<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
AMENDMENT NO. 1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended DECEMBER 31, 1997
-----------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _________________ to ________________________
Commission file number : 0-17287
--------
GLOBAL OUTDOORS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
ALASKA 33-0074499
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
43445 BUSINESS PARK DR. SUITE 113, TEMECULA, CALIFORNIA 92590
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (909) 699-4749
--------------
Securities registered pursuant to Section 12 (b) of the Act: None
----
Securities registered pursuant to Section 12 (g) of the Act:
COMMON STOCK
- --------------------------------------------------------------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [ ] No
[X]
<PAGE>
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year $6,309,417.
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
the past 60 days.
On December 7, 1998, 928,027 shares of voting Common Stock were held by
non-affiliates of the registrant. On Said date the aggregate market value of
such Common Stock was $1,972,057.
(ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports required to
be filed by Section 12, 13 or 15 (d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes [ ] No [ ]
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as latest practicable date:
Number of Shares Outstanding
Class at December 7, 1998
- ---------------------------------- --------------------------------------
Common Stock 4,253,749
DOCUMENTS INCORPORATED BY REFERENCES
If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II,
etc.) into which the document is incorporated: (1) any annual report to security
holders; (2) any proxy or information statement; and (3) any prospectus filed
pursuant to Rule 424 (b) or (c) under the Securities Act of 1933 ("Securities
Act"). The listed documents should be clearly described for identification
purposes (e.g., annual report to security holders for the fiscal year ended
December 24, 1990).
None.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
-2-
<PAGE>
ITEM.7 FINANCIAL STATEMENTS
Following are consolidated financial statements of the registrant for
the years ended December 31, 1997 and 1996. The consolidated financial
statements for the year ended December 31, 1997 have been restated effective
January 18, 1999.
-3-
<PAGE>
GLOBAL OUTDOORS, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
WITH
INDEPENDENT AUDITORS' REPORT THEREON
-4-
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors of
Global Outdoors, Inc.
We have audited the accompanying consolidated balance sheet of Global Outdoors,
Inc. and subsidiaries (the "Company") as of December 31, 1997, and the related
consolidated statements of operations, stockholders' deficit and cash flows for
the year then ended, as restated, (see Note 12). These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we 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.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Global
Outdoors, Inc. and subsidiaries as of December 31, 1997, and the results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ Corbin & Wertz
CORBIN & WERTZ
Irvine, California
April 14, 1998, except as to
Note 9, which is as of July 14, 1998,
Note 11, which is as of October 30, 1998 and
Note 12 , which is as of January 18, 1999
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<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Global Outdoors, Inc.:
We have audited the accompanying consolidated balance sheet of GLOBAL OUTDOORS,
INC. (an Alaska corporation) AND SUBSIDIARIES as of December 31, 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we 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.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Global Outdoors,
Inc. and subsidiaries as of December 31, 1996, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Orange County, California
April 15, 1997
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<PAGE>
<TABLE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<CAPTION>
RESTATED
1997 1996
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash $ 373,368 $ 82,027
Current portion of stockholder receivable 34,200 56,400
Advertising receivables, net of allowance for
doubtful accounts of $48,958 and $39,242
in 1997 and 1996, respectively 159,069 82,334
Income taxes receivable 310,215 230,000
Inventories 105,735 159,361
Prepaid expenses 19,109 174,372
------------ ------------
Total current assets 1,001,696 784,494
Membership Recreational Mining Properties, net 1,020,239 995,010
Alaska Recreational Mining Properties, net 1,466,095 1,465,609
Outdoor Channel Equipment, net 317,534 386,584
Other equipment and leasehold improvements, net 162,313 232,703
Stockholder receivable 160,586 223,657
Trademark, net of accumulated amortization of
$6,579 and $4,720 in 1997 and 1996, respectively 95,770 85,601
Deposits and other assets 34,000 52,240
------------ ------------
$ 4,258,233 $ 4,225,898
============ ============
</TABLE>
Continued
-7-
<PAGE>
<TABLE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<CAPTION>
RESTATED
1997 1996
---- ----
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ 934,581 $ 420,198
Line of credit - 715,322
Customer deposits 30,231 9,500
Deferred compensation 200,000 -
Current maturities of long-term debt 1,051,682 303,593
Current maturities of capital leases 79,619 47,172
Current maturities of stockholder loans 463,041 -
------------ ------------
Total current liabilities 2,759,154 1,495,785
Deferred revenue 2,215,114 2,084,782
Deferred rent 283,262 -
Long-term debt, less current portion 361,234 637,717
Capital leases, less current portion 141,458 192,664
Stockholder loans, less current portion 47,337 -
