<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
Commission file number : 0-17287
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GLOBAL OUTDOORS, INC.
- ----------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Alaska 33-0074499
- --------------------------- ----------------------------
(State or other Juris- (IRS Employer Identification
diction of incorporation Number)
or organization)
43445 Business Park Drive, Suite 113
Temecula, California 92590
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(Address and zip code of principal executive offices)
(909)699-4749
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(Issuer's telephone number, including area code)
- ----------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days. Yes (X) NO ( )
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Number of Shares Outstanding
Class at November 14, 1997
----- -------------------------------
Common Stock, $.02 par value 4,240,944
Transitional Small Business Disclosure Format (Check one): Yes ( ) No (X)
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
FINANCIAL STATEMENTS
PART I - ITEM 1
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For the quarter ended September 30, 1997
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GLOBAL OUTDOORS, INC.
2
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GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30 December 31
1997 1996
------------ ------------
(unaudited)
CURRENT ASSETS
Cash $ 58,432 $ 82,027
Current portion of stockholder receivable 56,400 56,400
Advertising receivables, net of allowance for
doubtful accounts 150,169 82,334
Income taxes receivable 230,000 230,000
Inventories 147,021 159,361
Prepaid expenses 258,849 174,372
------------ ------------
Total current assets 900,871 784,494
MEMBERSHIP RECREATIONAL MINING
PROPERTIES, NET 1,015,546 995,010
ALASKA RECREATIONAL
MINING PROPERTIES, NET 1,491,328 1,465,609
OUTDOOR CHANNEL EQUIPMENT, NET 335,010 386,584
OTHER EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, NET 192,359 232,703
STOCKHOLDER RECEIVABLE 163,357 223,657
DEFERRED TAXES - -
TRADEMARKS, net of accumulated amortization 92,293 85,601
DEPOSITS AND OTHER ASSETS 197,350 52,240
------------ ------------
TOTAL ASSETS $ 4,388,114 $ 4,225,898
============ ============
The accompanying notes are an integral part of these consolidated
balance sheets.
3
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GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30 December 31
1997 1996
------------ ------------
(unaudited)
CURRENT LIABILITIES
Line of credit $ 740,729 $ 715,322
Current maturities of long-term debt 312,152 303,593
Current maturities of capital leases 39,522 47,172
Customer deposits - 9,500
Accounts payable and accrued expenses 625,999 420,198
Deferred revenue, current 1,603,552 1,433,552
------------ ------------
Total current liabilities 3,321,954 2,929,337
DEFERRED REVENUE, Long term portion 420,381 424,230
LONG TERM DEBT, Less current portion 488,027 637,717
CAPITAL LEASES, Less current portion 174,211 192,664
LOANS FROM STOCKHOLDERS 569,533 -
------------ ------------
Total liabilities 4,974,106 4,183,948
------------ ------------
STOCKHOLDERS' EQUITY
Convertible preferred stock, non voting, 10%
noncumulative, no liquidation preference, $.001
par value; 10,000,000 shares authorized; shares
issued and outstanding: 60,675 at September
30, 1997; 60,775 at December 31, 1996. 61 61
Common stock, $.02 par value; 50,000,000
shares authorized; shares issued and outstanding:
4,239,944 at September 30, 1997; 4,122,354 at
December 31, 1996. 84,799 82,448
Additional paid-in capital 3,252,667 2,953,803
Retained deficit (3,702,269) (2,773,112)
Common stock subscriptions receivable (221,250) (221,250)
------------ ------------
Total stockholders' equity (585,992) 41,950
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,388,114 $ 4,225,898
============ ============
The accompanying notes are an integral part of these consolidated
balance sheets.
