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As filed with the Securities and Exchange Commission on August 5, 1996
Registration No.33-_____
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U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
GLOBAL OUTDOORS, INC.
(Name of small business issuer in its charter)
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ALASKA 4833 33-0074499
(State or Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
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43445 BUSINESS PARK DRIVE, SUITE 113, TEMECULA, CALIFORNIA 92590;
(909) 699-4749
(Address and telephone number of principal executive offices
and principal place of business)
Perry T. Massie, President and Chief Executive Officer
43445 Business Park Drive, Suite 113, Temecula, California 92390;
(909) 699-4719
(Name, address and telephone number of agent for service)
Copies to:
Richard K. Dickson II, Esq.
1100 Quail Street
Suite 113
Newport Beach, California 92660
(714) 955-3675
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
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 under 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, 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 MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT (1) OFFERING PRICE (1) REGISTRATION FEE
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Units consisting of two shares of
Common Stock, $.02 par value, and one
Class F Warrant 500,000 $ 10.00 $5,000,000.00 $1,724.14
Common Stock, $.02 par value (2) (3) 500,000 $ 5.50 $2,750,000.00 $ 948.28
Representative's Unit Warrants (4) 30,000 $ .001 $ 30.00 --
Units consisting of two shares of
Common Stock, $.02 par value, and one
Class F Warrant (5) 30,000 $ 12.00 $ 360,000.00 $ 124.14
Common Stock, $.02 par value (3) (6) 30,000 $ 5.50 $ 165,000.00 $ 56.90
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TOTAL $2,853.46
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(1) Estimated for purposes of computing registration fee.
(2) Issuable upon exercise of Class F Warrants.
(3) Pursuant to Rule 416, an indeterminable number of additional shares of
Common Stock are registered hereunder which may be issued, as provided in
the Class F Warrants and the Representative's Unit Warrants, in the event
provisions against dilution become operative.
(4) Issuable to the Representative or its designees. Pursuant to Rule 457(g),
no separate fees are required to register the Representative's Warrants.
(5) Issuable upon exercise of the Representative's Unit Warrants.
(6) Represents Common Stock issuable upon exercise of Class F Warrants
included in the Representatives Unit Warrants.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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GLOBAL OUTDOORS, INC.
CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS OF PART I ITEMS OF
FORM SB-2 REGISTRATION STATEMENT.
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REGISTRATION STATEMENT ITEMS AND HEADINGS LOCATION IN PROSPECTUS
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1. Front of Registration Statement and Outside
Front Cover Page of Prospectus.................. Facing Page; Cover Page of Prospectus.
2. Inside Front and Outside Back Cover Pages Inside Front and Outside Back Cover Pages of
of Prospectus................................... Prospectus; Additional Information.
3. Summary Information and Risk Factors............ Prospectus Summary; Risk Factors.
4. Use of Proceeds................................. Use of Proceeds.
5. Determination of Offering Price................. Cover Page of Prospectus; Underwriting.
6. Dilution........................................ Not Applicable.
7. Selling Security Holders........................ Not Applicable.
8. Plan of Distribution............................ Cover Page of Prospectus; Underwriting.
9. Legal Proceedings............................... Not applicable.
10. Directors, Executive Officers,
Promoters and Control Persons................... Management.
11. Security Ownership of Certain Beneficial Security Ownership of Certain Beneficial Owners and
Owners and Management........................... Management.
12. Description of Securities....................... Description of Securities.
13. Interest of Named Experts and Counsel........... Not Applicable.
14. Disclosure of Commission Position on
Indemnification for Securities Act Management -- Limitation of Directors' and Officers' Liability
Liabilities..................................... and Indemnification.
15. Organization Within Last Five Years............. Not Applicable.
16. Description of Business......................... Prospectus Summary; Business.
17. Management's Discussion and Analysis Management's Discussion and Analysis of Financial Condition
or Plan of Operation............................ and Results of Operations.
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REGISTRATION STATEMENT ITEMS AND HEADINGS LOCATION IN PROSPECTUS
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18. Description of Property......................... Properties.
19. Certain Relationships and Related
Transactions.................................... Management -- Certain Transactions.
20. Market for Common Equity and Related
Stockholder Matters............................. Cover Page of Prospectus; Price Range of Common Stock.
21. Executive Compensation.......................... Management -- Executive Compensation.
22. Financial Statements............................ Selected Financial Data; Index to Financial Statements.
23. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.......... Not Applicable.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 5, 1996
GLOBAL OUTDOORS, INC.
500,000 UNITS
EACH UNIT CONSISTING OF TWO SHARES OF COMMON STOCK
AND ONE CLASS F WARRANT TO PURCHASE COMMON STOCK
Global Outdoors, Inc. (the "Company") hereby offers 500,000 Units (the
"Units"), each Unit consisting of two shares of Common Stock (the "Common
Stock") and one redeemable Class F Warrant to purchase one share of Common Stock
(the "Warrant" or "Class F Warrant"). The Common Stock and Class F Warrants are
immediately detachable and separately transferable. Each Class F Warrant
entitles the registered holder thereof to purchase, at any time over a two-year
period commencing on the date of this Prospectus, one share of Common Stock at a
price of $5.50 per share, subject to certain adjustments. The Class F Warrants
are subject to redemption, at any time, by the Company at $.02 per Warrant on 20
days' prior notice. The Company's Common Stock is traded on the Nasdaq Small Cap
Market under the symbol "GLRS" and the Company is in the process of applying for
inclusion of the Common Stock on the Nasdaq National Market. On August __, 1996,
the closing bid and asked prices for a share of the Company's Common Stock, as
reported by Nasdaq, were $________ and $_________, respectively. See "Price
Range of Common Stock."
THE UNITS OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING AT PAGE 5 OF THIS PROSPECTUS FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Price to Underwriting Discounts Proceeds to
Public and Commissions (1) Company (2)
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Per Unit .......... $ 10.00 $ 1.00 $ 9.00
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Total Minimum ..... $ 200,000 $ 20,000 $ 180,000
20,000 Units
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Total Maximum ..... $5,000,000 $ 500,000 $4,500,000
500,000 Units
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(1) Excludes a non-accountable expense allowance payable to Castle Securities
Corp., the representative (the "Representative") of the Underwriters (the
"Underwriters"), and the value of warrants to be issued to the
Representative or its designees to purchase up to 30,000 Units (the
"Representative's Warrants"). The Company has agreed to indemnify the
Underwriters against certain liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(2) Before deducting expenses, other than underwriting discounts and
commissions, payable by the Company, estimated to be $250,000 for a maximum
offering and $30,000 for a minimum offering, including the Representative's
non-accountable expense allowance.
The Units are being offered severally by the Underwriters on a "best
efforts" basis and on all or none basis as to the minimum offering amount. The
Underwriters reserve the right to reject any order in whole or in part and to
withdraw, cancel or modify the offer without notice.
Castle Securities Corp.
The date of this Prospectus is _______, 1996.
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[ COLOR PHOTOGRAPHS ]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF THE COMPANY
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
The Outdoor Channel(TM) is a trademark of the Company. This Prospectus also
refers to trademarks of companies other than the Company.
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PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified
in its entirety by, the more detailed information and Financial Statements and
Notes thereto appearing elsewhere in this Prospectus. Unless otherwise
indicated, the information contained in this Prospectus assumes that there has
been no exercise of the Representative's Warrants, the Class E Warrants or
outstanding options to purchase shares of Common Stock granted or to be granted
under the Company's stock option plan and reflects (i) the two-for-one stock
split of the Common Stock effected September 12, 1994 and (ii) the
one-for-twenty reverse stock split of the Common Stock effected March 4, 1992.
THE COMPANY
Global Outdoors, Inc. (the "Company" or "Global") owns and operates The
Outdoor Channel, the first national television network devoted solely to outdoor
activities, such as hunting, fishing, scuba diving and recreational gold
prospecting. Launched as a part-time network in June 1993, The Outdoor Channel
progressed to a full-time channel in April 1994 and since then has continued to
develop its management, programming, distribution and revenue. The Company also
owns and operates related businesses which serve the interests of viewers of The
Outdoor Channel and other outdoor enthusiasts. These related businesses include,
LDMA-AU, Inc. ("Lost Dutchman's"), Gold Prospectors' Association of America,
Inc. ("GPAA"), the Trips Division and a 51% interest in American Prospecting
Equipment Company ("APEC"). Lost Dutchman's is a national recreational gold
prospecting campground club with over 6,000 members and properties in
California, Oregon, Alaska, Nevada, Arizona, Colorado, Georgia, North Carolina
and South Carolina. Since January 1993, Lost Dutchman's has added five
properties and approximately 4,000 members. GPAA is the largest recreational
gold prospecting club in the world with approximately 50,000 active members.
GPAA also sells products and services related to recreational gold prospecting
and is the publisher of the Gold Prospector magazine. American Prospecting
Equipment Company markets products related to the recreational prospector. APEC
publishes a products catalog which is distributed to members of the GPAA. The
Company's Trips Division sponsors unique recreational prospecting trips to
Australia and to the Company's 2300 acre camp located 11 miles west of Nome,
Alaska. In February 1995, the Company acquired 100% of GPAA for 2,500,000 shares
of Common Stock valued at $8,750,000 and potential Earn Out Shares (See "Certain
Transactions"). At the time of the acquisition, GPAA in addition to its other
interests owned The Outdoor Channel. Effective July 23, 1996, the Company
changed its name to Global Outdoors, Inc. from Global Resources, Inc. to better
reflect the nature of the Company's business. The Company's NASDAQ trading
symbol "GLRS" remained unchanged.
The Outdoor Channel's programming is offered mainly by means of satellite
and through contractual relationships with operators of cable television systems
as part of their programming packages. The Company estimates that over 60
million households in the United States have cable television and that the home
satellite market has attracted another 5.3 million households. Industry
statistics indicate that over 35,000 additional home satellite dishes are being
installed each month. In addition, digital satellite systems ("DSSs") provide
another means for the Company to distribute The Outdoor Channel. The Company
believes that The Outdoor Channel can currently be viewed by over 5,000,000
households and businesses that have satellite receivers and by approximately
2,000,000 cable and broadcast households.
The Company's principal business strategy is to establish a position as a
leading provider of entertainment programming relating to outdoor activities and
to leverage that position as a means to market and sell its products and
services. The Company intends to implement this strategy by (i) increasing The
Outdoor Channel's carriage on cable television systems, (ii) marketing and
selling products and services to other specialty or niche markets, (iii)
increasing advertising revenue and subscriber fees derived from The Outdoor
Channel and (iv) increasing the number of recreational activities offered by the
Company.
The Company was incorporated in Alaska on October 22, 1984, and its
principal office is located at 43445 Business Park Drive, Suite 113, Temecula,
California 92590. Its telephone number is (909) 699-4749. Unless otherwise
indicated, all references herein to the "Company" refer to Global Outdoors,
Inc., and its wholly-owned subsidiaries, LDMA-AU, Inc., The Outdoor Network,
Inc., Gold Prospectors' Association of America, Inc. and Big M Prospecting
Company, Inc.
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THE OFFERING
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Units offered by the Company................ 500,000 Units consisting of 1,000,000 shares of
Common Stock and 500,000 Class F Warrants
Common Stock and Class F Warrants
to be outstanding after the offering...... 5,116,664 shares of Common Stock and 500,000 Class
F Warrants if the maximum offering is completed(1)
4,156,664 shares of Common Stock and 20,000 Class F
Warrants, if the minimum offering is completed
Risk factors................................ This offering involves a high degree of risk. See "Risk
Factors."
Use of proceeds by the Company.............. To upgrade production and broadcasting facilities, fund
increased advertising and marketing efforts, fund
acquisition and production of programming for The
Outdoor Channel, fund acquisition of recreational
properties, reduce amount drawn on line of credit and
for working capital and other general corporate
purposes. See "Use of Proceeds."
Proposed Nasdaq National Market symbol...... GLRS
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(1) Excludes (i) 60,000 shares of Common Stock issuable upon exercise of
the Representative's Warrants, (ii) 500,000 shares of Common Stock
issuable in the future upon exercise of options granted or to be
granted under the Company's stock option plans, (iii) 61,875 shares of
Common Stock issuable in the future upon conversion of outstanding
shares of Preferred Stock, (iv) 110,984 shares of Common Stock issuable
upon exercise of outstanding Class E Warrants and (v) up to 1,500,000
shares of Common Stock issuable to the former shareholders of Gold
Prospectors' Association of America, Inc., upon the occurrence of
certain events. See "Underwriting;" "Management-- Stock Option Plans;"
"Management -- Certain Transactions" and "Description of Securities."
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30
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1993 1994 1995 1995 1996
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STATEMENT OF INCOME DATA:
Net sales $6,414 $7,331 $9,692 $4,698 $ 6,938
Total expenses 5,537 5,683 8,174 4,007 5,784
Net income from continuing
operations 877 1,648 1,518 691 1,154
Loss on discontinued business -- -- -- -- (575)
Net Income $ 522 $ 993 $ 956 $ 441 $ 370
per common share $ 0.13 $ 0.25 $ 0.23 $ 0.11 $ 0.09
Weighted average number of shares
outstanding 3,872 3,938 4,075 4,032 4,310
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DECEMBER 31, JUNE 30, 1996
1994 1995 ACTUAL AS ADJUSTED(1)
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BALANCE SHEET DATA:
Working capital $ 854 $ 516 $ (89) $ 3,861
Total assets 5,928 8,515 9,956 13,906
Long-term debt, net of current portion 181 289 928 628
Shareholders' equity 3,267 4,912 5,358 9,308
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(1) Adjusted to give effect to the sale by the Company of the maximum
offering of 500,000 Units offered hereby at an assumed public offering
price of $5.00 per share and the application of the estimated net
proceeds therefrom. See "Use of Proceeds."
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RISK FACTORS
This Prospectus contains 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. Discussions containing such forward-looking statements may
be found in the material set forth under "Prospectus Summary," Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business," as well as within the Prospectus generally. Actual results could
differ materially from those projected in the forward-looking statements as a
result of the risk factors set forth below and the matters set forth in the
Prospectus generally. Prospective investors should consider carefully the
following factors, in addition to the other information contained in this
Prospectus, in evaluating an investment in the Units offered hereby.
COMPETITION
The Outdoor Channel is the first television network devoted solely to
outdoor related programming. However, other basic and pay cable television
networks, including the Outdoor Life Network and ESPN compete with, or will
compete in the future with, The Outdoor Channel for viewers. If these or other
competitors, some of which may have substantially greater financial resources
than the Company, were to significantly expand their operations with respect to
outdoor-related programming or their market penetration, it could have a
material adverse effect on the Company. In addition, it is expected that certain
technological advances (including the development of digital compression
technology, the deployment of fiber optic cable and the "multiplexing" of cable
services) will eventually allow cable systems to greatly expand their present
channel capacity, which could lead to increased competition from existing or new
programming services. See "Business--Competition."
The Outdoor Channel competes or expects to compete in the future for
advertising revenue with the television networks described above, as well as
with other national programming services, superstations, broadcast networks,
local over-the-air television stations, direct broadcast satellite services
("DSSs"), multi-channel, multi-point distribution services, broadcast radio and
the print media. The Outdoor Channel also competes or will compete with the
television networks described above for subscriber fees from, and affiliation
agreements with, cable operators. Furthermore, recent court and Federal
Communications Commission (the "FCC") actions have removed certain of the
impediments to entry by local telephone companies into the video programming
distribution business, and proposals now under consideration may result in the
elimination of other impediments. These local telephone companies may distribute
programming that is competitive with that provided by the Company to cable
operators. See "Business--Competition."
The recent growth in revenue of the Company has been caused in part by
increases in the number of cable, satellite and DSS subscribers receiving The
Outdoor Channel. The Company believes, in light of the continued growth in the
market penetration of cable television systems (which currently reach only 67%
of all television households in the United States), satellites and DSSs, as well
as the potential for distribution of The Outdoor Channel via other alternate
delivery services to customers not presently served by cable systems, satellite
or DSS, that significant opportunities to further increase the number of
subscribers exist. However, no assurances can be given that the number of
subscribers will grow.
ADVERSE IMPACT OF REGULATION OF CABLE TELEVISION SYSTEMS
Certain aspects of the operations of cable television systems,
including those which carry The Outdoor Channel, are subject to the regulation
described below. In 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act"), which provides,
among other things, for a "must carry" regime for local broadcast stations
(which requires the mandatory carriage of certain broadcast stations and
payments by cable operators to other broadcast stations for retransmission of
their signals in some instances), for channel positioning rights for certain
local broadcast stations, for limits on the size of multiple system operators
("MSOs"), for limits on carriage by cable systems and other video distributors
of affiliated program services, for a prohibition on programmers in which cable
operators have an "attributable interest" from discriminating between cable
operators and their competitors, or among cable operators, and for increased
competition in video programming
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distribution (both within the cable industry and between cable and competing
video distributors). In addition, the 1992 Cable Act requires the FCC to
establish national guidelines for the rates that cable operators subject to rate
regulation may charge for basic cable service and certain other services and to
establish guidelines for determining when cable programming may not be provided
exclusively to cable system operators. Various cable operators have initiated
litigation challenging certain aspects of the 1992 Cable Act. The
constitutionality of the basic scheme of rate regulation under the 1992 Cable
Act has been upheld by a federal district court, and the FCC's regulation rules
were upheld by a federal appeals court in June 1995. The outcome of the balance
of this litigation cannot be predicted. However, Congress passed and the
President signed in March 1996 the most comprehensive rewrite of
telecommunications law since the Communications Act of 1934, reversing or
modifying many of the provisions of the 1992 Act. Among other things, the new
legislation allows cable and telephone industries into each other's markets and
eliminates federal cable rate regulation, immediately for small systems and
within three years for large operators. The Company cannot predict whether this
new law, possible changes in law or new regulations adopted or to be adopted by
the FCC to implement or amend the new law will have a material adverse impact on
the cable industry generally and/or the Company's television business. See
"Business--Government Regulation."
In the future, any increased regulation of rates, and in particular the
rates for basic cable services, could, among other things, put downward pressure
on the rates charged by cable programming services, and affect the ability or
willingness of cable system operators to retain The Outdoor Channel on their
cable systems. In the event that, in response to any rate regulation, cable
system operators implement channel offering structures that require subscribers
to affirmatively choose to pay a separate fee to receive The Outdoor Channel
(either by itself or in combination with a limited number of other channels),
the Company could be materially and adversely affected.
DEPENDENCE ON KEY PERSONNEL
The Company's success is dependent, in part, upon the continued
services of certain key executive officers, including Perry T. Massie, the
Company's Chief Executive Officer, President and Chairman of the Board of
Directors. The loss of any one of its key executive officers could have a
material adverse effect on the Company's results of operations. The continued
success of the Company may also be dependent upon its ability to attract and
retain highly qualified marketing, sales and other personnel. There can be no
assurance that the Company will be able to recruit and retain such personnel.
See "Management."
AGREEMENTS WITH PROGRAM CARRIERS
The success of The Outdoor Channel is highly dependent on its ability
to enter into and maintain agreements with program carriers, such as with
multiple systems operators ("MSOs") and their affiliate members, for the
transmission of The Outdoor Channel to cable television subscribers. Under its
current national carriage agreements("MSOs") and carriage agreements with the
MSOs' individual cable affiliates, the Company typically offers charter MSOs and
their cable affiliates the right, free of charge, to broadcast The Outdoor
Channel to their subscribers for two to five years and the Company provides the
MSOs and their cable affiliates with two minutes per broadcast hour of local
advertising time. The Outdoor Channel has entered into national carriage
agreements with 12 of the top 100 MSOs. However, execution of a national
carriage agreement with a MSO does not ensure that their affiliate members will
carry The Outdoor Channel. Additionally, three of the top ten MSOs together own
a competitor to The Outdoor Channel which the Company believes will be an
inhibiting influence in obtaining national carriage agreements with such MSOs.
SATELLITE TRANSPONDER ARRANGEMENT
The Outdoor Channel signal is transmitted to cable television
subscribers and satellite dish users via an exclusive, non-protected,
non-preemptible (except under catastrophic circumstances) satellite transponder
on a domestic communications satellite under a service agreement.
"Non-protected" status means that, in the event of transponder failure, The
Outdoor Channel's signal will not be transferred to another transponder. In
addition, under "catastrophic circumstances," The Outdoor Channel's signal may
be preempted by another signal with higher status than The Outdoor Channel's
signal, which status is based on the nature of the agreement between the
broadcaster and the lessor of the satellite transponder. The Outdoor Channel has
never had an interruption in programming due to
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transponder failure or preemption and the Company believes that because it has
the exclusive use of a non-preemptible transponder except under catastrophic
circumstances, such interruption is unlikely to occur. There can be no
assurance, however, that there will not be an interruption or termination of
satellite transmission due to transponder failure or preemption. Such
interruption could have a material adverse effect on The Outdoor Channel and the
Company.
FUTURE CAPITAL REQUIREMENTS AND UNCERTAINTY OF ADDITIONAL FUNDING
The Company expects that its existing capital resources, together with
the estimated net proceeds from this offering if the maximum offering amount is
sold, will enable the Company to maintain its current and planned operations for
the next 12 to 18 months. As of the date of this Prospectus, the Company
requires short-term financing of $300,000. With non-discounted contracts
receivable of approximately $8,000,000, the Company is considering obtaining
short-term loans utilizing the contracts receivable as collateral. In the event
that this offering is unsuccessful or only minimally successful, the Company
will require additional financing, in addition, to the $300,000 in short-term
financing. The Company's future capital requirements will depend on numerous
factors, including: the success of the Company's efforts to increase advertising
revenues; resources the Company devotes to increasing distribution of The
Outdoor Channel and acquiring and producing programming for The Outdoor Channel;
and the costs of acquiring additional recreational properties. Accordingly, the
Company may be required to seek additional funds through debt or equity
financing, and there can be no assurance that such financing will be available
on terms satisfactory to the Company, if at all. In addition, the issuance of
additional equity securities by the Company could result in substantial dilution
to existing shareholders, including those purchasing shares in this offering.
The Company's inability to fund its capital requirements could have a material
adverse effect on the Company's results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
VOLATILITY OF STOCK PRICE
The Company's Common Stock is currently traded on the Nasdaq Small Cap
Market and the Company has made application for inclusion of the Common Stock on
The Nasdaq National Market, both of which markets have experienced and are
likely to experience in the future significant price and volume fluctuations,
which could adversely affect the price of the Common Stock without regard to the
operating performance of the Company. The Company's Common Stock is currently
traded on the Nasdaq Small Cap Market and the Company believes factors such as
quarterly fluctuations in financial results, failure to meet financial analysts'
expectations and developments in the cable-television and outdoor recreational
activity industries could contribute to the volatility of the price of its
Common Stock, causing it to fluctuate significantly. These factors, as well as
general economic conditions such as recessions or high interest rates, may
adversely affect the market price of the Common Stock.
CONTROL BY MANAGEMENT
If the maximum offering amount is sold in this offering, the Company's
existing management will beneficially own 61% of the Company's Common Stock .