------------ ------------
Total liabilities 5,807,559 4,410,948
------------ ------------
Minority interest in subsidiary 16,340 -
Stockholders' deficit:
Convertible preferred stock, nonvoting, 10%
noncumulative, no liquidation preference, $.001
par value; 10,000,000 shares authorized; 60,675
shares (1997) and 60,775 shares (1996) issued
and outstanding 61 61
Common stock, $.02 par value; 50,000,000 shares
authorized; 4,394,492 shares (1997) and 4,122,394
shares (1996) issued and outstanding 87,890 82,448
Common stock subscribed, 104,069 shares subscribed 2,081 -
Common stock subscriptions receivable (221,250) (221,250)
Additional paid-in capital 3,936,381 2,941,163
Treasury stock (625,000) -
Preferred stock dividend payable in common stock - 12,640
Retained deficit (4,745,829) (3,000,112)
------------ ------------
Total stockholders' deficit (1,565,666) (185,050)
------------ ------------
$ 4,258,233 $ 4,225,898
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
-8-
<PAGE>
<TABLE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<CAPTION>
RESTATED
1997 1996
---- ----
<S> <C> <C>
Revenues:
Alaska trip $ 1,027,354 $ 828,901
Merchandise sales 767,308 488,973
Membership sales 2,569,018 2,910,447
Advertising 1,563,985 960,462
Interest 18,092 23,789
Other income - 45,436
------------ ------------
Total revenues 5,945,757 5,258,008
Expenses:
Alaska trip expenses 655,834 553,596
Cost of merchandise sold 618,992 321,843
Satellite transmission fees 2,120,369 1,441,619
Advertising and programming 219,839 945,357
Selling, general and administrative 4,234,040 4,851,648
Interest 250,964 138,303
Loss on disposal of equipment 20,055 -
------------ ------------
Total expenses 8,120,093 8,252,366
------------ ------------
Operating loss before gain on sale
of subsidiary stock (2,174,336) (2,994,358)
Gain on sale of subsidiary stock 363,660 -
------------ ------------
Loss before income taxes (1,810,676) (2,994,358)
Income tax benefit 80,215 217,658
------------ ------------
Net loss $ (1,730,461) $ (2,776,700)
============ ============
Loss per share $ (0.40) $ (0.68)
============ ============
Weighted average number of common shares
outstanding 4,356,371 4,103,141
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
-9-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (RESTATED)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK COMMON STOCK SUBSCRIBED
------------------------------ ------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------- -------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1996 63,195 $ 63 4,074,988 $ 81,500 - $ -
Preferred stock converted
to common stock (2,420) (2) 2,420 48 - -
Common stock issued for
services - - 21,568 431 - -
Common stock issued for
private placement - - 26,868 538 - -
Purchase of partial shares - - - - - -
Preferred stock dividend
payable in common stock - - - - - -
Retirement of treasury stock - - (3,450) (69) - -
Net loss - - - - - -
------------- -------------- ------------- ------------- ------------- -------------
Balances, December 31, 1996 60,775 61 4,122,394 82,448 - -
</TABLE>
Continued
-10-
<PAGE>
<TABLE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (RESTATED)
<CAPTION>
COMMON PREFERRED
STOCK ADDITIONAL STOCK
SUBSCRIPTION PAID-IN TREASURY DIVIDEND ACCUMULATED
RECEIVABLE CAPITAL STOCK PAYABLE DEFICIT TOTAL
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1996 $ (221,250) $ 2,793,938 $ - $ - $ (210,772) $ 2,443,479
Preferred stock converted
to common stock - (46) - - - -
Common stock issued for
services - 90,400 - - - 90,831
Common stock issued for
private placement - 75,526 - - - 76,064
Purchase of partial shares - (9) - - - (9)
Preferred stock dividend
payable in common stock - - - 12,640 (12,640) -
Retirement of treasury stock - (18,646) - - - (18,715)
Net loss - - - - (2,776,700) (2,776,700)
------------ ------------ ------------ ------------ ------------ ------------
Balances, December 31, 1996 (221,250) 2,941,163 - 12,640 (3,000,112) (185,050)
</TABLE>
Continued
-10-
<PAGE>
<TABLE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (RESTATED)
<CAPTION>
PREFERRED STOCK COMMON STOCK COMMON STOCK SUBSCRIBED
------------------------------ ------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------- -------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Preferred stock converted
to common (100) - 100 2 - -
Common stock issued as
dividend on preferred stock - - 12,398 248 - -
Common stock issued as
pledged collateral - - 250,000 5,000 - -
Common stock issued for
services rendered - - 9,600 192 - -
Issuance of common stock
for offering - - - - 104,069 2,081
Net loss - - - - - -
------------- -------------- ------------- ------------- ------------- -------------
Balance, December 31, 1997 60,675 $ 61 4,394,492 $ 87,890 104,069 $ 2,081
============= ============== ============= ============= ============= =============
</TABLE>
Continued
-11-
<PAGE>
<TABLE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (RESTATED)
<CAPTION>
COMMON PREFERRED
STOCK ADDITIONAL STOCK
SUBSCRIPTION PAID-IN TREASURY DIVIDEND ACCUMULATED
RECEIVABLE CAPITAL STOCK PAYABLE DEFICIT TOTAL
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Preferred stock converted - (2) - - - -
to common
Common stock issued as - 27,648 - (12,640) (15,256) -
dividend on preferred stock
Common stock issued as - 620,000 (625,000) - - -
pledged collateral
Common stock issued for - 35,608 - - - 35,800
services rendered
Issuance of common stock - 311,964 - - - 314,045
for offering
Net loss - - - - (1,730,461) (1,730,461)
------------ ------------ ------------ ------------ ------------ -----------
$ (221,250) $ 3,936,381 $ (625,000) $ - $(4,745,829) $(1,565,666)
Balance, December 31, 1997 ============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
-11-
<PAGE>
