Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of
1934
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ending January 31, 1999
GLOBAL MEDIA CORPORATION
_____________________________________________________________________________
(Name of Registrant in its Charter)
Nevada 0-23491 91-1842480
______________________________________________________________________________
(State of Incorporation) (Commission File No.) (IRS Employer ID No.)
83 Victoria Crescent
Nanaimo, BC, Canada V9R 5B9
_______________________________
(Registrant's address)
(250) 716-9949
_________________________________
Registrant's Telephone Number
Check whether the issuer:
(1) filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 12 months (or for such shorter period that
theregistrant was required to file such reports) ( X ) YES ( ) NO
(2) has been subject to such filing requirements for the past 90 days. ( X ) YES
( )NO
As of March 12, 1999 the Registrant had 20,544,431 shares of Common Stock
outstanding.
Transitional Small Business Disclosure Format ( )YES ( X )NO
<PAGE>
1. FINANCIAL STATEMENTS
Global Media Corp.
CONSOLIDATED BALANCE SHEETS
As at January 31 (in US dollars)
<TABLE>
<CAPTION>
For the Period For the Year
Ending Ending
--------------- --------------
January 31 July 31 July 31
1999 1998 1997
$ $ $
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
ASSETS
Current
Cash 610,376 14,996 121,890
Accounts receivable, net of allowance for doubtful
Accounts of $Nil [July 31, 1998 -
$ 92,366; July 31,1997 - $13,307] 206 206 58,838
Inventory -- 1,992 15,469
Prepaid expenses 3,761 8,229 917
Due from affiliated companies [note 4] -- 71,065 77,778
Income taxes recoverable [note 5] 2,441 2,439 --
----- ----- -------
616,784 98,927 274,892
------- ------ -------
Capital assets [notes 4 and 6] 269,143 172,635 20,566
------- ------- ------
885,927 271,562 295,458
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current
Accounts payable and accrued liabilities 135,728 201,234 94,649
Taxes payable 41,973 51,354 30,124
Due to affiliated company [note 4] 129,323 46,284 --
Note Payable [note 10] 500,000
Due to shareholders [note 4] 229,400 79,269 84,090
- ------- ------ ------
1,036,424 378,141 208,863
Deferred revenue -- -- 12,062
--------- ------- ------
1,036,424 378,141 220,925
--------- ------- -------
Shareholders= equity (deficiency)
Share capital [note 7] 12,546 11,892 11,059
Additional paid in capital [note 7] 869,671 543,525 128,641
Unissued share capital [note 7] -- -- 144,001
Deficit (1,052,330) (681,819) (209,145)
Cumulative translation adjustment 19,616 19,823 (23)
------ ------ ---
(150,497) (106,579) 74,533
-------- -------- ------
885,927 271,562 295,458
======= ======= =======
</TABLE>
See accompanying notes
<PAGE>
Global Media Corp.
CONSOLIDATED STATEMENTS OF OPERATIONS
6 Months ending January 31 (in US dollars)
<TABLE>
<CAPTION>
For the 3 Months For the 6 Months For the Year
Ending Ending Ending
January 31 January 31 January 31 January 31 July 31 July 31
1999 1998 1999 1998 1998 1997
$ $ $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Sales 1,141 49,454 21,271 139,454 326,279 --
General and administrative expenses
[note 4]
Advertising and marketing 52,317 2,755 93,286 2,755 6,691 --
Amortization 22,230 -- 35,277 8,448 29,973 --
Bad debts -- 17,500 -- 35,000 76,942 --
Bank charges, interest and
financing fees 10,642 92 11,610 137 1,298 445
Foreign exchange 1,161 6,478 4,374 11,595 12,222 (920)
Professional fees 38,149 6,495 62,655 19,053 147,500 49,386
Office and miscellaneous 45,631 51,812 89,602 76,606 98,379 21,842
Travel 25,265 2,753 33,967 8,935 21,174 --
Wages and benefits 30,492 9,406 58,946 36,408 128,406 1,461
------ ----- ------ ------ ------- -----
225,887 97,291 389,717 198,937 522,585 72,214
------- ------ ------- ------- ------- ------
Loss from continuing operations
before and after provision for
income taxes (224,746) (47,837) (368,446) (59,483) (196,306) (72,214)
- --------------------------------------------------------------------------------------------------------------------------
(Loss) recovery from operations of
discontinued home
satellite business, less
applicable income tax recovery
of $8,682 [1997 - $nil] [note 3] 4,984 (114,384) (2,065) (179,642) (276,368) (36,785)
----- -------- ------ -------- -------- -------
Loss for the year (219,762) (162,221) (370,511) (239,125) (472,674) (108,999)
======== ======== ======== ======== ======== ========
Loss per common share from
continuing operations (0.01) (0.00) (0.01) (0.00) (0.01) (0.01)
Loss per common share from
discontinued operations (0.00) (0.01) (0.00) (0.01) (0.01) (0.00)
Loss per common share (0.01) (0.01) (0.01) (0.01) (0.02) (0.01)
===== ===== ===== ===== ===== =====
</TABLE>
See accompanying notes
<PAGE>
Global Media Corp.
