<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 APRIL 30, 1999
[ ] 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.)
83 VICTORIA CRESCENT, NANAIMO, BC, CANADA V9R 5B9
(Address of Principal Executive Offices; Zip Code)
Registrant's telephone number, including area code: (250) 716-9949
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 JUNE 21, 1999, THERE WERE
20,545,431 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 April 30, 1999. This report is intended to
amend certain information contained in Part I, Items 1 and 2, and Part II, Item
2(a). 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
(in US dollars)
<TABLE>
<CAPTION>
April 30 July 31
1999 1998
$ $
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash 85,299 14,996
Accounts receivable 28,993 206
Inventory -- 1,992
Prepaid expenses 3,891 8,229
Due from affiliated companies [NOTE 4] -- 71,065
Income tax recoverable 2,531 2,439
- -------------------------------------------------------------------------------
120,714 98,927
Capital assets [NOTE 6] 621,942 172,635
- -------------------------------------------------------------------------------
742,656 271,562
- -------------------------------------------------------------------------------
LIABILITIES
CURRENT
Accounts payable and accrued liabilities 158,704 201,234
Employee withholdings 24,747 51,354
Due to affiliated company [NOTE 4] 137,703 46,284
Note Payable [NOTE 9] 548,200 --
Due to shareholders [NOTE 4] 242,536 79,269
- -------------------------------------------------------------------------------
1,111,890 378,141
SHAREHOLDERS' EQUITY (DEFICIENCY)
Share capital [NOTE 7] 12,546 11,892
Additional paid in capital [NOTE 7] 1,550,771 543,525
Deficit (1,941,221) (681,819)
Cumulative translation adjustment 8,670 19,823
- -------------------------------------------------------------------------------
(369,234) (106,579)
- -------------------------------------------------------------------------------
742,656 271,562
- -------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
2
<PAGE>
GLOBAL MEDIA CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
Unaudited
(in US dollars)
<TABLE>
<CAPTION>
For the 3 Months For the 9 Months
Ended April 30 Ended April 30
1999 1998 1999 1998
$ $ $ $
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
REVENUE -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
GENERAL AND ADMINISTRATIVE EXPENSES
Advertising, marketing and investor relations 51,361 505 144,648 3,529
Amortization 54,783 5,645 90,060 16,678
Foreign exchange 2,921 (3,923) 7,280 7,403
Professional fees 61,597 19,112 159,114 86,586
Office and miscellaneous 51,831 17,703 114,740 41,708
Travel 41,583 6,655 75,549 15,590
Wages and benefits 26,604 -- 69,848 --
Stock option compensation expense -- -- 548,800 --
- -----------------------------------------------------------------------------------------------------------------------------
290,680 45,697 1,210,039 171,494
Net interest expense and financing fees 36,814 209 47,283 346
- -----------------------------------------------------------------------------------------------------------------------------
LOSS FROM CONTINUING OPERATIONS (327,494) (45,906) (1,257,322) (171,840)
- -----------------------------------------------------------------------------------------------------------------------------
Income (Loss) recovery from operations of
discontinued call center and satellite
businesses [NOTE 3]
Call center -- 82,631 -- 146,497
Satellite -- (27,401) (2,080) (204,458)
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) RECOVERY FROM DISCONTINUED OPERATIONS -- 55,230 (2,080) (57,961)
- -----------------------------------------------------------------------------------------------------------------------------
NET AND COMPREHENSIVE INCOME (LOSS) FOR PERIOD (327,494) 9,324 (1,259,402) (229,801)
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Loss per common share from continuing operations (0.02) (0.00) (0.06) (0.01)
Loss per common share from discontinued operations (0.00) (0.00) (0.00) (0.00)
- -----------------------------------------------------------------------------------------------------------------------------
LOSS PER COMMON SHARE (0.02) (0.00) (0.06) (0.01)
- -----------------------------------------------------------------------------------------------------------------------------
Shares used in the computation of loss per share 20,544,431 19,890,831 20,253,942 19,619,116
</TABLE>
SEE ACCOMPANYING NOTES
3
<PAGE>
GLOBAL MEDIA CORP.
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY (DEFICIENCY)
Unaudited
(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] -- -- -- 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
Stock options exercised 653,600 654 326,146
Stock options charges 681,100
Movement on cumulative translation (11,153)
Loss for the Period (1,259,402)
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE, APRIL 30, 1999 20,544,431 12,546 1,550,771 -- (1,941,221) 8,670
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
4
<PAGE>
GLOBAL MEDIA CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(in US dollars)
<TABLE>
<CAPTION>
For the 9 Months Ended
-------------------------------
April 30 April 30
1999 1998
$ $
- ----------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Loss for the period (1,259,402) (229,801)
Items not requiring an outlay of funds
Interest expense accrued on bridge loan 48,200 --
Share option compensation expense 548,800 --
Share option professional fees expense 37,300 --
Amortization 90,060 16,678
Services settled through share issuance -- 50,449
Deferred revenue -- (12,062)
- ----------------------------------------------------------------------------------------
(535,042) (174,736)
Changes in non-cash operating working capital
Accounts receivable (28,787) (2,124)
Inventory 1,992 9,275
Prepaid expenses 4,338 (11,000)
Income tax recoverable (92) --
Accounts payable and accrued liabilities (42,530) 34,387
Employee withholdings (26,607) 11,576
Advances from (to) shareholder 163,267 (39,026)
Advances from affiliated companies 162,484 2,329
- ----------------------------------------------------------------------------------------
CASH USED IN OPERATING ACTIVITIES (300,977) (169,319)
- ----------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of capital assets (462,463) (165,414)
- ----------------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES (462,463) (165,414)
- ----------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Bridge loan 500,000 --
Share subscriptions 326,800 221,267
- ----------------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES 826,800 221,267
- ----------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 6,973 4,422
INCREASE (DECREASE) IN CASH DURING THE PERIOD 70,303 (109,044)
Cash, beginning of period 14,996 121,890
- ----------------------------------------------------------------------------------------
CASH, END OF PERIOD 85,299 12,846
- ----------------------------------------------------------------------------------------
Interest - paid 4,190 4,470
- ----------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
5
<PAGE>
NOTES TO RESTATED FINANCIAL STATEMENTS
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 Nanaimo, B.C., Canada. The Company
(through its now-subsidiary Westcoast Wireless Cable Ltd. ("Westcoast
Wireless")) was originally engaged in the marketing of satellite programming and
hardware and later was engaged in the business of providing call center
services, both of which lines of business are now discontinued (SEE note 3). In
the first quarter of fiscal 1999, the Company adopted an internet-focused
business plan. As of April 30, 1999 the Company had not yet commenced revenue
generating activities and was engaged primarily in the development of an
electronic commerce web site, the development of a broadcast network over the
internet, and the development of templates for the application of the e-commerce
back-end system to multiple sites on the internet. Subsequent to quarter-end,
the e-commerce web site, globalmedia.com, was launched on May 18, 1999.
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 quarters and nine months ended April 30, 1999 and April 30, 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 should
therefore be read in conjunction with the audited 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.
The results of operations for the quarters and nine months ended April 30, 1999
and 1998 are not necessarily indicative of the results to be expected or
anticipated for the full fiscal year.