Consequently, the Company's existing management will have the ability to control
the election of all the Company's directors and to determine the outcome of most
corporate actions submitted to the vote of the Company's shareholders. See
"Security Ownership of Certain Beneficial Owners and Management."
REGULATORY AND ENVIRONMENTAL CONSIDERATIONS
In addition to the regulations applicable to the cable television
industry in general, the Company is also subject to various local, state and
federal regulations, including, without limitation, regulations promulgated by
federal and state environmental, health and labor agencies. The Company's
prospecting clubs are subject to various local, state and federal statutes,
ordinances, rules and regulations concerning zoning, development and other
utilization of its properties. Historically, regulatory compliance by the
Company and its customers has not had a material effect on the Company's
business or operations. However, changes to or additions to the regulations
relating to federal
7
<PAGE> 11
prospecting claims and campground memberships could adversely affect the
Company's results of operations. See "Business -- Government Regulation."
BROAD DISCRETION IN APPLICATION OF PROCEEDS
A substantial portion of the net proceeds of this offering has been
allocated for working capital and will be used for such specific purposes as
management may determine. Accordingly, management will have broad discretion
with respect to the expenditure of substantial portions of the net proceeds of
this offering. See "Use of Proceeds."
POSSIBLE ISSUANCE OF PREFERRED STOCK; ANTI-TAKEOVER EFFECT OF ALASKAN LAW
The Company is authorized to issue up to 10,000,000 shares of preferred
stock, par value $.001 per share (the "Preferred Stock"). The Preferred Stock
may be issued in one or more series, the terms of which may be determined at the
time of issuance by the Board of Directors, without further action by the
Company's shareholders, and may include voting rights, preferences as to
dividends and liquidation, conversion and redemption rights, and sinking fund
provisions as determined by the Board of Directors. Although the Company has no
present plans to issue any shares of Preferred Stock in addition to the 61,875
outstanding shares of 10% Convertible Preferred Stock, which have no voting
rights nor any liquidation preference over the Common Stock, the issuance of any
additional shares of Preferred Stock in the future could affect the rights of
the holders of Common Stock and thereby reduce the value of the Common Stock. In
particular, specific rights granted to future holders of Preferred Stock could
be used to restrict the Company's ability to merge with or sell its assets to a
third party, thereby preserving control of the Company by its present owners.
These provisions, together with certain provisions of Alaskan law, may also have
the effect of delaying or preventing changes in control or management of the
Company which could adversely affect the market price of the Company's Common
Stock. See "Description of Securities."
ABSENCE OF DIVIDENDS
The Company has never paid any cash dividends on shares of its Common
Stock and does not anticipate that it will pay dividends in the foreseeable
future. The Company intends to apply any earnings to fund the development of its
business. See "Dividend Policy."
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of shares by existing shareholders could lead to a decline
in the market price of the Company's Common Stock. In addition to the 1,000,000
shares contained in the Units offered hereby, all of the shares of Common Stock
currently outstanding are available for immediate sale in the public market as
of July 30, 1996, other than (i) a total of 3,602,246 shares of Common Stock
that may be sold in compliance with Rule 144 under the Securities Act of 1933,
as amended (the "Securities Act") at various times.
POSSIBLE DILATIVE EFFECT OF OUTSTANDING OPTIONS AND WARRANTS
As of August 2, 1996, there were 900,000 shares of Common Stock
reserved for issuance upon exercise of outstanding stock options granted and
available for grant under the Company's stock options plans. Of such reserved
shares, there were 523,000 shares of Common Stock reserved for issuance upon the
exercise of stock options outstanding under the Company's stock option plan at
exercise prices ranging from $2.25 to $4.00 per share, of which options to
purchase 517,000 shares are currently exercisable. An additional 383,000 shares
of Common Stock are reserved for issuance upon the exercise of options available
for future grant under such plans. In addition, 110,984 shares of Common Stock
are reserved for issuance upon the exercise of the Class E Warrants at an
exercise price of $5.50 per share; 500,000 shares of Common Stock are reserved
for issuance upon exercise of the Class F Warrants at an exercise price of $5.50
per share, if the maximum offering amount is sold in this offering; and 30,000
shares of Common Stock are reserved for issuance upon the exercise of the
Representatives' Warrants. Furthermore, 1,500,000 shares of Common Stock are
reserved for issuance of Earn Out Shares to the former shareholders of GPAA. To
the extent the trading price of Common Stock at the time of exercise of any such
options or warrants
8
<PAGE> 12
exceeds the exercise price, such exercise will have a dilutive effect on the
Company's shareholders. See "Shares Eligible for Future Sale," "Description of
Securities" and "Management-Certain Transactions."
IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This Prospectus contains 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. The Company intends that such forward-looking statements
be subject to the safe harbors created thereby. These forward-looking statements
include plans and objectives of management for future operations including plans
and objectives relating to The Outdoor Channel's distribution, programming,
marketing, business strategy and competition. These forward-looking statements
also include plans and objectives of management relating to the Company's other
businesses including Lost Dutchman's, GPAA and the Trips Division. These
forward-looking statements include or relate to the ability of The Outdoor
Channel to (i) command subscriber fees in the future, (ii) continue to obtain
distribution, (iii) attract advertisers, (iv) increase product sales and
services through marketing and (v) have a competitive advantage over other
programming services. These forward-looking statements also include or relate to
the ability of Lost Dutchman's, GPAA and the Trips Divisions to (i) market their
products and services and (ii) to have a competitive advantage over their
competition.
The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. These
forward-looking statements are based on assumptions that The Outdoor Channel
will (i) continue to obtain acceptance by viewers, MSOs and local operators,
(ii) be perceived by advertisers as a worthwhile medium to place significant
advertising dollars and (iii) be an important avenue for sales of Company
products and services. These expectations could be materially different due to
the following factors. It is possible that other channels could be considered
superior to The Outdoor Channel to the degree that significant distribution of
The Outdoor Channel and attraction of advertisers is inhibited. Other direct
competitors to The Outdoor Channel's programming could launch channels. The
Outdoor Channel could be precluded from distribution based upon the absence of
business relationships with owners of MSOs and other channels. The Outdoor
Channel could lose a competitive advantage if it does not obtain additional
financing. The forward-looking statements are also based on the assumptions that
Lost Dutchman's, GPAA and the Trips Division will (i) continue to increase the
sales of their products and services and (ii) maintain competitive advantages.
These expectations could be materially different due to the following factors.
Lost Dutchman's may not be able to continue to attract members who prefer a
rustic hands on campground experience. The Company may reach a limit as to the
number of persons who would like to join recreational gold mining clubs such as
Lost Dutchman's and GPAA. Other forms of recreation may become more attractive
than the Company's gold prospecting clubs and prospecting trips.
In general the Company may not accurately forecast market demand and
the assumption that there will be no material adverse change in the Company's
operations or business may be incorrect. Assumptions relating to the foregoing
involve judgments with respect to, among other things, future economic,
competitive and market conditions, and future business decisions, all of which
are difficult or impossible to predict accurately and many of which are beyond
control of the Company.
9
<PAGE> 13
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Units offered by
it hereby, assuming a public offering price of $5.00 per Unit and after
deducting underwriting discounts and estimated offering expenses are estimated
to be approximately $4,250,000, if the maximum offering amount is sold. If the
minimum offering amount is sold the net proceeds are estimated to be $150,000.
If the maximum offering amount is sold, the Company anticipates that it
will use approximately $750,000 to fund marketing and advertising programs
related to The Outdoor Channel, $750,000 of the net proceeds of this offering to
upgrade its production and broadcasting facilities, approximately $1,000,000 for
funding the production and acquisition of programming for The Outdoor Channel,
approximately $750,000 for the acquisition of recreational properties and
approximately $500,000 for payment on the Company's line of Credit. The balance
of the net proceeds are expected to be used for working capital and general
corporate purposes. If the minimum offering amount is sold the net proceeds are
expected to be used for working capital and general corporate purposes.
The Company has not determined the exact amounts it plans to expend on
each of such uses or the timing of such expenditures. The amounts actually
expended for each such use, if any, are at the discretion of the Company and may
vary significantly depending upon a number of factors, including future revenue
growth, the amount of cash generated by the Company's operations, and changing
competitive conditions. See "Risk Factors -- Broad Discretion in Application of
Proceeds." Pending their use as set forth above, the net proceeds of this
offering will be invested in United States government or governmental agency
securities or short-term insured certificates of deposit.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is currently traded on the Nasdaq Small Cap
Market under the symbol "GLRS." The following table sets forth for the quarters
indicated the reported high and low closing sales prices as reported by Nasdaq.
The Company has made application for inclusion of its Common Stock on the Nasdaq
National Market.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1994:
1st Quarter.............................. $4.25 $3.00
2nd Quarter.............................. 4.00 2.50
3rd Quarter.............................. 4.00 2.25
4th Quarter.............................. 5.00 2.50
YEAR ENDED DECEMBER 31, 1995:
1st Quarter.............................. $4.88 $3.75
2nd Quarter.............................. 5.00 4.12
3rd Quarter.............................. 4.75 3.12
4th Quarter.............................. 5.75 3.50
YEAR ENDED DECEMBER 31, 1996:
1st Quarter.............................. $5.75 $4.62
2nd Quarter.............................. 5.50 3.75
3rd Quarter (through July 30, 1996)...... 5.00 3.75
</TABLE>
On August 2, 1996 there were four broker-dealers publishing quotes for
the Common Stock. As of August 2, 1996, there were approximately 893 holders of
record of the Company's Common Stock.
10
<PAGE> 14
DIVIDEND POLICY
The Company has never paid any cash dividends on its Common Stock and
does not anticipate that it will pay dividends in the foreseeable future. The
Company intends to apply any earnings to the development and expansion of its
business.
CAPITALIZATION
The following table sets forth the capitalization of the Company at
June 30, 1996 and as adjusted to reflect the receipt of the net proceeds from
the sale of the maximum offering amount of 500,000 Units offered hereby by the
Company at an assumed public offering price of $5.00 per Unit.
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, 1996
ACTUAL AS ADJUSTED
------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt (less current portion) ............................... $ 928 $ 628
Shareholders' equity:
Preferred stock, $.001 par value:
10,000,000 shares authorized, 61,875 issued and outstanding -- --
Common stock, $.02 par value:
10,000,000 shares authorized, 4,103,551 shares issued and
outstanding 5,103,551 shares issued and outstanding
as adjusted (1) ............................................ 82 102
Additional paid-in capital ....................................... 2,869 6,839
Less stock subscriptions receivable .............................. (221) (221)
Retained earnings ................................................ 2,628 2,628
------- -------
Total shareholders' equity ..................... 5,358 9,348
------- -------
Total capitalization ........ $ 6,286 $ 9,976
======= =======
</TABLE>
- ---------------------
(1) Excludes (i) 60,000 shares of Common Stock issuable upon exercise of the
Representative's Warrants; (ii) 900,000 shares of Common Stock issuable in
the future upon exercise of options granted or to be granted under the
Company's stock option plans; (iii) 61,875 shares of Common Stock issuable
in the future upon conversion of outstanding shares of Preferred Stock;
(iv) 110,984 shares of Common Stock issuable upon exercise of outstanding
Class E Warrants and (v) up to 1,500,000 shares of Common Stock issuable to
the former shareholders of Gold Prospectors' Association of America, Inc.,
upon the occurrence of certain events. See "Management-- Stock Option
Plans;" "Management-- Certain Transactions;" "Underwriting" and
"Description of Securities."
11
<PAGE> 15
SELECTED FINANCIAL DATA
The selected financial data set forth below as of and for each of the
three years in the period ended December 31, 1995 and for the six months ended
June 30, 1996 and 1995 have been derived from the Financial Statements of the
Company and its subsidiaries herein and should be read in conjunction with the
Financial Statements (including the notes thereto) included elsewhere herein and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" also included elsewhere herein.
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30
------------ -------
1993 1994 1995 1995 1996
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales ....................... $6,414 $7,331 $9,692 $4,698 $ 6,938
Total expenses .................. 5,537 5,683 8,174 4,007 5,784
Net income from continuing
operations ................. 877 1,648 1,518 691 1,154
Loss on discontinued business ... -- -- -- -- (575)
Net Income ...................... $ 522 $ 993 $ 956 $ 441 $ 370
per common share ................ $ 0.13 $ 0.25 $ 0.23 $ 0.11 $ 0.09
Weighted average number of shares
outstanding ................ 3,872 3,938 4,075 4,032 4,310
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1996
------------ -------------
1994 1995 ACTUAL AS ADJUSTED(1)
---- ---- ------ --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital ...................... $ 854 $ 516 $ (89) $ 3,861
Total assets ......................... 5,928 8,515 9,956 13,906
Long-term debt, net of current portion 181 289 928 628
Shareholders' equity ................. 3,267 4,912 5,358 9,308
</TABLE>
- ---------------
(1) Adjusted to give effect to the sale by the Company of the maximum
offering of 500,000 Units offered hereby at an assumed public offering
price of $5.00 per share and the application of the estimated net
proceeds therefrom. See "Use of Proceeds."
12
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information includes forward-looking statements, the realization
of which may be impacted by certain factors discussed under "Risk
Factors-Important Factors Related to Forward-Looking Statements and Associated
Risks."
GENERAL
Global Outdoors, Inc. (the "Company" or "Global") owns and operates The
Outdoor Channel, the first national television network devoted solely to outdoor
activities, such as hunting, fishing, scuba diving and recreational gold
prospecting. The Company also owns and operates related businesses which serve
the interests of viewers of The Outdoor Channel and other outdoor enthusiasts.
These related businesses include, LDMA-AU, Inc. ("Lost Dutchman's"), Gold
Prospectors' Association of America, Inc. ("GPAA") and the Trips Division. Lost
Dutchman's is a national recreational gold prospecting campground club with over
4,700 members and properties in California, Alaska, Oregon, Nevada, Arizona,
Colorado, Georgia, South Carolina and North Carolina GPAA is the largest
recreational gold prospecting club in the world with approximately 50,000 active
members. GPAA also sells products and services related to recreational gold
prospecting and is the publisher of the Gold Prospector magazine. Prior to being
a wholly-owned subsidiary of the Company, GPAA was an affiliated company which
owned the Outdoor Channel. As discussed below, the Company acquired 100% of the
stock of GPAA in February 1995. The Company's Trips Division sponsors unique
recreational prospecting trips to Australia and to the Company's 2300 acre camp,
located 11 miles west of Nome, Alaska. Global started a new products division in
1995 called "American Prospecting Equipment Company" and owns a 51% interest
therein.
The Company has been selling its GPAA club memberships since its
incorporation in 1984. From 1968 to 1984, GPAA memberships were sold by the
proprietorship owned by the Company's founders. GPAA membership sales took a
marked upswing in 1992 in conjunction with the airing of the "Gold Prospector
Show," a show the Company has owned and produced since 1990. During 1992, the
"Gold Prospector Show" was broadcast on various television and cable channels,
for which the Company purchased air time. In 1993, GPAA launched The Outdoor
Channel and, since then, broadcasts of the "Gold Prospector Show" and related
sales of GPAA memberships have occurred almost exclusively on The Outdoor
Channel. The Company intends that The Outdoor Channel be used as the primary
vehicle to promote the Company's services and products and anticipates that it
will be the major factor in the future growth of GPAA, Lost Dutchman's and the
Trips Division.
On February 10, 1995, Global acquired 100% of the stock of GPAA in
exchange for 2,500,000 shares of its Common Stock and potential Earn Out Shares
(See "Certain Transactions"). For accounting purposes, the assets of GPAA are
recorded at their historical cost basis in a manner similar to a pooling of
interest. The financial statements included herein and discussed below have been
restated to effect the pooling of interests between the Company and GPAA as of
January 1, 1992.
Although The Outdoor Channel is not aligned with any sizable
entertainment or cable company, as are many emerging channels, it has to date
achieved substantial visibility in the cable industry. The Company is committed
to converting visibility for The Outdoor Channel's programming into greater
distribution into cable households. Greater distribution will allow the Company
to charge higher advertising rates, command subscriber fees from cable
affiliates, attract more advertisers and receive greater revenues for the
Company's products.
Christopher B. Forgy has joined the Company as President and Chief
Executive Officer of The Outdoor Channel. Mr. Forgy is a recognized and highly
regarded cable television executive. From 1989 to 1995, he was Senior Vice
President of Marketing, Sales and Programming for Times Mirror Cable Television.
He is Immediate Past Chairman of the Cable Television Administration and
Marketing Society (CTAM), the cable industry's professional association of
marketers, with some 5,000 national members. He has also served on the boards of
directors of the Cabletelevision Advertising Bureau (CAB), the National
Association of Minorities in Cable, the
13
<PAGE> 17
NAMIC Foundation and Pay Per View Holding Company, Inc., which owns and operates
the Viewer's Choice networks. It is anticipated that Mr. Forgy will have a major
impact on The Outdoor Channel and Company as a whole.
In April 1996, The Outdoor Channel executed a media placement agreement
with Frederiksen Television, Inc. for the placement of direct response
programming on The Outdoor Channel, primarily during off hours. The contract is
potentially worth a minimum of $728,000 if it runs the full year term. In April
1996, The Outdoor Channel signed an advertising agreement with Honda
Corporation.
In May 1996, the Company hired James E. Crawford as Vice President for
Sales and Marketing for The Outdoor Channel. Mr. Crawford is also a recognized
cable television executive. From October 1995 to April 1996, he was the Director
of Affiliate Sales Western Division for Outdoor Life Network, a competitor of
The Outdoor Channel, and for Speedvision Network. Mr. Crawford was instrumental
in Outdoor Life's sales and marketing from that network's inception.
A primary objective of the Company is to obtain distribution for The
Outdoor Channel. To accomplish this objective the Channel seeks to sign national
carriage agreements with multiple systems operators ("MSOs") and thereafter
carriage agreements with the MSOs' individual cable affiliates. In January 1996,
The Outdoor Channel signed a national carriage agreement with Fanch
Communications which has 270,000 subscribers. In March 1996, The Outdoor Channel
signed a national carriage agreement with Service Electric Cable which has
257,000 subscribers. In April 1996, The Outdoor Channel was launched on several
cable affiliates of Bresnan Communications which has 209,000 subscribers in
anticipation of signing a national carriage agreement. In May 1996, The Outdoor
Channel signed a national carriage agreement with Northland Communications which
has 191,000 subscribers. The Company has received verbal agreements with several
other MSO's. The Outdoor Channel on an ongoing basis is being launched on the
individual cable affiliates of the above MSO's as well as MSO's that were signed
with prior to 1996 such as TCA Cable and Westar Communications. The Company
intends to continue its promotional activities, such as attending regional and
local cable trade shows, in order to increase cable industry awareness of The
Outdoor Channel.
The Company added the Vein Mountain Camp to its Lost Dutchman's
holdings in February 1996.The Vein Mountain Camp is located in West Central
North Carolina approximately 7 miles from the town of Marion. The Camp consists
of 130 deeded acres located in the middle of North Carolina's motherlode.
Between 1829 and 1830, seven pound nuggets were reported to have been taken from
the property. During the same era a 28 pound nugget and 200 pound mass of gold
and quartz were reported to have been taken within several miles of the
property. There are presently no improvements on the property. There is camping
for up to 250 self-contained recreational vehicles.
The Company undertook a major Lost Dutchman's sales effort commencing
in August and ending December 1995. The effort was very successful with a
significant portion of revenue being reported in the first quarter of 1996 due
to the Company's policy of recognizing income upon the expiration of the sale
refund period which, at the time, was 60 days. The Company has changed the sale
refund period to 10 days effective May 1, 1996. Therefore, most of the sales in
the Company's Spring membership drive will be reported in the second quarter of
1996. The Company will continue to aggressively market Lost Dutchman's
memberships in 1996 and expects the 1996 memberships sold to exceed those of
1995. The Company will also seek to add additional properties to Lost Dutchman's
in 1996, in addition to the Vein Mountain Camp.
The Company conducted the final closing of a private placement in
January 1996. The private placement consisted of the sale of Units at a price of
$7.50 per Unit, each made up of two (2) shares of Common Stock and one (1) Class
E Warrant to purchase Common Stock. A total of 110,984 Units were sold for
$832,380. Net proceeds to the Company were approximately $700,000.
14
<PAGE> 18
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995
Revenues. The Company's revenues include revenues from advertising
fees, GPAA and Lost Dutchman's membership sales, product sales and the Trips
Division sales. Advertising fees result from a combination of paid advertising
and barter transactions, under which the Company acquires programming from third
parties in exchange for a portion of advertising revenue derived from such
programming. Revenues for the six months ended June 30, 1996 were $6,938,144, a
substantial increase of $2,239,741 or 48%, compared to revenues of $4,698,403
for the six months ended June 30, 1995. This increase was primarily a result of
an increase in membership sales to $3,330,013 for the six months ended June 30,
1996 from $2,222,850 for the six months ended June 30, 1995, due to a major Lost
Dutchman's membership drive. Revenues from the Trips Division increased to
$556,273 for the six months ended June 30, 1996 from $476,970 for the six months
ended June 30, 1995, due to increased sales for the Alaska Trip for 1996
compared to 1995. Despite management devoting significant time and resources to
increasing distribution and revenues for The Outdoor Channel, in the first six
months of 1996, the Company increased its sales for Lost Dutchman's and for the
Alaska Trip. These sales increases reversed the trend of flat Lost Dutchman's
sales and decreasing Alaska Trip sales.
Expenses. Expenses consist primarily of the cost of the Company's
satellite transponder and uplink facilities, programming, advertising and
promotion, sales and administrative salaries, office expenses and general
overhead. Expenses for the six months ended June 30, 1996 were $5,783,763, an
increase of $1,775,990, or 44%, compared $4,007,773 for the six months ended
June 30, 1995. This increase was predominately due to increases in specific
areas. The primary component of the increase was the increased cost of
advertising to $857,856 for the six months ended June 30, 1996 from $489,427 for
the six months ended June 30, 1995, of which approximately $280,000 of the
increase was due to the Company upgrading satellite transponder and uplink
facilities utilized by The Outdoor Channel. Compensation and Related Payroll
Costs increased to $655,290 for the six months ended June 30, 1996, compared to
$489,427 for the six months ended June 30, 1995. This increase was due to the
cumulative addition of executive, sales and administrative personnel for The
Outdoor Channel during the period after March 31, 1995. The provision for
doubtful contracts increased to $190,320 for the six months ended June 30, 1996,
compared to $41,264 for the six months ended June 30, 1995 which was due to the
increased Lost Dutchman's sales in the first six months of 1996. Shows and
Seminars increased to $145,550 for the six months ended June 30, 1996, compared
to $76,614 for the six months ended June 30, 1995, due to substantial increase
in participation by The Outdoor Channel in trade shows for the purpose of
increasing industry visibility.
Income Before Income Taxes. Income before income taxes increased as a
percentage of revenues from 15% for the six months ended June 30, 1995 to 17%
for the six months ended June 30, 1996.