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY (DEFICIENCY)
Period ending January 31 (in US dollars)
<TABLE>
<CAPTION>
Additional Unissued Retained Cumulative
Common stock 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
Movement on cumulative translation (207)
Loss for the Period (370,511)
----------- ----- ----- ------- --------- --------
Balance, October 31, 20,544,431 12,546 869,671 -- (1,052,330) 19,616
========== ====== ======= ======= ========== ======
</TABLE>
See accompanying notes
<PAGE>
Global Media Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Period ending January 31 (in US dollars)
<TABLE>
<CAPTION>
For the 6 Months Ending For the Year Ending
January 31 January 31 July 31 July 31
1999 1998 1998 1997
$ $ $ $
- ---------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Loss for the period (370,511) (239,125) (472,674) (108,999)
Items not requiring an outlay of funds
Amortization 50,508 11,563 38,658 3,957
Services settled through share issuance -- 50,449 50,449 --
Deferred revenue -- (12,062) (12,062) 12,062
------- ------- ------- ------
(320,003) (189,175) (395,629) (92,980)
Changes in non-cash operating working capital
Accounts receivable -- (11,002) 58,632 47,216
Inventory 1,992 1,525 13,477 20,233
Prepaid expenses 4,466 (16,713) (7,312) 599
Income taxes recoverable -- -- (2,439) --
Accounts payable and accrued liabilities (65,506) 62,575 106,585 11,090
Accrued wages payable -- -- -- (58,527)
Taxes payable (9,381) (2,067) 21,230 5,034
Advances from (to) shareholder 150,131 (31,629) (4,821) 79,266
Advances from (to) affiliated companies 154,104 3,645 52,997 (80,309)
------- ------- ------ -------
Cash provided by (used in) operating activities (84,197) (182,841) (157,280) (68,378)
------- -------- -------- -------
INVESTING ACTIVITIES
Purchase of capital assets (147,016) (144,195) (189,706) (13,209)
Decrease in loan receivable from shareholder -- -- -- 18,306
Cash provided by (used in) investing activities (147,016) (144,195) (189,706) 5,097
-------- -------- -------- -----
FINANCING ACTIVITIES
Dividends -- -- (114,632)
Note payable 500,000
Share subscriptions 326,800 221,267 221,267 283,700
Cash provided by financing activities 826,800 221,267 221,267 169,068
------- ------- ------- -------
Effect of exchange rate changes on cash (207) 8,886 18,825 198
Increase (decrease) in cash during the period 595,380 (96,883) (106,894) 105,985
Cash, beginning of period 14,996 121,890 121,890 15,905
------ ------- ------- ------
Cash, end of period 610,376 25,007 14,996 121,890
======= ====== ====== =======
Interest - paid 11,610 11,675 9,180 357
Income taxes paid (recovered) -- -- (6,783) 10,354
======= ====== ====== =======
</TABLE>
See accompanying notes (recovered)
See accompanying notes
<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 engaged in providing internet-integrated call center
services from its location in Nanaimo, B.C., Canada. Until the 4th quarter of
1998, the Company was also engaged in the marketing of direct to home satellite
hardware and programming services to both commercial and private individuals
primarily in Western Canada [note 3]. The Company commenced its
internet-integrated call center in September, 1997. The Company is also in the
process of developing an electronic commerce web site for the distribution and
eventual downloading of music and video over the internet.
