B4
(Address of Principal Executive Offices; Zip Code)
Registrant's telephone number, including area code: (604) 688-9994
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. Yes____ No____
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: AS OF OCTOBER 25, 1999, THERE
WERE 20,710,456 SHARES OUTSTANDING OF THE COMPANY'S COMMON STOCK.
This report on Form 10-QSB/A constitutes Amendment No. 1 to the Registrant's
Form 10-QSB for the quarter ended October 31, 1998. This report is intended to
amend certain information contained in Part I, Items 1 and 2, and Part II, Item
2. SEE "Management's Discussion and Analysis of Financial Condition and Results
of Operations" for the basis for such amendments.
1
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
GLOBAL MEDIA CORP.
CONSOLIDATED BALANCE SHEETS
Unaudited
(As restated - SEE Note 12)
(in US dollars)
<TABLE>
<CAPTION>
October 31 July 31
1998 1998
$ $
- ------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash 66,669 14,996
Accounts receivable 526 206
Inventory 793 1,992
Prepaid expenses 588 8,229
Due from affiliated companies [NOTE 4] -- 71,065
Income taxes recoverable 2,439 2,439
- ------------------------------------------------------------------------------------
71,015 98,927
Capital assets [NOTE 6] 185,526 172,635
- ------------------------------------------------------------------------------------
256,541 271,562
====================================================================================
LIABILITIES
CURRENT
Accounts payable and accrued liabilities 315,370 201,234
Taxes payable 54,722 51,354
Due to affiliated company [NOTE 4] 126,650 46,284
Due to shareholders [NOTE 4] 11,142 79,269
- ------------------------------------------------------------------------------------
507,884 378,141
SHAREHOLDERS' DEFICIENCY
Share capital [NOTE 7] 11,892 11,892
Additional paid in capital [NOTE 7] 1,104,925 543,525
Deficit (1,393,968) (681,819)
Cumulative translation adjustment 25,808 19,823
- ------------------------------------------------------------------------------------
(251,343) (106,579)
- ------------------------------------------------------------------------------------
256,541 271,562
====================================================================================
</TABLE>
SEE ACCOMPANYING NOTES
2
<PAGE>
GLOBAL MEDIA CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
Unaudited
(As restated - SEE Note 12)
(in US dollars)
<TABLE>
<CAPTION>
For the 3 Months Ending
--------------------------------
October 31 October 31
1998 1997
$ $
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUE -- --
GENERAL AND ADMINISTRATIVE EXPENSES [NOTE 4]
Advertising and marketing 40,969 --
Amortization 13,047 8,834
Bad debts -- --
Bank charges, interest and financing fees 968 45
Foreign exchange 3,213 4,731
Professional fees 37,106 12,558
Office and miscellaneous 39,694 24,343
Travel 8,702 6,182
Wages and benefits 12,601 --
Share options compensation expense 548,800 --
- ---------------------------------------------------------------------------------------------------
705,100 56,693
- ---------------------------------------------------------------------------------------------------
LOSS FROM CONTINUING OPERATIONS (705,100) (56,693)
- ---------------------------------------------------------------------------------------------------
Income (loss) from operations of discontinued
call center and satellite businesses [NOTE 3]
Call center -- 45,047
Satellite (7,049) (65,258)
- ---------------------------------------------------------------------------------------------------
LOSS FROM DISCONTINUED OPERATIONS (7,049) (20,211)
- ---------------------------------------------------------------------------------------------------
NET AND COMPREHENSIVE LOSS FOR PERIOD (712,149) (76,904)
===================================================================================================
Loss per common share from continuing operations (0.04) (0.00)
Loss per common share from discontinued operations (0.00) (0.00)
- ---------------------------------------------------------------------------------------------------
LOSS PER COMMON SHARE (0.04) (0.00)
===================================================================================================
Shares used in the computation of loss per share 19,890,831 19,059,400
</TABLE>
SEE ACCOMPANYING NOTES
3
<PAGE>
GLOBAL MEDIA CORP.