Loss on discontinued business (TNN Show). The Company's "Gold
Prospecting Show" which was produced for airing on The Nashville Network ("TNN")
commencing January 1996 was popular with viewers. Production and airing costs
per show were approximately $43,000. Due to the lack of immediate commercial
success, the Company decided to devote its resources to other aspects of the
Company's business with the show ending its run on TNN in May 1996.
Income Tax Expense. Income tax expense for the six months ended June
30, 1996 was $210,000, a decrease of $40,000, or 16%, compared to $250,000 for
the six months ended June 30, 1995, due to the decrease in net income.
COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
Revenues. The Company's revenues include revenues from advertising
fees, GPAA and Lost Dutchman's membership sales, and the Trips Division.
Advertising fees result in part from barter transactions, under which the
Company acquires programming from third parties in exchange for a portion of
advertising revenue derived from such programming. Revenues for the year ended
December 31, 1995 were $9,691,736, an increase of $2,361,162 or 32%, compared to
revenues of $7,330,574 for the year ended December 31, 1994. This increase was
primarily a result of an increase in advertising revenue to $3,861,004 for the
year ended December 31, 1995 from $1,261,632
15
<PAGE> 19
for the year ended December 31, 1994. Because management has been devoting
additional time and resources to increasing revenues from The Outdoor Channel,
revenues from other divisions have decreased or not changed significantly.
Membership sales were $4,872,480 for the year ended December 31, 1995 compared
to $4,855,896 for the year ended December 31, 1994. Revenues from the Trips
Division decreased to $673,161 for the year ended December 31, 1995 from
$981,671 for the year ended December 31, 1994.
Expenses. Expenses consist primarily of the cost of the Company's
satellite transponder and uplink facilities, programming, advertising and
promotion, sales and administrative salaries, office expenses and general
overhead. Expenses for the year ended December 31, 1995 were $8,174,066, an
increase of $2,490,956, or 44%, compared to $5,683,110 for the year ended
December 31, 1994. This increase was predominately due to increases in specific
areas. The primary component of the increase was the increased cost of bartered
programming to $3,381,950 for the year ended December 31, 1995 from
approximately $1,687,819 for the year ended December 31, 1994, due to an overall
increase in advertising rates on The Outdoor Channel. Sales and administrative
salaries increased to $825,874 for the year ended December 31, 1995, compared to
approximately $587,643 for the year ended December 31, 1994. This increase was
due to the addition of sales and administrative personnel for The Outdoor
Channel during the year ended December 31, 1995. Advertising and promotion
increased during the year ended December 31, 1995, primarily due to increased
promotion in conjunction with management's focus on increasing visibility of The
Outdoor Channel. Advertising and promotion was $1,058,988 for the year ended
December 31, 1995, compared to $641,814 for the year ended December 31, 1994.
The provision for doubtful contracts increased to $251,635 for the year ended
December 31, 1995, compared to $209,235 for the year ended December 31, 1994,
which was due to increased Lost Dutchman's sales in 1995.
Income Before Income Taxes. Income before income taxes decreased as a
percentage of revenues from 22% for the year ended December 31, 1994 to 15% for
the year ended December 31, 1995. Although revenues increased overall for the
year ended December 31, 1995, income before income taxes was affected primarily
by an increase in expenses resulting from increased promotion of The Outdoor
Channel as well as increased employee and signal transmission costs.
Income Tax Expense. Income tax expense for the year ended December 31,
1995 was $561,132, a decrease of $92,911, or 14%, compared to $654,043 for the
year ended December 31, 1994. This was due to a decrease in net income.
LIQUIDITY AND CAPITAL RESOURCES
With the exception of a private placement of Common Stock completed in
January 1996 and its revolving line of credit, the Company has financed its
activities in the last five years with cash flows from operations. The private
placement raised gross proceeds of $832,380. Net proceeds to the Company were
approximately $700,000. The private placement consisted of the sale of Units at
a price of $7.50 per Unit, each made up of two (2) shares of Common Stock and
one (1) Class E Warrant to purchase Common Stock. A total of 110,984 Units were
sold.
On February 10, 1995, Global acquired 100% of the stock of GPAA in
exchange for 2,500,000 shares of its Common Stock (the "Acquisition"). The
Acquisition agreement provides for the issuance of up to an additional 1,500,000
shares of Common Stock of Global to the former shareholders of GPAA if GPAA
achieves certain earnings or valuation milestones. For purposes of the
Acquisition, the value of the Global Common Stock was deemed to be $3.50 per
share with the initial total acquisition cost being $8,750,000. For accounting
purposes, the assets of GPAA are recorded at their historical cost basis in a
manner similar to a pooling of interest.
The Company utilized cash from operations of $436,591 in 1995, compared
to generating cash of $364,000 in 1994 and had a cash balance of $458,448 at
December 31, 1995, which was an decrease of $306,665 from the balance of
$765,113 at December 31, 1994. Current assets increased to $1,920,942 compared
to $1,618,397 in 1994. Current liabilities increased to $1,392,753 for 1995
compared to $763,740 for 1994. Net working capital decreased to $528,189 in
1995, compared to $854,657 in 1994. The Company generated sufficient cash in
1994 and 1995 to acquire the Arctic Creek property in Alaska for $125,000 in
cash, make a $50,000 down payment on the Stanton property in Arizona, make
$100,000 down payment on the Oconee property in South Carolina and make
transponder
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<PAGE> 20
and "Gold Prospecting Show" deposits in 1995, of $270,000 and $363,436,
respectively. These deposits significantly diminished the Company's cash
reserves. The Company drew on its $500,000 credit line for the first time in the
fall of 1995.
As of June 30, 1996, the Company had a $750,000 revolving line of
credit with Wells Fargo Bank, $532,713 of which was outstanding. The line of
credit bears interest at 9.25%. The line of credit in unsecured but is
personally guaranteed by Perry T. Massie and Thomas H. Massie.
As of June 30, 1996, the Company had four notes payable to individuals,
with balances outstanding as of that date of $64,543, $93,508, $98,401 and
$200,000. The first three notes bear interest rates that range from 8% to 9.5%
and are due in August 1998, January 1997 and January 2001, and in respectively.
The fourth note bears interest at 7.5% with principal payments of $50,000 due
every January commencing in 1997.
The discontinued "Gold Prospecting Show" aired on TNN utilized
significant amounts of available cash in 1995 and the first quarter of 1996 but
will not require any additional expenditures. The Outdoor Channel has used a
significant portion of the Company's cash resources with transponder and uplink
costs increasing to $125,000 per month commencing December 1, 1995, from the
previous monthly cost of $85,000 from April 1995 through November 1995, and
$60,000 from April 1994 through March 1995.
Anticipated capital expenditures for 1996 include the purchase of
various equipment for The Outdoor Channel , purchase of computer and mailing
equipment, acquisition of new Lost Dutchmans properties and the retirement of
debt on Lost Dutchmans properties. The source of funds for the capital
expenditures is the general fund, credit line, lease financing, seller financing
and proceeds of this offering. The amount of these expenditures will vary
depending upon the success of this offering.
As of the date of this Prospectus, the Company requires short-term
financing of $300,000. With non-discounted contracts receivable of
approximately $8,000,000, the Company is considering obtaining short-term loans
utilizing the contracts receivable as collateral. Management believes that the
Company's existing cash resources and anticipated cash flows from operations,
when combined with the net proceeds of this offering and periodic borrowing
under the line of credit, will be sufficient to fund the Company's operations at
currently anticipated levels. To the extent that such amounts are insufficient
to finance the Company's working capital requirements , the Company could be
required to seek financing in addition to the $300,000 the Company believes it
will require in the short-term There can be no assurance that equity or debt
financing will be available if needed, or, if available, will be on terms
favorable to the Company or its shareholders. Significant dilution may be
incurred by present shareholders as a result of any such financing.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of."
The Company has adopted SFAS No. 121. SFAS No. 121 establishes recognition and
measurement criteria for impairment losses when the Company no longer expects to
recover the carrying value of a long-lived asset. The effect on the consolidated
financial statements of adopting SFAS was not material.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation." The accounting or disclosure requirements of this
statement are effective at the Company's fiscal year-ended 1996. It is currently
anticipated that the Company will continue to account for stock-based
compensation using Accounting Principles Board Opinion No. 25 and the impact of
SFAS 123 has not yet been determined.
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BUSINESS
The following information includes forward-looking statements. Actual results
could differ materially. See "Risk Factors-Important Factors Related to
Forward-Looking Statements and Associated Risks."
GENERAL
Global Outdoors, Inc. (the "Company" or "Global") owns and operates The
Outdoor Channel, the first national television network devoted solely to outdoor
activities, such as hunting, fishing, scuba diving and recreational gold
prospecting. Launched as a part-time network in June 1993, The Outdoor Channel
progressed to a full-time channel in April 1994 and since then has continued to
develop its management, programming, distribution and revenue. The Company also
owns and operates related businesses which serve the interests of viewers of The
Outdoor Channel and other outdoor enthusiasts. These related businesses include,
LDMA-AU, Inc. ("Lost Dutchman's"), Gold Prospectors' Association of America,
Inc. ("GPAA"), the Trips Division and a 51% interest in American Prospecting
Equipment Company ("APEC"). Lost Dutchman's is a national recreational gold
prospecting campground club with over 4,700 members and properties in
California, Oregon, Alaska, Nevada, Arizona, Colorado, Georgia, North Carolina
and South Carolina. Since January 1993, Lost Dutchman's has added five
properties and approximately 3,500 members. GPAA is the largest recreational
gold prospecting club in the world with approximately 50,000 active members.
GPAA also sells products and services related to recreational gold prospecting
and is the publisher of the Gold Prospector magazine American Prospecting
Equipment Company markets products related to the recreational prospector. APEC
publishes a products catalog which is distributed to members of the GPAA. The
Company's Trips Division sponsors unique recreational prospecting trips to
Australia and to the Company's 2300 acre camp, located 11 miles west of Nome,
Alaska. In February 1995, the Company acquired 100% of GPAA for 2,500,000 shares
of Common Stock valued at $8,750,000 and potential Earn Out Shares (See Certain
Transactions). At the time of the acquisition, GPAA in addition to its other
interests owned The Outdoor Channel. The Company was incorporated in Alaska on
October 22, 1984. Effective July 23, 1996, the Company changed its name to
Global Outdoors, Inc. from Global Resources, Inc. to better reflect the nature
of the Company's business. The Company's NASDAQ trading symbol "GLRS" remained
unchanged.
BUSINESS STRATEGY
The Company's principal business strategy is to establish a position as
a leading provider of entertainment programming relating to outdoor activities
and to leverage that position as a means to market and sell its products and
services. Key elements of the Company's business strategy are as follows:
Increase the Outdoor Channel's Carriage on Cable Television Systems:
The Company intends to increase The Outdoor Channel's carriage on cable
television systems by improving the quality of the originally produced and
acquired programming on The Outdoor Channel and by increasing the public's
awareness and name recognition of The Outdoor Channel through intensified public
relations and marketing efforts targeting cable operators and potential
subscribers.
Market and Sell Products and Services to Other Specialty or Niche
Markets: The Company intends to utilize The Outdoor Channel to market and sell
outdoor-related products to specialty or niche markets in addition to
recreational gold prospecting, including hunting, fishing and camping. The
Company intends to leverage The Outdoor Channel's increased distribution and
name recognition to market and sell such products and services to those viewers
who identify The Outdoor Channel and related products and services with quality
and integrity.
Increase Advertising Revenue and Subscriber Fees Derived From The
Outdoor Channel: The Company believes that as the quality and popularity of The
Outdoor Channel increase, the Company will be able to increase advertising rates
on The Outdoor Channel and begin commanding subscriber fees from cable
operators. The Outdoor Channel has recently introduced a rate card which
requires new affiliates to begin paying subscriber fees in 1997. In addition,
the Company intends to offer "charter" or reduced advertising rates to large
national advertisers in an effort to attract reputable, well-known advertisers
who will be willing to pay higher rates as The Outdoor Channel achieves greater
distribution.
Increase the Number of Offered Recreational Activities: The Company
intends to increase the number of recreational activities offered to members of
Lost Dutchman's and to customers of the Trips Division, including hunting,
fishing and camping. In addition, the Company may establish new clubs based on
these new activities and may acquire new properties to serve as campgrounds
where members can engage in such activities.
THE OUTDOOR CHANNEL
The Outdoor Channel is a premier provider of a full range of quality
programming related to outdoor activities and is one of the only television
networks whose programming specifically targets the interests and concerns of
the huge number of persons interested in the outdoors. The Outdoor Channel
provides the Company, as well as other advertisers, with a cost effective means
to promote goods and services to a large and rapidly increasing market. In
addition, The Outdoor Channel affords cable operators the opportunity to both
attract subscribers from a significant market segment not specifically targeted
by other programming services and respond to cable subscribers' demands for more
outdoor-related programming.
DISTRIBUTION AND CABLE SUBSCRIBERS
The Outdoor Channel's programming is offered mainly by means of
satellite and through contractual relationships with operators of cable
television systems and broadcast stations. The Company estimates that over 60
million households in the United States have cable television and that the home
satellite market has attracted another 5.3 million households. Industry
statistics indicate that over 35,000 additional home satellite dishes are being
installed each month. In addition, "wireless cable" ("MMDS"), new video systems
presently being built by telephone companies and the recent development of
digital satellite systems ("DSSs") provide additional opportunities for the
Company to distribute The Outdoor Channel. The Company believes that The Outdoor
Channel can currently be viewed by approximately 5,300,000 households and
businesses that have satellite receivers and 2,000,000 cable and broadcast
households.
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The Company transmits all of its programs from its production facility
located in Temecula, California by means of a master control room that is linked
via fiber optic cable to an earth station transmitting antenna (an "uplink"),
which the Company leases under a service agreement. The uplink facility
transmits The Outdoor Channel's programming signal over an orbiting AT&T Telstar
402R satellite transponder to cable system headend receiving antennae and
satellite dishes throughout the United States and Canada.
Under its current national carriage agreements with multiple systems
operators ("MSOs") and carriage agreements with the MSOs' individual cable
affiliates, the Company typically offers charter MSOs and their cable affiliates
the right, free of charge, to broadcast The Outdoor Channel to their subscribers
for two to five years and the Company provides the MSOs and their cable
affiliates with two minutes per broadcast hour of local advertising time. The
Company has entered into a carriage agreement with the National Cable Television
Cooperative ("NCTC"), a cooperative of independent, unaffiliated cable
companies, under which each unaffiliated cable company may broadcast, free of
charge, The Outdoor Channel for five years. The Company believes that, following
the initial term of these agreements, it will be in a position to command
subscriber fees from the MSOs, as well as from the affiliated and unaffiliated
cable companies, after the strong viewer interest and demand for The Outdoor
Channel has been demonstrated. In June 1996, the Company ceased offering five
years of free service to new affiliates and introduced a new rate card under
which cable operators who affiliate with The Outdoor Channel after that date
will begin paying carriage fees in 1997.
The Company's efforts to obtain distribution for The Outdoor Channel
to date have largely been focused on areas where there are the greatest number
of outdoor enthusiasts, mainly in rural areas of the United States. The Company
currently has entered into national carriage agreements with several MSOs
including TCA Cable, the 21st largest MSO in the United States with over 600,000
subscribers, Fanch Communications and Service Electric Cable with approximately
250,000 subscribers each, Bresnan Communications with approximately 200,000
homes, Rifkin Communications with nearly 400,000 subscribers, the NCTC, whose
unaffiliated members have over 4.5 million subscribers and various other cable
operators. In addition, the Company is in active negotiations with many other
cable operators, including Tele-Communications, Inc. and Time Warner Cable, the
two largest MSOs in the country. The Company believes that it will be able to
enter into more affiliation agreements in the future as a result of increased
installation of new cable distribution systems and the expected significant
expansion of channel capacity of existing cable systems. In addition, the
Company intends to increase its promotional activities, such as attending
regional and local cable trade shows, in order to increase cable industry
awareness of The Outdoor Channel.
The Outdoor Channel is also broadcast via direct broadcast satellite to
those homes and businesses that have satellite receivers. Given the fact that
approximately 5,300,000 homes and businesses own satellite receivers, the
Company believes that this means of broadcasting provides an unique opportunity
for the Company to attract advertisers as well as advertise and market the
Company's other outdoor-related products and services. The company intends to
encrypt its signal by the end of 1998 requiring satellite viewers to purchase
subscriptions.
DSSs, such as Direct TV and Prime Star represent an additional,
although significantly smaller, means of potential distribution of The Outdoor
Channel. The Company believes that distribution by means of DSSs will increase
as market acceptance and the installed base of DSSs increase. At this time The
Outdoor Channel is seeking DSS distribution but has no agreements for such
distribution.
The Company also plans to increase international distribution of The
Outdoor Channel, and has applied for trademarks in various foreign countries
including Canada, France, Taiwan, Hong Kong, Australia, New Zealand, Germany and
The United Kingdom. The Company recently completed initial negotiations with a
major packager and distributor of cable channels for international markets, and
expects to begin international distribution by 1997.
ADVERTISING
The Outdoor Channel derived $3,861,004 from advertising revenue for the
year ended December 31, 1995. However, compared to most other television
networks, The Outdoor Channel's success is not as dependant upon obtaining
advertising revenue due to the fact that the Company advertises and markets many
of its own products and
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<PAGE> 23
services on The Outdoor Channel, including trips offered through the Trips
Division and memberships offered in GPAA and Lost Dutchman's. The Company
anticipates that it will continue to derive a substantial portion of its revenue
from the sale of products and services to specialty or niche markets; however,
the Company will also focus its efforts on attracting national and local
advertisers who are interested in reaching these markets. The Company will also
continue to enter into "barter" advertising transactions under which the Company
acquires programming from third parties in exchange for a portion of the
advertising time within such programming. The long term plan for the Company is
to slowly replace the barter programming with programming that is either
produced in house or is acquired, giving the Company control of 100% of the
advertising time within these programs.
The Company believes that advertising on The Outdoor Channel is
attractive to advertisers because it allows them to execute both a general
market strategy of reaching more cable television viewers and a target market
strategy of reaching consumers interested in outdoor-related activities. The
Company believes that over the past 15 years, cable television has captured a
greater share of advertising budgets and that during this period, the overall
ratings for the major networks (ABC, CBS and NBC), and for local broadcast
stations, have declined, while over the same period the overall ratings for
basic cable television programming services have increased. Because ratings are
a significant factor in determining both advertisers' placement strategy and the
pricing of advertising time, cable advertising revenues have grown significantly
faster during this period than those of broadcast networks.
In addition the Company believes that The Outdoor Channel will benefit
from the trend in advertising strategies toward greater market segmentation. The
Company believes that a significant number of major national advertisers of
outdoor-related products and services are dedicating a larger share of their
advertising budgets to target the consumer interested in outdoor-related
activities, in an effort to increase their share of this large and rapidly
growing market. Industry sources estimate that the outdoor life-style market is
currently worth approximately $190 billion yearly worldwide. Therefore, the
Company believes that advertisers, including manufacturers and providers of
outdoor-related products and services, will increasingly advertise on The
Outdoor Channel because it will provide them with a cost effective means to
reach a significant number of consumers interested in outdoor-related
activities. Many well known companies have advertised on The Outdoor Channel
with much of such advertising revenue belonging to third parties who provide
barter programming for advertising time. Advertisers on The Outdoor Channel who
have paid The Outdoor Channel directly include Subaru Corporation, Honda
Corporation and The National Rifle Association.
Advertising time on The Outdoor Channel is marketed and sold by the
Company's advertising sales director located in Temecula, California. The
Company is currently interviewing candidates to increase the size of its
advertising sales staff, as well as seeking and reviewing proposals it has
requested from "rep firms," who would sell advertising on the network on a
commission basis.
The Company currently does not derive any revenue from subscriber fees
paid by MSOs or affiliated and unaffiliated cable systems. However, the Company
believes that it will be able to command subscriber fees from these cable
operators in the future as The Outdoor Channel experiences increased
distribution and encrypts its signal. Until the Company is able to command
subscriber fees from cable operators, it believes that it can induce cable
operators to carry The Outdoor Channel instead of a competing outdoor-related
programming service by offering The Outdoor Channel for longer initial free
terms and discounted future rates during the initial term of the carriage
agreement with such operators.
PROGRAMMING
The Outdoor Channel produces approximately 15% of its programming and
acquires the remainder from external sources. Program offerings include shows
devoted to hunting, fishing, recreational gold prospecting, rodeo and scuba
diving, as well as talk shows emphasizing issues relating to the outdoors.
The Company's originally produced programming is focused on providing
entertainment, education, consumer values and a balanced approach to the use of
outdoor natural resources. The Company produces its programs with the outdoor
enthusiast in mind, often after considering suggestions and recommendations of
its viewers.
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Therefore, the Company believes that its programming, as opposed to its
competitors' programming, accurately represents the values and interests of the
outdoor community. Most of the Company's originally produced programming is
produced in a production facility owned by the Company and located in Temecula,
California.
To complement its originally produced programming, the Company acquires
programs from independent film and television production companies. The Outdoor
Channel is often one of the few national television outlets for these types of
programs and, therefore, exhibition rights are relatively inexpensive. In
certain instances the Company is able to acquire programming in exchange for a
portion of the advertising time within such programming. The Company exhibits
the acquired productions pursuant to licensing agreements with suppliers who
generally own the copyrights to such programming. Licenses to air acquired
programming generally run for several years and entitle the Company to show each
episode several times. Examples of programming acquired from third parties
include "Billy Westmoreland's Fishing Diary," "Scuba World," and "The Great
Outdoorsman."
In 1996, the Company plans to produce and acquire higher quality
programming for The Outdoor Channel which the Company believes will enable it to
obtain greater distribution and increase advertising rates. In addition, the
Company plans to offer additional programming which will be of interest to a
wider demographic, including women.
MARKETING
Because it owns other outdoor-related businesses, The Outdoor Channel
affords the Company the unique opportunity to market and sell its own
outdoor-related products and services. The Company estimates that it has had
over 300,000 responses to outdoor-related products, services and memberships as
a direct result of the Company's marketing efforts on The Outdoor Channel. As
the network achieves greater name recognition and distribution, the Company
anticipates that it will be able to increase sales of its products and services,
as well as its sales and exclusive distribution of products produced by third
parties, often at relatively high profit margins.
Outdoor-related products and services currently marketed by the Company
on The Outdoor Channel include those of Lost Dutchman's, GPAA, the Trips
Division and the Products Division ("APEC"). In addition, the Company has
recently reached an agreement in principle with a major producer of
"infomercials" for a marketing partnership to develop private label products
under one or more of the Company's brands, produce infomercials and other
marketing materials, and market the products through The Outdoor Channel and
other media.
LOST DUTCHMAN'S
Lost Dutchman's is a national recreational gold prospecting campground
club, with campgrounds in California, Oregon, Alaska, Nevada, Arizona, Colorado,
Georgia, North Carolina and South Carolina. Lost Dutchman's currently has over
4,700 members, 1,200 and 1,600 of which joined in 1994 and 1995, respectively.