<TABLE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<CAPTION>
RESTATED
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,730,461) $ (2,776,700)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 222,537 263,144
Provision for doubtful accounts 9,716 24,138
Common stock issued for services 35,800 90,831
Application for rent obligation toward reduction
of stockholder note receivable 85,271 67,617
Deferred income taxes (81,015) -
Gain on sale of subsidiary stock (363,660) -
Loss on disposal of equipment 20,055 -
Changes in operating assets and liabilities:
Inventories 53,626 32,907
Prepaid expenses 155,263 385,687
Income taxes receivable 800 (154,719)
Advertising receivables (86,451) 29,465
Deposits and other assets 18,240 289,961
Accounts payable and accrued expenses 514,383 260,396
Deferred revenue 130,332 528,174
Deferred rent 283,262 -
Deferred compensation 200,000 -
Customer deposits 20,731 (7,479)
------------ ------------
Net cash used in operating activities (511,571) (966,578)
------------ ------------
Cash flows from investing activities:
Purchases of property, plant and equipment (92,611) (919,311)
Expenditures for trademarks (12,025) (44,353)
------------ ------------
Net cash used in investing activities (104,636) (963,664)
------------ ------------
</TABLE>
Continued
-12-
<PAGE>
<TABLE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<CAPTION>
RESTATED
1997 1996
---- ----
<S> <C> <C>
Cash flows from financing activities:
Net proceeds from offering 314,045 -
Proceeds from private placement - 76,064
(Payments) proceeds from long-term debt, net (256,014) 1,496,481
Net proceeds from stockholder's loans 522,676 -
Principal payments on capital leases (53,159) -
Retirement of treasury stock - (18,715)
Purchase of partial shares - (9)
Sale of subsidiary stock to minority interests 380,000 -
------------ ------------
Net cash provided by financing activities 907,548 1,553,821
------------ ------------
Net change in cash 291,341 (376,421)
Cash at beginning of year 82,027 458,448
------------ ------------
Cash at end of year $ 373,368 $ 82,027
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income taxes $ - $ -
============ ============
Interest $ 209,686 $ 132,677
============ ============
Supplemental disclosures of noncash investing and
financing activities:
Land acquired by incurring note payable $ - $ 200,000
============ ============
Application of rent obligation toward reduction
of stockholder note receivable $ 85,271 $ 73,150
============ ============
</TABLE>
During 1997, the Company acquired equipment under capital lease obligations
totaling $34,400.
See accompanying notes to consolidated financial statements
-13-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Organization
- ------------
Global Outdoors, Inc. (the "Company") owns a majority interest in The Outdoor
Channel, Inc., a national television network devoted solely to traditional
outdoor activities, such as hunting, fishing, shooting sports, rodeo 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
America, Inc. ("GPAA"), revenue from advertisers in a bi-monthly magazine,
advertising revenues through cable television programming dba The Outdoor
Channel, Inc. and through merchandise sales. Effective July 23, 1996, the
Company changed its name from Global Resources, Inc. to Global Outdoors, Inc.
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 stockholders of GPAA if GPAA
achieved certain earnings or valuation milestones. The former stockholders of
GPAA, Perry T. Massie, Thomas H. Massie, and Wilma M. Massie, are stockholders
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. To this date, no earn
out shares have been issued.
Basis of Presentation
- ---------------------
During 1997, the Company experienced significant operating losses, principally
due to The Outdoor Channel, Inc. As a result of losses in 1997 and prior years,
at December 31, 1997, the Company has negative working capital and a deficit
stockholders' equity. In November 1997, the Company commenced a plan to make The
Outdoor Channel, Inc. self supporting. In furtherance of that plan, The Outdoor
Channel, Inc. has been conducting a private placement of common stock and has
raised $1,005,000 through May 31, 1998. The Outdoor Channel, Inc. cannot predict
-14-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES. CONTINUED
- --------------------------------------------------------------------------------
how much additional money it will raise in its private placement. The Outdoor
Channel, Inc. 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 could result in an increase in advertising
revenue for the Company. Management is unable to predict the outcome of those
negotiations or determine when and if the Company's revenues will increase
therefrom.
Management is also unable to predict whether its current capital raising efforts
will be sufficient to cover operating losses until the Company achieves
profitability. In April 1998, the Company entered into agreements with Perry T.
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, if
needed. The Company's financial condition and future results of operations could
be adversely effected should the Company continue to generate operating losses
and not be able to raise sufficient additional equity funds through private
placements or through the stockholder commitment, as noted above.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of Global Outdoors,
Inc., LDMA-AU, Inc., GPAA and The Outdoor Channel, Inc. All material
intercompany accounts and transactions have been eliminated in consolidation.
During 1997, 380,000 shares of The Outdoor Channel, Inc.'s common stock were
issued to outside parties for $380,000, decreasing the Company's ownership
interest in The Outdoor Channel to 95.7% (see Notes 11 and 12).