On May 20, 1997 the Company issued 8,000,000 common shares and paid $100,000 in
cash for all of the outstanding shares of Westcoast Wireless Cable Ltd.
("Westcoast Wireless"), a company which markets direct to home satellite
hardware and programming services.
Westcoast Wireless contracted for the sales of certain satellite hardware and
programming services, therefore the majority of the purchases were sourced from
a single supplier.
These financial statements reflect the continuity of interests of the former
shareholder of Westcoast Wireless, due to the continuation of common control.
The consolidated statements of operations, shareholders' equity (deficiency),
and cash flows for the period from August 1, 1996 to May 20, 1997 (included in
the results for the year ended July 31, 1997) represent the results of
operations and cash flows of Westcoast Wireless during those periods.
References to "the Company" in these financial statements include Westcoast
Wireless (for events occurring prior to May 20, 1997).
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles in the United States of America.
The Company has not yet achieved a profitable level of operations. The Company's
continued operation is dependent upon achieving a profitable level of operations
from its electronic commerce web site, scheduled to commence operations in March
and May of 1999, upon obtaining additional financing and the continued support
of the Company's shareholders [note 10], to fund both current operations, and
web site construction.
2. SIGNIFICANT ACCOUNTING POLICIES
INVENTORY
Inventory is recorded at the lower of cost, using the first in, first out
method, and net realizable value.
CAPITAL ASSETS AND AMORTIZATION
Capital assets are recorded at cost. Amortization has been calculated using the
following methods and rates, except in the year of acquisition when one half of
the rate is used.
Call center infrastructure 3 year straight line
Office furniture and equipment 20% declining balance
Software 20% declining balance
Computer equipment 30% declining balance
Leasehold improvements 5 year straight line
REVENUE RECOGNITION
Revenues from the call center are recognized on a straight line basis over the
<PAGE>
term of the contract.
Revenues are recorded at the time of installation for hardware sales, and at
contract inception for sales of programming.
ADVERTISING AND MARKETING COSTS
Advertising and marketing costs are expensed as incurred.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of the Company's foreign subsidiary, Westcoast
Wireless, are translated into US dollars at fiscal period end exchange rates.
Income and expense items are translated at average exchange rates prevailing
during the fiscal period. The resulting translation adjustments are recorded as
a separate component of shareholders' equity.
Monetary assets and liabilities of the Company denominated in a foreign currency
are translated at period end exchange rates. Other balances are recorded at
rates in effect on the dates of the transaction. Exchange gains and losses
arising are reflected in net income for the period.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires the Company's management to
make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and related notes to the financial statements.
Actual results may differ from those estimates.
FINANCIAL INSTRUMENTS
The carrying values of the Company's financial instruments approximate fair
values, except as otherwise disclosed in the financial statements.
LOSS PER SHARE
The Company has adopted SFAS128, 'Earnings per share' in the current year on a
retroactive basis. There is no impact on previously reported loss per share
amounts.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued SFAS130, 'Reporting
comprehensive income', SFAS131, 'Disclosures about segments of an enterprise and
related information', SFAS132 'Employers' Disclosures about pensions and other
post-retirement benefits' and SFAS133 'Accounting for derivative instruments and
hedging activities'. SFAS130, SFAS131 and SFAS132 are effective for financial
statements for fiscal years beginning after December 15, 1997. SFAS133 is
effective for financial statements for fiscal years beginning after June 15,
1999.
SFAS130 establishes standards for reporting and display of comprehensive income,
its components and accumulated balances. Comprehensive income is defined to
include all changes in equity except those resulting from investments by owners
and distributions to owners. Among other disclosures, SFAS130 requires that all
items that are required to be recognized under current accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements.
SFAS131, SFAS132 and SFAS133 currently have no impact on the Company.