Lost Dutchman's memberships cost up to $4,500 with annual dues presently set at
$96; however, significant discounts are available to those members who purchase
memberships at Company sponsored outings or gold trade shows.
Lost Dutchman's members are entitled to use any of the fourteen
campgrounds owned by the Company or by an affiliated organization, pursuant to a
mutual use agreement between the Company and such organization. All members are
entitled to keep all gold found while prospecting on any of the Company's
properties. The Company is committed only to those duties which would be
required as an absentee owner of raw land, such as the payment of property
taxes. Five of the properties have a caretaker which the Company has been able
to retain at a minimal stipend which averages about $450 per month. The
caretaker's job it is to provide minor repairs and maintenance such as keeping
the weeds down, cleaning bathrooms and other facilities, if any, and generally
taking care of the property and the campers. It is worthy of note that in the
past when a major improvement has been made to a property such as a building, a
clubhouse or road that Lost Dutchmans members have contributed both labor and
materials towards its construction so that the Company had very little cost in
the project. It is the Company's intention to utilize a portion of the proceeds
of this offering, to actively acquire and develop additional recreational
properties and to add recreational facilities and improvements at current camps.
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In addition to advertising on The Outdoor Channel, the Company markets
Lost Dutchman's memberships by advertising at trade conventions and in the Gold
Prospector Magazine published by the Company. In addition, the Company targets
the 150,000 former and present members of GPAA as well as participants in the
Trips Division's expeditions as potential members of Lost Dutchman's. As funds
are available, the Company intends to purchase additional properties for use by
Lost Dutchman's members and to intensify its marketing efforts to recruit new
Lost Dutchman's members.
GPAA
GPAA is the largest recreational gold prospecting club in the world,
with approximately 50,000 members. In addition, GPAA publishes and sells the
Mining Guide, which contains detailed information on mining claims comprising
approximately 500,000 acres and is updated annually, as well as the bi-monthly
Gold Prospector magazine, which has a distribution of approximately 100,000
copies. GPAA also operates gold prospecting trade shows and conventions, from
which the Company derives revenue from admissions and booth rentals, and sells
recreational gold prospecting-related merchandise, including gold pans, hats,
jackets and belt buckles.
GPAA's initial memberships cost $67.50, and members are entitled to
receive a 14" gold pan, an annual subscription to the Gold Prospector magazine,
an annual subscription to the quarterly Pick & Shovel Gazette, a current GPAA
Mining Guide and Prospecting Permit as well as related merchandise. Annual
membership renewal fees range from $20 to $59. The Company markets and
advertises GPAA memberships and products on The Outdoor Channel.
THE TRIPS DIVISION
The Trips Division offers unique recreational gold prospecting trips to
residents of the United States and Canada. The principal trip offered by the
Trips Division is the annual trip to Alaska, the fees for which are up to $1,950
per week and $950 per additional week, that include round-trip transportation to
and from Seattle, Washington. The Alaska Trip Crew usually arrives in early June
with the camp closing in mid August. The Alaskan expedition begins in Nome,
Alaska where participants are taken to the Company's 2,300-acre camp on the
Cripple River adjacent to the Bering Sea. In 1995, the Alaskan trip had
approximately 369 participants, and the Company expects that the number of
participants will increase in the future due to the Company's increased
advertising and marketing efforts on The Outdoor Channel, as well as
advertisements in the Gold Prospector magazine and on the Gold Prospector's
Show.
In 1995, the Company augmented the Alaska Trip with a one week cruise
from Seattle to Anchorage. In 1995, approximately 80 people participated in the
Cruise.
The Company introduced an Australia Expedition in 1995. The
expedition's destination is to Leonora, near Kalgoorlie in Western Australia.
The Western Australia gold fields are some of the richest in the world. In 1995,
approximately 10 people participated in the expedition. Beginning April 1
through October 20, 1996 the Australian expedition has expanded and consists of
6 two week and 6 four week excursions into the Australian outback. The price of
the expedition is $4,950 for four weeks or $3,950 for two weeks and includes
airfare from Los Angeles, accommodations and meals.
AMERICAN PROSPECTING EQUIPMENT COMPANY
American Prospecting Equipment Company ("APEC") markets recreational
prospecting related products. APEC distributes a sales catalog and has
distribution agreements with equipment manufacturers including Homelite, 3M and
various others. The catalog is distributed to members of the GPAA and at company
sponsored conventions.
COMPETITION
There is intense competition for viewers among companies providing
programming services via cable television and through other video delivery
systems. More than 90 programming services are currently distributed
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nationwide by satellite to cable systems. The Outdoor Channel competes for
advertising revenues with other national cable programming services, broadcast
networks, local over-the-air television stations, broadcast radio and the print
media. The Outdoor Channel's direct competitors include the Outdoor Life Network
and to a lesser extent, The Nashville Network and ESPN. More generally, The
Outdoor Network competes with various other leisure-time activities such as home
videos, movie theaters, and other alternative forms of information and
entertainment.
The Outdoor Channel also competes for available channel space on cable
television systems with other cable programming services and nationally
distributed and local television stations. As of the end of fiscal 1995, there
were numerous basic cable programming services and several superstations.
Increased competition in the cable industry may result from
technological advances, such as digital compression, which allows cable systems
to expand channel capacity, and "multiplexing," which allows programming
services to offer more than one feed of their programming. As a result of the
increased segmentation made possible by these advances, other programming
services might be able to provide programming that targets the Company's viewing
audience.
The Company believes that The Outdoor Channel has a competitive
advantage over other outdoor-related programming services in obtaining
distribution, due to the fact that The Outdoor Channel offers cable operators
the opportunity to broadcast The Outdoor Channel free of charge for two to five
years until The Outdoor Channel obtains greater distribution, name recognition
and encrypts its signal. The Company also believes that it has an advantage over
its competitors in attracting advertisers of outdoor-related products and
services because the Company, unlike its competitors, broadcasts The Outdoor
Channel to approximately 5.3 million satellite receivers, currently charges
relatively low advertising rates and offers its advertisers exposure through a
programming format which focuses exclusively on the traditional outdoor
lifestyle of hunting, fishing, camping and related outdoor activities. In
addition, while developments such as digital compression and new distributors in
the cable marketplace may have the effect of increasing competition for The
Outdoor Channel, they also create tremendous potential for additional
distribution for the network.
Global is not aware of any company that is in direct competition for
the type of recreational activity it provides through the Alaska Trip. Global
believes it has an advantage in promoting its trip in Alaska due to its
association with the GPAA and its ability to utilize the Gold Prospector
magazine, The Outdoor Channel, its television show on The Nashville Network and
the Company's gold shows. Persons planning an Alaska gold prospecting venture
would be expected to evaluate other camps in Alaska, as well as the option of
undertaking a trip not associated with a group. The table below lists the
approximate number of participants in the "Alaska Trip" since 1990 by Global.
<TABLE>
<CAPTION>
Year Participants
---- ------------
<S> <C>
1990 172
1991 220
1992 215
1993 579
1994 538
1995 369
1996 410 (est.)
</TABLE>
In a broad sense, Global's "Alaska Trip" is an expedition for study in
Alaskan geology with equal emphasis on the educational and recreational aspects
of this far northern property. Its competition thus includes other sources of
recreational activities.
While Lost Dutchman's has numerous campground competitors, it is the
only campground club the Company is aware of that has a theme, namely gold
prospecting. It has been estimated that there are approximately 15,000
campgrounds in the United States of which approximately 600 are membership
campgrounds such as Lost Dutchman's. For instance, there is Thousand
Trails/NACO, Outdoor World and Thousand Adventures. It is believed that these
companies compete primarily by quality of facilities and amenities offered. By
contrast, Lost Dutchman's
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has rustic facilities and few amenities and seeks to attract persons who are
interested in gold prospecting, hands on outdoor activities and wish to be part
of a club.
EMPLOYEES
As of June 30, 1996, the Company had a total of 57 employees of which
53 were full time. The Company also engages the services of additional employees
during the Alaskan trip offered by the Trips Division. During 1995, the Company
engaged the services of eight such seasonal employees. None of the Company's
employees is covered by a collective bargaining agreement. The Company considers
its relationship with its employees to be good.
GOVERNMENT REGULATION
The Company's operations are subject to various government regulations.
The operations of cable television systems, satellite distribution systems and
broadcast television program distribution companies are subject to the
Communications Act of 1934, as amended, and to regulatory supervision thereunder
by the Federal Communications Commission (the "FCC"). The Company's leased
uplink facility in Perris, California is licensed by the FCC and must be
operated in conformance with the terms and conditions of that license. Cable
systems are also subjected to local franchise authority regulation.
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Local Cable Regulation
The cable television industry is regulated by municipalities or other
local government authorities which have the jurisdiction to grant and to assign
franchises and to negotiate generally the terms and conditions of such
franchises, including rates charged to subscribers, except to the extent that
such jurisdiction is preempted by federal law. Any such rate regulation could
place downward pressure on the potential subscriber fees to be earned by the
Company.
Federal Cable Regulation
In 1992, Congress enacted the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act"), which provides, among other
things, for a "must carry" regime for local broadcast stations (which requires
the mandatory carriage of certain broadcast stations and payments by cable
operators to other broadcast stations for retransmission of their signals in
some instances), for channel positioning rights for certain local broadcast
stations, for limits on the size of MSOs, for limits on carriage by cable
systems and other video distributors of affiliated program services, for a
prohibition on programmers in which cable operators have an "attributable
interest" from discriminating between cable operators and their competitors, or
among cable operators, and for increased competition in video programming
distribution (both within the cable industry and between cable and competing
video distributors). In addition, the 1992 Cable Act requires the FCC to
establish national guidelines for the rates that cable operators subject to rate
regulation may charge for basic cable service and certain other services and to
establish guidelines for determining when cable programming may not be provided
exclusively to cable system operators. Various cable operators have initiated
litigation challenging certain aspects of the 1992 Cable Act. The
constitutionality of the basic scheme of rate regulation under the 1992 Cable
Act has been upheld by a federal district court, and the FCC's regulation rules
were upheld by a federal appeals court in June 1995. The outcome of the balance
of this litigation cannot be predicted. However, Congress passed and the
President signed in March 1996 the most comprehensive rewrite of
telecommunications law since the Communications Act of 1934, reversing or
modifying many of the provisions of the 1992 Act. Among other things, the new
legislation allows cable and telephone industries into each other's markets and
eliminates federal cable rate regulation, immediately for small systems and
within three years for large operators. The Company believes these developments
are very positive for The Outdoor Channel, as they will result in significantly
expanded channel capacity, new distributors to whom the Company can market the
network, and new pressures on cable operators to launch new programming
services, both for competitive reasons and because they will once again be able
to recover the costs of new programming through rate actions.
Lost Dutchman's Regulations
To operate its campgrounds, the Company must comply with discretionary
permits or approvals issued by local governments under local zoning ordinances
and other state laws. In addition, to construct improvements at campgrounds, the
Company has usually been required to obtain permits such as building and
sanitary sewage permits. Some states in which the Company sells memberships have
laws regulating campground memberships. These laws sometimes require
comprehensive disclosure to prospective purchasers. Some states have laws
requiring the Company to register with a state agency and obtain a permit to
market. The Company has undertaken a comprehensive program to ensure compliance
with applicable laws in all 50 states.
Other Regulations
In addition to the regulations applicable to the cable television and
campground industries in general, the Company is also subject to various local,
state and federal regulations, including, without limitation, regulations
promulgated by federal and state environmental, health and labor agencies. The
Company's mining clubs and Trips Division are subject to various local, state
and federal statutes, ordinances, rules and regulations concerning, zoning,
development, and other utilization of its properties.
25
<PAGE> 29
INTELLECTUAL PROPERTY
The Company neither holds nor depends upon any material patent,
trademark, license or other proprietary right except its trademark for "The
Outdoor Channel(TM)" for which the Company has made application for
registration. The Company is, however, researching registration of several names
for the private label products referred to in the "Marketing" section above.
PROPERTIES
CRIPPLE RIVER
The Cripple River property which now includes the Arctic Creek property
consists of approximately 2300 patented (*See definition of "patented," below)
acres and is located in the Cape Nome area of Alaska. The Cripple River property
is the principal destination of the "Alaska Trip" participants. It is the former
location of a large historic gold mining operation. The Company has constructed
over 130 rooms on the property for trip participants. Also, Global has
constructed a chow hall, Saloon (non-alcoholic), general store, gold recovery
plant, small commercial gold mining plant, drinking and wastewater treatment
facilities and other buildings. In addition to recreational gold mining the
Cripple River property has excellent fishing including yearly runs of pink and
silver salmon.
LOUD MINE
The Loud Mine is located in White County, Georgia, near the eastern end
of Georgia's famous Dahlonega Gold Belt, which stretches diagonally (southwest
to northeast) across the north end of the state. The camp's office is staffed
with a full-time caretaker. Campground facilities include a clubhouse,
bathrooms, showers and a dump station. Camping is available for 250 or more
persons. Approximately one-third mile of Town Creek and one of its smaller
tributaries meander through this 38 deeded acre property. Dredges of up to 4"
intake may be used in Town Creek. Highbanking, sluicing and panning also are
popular. Deep layers of alluvial gravels, separated by dense clay layers,
overlay soft bedrock (saprolite) throughout this region. Numerous gold-bearing
quartz veins run through the Loud Mine property. Some "Loud" gold is smooth, but
coarse gold is mostly found, indicating that it is still relatively close to its
source.
STANTON PROPERTY
The Stanton property consists of 35 patented acres and is located
approximately 50 miles northwest of Phoenix, Arizona. It is contiguous with 85
acres owned by an affiliated organization with which Global has a mutual use
agreement. Either on Global's property or the other organization's property
there are sanitary facilities, showers, club house, pool room, card room,
library, kitchen area with sink, water and electric outlets, 65 sites for
hookups and parking for several hundred self contained units. Gold is present
throughout the property from surface to bedrock.
LEADVILLE PROPERTY
The Leadville property is located in Lake County, Colorado was acquired
in August 1995. The camp is approximately 60 patented acres in the heart of
Colorado's historic mining area. At over 11,000 feet in elevation, it has
spectacular scenery including views of the two highest peaks in Colorado. This
is a primitive campground with no facilities. Future plans include bathrooms,
showers and a clubhouse. Completion of future improvements is estimated at 1 to
2 years. There is camping for up to 200 self-contained recreational vehicles.
26
<PAGE> 30
OCONEE CAMP
The Oconee Camp is located in the northwest corner of South Carolina
and just north of Walhalla was acquired in June 1995. This camp consists of 120
acres of deeded property. Oconee is a primitive campground with no facilities.
Future plans include bathrooms, showers, water and a clubhouse. Completion of
future improvements is estimated at 1 to 2 years. There is Camping for up to 250
self-contained recreational vehicles.
VEIN MOUNTAIN CAMP
The Vein Mountain Camp is located in West Central North Carolina
approximately 7 miles from the town of Marion was acquired in February 1996. The
Camp consists of 130 deeded acres located in the middle of North Carolina's
motherlode. Between 1829 and 1830 7 pound nuggets were reported to have been
taken from the property. During the same era a 28 pound nugget and 200 pound
mass of gold and quartz were reported to have been taken within several miles of
the property. There are presently no improvements on the property. There is
camping for up to 250 self-contained recreational vehicles.
BURNT RIVER/ CAVE CREEK
The Burnt River Camp consists of 135 patented acres and the adjacent
Cave Creek property consists of 32 patented acres. These properties are located
in eastern Oregon and have a clubhouse, sanitary facilities, dump station,
restrooms and showers. There is dredging and excellent Highbanking along the
Burnt River. The Cave Creek property is a slender parcel of land that takes in
about one mile of Cave Creek, providing abundant ground for recreational
prospecting.
JUNCTION BAR PLACER
The Junction Bar Placer is located at the confluence of the Klamath and
Scott Rivers in northern California. Fourteen of the property's 26 acres of
patented land are zoned Highway Commercial. With frontage on both Highway 96 and
Scott River Road, this property has excellent development potential. Global has
begun to develop the Junction Bar Placer. Global has conducted a survey of the
property as well as contracted an architect to draw plans for a campground
facility. Approximately $9,000 was expended on the project in 1992. Global
commenced work on obtaining local approval to construct facilities in 1995. The
camp will only be constructed if the Company has sufficient cash on hand to
complete the project. Members of Lost Dutchman's have expressed great interest
in this property and Membership sales should be enhanced upon completion of the
campground.
AMERICAN CREEK
The American Creek claims consist of five U.S. Federal mining claims in
the Cape Nome area of Alaska. There are certain improvements and mining
equipment thereon including a bucket line gold dredge, machine shop and
airstrip. The dredge was partially operated in the summer of 1988, more fully
operated in 1989 and due to mechanical problems only partially operated in 1990,
1991 and 1992. Operations are not anticipated for 1996. In 1989 the Dredge
produced approximately 8.5 ounces of gold with global's share being 2.5 ounces
and trip participants dividing up 6 ounces. In 1990 the Dredge produced a small
and undetermined amount of gold which was divided up entirely among the Dredge
Crew. The Dredge produced no gold in 1988 and 1991. The Dredge Crew also had the
opportunity to operate small gold recovery machines at American Creek in 1989,
1991 and 1992. In 1996, it is anticipated that only experienced Dredge Crew
members will work at American Creek and will perform limited exploration work on
the claims.
27
<PAGE> 31
OMILAK SILVER MINE
The Omilak Silver Mine consists of approximately 40 acres of patented
land and is located about 80 miles northeast of Nome, Alaska. The property has
on it previously existing equipment, mine shafts, rail and mine cars and several
buildings including a two-story bunk house constructed by Global. The Omilak
Silver Mine, in addition to recreational uses, has the potential for being
reactivated as a commercial silver mine. At such time, as Global has sufficient
resources, the price of silver warrants and Global believes it is timely, the
Company intends on evaluating the Omilak property.
HIGH DIVIDE PROPERTY
The High Divide property consists of 20 acres of patented land and is
located in Esmeralda County, Nevada. This property is remote and there are no
facilities. It was patented for lode mining but placer gold is present in the
area.
NEDERLAND PROPERTY
The Nederland property consists of 5 patented acres located in Boulder
County, Colorado. There are no facilities on this property. The area around the
Nederland property has produced over 1 million ounces of gold since 1858. This
property has mostly silver with small amounts of gold.
Patented land is United States public land that has been transferred
to private fee simple ownership. Mining claims can be perfected into patented
land which is what occurred on some of the Company's properties before the
Company acquired those properties.
28
<PAGE> 32
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The directors, executive officers and key employees of the Company are
as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
--------------------- --- ------------------------------------------------------------
<S> <C> <C>
Perry T. Massie 34 Chief Executive Officer, President and Chairman of the Board
Thomas H. Massie 31 Executive Vice President, Secretary and Director
Richard K. Dickson II 50 Senior Vice President, General Counsel and Director
David M. Ashwood 48 Chief Financial Officer and General Manager
Christopher B. Forgy 43 President and Chief Executive Officer of The Outdoor Channel
Andrew J. Dale 40 Senior Vice President Operations of The Outdoor Channel
Jacob B. Hartwick 41 Vice President Sales and Promotions of The Outdoor Channel
and Lost Dutchmans Mining Association
James E. Crawford 40 Vice President Sales and Marketing of The Outdoor Channel
</TABLE>
Perry T. Massie has served as Chief Executive Officer of the Company since
1986, has served as President and Chairman of the Board since 1994. From 1986
until January 1996, Mr. Massie served as Chief Financial Officer of the Company.
He has been the Managing Editor of the Gold Prospector Magazine since 1988. Mr.
Massie earned a Bachelor of Science degree in Mining Engineering from the
University of Alaska, Fairbanks in June 1986. Perry T. Massie is the brother of
Thomas H. Massie.
Thomas H. Massie has served as Secretary and a director of the Company
since 1984, and has served as Executive Vice President of the Company and the
President of Gold Prospectors' Association of America, Inc. since 1994. Mr.
Massie is also the host of the "Gold Prospecting Show." He attended the
University of Alaska, Fairbanks from 1984 to 1986, studying business
administration. Thomas H. Massie is the brother of Perry T. Massie.
Richard K. Dickson II has served as Senior Vice President, General Counsel
and a director of the Company since 1994. From November 1984 until 1994, Mr.
Dickson served as the Company's corporate counsel and has been a practicing
attorney, specializing in corporate and securities law, with his own firm since
1979. Mr. Dickson served as an attorney with the California Department of
Corporations from 1976 to 1979. He earned a Bachelor of Science degree in
Business Administration from the University of California, Berkeley in 1968, a
Masters in Business Administration from the University of Southern California in
1970 and a law degree from the University of the Pacific in 1976.
David M. Ashwood has served as Chief Financial Officer of the Company since
January 1996. From May 1995 to the present, he has been the General Manager of
the Company. Mr. Ashwood has been the Controller of the Company since November
1984. From 1984 until February 1996, Mr. Ashwood was the President of Affiliated
Professional Services, a privately-held company that provides accounting, tax
consulting and business management services to small to medium-sized companies.
Mr. Ashwood earned a Bachelor of Science degree in Business Administration and a
Masters in Business Administration, with an emphasis in Accounting and Finance,
from California State University at Northridge in 1968 and 1969, respectively.
29
<PAGE> 33
Christopher B. Forgy has served as the President and Chief Executive
Officer of The Outdoor Channel since February 1996. From February 1995 through
January 1996, Mr. Forgy owned Chris Forgy Associates, a television industry
consulting firm. From 1989 through January 1995, he served as Senior Vice
President of Marketing, Sales and Programming for Times Mirror Cable Television.
Mr. Forgy is immediate past Chairman of the Cable Television Administration and
Marketing Society (CTAM). He has served on the board of directors of the
Cabletelevision Advertising Bureau (CAB) and Pay Per View Holding Company, which
owns and operates Viewer's Choice networks. Mr. Forgy was a founding member of
the cable committee of the Academy of Television Arts & Sciences.
Andrew J. Dale has served as Senior Vice President Operations of The
Outdoor Channel since 1994. From 1990 to 1993, he has acted as a video and
television consultant to both Global Outdoors, Inc. and the Gold News Network,
Inc. From 1989 to 1994, Mr. Dale was a production manager at Vidfilm Services, a
major Hollywood post-production facility, whose clients include Disney, MCA,
Columbia and a host of other major studios. Vidfilm provides comprehensive
services from film-to-tape transfer, editing and duplications, to standards
conversion from NTSC to PAL and SECAM. Mr. Dale was born and raised in the
United Kingdom.
Jacob B. Hartwick has served in various position with the Company since
1986. From 1994 to the present Mr. Hartwick has been Vice President Sales and
Promotions for The Outdoor Channel and Lost Dutchmans Mining Association. From
1991 to 1994, he served as a Vice President for Gold Prospector's Association of
America, Inc.
James E. Crawford has served as Vice President Sales and Marketing of The
Outdoor Channel since May 1996. From 1991 to May 1996, Mr. Crawford was employed
by Times Mirror Cable Television. While with Times Mirror, he was the Director
of Affiliate Sales Western Division for Outdoor Life Network, a competitor of
The Outdoor Channel and he was Director of Marketing and Sales for Times Mirror
Cable Television in North San Diego and Sun City, California. He is a graduate
of the University of Minnesota.