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements.
Certain estimates made by management also effect the reported operating results
during the reported periods. Actual results could materially differ from those
estimates. Significant estimates made by management include the provision for
losses on accounts receivable, stockholder receivable, the net realizability of
inventories, the evaluation of the potential impairment of property and
equipment, trademark and the net realizability of deferred tax assets.
-15-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES. CONTINUED
- --------------------------------------------------------------------------------
Fair Value of Financial Instruments
- -----------------------------------
The Company has financial instruments whereby the fair market value of the
financial instruments could be different than that recorded on a historical
basis. The Company's financial instruments consist of its cash and cash
equivalents, stockholder receivable, advertising receivables, long-term debt,
related party debt and accounts payable. The carrying amounts of the Company's
financial instruments generally approximate their fair values at December 31,
1997. The fair market value of financial instruments classified as current
assets or liabilities approximate carrying value due to the short-term maturity
of the instruments. The fair value of the Company's related party receivable and
debt is not practicable to obtain as market comparables are not available for
such instruments.
Risks and Uncertainties
- -----------------------
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.
Concentration of Credit Risk
- ----------------------------
The Company maintains, at times, cash balances at certain financial institutions
in excess of amounts insured by federal agencies.
Inventories
- -----------
Inventories are valued at the lower of cost (first-in, first-out) or market.
Trademarks
- ----------
The trademark is amortized on a straight-line basis over 15 years.
-16-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES. CONTINUED
- --------------------------------------------------------------------------------
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.
Impairment of Long-Lived Assets
- -------------------------------
In 1995, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121 ("SFAS 121") "ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF". The Company
adopted SFAS 121 in 1996, as required. SFAS 121 establishes accounting standards
for the impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used and for long-lived assets
and certain identifiable intangibles to be disposed of. The Company evaluates
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Management of the Company
assesses the recoverability of long-lived assets by determining whether the
depreciation and amortization of such assets over their remaining lives can be
recovered through projected undiscounted cash flows. The amount of impairment,
if any, is measured based on fair value (projected discounted cash flows) and is
-17-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES. CONTINUED
- --------------------------------------------------------------------------------
charged to operations in the period in which such impairment is determined by
management. To date, management has not identified any impairment of long-lived
assets.
Revenue Recognition
- -------------------
Revenues on the "Alaska trip" income is recognized when trips are taken. Trips
are taken in June through August each year.
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 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 the 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. 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.
During 1997, the Company adopted the policy of recognizing non-operating gains
or losses from direct sales of its subsidiaries' stock to third parties where
the Company's ownership percentage in the subsidiaries was reduced by the
issuance of such stock and the sale amount per share is different than the
Company's carrying amount per share (see Note 12).
-18-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES. CONTINUED
- --------------------------------------------------------------------------------
Stock-Based Compensation
- ------------------------
During 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "ACCOUNTING FOR STOCK-BASED
COMPENSATION," which defines a fair value based method of accounting for
stock-based compensation. However, SFAS 123 allows an entity to continue to
measure compensation cost related to stock and stock options issued to employees
using the intrinsic method of accounting prescribed by Accounting Principles
Board Opinion No. 25 ("APB 25"), "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES."
Entities electing to remain with the accounting method of APB 25 must make pro
forma disclosures of net income and earnings per share, as if the fair value
method of accounting defined in SFAS 123 had been applied. In 1996, the Company
adopted the provisions of SFAS 123 which relate to non-employee based
compensation and, has elected to account for its stock-based compensation to
employees under APB 25.
Loss Per Common Share
- ---------------------
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards (SFAS) No. 128, EARNINGS PER SHARE
("EPS"). SFAS No. 128 requires dual presentation of basic EPS and diluted EPS on
the face of all income statements issued after December 15, 1997 for all
entities with complex capital structures. Basic EPS is computed as net income
divided by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur from common
shares issuable through stock options, warrants and other convertible
securities. There was no effect on EPS upon the adoption of the provisions of
SFAS No. 128 for all years presented. Loss per common share has been computed on
the weighted average number of common and equivalent shares outstanding. Basic
and diluted net loss per share are approximately the same.
Advertising
- -----------
The Company generally expenses advertising costs as incurred. Advertising
expense for the years ended December 31, 1997 and 1996 was $219,839 and
$945,357, respectively.
-19-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES. CONTINUED
- --------------------------------------------------------------------------------
Income Taxes
- ------------
The Company accounts for its income taxes in accordance with Statement of
Financial Accounting Standards No. 109 ("Statement 109"), "ACCOUNTING FOR INCOME
TAXES." Under Statement 109, an asset and liability method is used whereby
deferred tax assets and liabilities are determined based on temporary
differences between bases used for financial reporting and income tax reporting
purposes. Income taxes are provided based on the enacted tax rates in effect at
the time such temporary differences are expected to reverse. A valuation
allowance is provided for certain deferred tax assets if it is more likely than
not that the Company will not realize tax assets through future operations. The
Company and its subsidiaries file a consolidated federal income tax return.