2. SIGNIFICANT ACCOUNTING POLICIES
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.
Communications infrastructure 3 year straight line
Office furniture and equipment 20% declining balance
Purchased software, other than for web site development 20% declining balance
Capitalized development costs and purchased
software for web site development 3 year straight line
Computer equipment 30% declining balance
Leasehold improvements 5 year straight line
6
<PAGE>
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 and nine
months ended April 30, 1999, the same number of shares were used to compute both
basic and fully diluted earnings per share.
3. DISCONTINUED OPERATIONS
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 nine
months ending April 30, 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;
(ii) Advances from an affiliated company in the amount of $
162,484; and,
(iii) Shareholder loans of $ 242,536.
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.
7
<PAGE>
6. CAPITAL ASSETS
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST AMORTIZATION VALUE
$ $ $
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
APRIL 30, 1999
Office furniture and equipment 22,431 2,696 19,735
Computer equipment 134,028 30,728 103,300
Leasehold improvements 3,832 762 3,070
Communications infrastructure 91,146 33,887 57,259
Web site development costs 402,393 38,420 363,973
Web site purchased software 24,550 3,068 21,482
Other purchased software 65,250 12,127 53,123
- ---------------------------------------------------------------------------------------------------
743,630 121,688 621,942
- ---------------------------------------------------------------------------------------------------
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
Web site development costs -- -- --
Web site purchased software -- -- --
Other purchased software 27,209 3,520 23,689
- ---------------------------------------------------------------------------------------------------
216,344 43,709 172,635
- ---------------------------------------------------------------------------------------------------
</TABLE>
7. SHARE CAPITAL
<TABLE>
<CAPTION>
QUARTER ENDED APRIL 30 YEAR ENDED JULY 31
---------------------- ------------------
1999 1998
# #
- --------------------------------------------------------------------------------------
<S> <C> <C>
AUTHORIZED
Common shares, par value $0.001 each 200,000,000 200,000,000
ISSUED
Common shares 20,544,431 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 1997 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.
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
8
<PAGE>
$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. NOTE PAYABLE AND DUE TO SHAREHOLDERS
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 was 24% per annum, with an origination fee of 1% payable on receipt of
the funds.
The shareholder loans as of April 30, 1999 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
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 Rose Glen 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
9
<PAGE>
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 the 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.
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.
10
<PAGE>
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 and nine months ended April 30, 1999. 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 Nine months ended
April 30, 1999 April 30, 1999
$ $
------------------------ ---------------------
<S> <C> <C>
Net sales before restatement - -
Net sales after restatement - -
General and administrative expenses before restatement 265,980 623,939
General and administrative expenses after restatement 290,680 1,210,039
Net loss before restatement (302,794) (673,302)
Net loss after restatement (327,494) (1,259,402)
Net loss per common share before restatement (0.01) (0.03)
Net loss per common share after restatement (0.02) (0.06)
At April 30, 1999
$
------------------------
<S> <C>
Capital assets before restatement 526,942
Capital assets after restatement 621,942
Total stockholders' deficit before restatement (464,234)
Total stockholders' deficit after restatement (369,234)
</TABLE>
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains or may contain 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 herein 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").
OVERVIEW
As of April 30, 1999 the Company was engaged primarily in the development of an
electronic commerce web site, the development of a broadcast network over the
internet, and the development of templates for the application of the e-commerce
back-end system to multiple sites on the internet. During the third quarter of
fiscal 1999, the Company made significant progress towards execution of its
business plan.
E-COMMERCE WEB SITE AND LICENSING MARKETING PROGRAM
During the quarter ended April 30, 1999, the Company continued development of
its main e-commerce web site, "globalmedia.com", and therefore did not generate
revenues. The Company launched the site subsequent to quarter-end on May 18,
1999 and began generating revenues. The Company adopted an initial pricing
policy intended to result in a small initial volume of transactions on the
globalmedia.com web site while the site development is fully completed. The
Company intends to generally lower prices during the latter part of the
Company's fourth quarter of fiscal 1999 and/or the first quarter of fiscal 2000,
which is anticipated to have the effect of increasing sales.
The Company's licensing marketing program continued to receive a positive
interest from the radio community and other target markets. The Company intends
to begin adding the e-commerce model to select licensees in the latter part of
fourth quarter fiscal 1999, which is also expected to increase the Company's
sales.
Until the pricing changes are implemented and the e-commerce model is launched
for licensees, the Company does not anticipate earning significant revenues from
sales through globalmedia.com. Management believes that at that time the Company
will be well positioned to take a leading position in providing complete turnkey
solutions for the retailing of entertainment product online.
12
<PAGE>
MUSIC WEB SITES
The Company also launched its "indieaudio.com" and "indielife.com" web sites
during the quarter. These sites are positioned to be an online center for the
independent music community. The interactive and compelling editorial and audio
content has been designed to attract a wide cross-section of musicians and music
fans. Management anticipates that the primary value of the sites will be in
driving traffic to the globalmedia.com web site. The sites will also generate
direct revenue through the sale of digital audio files as well as through
advertising revenue.
CORPORATE WEB SITE
During the quarter the Company continued to update its corporate web site,
"gmcorp.net", in order to showcase its business plan, management team and
provide information about its licensing and affiliate programs.
STRATEGIC ALLIANCES
During the quarter, the Company continued to improve its key strategic alliances
by entering into several agreements with RealNetworks, Inc. for the purpose of
providing audio and video broadcast capability to licensees. These agreements
encompass the building of the Global Media Broadcast Network and the development
of a highly customized RealPlayer. In the opinion of the Company's management,
the relationship with RealNetworks that the Company established during the
quarter represents a significant milestone reached towards successful
implementation of the Company's business plan.
As reported previously, other strategic partners that the Company has developed
relationships with include Muze, Baker and Taylor and Liquid Audio. Muze is the
leading independent source of digital information about music, books and movies
and is the database source for the globalmedia.com web site. Baker & Taylor
manages all packaging, shipping and returns of CDs, videos, DVDs and books sold
through the globalmedia.com 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. Baker & Taylor 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 web sites. These
include network television operators, cable and satellite operators as well as
radio networks. The Company is also seeking partnerships with large internet
portals, search engines and chat sites. The Company views entertainment
development and distribution as an essential element to draw visitors to its
globalmedia.com web site and worked during the quarter to develop relationships
with content developers and distribution technology partners.
RESULTS OF CONTINUING OPERATIONS
During the quarter and nine months ended April 30, 1998, 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
13
<PAGE>
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 quarters and nine months ended April 30, 1999
and 1998 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 third quarter and nine months ended April 30, 1999 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.
NINE MONTHS ENDED APRIL 30, 1999 COMPARED TO NINE MONTHS ENDED APRIL 30, 1998
NET REVENUES. During the nine months ended April 30, 1999 the Company
had not yet commenced earning revenues from its internet business (comparable
period fiscal 1998: Nil).
