<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, 1999
------------------
[ ] 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
-------
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
- --------------------------------------------------------------------------------
(Address and zip code of principal executive offices)
(909) 699-4749
- --------------------------------------------------------------------------------
(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 5, 1999
----- -------------------
Common Stock, $.02 par value 5,266,073
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
FINANCIAL STATEMENTS
PART I - ITEM 1
- --------------------------------------------------------------------------------
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
GLOBAL OUTDOORS, INC.
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<TABLE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
September 30 December 31
------------- ------------
1999 1998
------------- ------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 433,859 $ 326,225
Accounts receivables, net of allowance for
doubtful accounts of $54,766 937,818 405,350
Inventories 35,786 45,454
Income tax refund receivable - 1,549
Current portion of receivable from stockholders 15,488 8,850
Other current assets 17,623 1,422
------------- ------------
Total current assets 1,440,574 788,850
Property, plant and equipment, net:
Membership recreational mining properties 1,303,017 1,025,850
Alaska recreational mining properties 1,464,293 1,452,640
Outdoor Channel equipment and improvements 352,512 263,769
Other equipment and leasehold improvements 240,695 168,189
------------- ------------
Property, plant and equipment, net 3,360,517 2,910,448
Trademark, net of accumulated amortization of
$24,078 and $18,606 86,799 90,992
Deposits and other assets 71,127 42,200
------------- ------------
Totals $ 4,959,017 $ 3,832,490
============= ============
The accompanying notes are an integral part of these consolidated financial statements.
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</TABLE>
<PAGE>
<TABLE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIT
<CAPTION>
September 30 December 31
--------------- ---------------
1999 1998
--------------- ---------------
(unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses $ 576,033 $ 547,229
Current portion of notes and capital lease
obligations payable 931,094 999,038
Current portion of stockholder loans 1,770 1,770
--------------- ---------------
Total current liabilities 1,508,897 1,548,037
Stockholders loans, net of current portion 432,963 462,637
Other notes and capital lease obligations payable,
net of current portion 227,002 339,217
Deferred revenue 1,593,474 1,431,823
Deferred satellite rent obligations 614,755 474,920
Deferred compensation 270,000 260,000
--------------- ---------------
Total liabilities 4,647,091 4,516,634
--------------- ---------------
Commitments and contingencies
Minority interest in subsidiary 320,908 40,102
--------------- ---------------
Stockholders' deficit:
Convertible preferred stock, nonvoting, 10% noncumulative, no liquidation
preference, $.001 par value; 10,000,000 shares authorized;
60,675 shares issued and outstanding 61 61
Common stock, $.02 par value; 50,000,000
shares authorized; shares issued and outstanding:
5,266,073 at September 30, 1999; 5,253,937 at
December 31, 1998 105,321 105,079
Common stock subscriptions receivable (221,250) (221,250)
Additional paid-in capital 3,313,535 3,313,777
Accumulated deficit (3,206,649) (3,921,913)
--------------- ---------------
Total stockholders' deficit (8,982) (724,246)
--------------- ---------------
Totals $ 4,959,017 $ 3,832,490
=============== ===============
The accompanying notes are an integral part of these consolidated financial statements.
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</TABLE>
<PAGE>
<TABLE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
(unaudited) (unaudited)
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Advertising $ 1,098,442 $ 677,499 $ 2,814,760 $ 1,671,975
Subscriber fees 394,881 38,472 837,728 84,113
Membership services 481,533 873,510 1,991,460 2,677,287
Trips and outings 739,700 756,098 739,700 756,098
-------------- -------------- -------------- --------------
Total revenues 2,714,566 2,345,579 6,383,648 5,189,473
-------------- -------------- -------------- --------------
Expenses:
Satellite transmission fees 521,593 554,176 1,559,067 1,635,816
Advertising and programming 22,710 18,351 90,264 147,456
Trips and outings 478,890 485,168 478,890 485,168
Selling, general and administrative 1,203,867 995,172 3,761,457 2,780,032
-------------- -------------- -------------- --------------
Total expenses 2,227,060 2,052,867 5,889,678 5,048,472
-------------- -------------- -------------- --------------
Income from operations 487,496 292,712 493,970 141,001
Other income (expense):
Gain on sale of common stock of subsidiary - 153,180 408,859 744,247
Interest, net (31,592) (47,165) (114,601) (163,924)
-------------- -------------- -------------- --------------
Income before provision for income
taxes and minority interest 455,904 398,727 788,228 721,324
Provision for income taxes - - 800 -
-------------- -------------- -------------- --------------
Income before minority interest 455,904 398,727 787,428 721,324
Minority interest in net (income) loss of
consolidated subsidiary (51,821) (13,577) (72,164) 53,010
-------------- -------------- -------------- --------------
Net income $ 404,083 $ 385,150 $ 715,264 $ 774,334
============== ============== ============== ==============
Earnings per common share:
Basic $ 0.08 $ 0.09 $ 0.14 $ 0.17
============== ============== ============== ==============
Diluted $ 0.08 $ 0.09 $ 0.13 $ 0.17
============== ============== ============== ==============
Weighted average number of common
shares outstanding
Basic 5,266,073 4,498,875 5,259,331 4,498,750
============== ============== ============== ==============
Diluted 5,343,990 4,498,875 5,337,248 4,498,750
============== ============== ============== ==============
The accompanying notes are an integral part of these consolidated financial statements.