Limitation on Dividends
- -----------------------
Pursuant to state laws, the Company is currently restricted, and may be
restricted for the foreseeable future, from making dividends to its stockholders
as a result of its accumulated deficit as of December 31, 1997.
New Accounting Pronouncements
- -----------------------------
In June 1997, the FASB issued SFAS No. 130, REPORTING COMPREHENSIVE INCOME, and
SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION. SFAS No. 130 requires that an enterprise report, by major
components and as a single total, the change in its net assets during the period
from nonowner sources; and SFAS No. 131 establishes annual and interim reporting
standards for an enterprise's operating segments and related disclosures about
its products, services, geographic areas and major customers. Adoption of these
statements will not impact the Company's financial position, results of
operations or cash flows and any effect will be limited to the form and content
of its disclosures. Both statements are effective for fiscal years beginning
after December 15, 1997, with earlier application permitted.
-20-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES. CONTINUED
- --------------------------------------------------------------------------------
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.
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 multiple system operators, for limits or
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 services 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 rule
-21-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES. CONTINUED
- --------------------------------------------------------------------------------
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 or
telecommunications law since the Commissions 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.
Other Regulations
- -----------------
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 limitations, regulations promulgated by federal
and state environmental, health and labor agencies.
-22-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 2 - PROPERTY, PLANT AND EQUIPMENT
- --------------------------------------------------------------------------------
<TABLE>
The components of property, plant and equipment at December 31 are as follows:
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Membership recreational mining properties:
Land $ 926,378 $ 926,378
Buildings and improvements 137,908 102,874
------------- -------------
1,064,286 1,029,252
Less accumulated depreciation and amortization (44,047) (34,242)
------------- -------------
$ 1,020,239 $ 995,010
============= ==============
Alaska recreational mining properties:
Land $ 1,129,773 $ 1,129,773
Buildings and improvements 461,481 444,549
Vehicles and equipment 950,591 894,103
------------- -------------
2,541,845 2,468,425
Less accumulated depreciation and amortization (1,075,750) (1,002,816)
------------- -------------
$ 1,466,095 $ 1,465,609
============= =============
Outdoor Channel equipment:
Equipment $ 448,218 $ 433,211
Furniture and fixtures 67,551 64,001
Leasehold improvements 25,626 25,626
------------- -------------
541,395 522,838
Less accumulated depreciation and amortization (223,861) (136,254)
------------- -------------
$ 317,534 $ 386,584
============= =============
</TABLE>
-23-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
NOTE 2 - PROPERTY, PLANT AND EQUIPMENT, CONTINUED
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Other equipment and leasehold improvements:
Furniture and fixtures $ 11,625 $ 11,625
Equipment 205,353 287,842
Vehicles 150,283 150,283
Leasehold improvements 6,578 6,578
------------- -------------
373,839 456,328
Less accumulated depreciation and amortization (211,526) (223,625)
------------- -------------
$ 162,313 $ 232,703
============= =============
</TABLE>
NOTE 3 - DEFERRED REVENUE
- -------------------------
As of December 31, 1997, scheduled payments and amounts to be recognized as
income assuming collectibility in future years from existing LDMA-AU and GPAA
sales contracts are:
Scheduled Revenue To Be
Payments Recognized
--------------- ---------------
1998 $ 1,929,296 $ 1,507,653
1999 1,615,385 1,447,728
2000 1,530,475 1,416,094
2001 1,298,824 1,368,124
2002 1,040,671 1,298,410
Thereafter 580,461 3,172,217
-------------- -------------
$ 7,995,112 $ 10,210,226
============== =============
-24-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 4 - DEBT
- -------------
<TABLE>
Long-term debt at December 31 consists of the following:
1997 1996
--------------- ---------------
<S> <C> <C>
Notes payable to individuals, secured by deed of
trust, payable in monthly installments of $805
including interest at 8.5%, balance due December
2000. $ 95,605 $ 97,237
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
1999. 59,923 63,020
Note payable to an individual, secured by first deed
of trust on land, payable in monthly installments of
$900 including interest at 8%, balance due April 2000. 85,817 89,917
Note payable to individuals, secured by first deed of
trust on land, payable in four annual installations of
$50,000 beginning in 1997, with interest at 7.5%. 150,000 200,000
Note payable to the major stockholder, secured by a
motor home, payable at $520 per month including
interest at 9%. 50,378 51,070
Note payable to two major stockholders, due on
demand, maturing April 1999, with interest at 10%. 460,000 -
Note payable to finance companies, secured by
vehicles, payable in monthly installments including
interest ranging from 7.75% to 9.75%. 19,888 27,566
</TABLE>
-25-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
<S> <C> <C>
Installment note payable to a bank, secured by
substantially all of the Company's assets, guaranteed
by three major stockholders, payable in monthly
installments of $12,500 plus interest at 9.75%. 262,500 412,500
Installment note payable to a bank, secured by
substantially all of the Company's assets, guaranteed
by three major stockholders, payable in monthly
installments of $4,149 plus interest at index plus
4.5% (13% at December 31, 1997). 91,183 -
Note payable to a bank, secured by substantially all
of the Company's assets, guaranteed by three major
stockholders, with interest due monthly at a rate of
prime plus 3.125% (11.625% at December 31, 1997),
due July 10, 1998. The Company is negotiating with
the bank to extend this maturity date. 648,000 -
------------- -------------
1,923,294 941,310
Less current maturities (1,514,723) (303,593)
------------- -------------
$ 408,571 $ 637,717
============= =============
</TABLE>
The aggregate maturities of long-term debt as of December 31, 1997 are as
follows:
Years Ending
December 31,
1998 $ 1,514,723
1999 213,633
2000 60,568
2001 6,923
2002 5,260
Thereafter 122,187
------------
$ 1,923,294
============
-26-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 5 - CAPITAL LEASES
- -----------------------
The Company leases various equipment which are accounted for as capital leases.