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY (DEFICIENCY)
Unaudited
(As restated - SEE Note 12)
(in US dollars)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL UNISSUED RETAINED CUMULATIVE
------------ PAID-IN SHARE EARNINGS TRANSLATION
SHARES AMOUNT CAPITAL CAPITAL (DEFICIT) ADJUSTMENT
# $ $ $ $ $
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JULY 31, 1996 [NOTE 7] -- -- -- 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) -- --
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
Stock options charges 561,400
Movement on cumulative translation 5,985
Loss for the Period (712,149)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, OCTOBER 31, 1998 19,890,831 11,892 1,104,925 -- (1,393,968) 25,808
==================================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES
4
<PAGE>
GLOBAL MEDIA CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(As restated - SEE Note 12)
(in US dollars)
<TABLE>
<CAPTION>
For the 3 Months Ending
-----------------------
October 31 October 31
1998 1997
$ $
- -----------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Loss for the period (712,149) (76,904)
Items not requiring an outlay of funds
Share option compensation expense 548,800 --
Share option professional fees expense 12,600 --
Amortization 13,633 10,137
Services settled through share issuance -- 50,449
- -----------------------------------------------------------------------------------------
(137,116) (16,318)
Changes in non-cash operating working capital
Accounts receivable (320) (35,536)
Inventory 1,199 (8,333)
Prepaid expenses 7,641 (17,597)
Accounts payable and accrued liabilities 114,136 47,457
Taxes payable 3,368 413
Advances from (to) shareholder (68,127) (6,881)
Advances from (to) affiliated companies 151,431 1,264
- -----------------------------------------------------------------------------------------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 72,212 (35,531)
- -----------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of capital assets (26,524) (114,452)
- -----------------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES (26,524) (114,452)
- -----------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Share subscriptions -- 120,757
- -----------------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES -- 120,757
- -----------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 5,985 3,146
INCREASE (DECREASE) IN CASH DURING THE PERIOD 51,673 (26,080)
Cash, beginning of period 14,996 121,890
- -----------------------------------------------------------------------------------------
CASH, END OF PERIOD 66,669 95,810
=========================================================================================
Interest - paid 1,765 884
=========================================================================================
</TABLE>
SEE ACCOMPANYING NOTES
5
<PAGE>
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 headquartered in Vancouver, B.C., Canada. The Company
(through its now-subsidiary Westcoast Wireless Cable Ltd. ("Westcoast Wireless")
was originally engaged in the business of providing call center services, both
of which lines of business are now discontinued (SEE note 3).
The accompanying unaudited interim consolidated financial statements have been
prepared in conformity with generally accepted accounting principles in the
United States of America ("GAAP"). All significant intercompany amounts have
been eliminated in the consolidation process. The preparation of financial
statements in conformity with GAAP requires the Company's management to make
estimates and assumptions that affect the amounts reported in the financial
statements and related notes. Actual results may differ from these estimates. In
the opinion of management, all adjustments necessary to fairly state the results
for the quarter ended October 31, 1998 have been made. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with GAAP have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. These unaudited interim
consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended July 31, 1998.
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.
<TABLE>
<S> <C>
Communications 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
</TABLE>
6
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the Company's wholly-owned Canadian subsidiaries
Westcoast Wireless and Global Media Entertainment Corp. are translated into US
dollars at the period-end exchange rate. 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 into US dollars at period end exchange rates. Other balances are
recorded at rates in effect on the dates of the transaction. Exchange gains and
losses arising on translation are reflected in net income for the period.
LOSS PER SHARE
The Company has adopted SFAS128, "Earnings per share" in the current year on a
retroactive basis. In accordance with Statement 128, basic earnings per share is
computed using the weighted average number of common shares outstanding. Diluted
earnings per share is computed using the weighted average number of common
shares per dilutive common share equivalents outstanding during the period using
the treasury stock method. Due to the net loss during the quarter ended October
31, 1998, the same number of shares were used to compute both basic and fully
diluted earnings per share.
3. DISCONTINUED OPERATION
The Company was engaged in providing call center services until the third
quarter of fiscal 1999, and Westcoast Wireless was engaged in the marketing of
direct-to-home satellite hardware and programming services until the fourth
quarter of 1998.
4. RELATED PARTY TRANSACTIONS
The affiliated companies are related to the Company by virtue of control by an
officer of the Company. No related party transactions occurred during the three
months ending October 31, 1999 with the exception of:
(i) A partial repayment ($71,065) of a shareholder loan, which was used to
repay a receivable, owed to the Company by an affiliate owned by the
same shareholder; and,
(ii) Advances from an affiliated company in the amount of $80,366.
