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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 16, 2000
REGISTRATION NO. 333-______
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GLOBALMEDIA.COM
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 91-1842480
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
400 ROBSON STREET
VANCOUVER, BRITISH COLUMBIA
CANADA V6B 2B4
(604) 688-9994
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JIM PORTER, CHIEF FINANCIAL OFFICER
GLOBALMEDIA.COM
400 ROBSON STREET
VANCOUVER, BRITISH COLUMBIA
CANADA V6B 2B4
(604) 688-9994
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
COPY TO:
Eugenie D. Mansfield, Esq.
Britt M. Ericson, Esq.
Davis Wright Tremaine LLP
1501 Fourth Avenue, Suite 2600
Seattle, WA 98101-1688
(206) 622-3150
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this registration statement becomes effective.
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If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED
MAXIMUM PROPOSED
OFFERING MAXIMUM
AMOUNT TO BE PRICE PER AGGREGATE REGISTRATION
TITLE OF SHARES TO BE REGISTERED REGISTERED SHARE OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
Common Stock 1,697,619 $ 0.9532 (1) $ 1,618,085.55 (1) $ 427.17
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(1) Based on the average of the reported high and low prices of the common
stock reported on the Nasdaq National Market on October 11, 2000, for
the purpose of calculating the registration fee in accordance with Rule
457(c) under the Securities Act of 1933.
THE REGISTRANT AGREES TO THE DELAY OF THIS REGISTRATION STATEMENT'S EFFECTIVE
DATE UNTIL (a) IT FILES AN AMENDMENT SPECIFICALLY STATING THAT THIS REGISTRATION
STATEMENT WILL BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, OR (b) SUCH DATE AS THE SECURITIES AND EXCHANGE
COMMISSION DECLARES THE REGISTRATION STATEMENT EFFECTIVE, PURSUANT TO SECTION
8(a).
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION. OCTOBER 16, 2000
PROSPECTUS
1,697,619 SHARES
GLOBALMEDIA.COM
COMMON STOCK
---------------
GLOBALMEDIA.COM We have prepared this prospectus to allow the
400 Robson Street selling stockholders to sell from time to time up
Vancouver, British Columbia to 1,697,619 shares of our common stock which they
Canada V6B 2B4 currently hold.
We have registered the shares of common stock
which may be sold by the selling stockholders
pursuant to this prospectus by filing a
registration statement with the Securities and
Exchange Commission using a "shelf" registration
process. This process allows the selling
stockholders to sell their shares of common
stock over a period of time and in varying
amounts. We expect that the selling stockholders
will sell their shares of common stock from time
to time as described under "Plan of Distribution."
SELLING STOCKHOLDERS:
See page 16 for the
names of the selling
stockholders
TRADING MARKET AND SYMBOL:
Nasdaq National Market -
"GLMC"
RECENT PRICE:
On October 11, 2000, the
last reported sales price of
our common stock on the
Nasdaq National Market was
$1.00 per share.
---------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 3.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is October 16, 2000
<PAGE>
TABLE OF CONTENTS.
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PAGE
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WHERE YOU CAN FIND MORE INFORMATION......................... i
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE........... ii
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS........ ii
PROSPECTUS SUMMARY.......................................... 1
RISK FACTORS................................................ 3
USE OF PROCEEDS............................................. 16
SELLING STOCKHOLDERS........................................ 16
PLAN OF DISTRIBUTION........................................ 16
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS......... 17
LEGAL MATTERS............................................... 17
EXPERTS..................................................... 17
</TABLE>
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"GlobalMedia," "globalmedia.com," "store.globalmedia.com," "GlobalMedia
Network," "GlobalMedia Broadcast Network," "indieaudio.com,"
"globalmediacorp.com" and "gmcorp.net" are trademarks and service marks of
GlobalMedia.com. All other trademarks, service marks or trade names referred to
in this prospectus are the property of their respective owners. Except as
otherwise required by the context, all references in this prospectus to (a)
"we," "us," "our," or "GlobalMedia" refer to the consolidated operations of
GlobalMedia.com (formerly known as Global Media Corp.), a Nevada corporation,
and its wholly-owned subsidiaries, Westcoast Wireless Cable Ltd. and Global
Media (Canada) Entertainment Corporation, (b) "you" refers to prospective
investors in our common stock, (c) the "Web" refers to the World Wide Web and
(d) "our site" refers to our Web site at www.globalmedia.com.
This prospectus includes statistical data regarding us and the Internet
industry. Such data are based on our records or are taken or derived from
information published by various sources, including International Data
Corporation.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's Public Reference facilities in Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the SEC
located at 7 World Trade Center, Suite 1300, New York, New York 10048, and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to the public from the SEC's
Web site at http://www.sec.gov.
i
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them into this prospectus, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus, and later
information which we file with the SEC will update and supersede this
information. We incorporate by reference the documents listed below:
(1) Our Annual Report on Form 10-KSB for the year ended July 31, 1999.
(2) Our Quarterly Report on Form 10-QSB for the quarter ended October
31, 1999.
(3) Our Quarterly Report on Form 10-QSB for the quarter ended January
31, 2000, as amended by the Form 10-QSB/A filed with the SEC on
August 29, 2000.
(4) Our Quarterly Report on Form 10-QSB for the quarter ended April 30,
2000, as amended by the Form 10-QSB/A filed with the SEC on August
29, 2000.
(5) Our Current Reports on Form 8-K filed February 1, 2000, May 12,
2000, August 18, 2000, and October 4, 2000.
(6) Our Current Report on Form 8-K/A filed February 10, 2000.
(7) The description of our common stock contained in our registration
statement on Form 10-SB filed December 12, 1997, including any
amendments or reports filed for the purpose of updating such
description.
You may request a copy of these filings, at no cost, by calling us at (604)
688-9994 or writing to us at the following address:
GlobalMedia.com
Attn.: Secretary
400 Robson Street
Vancouver, British Columbia
V6B 2B4 Canada
All documents subsequently filed by us pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Securities Exchange Act of 1934, as amended, prior to the filing of
a post-effective amendment which indicates that all securities registered have
been sold or which deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference in this prospectus and to be part hereof
from the date of filing of such documents. You should rely on the information
incorporated by reference or provided in this prospectus. We have authorized no
one to provide you with different information. We are not making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information in this prospectus is accurate as of any date other
than the date on the front of the document.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements deal with our
current plans, intentions, beliefs and expectations and statements of future
economic performance. In some cases, you can identify forward-looking statements
by terminology such as "may," "will," "should," "could," "expects," "plans,"
"intends," "anticipates," "believes," "estimates," "predicts," "potential" or
"continue" or the negative of such terms and other comparable terminology. These
forward-looking statements include, without limitation, statements about our
market opportunity, our strategies, competition, expected activities and
expenditures as we pursue our business plan, and the adequacy of our available
cash resources. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Forward-looking statements
involve known and unknown risks and uncertainties which may cause our actual
results in future periods to differ materially from what is currently
anticipated. We make cautionary statements in certain sections of this
prospectus, including under the heading "Risk Factors." You should read these
cautionary statements as being applicable to all related forward-looking
statements wherever they appear in this prospectus, in the materials referred to
in this prospectus, in the materials incorporated by reference into this
prospectus, or in our press releases. No forward-looking statement is a
guarantee of future performance, and you should not place undue reliance on any
forward-looking statement. Moreover, neither we nor anyone else assumes
responsibility for the accuracy and completeness of such statements. We
undertake no obligation to update publicly any forward-looking statements for
any reason, even if new information becomes available or other events occur in
the future.
ii
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PROSPECTUS SUMMARY
THIS SUMMARY CONTAINS BASIC INFORMATION ABOUT US AND THIS OFFERING. BECAUSE IT
IS A SUMMARY, IT DOES NOT CONTAIN ALL OF THE INFORMATION THAT MAY BE IMPORTANT
TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE SECTION
ENTITLED "RISK FACTORS" AS WELL AS THE INFORMATION INCORPORATED BY REFERENCE
INTO THIS PROSPECTUS. THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS AND INTENTIONS. THE CAUTIONARY STATEMENTS MADE IN THIS PROSPECTUS
SHOULD BE READ AS BEING APPLICABLE TO ALL RELATED FORWARD-LOOKING STATEMENTS
WHEREVER THEY APPEAR IN THIS PROSPECTUS. OUR ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED IN THIS PROSPECTUS. SEE "CAUTIONARY NOTE
REGARDING FORWARD-LOOKING STATEMENTS."
GLOBALMEDIA
OVERVIEW. GlobalMedia.com offers an award-winning streaming media
broadcasting solution to radio and television stations and Internet sites
through our GlobalMedia.com network associate program. The centerpiece of our
broadcasting network solution is the GlobalMedia.com media player, a streaming
media player developed for us by RealNetworks, Inc., that enables Internet users
to experience multimedia content streamed over the Internet. Our media player
enables Internet users to stream live and simulated live audio, video and other
multimedia content such as radio feeds from our thirteen proprietary simulated
live music stations and from the stations of each of our broadcasting
associates.
We also provide e-commerce solutions that can be integrated with our
broadcasting solution. We sell music CDs and cassettes, home videos and digital
video discs (DVDs), books and other entertainment products through our own
online store and through the private-label storefronts that we create for
network associates in our GlobalMedia.com network associate program. Visitors to
a network associate's Web site can place merchandise orders from the storefront
on that site, which we then process through our e-commerce back-end solution and
fulfill through our fulfillment partners.