A schedule of future minimum lease payments together with the present value of
minimum lease payments as of December 31, 1997 is as follows:
1998 $ 106,820
1999 87,881
2000 42,785
2001 19,765
--------------
257,251
Less amount representing interest
ranging from 7% to 21.69% (36,174)
--------------
Present value of minimum lease payments 221,077
Less current portion (79,619)
$ 141,458
==============
At December 31, 1997 the book value of the assets held under capital leases is
approximately $180,000. The amortization of these assets is included in
depreciation expense.
NOTE 6 - 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. On December 11, 1996, the Company authorized
the payment of a common stock dividend to holders of the preferred shares as of
December 31, 1996 at a rate of one common stock for every ten shares of
preferred stock. The remaining stock dividend was paid in December 1997 and is
reflected as a common stock dividend payable on December 31, 1996.
-27-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 6 - STOCKHOLDERS' EQUITY, CONTINUED
- ----------------------------------------
Stock Option Plan
- -----------------
The Company has three stock option plans, Stock Option Plan 1 (Plan 1), Stock
Option Plan 2 (Plan 2), and the 1995 Stock Option Plan ("1995 Plan"). As
discussed in Note 1 above, the Company accounts for the above plans under APB
Opinion No. 25, under which no compensation cost has been recognized.
SFAS 123 Pro Forma Information
- ------------------------------
Pro forma information regarding net loss and loss per share is required by SFAS
123, and has been determined as if the Company had accounted for its employee
stock options under the fair value method of SFAS 123. The fair value for these
options was estimated at the date of grant using the Black Scholes option
pricing model with the following assumptions; risk free interest rate of 6.3%;
dividend yield of 0%; expected life of the options of 1 to 5 years; and
volatility factors of the expected market price of the Company's common stock of
59% and 67% for 1997 and 1996, respectively.
The Black Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
Had compensation cost for the plans been determined consistent with SFAS No.
123, the Company's net income and loss per share would have been the following
pro forma amounts for the years ended December 31, 1997 and 1996:
-28-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 6 - STOCKHOLDERS' EQUITY, CONTINUED
- ----------------------------------------
1997 1996
---- ----
Net loss:
As reported $ (1,730,461) $ (2,776,700)
============= =============
Pro forma $ (1,792,780) $ (2,796,532)
============= =============
Loss per share:
As reported $ (0.40) $ (0.68)
============= =============
Pro forma $ (0.41) $ (0.68)
============= =============
A summary of the status of the Company's three stock option plans at December
31, 1997 and 1996 and changes during the years then ended is presented in the
table and narrative below:
<TABLE>
<CAPTION>
Shares Price
----------- ---------------
<S> <C> <C>
Outstanding at January 1, 1996 510,000 $2.25-3.50
Granted 13,000 3.25-4.00
Exercised - -
Expired/forfeited (20,000) 3.25
----------
Outstanding at December 31, 1996 503,000 2.25-4.00
Granted -
Exercised -
Expired/forfeited (125,000) 3.50
Outstanding at December 31, 1997 378,000 2.25-4.00
============
Exercisable at December 31, 1997 378,000
============
Weighted average fair value of options granted $ 2.42
============
</TABLE>
The 378,000 options outstanding at December 31, 1997 have a weighted average
remaining contractual life of 5.22 years.
On November 17, 1994, the principal stockholder granted options to purchase
200,000 shares each to three directors of the Company. In July 1995, two of
these directors subsequently assigned 40,000
-29-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 6 - STOCKHOLDERS' EQUITY, CONTINUED
- ----------------------------------------
shares each to an employee of the Company. The options all vest immediately,
have exercise prices of $2.33 and expire November 17, 2004.
Common Stock Subscriptions Receivable
- -------------------------------------
On June 22, 1993 certain stockholders and other individuals exercised a portion
of their options available under the stock option plans above. In connection
therewith, these individuals issued promissory notes to the Company whereby the
individuals are obligated to pay a total of $221,250, plus interest at 4% per
annum, due on June 30, 1999, secured by the related shares of common stock.
Stock Issuances
- ---------------
During 1997, the Company sold 52,034 units at $8.00 per unit. Each unit consists
of two shares of the Company's common stock and one warrant to purchase one
share of the Company's common stock at $5.50 per share, subject to adjustments
as defined, over a two-year period, expiring on January 31, 1999. The warrants
are subject to redemption, at anytime, by the Company at $.02 per warrant on 20
days prior notice. Proceeds to the Company were $314,045, net of offering costs
of $102,227.