7
<PAGE>
5. INCOME TAXES
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 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.
<TABLE>
<CAPTION>
6. CAPITAL ASSETS
ACCUMULATED NET BOOK
COST AMORTIZATION VALUE
$ $ $
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OCTOBER 31, 1998
Office furniture and equipment 23,718 5,556 18,162
Computer equipment 70,825 18,301 52,524
Leasehold improvements 8,504 4,987 3,517
Communications infrastructure 91,575 19,483 72,092
Software 48,246 9,015 39,231
- ------------------------------------------------------------------------------------------------------------------
242,868 57,342 185,526
==================================================================================================================
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
Communications infrastructure 91,575 17,325 74,250
Software 27,209 3,520 23,689
- ------------------------------------------------------------------------------------------------------------------
216,344 43,709 172,635
==================================================================================================================
<CAPTION>
<S> <C> <C>
7. SHARE CAPITAL
QUARTER ENDED OCTOBER 31 YEAR ENDED JULY 31
------------------------ ------------------
1998 1998
# #
- ------------------------------------------------------------------------------------------------------------------
AUTHORIZED
Common shares, par value $0.001 each 200,000,000 200,000,000
ISSUED
Common shares 19,890,831 19,890,831
==================================================================================================================
</TABLE>
STOCK OPTION PLANS
Effective April 8, 1997 the Company adopted the 1997 Directors and Officers
Stock Option Plan (the "1997 Plan"). The 1997 Plan is administered by the Board
of Directors who have sole discretion and authority to determine individuals
eligible for awards under the 1997 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. No options have been granted under this plan.
8
<PAGE>
7. SHARE CAPITAL (CONT'D.)
Effective August 21, 1998 the Company adopted the 1998 Directors and Officers
Stock Option Plan (the "1998 Plan"). The Plan is administered by the Board of
Directors who have sole discretion and authority to determine individuals
eligible for awards under the 1998 Plan. The 1998 Plan provides for issuance of
a total of 1,000,000 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. 1,000,000 options at an exercise price of
$0.50 per share have been granted under this plan. No grants occurred in the
quarter ended April 30, 1999. Of these options, 980,000 were granted to
directors, officers, employees and inside consultants, and the $548,800 imputed
value thereof as calculated pursuant to APB 25 has been charged to compensation
expense. The remaining 20,000 were granted to an outside consultant and the
$12,600 imputed value thereof as calculated pursuant to FAS 123 has been charged
to professional fees expense. SEE Note 12.
Effective March 24, 1999 the Company adopted the 1999 Directors and Officers
Stock Option Plan (the "1999 Plan"). The 1999 Plan is administered by the Board
of Directors who have sole discretion and authority to determine individuals
eligible for awards under the 1999 Plan. The 1999 Plan provides for issuance of
a total of 4,000,000 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. 2,933,000 options at exercise prices of
$4.00 have been granted under this plan and all of these grants occurred in the
quarter ended April 30, 1999. Of these options, 25,000 were issued to acquire
the globalmedia.com domain name and the $95,000 imputed value thereof has been
capitalized to web site development costs. Additionally, 10,000 were issued to
an outside consultant and the $24,700 imputed value thereof, as calculated
pursuant to FAS 123, has been charged to professional fees expense. SEE Note 12.
As of April 30, 1999, 653,600 options had been exercised under the 1998 Plan and
no options had been exercised under the 1999 Plan.
8. COMMITMENTS AND CONTINGENCIES
The Company 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.
By agreement dated April 20, 1999, as amended on June 4, 1999, the Company
entered into an arrangement to engage RealNetworks, Inc. to perform consulting
services in connection with the Global Media Broadcast Network project. Under
the terms of the agreement, the Company is required to make payments totaling
$3,655,000 over the duration of the project with the final payment date
projected to be December 21, 1999.
9
<PAGE>
9. NOTE PAYABLE AND DUE TO SHAREHOLDERS
The shareholder loans as of October 31, 1998 had no fixed terms of repayment and
therefore are classified as current liabilities on the balance sheet. Subsequent
to quarter-end, the Company and the shareholders agreed to settle the loans by
way of the issuance of shares, partial repayment and partial conversion to new
promissory notes.