<PAGE>
3. DISCONTINUED OPERATION
In November 1997, a decision was made by the Canadian Federal Court of Appeal
of, ruling that sale of US satellite and programming services in Canada was not
permitted. Following a period of trading in Canadian satellite and programming
services the management of Westcoast Wireless decided to withdraw completely
from the home satellite business in late fiscal 1998. The home satellite
business includes all operations of Westcoast Wireless.
This subsidiary company has been accounted for as a discontinued operation, and
accordingly, its operations have been segregated in the accompanying
consolidated statements of operations.
Revenues of the discontinued company for the period ending January 31, 1999 were
Nil, (1998-$568,154) and for the year ended July 31, 1998 were $591,938 [1997 -
$1,617,528]. At January 31, 1999, net current liabilities of the discontinued
operation were $ 73,168, (1998-$108,522) and at July 31, 1998 were $130,076
[1997 - $31,578] consisting principally of accounts payable and balances due to
shareholder. Net non-current assets at January 31, 1999 were $Nil,
(1998-$21,407) and at July 31, 1998 were $15,352 [1997 - $8,504].
4. RELATED PARTY TRANSACTIONS
All related party balances as disclosed in the balance sheet are non-interest
bearing and without specific terms of repayment.
The affiliated companies are related to Global Media Corp. by virtue of control
by officers of the Company. The fair values of the balances are not determinable
since they have no fixed repayment terms.
The Company's consolidated statement of operations for the period ended January
31, 1999 and year ended July 31, 1998 includes the following related party
transactions:
- wages and benefits expense of $Nil, July 31,1998 were $81,747 [1997 -
$45,565], to a shareholder and spouse.
- income from recharge of wages of $Nil, July 31, 1998 were $Nil [1997 -
$72,610], to a company related by virtue of control by an officer of
the Company.
During the year ended July 31, 1998 the following capital asset additions were
purchased from related parties:
- $32,909 [1997 - $nil] for call center development from shareholders of
the Company.
- $2,454 [1997 - $nil] for call center development from an officer of
the Company.
- $5,709 [1997 - $nil] for office equipment, $4,171 [1997 - $nil] for
leasehold improvements and $12,170 [1997 - $nil] for call center
development from a company controlled by an officer of the Company.
No related party transactions occurred during the period ending January 31, 1999
with the exception of:
(i) A partial repayment of a shareholder loan, $ 71,065, which was used to
repay a receivable owed to the Company by an affiliate owned by the
same shareholder;
(ii) Advances from affiliated companies for $ 154,104;
(iii) Shareholder loans of $ 222,231.
5. INCOME TAXES
At July 31, 1998, the Company had a domestic net operating loss of $240,407
which will begin to expire in 2011, and foreign net operating loss carryforwards
of $250,671 which will expire in 2005. Utilization of these carryforwards
depends on the recognition of future taxable income.
<PAGE>
For financial reporting purposes, a valuation allowance has been established for
all deferred tax assets due to the uncertainty of realization. As a result of
certain stock transactions, utilization of the Company's net operating loss
carryforwards may be subject to certain limitations in the event that a change
in ownership has occurred, as defined in Section 382 of the Internal Revenue
Code of 1986, as amended.