MARKET OPPORTUNITY. International Data Corporation estimates that the
number of persons accessing the Web will reach 320 million by 2002 and that
worldwide business-to-consumer sales over the Internet will increase from
approximately $11 billion in 1998 to approximately $93 billion by 2002. Advances
in technology, such as streaming media technologies which enable the continuous
transmission and playback of multimedia content, and broadband access are making
the Internet an increasingly important new medium for multimedia content
delivery and distribution. We are positioning ourselves to take advantage of the
convergence of traditional audio and video media with the Internet and
electronic commerce.
NETWORK ASSOCIATE PROGRAM. We offer our network associates solutions to
provide their online customers with an integrated entertainment and online
shopping experience. Our solutions enable our network associates to deliver
simulated live and live Internet broadcast of audio, video and other multimedia
content from their Web sites. We have designed our broadcasting network so that
our streaming media solution can be combined with our private label e-commerce
solution. We provide participating network associates with a customized,
merchant-branded storefront on the network associate's own Web site which we
integrate with our own back-end e-commerce systems, order fulfillment services
and customer service support. For example, customers of a network associate that
uses our streaming and e-commerce solutions can listen to live music programming
through the GlobalMedia.com player and purchase CDs of the featured artists at
the same time. Network associates who use our broadcasting pay us an up-front
fee for design and implementation and ongoing streaming fees based on usage. We
pay our network associates a percentage of advertising revenues and gross margin
for products we sell through their sites.
We believe that our broadcasting network will be a compelling solution
to radio and television stations that are interested in extending their brands
onto the Internet and developing new sources of revenues. By establishing
network associate relationships with radio and television stations and other
media businesses, our goal is to leverage off the existing brand identities and
marketing efforts - both online and offline - of our network associates to drive
Internet traffic and sales of entertainment merchandise.
We launched our broadcasting network with the beta version of our media
player in October 1999, and incorporated the commercial version into our
broadcasting network in January 2000. We launched a beta version of our own
e-commerce site in May 1999 and commercially launched our own online store in
September 1999. We significantly revised our online store in November 1999 to
offer greater functionality and ease of use.
Our online store combines an extensive catalogue of music, books, videos
and other entertainment products, with easy-to-use navigation and search
capabilities and entertainment-focused content. Additionally, visitors can
download our media player for free. We are continuing the further development of
our online store and e-commerce back-end to provide additional features and
expect that these enhancements will improve the revenue generating potential of
our own store and the stores of our network associates.
RECENT EVENTS
SERIES B PREFERRED OFFERING. On April 28, 2000, we sold to RGC
International Investors, LDC, for an aggregate purchase price of $5,000,000, (a)
5,000 shares of Series B convertible preferred stock, (b) investment options to
purchase
1
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the same number of common shares as issued on conversion of our Series B
convertible preferred stock, and (c) warrants to purchase an aggregate of
388,500 shares of common stock at a purchase price of $7.0785 per share. The
common stock issuable upon conversion or exercise of those securities was
registered for resale under a registration statement declared effective by the
SEC on September 26, 2000.
OPTION TO PURCHASE SERIES C PREFERRED. In connection with the sale of
our Series B convertible preferred stock, RGC agreed to invest another
$5,000,000 in us upon the effective date of the prospectus for the registration
statement filed on September 26, 2000, in exchange for 5,000 shares of our
Series C convertible preferred stock, and related investment options and
warrants, subject to the satisfaction of certain other conditions. None of these
conditions were within our control and did not occur by the effective date of
the prospectus. We therefore agreed to amend the purchase agreement to grant RGC
the option to purchase the Series C convertible preferred stock and related
investment options and warrants at such time as the conditions are satisfied.
RGC continues to have registration rights with respect to the common stock
underlying those securities.
ONRADIO.COM TRANSACTION. On June 6, 2000, we entered into an agreement
with OnRadio.com to acquire assignable contracts relating to the provision of
certain Web-related services to 212 radio station customers of OnRadio.com.
Of the contracts we acquired, contracts with 144 stations relate to basic
services like Web-site hosting, content provision and ad placement. An
initial closing involving the acquisition of these contracts occurred on June
7, 2000. The contracts with the remaining 68 stations relate to streaming
media services. We acquired these contracts in a subsequent closing on June
29, 2000.
We paid OnRadio.com total consideration of $9,000,000 for these
contracts, consisting of $500,000 in cash and the balance in 1,697,619 shares of
our common stock, which includes 450,000 shares of which are held in escrow
until June 6, 2001, against any purchase price adjustment or indemnification
obligations of OnRadio.com. Those shares are registered for resale under the
registration statement containing this prospectus. We also agreed to pay
OnRadio.com additional stock consideration worth up to $3,000,000, payable
in stock based on the $5.00 closing sales price, if we conclude customer
contracts with certain identified sales prospects of OnRadio.com, which
OnRadio.com has agreed to transition over to us. In addition, we entered into
certain other agreements with OnRadio.com, including agreements relating to
transitional services.
MAGNITUDE ACQUISITION. On August 3, 2000, we entered into an asset
purchase agreement with Magnitude Network, Inc., under which we (a) acquired
customer contracts, software, trademarks, domain names and web sites, and other
tangible and intangible assets used in the online media and streaming solutions
business of Magnitude, and (b) assumed certain of Magnitude's liabilities. We
also licensed certain software and other intellectual property rights from
Magnitude. In addition, Magnitude's parent corporation signed a non-solicitation
agreement under which it agreed to refrain from soliciting customers we acquired
in connection with the transaction, or our employees.
Magnitude paid us $238,715 in cash to cover the transition costs and we
issued Magnitude 2,082,429 shares of our common stock valued at $6,000,000, and
a stock purchase warrant to acquire 2,000,000 shares of our common stock at an
exercise price of $3.60. Of these shares, 416,485 are being held in escrow for
twelve months to satisfy certain indemnity claims that may arise against
Magnitude. We also granted Magnitude registration rights with regard to these
shares.
STANDARD RADIO FINANCING. On September 7, 2000, we sold to Standard
Radio Inc., an existing investor, 1,388,888 shares of common stock for $1.80 per
share and warrants to purchase up to 277,778 shares of common stock, for an
aggregate purchase price of approximately $2,500,000 (the "Standard Offering").
The warrants have a per share exercise price of $2.25, which is 125% of the per
share offering price in Standard Offering. If we raise a minimum of $7,500,000
on or before December 31, 2000, Standard has agreed to invest another $2,500,000
in us. However if that offering is made at a per share price that is less than
the price in the Standard Offering, then the Company shall promptly issue to
Standard additional shares based on a specified antidilution formula and shall
adjust the exercise price of the warrants issued to Standard. As part of the
transaction, we agreed to waive all of Standard's fees and expenses under our
existing co-marketing agreement with Standard's current radio stations for three
years, or so long as Standard continues to hold 2% or more of our issued and
outstanding shares.
BACKGROUND
We were incorporated in Nevada in April 1997 as Global Media Corp. In
May 1997, we acquired Westcoast Wireless Cable Ltd., which marketed
direct-to-home satellite broadcast hardware and programming services, from our
controlling stockholder. However, in late 1997, a Canadian federal court
prohibited the delivery of U.S.-based satellite programming in Canada, which had
been a significant part of our business. As a result, we wound down our home
satellite business and discontinued those operations completely in the fourth
quarter of fiscal 1998. In October 1997, we began operating a call center, which
provided investor relations services to U.S. and Canadian public companies. We
discontinued those operations in the third quarter of fiscal 1999 after we
adopted our e-commerce business plan. We changed our name to GlobalMedia.com in
April, 2000.
Our principal executive offices are located at 400 Robson Street,
Vancouver, British Columbia, Canada V6B 2B4 and our telephone number is (604)
688-9994. We maintain our principal Web site at www.globalmedia.com.
INFORMATION CONTAINED ON OUR WEB SITES SHOULD NOT
BE CONSIDERED A PART OF THIS PROSPECTUS.
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RISK FACTORS
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NOTE: In addition to reviewing other information in this prospectus and in our
Annual Report on Form 10-KSB and other documents incorporated herein by
reference, you should consider carefully the following risks before you decide
to buy our common stock. We have described these risks and uncertainties under
the following general categories: "Risks Related to Our Business," "Risks
Related to the Internet Industry" and "Risks Related to this Offering and Our
Common Stock." Our business, financial condition or results of operations could
be materially and adversely affected by any of these or other risks. In that
case, the trading price of our common stock could decline, and you may lose all
or part of the money you paid to buy our common stock. You should also consider
the risks and uncertainties associated with forward-looking statements included
in this prospectus with respect to our plans, objectives, expectations, and
intentions. SEE "Cautionary Note Regarding Forward-Looking Statements."
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RISKS RELATED TO OUR BUSINESS
WE HAVE A LIMITED HISTORY OF CURRENT OPERATIONS ON WHICH TO EVALUATE OUR
POTENTIAL FOR FUTURE SUCCESS.
We were incorporated in April 1997 and acquired Westcoast Wireless Cable
Ltd. in May 1997. We discontinued Westcoast's historical operations, the sale
and servicing of direct-to-home satellite broadcast hardware and programming
services, in the fourth quarter of fiscal 1998, and discontinued our other
historical operations, the operation of an investor relations call center, in
the third quarter of fiscal 1999. We commercially launched our e-commerce
solution in September 1999, and our streaming media solution in January 2000.