10. SUBSEQUENT EVENTS
On November 5, 1998, the Company entered into a bridge 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.
Effective May 6, 1999 the Company entered into a Securities Purchase Agreement
and ancillary agreements with RGC International Investors LDC ("RGC") pursuant
to which the Company issued, for cash, a convertible debenture to RGC in the
aggregate principal amount of $8,500,000 and warrants to purchase 680,000 shares
of the Company's common stock at an exercise price of $8.4375 per share. The
convertible debenture is convertible from time to time at RGC's option into
shares of Common Stock of the Company at the lesser of a fixed conversion price
or a variable conversion price based on the market price of the Common Stock at
the time of conversion. The debenture includes an investment option, exercisable
by RGC at the time of conversion, to acquire a number of additional shares of
Common Stock equal to the number of shares with respect to which RGC is
converting the debenture, at an exercise price equal to the conversion price
then in effect. The debenture has a three year term, after which any previously
unconverted portion is converted automatically into Common Stock. The debenture
may be converted at the option of the Company into convertible preferred shares
of the Company (having the same basic terms as the convertible debenture) once
the Company's articles of incorporation have been amended to allow for the
issuance of preferred shares. On or about June 9, 1999 the Company mailed to its
shareholders an Information Statement concerning this matter, and as majority
shareholder approval has already been obtained for the amendment of the
Company's articles of incorporation to allow for the issuance of the preferred
shares, the Company expects that the convertible debentures will have been
converted into convertible preferred shares of the Company by July 31, 1999, the
Company's fiscal year-end. Further details on this matter are also available by
referring to the Company's Form 8-K filing made May 20, 1999.
On May 18, 1999 the Company fully repaid its $500,000 line of credit, and
$48,200 of accrued interest, to Rolling Oaks Enterprises, LLC.
The Company launched its main e-commerce internet site, globalmedia.com, on May
18, 1999.
10
<PAGE>
11. 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 other things, 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 is in the process of inquiring as to
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, historically 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 be the
failure of the communication mode (telephone, cable or satellite), over the
internet, which could significantly impact the Company's ability to generate
sales.
12. RESTATEMENT
Subsequent to the issuance of the Company's financial statements for the quarter
ended April 30, 1999, the Company identified accounting issues with regard to
its treatment of stock options granted during the first and third quarters of
fiscal 1999. SEE Note 7. As a result, the Company has restated its financial
statements for the three months ended October 31, 1998. The effects of such
restatement, and of the Company's discontinuance of its call center operation
(SEE Note 3) are summarized as follows:
<TABLE>
<CAPTION>
Three months ended Three months ended
October 31, 1998 October 31, 1997
-----------------------------------------
<S> <C> <C>
Net sales before restatement 20,130 90,000
Net sales after restatement -- --
General and administrative expenses before restatement 163,830 101,646
General and administrative expenses after restatement 705,100 56,693
Net loss before restatement (150,749) (76,904)
Net loss after restatement (712,149) (76,904)
Net loss per common share before restatement (0.01) (0.00)
Net loss per common share after restatement (0.04) (0.00)
</TABLE>
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contains forward-looking statements based on current
expectations, estimates and projections about the Company's 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. 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").
During the three months ended October 31, 1997, the Company operated a call
center and a satellite marketing business. The Company had discontinued both of
those businesses by the end of the third quarter of fiscal 1999. The financial
results from those previous periods contained in the following discussion
therefore include only revenues and expenses related to the Company's corporate
activities and exclude any revenues or expenses from those discontinued lines of
business. SEE " -- Discontinued Operations."
The results of operations for the three months ended October 31, 1998 and 1997
are not necessarily indicative of the results to be expected or anticipated for
any future comparable period or full fiscal year.
Subsequent to the issuance of the Company's financial statements for the quarter
ended April 30, 1999, the Company identified accounting issues with regard to
its treatment of stock options granted during the first and third quarters of
fiscal 1999. SEE Note 7. As a result, the Company has restated its financial
statements for the three months ended October 31, 1998 in the form included with
this Amendment No. 1 to Quarterly Report on Form 10-QSB/A. The following
discussion reflects, where appropriate, changes as a result effects of such
restatement. SEE "Note 7" and "Note 12" to the Company's attached financial
statements.