Deferred tax assets reflect the net tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the
Company's deferred tax assets and liabilities are as follows:
July 31, 1998
$
Deferred tax assets:
Net operating loss carryforwards 196,094
Tax vs. accounting value in fixed assets 5,431
Unrealized foreign exchange loss 4,155
- --------------------------------------------------------------------------------
Total gross deferred tax assets 205,680
Less valuation allowance (205,680)
Deferred tax liability --
---------
NET DEFERRED TAX ASSETS --
=========
6. CAPITAL ASSETS Accumulated Net Book
Cost Amortization Value
$ $ $
- --------------------------------------------------------------------------------
JANUARY 31, 1999
Office furniture and equipment 24,303 12,207 12,096
Computer equipment 81,580 27,418 54,162
Leasehold improvements 8,412 5,082 3,330
Call center infrastructure 92,312 27,525 64,787
Software 156,753 21,985 134,768
------- ------ -------
363,360 94,217 269,143
======= ====== =======
JULY 31, 1998
Office furniture and equipment 18,859 4,842 14,018
Computer equipment 70,107 13,117 56,990
Leasehold improvements 8,594 4,905 3,689
Call center infrastructure 91,575 17,325 74,250
Software 27,209 3,520 23,689
------ ----- ------
216,344 43,709 172,635
======= ====== =======
JULY 31, 1997
Office furniture and equipment 9,794 2,576 7,218
Computer equipment 8,814 2,187 6,627
Leasehold improvements 2,029 709 1,320
Software 6,001 600 5,401
----- --- -----
26,638 6,072 20,566
====== ===== ======
7. SHARE CAPITAL
<PAGE>
Period Ended January 31 Year ended July 31
1999 1998 1997
# # #
- --------------------------------------------------------------------------------
AUTHORIZED
Common shares,
par value $0.001 each 200,000,000 200,000,000 200,000,000
ISSUED
Common shares 20,544,431 19,890,831 11,059,400
Unissued common shares -- 8,288,000
- --------------------------------------------------------------------------------
As at July 31, 1997, 8,000,000 shares issued in consideration for the shares in
Westcoast Wireless and 288,000 of the shares issued for cash had not been
issued; however, legal agreements for the issue of these shares were in place at
July 31, 1997. The amounts were recorded as unissued share capital of $1 and
$144,000 respectively as at July 31, 1997. All of these shares were issued in
the year ended July 31, 1998.
Effective April 8, 1997 the Company adopted the 1997 Directors and Officers
Stock Option Plan (the "Plan"). The Plan is administered by the Board of
Directors who have sole discretion and authority to determine individuals
eligible for awards under the Plan. The Plan provides for issuance of a total of
500,000 options, within a period of 10 years from the effective date. The
conditions of exercise of each grant are determined individually by the Board at
the time of the grant. During the current year, this plan was amended to
increase the number of options from 500,000 to 1,000,000 shares.
During the first quarter 1,000,000 options at an exercise price of $0.50 per
share were granted to various officers, directors and employees of the company.
At January 31, 1999, 653,300 options have been exercised.
8. SEGMENTED INFORMATION
The Company's business segment which derived revenue from the marketing of
direct to home satellite hardware and programming services, has been presented
as a discontinued operation in the current year [note 3].
The remaining segment of the business relates to call center services. The
Global Media call center provides internet integrated call center services to US
based clients from its location in Nanaimo, Canada. The Global Media call center
commenced operations in September of 1997 and comprises all continuing
operations of the Company. The call center is presently providing services to
the Company by obtaining licensing contacts for the entertainment web site and
fielding investor and shareholder inquiries relating to the Company and its
operations.
9. COMMITMENTS AND CONTINGENCIES
Global Media entered into a commercial lease for office space effective October
1, 1997, and will pay a total of $52,939 per year until July 31, 2002.
10. NOTE PAYABLE
On November 5, 1998, the Company entered into a loan agreement with Rolling Oaks
Enterprises, LLC allowing the Company to draw on a line of credit of up to
$500,000, repayable within one year. The interest rate on the credit facility is
24% per annum, with an origination fee of 1% payable on the receipt of funds.
The loan is collateralized by a first charge on all available fixed assets of
the Company, and 1,000,000 of common shares in the Company.
<PAGE>
Two principal shareholders of the Company have advanced funds to the Company.
The shareholder loans at January 31, 1999, have no fixed terms of repayment and
therefore are classified as current liabilities in the balance sheet. However,
the shareholders have indicated their intent to continue to support the
operations of the Company.
<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").
Results of Operations
Operating losses of $ 370,511 (1998-$239,125), were incurred during the first
six months of the year. This was a result of fundamental changes in the
company's business and corresponding decreasing revenues. The Company, Global
Media Corp. is in the process of developing web sites and associated licensing
programs 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 and is developing a web site to
showcase this technology and allow independent artists to feature their work on
the site.
As the Company has moved into a development cycle, it does not expect further
revenues pending the launch of its web sites. Consequently, revenues decreased
to $21,271 (1998 - $139,454) during the first half of the year, ending January
31, 1999.
General and Administrative expenses for the first six month period ending
January 31, 1999 were $389,717, (1998 - $198,937). The increase in expenses
reflects 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; more professional fees in developing corporate licensing and
other legal agreements; more office expenses; increased corporate travel; and
hiring additional staff all lead to an increase in expenses.