4
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<TABLE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
September 30 September 30
------------ ------------
(unaudited) (unaudited)
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Alaska Trip $ 791,670 $ 828,901 $ 791,670 $ 828,901
Merchandise sales 197,088 85,605 721,165 402,016
Membership sales 532,478 411,039 1,959,691 2,006,896
Advertising 377,126 192,959 1,087,683 731,649
Interest 4,887 6,132 14,297 19,210
Other income 91,544 10,803 136,710 32,411
------------ ------------ ------------ ------------
Total revenues $ 1,994,793 $ 1,535,439 $ 4,711,216 $ 4,021,083
============ ============ ============ ============
EXPENSES:
Alaska trip expenses 563,016 553,596 563,016 553,596
Cost of merchandise sold 219,511 38,333 545,489 246,759
Cost of memberships sold 98,501 71,263 245,711 222,479
Satellite transmission fees 481,500 276,709 1,264,607 1,065,119
Advertising and programming 37,932 87,054 348,294 861,200
Selling, general and administrative 782,694 670,343 2,499,320 2,667,408
Interest 81,196 35,109 173,936 83,430
------------ ------------ ------------ ------------
Total expenses 2,264,350 1,732,407 5,640,373 5,699,991
------------ ------------ ------------ ------------
Loss before income taxes (269,557) (196,968) (929,157) (1,678,908)
Income tax benefit - - - 217,658
------------ ------------ ------------ ------------
Net loss $ (269,557) $ (196,968) $ (929,157) $(1,461,250)
------------ ------------ ------------ ------------
Loss per share $ (0.06) $ (0.05) $ (0.22) $ (0.34)
============ ============ ============ ============
Weighted average number of common
shares outstanding 4,275,542 4,333,179 4,256,318 4,303,287
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
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GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30
------------------------------
1997 1996
---------- ----------
Cash flows used in operating activities $(674,332) $(926,293)
Cash flows used in investing activities,
purchase of equipment (112,824) (447,922)
Cash flows from financing activities,
proceeds from long-term debt
and public offering 763,561 952,668
---------- ----------
Net decrease in cash $ (23,595) $(421,547)
Cash at beginning of period $ 82,027 $ 458,448
---------- ----------
Cash at end of period $ 58,432 $ 36,901
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
6
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GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------------------
NATURE OF BUSINESS:
Global Outdoors, Inc. (the Company) owns and operates The Outdoor Channel,
Inc., 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
entitle 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,
Gold Prospectors' Association of American, Inc. (GPAA), revenue from
advertisers in a bi-monthly magazine, advertising revenue through cable
television programming d/b/a The Outdoor Channel, Inc. and through
merchandise sales. In July 1996, the Company changed its name from Global
Resources, Inc. to Global Outdoors, Inc.
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.
During 1996, the Company experienced significant operating losses,
principally from the operation of The Outdoor Channel, Inc. As a result of
losses in 1996 and prior years, at December 31, 1996, the Company had
negative working capital. Furthermore, losses subsequent to December 31,
1996 have resulted in a deficit stockholders' equity position. The Company
has been conducting a public offering of common stock, and management is
discussing additional capital-raising efforts with third parties; however,
management is unable to predict the outcome of the discussions or determine
to what extent the Company will increase its capital base. Management is
also currently negotiating carriage agreements with third parties that could
result in a significant increase in the subscriber base for The Outdoor
Channel, Inc., which would result in an increase in advertising revenue for
the Company; however, management is unable to predict the outcome of those
negotiations or determine when the Company's revenues will increase. In
April, 1997, the Company entered into an agreement with Perry T. Massie,
Thomas H. Massie and Wilma M. Massie (the Principal Stockholders), whereby
the Principal Stockholders agreed to provide for the cash flow requirements
of the Company over the next twelve months by means of loans or equity
investments.
SIGNIFICANT ACCOUNTING POLICIES:
MANAGEMENT STATEMENT:
The interim financial statements for the period January 1 through September
30, 1997, include all adjustments which in the opinion of management are
necessary in order to make the financial statements not misleading.
7
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GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REFERENCE TO FORM 10-KSB:
Please refer to the Company's Form 10-KSB for the year ended December 31,
1996, for additional information and disclosures which may be of interest to
the reader hereof.
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 and
The Outdoor Channel, Inc. which operates a satellite and cable television
channel. All material intercompany accounts and transactions have been
eliminated in consolidation.
INVENTORIES:
Inventories are valued at the lower of cost (first-in, first-out) or market.
TRADEMARKS:
Trademarks are amortized on a straight-line basis over 15 years.
MEMBERSHIP RECREATIONAL MINING PROPERTIES:
Membership recreational mining properties consist primarily of land, are
held for membership use and are recorded at cost, net of accumulated
depreciation on non-land assets provided on a straight-line basis over 15
years.
ALASKA RECREATIONAL MINING PROPERTIES:
Alaska recreational mining properties consist primarily of land, buildings
and equipment and are recorded at cost, net of accumulated depreciation on
the buildings and equipment provided on a straight-line basis over 10 years.