12
<PAGE>
RESULTS OF OPERATIONS
STATEMENT OF OPERATIONS DATA
Revenue as restated decreased to $nil during the first quarter ending October
31, 1998. This was due to fundamental changes in the company's business
discussed above and the restatement of call center revenues included in
discontinued operations. The Company has moved into a development cycle and does
not expect further revenues pending the launch of its web site. 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.
General and Administrative expenses of $705,100 (1997 $56,693) increased mainly
as a result of advertising (news releases, Internet and other promotional
material) associated with informing the investment community of the listing of
the Company's securities, office expenses relating increase operations, and the
inclusion of share options compensation expense. Share options compensation
expense of $548,800 consists of the imputed benefit calculated pursuant to APB
25 of stock options granted immediately prior to August 24, 1998, the date the
Company's shares commenced trading on the NASD OTC Bulletin Board. SEE "Note 7"
and "Note 12" to the Company's Financial Statements.
Advertising expense was $40,969 (1997 - $NIL) due to the news releases, Internet
and other promotions used to inform the investment community of the listing of
the Company's securities and its busines plan. Professional fees increased to
$37,106 (1997 - $12,558) mainly relating to corporate web site development,
generation of investor leads and listing in Standard and Poor's Corporation
Records. Professional fees also include $12,600 in imputed benefit related to
stock options mentioned above.
Office expense of $39,694 (1997 - $24,343) increased primarily due to rent
expense at the larger Nanaimo offices and other expenses associated with
promotion. Office expense consisted mainly of accounting and legal fees $7,907
(1997 - $16,720); rent $15,825 (1997 - $5,930); telephone $6,868 (1997 $324);
general office expense $5,205 (1997 - $1,305) and Internet charges of $2,382
(1997 $288). Travel expense of $8,702 (1997 - $6,182) consisted primarily of
travel relating to development of strategic alliances, evaluation of web site
designers and attending industry related conferences. Wages of $12,601 (1997 -
$nil) consisted primarily of administration staff; answering investor,
shareholder and other investment community member inquiries; initiating our
licensing and affiliate programs and corporate web site development.
13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash increased by $51,673 (1997 decrease of $26,080) primarily resulting from
advances from affiliated companies in the amount of $151,431. This increase in
cash was offset by cash used in operations to repay shareholder loans of $68,127
(1997 - $6,881) and purchase of capital assets of $26,524 (1997 - $114,452)
Operating activities produced a loss of $705,100 (1997 $76,904) offset by
amortization of $13,633 (1997 - $10,137).
CHANGES IN NON-OPERATING CAPITAL
Increases in cash were caused by: the sale of some inventory for $1,199 (1997
increase in inventory levels needed for sales lead to decrease in cash of
$8,333); prepaid expenses decreased by $7,641 due to use of presentation folders
for mailing corporate information and expensing of prepaid rent (1997 increase
in prepaid of $17,597 resulting from prepayment of a portion of rent to
landlord); an increase in accounts payable of $114,136 resulting from recent
payables from web site development and operating activities (1997 - $47,457);
and advances from affiliated companies totaled $151,431 (1997 $1,264).
The increase in cash was offset by a small increase in accounts receivable due
to employee advances (1997 decrease in receivable of $35,536 from tightening up
on receivable policy); and a re-payment of a shareholder loan of $68,127 which
was re-advanced to the Company to pay off a receivable owed by an affiliate
owned by the same shareholder (1997 payment of $6,881).
INVESTING ACTIVITIES
There was a decrease in cash of $26,524 (1997 - $114,452) caused by fixed asset
purchases of computer equipment and software to be used in the entertainment
website.
FINANCING ACTIVITIES
No financing activities occurred during the period.
14
<PAGE>
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 catalog 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 offers customers a vast selection
through an efficient search-and-retrieval interface. 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
listed its common stock is on the NASD Over the Counter Bulletin Board (OTC:BB)
under the symbol "GLMC".
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
consisting only of web design fees 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 licensees 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 appear to 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, etc.. 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.
15
<PAGE>
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, 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.
GENERAL
During the past quarter, the Company listed its securities on the NASD Over The
Counter Bulletin Board under the symbol GLMC. The Company engaged in various
promotional activities to inform the investment community of its listed
securities and current business plan, these included press releases, phone and
Internet based investor relations and development and promotion of a corporate
web site.