BOARD OF DIRECTORS
The Board of Directors of the Company took action by unanimous written
consent or held meetings thirteen (13) times during the fiscal year ended
December 31, 1995. Each incumbent Director attended at least seventy-five
percent (75%) of the aggregate of the number of meetings of the Board and the
number of meetings held by all committees of the Board on which he or she
served. The Company does not have any standing committees. In July 1996, the
Company amended its Articles of Incorporation to authorize the Board of
Directors to be increased to a maximum of seven directors. The Company
anticipates increasing the size of the Board to five members when it becomes
listed on the National Market System.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth compensation received for the fiscal years
ended December 31, 1995, 1994 and 1993 by the Company's Chief Executive Officer,
and the other executive officers whose salary and bonus exceeded $100,000 for
fiscal year 1995, 1994 and 1993 (collectively, the "Named Executive Officers"):
30
<PAGE> 34
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Securities
Other Under-
Annual Restricted laying All Other
Compen- Stock Options/ LTIP Compen-
Name and Principal Position Year Salary($) Bonus($) sation($) Awards /SARS Payouts sation
- --------------------------- ---- --------- -------- --------- ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Perry T. Massie, CEO 1995 52,000 10,500 - - - - -
1994 52,000 43,301 - - - - -
1993 35,850 -
Richard K. Dickson II 1995 60,000 60,000 - - - - -
1994 60,000 60,000 - - - - -
</TABLE>
In 1995 and 1994, Mr. Dickson devoted approximately 80% and 75%,
respectively, of his business time to the Company's affairs. Mr. Dickson
received cash payments for 1995 and 1994 of $100,000 and $60,000, respectively,
out of which he paid his office expenses of approximately $2,200 per month. The
additional $20,000 due Mr. Dickson for 1995 may be paid in either cash or stock
at such time as is agreed upon by Mr. Dickson and the Company. The additional
$60,000 for 1994 due Mr. Dickson may be paid in either cash or stock at such
time as is agreed upon by Mr. Dickson and the Company.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% of Total Potential Realizable
Options Value at Assumed
Number of Granted Annual Rates of Stock
Securities to Exercise Price Appreciation for
Underlying Employees or Base Option Term(2)
Options in Fiscal Price Expiration ----------------------
Name Granted (#) Year(1) ($/Share) Date 5%($) 10%($)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Perry T. Massie, CEO - - - - - -
</TABLE>
- ---------------
31
<PAGE> 35
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options in-the-Money Options
Shares at Fiscal Year-End(#) at Fiscal Year-End($)
Acquired On Value ------------------------------- ----------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Perry T. Massie, CEO - - 85,000 -- $210,628 -
Thomas H. Massie - - 85,000 - $210,628 -
Richard K. Dickson II - - 25,000 - $ 65,625 -
David M. Ashwood - - 20,000 - $ 52,500 -
Christopher B. Forgy - - 125,000 - $172,500 -
</TABLE>
The exercise price of the options listed above for Messrs. Perry T. Massie
and Thomas H. Massie are $2.50 per share for 50,000 shares and $2.25 per share
for 35,000 shares. The exercise price of the options listed above for Messrs.
Dickson and Ashwood are $2.25. The exercise price of the options listed above
for Mr. Forgy is $3.50. The Bid Price of Global's Common Stock at 1995 fiscal
year-end was $4.88 per share.
STOCK OPTION PLANS
On May 26, 1993, the Company adopted two stock option plans ("Plan 1
Stock Options" and "Plan 2 Stock Options"). Plan 1 Stock Options are for persons
who held stock options prior to the adoption of Plan 1 Stock Options. There are
presently four persons who hold Plan 1 Stock Options for 115,000 shares of
Common Stock exercisable at a price of $2.50 per share. Plan 1 Stock Options are
non-qualified stock options and no further grants will be made under this plan.
Plan 2 Stock Options may be granted to provide incentives to executive officers,
employees and independent consultants. Options to purchase 285,000 may be
granted under Plan 2 Stock Options. Options to purchase 235,000 shares are
outstanding at an exercise price of $2.25 per share leaving options to purchase
50,000 shares available for grant. Plan 1 Stock Options are non-qualified stock
options.
In September 1995, the Company authorized another stock option plan
(the "1995 Stock Option Plan"). The 1995 Stock Option Plan was approved the by
the shareholders of the Company at the Company's 1996 Annual Meeting held on
July 16, 1996. The 1995 Stock Option Plan provides for the grant of options to
purchase up to 500,000 shares of Common Stock in order to enhance the Company's
ability to attract and retain the services of qualified employees, officers,
directors, consultants and other service providers. The Company may grant
incentive stock options and nonqualified stock options under the 1995 Stock
Option Plan. There are options to purchase 173,000 shares of Common Stock
outstanding under the 1995 Stock Option Plan. An option to purchase 125,000
shares of Common Stock exercisable at $3.50 per share was granted to Christopher
B. Forgy, President and Chief Executive Officer of The Outdoor Channel,
effective October 16, 1995 and options to purchase 48,000 shares of Common Stock
exercisable at prices ranging form $3.25 to $4.00 per share were granted to
several employees and service providers. As of the date of this Prospectus,
options to purchase 327,000 shares of Common Stock may be granted under the 1995
Stock Option Plan.
DIRECTOR'S FEES
The directors of the Company are also executive officers of the
Company. For 1995, directors were not compensated separately or reimbursed for
expenses incurred in attending meetings of the Board of Directors.
32
<PAGE> 36
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Based solely upon its review of the copies of reports furnished to the
Company, or representations that no annual Form 5 reports were required, the
Company believes that all filing requirements under Section 16(a) of the
Exchange Act applicable to its directors, officers and any persons holding ten
percent (10%) or more of the Company's Common Stock with respect to the
Company's fiscal year ended December 31, 1995, were satisfied, with the
exception that Perry T. Massie filed a Form 5 on a timely basis that included
sales of 6,000 shares of the Company's Common Stock at prices ranging from $3.75
to $4.50 per share not filed on a timely basis on Form 4 during the year 1995.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
The Board of Directors has responsibility for matters that would be
handled by the Compensation Committee if Global had such a committee. The Board
has attempted to conserve Global's cash. Therefore, Global did not pay any
direct salaries in 1994 and 1993. With the acquisition of Gold Prospector's
Association of America, Inc. ("GPAA") in 1995, Global commenced paying direct
salaries to Messrs. Perry and Thomas Massie since they were receiving salaries
from GPAA. Global paid GPAA management fees of $30,000 in 1994 and 1993. Global
considers part of this prior management fee an indirect salary to Global's Chief
Executive Officer, Perry Massie, since this management fee was utilized to pay a
portion of Perry Massie's salary at GPAA. Global paid Richard Dickson for legal
services rendered to the Company in 1995 and it is anticipated that Global will
continue to pay Mr. Dickson for legal services rendered to Global.
The Company considers services rendered, nature of the services,
quality of performance, past practice, conservation of cash and amount of
present stock ownership in determining executive compensation. The Company
desires to encourage performance by stock ownership.
EMPLOYMENT CONTRACTS
The Company has entered into an employment agreement with Christopher
B. Forgy, President and Chief Executive Officer of The Outdoor Channel, for a
four year term commencing on February 1, 1996. If Mr. Forgy's employment is
terminated other than for cause, he will be entitled generally to one year's
salary and upon a change in control to two year's salary
CERTAIN TRANSACTIONS
Prior to the acquisition in February 1995 of 100% of the outstanding
stock of Gold Prospectors Association of America, Inc. ("GPAA") by the Company,
GPAA was paid a management fee by the Company which amounted to $30,000 in 1994,
said fee included office rent for the Company. Additionally, GPAA received a 25%
sales commission on all sales of Lost Dutchman's memberships sold using GPAA
mailing lists. Sales commissions paid to GPAA by the Company for 1994 totaled
$614,037. The shareholders of GPAA were Perry T. Massie, Thomas H. Massie and
Wilma M. Massie, all of whom were shareholders of the Company prior to the
Company's acquisition of 100% of the outstanding stock of GPAA. The Company has
accounted for its purchase of GPAA as a pooling of interests. Accordingly, the
Company has restated its financial statements to include those of GPAA for the
period prior to February 1995, and the related management fees and sales
commissions have been eliminated upon such consolidated restatement. No
management fees or sales commissions have been paid since February 1995.
The Company is leasing its administrative facilities from Wilma M.
Massie, a shareholder of the Company and the mother of Perry T. Massie and
Thomas H. Massie, under a month-to-month lease agreement (the "Lease") currently
requiring monthly rent payments of $5,000. Rent expense totaled $57,000 and
$48,000 for the years ended December 31, 1995 and 1994, respectively. The total
rent commitment at December 31, 1995 is five years or $300,000.
33
<PAGE> 37
In conjunction with the Lease, the Company has a note receivable from
Wilma M. Massie, the balance outstanding on which was $292,616 and $342,570 at
December 31, 1995 and 1994, respectively. The note bears interest at 6%.
On February 10, 1995, the Company acquired 100% of the stock of GPAA in
exchange for 2,500,000 shares of its Common Stock (the "Acquisition"). The
acquisition agreement provided for the issuance of up to an additional 1,500,000
shares of Common Stock ("Earn Out Shares") to the former shareholders of GPAA if
GPAA achieved certain earnings or valuation milestones. The former shareholders
of GPAA, Perry T. Massie, Thomas H. Massie, and Wilma M. Massie, are
shareholders of the Company and Messrs. Perry and Thomas Massie are officers of
the Company. For purposes of the Acquisition, the value of the Global Common
Stock was deemed to be $3.50 per share with the initial total acquisition cost
being $8,750,000. For accounting purposes, the assets of GPAA are recorded at
their historical cost basis in a manner similar to a pooling of interest.
The 1,500,000 Earn Out Shares will be unissued or held in escrow by
Global's Transfer Agent for the benefit of the former shareholders of GPAA. All
or part of such shares are to be delivered to the former shareholders of GPAA in
the amounts set forth below if GPAA achieves the cumulative levels of earnings
after deduction of income taxes, set forth below during the period beginning
January 1, 1995 and ending March 31, June 30, September 30 or December 31, in
1995, 1996, 1997, and 1998.
<TABLE>
<CAPTION>
The Number of Earn Out Shares
If Cumulative Earnings to be Delivered to Former
Are Not Less Than GPAA Shareholders
---------------------- -----------------------------
<S> <C>
$1,500,000 500,000
$2,000,000 an additional 500,000
$2,700,000 an additional 500,000
</TABLE>
Alternatively, in recognition of the fact that a significant expansion
of The Outdoor Channel is being conducted and that such expansion, while
potentially increasing the value of GPAA, may not be reflected in earnings, the
below listed valuation earn out formula may be used. The valuation must be made
by an independent certified public accountant or independent unaffiliated
appraiser. The time periods listed above for earnings also apply for the
valuation.
<TABLE>
<CAPTION>
The Number of Earn Out Shares
If Valuation of GPAA to be Delivered to Former
Is Not Less Than GPAA Shareholders
-------------------- -----------------------------
<S> <C>
$12,000,000 500,000
$16,000,000 an additional 500,000
$21,000,000 an additional 500,000
</TABLE>
After 1998, Earn Out Shares which are not delivered to the former
shareholders of GPAA are to be considered void. While unissued or held in
escrow, the former shareholders of GPAA will not be able to vote such shares and
will not be entitled to receive any dividends thereon.
The Company has an agreement with Richard K. Dickson II, a director and
officer of the Company, to provide legal services for a monthly retainer of
$5,000. In the event services rendered by Mr. Dickson on behalf of the Company
exceed $5,000 in any given month, the agreement calls for Mr. Dickson to receive
shares of the Company's Common Stock at its then current market value as payment
for the services rendered in excess of $5,000. During 1994, Mr. Dickson was paid
$60,000 and was entitled to receive $60,000 worth of Common Stock pursuant to
this agreement. During 1995, Mr. Dickson was paid $100,000 and was entitled to
receive $20,000 worth of Common Stock pursuant to this agreement.
34
<PAGE> 38
The transactions between the Company and the Company's management and
significant shareholders are believed by management of the Company to have been
on terms no less favorable to the Company than those that could have been
obtained from unaffiliated parties
In connection with an employment agreement entered into between the
Company and Christopher B. Forgy on February 1, 1996, Wilma M. Massie, a
shareholder of the Company, granted to Mr. Forgy an option to purchase an
aggregate of 100,000 shares of common stock of the Company owned by her. The
option to Mr. Forgy to purchase stock is exercisable at a price of $3.50 per
share of Common Stock.
Perry T. Massie and Thomas H. Massie each have an option to purchase
160,000 shares of the Company owned by Wilma M. Massie and an option to purchase
up to 96,000 shares of Wilma Massie's Earn Out Shares. Mr. Dickson has an option
to purchase 200,000 shares of the Common Stock of the Company owned by Wilma
Massie and has an option to purchase up to 150,000 shares of Wilma Massie's Earn
Out Shares. In January 1996, Mr. Dickson exercised an option to purchase 50,000
shares of his option from Wilma M. Massie. David M. Ashwood, an officer of the
Company, has an option to purchase 80,000 shares of the Common Stock of the
Company owned by Wilma Massie and has an option to purchase up to 34,000 shares
of Wilma Massie's Earn Out Shares.
LIMITATION OF DIRECTORS' AND OFFICERS' LIABILITY AND INDEMNIFICATION
Section 10.06.490 of the Alaska Corporations Code provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by the person in
connection with specified actions or proceedings, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation -- a "derivative action"), if they acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests of
the corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) actually and reasonably incurred
by the person in connection with the defense or settlement of such action, and
the statute requires court approval before there can be any indemnification
where the person seeking indemnification has been found liable for negligence or
misconduct in the performance of the person's duty to the corporation. The
statute provides that it is not exclusive of other indemnification that may be
granted by a corporation's bylaws, agreement, vote of shareholders or
disinterested directors or otherwise.
There is no pending litigation or proceeding involving a director or
officer of the Company as to which indemnification is being sought, nor is the
Company aware of any pending or threatened litigation that may result in claims
for indemnification by any director or officer.
35
<PAGE> 39
SECURITY OWNERSHIP
OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of August 2, 1996 by each
director and executive officer of the Company, each person known to the Company
to be the beneficial owner of more than 5% of the outstanding Common Stock, and
all directors and executive officers of the Company as a group. Except as
otherwise indicated below, the Company believes that each person listed below
has sole voting and investment power with respect to the shares owned, subject
to applicable community property laws.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNED PRIOR TO THE OWNED IF MAXIMUM
OWNER OR IDENTITY OF GROUP OFFERING(1) OFFERING AMOUNT SOLD
- ------------------------------ -------------------- --------------------
NUMBER PERCENT NUMBER PERCENT
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Wilma M. Massie (3)........... 1,401,926 33% 1,401,926 27%
Perry T. Massie (4)(5)........ 1,239,196 28% 1,239,196 23%
Thomas H. Massie (6)(7)....... 1,262,700 29% 1,262,700 24%
Richard K. Dickson II(8)...... 301,550 7% 301,550 6%
David M. Ashwood(9)........... 114,070 3% 114,070 2%
Christopher B. Forgy(10)...... 125,000 3% 125,000 2%
Andrew J. Dale(11)............ 25,000 * % 25,000 *%
Jacob B. Hartwick(12)......... 30,904 * % 30,904 *%
All directors and Named
Executive Officers as a
group (7 persons) (13)........ 3,098,420 75% 3,098,420 61%
</TABLE>
- -------------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to options or warrants currently exercisable or convertible, or
exercisable or convertible within 60 days of August 10, 1996, are
deemed outstanding for computing the percentage of the persons holding
such options but are not deemed outstanding for computing the
percentage of any other person.
(2) The address of each shareholder is c/o Global Outdoors, Inc., 43445
Business Park Dr., Suite 113, Temecula, California 92590.
(3) Includes 95,000 shares subject to options from the Company exercisable
within 60 days of August 10, 1996.
(4) Includes 85,000 shares subject to options from the Company and 160,000
shares subject to options from Wilma M. Massie exercisable within 60
days of August 10, 1996.
(5) 8,500 of the shares shown are owned jointly by Perry T. Massie and his
wife, Sandy Massie, who share voting and investment power with respect
to such shares.
(6) Includes 85,000 shares subject to options from the Company and 160,000
shares subject to options from Wilma M. Massie exercisable within 60
days of August 10, 1996.
(7) 8,500 of the shares shown are owned jointly by Thomas H. Massie and his
wife, Cindy Massie, who share voting and investment power with respect
to such shares.
36
<PAGE> 40
(8) Includes 25,000 shares subject to options from the Company and 200,000
shares subject to options from Wilma M. Massie exercisable within 60
days of August 10, 1996.
(9) Includes 20,000 shares subject to options from the Company and 80,000
shares subject to options from Wilma M. Massie exercisable within 60
days of August 10, 1996.
(10) Includes 125,000 shares subject to options from the Company exercisable
within 60 days of August 10, 1996.
(11) Includes 20,000 shares subject to options from the Company exercisable
within 60 days of August 10, 1996.
(12) Includes 20,000 shares subject to options from the Company exercisable
within 60 days of August 10, 1996.
(13) Includes directors' and executive officers' shares listed above,
including 465,000 shares subject to options from the Company and
600,000 shares subject to options from Wilma M. Massie exercisable
within 60 days of August 10, 1996.
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 50,000,000
shares of Common Stock, $.02 par value per share, of which 4,116,664 shares were
issued and outstanding as of August 2, 1996, and 10,000,000 shares of Preferred
Stock, $.001 par value per share, of which 61,875 shares were issued and
outstanding as of August 2, 1996.
UNITS
The securities offered hereby are Units consisting of two shares of
Common Stock and one Class F Warrant. The shares of Common stock and Class F
Warrant included in the Units become separately transferable immediately.
COMMON STOCK
Holders of the Common Stock are entitled to one vote per share on all
matters to be voted upon by the shareholders. Holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared by the
Board of Directors out of funds legally available therefor. See "Dividend
Policy." Upon the liquidation, dissolution, or winding up of the Company, the
holders of Common Stock are entitled to share ratably in all assets of the
Company which are legally available for distribution, after payment of all debts
and other liabilities. Holders of Common Stock have no preemptive, subscription,
redemption or conversion rights. The outstanding shares of Common Stock are, and
the shares being sold by the Company in this offering will be, when issued and
delivered, validly issued, fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors is authorized, subject to any limitations
prescribed by the laws of the State of Alaska, but without further action by the
Company's shareholders, to provide for the issuance of Preferred Stock in one or
more series, to establish from time to time the number of shares to be included
in each such series, to fix the designations, powers, preferences and rights of
the shares of each such series and any qualifications, limitations or
restrictions thereof, and to increase or decrease the number of shares of any
such series (but not below the number of shares of such series then outstanding)
without any further vote or action by the shareholders. The Board of Directors
may authorize and issue Preferred Stock with voting or conversion rights that
could adversely affect the voting power or other rights of the holders of Common
Stock. In addition, the issuance of Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the Company.
As of July 30, 1996, there were 61,875 shares of 10% noncumulative
convertible preferred stock (the "10% Preferred Stock") issued and outstanding.
Each holder of 10% Preferred Stock is entitled to receive annual noncumulative
dividends at the rate of 10% per annum. Such dividends on the 10% Preferred
Stock are payable before any dividends are paid or declared with respect to the
Common Stock, and may be paid in Common Stock, at the option of the Company, at
the rate of one share of Common Stock per share of 10% Preferred Stock. Each
share of 10% Preferred Stock is convertible into one share of Common Stock,
subject to adjustment for stock splits,
37
<PAGE> 41
stock dividends and similar events, at the option of the holders thereof or the
Company upon giving the holders 30 days' prior notice. The holders of the 10%
Preferred Stock are not entitled to vote on any matters and are not entitled to
any preemptive rights nor any preference upon liquidation, dissolution or
winding-up of the Company.
WARRANTS
The Class F Warrants will be issued separate from, and not attached to,
the Common Stock offered hereby and may be immediately transferred separately
from the Common Stock. The Class F Warrants will be issued in registered form
pursuant to the terms of a warrant agreement (the "Warrant Agreement") between
the Company and American Securities Transfer and Trust, Inc. as warrant agent
(the "Warrant Agent"). The following statements are brief summaries of certain
provisions of the Warrant Agreement. Copies of the Warrant Agreement may be
obtained from the Company or the Warrant Agent and have been filed with the
Commission as an exhibit to the Registration Statement of which this Prospectus
is a part.
The Company has authorized the issuance of Class F Warrants to purchase
a maximum of 530,000 shares of Common Stock (including 30,000 Class F Warrants
issuable upon exercise of the Representative's Warrants) and has reserved an
equivalent number of shares of Common Stock for issuance upon exercise of such
Class F Warrants. The Company will pay cash in lieu of fractional shares. Each
Class F Warrant entitles the holder thereof to purchase at any time one share of
Common Stock at an exercise price of $5.50 per share of Common Stock until the
second anniversary of the date of this Prospectus. The rights to exercise Class
F Warrants will terminate at the close of business on the second anniversary of
the date of this Prospectus. The Class F Warrants contain provisions that
protect the Class F Warrant holders against dilution by adjustment of the
exercise price in certain events, including, but not limited to stock dividends,
stock splits, reclassification or mergers. Holders of Class F Warrants may not
exercise the Class F Warrants for fractional shares. A Class F Warrant holder
will not possess any rights as a shareholder of the Company. Shares of Common
Stock, when issued upon the exercise of the Class F Warrants in accordance with
the terms thereof, will be fully paid and non-assessable.
The Company may redeem, at any time, some or all of the Class F
Warrants at a call price of $.02 per Warrant upon 20 days' prior written notice.
At any time when the Class F Warrants are exercisable, the Company is
required to have a current Registration Statement on file with the Commission
and to effect appropriate qualifications under the laws and regulations of
states in which the holders of the Class F Warrants reside in order to comply
with applicable laws in connection with the exercise of the Class F Warrants and
the resale of the Common Stock issued upon such exercise. So long as the Class F
Warrants are outstanding, the Company has undertaken to file all post-effective
amendments to the Registration Statement required to be filed under the
Securities Act, and to take appropriate action under federal law and the
securities laws of those states where the Class F Warrants were initially
offered to permit the issuance and resale of the Common Stock issuable upon
exercise of the Class F Warrants. However, there can be no assurance that the
Company will be in a position to effect such action under the federal and
applicable state securities laws, and the failure of the Company to effect such
action may cause the exercise of the Class F Warrants and the resale or other
disposition of the Common Stock issued upon such exercise to become unlawful.
The Company may amend the terms of the Class F Warrants, but only by extending
the termination date or lowering the exercise price thereof. The Company has no
present intention of amending such terms.