OUTDOOR CHANNEL EQUIPMENT:
Outdoor Channel assets consist primarily of equipment and are recorded at
cost, net of accumulated depreciation provided on a straight line basis over
five years.
OTHER EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Equipment and leasehold improvements are carried at cost net of accumulated
depreciation provided on a straight line basis over five to ten years.
REVENUE RECOGNITION:
Revenue on the "Alaska trip" income is recognized when trips are taken.
Trips are taken in June through August each year.
8
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GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has sold memberships in LDMA-AU 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 for camping and recreational vehicle parking. The
contracts are generally noninterest bearing, unsecured and provide for a
down payment and monthly installments of $25 or $30 for periods of up to ten
years. No deferred revenue or accounts receivable have been recorded for
amounts not yet due under the contract terms due to uncertainty of
collection. Sales revenue is recognized based upon a weighted average ten
year straight line method. The ten year weighted average method was
established based upon historical membership longevity, taking into
consideration member defaults and withdrawals. Deposits are taken on new
sales contracts, and are fully refundable for 10 days.
The Company also sells GPAA memberships for periods varying from one year to
lifetime memberships. For nonlifetime memberships, revenue is recognized
over the life of the membership. Approximately 10% of GPAA members are
members of LDMA-AU referred to in the paragraph above. Based on
demographics, the GPAA members have a longer term than LDMA-AU members.
Management estimates the expected period of time a lifetime member is active
in the GPAA to be fifteen years. Accordingly, for lifetime memberships,
revenue is recognized on a straight line basis over fifteen years.
Advertising revenue for The Outdoor Channel, Inc. is recognized when the
advertisement takes place. Advertising revenue from advertisers in the
Company's bi-monthly magazine is recognized when the magazine is
distributed.
RECLASSIFICATION:
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 expense as incurred and production costs of
advertising are expensed the first time the advertising takes place.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS:
Effective in 1997, the Company will be required to adopt Statement of
Financial Accounting Standards No. 128, "Earnings per Share" and No. 129,
"Capital Structure." The impact of the adoptions of these pronouncements is
not expected to be material to the Company's financial position or results
of operations.
INCOME TAXES:
Deferred taxes are provided on the 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.
9
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GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LOSS PER SHARE:
The computation of loss per share is based on the weighted average number of
common and common equivalent shares outstanding during the year. In 1996,
the weighted average number of shares for computing loss per share was
4,103,141. For the quarter ended September 30, 1997 and 1996, the weighted
average number of shares for computing loss per share were 4,275,542 and
4,333,179, respectively. For the nine months ended September 30, 1997 and
1996, the weighted average number of shares for computing loss per share
were 4,256,318 and 4,303,287, respectively. The computation of fully
diluted loss per share was antidilutive in each of the periods presented;
therefore, the amounts reported for primary and fully diluted loss are the
same.
USE OF ESTIMATES:
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates
and assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying value of accounts receivable and trade payables approximates
the fair value due to their short-term maturities. The carrying value of
the Company's debt is considered to approximate fair market value as the
interest available to the Company for loans with similar terms.
ACCOUNTING FOR STOCK BASED COMPENSATION:
The Company accounts for stock-based compensation issued to employees using
the intrinsic value based method as prescribed by The Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB No.
25). Under the intrinsic value based method, compensation is the excess, if
any, of the fair value of the stock at the grant date or other measurement
date over the amount an employee must pay to acquire the stock.
Compensation expense, if any, is recognized over the applicable service
period, which is usually the vesting period.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123). This standard, if fully adopted, changes the
methods of accounting for employee stock-based compensation plans to the
fair value based method. For stock options and warrants, fair value is
determined using an option pricing model that takes into account the stock
price at the grant date, the exercise price, and the expected life of the
option or warrant. Compensation expense, if any, is recognized over the
applicable service period, which is usually the vesting period.
The adoption of the accounting methodology of SFAS No. 123 is optional and
the Company has elected to continue accounting for stock-based compensation
issued to employees using APB No. 25; however, pro forma disclosures, as if
the Company adopted the cost recognition requirements under SFAS No. 123,
are required to be presented (see Note 8).
NOTE 2. 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.