During 1997, the Company issued 250,000 shares of its previously unissued common
stock in lieu of a deposit under the terms of a satellite equipment lease. Under
the terms of the lease, the Company is to receive the stock back if they do not
default under the lease. The Company has recorded such as an issuance of common
stock and an offset to treasury stock until they receive the stock back at which
time such will be retired.
During 1997, the Company issued 9,600 shares of its common stock for services
rendered and recorded $35,800 as compensation expense.
Subsidiary Options
- ------------------
The Outdoor Channel, Inc. has 1,750,000 options outstanding as of December 31,
1997 at an exercise price of $1.50.
-30-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 7 - COMMITMENTS, CONTINGENCIES AND RELATED PARTY
TRANSACTIONS
- --------------------------------------------------------------------------------
The Company is leasing its administrative facilities from a stockholder under an
agreement which requires monthly rent payments of approximately $0.34 per square
foot. The term of this lease is from January 1997 to December 2000. The building
serves as security under the terms of the note receivable from the stockholder.
The note receivable from stockholder, in the amount of $194,786 at December 31,
1997, plus interest at six percent, is due in 2000. Rent expense is applied as a
reduction of the note receivable. Rent expense applied against the stockholder
note totaled $85,271 and $67,617 for the years ended December 31, 1997 and 1996,
respectively.
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 defer payment of such.
During 1997, the Company deferred $200,000 to such director. Such amount is
included in the accompanying balance sheet as of December 31, 1997.
The Company is party to various other lawsuits which have arisen in the normal
course of its business. Certain matters are covered by insurance, after the
Company meets certain deductible requirements. The liability, if any, arising
from unfavorable outcomes of the aforementioned lawsuits is presently unknown.
In December 1997, intercompany advances outstanding of $4,121,375 were
contributed by the Company to The Outdoor Channel, Inc. in exchange for
4,500,000 shares of The Outdoor Channel, Inc.'s previously unissued common
stock.
-31-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 8 - INCOME TAXES
- ---------------------
The components of the benefit for income taxes for the years ended December 31,
1997 and 1996 are summarized as follows:
1997 1996
--------------- ---------------
Current:
Federal $ - $ (847,159)
State 800 (149,499)
------------ -------------
800 (996,658)
------------ -------------
Deferred:
Federal - 662,000
State - 117,000
------------ -------------
- 779,000
------------ -------------
Change in estimate (81,015) -
------------- -------------
$ (80,215) $ (217,658)
============ =============
The following table reconciles the federal statutory income tax rate to the
effective tax rate of the benefit for income taxes:
<TABLE>
<CAPTION>
1997 1996
--------------- ------------
<S> <C> <C>
Federal statutory income tax rate (34.0) % (34.0)%
State income taxes, net of federal benefit - (5.6)
Effect of net operating loss carryforward
not utilized 34.5 14.6
Valuation of temporary differences - 15.3
Change in estimate (4.9) -
Other - 2.4
----------- -----------
Effective tax rate (4.4)% (7.3)%
=========== ===========
</TABLE>
-32-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 8 - INCOME TAXES, CONTINUED
- --------------------------------
1997 1996
------------- -------------
Bad debts $ 20,000 $ 17,000
Depreciation 80,000 95,000
Accruals 199,000 57,000
Deferred revenue 889,000 743,000
Net operating loss 712,000 371,000
------------- -------------
1,900,000 1,283,000
Valuation allowance (1,900,000) (1,283,000)
------------- -------------
$ - $ -
============= =============
The Company has available for federal and state income tax purposes, net
operating loss carryforwards of approximately $1,889,000 and $1,278,000,
respectively, which expire in the year 2012.
NOTE 9 - LEASE AGREEMENTS
- -------------------------
The Company leases its facilities and certain equipment under noncancelable
operating leases which expire at various dates through December 2004. In 1995,
under the terms of an operating lease, the Company acquired certain rights to
utilize certain satellite equipment. This lease was to expire on July 7, 1998.
The Company terminated this agreement on March 1, 1997 and entered into a new
satellite equipment lease that will expire on June 30, 1998. This agreement
requires monthly payments of $115,000 during the period March 1, 1997 through
June 30, 1997, $150,000 through October 31, 1997, $170,000 through February 28,
1998 and $190,000 through June 30, 1998. On May 27, 1998 and July 14, 1998, the
Company entered into two two-month extensions of the satellite equipment lease
that require monthly lease payments of $170,000 for July 1998 and $150,000 per
month for August 1998 through October 1998. In addition, the Company has entered
into two other leases to obtain access to certain satellite equipment. These
agreements require monthly payments of $5,500 during the period March 1, 1995
through February 28, 1996, $10,500 through August 31, 1997, $15,500 through May
31, 1999, $25,500 through June 30, 1999, $35,000 through August 31, 2004.