As of July 30, 1996, there were 110,984 Class E Warrants outstanding to
purchase an aggregate of 110,984 shares of Common Stock at an exercise price of
$5.50 per share. The Class E Warrants were issued in a private placement, became
exercisable on July 1, 1995 and expire on December 31, 1997, unless extended by
the Board of Directors. The Company may redeem the Class E Warrants at a price
of $0.02 per Class E Warrant, upon giving the holders thereof 20 days' prior
written notice. If any Class E Warrant called for redemption is not exercised by
such time, it will cease to be exercisable and the holder thereof will be
entitled only to the redemption price. The exercise price of the Class E
Warrants and the number of shares of Common Stock underlying such Class E
Warrants are subject to adjustment for stock splits, stock dividends and similar
events. The Class E Warrants do not contain
38
<PAGE> 42
anti-dilution provisions relating to issuances or sales of Common Stock at
prices below the exercise price or the then prevailing market price of the
Common Stock. The Class E Warrants may be exercised in whole or in part.
The Company has previously issued or authorized the issuance of Class
A, Class B, Class C and Class D Warrants. The expiration date for all such
warrants has lapsed.
TRANSFER AGENT, WARRANT AGENT AND REGISTRAR
The transfer agent, warrant agent and registrar for the Company's
Common Stock and Class F Warrants is American Securities Transfer and Trust,
Inc., 1825 Lawrence Street, Suite 444, Denver, Colorado 80202.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, if the maximum offering amount of
1,000,000 shares are sold, the Company will have 5,103,551 shares of Common
Stock outstanding. All of the 1,000,000 shares potentially sold in this offering
will be freely transferable by persons other than "affiliates" of the Company
(as that term is defined under the Securities Act) without restriction or
further registration under the Securities Act.
Of the remaining outstanding shares of Common Stock, 3,589,133 shares
will be "restricted securities" within the meaning of Rule 144 under the
Securities Act and may not be sold in the absence of registration under the
Securities Act unless an exemption from registration is available, including the
exemption contained in Rule 144. In the absence of agreements with the
Representative, approximately 3,350,000 of such shares have met the two-year
holding period requirement under Rule 144 and are available for immediate sale
in the public market. However, pursuant to the terms of the Underwriting
Agreement, the Representative has required that 2,500,000 shares of such Common
Stock owned by officers, directors and other holders, as well as Common Stock
obtained by them upon exercise of stock options, may not be sold until twelve
months from the date of this Prospectus without the prior written consent of the
Representative. The remaining approximately 240,000 shares of Common Stock held
by existing shareholders have not met the two-year holding period requirement
under Rule 144 and become available for sale in the public market at various
times commencing in August, 1996.
In general, under Rule 144, as currently in effect, a person who has
beneficially owned shares for at least two years is entitled to sell, within any
three-month period, a number of "restricted" shares that does not exceed the
greater of 1% of the then outstanding shares of Common Stock or the average
weekly trading volume during the four calendar weeks preceding such sale. Sales
under Rule 144 are also subject to certain manner of sale limitations, notice
requirements and the availability of current public information about the
Company. Rule 144(k) provides that a person who is not deemed an "affiliate" and
who has beneficially owned shares for at least three years is entitled to sell
such shares at any time under Rule 144 without regard to the limitations
described above.
In addition to the shares of Common Stock that are currently
outstanding, a total of (i) 900,000 shares of Common Stock have been reserved
for issuance under the Company's stock option plans, (ii) 61,875 shares of
Common Stock have been reserved for issuance upon conversion of outstanding
shares of Preferred Stock, (iii) 110,984 shares of Common Stock have been
reserved for issuance upon exercise of outstanding Class E Warrants at an
exercise price of $5.50 per share and (iv) 1,500,000 shares of Common Stock have
been reserved for issuance to the former shareholders of Gold Prospectors'
Association of America, Inc. upon the occurrence of certain events. Options to
acquire 500,000 shares of Common Stock at prices ranging from $2.25 to $4.00 per
share have been granted pursuant to the Company's stock option plans. See
"Description of Securities;" "Management -- Certain Transactions; -- Stock
Option Plans."
The Company is unable to estimate the number of shares that may be sold
in the future by its existing shareholders or the effect, if any, that sales of
shares by such shareholders will have on the market price of Common Stock
prevailing from time to time. Sales of a substantial number of shares of Common
Stock by existing shareholders could adversely affect prevailing market prices.
39
<PAGE> 43
UNDERWRITING
The Underwriting Agreement, a copy of which has been filed with the
Securities and Exchange Commission as an exhibit to the Registration Statement
provides in part as follows:
The Company has agreed to pay the Castle Securities Corp. (the
"Underwriter" or "Representative") a commission of 2% and a nonaccountable
expense allowance of 2% of the sales price of all Units sold in this offering
from referrals by the Company and a commission of 10% and a nonaccountable
expense allowance of 2% of the sales price of all other Units sold in this
offering. The nonaccountable expense allowance is limited to a maximum of
$20,000 on all Units sold. A $2,000 advance on said allowance has been paid to
the Underwriter by the Company.
At the Closing of the Offering, the Company will sell to the
Underwriter for $0.001 per Warrant, Warrants (the "Underwriter's Warrants")
entitling the Underwriter to purchase one Unit for each ten Units sold in the
Offering for the first 100,000 Units sold and one Unit for each twenty Units
sold thereafter. The exercise price of the Underwriter's Warrants shall be $6.00
per Unit. The Underwriter's Warrants will be exercisable one year after the date
of the definitive Prospectus and for one year thereafter. At any time within the
period commencing one year and ending two years after the date of this
Prospectus, the Underwriter will have the right to sell its Underwriter's
Warrants or Warrant Stock pursuant to a Registration Statement the Company files
under the Securities Act of 1933.
The obligation of the Underwriter to offer Units described herein is
subject to (a) the accuracy of the representations and warranties of the Company
contained in the Underwriting Agreement, (b) performance by the Company of its
obligations contained herein, (c) approval of certain legal matters by the
Underwriter or counsel for the Underwriter and (d) the condition, among others,
that a Registration Statement on Form SB-2 shall have become effective with the
U.S. Securities and Exchange Commission. The Underwriter has agreed to
cross-indemnify the Company regarding certain matters. In the opinion of the
Securities and Exchange Commission, such indemnification is contrary to public
policy and therefore, unenforceable.
The Company is offering a minimum of 20,000 Units and a maximum of
500,000 Units at a purchase price of $5.00 per Unit. The Company has entered
into an Underwriting Agreement with Castle Securities Corp., 45 Church Street,
Freeport, New York 11520. The Underwriter has made no commitment to sell any of
the Units offered hereby and no assurance is given than any of the Units offered
hereby will be sold. The Underwriter has agreed to use its "best efforts" to
sell the Units offered hereby.
The Underwriter has the option to utilize other broker-dealers to
assist in the underwriting of this issue. At the date hereof, the Underwriter
has not organized a group to conduct selling efforts with respect to the
Company's Units. In the event such group is formed, the Underwriter intends to
reallow participating broker-dealers 80% of the full 10% underwriting
commission, i.e. $0.40 per Unit.
The proceeds from the sale of Units will be held in an Escrow Account
at Wells Fargo Bank, Irvine, California, until a minimum of 20,000 Units have
been sold. If at least 20,000 Units are not sold by 120 days from the date of
this Prospectus, which date may be extended for an additional period of 60 days
by the Company and Underwriter, the proceeds received from investors will be
promptly refunded to the investors in full without interest thereon and or
deduction of any kind therefrom, such as sales commissions or expenses of the
offering. Until the proceeds from the sale of at least 20,000 Units are
deposited in escrow investors will not be security holders nor able to demand
return of their subscription proceeds.
All purchasers' checks should be made payable to "Global Outdoors, Inc.
- -Escrow Account." Certificates evidencing Common Stock and Warrants will be
issued to purchasers only if the proceeds from the sale of at least 20,000 Units
are actually deposited in escrow and released to the Company pursuant to the
Escrow Agreement. Until such time as the proceeds are actually received by the
Company and the certificates delivered to the purchasers thereof, such
purchasers will be deemed subscribers and not security holders of the Company.
During the selling period, purchasers will have no right to demand return of
their subscription proceeds. If the minimum proceeds are
40
<PAGE> 44
successfully obtained, the Offering will be continued until completed, until the
maximum period of the Offering has elapsed or until the Offering is terminated
by the Company and Underwriter, whichever occurs first.
The foregoing is a summary of some of the terms of the Underwriting
Agreement which summary does not purport to be complete, and is deemed amplified
in all respects by reference to the Underwriting Agreement, copies of which may
be examined in the offices of the Company, the Underwriter and the Securities
and Exchange Commission, Washington, D.C. See "Additional Information."
LEGAL MATTERS
The legality of the issuance of the Shares offered hereby and certain
other legal matters will be passed upon for the Company by Richard K. Dickson
II, Newport Beach, California. Mr. Dickson is an officer and director of the
Company. He beneficially owns 301,550 shares of Common Stock of the Company. See
"Management" and "Security Ownership of Certain Beneficial Owners and
Management." Certain legal matters will be passed upon for the Underwriters by
_____________________________________.
EXPERTS
The audited financial statements included in this Prospectus and
elsewhere in the Registration statement, to the extent and for the periods
indicated in their report, have been audited by Kenneth E. Walsh, certified
public accountant, and are included herein in reliance upon the authority of
said firms as experts in giving said reports.
ADDITIONAL INFORMATION
A Registration Statement on Form SB-2, including amendments thereto
(herein, the "Registration Statement") relating to the Common Stock offered
hereby has been filed by the Company with the Securities and Exchange Commission
(the "Commission"). This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to are not necessarily complete and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference.
For further information with respect to the Company and the Units
offered hereby, reference is made to such Registration Statement, exhibits and
schedules.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith, files
reports, proxy or information statements, and other information with the
Commission. Such reports, proxy statements and other information, including a
copy of the Registration Statement may be inspected by anyone without charge at
the Securities and Exchange Commission's principal office located at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as at
the following regional offices: the New York Regional Office located at 7 World
Trade Center, 13th Floor, New York, New York 10048, and the Chicago Regional
Office located at Northwestern Atrium Center, 500 West Madison Street, Chicago
Illinois 60661-2511 and copies of all or any part thereof may be obtained from
the Public Reference Branch of the Commission upon the payment of certain fees
prescribed by the Securities and Exchange Commission.
41
<PAGE> 45
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
UNAUDITED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1996
AND 1995:
Consolidated Balance Sheets................................................ FI-2
Consolidated Statements of Income.......................................... FI-4
Consolidated Statements of Cash Flows...................................... FI-5
Notes to Unaudited Consolidated Financial Statements....................... FI-6
AUDITED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994:
Independent Auditors Report................................................ F-2
Consolidated Balance Sheets................................................ F-3
Consolidated Statements of Income.......................................... F-5
Consolidated Statements of Stockholders' Equity............................ F-6
Consolidated Statements of Cash Flows...................................... F-8
Notes to Unaudited Consolidated Financial Statements....................... F-10
</TABLE>
42
<PAGE> 46
GLOBAL OUTDOORS, INC.
Consolidated Financial Statements
for the six months ended
June 30, 1996 and 1995
Unaudited
FI-1
<PAGE> 47
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
------- -----------
1996 1995 1995
---------- ---------- ----------
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 71,764 $ 580,425 $ 458,448
Current portion of membership sales
contracts receivable, net (Note 2) 733,154 581,457 506,602
Current portion of stockholder receivable 40,800 25,892 40,800
Other receivables, net 207,838 103,379 135,937
Income taxes receivable - 33,000 -
Inventories 145,675 50,000 192,268
Prepaid expenses 369,034 119,213 536,591
Deferred income taxes 50,296 85,000 50,296
---------- ---------- ----------
Total current assets 1,618,561 1,578,366 1,920,942
MEMBERSHIP SALES CONTRACTS
RECEIVABLE, net (Note 2) 4,738,529 2,379,207 3,392,326
MEMBERSHIP RECREATIONAL
MINING PROPERTIES (Note 3) 744,133 504,692 480,226
ALASKA RECREATIONAL
MINING PROPERTIES (Note 3) 1,549,426 1,588,702 1,550,052
EQUIPMENT AND LEASEHOLD
IMPROVEMENTS 413,209 62,688 226,970
STOCKHOLDER RECEIVABLE,
Interest at 6% $5,000 per month including
interest, secured by building, less
current portion 268,217 326,434 292,616
DEPOSITS 312,926 383,000 323,226
DEFERRED INCOME TAXES 261,578 155,000 261,578
OTHER ASSETS 49,599 12,140 67,376
---------- ---------- ----------
TOTAL ASSETS $9,956,178 $6,990,229 $8,515,312
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
FI-2
<PAGE> 48
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
------- -----------
1996 1995 1995
---------- ---------- ----------
<S> <C> <C> <C>
CURRENT LIABILITIES
Funds held in escrow $ - $ - $ 36,250
Current maturities of long-term debt 177,516 29,060 111,387
Customer deposits 237,515 193,778 224,273
Deferred membership costs (Note 2) 119,793 - 83,793
Accounts payable and accrued expenses 108,320 268,552 123,552
Income taxes payable 516,540 110,000 561,538
Deferred income taxes 300,714 302,500 45,714
Current portion of deferred revenue 247,650 206,246 218,621
---------- ---------- ----------
Total current liabilities 1,708,048 1,110,136 1,405,128
DEFERRED REVENUE, Long term portion 1,082,971 942,526 1,029,999
DEFERRED INCOME TAXES 879,102 836,000 879,102
LONG TERM DEBT, Less current portion 927,837 261,447 288,600
---------- ---------- ----------
Total liabilities 4,597,958 3,150,109 3,602,829
---------- ---------- ----------
STOCKHOLDERS' EQUITY (Notes 5 and 6)
Common stock, $.02 par value; 50,000,000
shares authorized; shares issued and outstanding:
4,103,551 at June 30, 1996; 4,074,988 at
December 31, 1995; and 3,868,758 at June
30, 1995 82,071 77,375 81,500
Convertible preferred stock, non voting, 10%
noncumulative, no liquidation preference,
$.001 par value; 10,000,000 shares authorized;
shares issued and outstanding: 61,875 at June
30, 1996; 63,195 at December 31, 1995; and
63,855 at June 30, 1995 62 64 63
Additional paid-in capital 2,869,424 2,060,014 2,793,938
Retained Earnings 2,627,913 1,923,917 2,258,232
Less Stock Subscriptions receivable (221,250) (221,250) (221,250)
---------- ---------- ----------
Total stockholders' equity $5,358,220 $3,840,120 $4,912,483
---------- ---------- ----------
TOTAL LIABILITIES AND EQUITY $9,956,178 $6,990,229 $8,515,312
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
FI-3
<PAGE> 49
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
------- ------------
REVENUES: 1996 1995 1995
---------- ---------- ----------
<S> <C> <C> <C>
Alaska/Australia Trip $ 556,273 $ 476,970 $ 673,161
Membership sales 3,330,013 2,222,850 4,872,480
Advertising 2,600,312 1,943,421 3,831,004
Management fees - 30,000 30,000
Interest 173,428 25,162 285,091
---------- ---------- ----------
Total Net Revenues 6,938,144 4,698,403 9,691,736
EXPENSES:
Alaska/Australia trip expenses 304,933 239,631 357,570
Advertising 857,856 489,427 1,058,988
Bank credit card charges 34,401 24,511 45,080
Compensation & related payroll costs 655,290 340,162 825,874
Cost of memberships sold 74,000 6,736 141,460
Depreciation 62,400 68,866 137,806
Freight 51,411 33,853 69,987
Insurance 46,488 49,823 67,203
Interest 38,321 12,050 38,218
Merchandise purchases 163,872 60,789 326,502
Office supplies 23,744 14,171 30,541
Other 61,291 61,054 75,399
Outside labor 89,874 9,240 126,036
Postage & Delivery 253,385 152,299 367,301
Printing 175,691 151,312 254,051
Professional services 122,871 169,473 62,787
Programming/advertising-barter 2,102,625 1,826,400 3,381,950
Property tax 3,987 3,119 8,818
Provision for doubtful contracts 190,320 41,264 235,116
Repairs and maintenance 33,347 15,663 33,984
Rent 71,665 27,930 87,772
Shows and seminars 145,550 76,614 150,496
Supplies and small tools 83,828 63,666 106,436
Tax and license 22,655 6,676 32,259
Telephone and utilities 113,958 63,044 152,432
---------- ---------- ----------
Total expenses 5,783,763 4,007,773 8,174,066
---------- ---------- ----------
Income before income taxes 1,154,381 690,630 1,517,670
Loss on discontinued business
(TNN Show) (Note 7) 574,700 - -
Income tax expense 210,000 250,000 561,538
---------- ---------- ----------
Net income $ 369,681 $ 440,630 $ 956,132
---------- ---------- ----------
Earnings per share (Note 6) $ 0.08 $ 0.11 $ 0.23
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
FI-4
<PAGE> 50
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period Ended June 30
--------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities $(619,125) $ 759,496
Cash flows (used in) investing activities,
purchase of equipment (421,443) (520,935)
Cash flows (used in) financing activities,
payments on long-term debt 653,884 (423,249)
--------- ---------
Net increase (decrease) in cash $(386,684) $(184,688)
Cash at beginning of period $ 458,448 $ 765,113
--------- ---------
Cash at end of period $ 71,764 $ 580,425
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
FI-5
<PAGE> 51
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business:
The Company owns and operates The Outdoor Channel, the first national television
network devoted solely to outdoor activities, such as hunting, fishing, scuba
diving, camping, RV-ing and recreational gold prospecting. The Company's other
business activities consist of the promotion and sale of an "Alaska trip", a
recreational gold mining expedition to the Company's Cripple River property
located near Nome, Alaska, and the sale of Lost Dutchman's, (LDMA-AU, Inc.)
memberships which entitles members to engage in recreational prospecting on its
California, Oregon, Alaska, Nevada, Arizona, Colorado, Georgia, North Carolina
and South Carolina properties. The Company has also signed a mutual use
agreement with another organization whose members are entitled to engage in
recreational mining on certain of each other's properties. The Company also
receives revenues from the sale of memberships in a gold prospecting club,
revenue from advertisers in a bi-monthly magazine, advertising revenue through
cable television programming d/b/a The Outdoor Channel and through merchandise
sales. The Outdoor Channel barters advertising time for some of its programming.
For financial reporting purposes the Company reports offsetting revenue and
expense items, as if the Company had sold advertising and purchased programming,
at the prevailing advertising rates.
A summary of the Company's significant accounting policies is as follows:
Management Statement - The interim financial statements for the period January 1
through June 30, 1996, include all adjustments which in the opinion of
management are necessary in order to make the financial statements not
misleading.
The Principles of Consolidation - The consolidated financial statements include
the accounts of Global Outdoors, Inc. and its wholly-owned subsidiaries,
LDMA-AU, Inc., Big "M" Mining Company, Inc., Gold Prospectors' Association of
American, Inc. (GPAA) and The Outdoor Network, Inc. which operates a satellite
and cable television channel.
Business Combination - On February 10, 1995, the Company effected a business
combination with GPAA by exchanging 2,500,000 shares of its common stock for all
the common stock of GPAA. GPAA was 100% owned by the majority stockholders of
the Company. The agreement called for an additional 1,500,000 shares of common
stock to be issued if certain earnings or valuation levels are attained. The
combination was accounted for in a manner similar to a pooling of interests with
prior periods being restated to give retroactive effect to the combination as if
it occurred on January 1, 1992. A reconciliation of the amounts of revenue and
earnings previously reported by the Company and the combined amounts presented
in the financial statements was included in the Company's Form 10-K for the year
ended December 31, 1994. Details of the results of operations for the previously
separate companies for the period before the combination was consummated were
included in the Form 10-K for the year ended December 31, 1994. GPAA previously
had a year of February 28 and as a result of the combination adopted a December
31 fiscal year-end. The income and cash flows for two months ended February 28,
1994 were included in both the twelve months ended December 31, 1994 and 1993.
The duplication of income for these two months totals $21,667 and was eliminated
in the statement of retained earnings. The amount of revenues and expenses for
that period were, $646,880 and $625,213, respectively.
Reference to Forms 10-KSB and 10-K - Please refer to the Company's Form 10-KSB
for the year ended December 31, 1995 and Form 10-K for the year ended December
31, 1994 for additional information and disclosures which may be of interest to
the reader hereof.
FI-6
<PAGE> 52
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recently Issued Accounting Pronouncements - In March 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed of." The Company has adopted SFAS No. 121. SFAS
No. 121 establishes recognition and measurement criteria for impairment losses
when the Company no longer expects to recover the carrying value of a long-lived
asset. The effect on the consolidated financial statements of adopting SFAS was
not material.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation." The accounting or disclosure requirements of this statement are
effective at the Company's fiscal year-ended 1996. It is currently anticipated
that the Company will continue to account for stock-based compensation using
Accounting Principles Board Opinion No. 25 and the impact of SFAS 123 has not
yet been determined.
Allowance for Contract Cancellations - The Company provides an allowance for
future cancellations of membership contracts. The allowance is based on
management's estimate of future contract cancellations considering the Company's
historical cancellation rates, delinquencies of receivables and other factors
deemed relevant to the analysis. The allowance is reviewed on a periodic basis
and adjusted upon management's estimate.
Membership Recreational Mining Properties - Membership recreational mining
properties consist primarily of land, are held for membership sales and are
recorded at the lower of cost or estimated net realizable value. These
properties are charged to cost of memberships sold in proportion to total
memberships which the Company estimates it will ultimately sell.
Alaska Recreational Mining Properties - Alaska recreational mining properties
consist primarily of land, buildings and equipment, are recorded at cost, net of
accumulated depreciation on the buildings and equipment provided on a
straight-line basis over the estimated economic lives of between 5 and 10 years.
Equipment and leasehold improvements:
Equipment and leasehold improvements are carried at cost. Depreciation is
calculated using accelerated methods over the estimated useful lives of the
assets.
Revenue recognition:
Revenue on the "Alaska trip" income is recognized when the trips are taken.
Trips are taken in July and August each year.
The Company has sold memberships primarily on an installment basis. Memberships
include contracts that give purchasers recreational prospecting and mineral
rights to the Company's land and rights to use the land and facilities. The
contracts are generally noninterest bearing, unsecured and provide for a down
payment and monthly installments of $25 for periods of up to ten years. Sales
revenue is recognized upon execution of a sales contract, expiration of the
refund period, and receipt of cumulative payments of at least 10% of the sales
price. Cumulative payments received on contracts where the refund period has not
FI-7
<PAGE> 53
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
expired, or which are less than 10% of the original contract amount are recorded
as deposits. Deposits are fully refundable for ten days. The contracts are
discounted over the contractual repayment period at a discount rate of 8%.
The Company also sells membership for periods varying from one year to lifetime
memberships. For nonlifetime memberships, revenue is recognized over the life of
the membership. Management estimates the expected period of time a lifetime
member is active in the membership club to be fifteen years. Accordingly, for
lifetime memberships, revenue is recognized over fifteen years. Effective March
1, 1994, the expected period of time a lifetime member is active in the
membership club was extended from ten to fifteen years as it was determined that
lifetime members are remaining active on average approximately fifteen years.