OPERATING EXPENSES. General and Administrative expenses for the nine
months ended April 30, 1999 were $1,210,039, as compared to $171,494 for the
nine months ended April 30, 1998. The increase reflects costs associated with
ongoing development of the Company's web sites, more advertising for the
preparation of the launch of the sites, greater amortization due to more capital
assets, increased office expenses, increased corporate travel and the hiring of
additional staff. 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. Wages and benefits of $69,848 (comparable period
fiscal 1998: Nil) reflect the hiring of staff for the Company's licensing and
affiliate programs, corporate web site development and e-commerce web site
development. Advertising, marketing and investor relation expenses increased to
$144,648 (comparable period fiscal 1998: $3,529) due to the news releases,
internet and other promotions used to inform shareholders and the general
public, and expenses related to promotion of the web site licensing programs.
Amortization increased to $90,060 (comparable period fiscal 1998: $16,678), due
to the increase in capital assets over the last year. Professional fees
increased to $159,114 (comparable period fiscal 1998: $86,586) in concert with
the Company's general increase in business activities. Professional fees for the
nine months ended April 30, 1999 included $37,300 representing the imputed value
of options granted during the period as compensation for professional services.
See Note 7 to Financial Statements. Office and miscellaneous expenses of
$114,740 (comparable period fiscal 1998: $41,708) increased primarily due to:
rent expense at the larger Nanaimo offices $48,993 (comparable period fiscal
1998: $33,507), telephone $23,955 (comparable period fiscal 1998: $3,690), and
general office expense $18,124 (comparable period fiscal 1998: $3,532). Travel
expense of $75,549 (comparable period fiscal 1998: $15,590) consisted primarily
of travel relating to development of strategic alliances, working with web site
designers and developers and attending industry related conferences.
14
<PAGE>
INTEREST EXPENSE. Net interest expense and financing fees increased to
$47,283 (comparable period fiscal 1998: $346), due primarily to interest
payments on the Rolling Oaks Enterprises, LLC bridge financing which was repaid
subsequent to quarter end.
NET LOSS. The Company experienced a $1,257,322 loss from continuing
operations for the nine months ended April 30, 1999, as compared to a $171,840
loss from continuing operations for the nine months ended April 30, 1998. This
increase in loss from continuing operations reflects increases in the Company's
development activities including increases in the number of employees, an
increase in amortization as the result of additional computer equipment
purchases, an increase in office, travel and other costs, and the expensing of
imputed stock option benefits.
QUARTER ENDED APRIL 30, 1999 COMPARED TO QUARTER ENDED APRIL 30, 1998
NET REVENUES. During the quarter ended April 30, 1999 the Company had
not yet commenced earning revenues from its internet business (third quarter
fiscal 1998: Nil).
OPERATING EXPENSES. General and administrative expenses increased in
the third quarter to $290,680 as compared to $45,697 in third quarter fiscal
1998. The low comparative prior year figure reflects the fact that development
of the Company's web sites had not yet commenced. The following factors
contributed to larger expenses in the current quarter: greater emphasis on
promotion of the Company to attract quality licensee leads for the e-commerce
site increased advertising to $51,361 (third quarter fiscal 1998: $505);
depreciation of a larger capital base increased amortization costs to $54,783
(third quarter fiscal 1998: $5,645); increases in corporate travel increased
travel costs to $41,583 (third quarter fiscal 1998: $6,655); increased use of
consultants and legal counsel increased professional fees to $61,597, including
$24,700 representing the imputed value of options granted in the third quarter
of fiscal 1999 as compensation for professional services (third quarter fiscal
1998: $19,112), and hiring staff increased wages to $26,604 (third quarter
fiscal 1998: Nil).
INTEREST EXPENSE. Net interest expense and financing fees increased to
$36,814 (comparable period fiscal 1998: $209), due primarily to interest
payments on the Rolling Oaks Enterprises, LLC bridge financing which was repaid
subsequent to quarter-end.
NET LOSS. The Company experienced a $327,494 loss from continuing
operations for the quarter ended April 30, 1999, as compared to a $45,906 loss
from continuing operations for the quarter ended April 30, 1998. This increase
in loss reflects the increased development activity of the Company, including
increased number of personnel, increased amortization from increased computer
equipment purchases, and an increase in office, travel and other costs.
LIQUIDITY AND CAPITAL RESOURCES
In the nine months ended April 30, 1999 the Company financed its operations and
capital expenditures primarily from equity financing and loans from shareholders
and affiliates. As of April 30, 1999 the Company had cash of $85,229, a working
capital ratio of 0.11 and negative shareholders' equity of $369,234. Subsequent
to quarter-end, the Company considerably strengthened its financial position by
entering into a $8.5 million financing arrangement with an unrelated
institutional investor. Under this arrangement, the Company issued, for cash,
$8.5 million of convertible debentures which would be convertible in certain
circumstances into convertible preferred shares. In such case, the convertible
preferred shares would be convertible
15
<PAGE>
into common shares of the Company. Management of the Company currently
anticipates that the debentures will be converted into convertible preferred
shares of the Company prior to the Company's July 31, 1999 year-end.
In the nine months ended April 30, 1999 the Company's cash position increased by
$70,303, from $14,996 to $85,299 (comparable period fiscal 1998: decreased
$109,044). This improvement resulted primarily from the Company obtaining a
bridge loan of $500,000, (comparable period fiscal 1998: Nil) and sales of
common shares pursuant to stock option exercises totaling $326,800, (comparable
period fiscal 1998: $221,267 from the sale of common shares). The increase in
cash was offset by cash used in operating activities of $300,977 (comparable
period fiscal 1998: $169,319), and cash spent on investment in capital assets of
$462,463 (comparable period fiscal 1998: $165,414).
CASH USED BY OPERATIONS
Over the nine months ended April 30, 1999 as compared to the prior year period,
cash used by operating activities increased by $131,658, reflecting the
increased level of activity in the Company. The Company experienced an operating
loss of $1,259,402 (comparable period fiscal 1998: $229,801) offset by accrued
but unpaid interest of $48,200 on bridge financing (comparable period fiscal
1998: Nil), imputed stock option compensation benefits of $586,100 (comparable
period fiscal 1998: Nil), amortization of $90,060 (comparable period fiscal
1998: $16,678), leaving cash used by operations, before consideration of changes
in non-cash working capital items, of $535,042 (comparable period fiscal 1998:
$174,736).
CHANGES IN NON-CASH OPERATING WORKING CAPITAL ITEMS
In the nine months ended April 30, 1999 cash provided by changes in working
capital resulted from a sale of inventory for $1,992 (comparable period fiscal
1998: $9,275), a decrease in prepaid expenses of $4,338 (comparable period
fiscal 1998: increase of $11,000), an increase in advances from shareholder of
$163,267 (comparable period fiscal 1998: decrease of $39,026) and an increase in
advances from affiliated companies of $162,484 (comparable period fiscal 1998:
$2,329). Cash used by changes in working capital resulted from an increase in
accounts receivable of $28,787, a decrease in accounts payable and accrued
liabilities of $42,530 and a decrease in employee withholdings payable of
$26,607.
INVESTING ACTIVITIES
In the nine months ended April 30, 1999 there was a decrease in cash of $462,463
(comparable period fiscal 1998: $165,414) caused by fixed asset purchases of
computer equipment and software to be used in the e-commerce web sites, and the
expenditure of development costs on these sites.