<PAGE>
Advertising expenses increased to $93,286 (1998 - $2,755) due to the news
releases, Internet and other promotions used to inform the shareholders and
general public, and expenses related to promotion of the web site licensing
programs. Amortization increased to $ 35,277, (1998-$8,448), due to the increase
in capital assets over the last year. Bank charges and interest increased to $
11,610, (1998-$137), due to interest payment on the bridge financing.
Professional fees increased to $62,655 (1998 - $19,053) mainly relating to
corporate web site development agreements, generation of investor leads and
costs associated with listing in Standard and Poor's Corporation Records.
Office expense of $89,602 (1998 - $76,606) increased primarily due to rent
expense at the larger Nanaimo offices and other expenses associated with a
growing company such as increased telephone and general office expenses. Office
expense consisted mainly of accounting and legal fees $22,209 (1998 - $48,421);
rent $32,351 (1998 - $18,343); telephone $15,757 (1998 - $4,180); and general
office expense $10,176 (1998 - $2,497). Travel expense of $33,967 (1998 -
$8,935) consisted primarily of travel relating to development of strategic
alliances, working with web site designers and developers and attending industry
related conferences. Wages of $58,946 (1998- $36,408) increased due to hiring
additional staff for our licensing and affiliate programs, our corporate web
site development, and our e-commerce web site development.
Losses from discontinued operations decreased significantly to $ 2,065
(1998-$179,642) as a result of winding down the home satellite business.
Operating results for the most recent quarter ending January 31, 1999 consisted
of a loss of $219,762 (1998-$162,221). The combination of minimal revenues $
1,141 (1998-$49,454), with increased general and administrative expenses
resulted in larger losses than in the same period last year.
General and administrative expenses increased in the second quarter to $
225,887, (1998-$47,837). The prior period reflects the Company initiating and
developing its call center whereas the most recent quarter reflects an increase
in activity related to the ongoing development of the company's web sites. The
following factors contributed to larger expenses in the current period. Greater
emphasis on promotion of our company to attract quality licensee leads for the
e-commerce site increased advertising to $ 52,317 (1998-$2,755). Depreciation of
a larger capital base increased amortization costs to$22,230. Increased activity
in developing corporate licensing and other legal agreements increased
professional fees to $38,149 (1998-$6,495). Increases in corporate travel to
industry related events and web developers increased the travel costs to $
25,265 (1998-$2,753), while hiring additional staff increased wages to $30,492
(1998-$9,406).
<PAGE>
Liquidity and Capital Resources
Since the year-end, the Company's cash position has improved considerably. Cash
has increased by $595,380 (1998 - decrease of $96,883) primarily resulting from
the Company obtaining a bridge loan of $500,000, (1998 - Nil) and stock options
being exercised totaling $326,800, (1998 - $221,267 from the sale of common
shares). This increase in cash was offset by cash used in operating activities
of $ 84,197, (1998 - $182,841; and purchase of capital assets of $147,016 (1998
- - $144,195).
Operating losses for the first six months were $370,511 (1998 - $239,125) offset
by amortization of $50,508 (1998 - $11,563). These losses were the result of
decreased revenues combined with increased general and administrative expenses
as noted above.
Changes in non-cash operating capital
Over the last six months, cash used by operating activities decreased by $
84,197, (1998 - $182,841). The Company had an operating loss of $370,511 (1998 -
$239,125) offset by amortization of $50,508 (1998 - $11,563) leaving cash used
by operations of $ 320,003, (1998-$189,175). The loss from operations were
offset by the following changes in non-cash working capital.
Increases in cash were caused by: the sale of inventory for $1,992 (1998
- -$1,525); decrease in prepaid expenses of $4,466, (increase in 1998-$16,713),
due to use of presentation folders for mailing corporate information and
expensing of prepaid rent; shareholder advances of $150,131 (repayment of
shareholder loan 1998 - $31,629); and advances from affiliated companies
totaling $154,104 (1998 - $3,645).
Decreases in cash were caused by a reduction of accounts payable of $ 65,506
(increase in 1998 - $62,575); and a reduction of taxes payable of $ 9,381 (1998
- -$2,067).