Accordingly, we have a very limited operating history on which you can evaluate
our business and prospects. You must consider the risks and uncertainties
frequently encountered by early stage companies in new and rapidly evolving
markets, such as Internet streaming and electronic commerce. To address the
risks and uncertainties we face, we must:
- gain broad market acceptance of our network associate program;
- improve reliability and performance of our streaming and
e-commerce solutions, front-end and back-end systems, and order
fulfillment;
- successfully develop new features and functionality of our
GlobalMedia.com player and of our online store and those of our
network associates;
- successfully respond to competition in streaming media services
from Yahoo!Broadcast, BroadcastAmerica.com, and others, and in
our entertainment product e-commerce operations from Amazon.com,
Inc., Ubrandit.com, CDNow, Inc., and others;
- recruit and retain key management, sales, technical and other
employees; and
- implement adequate internal processes and controls to manage our
growth.
Our business strategy may be unsuccessful and we may be unable to
address the risks we face in a cost-effective manner, if at all. Our inability
to successfully address these risks would cause significant harm to our
business, financial condition and results of operations.
WE HAVE A HISTORY OF LOSSES AND WE EXPECT LOSSES FOR THE NEAR FUTURE.
Since our inception, we have incurred significant losses, including
losses from our discontinued operations. Since the third quarter of fiscal 1999,
these losses have resulted primarily from costs related to developing our
broadcasting and e-commerce solutions, developing or acquiring technologies to
be used in our business, and general corporate overhead. We have generated
minimal revenues from our new operations. We expect to continue incurring net
losses through the fourth quarter of fiscal 2001, as we plan to invest in:
3
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- enhancing our broadcasting and e-commerce solutions and
improving their reliability and functionality;
- developing infrastructure and applications;
- marketing our network associate program; and
- hiring additional employees.
We believe these expenditures are necessary to attract more customers to
our Web site and the Web sites of our network associates, and to generate
greater online revenues. As a result, we anticipate operating losses and
negative operating cash flow through fiscal 2001. If our revenue growth is
slower than we anticipate or our operating expenses exceed our expectations, our
losses will be significantly greater and it will take longer to achieve positive
operating cash flow and profitability. We may never achieve or sustain
profitability.
OUR CAPITAL RESOURCES ARE LIMITED AND WE NEED FURTHER CAPITAL.
We expect to incur net losses and negative cash flow at least until the
end of fiscal 2001. We currently anticipate that our available funds will be
sufficient to meet our anticipated needs for working capital, capital
expenditures and business expansion through November 2000. If and when we close
the sale of the Series C convertible preferred stock and related investment
options and warrants (the "Series C offering"), we anticipate that our available
funds would be sufficient to meet our anticipated needs for working capital,
capital expenditures and business expansion through May 2001. However, we do not
expect to have satisfied those conditions by the end of November 2000. SEE " -
Risks Related to this Offering and Our Common Stock - Your holdings may be
diluted in the future - Series C Preferred." We will therefore need to raise
additional capital to meet our current obligations and operating needs by that
time. There is no assurance that additional financing will be available on terms
favorable to us or at all.
If additional funds are raised through the issuance of equity or
convertible debt securities, the percentage ownership of our stockholders will
be reduced, stockholders may experience additional dilution and such securities
may have rights, preferences and privileges senior to those of our common stock.
OUR FUTURE REVENUES ARE UNPREDICTABLE AND OUR QUARTERLY OPERATING RESULTS MAY
FLUCTUATE SIGNIFICANTLY.
Our revenues for the foreseeable future will derive primarily from
advertising, streaming fees, design and implementation fees and product sales.
Our revenues will depend primarily on:
- the number of network associates to whom we provide solutions;
- the number of listeners on our simulated live stations and the
stations of our network associates;
- the number of other visitors to our Web sites;
- the number of visitors that our network associates are able to
attract to their stores; and
- how many visitors to our and our network associates' sites
purchase our products.
Because these factors are difficult to predict, we cannot forecast with
any degree of certainty the amount of our entertainment product sales and
streaming media services revenues.
We expect our operating results to fluctuate significantly from period
to period. Both seasonal fluctuations in Internet usage and traditional retail
seasonality may affect our business. Internet usage generally declines during
the summer. Sales in the traditional retail book and music industries usually
increase significantly in the fourth calendar quarter of each year and are
correspondingly lower in other quarters. If similar seasonal patterns emerge in
e-commerce business, our revenues may vary significantly.
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Other factors which may cause our operating results to fluctuate
significantly from quarter to quarter include:
- technical difficulties with our system, downtime, system
failures or interruptions in Internet access;
- our ability to attract new and repeat users of the
GlobalMedia.com media player, visitors to our Web sites and the
Web sites of our network associates, and visitors to our online
store and the online stores of our network associates;
- our ability to attract and retain network associates;
- our network associates' ability to attract new and repeat
visitors to their Web sites and convert them into customers;
- our ability to keep current with the evolving tastes of our
target markets;
- the frequency of repeat purchases by customers, our average
order size, and the mix of products we sell on our own online
store and those of our network associates;
- the success of our existing competitors, the emergence of new
competitors, and the ability of our competitors to offer new or
enhanced Web site features, products or services;
- our ability, through our fulfillment partners, to ensure
sufficient product supply;
- changes in our pricing policies or the pricing policies of our
competitors;
- our ability to scale technology and upgrade processing
capabilities;
- the demand for Internet advertising and sponsorships;
- varying operating costs and capital expenditures related to the
expansion of our business operations and infrastructure,
including the hiring of new employees, and the acquisition or
development of new technologies or businesses;
- unanticipated cost increases, delays or interruptions in
transaction processing and order fulfillment;
- unanticipated delays or cost increases with respect to the
introduction of new products or services; and
- the costs, timing and impact of our marketing and promotion
initiatives.
In addition, because the market for our services is relatively new and
changing rapidly, it is difficult to predict future financial results. Our
business expenditures are partially based on our predictions regarding certain
developments for media delivery, Internet advertising, and consumer e-commerce.
To the extent that these predictions prove inaccurate, our operating results may
be negatively affected and fluctuate significantly. Because of these and other
factors, we believe that period-to-period comparisons of our results of
operations are not good indicators of our future performance. If our operating
results fall below the expectations of investors and other market participants
in some future periods, then our stock price may decline.
WE MAY BE OBLIGATED TO PAY A LARGE SALES TAX ASSESSMENT RELATING TO THE
PRE-ACQUISITION OPERATIONS OF WEST COAST.
In June 2000, West Coast received a sales tax assessment of
approximately $191,500 from the British Columbia Ministry of Finance and
Corporate Relations. The assessment relates to the operations of West Coast
prior to its purchase by us. We are considering an appeal of this assessment, in
addition to other available legal remedies, but may be required to pay it before
resolution of any appeal.
WE ARE GROWING RAPIDLY, AND EFFECTIVELY MANAGING OUR GROWTH MAY BE DIFFICULT.
We are currently experiencing a period of significant expansion. In
order to execute our business plan, we must continue to grow. This growth will
strain our personnel, management, systems, policies and procedures and other
resources. To manage our growth, we must implement operational and financial
systems and controls and recruit, train and manage new employees. We cannot be
certain that we will be able to integrate new executives and other employees
into our organization
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effectively. If we do not implement adequate systems and controls, recruit,
integrate and retain necessary personnel or otherwise manage growth effectively,
our business, results of operations and financial condition will be materially
and adversely affected.
CONSUMERS OF ENTERTAINMENT MERCHANDISE MAY NOT ACCEPT OUR ONLINE SOLUTION.
If a high volume of first-time and repeat customers are not attracted to
the Web sites of our network associates and our online store at a reasonable
cost, our business and operating results will be negatively affected. We may not
be able to convert a large number of customers from traditional shopping methods
to online shopping for CDs, videos, DVDs, books and other entertainment
merchandise. Specific factors that could prevent widespread customer acceptance
of our solution, and our ability to grow revenues, include:
- shipping charges, which do not apply to shopping at traditional
retailers of the merchandise we offer;
- delivery time associated with Internet orders, as compared to
the immediate receipt of products at a physical store;
- lack of consumer awareness of our online store and those of our
network associates;
- customer concerns about the security of online transactions and
the privacy of their personal information;
- product damage incurred during shipping or shipments of wrong
products from our fulfillment partners, resulting in a failure
to establish customers' trust in buying items online;
- delays in responses to customer inquiries or in deliveries to
customers; and
- difficulties in returning or exchanging orders.
WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY.
The markets in which we are engaged are new, rapidly evolving and
intensely competitive. Barriers to entry are relatively low but increasing. We
may not be able to compete successfully against current and future competitors.
Further, as a strategic response to changes in the competitive environment, we
may make certain pricing, service or marketing decisions or acquisitions that
could adversely affect our business, results of operations and financial
condition.
We currently or potentially compete with a number of other companies. We
compete with large, well-established Internet broadcasters such as
Yahoo!Broadcast and BroadcastAmerica.com. We also compete with traditional
physical retailers of entertainment merchandise, including large,
well-established book, music and video stores such as Barnes & Noble, Inc.,
Borders Group, Inc., and Wherehouse Entertainment, Inc., and mass market
retailers such as Wal-Mart Stores, Inc. In the market for online retailing of
books, CDs, video cassettes and DVDs, we compete with large, well-established
companies such as Amazon.com, Inc., Ubrandit.com, and CDNow, Inc.