FINANCING ACTIVITIES
Financing activities provided $826,800 of cash during the nine months ended
April 30, 1999. The Company secured bridge financing in the amount of $500,000
(comparable period fiscal 1998: Nil), and realized $326,800 from the sale of
shares through the exercise of stock options (comparable period fiscal 1998:
$221,267 through the sale of common shares) under the Company's 1998 Directors
and Officers Stock Option Plan (the "1998 Plan").
16
<PAGE>
Effective March 24, 1999 the Company adopted the 1999 Directors and Officers
Stock Option Plan (the "1999 Plan"). The 1999 Plan (a) is administered by the
Board of Directors who have sole discretion and authority to determine the
individuals eligible for awards under the 1999 Plan and the conditions of
exercise of each grant, and (b) provides for issuance of options to purchase a
total of 4,000,000 shares of the Company's common stock within a period of ten
years from the effective date of the option. The Company has granted 2,933,000
options at exercise prices of $4.00 per share under the 1999 Plan, all of which
occurred in the quarter ended April 30, 1999. As of April 30, 1999, 653,600
options had been exercised under the Company's 1998 Stock Option Plan and no
options had been exercised under the 1999 Plan. No options have been issued or
exercised under the Company's 1997 Directors and Officers Stock Option Plan.
CAPITAL EXPENDITURES AND COMMITMENTS
The Company made capital expenditures of $409,368 during the third quarter of
fiscal 1999, principally consisting of $296,620 of capitalized development costs
for the globalmedia.com web site and the Company's other initiatives, $59,633 of
computer hardware purchases and $44,328 of software purchases. As of April 30,
1999 the Company had no material commitments outstanding for purchases of
additional capital assets, except for the Company's April 20, 1999 engagement of
RealNetworks Inc. to perform consulting services in connection with the design
and development of the Global Media Broadcast Network. Under the terms of the
agreement, as amended on June 4, 1999, 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.
FUTURE CAPITAL REQUIREMENTS
The Company believes that the net proceeds from its convertible debenture
offering and revenue from its newly opened web site, plus the availability of
additional shareholder and other secured loans, will be sufficient to meet its
operating cash requirements and budgeting capital expenditures for the remainder
of fiscal 1999. The Company expects to meet its long-term cash and operational
requirements through equity financings and revenues from its web site and its
licensees' web sites.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the Company's wholly-owned Canadian subsidiary,
Westcoast Wireless Cable Ltd., 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.
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
17
<PAGE>
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.
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
None.
ITEM 2. CHANGES IN SECURITIES
None.
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. EXHIBITS.
The following documents are filed as exhibits to this Quarterly Report:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT
- ------- --------
<S> <C>
4.1 1999 Directors and Officers Stock Option Plan(1)
10.1 Secured Promissory Note, dated November, 1998, from the Company to
Rolling Oaks Enterprises, LLC.(2)
10.2 Security Agreement, dated November 30, 1998, from the Company to
Rolling Oaks Enterprises, LLC.(2)
10.3 Streaming Media Services Agreement, dated April 19, 1999, between the
Company and RealNetworks, Inc.(3)(2)
10.4 Letter agreement for consulting services from RealNetworks, Inc. to the
Company, dated and accepted on April 20, 1999.(3)(4)
10.5 Letter from RealNetworks, Inc. to the Company, dated and accepted on
June 4, 1999, amending the April 20, 1999 letter agreement.(3)(4)
27 Financial Data Schedule.(4)
</TABLE>
- ------------------------------------------
(1) Incorporated by reference to the Company's Form S-8 Registration Statement
filed with the SEC via Edgar on March 24, 1999.
(2) Incorporated by reference to the Company's quarterly report on Form 10-QSB
for the period ended April 30, 1999 filed with the SEC via Edgar on June 14,
1999.
(3) Subject to a request for confidential treatment filed with the SEC
contemporaneously with the Company's Form 10-QSB for the period ended April
30, 1999.
(4) Filed with this Form 10-QSB/A for the period ended April 30, 1999.
b. REPORTS ON FORM 8-K.
None during the reporting period.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has
caused this amended report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: June 29, 1999 /s/ L. James Porter
-------------------------------------------------
L. James Porter
Chief Financial Officer
(Principal Financial and Accounting Officer,
and authorized signatory for the registrant)
20
<PAGE>
EXHIBIT INDEX
The following documents are filed as exhibits to this Quarterly Report:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT
- ------- --------
<S> <C>
4.1 1999 Directors and Officers Stock Option Plan(1)
10.1 Secured Promissory Note, dated November, 1998, from the Company to
Rolling Oaks Enterprises, LLC.(2)
10.2 Security Agreement, dated November 30, 1998, from the Company to
Rolling Oaks Enterprises, LLC.(2)
10.3 Streaming Media Services Agreement, dated April 19, 1999, between the
Company and RealNetworks, Inc.(3)(2)
10.4 Letter agreement for consulting services from RealNetworks, Inc. to the
Company, dated and accepted on April 20, 1999.(3)(4)
10.5 Letter from RealNetworks, Inc. to the Company, dated and accepted on
June 4, 1999, amending the April 20, 1999 letter agreement.(3)(4)
27 Financial Data Schedule.(4)
</TABLE>
- ------------------------------------------
(1) Incorporated by reference to the Company's Form S-8 Registration Statement
filed with the SEC via Edgar on March 24, 1999.
(2) Incorporated by reference to the Company's quarterly report on Form 10-QSB
for the period ended April 30, 1999 filed with the SEC via Edgar on June 14,
1999.
(3) Subject to a request for confidential treatment filed with the SEC
contemporaneously with the Company's Form 10-QSB for the period ended April
30, 1999.
(4) Filed with this Form 10-QSB/A for the period ended April 30, 1999.
21
<PAGE>
Exhibit 10.4
[REALNETWORKS LETTERHEAD]
April 20, 1999
Global Media Corporation
83 Victoria Crescent
Nanaimo, British Columbia
Canada V9R 5B9
Dear Michael Metcalfe:
This letter shall serve as a formal Agreement between RealNetworks, Inc.
("RN") and Global Media Corporation ("Customer"). Customer desires that RN
perform consulting services in connection with the Global Media Broadcast
Network project ("Broadcast Network") as set forth below.
1. SERVICES. RN shall provide the Services set forth on Attachment A
hereto and shall deliver to Customer all work product and results of such
Services (the "Deliverables") according to the Delivery Schedule set forth on
Attachment A. Customer acknowledges that its timely provision of and
unimpeded access to office accommodations, facilities, equipment, assistance,
cooperation, complete and accurate information and data from its officers,
agents, and employees, and suitably configured computer products are
essential to performance of any Services within the timeframe set forth in
this Agreement and that RN shall not be liable for any deficiency in
performing Services if such deficiency results from Customer's failure to
provide such full cooperation. With respect to the performance of Services,
Customer will not direct or supervise RN's employees or staff at Customer's
premises with respect to said individuals' tasks or responsibilities without
RN's express written consent.