Certain leases contain stepped rent periods throughout the lease. The Company
recognizes the related rental expenses on a straight-line basis and records the
difference between the expense charged to operations and amounts
-33-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 9 - LEASE AGREEMENTS, CONTINUED
- ------------------------------------
paid under the lease as deferred rent. As of December 31, 1997, the Company has
recorded a deferred rent obligation of $283,262 in the accompanying financial
statements. The total minimum rental commitment under these operating lease
agreements, including amendments, is as follows:
Years Ending
December 31,
1998 $ 1,921,651
1999 411,783
2000 447,081
2001 420,000
2002 420,000
Thereafter 700,000
------------
$ 4,320,515
============
On October 23, 1996 the Company entered into a satellite equipment lease
agreement which will become effective when the subject satellite is place into
service. The agreement requires monthly lease payments of $70,000 for the first
month and increasing by $10,000 per month for months two through five, beginning
on the six month through the one hundred and second month the monthly lease
payment is $120,000, beginning on the one hundred and third month through the
one hundred and forty-forth month the monthly lease payment is $140,000. As of
the date of these financial statements, the satellite equipment has not been
placed in service.
During the years ended December 31, 1997 and 1996, the Company incurred
$2,082,369 and $1,490,812, respectively, in rent expense.
-34-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 10 - SEGMENT INFORMATION
- -----------------------------
Reportable business segments for the years ended December 31, 1997 and 1996 are
as follows:
<TABLE>
<CAPTION>
Additions to
Property,
Income Depreciation Equipment and
(Loss) Before And Leasehold
Revenues Income Assets Amortization Improvements
Taxes
----------- ------------ ----------- -------------- ------------------
1997
<S> <C> <C> <C> <C> <C>
Alaska trip $1,027,354 $ 99,322 $ 1,628,407 $ 72,934 $ 73,420
The Outdoor Channel 1,618,870 (2,262,381) 820,518 94,187 18,558
Membership sales
of recreational
prospecting and
mineral rights and
merchandise sales 3,299,533 1,222,758 1,020,239 9,805 35,033
Other - (870,375) 863,271 45,611 -
----------- ------------ ------------ -------------- --------------
$5,945,757 $(1,810,676) $ 4,332,435 $ 222,537 $ 127,011
=========== ============ ============ ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Additions to
Property,
Income Depreciation Equipment and
(Loss) Before And Leasehold
Revenues Income Assets Amortization Improvements
Taxes
----------- ------------ ----------- -------------- ------------------
1996
<S> <C> <C> <C> <C> <C>
Alaska trip $ 828,901 $ 158,678 $1,465,608 $ 69,700 $ 54,365
The Outdoor Channel 743,143 (1,983,518) 679,519 100,197 321,616
Membership sales
of recreational
prospecting and
mineral rights and
merchandise sales 3,399,420 150,841 1,047,250 36,667 357,930
Other 286,544 (1,320,359) 1,033,521 56,580 185,400
----------- ------------ ----------- -------------- ------------
$5,258,008 $(2,994,358) $4,225,898 $ 263,144 $ 919,311
=========== ============ =========== ============= ============
</TABLE>
NOTE 11 - SUBSEQUENT EVENT
- --------------------------
Subsequent to December 31, 1997 and as of October 30, 1998, 877,000 shares of
The Outdoor Channel, Inc.'s common stock were issued to outside parties for
$1,003,000, decreasing the Company's ownership interest in The Outdoor Channel
to 88%.
-35-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 12 - RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------
The Company's 1997 consolidated financial statements have been restated to
reflect an increase in net loss due to the minority interest in net losses of
consolidated subsidiaries, in the amount of $16,340, being restated on the
balance sheet as an increase to minority interest in subsidiary and not as a
gain on the consolidated statement of operations. As previously reported, net
loss for 1997 was $(1,714,121). As restated, net loss for 1997 is $(1,730,461).
As previously reported, net loss per share was $(0.39). As restated, net loss
per share is $(0.40). Also, the gain on sale of subsidiary stock in the amount
of $363,660 was previously reported in revenues on the consolidated statements
of operations. As restated, gain on the sale of subsidiary stock is now reported
after loss from operations. As previously reported, revenues for 1997 were
$6,309,417. As restated, revenues for 1997 are $5,945,757.
-36-
<PAGE>
SIGNATURES
In accordance with section 13 or 15 (d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
(Registrant) GLOBAL OUTDOORS, INC.
-----------------------
By: (Signature and Title) /s/Perry T. Massie
----------------------------------------------
Perry T. Massie, President
Dated: February 26, 1999
-----------------
-37-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 373,368
<SECURITIES> 0
<RECEIVABLES> 552,442
<ALLOWANCES> 48,958
<INVENTORY> 105,735
<CURRENT-ASSETS> 1,075,898
<PP&E> 2,966,181
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,258,233
<CURRENT-LIABILITIES> 2,759,154
<BONDS> 0
0
61
<COMMON> 87,890
<OTHER-SE> (1,653,617)
<TOTAL-LIABILITY-AND-EQUITY> 4,258,233
<SALES> 5,945,757
<TOTAL-REVENUES> 5,945,757
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (8,120,093)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,810,676)
<INCOME-TAX> (80,215)
<INCOME-CONTINUING> (1,730,461)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,730,461)
<EPS-PRIMARY> (0.40)
<EPS-DILUTED> (0.40)
</TABLE>