Certain of our competitors currently offer, either alone or through
strategic relationships with other companies, a blend of multimedia content
delivery and e-commerce services to the principal target market for our network
associate program. Certain of our current competitors have longer operating
histories, larger customer bases, greater brand recognition in other business
and Internet markets, and significantly greater financial, marketing, technical
and other resources than us. In addition, other online retailers may be acquired
by, receive investments from, or enter into other commercial relationships with
larger, well-established and well-financed companies as use of the Internet and
other online services increases. Therefore, certain of our competitors with
other revenue sources may be able to devote greater resources to marketing and
promotional campaigns, adopt more aggressive pricing policies, and devote
substantially more resources to Web site and systems development than us.
Competitive pressures created by any one of these companies, or by our
competitors collectively, may result in loss of market share and reduced
operating margins, any of which could have a material adverse effect on our
business, results of operations and financial condition.
WE FACE THE RISK OF SYSTEMS INTERRUPTIONS AND CAPACITY CONSTRAINTS.
The satisfactory performance, reliability and availability of our media
player, online store, transaction processing systems and network infrastructure
are critical to our reputation and our ability to attract and retain customers
and maintain adequate customer service levels. From time to time, we have
experienced temporary system interruptions for a variety of reasons, including
software bugs and lack of reliable integration between various elements of our
systems and those of our
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vendors. We may not be able to correct any problem in a timely manner. Because
we outsource certain aspects of our system and because some of the reasons for a
systems interruption may be outside of our control, we also may not exercise
sufficient control to remedy the problem quickly or at all. Any future system
interruption that results in the unavailability of our media player or Web sites
or reduced order fulfillment performance could result in negative publicity
which would negatively affect our business.
We commercially opened our online e-commerce solution in September 1999
and to the extent that customer traffic grows substantially, we may need to
expand the capacity of our systems to accommodate a larger number of visitors.
We may be required to add additional software and hardware and further develop
and upgrade our existing technology, transaction-processing systems, network
infrastructure and distribution capabilities to accommodate increased traffic on
our site and those of our network associates and increased sales volume. Any
inability to scale our systems may cause unanticipated system disruptions,
slower response times, degradation in levels of customer service, impaired
quality and speed of order fulfillment, or delays in reporting accurate
financial information.
WE MAY NOT BE SUCCESSFUL IN IMPLEMENTING OUR NETWORK ASSOCIATE PROGRAM OR OUR
NETWORK ASSOCIATES MAY FAIL TO ATTRACT SIGNIFICANT NUMBERS OF CUSTOMERS.
Our business and results of operations will depend in large part on the
success of our network associate program. We have entered into definitive
agreements with 113 network associates (representing 185 unique e-commerce sites
and 59 broadcasters) and have implemented more than 150 e-commerce sites and 25
broadcasters. We have also recently acquired Web-services contacts for an
additional 144 radio stations and streaming contracts for 68 radio stations from
OnRadio, and Web-services and streaming contracts for an additional 112 stations
from Magnitude Networks. However, there is no guarantee that our network
associates will renew these contracts upon their expiration or that all of the
contracts that we purchased from OnRadio.com and Magnitude will be successfully
transitioned to our service. In order to attract and retain significant numbers
of network associates, we must:
- build a larger sales force to promote our network associate
program, particularly to the radio and television industries;
- successfully promote the benefits of our end-to-end streaming
and e-commerce solutions to potential network associates; and
- successfully compete against other companies that offer, or in
the future may offer, similar e-commerce and content-delivery
solutions, either on their own or through strategic
relationships with other parties.
In addition, in order to retain our network associates:
- our media player must function reliably and provide users with a
compelling interactive experience;
- our e-commerce system must work reliably and effectively with
our network associates' own Web sites;
- we must reliably fulfill orders of customers who purchase
products through our network associates' storefronts;
- we must provide a high level of customer service; and
- our program must result in significant direct or indirect
financial benefit to our network associates.
We may face obstacles in signing up significantly larger numbers of
network associates in the media industry, despite the appeal to radio and
television stations of our private label e-commerce solution bundled with
streaming media services. For example, Yahoo!Broadcast, a leading Internet
broadcaster of radio, television and other multimedia content, has established
relationships with hundreds of radio stations across the country, including
stations in many of the top radio markets in the U.S., and can offer its
streaming media customers some e-commerce solutions that are competitive to our
own through strategic relationships with other companies. Because
Yahoo!Broadcast has exclusive relationships with many of its streaming media
customers, those customers may not be willing or able contractually to become
our network associates.
We intend to control our own marketing and promotion expenditures by
relying on the marketing efforts of our network associates. Our business and
results of operations may therefore suffer if our network associates are
unsuccessful in attracting significant numbers of visitors to their Web sites.
While we analyze our potential network associates' plans for increasing traffic
to their Web sites, we have no control of the steps they actually take to
attract visitors to their sites except to the extent that the network associates
are contractually bound.
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WE DEPEND SIGNIFICANTLY ON OUR STRATEGIC RELATIONSHIPS WITH REALNETWORKS AND WE
HAVE ONLY A NON-EXCLUSIVE LICENSE TO THE TECHNOLOGIES IT HAS DEVELOPED FOR US.
We have entered into a number of transactions with RealNetworks which
are important to our business, including the following:
- a development agreement entered into in April 1999, under which
RealNetworks developed and licenses our media player to us, and
a related support and upgrade agreement entered into in January
2000;
- a streaming media services agreement entered into in January
2000 and amended in June 2000, under which we have agreed, for a
five year term, to use RealNetworks for streaming media services
over the Real Broadcast Network; and
- various marketing related agreements we entered into in the
first quarter of fiscal 2000, including advertising and
promotion agreements and other agreements pursuant to which we
are provided a "channel" and a number of "presets" on the
RealPlayer, which is RealNetworks' client media player that
enables end-users to experience multimedia content.
Our business depends to a significant extent on these relationships with
RealNetworks. Our relationships with RealNetworks involve numerous risks,
including the following:
- We do not own or have exclusive rights to the technology
underlying the GlobalMedia.com player and RealNetworks therefore
could license that technology to one or more of our existing or
future competitors or could use that technology itself to launch
competitive solutions.
- Our streaming media services agreement with RealNetworks
obligates us to use RealNetworks' streaming media services and
streaming media technologies on an exclusive basis until at
least June 2001, except to the extent necessary to service
customers we have or may acquire in certain acquisitions who are
using competitive streaming media technologies or service
providers at the time of acquisition. This exclusivity
limitation restricts our ability to develop and market streaming
solutions based on other streaming technologies such as the
Windows Media Player or to secure alternative streaming media
services at potentially more favorable costs.
- We have paid RealNetworks significant sums under our contracts
with them and we are not assured of receiving the expected
benefits of those contracts, particularly in the case of our
marketing-related agreements, which may fail to result in
sufficient consumer traffic to our network to pay for the costs
we incurred with RealNetworks under these agreements.
- Any early termination of our agreements with RealNetworks as a
result of our breach or otherwise could significantly disrupt
our business and potentially result in claims against us by
customers of our streaming media services.
WE MAY FAIL TO ESTABLISH AN EFFECTIVE INTERNAL SALES ORGANIZATION TO ATTRACT
NETWORK ASSOCIATES.
We believe that successful implementation of our network associate
program will depend on our ability to establish an aggressive and effective
internal sales organization. As of September 25, 2000, our internal sales team
had 22 members. We may need to substantially increase this sales force in the
future in order to execute our business plan. Our ability to increase our sales
force involves a number of risks and uncertainties, including competition for
employees and the length of time required for new sales employees to become
productive.
ACQUISITIONS OF TECHNOLOGIES OR BUSINESSES INVOLVE RISKS WE MAY NOT ADEQUATELY
ADDRESS.
We recently concluded an acquisition of certain customer contracts for
Web-related services, including streaming media services, from OnRadio.com and
an acquisition of the online media and streaming solutions business of Magnitude
Networks. The success of these transactions in increasing our revenues and
providing other expected benefits to our business depends on our ability to
integrate customers acquired in connection with these transactions into our
business and on our ability to market and sell our own solutions and services to
these customers. Until we do so, we will continue to provide certain services
OnRadio.com and Magnitude had contracted to provide, partly through ongoing
transitional relationships with OnRadio.com and Magnitude. We cannot provide any
assurance that substantial numbers or any of the customers we acquired from
OnRadio.com and Magnitude will enter into new agreements with us, that we will
be able adequately provide
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the services under the contracts we acquired from OnRadio.com and Magnitude
until the customers transition over to our solutions and enter into new
agreements with us, or that even if substantial numbers or any of these acquired
customers do enter into new contracts with us for our own solutions and services
that the transaction will ultimately result in the benefits we expect it to
provide. We also may consider other acquisitions from time to time. The
OnRadio.com transaction and Magnitude acquisition, as well as any future
acquisitions of technologies, businesses or other assets we consummate in the
future, may involve various risks, including the following:
- potentially dilutive issuances of equity securities to pay for
acquisitions;
- use of cash resources;
- incurrence of contingent liabilities or assumption of known or
unknown liabilities;
- difficulties in assimilating operations, products, technologies,
services and personnel of acquired companies;
- diversion of management's attention from other business
concerns;
- impairment of relationships with our employees, advertisers,
customers and content providers or those of companies we may
acquire; and
- inability to maintain uniform standards, controls, procedures
and policies.