The Company imputes compensation for the future campground services that lost
Dutchman's will provide until dues are paid (usually around 6 years per
membership), pursuant to Paragraph 31 of FAS 66. In addition, the Company
accrues the future costs for GPAA benefits provided with Lost Dutchman's
memberships (bi-monthly magazine, yearly mining guide and quarterly newspaper)
until dues are paid.
Certain prior year amounts in the consolidated financial statements have been
reclassified to conform to the current year presentation.
Advertising:
Advertising costs are charged to income as incurred and production costs of
advertising are expensed the first time the advertising takes place.
Income taxes:
Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and deferred tax liabilities
are recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
basis. Deferred tax assets are reduced by valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of the enactment.
FI-8
<PAGE> 54
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. MEMBERSHIP SALES CONTRACTS RECEIVABLE
Membership sales contracts receivable are summarized as follows:
<TABLE>
<CAPTION>
JUNE 30 JUNE 30 DECEMBER 31
------- ------- -----------
1996 1995 1995
---------- --------- ----------
<S> <C> <C> <C>
Contracts receivable 8,032,614 4,288,903 5,723,780
Unearned interest (1,952,966) (999,276) (1,391,638)
Allowance for cancellations (607,965) (328,963) (433,214)
---------- --------- ----------
5,471,683 2,960,664 3,898,928
Less current portion (733,.154) (481,457) (506,602)
---------- --------- ----------
4,738,529 2,479,207 3,392,326
========== ========= ==========
</TABLE>
NOTE 3. RECREATIONAL MINING PROPERTIES
The components of recreational mining properties are as follows:
<TABLE>
<CAPTION>
JUNE 30 JUNE 30 DECEMBER 31
------- ------- -----------
1996 1995 1995
---------- ---------- ----------
<S> <C> <C> <C>
Membership recreational mining properties: $ 859,677 $ 580,781 $ 604,477
Land 78,553 67,396 66,845
Buildings and improvements (166,492) (124,880) (166,492)
---------- ---------- ----------
Less cost of memberships sold 771,738 523,297 504,830
Less accumulated depreciation (27,605) (18,605) (24,605)
---------- ---------- ----------
$ 744,133 $ 504,692 $ 480,225
========== ========== ==========
Alaska recreational mining properties: $1,202,373 $1,202,373 $1,202,373
Land 444,549 444,549 444,549
Buildings and Improvements 883,511 826,787 842,137
---------- ---------- ----------
Vehicles and equipment 2,530,433 2,473,709 2,489,059
Less accumulated depreciation (981,007) (885,007) (939,007)
---------- ---------- ----------
$1,549,426 $1,588,702 $1,550,052
========== ========== ==========
</TABLE>
FI-9
<PAGE> 55
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. LONG-TERM DEBT
The Company purchased the Vein Mountain Camp for $250,000 to add to its Lost
Dutchman's holdings in February 1996. The Camp consists of 130 deeded acres
located in the middle of North Carolina's motherlode. There are presently no
improvements on the property. There is camping for up to 250 self-contained
recreational vehicles. In connection with the purchase the Company executed a
note payable to individuals in the amount of $200,000 secured by Deed of Trust
on the land. The note is payable in monthly installments of interest at 7.5%
($1,250 per month) plus annual principal payments due every January commencing
in 1997 of $50,000. The made significant draws on its bank line of credit
increasing the amount drawn from $33,139 as of December 31, 1995 to $532,713 as
of June 30, 1996.
NOTE 5. STOCKHOLDERS' EQUITY
In February of 1992, the Board of Directors authorized a one-for-twenty reverse
stock split which reduced the number of outstanding common shares from
12,250,435 to 612,521. The par value of the Company's common stock was
simultaneously increased from $.001 a share to $.02 a share. All per share
amounts for prior years have been restated to give retroactive effect to the
reverse stock split.
In August 1994, the Board of Directors authorized a two-for-one forward stock
split which increased the number of outstanding shares from 1,920,955 to
3,841,910. The par value of the Company's common stock was not changed.
NOTE 6. EARNINGS PER SHARE
Earnings per share are based on the weighted average number of common and common
equivalent shares outstanding during the year. On June 30, 1996 and 1995, the
weighted average number of shares for computing earnings per share were
4,309,527 and 4,031,974, respectively.
NOTE 7. LOSS ON DISCONTINUED BUSINESS (TNN SHOW)
The Company's "Gold Prospecting Show" which was produced by an outside
production company for airing on The Nashville Network ("TNN") commencing
January 1996 was popular with viewers. Production and airing costs per show
were approximately $43,000. Due to the lack of immediate commercial success,
the Company decided to devote its resources to other aspects of the Company's
business with the show ending its run on TNN in May 1996.
FI-10
<PAGE> 56
GLOBAL RESOURCES, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
F-1
<PAGE> 57
KENNETH E. WALSH
CERTIFIED PUBLIC ACCOUNTANT
3820 DEL AMO BLVD.
SUITE 305
TORRANCE, CA 90503
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Global Resources, Inc.
Temecula, California
I have audited the accompanying consolidated Balance sheets of Global Resources,
Inc. and Subsidiaries as of December 31, 1995 and 1994 and the related
consolidated statements of income, stockholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Global Resources,
Inc. and Subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
Kenneth E. Walsh
Certified Public Accountant
April 12, 1996
F-2
<PAGE> 58
GLOBAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash (Note 11) $ 458,448 $ 765,113
Current portion of membership sales
contracts receivable, net (Note 2) 506,602 434,660
Current portion of stockholder receivable (Note 6) 40,800 25,892
Other receivables, net (Note 2) 135,937 76,879
Income taxes receivable - 69,000
Inventories 192,268 30,000
Prepaid expenses 536,591 131,853
Deferred income taxes (Note 7) 50,296 85,000
---------- ----------
Total current assets 1,920,942 1,618,397
MEMBERSHIP SALES CONTRACTS
RECEIVABLE, net (Note 2) 3,392,326 1,781,470
MEMBERSHIP RECREATIONAL
MINING PROPERTIES (Note 3) 480,226 308,679
ALASKA RECREATIONAL
MINING PROPERTIES (Note 3) 1,550,052 1,585,302
EQUIPMENT AND LEASEHOLD
IMPROVEMENTS 226,970 69,666
STOCKHOLDER RECEIVABLE,
Interest at 6% $5,000 per month including interest,
secured by building, less current portion (Note 6) 292,616 342,570
DEPOSITS (Note 10) 323,226 38,000
DEFERRED INCOME TAXES (Note 7) 261,578 155,000
OTHER ASSETS 67,376 28,640
---------- ----------
TOTAL ASSETS $8,515,312 $5,927,724
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
F-3
<PAGE> 59
GLOBAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES
Funds held in escrow $ 36,250 $ -
Current maturities of long-term debt (Note 4) 111,387 29,060
Customer deposits 224,273 62,878
Deferred membership costs (Note 4) 83,793 -
Accounts payable and accrued expenses 123,552 221,556
Income taxes payable 561,538 208,000
Deferred income taxes (Note 7) 45,714 36,000
Current portion of deferred revenue 218,621 206,246
---------- ----------
Total current liabilities 1,405,128 763,740
DEFERRED REVENUE, Long term portion 1,029,999 967,526
DEFERRED INCOME TAXES (Note 7) 879,102 747,940
LONG TERM DEBT, Less current portion 288,600 181,120
---------- ----------
Total liabilities 2,197,701 2,660,326
---------- ----------
STOCKHOLDERS' EQUITY (Notes 5 and 12)
Common stock, $.02 par value; 5,000,000
shares authorized; shares issued and outstanding;
1995 4,074,988; 1994 3,843,410 81,500 76,868
Convertible preferred stock, non voting, 10%
noncumulative, no liquidation preference,
$.001 par value; 10,000,000 shares authorized;
shares issued and outstanding: 1995 63,195;
1994 65,455 63 65
Additional paid-in capital 2,793,938 2,060,520
Retained Earnings 2,258,232 1,351,195
Less Stock Subscriptions receivable (221,250) (221,250)
---------- ----------
Total stockholders' equity $4,912,483 $3,267,398
---------- ----------
TOTAL LIABILITIES AND EQUITY $8,515,312 $5,927,724
========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-4
<PAGE> 60
GLOBAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
REVENUES:
Alaska/Australia Trip $ 673,161 $ 981,671
Membership sales 4,872,480 4,855,896
Advertising 3,831,004 1,261,632
Management fees (Note 6) 30,000 25,000
Gain on sale of land - 30,983
Interest 285,091 175,392
---------- ----------
Total Net Revenues 9,691,736 7,330,574
EXPENSES:
Alaska/Australia trip expenses 357,570 453,408
Advertising 1,058,988 641,814
Bank charges 45,080 31,908
Compensation & related payroll costs 825,874 587,643
Cost of memberships sold 141,460 86,856
Depreciation 137,806 148,000
Freight 69,987 66,569
Insurance 67,203 24,009
Interest 38,218 19,992
Merchandise purchases 326,502 254,508
Office supplies 30,541 27,646
Other 75,399 144,976
Outside labor 126,036 49,998
Postage & Delivery 367,301 295,128
Printing 254,051 306,051
Professional services 62,787 311,367
Programming/advertising-barter 3,381,950 1,687,819
Property tax 8,818 1,214
Provision for doubtful contracts 235,116 209,235
Repairs and maintenance 33,984 17,563
Rent (Note 6) 87,772 53,393
Shows and seminars 150,496 62,642
Supplies and small tools 106,436 54,741
Tax and license 32,259 8,082
Telephone and utilities 152,432 138,548
---------- ----------
Total expenses 8,174,066 5,683,110
---------- ----------
Income before income taxes 1,517,670 1,647,464
Income tax expense (Note 7) 561,538 654,043
---------- ----------
Net income $ 956,132 $ 993,421
---------- ----------
Earnings per share (Note 12) $ 0.23 $ 0.25
========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-5
<PAGE> 61
GLOBAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Common Stock Preferred Stock
---------------------------------------------
Shares Amounts Shares Amounts
--------------------- -------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1993 1,914,303 $38,286 69,515 $69
Preferred stock converted to
common stock 1,780 36 (3,560) (4)
Common stock issued for
services 500 10 - -
Common stock issued as
dividend on preferred stock 3,472 69 - -
Common stock issued for land 900 18 - -
Two for one forward stock
split (Note 5) 1,920,955 38,419 - -
Preferred stock converted to
common stock 500 10 (500) -
Common stock issued for
services 1,000 20 - -
Elimination of duplicate income due
to change in year end (Note 8) - - - -
Net Income - - - -
-------------------------------------------
Balance, December 31, 1994 3,843,410 76,868 65,455 65
Preferred stock converted to 2,260 45 (2,260) (2)
common stock
Common stock issued for services 27,670 553 - -
Common stock issued for private
placement 195,102 3,902 - -
Common stock issued as dividend
on preferred stock 6,546 132 - -
Net Income - - - -
-------------------------------------------
Balance, December 31, 1995 4,074,988 $81,500 63,195 $63
===========================================
</TABLE>
See Notes to Consolidated Financial Statements
F-6
<PAGE> 62
GLOBAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Continued)
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Additional Retained Common Stock
paid in earnings subscriptions
capital (deficit) (Receivable) TOTAL
---------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, 12/31/93 $2,067,766 $ 400,273 $(221,250) $2,285,144
Preferred stock converted to
common stock (32) - - -
Common stock issued for
services 2,990 - - 3,000
Common stock issued as
dividend on preferred
stock 20,763 (20,832) - -
Common stock
issued for land 4,482 - - 4,500
Two for one forward stock
split (Note 5) (38,419) - - -
Preferred stock converted to
common stock (10) - - -
Common stock issued for
services 2,980 - - 3,000
Elimination of duplicate
income due to change in -
year end (Note 8) - (21,667) (21,667)
Net Income - 993,421 - 993,421
---------------------------------------------------------
Balance, 12/31/94 2,060,520 1,351,195 (221,250) 3,267,398
Preferred stock converted
to common stock (43) - - -
Common stock issued
for services 109,871 (22,911) - 87,513
Common stock issued
for private placement 597,538 - - 601,440
Common stock issued
as dividend on
preferred 26,052 (26,184) - -
Net Income - 956,132 - 956,132
---------------------------------------------------------
Balance, 12/31/95 $2,793,938 $2,258,232 $(221,250) $4,912,483
---------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements
F-7
<PAGE> 63
GLOBAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 956,132 $ 993,421
Adjustments to reconcile net income to net
cash provided by operating activities:
Elimination of duplicated income - (21,667)
Depreciation 137,806 148,000
Gain on sale of land - (30,983)
Proceeds from sale of land - 32,983
Cost of memberships sold 141,460 86,856
Provision for doubtful accounts 235,116 209,235
Purchase of membership properties (222,158) (27,246)
Deferred income taxes 240,000 455,051
Common stock issued for services 87,513 6,000
Change in assets and liabilities:
(Increase) decrease in:
Membership sales contracts receivable (1,682,798) (1,735,411)
Prepaid expenses (567,006) (55,228)
Other assets (38,736) (26,500)
Other receivables 97,794 9,568
Income taxes receivable 69,000 (69,000)
Increase in accounts payable accrued
expenses, income taxes payable, customer
deposits and deferred revenue 109,286 388,921
----------- ----------
Net cash provided by operating activities (436,591) 364,000
----------- ----------
Cash Flows from Investing Activities
Purchase of property, equipment and
leasehold improvements (193,054) (233,023)
Increase in deposits (285,226) (38,000)
Principal payments received on stockholder receivable 35,046 16,395
----------- ----------
Net cash (used in) financing activities (443,234) (254,628)
----------- ----------
Cash Flows from Financing Activities
Proceeds from private placement 601,440 -
Principal payments on long-term debt (28,280) (26,423)
----------- ----------
Net cash (used in) financing activities 573,160 (26,423)
----------- ----------
Net increase (decrease) in cash (306,665) 82,949
Cash
Beginning 765,113 682,164
----------- ----------
Ending $ 458,448 $ 765,113
=========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-8
<PAGE> 64
GLOBAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------- --------
<S> <C> <C>
Supplemental Disclosures of Cash Flow Information
Cash paid for:
Income taxes $ - $423,764
======= ========
Interest $38,218 $ 19,992
======= ========
Supplemental Disclosures of Noncash Investing and
Financing Activities
Land acquired with seller financing $93,373 $100,000
======= ========
Common stock issued in exchange for land $ - $ 4,500
======= ========
Common stock issued as a dividend on preferred stock $26,184 $ 20,832
======= ========
</TABLE>
See Notes to Consolidated Financial Statements
F-9
<PAGE> 65
GLOBAL RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business:
The Company owns and operates The Outdoor Channel, the first national television
network devoted solely to outdoor activities, such as hunting, fishing, scuba
diving, camping, RV-ing and recreational gold prospecting. The Company's other
business activities consist of the promotion and sale of an "Alaska trip", a
recreational gold mining expedition to the Company's Cripple River property
located near Nome, Alaska, and the sale of Lost Dutchman's, (LDMA-AU, Inc.)
memberships which entitled members to engage in recreational prospecting on its
California, Oregon, Alaska, Nevada, Arizona, Colorado, Georgia, North Carolina
and South Carolina properties. The Company has also signed a mutual use
agreement with another organization whose members are entitled to engage in
recreational mining on certain of each other's properties. The Company also
receives revenues from the sale of memberships in a gold prospecting club,
revenue from advertisers in a bi-monthly magazine, advertising revenue through
cable television programming d/b/a The Outdoor Channel and through merchandise
sales. Revenues and Expenses for the fair value of these services are recorded
in the consolidated financial statements.
A summary of the Company's significant accounting policies is as follows:
The Principles of Consolidation - The consolidated financial statements include
the accounts of Global Resources, Inc. and its wholly-owned subsidiaries,
LDMA-AU, Inc., Big "M" Mining Company, Inc., Gold Prospectors' Association of
American, Inc. (GPAA) and The Outdoor Network, Inc. which operates a satellite
and cable television channel.
Allowance for Contract Cancellations - The Company provides an allowance for
future cancellations of membership contracts. The allowance is based on
management's estimate of future contract cancellations considering the Company's
historical cancellation rates, delinquencies of receivables and other factors
deemed relevant to the analysis. The allowance is reviewed on a periodic basis
and adjusted upon management's estimate.
Membership Recreational Mining Properties - Membership recreational mining
properties consist primarily of land, are held for membership sales and are
recorded at the lower of cost or estimated net realizable value. These
properties are charged to cost of memberships sold in proportion to total
memberships which the Company estimates it will ultimately sell.
Alaska Recreational Mining Properties - Alaska recreational mining properties
consist primarily of land, buildings and equipment, are recorded at cost, net of
accumulated depreciation on the buildings and equipment provided on a
straight-line basis over the estimated economic lives which in general is 10
years.
Equipment and leasehold improvements:
Equipment and leasehold improvements are carried at cost. Depreciation is
calculated using accelerated methods over the estimated useful lives of the
assets.
F-10
<PAGE> 66
GLOBAL RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue recognition:
Revenue on the "Alaska trip" income is recognized when the trips are taken.
Trips are taken in July and August each year.
The Company has sold memberships primarily on an installment basis. Memberships
include contracts that give purchasers recreational prospecting and mineral
rights to the Company's land and rights to use the land and facilities. The
contracts are generally nointerest bearing, unsecured and provide for a down
payment and monthly installments of $25 for periods of up to ten years. Sales
revenue is recognized upon execution of a sales contract, expiration of the
refund period, and receipt of cumulative payments of at least 10% of the sales
price. Cumulative payments received on contracts where the refund period has not
expired, or which are less than 10% of the original contract amount are recorded
as deposits. Deposits are fully refundable for sixty days. The contracts are
discounted over the contractual repayment period at a discount rate of 8%.
The Company also sells membership for periods varying from one year to lifetime
memberships. For nonlifetime memberships, revenue is recognized over the life of
the membership. Management estimates the expected period of time a lifetime
member is active in the membership club to be fifteen years. Accordingly, for
lifetime memberships, revenue is recognized over fifteen years. Effective March
1, 1994, the expected period of time a lifetime member is active in the
membership club was extended from ten to fifteen years as it was determined that
lifetime members are remaining active on average approximately fifteen years.
The Company imputes compensation for the future campground services that lost
Dutchman's will provide until dues are paid (usually around 6 years per
membership), pursuant to Paragraph 31 of FAS 66. In addition, the Company
accrues the future costs for GPAA benefits provided with Lost Dutchman's
memberships (bi-monthly magazine, yearly mining guide and quarterly newspaper)
until dues are paid.
Certain prior year amounts in the consolidated financial statements have been
reclassified to conform to the current year presentation.
Advertising:
Advertising costs are charged to income as incurred and production costs of
advertising are expensed the first time the advertising takes place.
Income taxes:
Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and deferred tax liabilities
are recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
basis. Deferred tax assets are reduced by valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of the enactment.
F-11
<PAGE> 67
GLOBAL RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. MEMBERSHIP SALES CONTRACTS RECEIVABLE
Membership sales contracts receivable are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Contracts receivable $5,723,780 $3,210,344
Unearned interest (1,391,638) (747,977)
Allowance for cancellations (433,214) (246,237)
---------- ----------
3,898,928 2,216,130
Less current portion 506,602 434,660
---------- ----------
$3,392,326 $1,781,470
========== ==========
</TABLE>
Estimated maturities of membership sales contracts as of December 31, 1995 are
as follows:
<TABLE>
<S> <C>
1996 $ 506,000
1997 468,000
1998 400,000
1999 320,000
2000 240,000
Thereafter 1,964,928
----------
$3,898,928
==========
</TABLE>
NOTE 3. RECREATIONAL MINING PROPERTIES
The components of recreational mining properties are as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Membership recreational mining properties:
Land $ 604,477 $ 384,568
Buildings and improvements 66,845 64,596
Less cost of memberships sold (166,492) (124,880)
---------- ----------
504,830 324,284
Less accumulated depreciation (24,605) (15,605)
---------- ----------
$ 480,225 $ 308,679
========== ==========
Alaska recreational mining properties:
Land $1,202,373 $1,202,373
Buildings and improvements 444,549 444,549
Vehicles and equipment 842,137 796,387
---------- ----------
2,489,059 2,443,309
Less accumulated depreciation (939,007) (858,007)
---------- ----------
$1,550,052 $1,585,302
========== ==========
</TABLE>
F-12
<PAGE> 68
GLOBAL RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Note payable to an individual, secured by first
deed of trust on land, payable in monthly
installments of $746 including interest at
9.5%, balance due August 1998. $ 65,889 $ 68,348
Note payable to finance companies, secured by
vehicles, payable in monthly installments
including interest ranging from 2.9% to
12.5%. 109,019 42,965
Notes payable to an individual, secured by
first deed of trust on land, payable in
monthly installments of $900 including
interest at 8.0%, balance due June 1996. 93,373 0
Line of Credit payable to a bank, unsecured,
payable on a revolving payment plan.
Total available balance is $500,000.
Monthly installments currently at $727
including interest at 9.5%. 33,139 0
Note payable to individuals, secured by deed
of trust, payable in monthly installments
of $808 including interest at 9.5%,
balance due January 2001. 98,567 98,867
-------- --------
399,987 210,180
Less current maturities 111,387 29,060
-------- --------
Total Long Term Debt $288,600 $181,120
======== ========
</TABLE>
The aggregate maturities of long-term debt as of December 31, 1995 are as
follows:
<TABLE>
<S> <C>
1996 $111,387
1997 31,240
1998 86,590
1999 63,280
2000 46,210
Thereafter 61,280
--------
$399,987
========
</TABLE>
F-13
<PAGE> 69
GLOBAL RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. STOCKHOLDERS' EQUITY
Preferred stock:
During 1990, the company issued 71,835 shares of 10% noncumulative, convertible,
exchangeable, nonvoting preferred stock at $.001 par value for $5 per share. The
preferred shares have no liquidation preference over the Company's common stock.
The preferred shares are convertible at any time at the option of the holder
into common stock at the rate of one share of common stock for one share of
preferred stock. The preferred stock is exchangeable at the option of the Board
of Directors, in whole or in part, at the same rate of one share of common stock
for one share of preferred stock.
Stock option plan:
On February 8, 1986, the Company granted certain stockholders and other
individuals the option to purchase 112,500 shares of $.02 par value common stock
for $5.00 per share over a period of five years. On June 28, 1990, the Company
amended its stock option plan by terminating options to purchase 16,000 shares
and granting options to purchase an additional 5,500 shares to certain
stockholders and individuals. On June 15, 1993, the Company further amended its
stock option plan by granting options to purchase additional 118,000 shares, at
$4.50 per share and extending the life of all the options through July 1, 1997.
Due to a two for one forward stock split authorized by the Board of Directors in
August, 1994, the options prices were revised from $5.00 and $4.50 to $2.50 and
$2.25 per share and the number of options outstanding were doubled. The stock
option plan includes a provision under which the Company will purchase the
options from the holder's estate at the agreed upon price upon death of the
holder. During 1995 a new stock option plan was adopted but no options were
granted under this stock option plan.