The Company also continued development of its communications center which
managed Global Media's investor relations over multiple mediums including phone,
fax and e-mail. The communications center also managed the distribution of
corporate information via the Internet, fax and physical packages. The
communications center continues to allow Global Media to maintain and develop
relationships with its shareholders, the investment community and the media. It
is also being used to develop and manage relationships with the large number of
companies and individuals expressing interest in Global Media's licensing and
affiliate programs.
The Company developed its corporate web site in order to showcase its business
plan, management and partnerships with its shareholders, the investment
community and the media. The corporate web site is also being used to provide
information to businesses and individuals about the Global Media's licensing and
affiliate programs.
During the quarter, Global Media also developed several key strategic alliances
including Muze Inc., Baker & Taylor and Liquid Audio. These alliances represent
significant steps toward execution of the company's business plan. 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.
16
<PAGE>
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 views entertainment development and distribution as an
essential, compelling element to draw visitors to its site and worked during the
quarter to develop relationships with content developers and distribution
technology partners.
Pursuing the business plan relating to company's Internet entertainment and
sales web site and licensing program was coupled with fundamental changes in the
company's business. The Company's satellite hardware and programming sales
business was discontinued in the previous quarter and the Company is no longer
accepting investor relations contracts in favor of focussing entirely on
development of its current business plan. The Company has thus moved into a
development cycle and does not expect further revenues pending the launch of its
web site.
DISCONTINUED OPERATIONS
The Company was engaged in the business of providing call center services until
the third quarter of fiscal 1999, at which time it discontinued those
operations. In addition, the Company's wholly-owned subsidiary Westcoast
Wireless Cable Ltd., a Canadian limited company, was engaged in the home
satellite business until the fourth quarter of fiscal 1998 at which time it
discontinued its 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.
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 other things, a temporary
inability to process transactions, send invoices or engage in similar normal
business activities.
17
<PAGE>
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 is in the process of inquiring as to
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, historically 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 be the
failure of the communication mode (telephone, cable or satellite), over the
internet, which could significantly impact the Company's ability to generate
sales.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued SFAS133, "Accounting for
derivative instruments and hedging activities". SFAS 133 was initially to be
effective for financial statements for fiscal years beginning after June 15,
1999. On May 19, 1999, FASB voted to delay the effective date of SFAS 133 by one
year. The consequences of that vote are not yet known.
18
<PAGE>
PART II
OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
There are no legal proceedings to report.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
On or about August 18, 1998, the Registrant filed on Form S-8 its
registration statement for 1,000,000,000 shares of common stock dedicated
to the Global Media Corporation 1998 Directors and Officers Stock Option
Plan. As of October 31, 1998, no options had been exercised under the
plan.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBIT.
The following document is filed as an exhibit to this Quarterly Report:
<TABLE>
<CAPTION>
<S> <C>
EXHIBIT
NUMBER DOCUMENT
- ------ --------
27 Financial Data Schedule. (1)
- ------------------------------------------
</TABLE>
(1) Filed with this Form 10-QSB/A for the period ended October 31, 1998.
b. REPORTS ON FORM 8-K.
None during the reporting period.
19
<PAGE>
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/ L. James Porter
--------------------
L. James Porter
Chief Financial Officer
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RESTATED
UNAUDITED CONSOLIDATED FINACIAL STATEMENTS OF GLOBAL MEDIA CORPORATION FOR THE
THREE MONTHS ENDED OCTOBER 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> OCT-31-1999
<CASH> 66,669
<SECURITIES> 0
<RECEIVABLES> 526
<ALLOWANCES> 0
<INVENTORY> 793
<CURRENT-ASSETS> 71,015
<PP&E> 242,868
<DEPRECIATION> 57,342
<TOTAL-ASSETS> 256,541
<CURRENT-LIABILITIES> 507,884
<BONDS> 0
0
0
<COMMON> 11,892
<OTHER-SE> (263,235)
<TOTAL-LIABILITY-AND-EQUITY> 256,541
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 705,100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (705,100)
<INCOME-TAX> 0
<INCOME-CONTINUING> (705,100)
<DISCONTINUED> (7,049)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (712,149)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
</TABLE>