2. ACCEPTANCE. In the event Customer fails to notify RN of any
difficulties or problems with the Deliverables within 30 days after
installation thereof, Customer shall be deemed to have accepted the
Deliverables. Prior to acceptance of such Deliverables, RN shall have the
right to repair or replace the Deliverables at its discretion. Upon
acceptance of such Deliverables, RN shall be under no obligation to repair or
replace such Deliverables.
3. FEES AND PAYMENT.
a. PROGRESS PAYMENTS. Customer will pay RN according to the Payment
Schedule set forth on Attachment A. By executing this Agreement, Customer
confirms the budget for the work, and the charges and purchases set forth in
Appendix A hereto. If Customer wishes to enlarge the scope of the Services
or implement additional features or subtasks, the parties shall agree upon
the costs therefor in advance in writing.
b. EXPENSES. Customer will reimburse RN for incidental expenses and
disbursements incurred by RN related to supplies, media (disks and CD-ROM
costs), travel and related lodging and meals, shipping, telephone charges,
and any other incidental expenses incurred in the performance of the
Services. RN shall bear sole responsibility for expenses incurred to acquire
the necessary tools to perform the Services. If RN needs to procure any
third party computer software, hardware, other office supplies or any other
subcontracted services or products to implement, perform, or install items
set forth in Attachment A, the cost of which will exceed $1000, RN will
notify Customer in advance, and obtain approval for the amount of the
purchase plus any applicable sales tax.
c. BILLING. RN will invoice Customer for expenses and any third
party purchases on a monthly basis. The invoice will include a report
itemizing the expenses and third party purchases. Customer shall pay all
invoices within 30 days of receipt, and shall not make any deductions thereto.
1
<PAGE>
d. TAXES. The charges do not include taxes or duties. If RN is
required to pay or collect any local, value added, goods and services, or any
other similar taxes or duties based on Services provided under this
Agreement, then such taxes and/or duties shall be billed to and paid by
Customer. This shall not apply to taxes based on RN's income.
4. CHANGE REQUESTS AND COOPERATION. Customer's request for any change in
Services must be in writing; this requirement pertains to all such requests
including but not limited to requests for changes in project plans, scope,
specifications, schedule, designs, or requirements. RN shall not be
obligated to perform tasks described in Customer's request until the parties
agree in writing to the proposed change.
5. NON-SOLICITATION. Customer will not enter into any separate
agreements, written or oral, with current or former employees or staff of RN
without RN's express written consent during the term of this Agreement and
for two (2) years from RN's completion of work performed for Customer by RN
under this or other agreements.
6. TERM; TERMINATION.
a. TERM. This Agreement shall commence as of the Effective Date and
shall remain in effect until the earlier of RN's completion of the Services,
or until terminated in accordance with this Section 4.
b. TERMINATION BY RN. Failure of Customer to make payments to RN in
accordance with this Agreement shall be considered substantial nonperformance
and cause for termination. If Customer fails to make payments when due, RN
may, upon seven days' written notice to Customer suspend performance under
this agreement. Unless payment in full is received by RN within seven days
of the date of the notice, the suspension shall take effect without further
notice. In the event of a suspension of services, RN shall have no liability
to Customer for delay or damage caused Customer because of such suspension of
services.
c. TERMINATION BY CUSTOMER. Customer shall have the right at any
time to terminate this Agreement on twenty-one (21) days' written notice. In
the event of such termination, and provided termination is not as a result of
RN's unremedied breach of this Agreement, Customer shall pay RN then accrued
payments due under the Delivery Schedule, plus the pro-rated portion of the
next payment, if any, due with respect to items being worked on up to the
time of termination, plus reimbursable expenses, plus twenty percent (20%) of
the total charges due through the date of the termination. Should Customer
wish to delete specific subtasks, Customer will notify RN immediately in
writing. As long as said deletions represent less than twenty percent of the
labor cost for the project, Customer shall not be liable for the twenty
percent termination charge.
d. TERMINATION FOR BREACH. Either party may terminate this
Agreement upon seven (7) days' written notice to the other party in the event
the other party materially breaches this Agreement and fails to cure such
breach within fifteen (15) days' written notice from the non-breaching party.
7. SOFTWARE LICENSE.
a. All right, title and interest in and to the Deliverables is owned
by, and shall remain with, RN; provided, however, that Customer shall have
the perpetual, non-exclusive, royalty-free right to use such Deliverables for
internal use in connection with the Broadcast Network project. No license or
other rights in the Deliverables is granted hereby.
b. The Services provided under this Agreement may be in support of
Customer's license to use computer software programs, owned or distributed by
RN, under a separate software license agreement. The software license
agreement shall govern all use by Customer of such programs. Neither this
Agreement nor any Ordering Document includes the grant of any license or any
other rights for such programs.
c. Any Services acquired from RN shall be bid separately from such
program licenses, and Customer may acquire either Services or such program
licenses without acquiring the other.
2
<PAGE>
8. WARRANTY. RN represents, warrants and covenants that: (i) any
Deliverables, information or materials developed for, or any advice provided
to RN, shall not rely or in any way be based upon confidential or proprietary
information or trade secrets obtained or derived by RN from sources other
than RN unless RN has received specific authorization in writing to use such
proprietary information or trade secrets; (ii) RN will not enter into any
contracts or otherwise obligate Customer in any way without Customer's
express approval; and (iii) RN will perform the Services consistent with
generally accepted industry practices. Customer must report any deficiencies
in the Services to RN in writing within thirty (30) days of completion of the
Services in order to receive warranty remedies. THE WARRANTY HEREIN IS
EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED,
INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. FOR ANY BREACH OF THE ABOVE WARRANTY, CUSTOMER'S
EXCLUSIVE REMEDY, AND RN'S ENTIRE LIABILITY, SHALL BE THE RE-PERFORMANCE OF
THE SERVICES. IF RN FAILS OR IS UNABLE TO RE-PERFORM THE SERVICES AS
WARRANTED, CUSTOMER SHALL BE ENTITLED TO RECOVER THE FEES PAID TO RN FOR THE
DEFICIENT SERVICES.
9. RESPONSIBILITY FOR CUSTOMER CONTENT AND SITES; INDEMNIFICATION. Except
for the Services to be provided by RN hereunder, as between Customer and RN,
Customer shall be completely and solely responsible for all matters relating
to any content or material ("Content") owned or used by Customer in
connection with any equipment provided by RN, and in connection with
Customer's Internet web site, intranet, or extranet system (collectively,
"Sites"). Customer shall remain solely responsible and liable for the
Content and the Sites, and RN assumes no responsibility for editing,
reviewing, controlling or any other activities associated with the use or
publication of any of the Content, the operation and maintenance of
Customer's Sites, and shall have no liability to any third party in
connection with such activities, whether or not RN undertakes such
responsibilities. Customer hereby agrees to indemnify, hold harmless and
defend RN and its employees, contractors and agents from all claims, damages,
costs and expenses, including reasonable attorneys' fees and litigation
expenses, arising out of or in connection with any Content or the Site.
10. CONFIDENTIAL INFORMATION. From the date of execution hereof for a
period of five (5) years from termination of this Agreement, neither party
shall use, disclose, or permit any person to obtain any confidential
information of the other party, including any materials developed or
generated hereunder (whether or not such confidential information is in
written or tangible form), except as specifically authorized by such party.