The failure to address financial and operational risks involved in
acquisitions of technology, businesses or other assets could cause material harm
to our business and negatively affect our financial condition and results of
operations.
WE DEPEND ON OUR FULFILLMENT PARTNERS; IF THEY DO NOT PERFORM OR OUR
RELATIONSHIP WITH THEM IS TERMINATED, OUR BUSINESS MAY SUFFER.
To generate the significant customer traffic, volume of purchases and
repeat purchases that we believe are crucial to obtaining sufficient revenues,
we must develop and maintain customer trust in the timing and accuracy of our
product deliveries. We currently carry no inventory of our own and depend on
fulfillment partners for rapid order fulfillment. We currently purchase all of
the merchandise we offer online from two fulfillment partners, Baker & Taylor,
Inc. and the iFill division of Valley Media, Inc. We intend to enter into other
fulfillment agreements to have alternative sources of supply and expand our
product offerings. We may not be able to secure alternative fulfillment partners
on acceptable terms in a timely manner, or at all. Negotiating and implementing
relationships with additional fulfillment partners would take substantial time
and resources. Our agreements with Baker & Taylor and Valley Media have one-year
terms and renew on an annual basis for up to five succeeding years. However,
each agreement can be terminated prior to the annual renewal date. We cannot be
certain that our contracts with Baker & Taylor and Valley Media will be renewed
or that either fulfillment partner will not terminate its agreement earlier for
breach.
Our ability to fulfill our customers' orders may be significantly
hampered and our business will suffer major disruptions if Baker & Taylor,
Valley Media, or any alternative fulfillment partners with whom we may establish
relationships in the future:
- fail to comply with federal, state and local regulations that
apply to their performance of services for us;
- breach or terminate their agreements with us;
- suffer adverse developments that affect their ability to supply
products to us, such as employee strikes, system crashes and
inclement weather;
- are unable or unwilling to supply products to us in sufficient
quantities or in a timely manner; or
- are unable or unwilling to ship products to any markets in which
we have customers.
Because we rely on third parties to fulfill orders, we depend on their
systems for tracking inventory and financial data. In addition, our order
fulfillment and distribution process requires us to cooperate extensively with
our fulfillment partners with respect to the coordination of separate
information technology systems. From time to time we have experienced problems
relating to the integration of our systems with those of Baker & Taylor and
Valley Media, which has affected our ability to timely fill customers' orders.
While we have corrected these problems, we cannot ensure that any
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future problems will be resolved on a timely basis or at all. In addition, if we
establish new fulfillment partner relationships, we cannot be sure that we will
be able to integrate our respective information systems on a timely basis. If
our fulfillment partners' systems fail or are unable to scale or adapt to
changing needs, our ability to timely fill customers' orders may be hindered and
we may not have adequate, accurate or timely inventory or financial information.
Our failure to have adequate, accurate or timely inventory and financial
information would harm our ability to manage our business effectively.
WE RELY HEAVILY ON THIRD PARTIES FOR ESSENTIAL BUSINESS OPERATIONS AND MAY BE
ADVERSELY AFFECTED BY DISRUPTIONS OR FAILURES IN SERVICE.
We depend on third parties for important aspects of our business,
including Internet access and Web hosting services, and new Web site features
and content. We have limited control over these third parties, and we are not
their only client. We may not be able to maintain satisfactory relationships
with any of them on acceptable commercial terms. Further, we cannot be certain
that the quality of products and services that they provide will remain at
levels needed to enable us to conduct our business effectively. We may not be
able to renew agreements with third party vendors on current terms.
Our dependence on third party vendors entails various risks, including:
- our current vendors may not continue to provide services to us
on current terms;
- we may not be able to establish new or extend current vendor
terms on a timely basis or at all; and
- our vendors may not comply with federal, state and local
regulations that apply to their performance of services for us.
If we cannot develop and maintain relationships with vendors that allow
us to obtain sufficient quantities of merchandise or necessary services on
acceptable commercial terms or if our vendors fail to comply with applicable
law, our business may be harmed.
We also rely on third-party carriers for product shipments, including
shipments to and from our fulfillment partners' distribution facilities. We are
therefore subject to the risks, including employee strikes and inclement
weather, associated with third-party carriers' ability to provide delivery
services to meet our shipping needs. Failure to deliver products to our
customers in a timely and accurate manner would harm our reputation, and our
business and results of operations.
OUR SYSTEMS AND OPERATIONS, AND THOSE OF OUR VENDORS AND DISTRIBUTORS, ARE
VULNERABLE TO NATURAL DISASTERS, SYSTEMS INTERRUPTIONS AND OTHER UNEXPECTED
PROBLEMS.
Substantially all of our computer and communications hardware is located
at our leased facilities in Vancouver, British Columbia, Canada, and our systems
infrastructure is hosted at third-party hosting providers' facilities in
Vancouver, British Columbia and Seattle, Washington. The continuing and
uninterrupted performance of those systems is critical to our success. Our
systems and operations and those of our hosting providers are vulnerable to
damage or interruption from fire, flood, power loss, telecommunications failure,
earthquakes and similar events. In addition, our servers are vulnerable to
computer viruses, physical or electronic break-ins and similar disruptions,
which could lead to interruptions, delays, loss of data or the inability to
accept and fulfill customer orders. Sustained or repeated system failures or
interruptions of our site connection services would reduce the attractiveness of
our site to customers, and could therefore have a material adverse effect on our
business. Our fulfillment partners, including Baker & Taylor and Valley Media,
may also face these risks.
We depend on the efficient operation of Internet connections from
customers to our systems. These connections, in turn, depend on the efficient
operation of Web browsers, Internet service providers and Internet backbone
service providers, all of which have had periodic operational problems or
experienced outages. Any system delays, failures or loss of data, whatever the
cause, could reduce customer satisfaction with our applications and services and
harm our business.
We retain confidential customer information in our processing centers.
Therefore, it is critical that our facilities and infrastructure remain secure
and that our facilities and infrastructure are perceived by the marketplace to
be secure. A material security breach could damage our reputation or result in
liability to us.
WE DEPEND ON OUR KEY PERSONNEL TO OPERATE OUR BUSINESS, AND WE MAY NOT BE ABLE
TO HIRE ENOUGH ADDITIONAL MANAGEMENT AND OTHER PERSONNEL AS OUR BUSINESS GROWS.
Our performance is substantially dependent on the continued services of
our executive officers and other key employees, particularly Michael Metcalfe,
our former Chairman, Jeffrey Mandelbaum, our President, Chief Executive
Officer, and Chairman, Robert Fuller, our Chief Operating Officer, L. James
Porter, our Chief Financial Officer, and Winston
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V. Barta, our Vice President of Business Development. The loss of the
services of any of our executive officers could materially and adversely
affect our business. We do not maintain key man insurance on any of our
employees. Additionally, we believe that we will need to attract, retain and
motivate talented management and other highly skilled employees, particularly
those with technical backgrounds, to be successful. Competition for employees
that possess knowledge of both the Internet industry and our target market is
intense. We may be unable to retain our key employees or attract, assimilate
and retain other highly qualified employees in the future.
WE MAY NOT BE ABLE TO ADAPT AS INTERNET TECHNOLOGIES AND CUSTOMER DEMANDS
CONTINUE TO EVOLVE.
To be successful, we must adapt to rapidly changing Internet
technologies and continually enhance the features and services provided on our
GlobalMedia.com player and Web sites, and to our network associates. We could
incur substantial, unanticipated costs if we need to modify our media player,
Web sites, software or infrastructure to incorporate new technologies demanded
by our customers or our network associates. We may use new technologies
ineffectively or we may fail to adapt our media player, Web sites,
transaction-processing systems and network infrastructure to user requirements
or emerging industry standards.
WE MAY NOT BE ABLE TO PROTECT AND ENFORCE OUR TRADEMARKS, WEB ADDRESSES AND
PROPRIETARY RIGHTS.
We rely or may in the future rely on a combination of patent, trademark,
trade secret and copyright law and contractual restrictions to protect the
proprietary aspects of our technology and proprietary content. These legal
protections afford only limited protection for our intellectual property and
trade secrets. Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy aspects of our proprietary technology
or otherwise obtain and use information that we regard as proprietary.
We are in the process of filing Canadian and U.S. applications for
trademark registration of "GlobalMedia.com," "GlobalMedia.com Network." We may
be unable to secure such trademark registrations. It is also possible that our
competitors or others will adopt service names similar to ours, thereby possibly
leading to customer confusion. Any claims or customer confusion related to our
trademarks, or our failure to obtain trademark registrations, could negatively
affect our business.
Litigation may be necessary in the future to enforce our intellectual
property rights, to protect our trade secrets and domain names, and to determine
the validity and scope of the proprietary rights of others. If third parties
prepare and file applications in the United States, Canada or other countries
that claim trademarks used or registered by us, we may oppose those applications
and be required to participate in proceedings before the regulatory agencies
involved determine priority of rights to the trademarks. Any litigation or
adverse priority proceeding could result in substantial costs and diversion of
resources and could seriously harm our business and operating results.
Finally, to the extent that we operate internationally, the laws of many
countries do not protect our proprietary rights to as great an extent as do the
laws of the United States and Canada. Many countries have a "first-to-file"
trademark registration system. As a result, we may be prevented from registering
or using our trademarks in certain countries if third parties have previously
filed applications to register or have registered the same or similar trademark.