-5-
</TABLE>
<PAGE>
<TABLE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Nine Months Ended September 30
1999 1998
------------- ------------
(unaudited)
<S> <C> <C>
Operating activities:
Net income $ 715,264 $ 774,334
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 185,229 174,076
Common stock issued for services - 1,504
Rent expense paid through offsets against
stockholder note receivable - 38,250
Interest on stock subscription receivable (6,638) (6,638)
Gain on sale of common stock of subsidiary (408,859) (744,247)
Minority interest in net income (loss) of consolidated
subsidiary 72,164 (53,010)
Cash supplied (used) by changes in operating assets
and liabilities:
Accounts receivable (532,468) (233,681)
Inventories 9,668 36,749
Income taxes receivable 1,549 92,764
Other current assets (16,201) 7,586
Deposits and other assets (28,927) (24,245)
Accounts payable and accrued expenses 47,862 (61,079)
Customer deposits (19,058) (30,231)
Deferred revenue 161,651 (579,039)
Deferred rent obligations 139,835 1,713
Deferred compensation 10,000 68,500
------------- ------------
Net cash provided by (used in) operating activities 331,071 (536,693)
------------- ------------
Investing activities:
Purchase of property, plant and equipment (629,827) (142,822)
Expenditures for trademarks (1,279) (2,529)
------------- ------------
Net cash used in investing activities (631,106) (145,351)
------------- ------------
Financing activities:
Principal payments on long-term debt and capital leases (180,159) (178,060)
Principal payment on stockholder loans (29,674) -
Return of funds to investors - (4,000)
Sale of subsidiary stock to the public 617,502 821,500
------------- ------------
Net cash provided by financing activities 407,669 639,440
------------- ------------
Net increase (decrease) in cash and cash equivalents 107,634 (42,604)
Cash and cash equivalents, beginning of period 326,225 373,368
------------- ------------
Cash and cash equivalents, end of period $ 433,859 $ 330,764
============= ============
The accompanying notes are an integral part of these consolidated financial statements.
-6-
</TABLE>
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. ORGANIZATION, MANAGEMENT STATEMENT AND REFERENCE TO FORM 10-KSB
Organization
- ------------
Global Outdoors, Inc. (the "Company") owns a majority interest in The Outdoor
Channel, Inc. ("The Outdoor Channel" or "Channel"), a national television
network devoted primarily to traditional outdoor activities, such as hunting,
fishing, shooting sports, rodeo and recreational gold prospecting. The Company
has a variety of other business activities. The Company receives revenues from
the sale of memberships in a gold prospecting club, Gold Prospectors'
Association of America, Inc. ("GPAA") and from the sale of memberships in Lost
Dutchman's (LDMA-AU, Inc.) 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 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
receives revenues from its Trips and outings division which includes its "Alaska
trip," a recreational gold mining expedition to the Company's Cripple River
property located near Nome, Alaska, advertising revenue in a bi-monthly
magazine, advertising revenues through cable television programming on 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.
Management Statement
- --------------------
The interim financial statements for the periods reported include all
adjustments which in the opinion of management are necessary in order to make
the financial statements not misleading. The results of operations for the
quarter and nine month period ended September 30, 1999, are not necessarily
indicative of the results to be expected for the full year.
Reference to Form 10-KSB
- ------------------------
Please refer to the Company's Form 10-KSB for the year ended December 31, 1998
for additional information and disclosures which may be of interest to the
reader hereof.
NOTE 2. STOCKHOLDERS' EQUITY
On September 12, 1994, the Company effected a 2 for 1 forward split of its
common stock. On March 4, 1992, the Company effected a 1 for 20 reverse split of
its common stock. On May 1, 1989, the Company distributed a 10% common stock
dividend. Share amounts and prices herein have been adjusted to reflect the
foregoing activity.
-7-
<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, 1998.