As used herein, confidential information shall mean a whole or any portion or
phase of any marketing plans, business plans, sales information, customer
lists, scientific or technical information, design, process, procedure,
formula, or improvement relating to the development, design, construction,
and operation of a program that is valuable and not generally known to a
party's competitors and any other information of a party of which the other
party becomes aware of as a result of this Agreement and which is indicated
to be confidential or, if not so indicated, which could reasonably be
interpreted to be confidential. The parties agree that, in the event of a
breach or threatened breach of the terms of this confidentiality provision,
the non-breaching party shall be entitled to an injunction prohibiting any
such breach. Any such relief shall be in addition to and not in lieu of any
appropriate relief in the way of money damages. The parties acknowledge that
Confidential Information is valuable and unique and that disclosure in breach
of this confidentiality provision will result in irreparable injury to its
owner.
11. NO ASSIGNMENT. Neither party shall assign, transfer or otherwise
dispose of this Agreement or any rights or duties hereunder without the prior
written consent of the other.
12. LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR
ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, OR DAMAGES FOR
LOSS OF PROFITS, REVENUE, DATA, OR USE, INCURRED BY EITHER PARTY OR ANY THIRD
PARTY, WHETHER IN AN ACTION IN CONTRACT OR TORT, EVEN IF THE OTHER PARTY OR
ANY OTHER PERSON HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. RN'S
LIABILITY FOR DAMAGES HEREUNDER SHALL IN NO EVENT EXCEED THE AMOUNT OF FEES
PAID BY CUSTOMER UNDER THE APPLICABLE ORDERING DOCUMENT.
3
<PAGE>
13. MISCELLANEOUS. This Agreement and Attachment A attached hereto and
incorporated herein constitute the entire agreement between the parties, and
supersedes any and all agreements, whether written or oral, and may only be
amended or modified by a written instrument signed by both parties. Any
controversy, dispute or question arising out of, in connection with or in
relation to this Agreement or its interpretation, performance or
nonperformance, or any breach thereof, shall be determined by arbitration in
the County of King, State of Washington, in accordance with the rules then
obtaining of the American Arbitration Association. The cost and expenses of
such arbitration shall be paid by the party against whom the arbitrator
renders a decision. The decision of the arbitrator shall be final and
binding upon the parties hereto and may be entered as a final decree or
judgment in any court of competent jurisdiction. It is expressly agreed that
the terms and conditions of this Agreement and any Ordering Document
supersede the terms of Customer's purchase order.
If the terms of this Letter Agreement are acceptable to you, please sign and
date where indicated below and return to RN.
Sincerely,
RealNetworks, Inc.
By: /s/ MARTIN SCHWARZ
--------------------------
Martin Schwarz
General Manager, Consulting Group
Accepted and Agreed to
this _____ day of April, 1999.
Customer: Global Media Corporation
By: /s/ MICHAEL METCALFE
---------------------------
Print Name: MICHAEL METCALFE
-------------------
Title: PRESIDENT
------------------------
EFFECTIVE DATE: 20 APRIL 1999
---------------
4
<PAGE>
[REAL NETWORKS LOGO]
ATTACHMENT A
PROPOSAL FOR GLOBAL MEDIA
BROADCAST NETWORK SERVICES
Prepared for Global Media Corporation
April 20, 1999
This document contains proprietary information belonging to RealNetworks,
Inc. No use or disclosure of the information contained herein is permitted
without the prior written consent of RealNetworks, Inc.
<PAGE>
PROPOSAL FOR GLOBAL MEDIA BROADCAST NETWORK SERVICES [REAL NETWORKS LOGO]
- -------------------------------------------------------------------------------
1.0 BACKGROUND
Per several discussions held between RealNetworks and Global Media
Corporation (Global Media), Real Networks is proposing a build out of a new
service for Global Media for the private branded delivery of audio and video
content from radio stations (and TV stations) to Internet consumers. The new
service is referred to as the Global Media Broadcast Network (GMBN) in this
scope of work and proposal.
The overall objective of Global Media is to quickly bring to market a service
for radio stations and TV stations to deliver audio/video content on the
Internet with a unique revenue share model for the radio station owners,
advertisers and Global Media. Global Media anticipates launching a service
that will attract tens of thousands of content providers (stations and group
owners) to use the Global Media player faceplate, encoder services and
delivery network for delivery of content on the web.
The consumer, using a personal computer on the Internet, will be offered
several unique services within the player including listening to any of the
live radio stations, simulated live (on-demand) playlists of music, and video
(TV or similar programming). Along with listening/viewing this traditional
content the consumer/user can "interact" with the player and the "experience"
by viewing album covers, voting for songs, see scrolling text messages,
participate in live DJ chat, purchase consumer goods and content on-line,
view advertising, and build personal preferences for their own environment.
The current strategy of Global Media is to announce the GMBN service within
the next 30 days and begin leveraging RealNetworks assets (such as RBN and
RealNetworks Consulting) to build out the GMBN in 1999. RealNetworks
Consulting (RN Consulting) will provide services and application development
to turnkey the design, architecture, programming/coding, testing,
installation, deployment, launch and training/turn-over of the GMBN for a
successful launch of this first-to-market offering on the Internet.
2.0 GLOBAL MEDIA BROADCAST NETWORK OVERVIEW
Global Media requires a number of key systems to be designed and developed to
build the Global Media Broadcast Network. The following diagram provides a
general overview of the critical components to be developed and integrated
into the GMBN:
[THE GLOBAL MEDIA BROADCAST NETWORK GRAPHIC]
Page 2 of 10
<PAGE>
PROPOSAL FOR GLOBAL MEDIA BROADCAST NETWORK SERVICES [REAL NETWORKS LOGO]
- -------------------------------------------------------------------------------
Global Media requires RN Consulting to design, architect, prototype,
application program, test, install, deploy and project manage the integration
of each of these functional components of the Global Media Broadcast Network.
Global Media will be responsible for the content (radio and TV stations),
commerce (e-catalog, e-commerce, back-end systems), advertising (ad
inventory, ad database, etc.) and operation of the entire system. Likewise,
Global Media representatives will be required to be assigned to the project
to approve storyboards, make design and architectural designs, provide
interfaces to back-end systems, assign resources to be trained, managed and
to operate the GMBN system, procure hardware/software, assign resources for
the physical deployment of the system, and related services.
RealNetworks Consulting will be responsible for turnkey development and
installation of the following components:
- Global Media Player
- Radio Station Encoder Station
- HeadEnd Manager (and interface to Real Broadcast Network service)
- Ad Server Integration
- Commerce Server Integration
- Global Media Guide
- On-Demand Content Manager
- Live DJ Application
- Jukebox Application
- Project Management
Each of these components will be developed with scalability in mind (i.e.,
support for tens of thousands of stations) operation using RBN (for network
and delivery transport system), management by Global Media resources (tools
to automate and allow Global Media personnel to manage the system after
deployment), and allow for future expansion (architecture that allows adding
features or enhancements to the Broadcast Network operations and "user
experience" on future projects with RealNetworks).