Our means of protecting our proprietary rights may not be adequate, and our
competitors could independently develop similar technology.
We hold rights to various Web domain names, including "globalmedia.com."
Governmental agencies typically regulate domain names. These regulations are
subject to change. We may not be able to acquire or maintain appropriate domain
names in all countries in which we do business. Furthermore, regulations
governing domain names may not protect our trademarks and similar proprietary
rights. We may be unable to prevent third parties from acquiring domain names
that are similar to, infringe upon or diminish the value of our trademarks and
other proprietary rights.
WE MAY BE FOUND TO INFRINGE UPON THE PROPRIETARY RIGHTS OF OTHERS OR FACE
LIABILITY FOR CONTENT ON OUR WEB SITES.
Third parties may claim infringement by us with respect to past, current
or future technologies and other proprietary rights. Any such claim, whether
meritorious or not, could be time-consuming, result in costly litigation, or
require us to enter into royalty or licensing agreements. Such royalty or
licensing agreements might not be available on terms acceptable to us or at all.
Because we post our own content and content licensed from third parties
on our sites, we face potential liability for negligence, copyright, patent,
trademark, defamation, indecency and other claims based on the nature and
content of the materials that we post. Such claims have been brought, and
sometimes successfully pressed, against Internet content distributors. In
addition, we could be exposed to liability with respect to the unauthorized
duplication or distribution of content.
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Although we maintain general liability insurance, our insurance may not
cover potential claims of the types described above or may not be adequate to
indemnify us for all liability that may be imposed. Any imposition of liability
that is not covered by insurance or is in excess of insurance coverage could
harm our business.
RISKS RELATED TO THE INTERNET INDUSTRY
WE ARE DEPENDENT ON THE CONTINUED DEVELOPMENT OF THE INTERNET INFRASTRUCTURE.
Our industry is rapidly evolving. Our business would be adversely
affected if Web usage, media delivery over the Internet, and e-commerce does not
continue to grow. Growth in these areas may be inhibited for a number of
reasons, including:
- inadequate Internet infrastructure;
- security concerns;
- inconsistent quality of service;
- unavailability of cost-effective, high-speed service; or
- imposition of transactional or other taxes.
OUR LONG-TERM SUCCESS DEPENDS ON THE DEVELOPMENT OF E-COMMERCE AND THE MARKET
FOR STREAMING MEDIA SERVICES, WHICH IS UNCERTAIN.
Our future revenues and profits depend substantially on the widespread
acceptance and use of the Web as an effective medium of commerce by consumers,
as well as the widespread acceptance of the Internet as a medium of broadcast by
consumers and producers of audio, video and other multimedia content. Commercial
use of the Internet as a broadcast medium is in its early stages. Demand for
recently introduced services and products over the Web is subject to a high
level of uncertainty. The development of the Web as a viable commercial
marketplace or as a broadcast medium is subject to a number of factors,
including the following:
- buyers may be unwilling to shift their purchasing from
traditional vendors to online vendors;
- broadcasts of multimedia content on the Internet are generally
of lower quality than broadcasts in traditional mediums and are
subject to more frequent interruptions and packet loss;
- radio listeners, television viewers and consumers of other
multimedia content may be unwilling to shift their consumption
of such content to the Internet or it may be more difficult to
establish viable revenue streams from Internet broadcasts;
- telecommunication services may not be sufficiently available or
may change in ways that adversely affect e-commerce or streaming
media services; and
- adverse publicity and consumer concerns about the security of
commerce transactions on the Internet could discourage its
acceptance and growth.
BREACHES OF SECURITY ON THE INTERNET MAY SLOW THE GROWTH OF E-COMMERCE AND
SUBJECT US TO LIABILITY.
The need to securely transmit confidential information such as credit
card and other personal information over the Internet has been a significant
barrier to e-commerce and communications over the Web. Any well-publicized
compromise of security could deter more people from using the Web or from using
it to conduct transactions that involve transmitting confidential information,
such as purchases of goods or services. To the extent that our activities or the
activities of third-party contractors involve the storage and transmission of
proprietary information, such as credit card numbers, security breaches could
disrupt our business, damage our reputation and expose us to a risk of loss or
litigation and possible liability. We could be liable for claims based on
unauthorized purchases with credit card information, impersonation or other
similar fraud claims. Claims could also be based on other misuses of personal
information, such as for unauthorized marketing purposes. We may need to spend a
great deal of money and use other resources to protect against the threat of
security breaches or to alleviate problems caused by security breaches.
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WE FACE RISKS ASSOCIATED WITH GOVERNMENT REGULATION OF AND LEGAL UNCERTAINTIES
SURROUNDING THE INTERNET.
Any new law or regulation pertaining to, or the application or
interpretation of existing laws to, the Internet could increase our cost of
doing business or otherwise adversely affect our business. Laws and regulations
directly applicable to Internet communications, commerce and advertising are
becoming more prevalent. The law governing the Internet, however, remains
largely unsettled, even in areas where there has been some legislative action.
It may take years to determine whether and how existing laws governing
intellectual property, copyright, privacy, obscenity, libel and taxation apply
to the Internet. In addition, the growth and development of e-commerce may
prompt calls for more stringent consumer protection laws, both in the United
States and abroad. Governments in foreign jurisdictions may regulate Internet or
other online services in such areas as content, privacy, network security,
encryption or distribution more stringently than in the United States. This may
affect our ability to conduct business internationally. We also may be subject
to future regulation not specifically related to the Internet, including laws
affecting direct marketers.
RISKS RELATED TO THIS OFFERING AND OUR COMMON STOCK
YOUR HOLDINGS MAY BE DILUTED IN THE FUTURE.
SERIES A AND B PREFERRED. As of September 25, 2000, (a) 4,175 shares of
our Series A and 5,000 shares of our Series B convertible preferred stock,
having an aggregate stated value of $9,175,000, were outstanding, and (b)
warrants to purchase 1,068,500 shares of common stock issued to the holders of
the Series A and Series B convertible preferred stock were outstanding. Based on
the conversion price in effect immediately prior to our filing of the
registration statement declared effective on September 26, 2000, the total
number of shares that we would have issued to the holders of the outstanding
shares of Series A and Series B convertible preferred stock at that time had
they converted the total number of such shares and exercised the related
investment options in full would have been 11,940,742 shares. However, the
actual number of shares that may be issued on conversion of the Series A and
Series B convertible preferred stock and exercise of the related investment
options may prove to be significantly greater in the event of a decrease in the
trading price of our common stock. The warrants have a term of five years from
the date of issuance at a price of $8.3475 for the 680,000 warrants issued with
the Series A convertible preferred stock, and $7.0785 for the 388,500 warrants
issued with the Series B convertible preferred stock. Purchasers of common stock
could experience substantial dilution from the conversion of shares of Series A
and B convertible preferred stock and exercise of related investment options and
warrants, and such dilution could increase with decreases in the trading price
of our common stock.
STOCK OPTIONS AND OTHER WARRANTS. As of September 25, 2000, 7,653,475
shares of common stock were reserved for issuance upon exercise of outstanding
stock options granted under our stock option plans at exercise prices ranging
from $0.50 to $8.00 per share, of which 3,352,907 are currently exercisable. In
addition, at such date we had other warrants to purchase a total of 62,769
shares at an exercise price of $8.125 per share outstanding which are currently
exercisable. Under agreements with a certain party that has acted as our
financial advisor, we may be required to issue that party additional warrants as
compensation under those agreements. Purchasers of common stock could experience
substantial dilution of their investment upon exercise of stock options and
warrants.
FUTURE INVESTMENT BY STANDARD RADIO. On September 7, 2000, we sold to
Standard Radio Inc., an existing investor, 1,388,888 shares of common stock for
$1.80 per share and warrants to purchase up to 277,778 shares of common stock,
for an aggregate purchase price of approximately $2,500,000 (the "Standard
Offering"). The warrants have a per share exercise price of $2.25, which is 125%
of the per share offering price in Standard Offering. If we raise a minimum of
$7,500,000 on or before December 31, 2000, Standard has agreed to invest another
$2,500,000 in us. However if that offering is made at a per share price that is
less than the price in the Standard Offering, then the Company shall promptly
issue to Standard additional shares based on a specified antidilution formula
and shall adjust the exercise price of the warrants issued to Standard. As part
of the transaction, we agreed to waive all of Standard's fees and expenses under
our existing co-marketing agreement with Standard's current radio stations for
three years, or so long as Standard continues to hold 2% or more of our issued
and outstanding shares.
SHARES ELIGIBLE FOR FUTURE SALE BY OUR CURRENT STOCKHOLDERS MAY ADVERSELY AFFECT
OUR STOCK PRICE.
As of September 25, 2000, 28,786,522 shares of our common stock were
outstanding. Of these outstanding shares, 8,570,568 were freely tradable without
restriction. The remaining 20,215,954 shares are eligible for sale in the public
markets within the limits of Rule 144 under the Securities Act. If our
stockholders sell substantial amounts of our common stock in the public market
in the future, then the market price of our common stock could fall. To date, we
have had limited trading volume in our common stock. Sales of substantial
amounts of common stock under Rule 144, the registration statement of which this
prospectus is a part, our other registration statements or otherwise could
adversely affect the
13
<PAGE>
prevailing market price of our common stock and could impair our ability to
raise capital at that time through the sale of our securities.