<PAGE>
Investing activities
There was a decrease in cash of $147,016 (1998 - $144,195) caused by fixed asset
purchases of computer equipment and software to be used in the entertainment
websites.
Financing Activities
The increase in cash was mainly due to two financing activities. The Company
secured bridge financing in the amount of $500,000, (1998- Nil) together with
the sale of shares through the exercise of stock options for $ 326,800, (1998 -
$ 221,267 through the sale of common shares).
General
During the quarter, the Company made significant strides toward execution of its
business plan. The Company launched its licensing program and online licensing
application center. Response to the program has been better than accepted. The
Company has received applications from companies representing over 1000 media
entities. The Company continues development its web site and associated
licensing program. Toward its commitment to developing an excellent corporate
culture, Global Media has continued to hire excellent people who share the
Company's vision and hard working philosophy.
The Company also began development of its Indieaudio.com and Indielife.com web
sites. These sites are positioned to be an online center for the independent
music community. The interactive and compelling editorial and audio content is
being designed to attract a wide cross-section of musicians and music fans. The
primary value of the sites will be in driving traffic to the Global Media
entertainment and sales site. The sites will also generate direct revenue
through the sale of digital audio files as well as through advertising revenue.
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.
<PAGE>
The Company continues to develop 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 continued to improve its 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.
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.
The Company continues to be in a development cycle and does not expect further
revenues pending the launch of its web site. With the success of the licensing
program, the Company expects to begin to generating revenues immediately
proceeding the launch of its site and licensees. Management believes the Company
is well positioned to take a leading position in providing complete turnkey, end
to end solutions for the retailing of entertainment product online.
<PAGE>
Part II - Other Information
Item 1 - Legal Proceedings: There are no proceedings to report.
Item 2. - Changes in Securities: On November 5, 1998, the Company entered into a
loan agreement with Rolling Oaks Enterprises, LLC allowing the Company to draw
on a line of credit of up to $500,000, repayable within one year. The interest
rate on the credit facility is 24% per annum, with an origination fee of 1%
payable on the receipt of funds. The loan is collateralized by a first charge on
all available fixed assets of the Company, and 1,000,000 of common shares in the
Company. The Company relied upon the section 4(2) exemption from the
registration requirements of section 5 of the Securities Act for entering into
the loan agreement based upon the fact that the transaction does not involve a
public offering in that there was only one offer of the loan agreement to a
sophisticated investor who had access to all material information regarding the
Company.
Item 3. - Default Upon Senior Securities: There are no defaults to report.
Item 4. - Submission of Matters to a Vote of Security Holders: None during the
quarter.
Item 5. - Other Information: none
Item 6. - Exhibits and Reports on Form 8-K: none
<PAGE>
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GLOBAL MEDIA CORPORATION
/s/ Michael Metcalfe
Michael Metcalfe, President and Director
<PAGE>
EXHIBIT 27
GLOBAL MEDIA CORP.
------------------------
FINANACIAL DATA SCHEDULE
PERIOD-START NOV-1-1998
FISCAL-YEAR-END JUL-31-1998
PERIOD-END JAN-31-1999
CASH 610,376
SECURITIES 0
RECEIVABLES 206
ALLOWANCES 0
INVENTORY 0
CURRENT-ASSETS 616,784
PP&E 363,360
DEPRECIATION 94,217
TOTAL-ASSETS 885,927
CURRENT-LIABILITIES 1,036,424
BONDS 0
PREFERRED-MANDATORY 0
PREFERRED 0
COMMON 12,546
OTHER-SE 869,671
TOTAL-LIABILITY-AND-EQUITY 885,927
SALES 1,141
TOTAL-REVENUES 1,141
CGS 0
TOTAL-COSTS 0
OTHER-EXPENSES 225,887
LOSS-PROVISION (224,746)
INTEREST-EXPENSE 10,642
INCOME-PRETAX (219,762)
INCOME-TAX 0
INCOME-CONTINUING 0
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET-INCOME (219,762)
EPS-PRIMARY (.01)
EPS-DILUTED (.01)
<PAGE>