3. SCOPE OF WORK
3.1 PROJECT PHASES
An overview of the tasks and functions (scope of work) to be performed by
RealNetworks Consulting is presented in this section. The project is to be
accomplished with four (4) critical phases:
<TABLE>
<CAPTION>
- -------- --------------------------------------------------- ----------------------------------
PHASE DESCRIPTION SCHEDULE (CURRENT ESTIMATE)
- -------- --------------------------------------------------- ----------------------------------
<S> <C> <C>
Phase 1 Basic RBN Hosting and Basic Player for Global Media Project Start Date (April '99)
Phase 2 First Major Code Release: Initial Player, HeadEnd, Start Date + 3 months (July '99)
Encoder, Ad and Commerce Services
Phase 3 Second Major Code Release: Enhanced Player, Start Date + 5 months (Sept '99)
HeadEnd, Encoder, Ad and Commerce Services; Initial
DJ, On-Demand Manager, JukeBox and Guide
Phase 4 Final Code Release: All Components Production-ready Start Date + 8 months (Dec '99)
- -------- --------------------------------------------------- ----------------------------------
</TABLE>
Page 3 of 10
<PAGE>
PROPOSAL FOR GLOBAL MEDIA BROADCAST NETWORK SERVICES [REAL NETWORKS LOGO]
- -------------------------------------------------------------------------------
3.2 PROJECT DEPLOYMENT METHODOLOGY
The following provides a summary of the methodology used for the project to
deliver the turnkey Global Media Broadcast Network system in a timely fashion.
- - Needs Analysis and System Component Design
- General business analysis (audience, business model, future plans)
- Functional systems requirements analysis (GMBN components and back-end
systems)
- System and network infrastructure analysis (confirm RBN specifications
for GMBN)
- Infrastructure design (LAN, WAN, splitters, load balancing, etc., for
GMBN)
- Server system designs (encoder servers, multicast & on-demand media
servers, data base servers, archive servers, web servers and other
servers)
- Component application storyboards and functional system design
specifications for each component (player, encoder, headend, ad
server, commerce server, guide, on-demand manager, live DJ, jukebox)
- Specifications for the live and on-demand broadcast system
administration and operations; content management, reporting and usage
system; back-office systems integration and any third party product
integration
- ISP and broadband vendor system integration design (as necessary with
RBN)
- Develop master project schedule and master test plan (schedule and
draft)
- Provide procurement assistance
- Consultation on Global Media systems integration (commerce,
accounting/pay per view, ad management, web, data base, user
profiling, station acquisition, etc.)
- Initial deployment of Real Broadcast Network (RBN) hosting services
and basic player functions (Phase 1)
DELIVERABLES: SYSTEM DESIGN DOCUMENT, DETAILED PROJECT SCHEDULE/PLAN, AND
PHASE 1 DEPLOYMENT
- - Software Component Development
- Rapid application prototyping (and some joint application prototyping
with Global Media on ad serving and commerce systems) including:
- Application programming
- Scripting, batch processes
- API/SDK integration
- development, customization and integration of all components
into the GMBN
- Systems integration and application development for integration to
Global Media supplied systems (ad service commerce server, master web
service, and other non-RealNetworks/Real Broadcast Network
components)
- Global Media Broadcast Network administration and operations
customization including monitoring, content acquisition, content
distribution, system management, scheduling, usage, reporting, etc.
- Back-end systems integration and customization
- - DELIVERABLES: COMPONENT CODE DROPS
- - System Deployment
- Centralized servers, encoders, and systems staging, configuration,
installation, testing, validation, system documentation, and shipping
- Integration and installation tasks at Real Broadcast Network
- Configuration, installation, testing, validation,
modification/customization, documentation of Global Media Broadcast
Network Operations Center (NOC)
Page 4 of 10
<PAGE>
PROPOSAL FOR GLOBAL MEDIA BROADCAST NETWORK SERVICES [REAL NETWORKS LOGO]
- -------------------------------------------------------------------------------
- Coordination of on-site deployments (radio/TV stations) including
technical support, dial-in testing, validation/testing, training, etc.
- Broadcast Network operations and administration software installation,
configuration and integration
- GMBN scheduling, monitoring and reporting application installation,
configuration and integration
- Encoder monitoring and player monitoring system integration
- Content management system installation, configuration and integration
DELIVERABLES: INSTALLATION OF THE GMBN NETWORK OPERATIONS CENTER
- - Testing
- Unit (component) testing
- System (integrated components and back-end systems) testing
- Operational readiness testing (ORT) on GMBN
DELIVERABLES: PHASE 2 DEPLOYMENT OF INITIAL PLAYER, HEADEND MANAGER, RADIO
STATION ENCODER AND AD SERVER/COMMERCE COMPONENTS
DELIVERABLES: PHASE 3 DEPLOYMENT OF PRODUCTION-READY COMPONENTS AND
INITIAL VERSIONS OF DJ, JUKEBOX, ON-DEMAND MANAGER AND GUIDE
COMPONENTS.
- - Training and Documentation
- Complete component training
- Broadcast Network system administration and operations training
- Customized scheduling, monitoring and reporting training
- Remote site logistics, troubleshooting methods and consultation
- Content creation and content management training
- System documentation
- Post-deployment software support and maintenance
DELIVERABLES: PHASE 4 DEPLOYMENT OF TURNKEY PRODUCTION-READY AND SCALABLE
GMBN SYSTEM WITH ALL COMPONENTS TESTING COMPLETE
The main deliverable from this methodology and the associated deliverables is
a turnkey, RealNetworks G2-enabled Broadcast Network system customized for
Global Media which will operate and manage the thousands of content sources
and manage the streaming of media onto the Internet via RBN. The
production-ready deployment of the GMBN will result in delivering a
compelling user experience for consumer listening/viewing of the Global Media
private branded content. This system should result in garnering advertising
revenues and consumer goods commerce revenues for Global Media (and their
affiliates) resulting from this consumer usage model.
3.3 COMPONENT FUNCTIONAL SPECIFICATIONS
This section outlines each of the major system components for the Global
Media Broadcast Network and the key tasks and deliverables to be developed by
RealNetworks Consulting.
[OMITTED CONFIDENTIAL INFORMATION FILED SEPARATELY WITH THE SEC.]
Page 8 of 10
<PAGE>
PROPOSAL FOR GLOBAL MEDIA BROADCAST NETWORK SERVICES [REAL NETWORKS LOGO]
- -------------------------------------------------------------------------------
3.4 REALNETWORKS PROJECT TEAM
From the tasks and requirements listed above, a team of RealNetworks
Consulting resources is required to satisfy the multiple design and
deployment activities for the Global Media Broadcast Network system. Based
on the requirements and tasks outlined for Global Media, and RealNetworks
Consulting past experience of similar systems deployments, it is estimated
that a team of six to ten RealNetworks Consulting resources will be required
for the GMBN project. These individuals include a combination of project
management, senior software development programmers, web programming team,
database architect and specialists, QA/test engineers, systems consultants
and system engineers.