STOCK OPTIONS. We have filed registration statements to register all
shares of common stock issuable under our 1998 and 1999 stock option plans and
intend to file a registration statement to register all shares of common stock
issuable under our 2000 stock option plan. Consequently, shares issued upon
exercise of stock options granted under those plans will be eligible for resale
in the public market without restriction (except to the extent they are issued
to our executive officers and directors). As of September 25, 2000, options
covering a total of 5,046,770 shares, of which 3,352,907 were vested, were
outstanding under these plans.
PREFERRED STOCK. We filed a registration statement covering the resale
of shares of common stock issuable upon conversion of the Series A convertible
preferred stock, related investment options and warrants in 1999 and such
registration statement is currently effective. We also filed a registration
statement folding in the Series A transaction and covering the resale of shares
issuable upon conversion of the Series B convertible preferred stock, related
investment options and warrants, which was declared effective on September 26,
2000. Consequently, all such shares when issued are eligible for resale in the
public market without restriction. Based on the conversion price in effect as of
September 25, 2000, the total number of shares of common stock issuable upon
conversion of the outstanding shares of Series A and Series B convertible
preferred stock and exercise of the related investment options, and upon
exercise of the related warrants, was 13,009,242 shares.
ONRADIO.COM SHARES. In connection with our acquisition of certain
assignable customer contracts from OnRadio.com in June 2000, we issued to
OnRadio.com a total of 1,697,619 shares, of which 450,000 shares are being
held in escrow to cover a purchase price adjustment which may be required if
certain levels of customer attrition are exceeded during the 12 months period
after the initial closing of this transaction. We also agreed to issue
OnRadio.com up to an additional 600,000 shares in connection with our
consummation of contractual relationships with certain sales prospects
OnRadio.com agreed to transition over to us in connection with this
transaction. Under our agreements with OnRadio.com, we are required to file a
registration statement, of which this prospectus is a part, covering the
shares we issued and may issue to them in connection with this transaction.
Once this registration statement is declared effective, the shares issued to
OnRadio.com will be eligible for resale in the public market without
restriction, except that OnRadio.com agreed to limitations on the number of
shares it will sell determined by reference to the volume limitations under
Rule 144(e).
MAGNITUDE SHARES. In connection with our acquisition of the online media
and streaming solutions business of Magnitude Network, in August 2000, we issued
a total of 2,082,429 shares (416,485 of which are being held in an escrow for
twelve months to satisfy certain indemnity claims that may arise against
Magnitude), and a stock purchase warrant to acquire 2,000,000 shares of our
common stock at an exercise price of $3.60. Under our agreements with Magnitude
and its corporate affiliates, we are required to file a registration statement
covering the shares we issued and may issue to them in connection with this
transaction. Once that registration statement is effective, the shares issued in
connection with the Magnitude transaction will be eligible for resale in the
public market without restriction.
WE ARE CONTROLLED BY OFFICERS, DIRECTORS AND EXISTING STOCKHOLDERS, IN
PARTICULAR OUR CHAIRMAN.
As of September 25, 2000, executive officers, directors and entities
affiliated with them, in the aggregate, beneficially owned approximately 59%,
and Michael Metcalfe, our former Chairman, beneficially owned approximately
42.73%, of our outstanding shares of common stock. Mr. Metcalfe is able to
control substantially all matters requiring approval by our stockholders,
including the election of directors, amendments to our articles of
incorporation, and mergers or other business combination transactions. Mr.
Metcalfe's substantial equity stake could also make us a much less attractive
acquisition candidate to potential acquirers, because Mr. Metcalfe could have
sufficient votes to prevent the approval or the tax-free treatment of an
acquisition.
ANTI-TAKEOVER PROVISIONS AND OUR RIGHT TO ISSUE PREFERRED STOCK COULD MAKE A
THIRD-PARTY ACQUISITION OF US DIFFICULT.
We are a Nevada corporation. The anti-takeover provisions of Nevada law
could make it more difficult for a third party to acquire or gain control of us,
even if such a transaction would be beneficial to stockholders. Our articles of
incorporation provide that our board of directors may issue preferred stock
without stockholder approval. The issuance of preferred stock could make it more
difficult for a third party to acquire us. Each of these factors could adversely
affect the prevailing market price for our common stock.
OUR COMMON STOCK PRICE IS HIGHLY VOLATILE.
The market price of our common stock has been, and is likely to continue
to be, highly volatile. In addition, the market for technology stocks has been
extremely volatile. Purchasers of our common stock may not be able to resell
their
14
<PAGE>
shares following periods of volatility because of the market's adverse reaction
to volatility. The trading prices of many technology and Internet-related
companies' stocks reached historical highs during 1999 and the first quarter of
2000, reflecting valuations substantially above historical levels. During the
same period, these companies' stocks have also been highly volatile, and since
the first quarter of 2000 have recorded lows well below the historical highs. We
cannot assure you that our stock will trade at the same levels of other Internet
stocks or that Internet stocks in general will sustain their current market
prices. Factors that could cause volatility in our stock price may include,
among other things:
- actual or anticipated fluctuations in our quarterly operating
results;
- announcements by us or our competitors of technological
innovations, significant contracts, new products or services
offerings or enhancements;
- changes in financial estimates or recommendations by securities
analysts;
- conditions or trends in the Internet industry;
- changes in the market valuations of other Internet, streaming
media, online services and software companies;
- the addition or loss of strategic relationships or key vendors;
- conditions or trends in the Internet, online commerce and media
streaming markets;
- announcements by us or our competitors of significant
acquisitions, strategic partnerships, joint ventures or capital
commitments;
- additions or departures of key personnel;
- sales of our common stock or other securities in the future;
- fluctuations in stock market prices and volumes; and
- general stock market conditions and conditions in the technology
and Internet sectors in particular.
Volatility in the market price of our common stock may prevent investors
from being able to sell their common stock at or above the price at which
investors bought our common stock. In the past, class action litigation has
often been brought against companies following periods of volatility in the
market price of those companies' common stock. We may become involved in this
type of litigation in the future. Litigation is often expensive and diverts
management's attention and resources, which could materially and adversely
affect our business and results of operations.
15
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the sale by the selling
stockholders of common stock held by them and registered pursuant to the
registration statement of which this prospectus is a part.
SELLING STOCKHOLDERS
This prospectus relates to the offering of shares of our common stock
for resale by (1) OnRadio.com, and (2) its pledgees, donees, transferees or
other successors in interest (collectively, the "selling stockholders"). All of
the shares of common stock offered by this prospectus are being offered by the
selling stockholders for their own accounts.
The following table sets forth certain information with respect to the
common stock beneficially owned by the selling stockholders as of the date of
this prospectus and after the offering, assuming that all of the shares held by
the selling shareholder are sold. The selling stockholders provided us the
information included in the table below. To our knowledge, OnRadio.com has sole
voting and investment power over the shares of common stock offered for resale
by it. No selling stockholder, to our knowledge, has had a material relationship
with us during the last three years, except (a) for our transaction with
OnRadio.com described elsewhere in this prospectus, or (b) as an owner of our
common stock or other securities.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF
BENEFICIAL OWNERSHIP OF COMMON COMMON STOCK AFTER THE
STOCK PRIOR TO THE OFFERING OFFERING
--------------------------------------------------------------
NUMBER OF SHARES TO
NUMBER OF BE SOLD UNDER THIS NUMBER OF PERCENT OF
SELLING STOCKHOLDER SHARES PROSPECTUS SHARES CLASS
------------------- ------ ---------- ------ -----
<S> <C> <C> <C> <C>
OnRadio.com 1,697,619 1,697,619 0 0
</TABLE>
PLAN OF DISTRIBUTION
The shares being offered by the selling stockholders will be sold from
time to time in one or more transactions, which may involve block transactions:
- on the Nasdaq National Market or on such other market on which
the common stock may from time to time be trading;
- in privately-negotiated transactions;
- through the writing of options on the shares;
- short sales; or
- any combination thereof.
The sale price to the public may be:
- the market price prevailing at the time of sale;
- a price related to such prevailing market price;
- at negotiated prices; or
- such other price as the selling stockholders determine from time
to time.
The shares may also be sold pursuant to Rule 144. The selling
stockholders shall have the sole and absolute discretion not to accept any
purchase offer or make any sale of shares if they deem the purchase price to be
unsatisfactory at any particular time.
The selling stockholders may also sell the shares directly to market
makers acting as principals or broker-dealers acting as agents for themselves or
their customers. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling stockholders and/or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal or both, which compensation as to a particular
broker-dealer might be in excess of customary commissions. Market makers and
block purchasers purchasing the shares will do so for their own account and at
their own risk. It is possible that a selling stockholder will attempt to sell
shares of common stock in block transactions to market makers or other
purchasers at a price per share which may be below the then market price. The
selling stockholders cannot assure that all or any of the shares offered in this
prospectus will be issued to, or sold by, the selling
16
<PAGE>
stockholders. The selling stockholders and any brokers, dealers or agents, upon
effecting the sale of any of the shares offered in this prospectus, may be
deemed "underwriters" as that term is defined under the Securities Act or the
Exchange Act, or the rules and regulations under such acts.
The selling stockholders, alternatively, may sell all or any part of the
shares offered in this prospectus through an underwriter. No selling stockholder
has entered into any agreement with a prospective underwriter and there is no
assurance that any such agreement will be entered into. If a selling stockholder
enters into such an agreement or agreements, the relevant details will be set
forth in a supplement or revisions to this prospectus.