COMPARISON OF QUARTERS ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998
REVENUES. The Company's revenues include revenues from advertising fees,
subscriber fees, GPAA and Lost Dutchman's membership sales, product sales and
Trips and outings 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, 1999
were $2,714,566, an increase of $368,987, or 16%, compared to revenues of
$2,345,579 for the quarter ended September 30, 1998. This increase was the
result of changes in several items composing revenue. Advertising increased
significantly to $1,098,442 for the quarter ended September 30, 1999 from
$677,499 for the quarter ended September 30, 1998, primarily due to an increase
in advertising revenue on The Outdoor Channel. Subscriber fees increased
dramatically to $394,881 for the quarter ended September 30, 1999 from $38,472
for the quarter ended September 30, 1998, primarily due to carriage of The
Outdoor Channel on the Dish Network. Membership services decreased significantly
to $481,533 for the quarter ended September 30, 1999 from $873,510 for the
quarter ended September 30, 1998, due principally to the cumulative effect of
the Company devoting its primary resources to development of The Outdoor Channel
and to the change in Lost Dutchman's membership life that occurred in 1998.
EXPENSES. The Company's expenses consist primarily of the cost of 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, 1999 were $2,227,060, an increase of $174,193,
or 8%, compared to $2,052,867 for the quarter ended September 30, 1998. This
increase was primarily the result of an increase in selling, general and
administrative expenses which increased significantly to $1,203,876 for the
quarter ended September 30, 1999, compared to $995,172 for the quarter ended
September 30, 1998. This increase was due primarily to growth at The Outdoor
Channel. Advertising and programming increased to $22,710 for the quarter ended
September 30, 1999, compared to $18,351 for the quarter ended September 30,
1998, due to an increased emphasis in this area by management. Satellite
transmission fees remained near the same level at $521,593 for the quarter ended
September 30, 1999 compared to $554,176 for the quarter ended September 30,
1998, due to satellite transponder expenses plateauing.
INCOME BEFORE PROVISION FOR INCOME TAXES AND MINORITY INTEREST. Income
before provision for income taxes and minority interest remained at the same
level as a percentage of revenues at 17% for the quarter ended September 30,
1999 compared to 17% for the quarter ended September 30, 1998. This was due
primarily to the Company having a gain from operations of $487,486 and no Gain
on sale of common stock for the quarter end September 30, 1999, compared to a
income from operations of $292,712 and Gain on sale of common stock of $153,180
for the quarter ended September 30, 1998. There was no Gain on sale of common
stock of subsidiary for the quarter ended September 30, 1999, due to The Outdoor
Channel closing its private placement on March 5, 1999.
GENERAL
Global Outdoors, Inc. (the "Company" or "Global") is the principal owner of
The Outdoor Channel, Inc. which owns and operates The Outdoor Channel ("The
Outdoor Channel" or "Channel"), the first national television network devoted
primarily to traditional outdoor activities, such as hunting, fishing, shooting
sports, rodeo and recreational gold prospecting. The Company also owns and
operates related businesses which serve the interests
-8-
<PAGE>
of viewers of The Outdoor Channel and other outdoor enthusiasts. These related
businesses include, LDMA-AU, Inc. ("Lost Dutchman's"), Gold Prospectors'
Association of America, Inc. ("GPAA") and the Trips Division. Lost Dutchman's is
a national recreational gold prospecting campground club with over 5,000 members
and properties in California, Alaska, Oregon, Nevada, Arizona, Colorado,
Georgia, South Carolina and North Carolina. GPAA is the largest recreational
gold prospecting club in the world with approximately 35,000 active members.
GPAA also sells products and services related to recreational gold prospecting
and is the publisher of the Gold Prospector magazine. The Company's Trips and
outings Division sponsors unique recreational prospecting trips to the historic
Mother Lode area of California 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 a primary
vehicle to promote the Company's services and products and anticipates that it
will be a factor in the future growth of GPAA, Lost Dutchman's and the Trips
Division. In that regard, in 1998 the Company entered into a long term contract
with The Outdoor Channel whereby the Company has the rights to ten hours of
programming time and thirty sixty second advertising spots per week. The Outdoor
Channel became profitable and cash flow positive in the second quarter of 1999.
Subsequently, the Company has directed more resources to other Company
divisions. For example, in September 1999, the Company commenced airing
"Prospecting America" on The Outdoor Channel. Prospecting America, hosted by
Perry Massie, is a new series produced by the Company's television production
unit headed by Rick Griffith.
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 Outdoor Channel is committed
to converting visibility for the Channel's programming into greater distribution
into cable households. Greater distribution will allow The Outdoor Channel to
charge higher advertising rates, command higher subscriber fees from cable
affiliates, attract more advertisers and receive greater revenues for the
Company's products.