A full time Project Manager will be assigned as the overall program manager
for the project. The Project Manager will augment and supplement Global
Media's existing staff with specialized expertise on streaming media,
networking (LAN/WAN/Internet), content publishing/creation, broadcast
services, software development, business processes/systems policies, and
related knowledge transfer to Global Media's staff throughout the project
term. This individual will be an integral part of the Consulting Team and
have an on-site presence at Global Media to deliver the necessary expertise
for the various phases of the project and GMBN solution.
It is estimated that the RealNetworks G2 Broadcast Network system for Global
Media will require approximately eight (8) calendar months to complete and
deliver; from analysis to final testing/deployment with the team proposed.
It may be necessary to introduce a number of RealNetworks Consulting
resources into the project at peak deliverable periods in addition to the
assigned project team. A detailed scope of work and project schedule will be
developed/delivered upon completion of the initial needs analysis tasks.
In addition to the skills maintained by the Project Manager and RN Consulting
resources assigned to the Global Media project, the team will also have
access to subject matter experts within the RealNetworks Consulting group
(consultants and developers), RealNetworks core technology group (software
developers), RBN group (system operators and consultants), and related
divisions within RealNetworks to develop, customize and deploy the GMBN
system specific to Global Media's requirements. The team assigned to Global
Media will act as a conduit for critical thinking, analysis, solutions,
recommendations and experience to Global Media's project team appropriately.
4.0 COSTS AND SCHEDULE
[OMITTED CONFIDENTIAL INFORMATION FILED SEPARATELY WITH THE SEC.]
Page 9 of 10
PROPOSAL FOR GLOBAL MEDIA BROADCAST NETWORK SERVICES [REAL NETWORKS LOGO]
- -------------------------------------------------------------------------------
Page 10 of 10
<PAGE>
EXHIBIT 10.5
[REAL NETWORKS LOGO]
June 4, 1999
Global Media Corporation
83 Victoria Crescent
Nanaimo, British Columbia Canada V9R 5B9
Dear Michael Metcalfe:
This Amendment No. 1 is the first amendment to the letter agreement dated
April 20, 1999 (the "Agreement"), by and between RealNetworks, Inc. ("RN"),
and Global Media Corporation ("Customer").
The parties hereby amend Attachment A of the Agreement as follows:
1. The following is inserted as new Section 1.1:
1.1 PROJECT ACCELERATION BACKGROUND
Based on recent activities in the marketplace and discussions between
Global Media and RealNetworks, Global Media Corporation has requested
that RealNetworks accelerate the current Global Media Broadcast Network
Services project to be able to bring a product out quicker to market.
RealNetworks has analyzed it's current project schedule and resource
commitments and has identified a means to accelerate the schedule and
delivery of product to allow Global Media to quickly sign up licensee's
and increase their effectiveness in building a media portal solution
for radio groups around the country.
2. The following is inserted as new Section 3.5
3.5 ACCELERATION SCOPE OF WORK
RealNetworks proposes to accelerate the delivery of the live station
experience by implementing a fast track, parallel prototype development
effort with another team of software development engineers and experts
managed by the RealNetworks Consulting group. This new prototype
development effort is in addition to the existing project schedule and
resources currently allocated to the project for the existing scheduled
deliverables.
The main deliverables from the accelerated live station prototype
development includes the following two deliverables:
Accelerated player system:
- Station Guide
- A RealPlayer event renderer to Show ads and Station Information
(pseudo synchronized with the audio stream)
- Static e-comm link
- Station Logo and Skin (5 samples will be developed by RealNetworks)
Server/Backend System:
- Live station encoder, with Live Ad+Station Info stream
- Station Manager (functional administrative interface of input of all
station information)
- Guide Manager
- SMIL (and HTML) server.
The team necessary for the deliverables above includes:
2 Full time Software Development Engineers (C++, Win32)
3 Web Developer (Javascript, server-side script, HTML)
4 Flash/SMIL Developer
5 Accelerated Team Software Project Manager (Half time, estimated)
6 Part-time (overtime) of existing Lead Developers on original project
<PAGE>
The development schedule is anticipated to occur in two phases. The
first phase will be completed within approximately six (6) weeks with
the initial player and server/backend system. The second phase will be
to provide technical support with a principal software development
engineer for an additional two (2) weeks after phase 1. At the
completion of this effort, the original effort of the Global Media
Broadcast Network Services project will synchronize with the accelerated
project team.
The deployment of the player and server systems will be dependent on
Global Media also accelerating their deployment of hardware, software,
network and related equipment necessary for the new software to operate
on. Likewise, this project schedule is dependent on the initial 25
radio stations selected by Global Media to have appropriate connectivity
for signal acquisition and signal sourcing for the backend server system.
3. The following is inserted as new Section 4.1:
4.1 PROJECT ACCELERATION COST SUMMARY
The costs for the accelerated project team proposed to Global Media for
both phases of the development effort for both Phase 1 (initial six week
effort) and Phase 2 (technical support for two weeks) deliverables over
the next eight (8) weeks is $355,000.00. This is a fixed fee cost to
rapidly prototype, develop and deploy the player and server/backend
system on an accelerated effort, above and beyond the original scope of
work as well as to provide basic technical support for this effort.
The term of the project is anticipated to begin June 4, 1999 with first
delivery of the player/server system by July 16, 1999. The completion of
the accelerated project team deliverables is anticipated to be by the
end of July/beginning of August, 1999.
The payment schedule for the Project Acceleration services from
RealNetworks Consulting are as follows:
- 50% payable on July 16, 1999 (Phase 1 complete)
- 50% payable at beginning of August (Phase 2 complete)
4. The payment schedule at the end of Section 4.0 is replaced in its entirety
with the following payment schedule:
The following outlines the payment schedule and deliverable milestones
for all Deliverables:
[OMITTED CONFIDENTIAL INFORMATION FILED SEPARATELY WITH THE SEC.]
All other terms and conditions of the Agreement shall remain in full
force and effect except as modified by this Amendment No. 1. In the event of
any inconsistencies between this Amendment No. 1 and the Agreement, this
Amendment No. 1 shall prevail.
In witness whereof, the parties have caused this Amendment No. 1 to be
executed on this ______________ day of June, 1999.
REALNETWORKS, INC. GLOBAL MEDIA CORPORATION.
By: /s/ By: /s/ MICHAEL METCALFE
------------------------------- -----------------------------
Title: VICE PRESIDENT Title: PRESIDENT
---------------------------- --------------------------
Date: JUNE 4, 1999 Date: 4 JUNE 99
---------------------------- --------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RESTATED
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF GLOBAL MEDIA CORPORATION FOR THE
NINE MONTHS ENDED APRIL 30, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-END> APR-30-1999
<CASH> 85,299
<SECURITIES> 0
<RECEIVABLES> 28,993
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 120,714
<PP&E> 743,630
<DEPRECIATION> 121,688
<TOTAL-ASSETS> 742,656
<CURRENT-LIABILITIES> 1,111,890
<BONDS> 0
0
0
<COMMON> 12,546
<OTHER-SE> (381,780)
<TOTAL-LIABILITY-AND-EQUITY> 742,656
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 1,210,039
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,283
<INCOME-PRETAX> (1,257,322)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,257,322)
<DISCONTINUED> (2,080)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,259,402)
<EPS-BASIC> (.06)
<EPS-DILUTED> (.06)
</TABLE>