The selling stockholders and any other persons participating in the sale
or distribution of the shares will be subject to applicable provisions of the
Exchange Act and the rules and regulations under such act, including, without
limitation, Regulation M. These provisions may restrict certain activities of,
and limit the timing of purchases and sales of any of the shares by, the selling
stockholders or any other such person. Furthermore, under Regulation M, persons
engaged in a distribution of securities are prohibited from simultaneously
engaging in market making and certain other activities with respect to such
securities for a specified period of time prior to the commencement of such
distributions, subject to specified exceptions or exemptions.
All of these limitations may affect the marketability of the shares.
We have agreed to indemnify the selling stockholders, or their
transferees or assignees, against certain liabilities, including liabilities
under the Securities Act, or to contribute to payments the selling stockholders
or their respective pledgees, donees, transferees or other successors in
interest, may be required to make in respect of such liabilities.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
We believe that certain provisions of our articles of incorporation and
bylaws will be useful to attract and retain qualified persons as directors and
officers. Our articles of incorporation limit the liability of directors and
officers to the fullest extent permitted by Nevada law. This is intended to
allow our directors and officers the benefit of Nevada's corporation law which
provides that directors and officers of Nevada corporations may be relieved of
monetary liabilities for breach of their fiduciary duties as directors, except
under certain circumstances, including (a) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law, or (b) the payment
of unlawful distributions.
There is no pending litigation or proceeding involving any of our
directors, officers, associates or other agents to which indemnification is
being sought, nor are we aware of any threatened litigation that may result in
claims for indemnification by any director, officer, associate or other agent.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 15, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
LEGAL MATTERS
The validity of the issuance of common stock offered by this prospectus
has been passed upon for us by Dennis Brovarone, Esq., of Westminster, Colorado.
EXPERTS
Ernst & Young LLP, independent auditors, audited our consolidated
financial statements included in our annual report on Form 10-KSB for the years
ended July 31, 1999 and 1998, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our financial statements are incorporated by reference in reliance on
Ernst & Young LLP's report, given on their authority as experts in accounting
and auditing.
On February 1, 2000, we filed a Current Report on Form 8-K reporting the
substitution of Arthur Andersen LLP for Ernst & Young, as our auditors.
17
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses incurred in connection with the sale
and distribution of the securities being registered, other than underwriting
discounts and commissions. All of the amounts shown are estimated except the SEC
registration fee.
<TABLE>
--------------------------------------------------------------
<S> <C>
SEC registration fee $ 427.17
--------------------------------------------------------------
Nasdaq listing fee $17,500
--------------------------------------------------------------
Transfer agent fee 500
--------------------------------------------------------------
Printing expenses 8,000
--------------------------------------------------------------
Legal fees and expenses 50,000
--------------------------------------------------------------
Accounting fees and expenses 30,000
--------------------------------------------------------------
Blue sky fees and expenses, including legal fees 5,000
--------------------------------------------------------------
Miscellaneous 1,000
--------------------------------------------------------------
TOTAL $112,427.17
--------------------------------------------------------------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
LIMITATIONS ON DIRECTORS' LIABILITIES UNDER NEVADA LAW.
The General Corporation Law of Nevada (the "GCL") permits a corporation
organized thereunder to indemnify its directors and officers for certain of
their acts. Article 11 of the Bylaws of Global Media.com (formerly known as
Global Media Corp.) provides that:
(a) to the full extent of Section 78.751 of the GCL, the Company shall
indemnify all persons who may be indemnified pursuant thereto, and that every
person who was or is a party or is threatened to be made a party to or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or a person of
whom he is the legal representative is or was a director or officer of the
corporation or is or was serving at the request of the corporation or for its
benefit as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless to the fullest extent legally permissible under
the GCL from time to time against all expenses, liability and loss (including
attorneys' fees, judgments, fines and amounts paid or to be paid in settlement)
reasonably incurred or suffered by him in connection therewith; and
(b) the Company shall pay any expenses of officers and directors
incurred in defending a civil or criminal action, suit or proceeding as they are
incurred and in advance of the final disposition of the action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the Company;
and
(c) this right of indemnification is a contract right which may be
enforced in any manner desired by such person, and is not be exclusive of any
other right which such directors, officers or representatives may have or
hereafter acquire and, without limiting the generality of such statement, they
shall be entitled to their respective rights of indemnification under any bylaw,
agreement, vote of stockholders, provisions of law or otherwise, as well as
their rights under Article 11 of the Bylaws of GlobalMedia.com.
Should the indemnified person be successful on the merits, Section
78.751 provides that such person shall be indemnified against expenses incurred
by him. In a suit, action or proceeding against such person brought by or on
behalf of the corporation in which such person was found to be liable to the
corporation, any indemnification must be approved by the court in which such
action is brought. Section 78.752 of the GCL empowers corporations to purchase
and maintain insurance on behalf of an officer or director of the corporation
against any liability, regardless of whether the corporation could indemnify
such person against such liabilities.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
II-1
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
4.1 Form of specimen certificate for common stock. (1)
4.2 Investor Rights Agreement as of June 7, 2000 by and between
GlobalMedia.com and OnRadio.com. (2)
5.1 Legal Opinion Regarding Legality of the Securities Being Registered
23.1 Consent of Ernst & Young, LLP. (3)
23.2 Consent of Dennis Brovarone, Esq. (contained in Exhibit 5.1)
24 Power of Attorney
99.1 Asset Purchase Agreement dated June 6, 2000 by and among
GlobalMedia.com and OnRadio.com.(2)
99.2 Transition Services Agreement dated June 7, 2000 by and among
GlobalMedia.com and OnRadio.com. (2)
99.3 Software License Agreement dated June 7, 2000 by and among by and
among GlobalMedia.com and OnRadio.com. (2)
99.4 Lease Agreement dated June 7, 2000 by and among GlobalMedia.com and
OnRadio.com. (2)
99.5 Transfer Agent Instructions dated June 7, 2000. (2)
99.6 Form of Non-competition Agreement. (2)
</TABLE>
(1) Incorporated by reference to the Company's Form SB-2 Registration Statement
filed on July 30, 1999.
(2) Incorporated by reference to the Company's Form 10-QSB filed on June 14,
2000, as amended by Form 10-QSB/A filed on July 29, 2000.
(3) To be filed by amendment.
ITEM 17. UNDERTAKINGS.
RULE 415 OFFERINGS.
The undersigned registrant hereby undertakes:
1. To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information set forth in the registration statement; and
(iii) include any additional or changed material information on
the plan of distribution.
2. That, for determining liability under the Securities Act, it will
treat each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be the
initial bona fide offering.
3. To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 15, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, GLOBALMEDIA.COM certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and authorized this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Vancouver, British Columbia, Canada on October 6, 2000.
GLOBALMEDIA.COM
By /s/ L. James Porter
--------------------------------------------
Name: L. James Porter
Title: Director, Chief Financial Officer,
Secretary and Vice President of Finance
and Administration (Principal
Accounting Officer)
In accordance with the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the following persons in
the capacities indicated on October 6, 2000.
SIGNATURE TITLE
--------- -----
/s/ Michael Metcalfe*
-----------------------------
Michael Metcalfe Director
/s/ Jeffrey Mandelbaum*
-----------------------------
Jeffrey Mandelbaum President, Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
/s/ Robert Fuller*
-----------------------------
Robert Fuller Chief Operating Officer and Director
/s/ Winston V. Barta*
-----------------------------
Winston V. Barta Director, Vice President of Marketing
and Business Development
/s/ L. James Porter*
-----------------------------
L. James Porter Director, Chief Financial Officer, Secretary
and Vice President of Finance and
Administration (Principal Accounting Officer)
/s/ Jack MacDonald*
-----------------------------
Jack MacDonald Director
/s/ Barr Potter *
-----------------------------
Barr Potter Director
/s/ Gary Slaight*
-----------------------------
Gary Slaight Director
BY: /s/ L. James Porter
------------------------------------------
L. James Porter, as attorney-in-fact
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
4.1 Form of specimen certificate for common stock. (1)
4.2 Investor Rights Agreement as of June 7, 2000 by and between
GlobalMedia.com and OnRadio.com. (2)
5.1 Legal Opinion Regarding Legality of the Securities Being Registered (3)
23.1 Consent of Ernst & Young, LLP. (3)
23.2 Consent of Dennis Brovarone, Esq. (contained in Exhibit 5.1)
24 Power of Attorney
99.1 Asset Purchase Agreement dated June 6, 2000 by and among
GlobalMedia.com and OnRadio.com.(2)
99.2 Transition Services Agreement dated June 7, 2000 by and among
GlobalMedia.com and OnRadio.com. (2)
99.3 Software License Agreement dated June 7, 2000 by and among by and
among GlobalMedia.com and OnRadio.com. (2)
99.4 Lease Agreement dated June 7, 2000 by and among GlobalMedia.com and
OnRadio.com. (2)
99.5 Transfer Agent Instructions dated June 7, 2000. (2)
99.6 Form of Non-competition Agreement. (2)
</TABLE>
-------------------
(1) Incorporated by reference to the Company's Form SB-2 Registration Statement
filed on July 30, 1999.
(2) Incorporated by reference to the Company's Form 10-QSB filed on June 14,
2000, as amended by Form 10-QSB/A filed on July 29, 2000.
(3) To be filed by amendment.