In 1998, The Outdoor Channel signed an affiliation agreement with EchoStar
Satellite Corporation ("EchoStar"), one of the largest direct broadcast
satellite companies ("DBS") in the U.S. with approximately three million
subscribers. The Outdoor Channel's launch on EchoStar's Dish Network occurred in
December 1998. Commencing February 1, 1999, The Outdoor Channel has been
available on the Dish Network on an al a carte basis (i.e stand alone) for a fee
of $1.99 per month. Through September 21, 1999, there were approximately 155,000
subscribers to The Outdoor Channel on the Dish Network. The Channel receives a
significant portion of the monthly subscriber fees.
A primary objective of the Company is for The Outdoor Channel to obtain
distribution. To accomplish this objective the Channel seeks to sign national
carriage agreements with MSOs and thereafter carriage agreements with the MSOs'
individual cable affiliates. 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. As of
October 1999 The Outdoor Channel was launched on approximately 1,600 cable
systems with approximately 4.3 million subscribers. The Outdoor Channel is under
contract with or has signed national carriage agreements with over 75 of the top
100 multi-system cable operators representing over 40 million potential
households.
As of October 1999, the Company is generating sufficient cash flow from
operations to meet its short-term cash flow requirements. The Outdoor Channel is
also meeting its short-term cash flow requirements and is profitable.
-9-
<PAGE>
Management believes that the Company's existing cash resources and anticipated
cash flow from operations will be sufficient to fund the Company's operations at
current and moderately expanded levels for the next twelve months. In the event
that the Company desires to grow at an accelerated rate, to the extent that its
anticipated cash flow is insufficient to finance the Company's working capital
requirements, the Company could be required to seek 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. At the current level of operations, the Company is retiring some
of its existing debt and is planning to finish significant improvements on its
Stanton Property and make further improvements to some of its other properties.
At the current level of operations, the Channel has increased its promotional
activities and has augmented its professional staff. The Outdoor Channel
commenced retiring some of its debt with the Company in the second half of 1999.
The Company presently intends to utilize such funds for working capital, to be
in a position to retire a portion of its bank loan and to make Lost Dutchmans
and GPAA acquisitions and improvements.
Since July 30, 1997, the Company's Common Stock has been traded on the
NASD's over the counter Bulletin Board under the symbol "GLRS." Price quotes on
the Company's Common Stock can be obtained from any stockbroker. Also, price
quotes can be obtained from a number of other sources including internet sites
on America On Line, Yahoo Finance and CheckFree Investment Services.
YEAR 2000
Computer systems, computer software and equipment dependent on
microprocessors may cease to function or work incorrectly when the year 2000
arrives. The problem affects those systems and computer products which are
programmed to use a two digit code for the year, and may read the code "00" as
1900 rather than 2000. To prevent critical failures of important computers or
products, this problem, sometimes referred to as the "Year 2000" problem, must
be identified and corrected. Systems and equipment that will not experience this
problem are generally referred to as "Year 2000 compliant."
The Company has reviewed all its systems, and based on its review, believes
it will not have any material "in house" problems regarding the Year 2000 and is
Year 2000 compliant. The Company has not incurred any material expense regarding
this review.
The Company believes that, with respect to technological operations which
are dependent on third parties, the worst case scenario for the Company would be
for critical vendors or service providers to have Year 2000 problems. These
critical vendors and suppliers include bank card processors, long distance
telephone service providers, the full time satellite provider and uplink
service. Although the significant vendors have advised us that they are in
compliance, contingency plans include alternative vendors and suppliers.
-10-
<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.
-11-
<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 10, 1999 By: /s/ PERRY T. MASSIE
----------------------------
PERRY T. MASSIE,
President and Chief
Executive Officer
Dated: November 10, 1999 By: /s/ RONALD D. WARD
-------------------------
RONALD D. WARD,
Controller
(Principal Financial and
Accounting Officer)
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 433,859
<SECURITIES> 0
<RECEIVABLES> 992,584
<ALLOWANCES> 54,766
<INVENTORY> 35,786
<CURRENT-ASSETS> 1,440,574
<PP&E> 5,326,001
<DEPRECIATION> 1,965,484
<TOTAL-ASSETS> 4,959,017
<CURRENT-LIABILITIES> 1,508,897
<BONDS> 0
0
61
<COMMON> 105,321
<OTHER-SE> (114,364)
<TOTAL-LIABILITY-AND-EQUITY> 4,959,017
<SALES> 6,383,648
<TOTAL-REVENUES> 6,383,648
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,889,678
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 114,601
<INCOME-PRETAX> 788,228
<INCOME-TAX> 800
<INCOME-CONTINUING> 787,428
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 715,264
<EPS-BASIC> 0.14
<EPS-DILUTED> 0.13
</TABLE>