Transactions during the years ended December 31, 1993 through 1995 are
summarized as follows:
<TABLE>
<CAPTION>
Options
Outstanding
-----------
<S> <C>
Balance, December 31, 1993 175,000
Options exercised -
Stock split 175,000
-------
Balance, December 31, 1994 350,000
Options exercised -
Options granted 35,000
-------
Balance, December 31, 1995 385,000
========
</TABLE>
The stock options outstanding as of December 31, 1995 totaled 385,000, at prices
ranging form $2.25 to $3.25 per share, with 345,000 exercisable as of December
31, 1995 and 40,000 exercisable during the following periods:
F-14
<PAGE> 70
GLOBAL RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. STOCKHOLDERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
Options
During Year Becoming
Ending December 31 Exercisable
- ------------------ -----------
<S> <C>
1996 30,000
1997 10,000
------
40,000
======
</TABLE>
Common stock subscriptions receivable:
On June 22, 1993 certain stockholders and other individuals exercised a portion
of their options available under the stock option plan above. In connection
therewith, the Company loaned these individuals a total of $221,250 in order to
provide the funds to purchase the respective shares of common stock. The notes
receivable from the individuals bear interest at 4% and are secured by the
respective shares of common stock.
Stock split:
In February of 1992, the Board of Directors authorized a one-for-twenty reverse
stock split which reduced the number of outstanding common shares from
12,250,435 to 612,521. The par value of the Company's common stock was
simultaneously increased from $.001 a share to $.02 a share. All per share
amounts for prior years have been restated to give retroactive effect to the
reverse stock split.
In August 1994, the Board of Directors authorized a two-for-one forward stock
split which increased the number of outstanding shares from 1,920,955 to
3,841,910. The par value of the Company's common stock was not changed.
NOTE 6. COMMITMENTS AND RELATED PARTY TRANSACTIONS
The Company is leasing its administrative facilities from a stockholder under a
month-to-month lease agreement requiring monthly rent payments of $4,000 from
January to March and $5,000 the remaining months of the year. Rent expense
totaled $57,000 for the year ended December 31, 1995 and $48,000 for 1994. The
company holds the building as security on the stockholder note receivable and
accordingly, the rent commitment extends through the term of the note. The total
rent commitment at December 31, 1995 is ten years or $600,000.
The Company receives management fees from lost Dutchman's Mining Associations,
Inc., a nonprofit corporation related through common directors. Management fees
totaled approximately $30,000 and $25,000 for the years ended December 31, 1995
and 1994 respectively.
The Company receives interest on the stockholder receivable. Interest on the
receivable totaled approximately $21,000 and $28,000 for the years ended
December 31, 1995 and 1994, respectively.
F-15
<PAGE> 71
GLOBAL RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. COMMITMENTS AND RELATED PARTY TRANSACTIONS (CONTINUED)
The Company initiated an agreement with one of its directors during 1994 to
receive legal services on a monthly basis. The agreement calls for the Company
to pay the director a monthly retainer in the amount of $5,000. In the event
that services rendered by the director on behalf of the Company exceed $5,000 in
any given month, the agreement calls for the director to receive shares of the
Company's common stock at its then current fair market value as payment for the
services in excess of $5,000.
NOTE 7. INCOME TAXES
The components of the income tax expense are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Current $175,860 $198,992
Deferred 385,678 455,051
-------- --------
$561,538 $654,043
======== ========
</TABLE>
A reconciliation of income tax expense to the amount computed by applying
statutory income tax rates to earnings before income taxes is as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Federal income tax $516,008 $605,640
State income tax, net 62,530 72,200
Benefit of income tax at lower rate (17,000) (17,000)
Other - (6,797)
-------- --------
$561,538 $654,043
======== ========
</TABLE>
Net deferred income taxes consist of the following components:
<TABLE>
<CAPTION>
1995 1994
--------- -----------
<S> <C> <C>
Deferred tax (liabilities):
Property and equipment $(106,500) $ (102,600)
Membership sales (492,993) (974,500)
Other receivables (50,296) (75,937)
Prepaid expenses (232,778) (30,650)
Other (22,300) (10,044)
--------- -----------
(904,867) (1,193,731)
--------- -----------
Deferred tax assets:
Accounts payable 45,714 47,965
Accrued expenses 268,610 326,100
Deferred revenue 285,678 187,666
--------- -----------
600,002 561,731
--------- -----------
$(304,865) $ (632,000)
========= ===========
</TABLE>
F-16
<PAGE> 72
GLOBAL RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. INCOME TAXES (CONTINUED)
The components giving rise to the net deferred tax liabilities described above
have been included in the accompanying consolidated balance sheets as of
December 31, 1995 and 1994 as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Current assets $ 50,296 $ 85,000
Noncurrent assets 261,578 155,000
Current (liabilities) (45,714) (36,000)
Noncurrent (liabilities) (571,025) (836,000)
--------- ---------
$(304,865) $(632,000)
========= =========
</TABLE>
NOTE 8. BUSINESS COMBINATION
On February 10, 1995, the Company effected a business combination with GPAA by
exchanging 2,500,000 shares of its common stock for all of the common stock of
GPAA. GPAA was 100% owned by the majority stockholders of the Company. The
agreement also calls for an additional 1,500,000 shares of commons stock to be
issued if certain earnings or valuation levels are attained. The principal
business of GPAA is the sales of memberships in a gold prospecting club. The
GPAA also generates revenue from advertisers in a bimonthly magazine, through
satellite and cable television programming d/b/a The Outdoor channel and through
merchandise sales. The combination was accounted for in manner similar to a
pooling of interests. GPAA previously had a year-end of February 28 and as a
result of the combination has adopted a December 31 fiscal year-end. The income
and cash flows for two months ended February 28, 1994 are included in both of
the twelve months ended December 31, 1995 and 1994. The duplication of the
income for these two months totals $21,667 and is eliminated in the statement of
retained earnings.
NOTE 9. LEASE AGREEMENTS
During the year ended 1995, the Company entered into several operating lease
agreements. Satellite equipment was leased under terms of an operating lease
agreement that expired on November 30, 1995 and requiring monthly payments of
$75,000. Satellite equipment is now being used under terms of an operating lease
agreement expiring on March 1, 1999 and requiring monthly payments ranging from
$115,000 for the first year with the monthly amount increasing $10,000 per year.
The agreement contains an option to lease the satellite for an additional two
years with the monthly payments increasing an additional $10,000 each year. The
Company currently has a deposit on the satellite equipment of $270,000. This
consists of a $45,000 deposit and three prepaid rent checks of $75,000 each.
Equipment is being leased under three separate operating lease agreements
expiring at various dates through February 2000. Monthly payments on the three
agreements total approximately $2,300.
The total minimum rental commitment under these operating lease agreements due
in future years as follows: 1996 $1,367,642; 1997 $1,513,609; 1998 $1,633,609;
1999 $158,609; 2000 $1,967 (total $4,675,436).
F-17
<PAGE> 73
GLOBAL RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. SUBSEQUENT EVENTS
Subsequent to year-end, the Company purchased 130 acres of land in North
Carolina. This land will be used for gold mining camps. The purchase price of
the land was $250,000. A down payment of $50,000 was made. Interest only
payments are due each month with a $50,000 balloon payment due on January first
of each year until paid off.
Also subsequent to year-end, the Company began producing and airing a gold
prospecting show on TNN. The first show aired on January of 1996. During 1995
the Company paid $363,436 in expenses to produce the show. Since the show did
not air until 1996, these costs were set up in the current asset called prepaid
expenses.
NOTE 11. CASH CONCENTRATION RISK
The Company has approximately $250,000 and $147,000 in two separate financial
institutions. Deposits at a financial institution in excess of $100,000 are not
insured.
NOTE 12. EARNINGS PER SHARE
Earnings per share are based on the weighted average number of common and common
equivalent shares outstanding during the year. In 1995 and 1994, the weighted
average number of shares for computing primary earnings per share were 4,074,988
and 3,937,704 respectively.
F-18
<PAGE> 74
GLOBAL RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. BUSINESS SEGMENT INFORMATION
Business segment information is summarized as follows:
<TABLE>
<CAPTION>
Additions to
Depreciation Property,
and Cost of Equipment &
Income Before Membership Leasehold
Revenues Income Taxes Assets Sold Improvements
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Alaska trip
income $ 981,671 $ 438,913 $1,585,302 $100,852 $189,478
The Outdoor
Channel 1,261,632 (426,187) 69,033 5,811 -
Membership
sales of
recreational
prospecting
and mineral
rights and
merchandise
sales 4,886,879 2,957,522 2,759,689 102,704 134,062
Corporate 200,392 (1,322,784) 1,513,700 25,489 38,228
---------- ----------- ---------- -------- --------
$7,330,574 $ 1,647,464 $5,927,724 $234,856 $361,768
========== =========== ========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Additions to
Depreciation Property,
and Cost of Equipment &
Income Before Membership Leasehold
Revenues Income Taxes Assets Sold Improvements
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995
Alaska trip
income $ 673,161 $ 315,591 $1,550,052 $ 81,000 $ 45,750
The Outdoor
Channel 3,831,004 (609,934) 702,469 21,306 105,304
Membership
sales of
recreational
prospecting
and mineral
rights and
merchandise
sales 4,872,480 3,040,021 4,379,154 41,612 222,158
Corporate 315,091 (1,228,008) 1,664,303 35,500 52,000
---------- ----------- ---------- -------- --------
$9,691,736 $ 1,517,670 $8,295,978 $179,418 $425,212
========== =========== ========== ======== ========
</TABLE>
F-19
<PAGE> 75
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING SHAREHOLDERS OR ANY OF THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY
OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF THE COMMON STOCK OFFERED BY
THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
ANY OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................................ 3
Risk Factors.................................................. 5
Use of Proceeds............................................... 10
Price Range of Common Stock................................... 10
Dividend Policy............................................... 11
Capitalization................................................ 11
Selected Financial Data....................................... 12
Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 13
Business...................................................... 18
Properties.................................................... 26
Management.................................................... 29
Security Ownership of Certain Beneficial
Owners and Management....................................... 36
Description of Securities..................................... 37
Shares Eligible for Future Sale............................... 39
Underwriting.................................................. 40
Legal Matters................................................. 41
Experts....................................................... 41
Additional Information........................................ 41
Index to Financial Statements................................. 42
</TABLE>
UNTIL ____________, 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
GLOBAL OUTDOORS, INC.
500,000 UNITS
CONSISTING OF
TWO SHARES OF COMMON STOCK
AND ONE CLASS F WARRANT
PROSPECTUS
CASTLE SECURITIES, CORP.
________, 1996
<PAGE> 76
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 10.06.490 of the Alaska Corporations Code provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by the person in
connection with specified actions or proceedings, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation -- a "derivative action"), if they acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests of
the corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) actually and reasonably incurred
by the person in connection with the defense or settlement of such action, and
the statute requires court approval before there can be any indemnification
where the person seeking indemnification has been found liable for negligence or
misconduct in the performance of the person's duty to the corporation. The
statute provides that it is not exclusive of other indemnification that may be
granted by a corporation's bylaws, agreement, vote of shareholders or
disinterested directors or otherwise.
The Underwriting Agreement to be filed as Exhibit 1.1 to this Registrant
Statement provides for indemnification by the Underwriters of the Registrant and
its officers and directors for certain liabilities arising under the Securities
Act, or otherwise.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions and the non-accountable expense allowance, payable by
the Registrant in connection with the sale of the Common Stock being registered.
All the amounts are estimates except for the registration fee and the NASD
filing fee.
<TABLE>
<S> <C>
Registration fee................................ $ *
NASD filing fee................................. *
Blue sky qualification fees and expenses........ *
Printing and engraving expenses................. *
Legal fees and expenses......................... *
Accounting fees and expenses.................... *
Transfer agent and registrar fees............... *
Miscellaneous................................... *
-------------
Total...................................... *
=============
</TABLE>
- -----------------
* To be completed by Amendment.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Since August 2, 1993, the Registrant has sold and issued the following
unregistered securities pursuant to an exemption under the Securities Act:
1. In August 1993, options to purchase 45,000 shares of Common Stock
were exercised by certain key officers and employees at prices ranging from
$2.25 to $2.50 per share. The exercise of all such options was deemed to be
exempt from registration under the Securities Act by virtue of Section 4(2) of
the Securities Act.
2. In August 1993, the Registrant issued 4,650 shares of Common Stock
at approximately $2.25 per share to persons who performed various services for
the Company. The issuance of all such Common Stock was deemed to be exempt from
registration under the Securities Act by virtue of Section 4(2) of the
Securities Act.
II-1
<PAGE> 77
3. In September 1994, the Registrant issued 1,000 shares of Common
Stock at $3.00 per share to consultants who performed various services for the
Company. The issuance of all such Common Stock was deemed to be exempt from
registration under the Securities Act by virtue of Section 4(2) of the
Securities Act.
4. In January 1995, the Registrant issued 22,.667 shares of Common
Stock at $3.00 per share to consultants who performed various services for the
Company. The issuance of all such Common Stock was deemed to be exempt from
registration under the Securities Act by virtue of Section 4(2) of the
Securities Act.
5. In February 1995, the Registrant issued 2,500,000 shares of Common
Stock at $3.50 per share to the owners of Gold Prospector's Association of
America, Inc. ("GPAA") in exchange for all the stock of GPAA. The issuance of
all such Common Stock was deemed to be exempt from registration under the
Securities Act by virtue of Section 4(2) of the Securities Act.
6. In March 1995, the Registrant issued 563 shares at $4.00 per share
to an individual to repurchase a lease lot sold to him in 1986. The issuance of
all such Common Stock was deemed to be exempt from registration under the
Securities Act by virtue of Section 4(2) of the Securities Act.
7. In August 1995, the Registrant issued 2,000 shares of Common Stock
at $3.75 per share to a consultant who performed various services for the
Company. The issuance of all such Common Stock was deemed to be exempt from
registration under the Securities Act by virtue of Section 4(2) of the
Securities Act.
8. In August 1995, the Registrant granted options subject to conditions
to purchase 230,000 shares of Common Stock at an exercise price of $3.25 to a
public relations firm under the Registrant's 1995 Stock Option Plan. The grant
of such options was deemed to be exempt from registration under the Securities
Act by virtue of Section 4(2) of the Securities Act.
9. In September 1995, the Registrant granted options to purchase 15,000
shares of Common Stock at an exercise price of $3.25 to a consultant under the
Registrant's 1995 Stock Option Plan. The grant of such options was deemed to be
exempt from registration under the Securities Act by virtue of Section 4(2) of
the Securities Act.
10. In October and November 1995, the Registrant issued 2,440 shares at
$4.00 per share to individuals to repurchase a lease lot sold to them in
approximately 1986. The issuance of all such Common Stock was deemed to be
exempt from registration under the Securities Act by virtue of Section 4(2) of
the Securities Act.
11. In January 1996, the Registrant consummated a private placement of
110,984 Units for cash, each Unit consisting of two shares of Common Stock of
the Company and one Class E Warrant to purchase one share of Common Stock, at
price of $7.50 per Unit, or an aggregate price of $832,380. The sale of the
Units was deemed to be exempt from registration under the Securities Act by
virtue of Rule 505 promulgated under Section 3(b) of the Securities Act.
12. In January 1996, the Registrant granted options to purchase 125,000
shares of Common Stock at an exercise price of $3.50 to a key officer under the
Registrant's 1995 Stock Option Plan. The grant of such options was deemed to be
exempt from registration under the Securities Act by virtue of Section 4(2) of
the Securities Act.
13. In April 1996, the Registrant issued 375 shares at $4.00 per share
to individuals to repurchase a lease lot sold to them in approximately 1986. The
issuance of all such Common Stock was deemed to be exempt from registration
under the Securities Act by virtue of Section 4(2) of the Securities Act.
14. In May 1996, the Registrant granted options to purchase 10,000
shares of Common Stock at an exercise price of $3.50 to a key officer under the
Registrant's 1995 Stock Option Plan. The grant of such options was deemed to be
exempt from registration under the Securities Act by virtue of Section 4(2) of
the Securities Act.
II-2
<PAGE> 78
15. In July 1996, the Registrant issued 1313 shares at $4.00 per share
to individuals to repurchase a lease lot sold to them in approximately 1986. The
issuance of all such Common Stock was deemed to be exempt from registration
under the Securities Act by virtue of Section 4(2) of the Securities Act.
16. In July 1996, the Registrant authorized the issuance of 11,800
shares of Common Stock at $4.00 per share to persons who performed various
services for the Company. The issuance of all such Common Stock was deemed to be
exempt from registration under the Securities Act by virtue of Section 4(2) of
the Securities Act.
The foregoing information has been adjusted to reflect a (i)
two-for-one stock split of the Common Stock effected September 12, 1994 and (ii)
one-for-twenty reverse stock split of the Common Stock effected March 4, 1992.
II-3
<PAGE> 79
ITEM 27. EXHIBITS.
The following is a list of exhibits filed as a part of this Registration
Statement:
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION OF DOCUMENT NUMBER
- ------ ----------------------- ----------
<S> <C> <C>
1.1 Form of Underwriting Agreement by and among the Registrant
and Castle Securities, Corp (1)
3.1 Articles of Incorporation of Registrant, as amended. (2).
3.2 Bylaws of Registrant (2).
3.3 Articles of Incorporation of Registrant, as amended. (1).
4.1 Form of Underwriter's Warrant Agreement by and between the
Registrant and Castle Securities, Corp. (1)
4.2 Form of Class F Warrant Agreement by and between the Registrant
and American Securities Transfer and Trust, Inc. (1)
5.1 Opinion of Richard K. Dickson II, Esq. (1)
10.1 Stock Option Plan.(1)
10.2 Agreement and Plan of Reorganization dated February 10, 1995,
by and between the Registrant and Gold Prospector's Association
of America, Inc. (3)
10.3 Employment Contract dated October 16, 1995, between the
Registrant and Christopher B. Forgy.(4)
10.4 1995 Stock Option Plan.(4)
21.1 Subsidiaries of the Registrant.(1)
23.1 Consent of Richard K. Dickson II, Esq. (included in the
opinion to be filed as Exhibit 5.1).
23.2 Consent of Kenneth E. Walsh, Certified Public Accountant
24.1 Power of Attorney (included on page II-5).
</TABLE>
(1) To be filed by amendment.
(2) Previously filed as an Exhibit to the Registrant's Registration
Statement on Form S-1 as filed with the Securities and Exchange
Commission, Registration No. 33-0074499.
(3) Previously filed as an Exhibit to the Registrant's Current Report on
Form 8-K dated February 13, 1995, as filed with the Securities and
Exchange Commission.
(4) Previously filed as an Exhibit to the Registrant's Current Report on
Form 10-KSB dated December 31, 1995, as filed with the Securities and
Exchange Commission.
II-4
<PAGE> 80
ITEM 28. UNDERTAKINGS.
The small business issuer (the "Registrant") hereby undertakes the
following:
(1) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in such
names as required by the Underwriters to permit prompt delivery to each
purchaser.
(2) For deterprospecting any liability under the Securities Act, to
treat the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant under Rule 424(b)(1) or (4) or 497(h) under
the Securities Act as part of this Registration Statement as of the time the
Commission declared it effective.
(3) For deterprospecting any liability under the Securities Act, to
treat each post-effective amendment that contains a form of prospectus as a new
Registration Statement for the securities offered in the Registration Statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
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 foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the 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 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 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-5
<PAGE> 81
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorizes this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Temecula, State of California, on the 2nd day of
July, 1996.
GLOBAL OUTDOORS, INC.
By: /s/ PERRY T. MASSIE
--------------------------------------
Perry T. Massie,
Chief Executive Officer, President and
Chairman of the Board of Directors
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Perry T. Massie and Richard K. Dickson
II, and each of them, as his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, with all exhibits
thereto and other documents in connection therewith, and to file the same with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitutes, may lawfully do or cause to be done by virtue
hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ PERRY T. MASSIE Chief Executive Officer, President August 2, 1996
- -------------------------------- and Chairman of the Board of Directors
Perry T. Massie (Principal Executive Officer)
/s/ THOMAS H. MASSIE Executive Vice President, Secretary August 2, 1996
- -------------------------------- and Director
Thomas H. Massie
/s/ RICHARD K. DICKSON II Senior Vice President, General August 2, 1996
- -------------------------------- Counsel and Director
Richard K. Dickson II
/s/ DAVID M. ASHWOOD Chief Financial Officer and August 2, 1996
- -------------------------------- General Manager
David M. Ashwood (Principal Financial and Accounting Officer)
</TABLE>
II-6
<PAGE> 82
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION OF DOCUMENT NUMBER
- ------ ----------------------- ----------
<S> <C> <C>
1.1 Form of Underwriting Agreement by and among the Registrant
and Castle Securities, Corp (1)
3.1 Articles of Incorporation of Registrant, as amended. (2)
3.2 Bylaws of Registrant (2).
3.3 Articles of Incorporation of Registrant, as amended. (1).
4.1 Form of Underwriter's Warrant Agreement by and between the
Registrant and Castle Securities, Corp. (1)
4.2 Form of Class F Warrant Agreement by and between the
Registrant and American Securities Transfer and Trust, Inc. (1)
5.1 Opinion of Richard K. Dickson II, Esq. (1)
10.1 Stock Option Plan.(1)
10.2 Agreement and Plan of Reorganization dated February 10, 1995,
by and between the Registrant and Gold Prospector's Association
of America, Inc. (3)
10.3 Employment Contract dated October 16, 1995, between the
Registrant and Christopher B. Forgy.(4)
10.4 1995 Stock Option Plan.(4)
21.1 Subsidiaries of the Registrant.(1)
23.1 Consent of Richard K. Dickson II, Esq. (included in the
opinion to be filed as Exhibit 5.1).
23.2 Consent of Kenneth E. Walsh, Certified Public Accountant
24.1 Power of Attorney (included on page II-5).
</TABLE>
(1) To be filed by amendment.
(2) Previously filed as an Exhibit to the Registrant's Registration
Statement on Form S-1 as filed with the Securities and Exchange
Commission, Registration No. 33-0074499.
(3) Previously filed as an Exhibit to the Registrant's Current Report on
Form 8-K dated February 13, 1995, as filed with the Securities and
Exchange Commission.
(4) Previously filed as an Exhibit to the Registrant's Current Report on
Form 10-KSB dated December 31, 1995, as filed with the Securities and
Exchange Commission.
II-7
<PAGE> 1
EXHIBIT 23.2
KENNETH E. WALSH
CERTIFIED PUBLIC ACCOUNTANT
3820 DEL AMO BLVD.
SUITE 305
TORRANCE, CA 90503
CONSENT OF INDEPENDENT AUDITOR
I Consent to the use in this Registration Statement of my reports on
the consolidated financial statements of Global Outdoors, Inc. (formerly Global
Resources, Inc.) and subsidiaries included herein and to the reference made to
me under the captions "Experts" and "Selected Financial Data" in the
Prospectus.
Kenneth E. Walsh
Certified Public Accountant
July 30, 1996