10
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GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. SUBSEQUENT EVENTS
- --------------------------
In October 1997, The Outdoor Channel signed a national carriage agreement
with TCI, the largest multiple system operator (" MSO") in the U.S. In
November 1997, the Company added Ray V. Miller and Elizabeth Sanderson-Burke
to the Board of Directors of The Outdoor Channel. In November 1997, The
Outdoor Channel made several other management changes. Andrew J. Dale was
promoted to President and Jacob B. Hartwick was promoted to Executive Vice
President. The Outdoor Channel also added advertising and financial
executives. Christopher B. Forgy the former President left The Outdoor
Channel in November 1997.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This report on Form 10-QSB 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. This
report should be read in conjunction with the Company's report on Form 10-
KSB for the year ended December 31, 1996.
COMPARISON OF QUARTERS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
- ----------------------------------------------------------------------
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 the sale of advertising time
on The Outdoor Channel and from advertising space in publications such as
the Gold Prospector magazine. Revenues for the quarter ended September 30,
1997 were $1,994,793, an increase of $459,354 or 30%, compared to revenues
of $1,535,439 for the quarter ended September 30, 1996. This increase was
primarily the result of an increase in Advertising revenue, Membership sales
and Merchandise sales. Advertising increased to $377,126 for the quarter
ended September 30, 1997 from $192,959 for the quarter ended September 30,
1996, due principally to an increase in advertising revenue on The Outdoor
Channel. Membership sales increased to $532,478 for the quarter ended
September 30, 1997 from $411,039 for the quarter ended September 30, 1996
and Merchandise sales increased to $197,088 for the quarter ended September
30, 1997 from $85,605 for the quarter ended September 30, 1996 due a greater
public exposure to the Company's products. Despite management devoting
significant time and resources to increasing distribution and revenues for
The Outdoor Channel, in the third quarter of 1997, the Company was able to
significantly increase Membership sales and Merchandise sales from the
second quarter of 1996 while almost doubling Advertising revenue from the
same period.
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 quarter ended September 30, 1997 were $2,264,350
an increase of $531,943, or 31%, compared to $1,732,407 for the quarter
ended September 30, 1996. This increase was primarily the result of
significant increases in Cost of merchandise sold and Satellite transmission
fees. Cost of Merchandise sold increased to $219,511 for the quarter ended
September 30, 1997 compared to $38,333 for the quarter ended September 30,
1996, due to an increase in Merchandise sales and Satellite transmission
fees increased to $481,500 for the quarter ended September 30, 1997 compared
to $276,709 for the quarter ended September 30, 1996 due to The Outdoor
Channel changing to a more widely viewed but more expensive satellite
transponder.
LOSS BEFORE INCOME TAXES. Loss before income taxes as a percentage of
revenues was (14)% for the quarter ended September 30, 1997 which was
similar to (13)% for the quarter ended September 30, 1996.
INCOME TAX BENEFIT. Income tax benefit for the quarters ended September
30, 1997 and September 30, 1996 was $0. The Company has utilized all its
carry back losses and there is no present income tax benefit associated with
its losses. The Company is able to carry that loss forward for fifteen
years and apply it against future taxable income.
12
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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 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. 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 the California Motherlode area and
to the Company's 2300 acre camp, located 11 miles west of Nome, Alaska.
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.
Management of Global continued its emphasis on the growth and development
of The Outdoor Channel during 1997. 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.
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 MSOs and thereafter carriage agreements
with the MSOs' individual cable affiliates. 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. In November 1997, the Company was
launched on over 600 cable systems with over 1,100,000 subscribers. The
Company has signed national carriage agreements with 60 of the top 100
multi-system cable operators. The Company has also been launched on cable
systems without signed national carriage agreements and is in active
negotiations with such systems. In addition, the Company is in active
negotiations with many other cable operators. 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. 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.
Direct-broadcast satellite ("DBS") companies, such as DirecTV, Primestar
and Echostar represent an additional, although smaller, means of potential
distribution of The Outdoor Channel. The Company believes that distribution
by means of DBS will increase as market acceptance and the installed base of
DBSs increase. The Outdoor Channel has been negotiating for DBS
distribution with all of the major DBS providers, but has no executed
agreement for such distribution, to date.
13
<PAGE>
In September 1997, The Outdoor Channel executed a contract with the
National Digital Television Center, Inc. DBA AHeadend In The Sky@ ("HITS"),
a wholly owned subsidiary of Tele-Communications Inc. ("TCI"). HITS is a
digitally compressed programming service that is available to cable systems.
The Outdoor Channel launched on HITS in October of 1997. The Company
expects to receive a significant amount of distribution from HITS although
the amount is limited by the number of digital receivers installed by cable
systems and by their HITS channel selections.
In October 1997, The Outdoor Channel signed a national carriage agreement
with TCI, the largest multiple system operator (" MSO") in the U.S. In
anticipation of the TCI agreement, The Outdoor Channel was launched on eight
TCI systems. The Company believes there will be further significant
distribution with TCI systems.
In November 1997, the Company added Ray V. Miller and Elizabeth
Sanderson-Burke to the Board of Directors of The Outdoor Channel. Mr.
Miller is a cable industry pioneer. He has served as President of 17 cable
television companies. He has been a Director of the National Cable
Television Cooperative ("NCTC") since 1991. Mr. Miller is a past officer of
the California Cable television Association and the North Carolina Cable
Television Association. He is a member of the "Cable Television Pioneers.
Ms. Burke has been the president of several communications companies. Ms.
Burke was on the Board of Directors of the National Cable Television
Cooperative ("NCTC") from 1993 to 1996. She earned a B.A. degree from the
College of Colorado and a law degree from Pepperdine University.
In November 1997, The Outdoor Channel made several other management
changes. Andrew J. Dale was promoted to President and Jacob B. Hartwick was
promoted to Executive Vice President. The Outdoor Channel also added
advertising and financial executives. Christopher B. Forgy the former
President left The Outdoor Channel in November 1997.
In November 1997, the Company hired Richard D. Vermeer as a finance
executive for the Company. Mr. Vermeer has been the Chief Financial Officer
and Senior Vice President Finance for several companies including a company
listed on New York Stock Exchange and a Nasdaq listed company. He earned a
B. S. degree form Fairleigh Dickinson University and an M.B.A. degree from
Lehigh University.
As of November 1, 1997, the Company had raised over $400,000 in it
public offering. This offering has now wound down. The primary reasons
Global conducted the offering was to provide additional capital for The
Outdoor Channel and the Lost Dutchman's camp club. The Company is now
focusing primarily on private financing to achieve funding for The Outdoor
Channel. In addition, the Company is considering various strategic
alliances to raise outside capital and for assistance in the development of
its businesses.
Since July 30, 1997, the Company's Common Stock has been traded on the
over the counter Bulletin Board. Price quotes on the Company's Common
Stock can be obtained from any stock broker. Also, price quotes can be
obtained from a number of other sources including internet sites on American
On Line, Yahoo Finance and Paww's Financial Network.
14
<PAGE>
From time to time the Company doe not generate sufficient cash flow from
its operation to meet its cash flow requirements. In April, 1997, the
Company entered into an agreement with Perry T. Massie, Thomas H. Massie and
Wilma M. Massie (the Principal Stockholders), whereby the Principal
Stockholders agreed to provide for the cash flow requirements of the Company
over the next twelve months by means of loans or equity investments. From
January 1 through August 14, 1997, Perry T. Massie and Wilma M. Massie have
loaned the Company an aggregate of $540,000 on notes bearing interest at
10%. The Company has renewed its credit line with Wells Fargo Bank.
To achieve modest growth, the Company believed at quarter end that in
addition to its available funds, credit line and expected cash flow to be
generated from operations that it will require an additional $500,000
through December 31, 1997. The Company's primary source for these funds is
either private financing or the Principal Stockholders referred to in the
paragraph above. For the next six months, the Company anticipates that it
will require an additional $500,000 in outside capital to maintain its
current level of operations. In order to have a higher growth rate, the
Company believes it will be necessary to raise other outside capital. The
Company can place no assurance on receiving equity funding through outside
sources. If cash flow from operations are insufficient or if working
capital requirements are greater than anticipated, the Company could be
required to seek other financing. 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.
15
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
Exhibit
Number
------
27 Financial Data Schedule (SEC filing only).
(b) Reports on Form 8-K
-------------------
None.
16
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GLOBAL OUTDOORS, INC.
(Registrant)
Dated: November 19, 1997 By: /s/ PERRY T. MASSIE
-------------------------
PERRY T. MASSIE,
President and Chief
Executive Officer
Dated: November 19, 1997 By: /s/ DAVID M. ASHWOOD
-------------------------
DAVID M. ASHWOOD
Chief Financial Officer
(Principal Financial and Accounting Officer)
17
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
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<SECURITIES> 0
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<PP&E> 3,034,243
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