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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(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, 1999
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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
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GLOBAL OUTDOORS, INC.
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(Exact name of registrant as specified in its charter)
ALASKA 33-0074499
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
43445 BUSINESS PARK DR. SUITE 113, TEMECULA, CALIFORNIA 92590
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (909) 699-4749
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Securities registered pursuant to Section 12 (b) of the Act: None
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Securities registered pursuant to Section 12 (g) of the Act:
COMMON STOCK
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(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 [X] No [ ]
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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. [ ]
State issuer's revenues for its most recent fiscal year $8,976,442.
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 March 14, 2000, 929,527 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 $3,427,308.
(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 March 25, 2000
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Common Stock 5,266,073
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]
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
INTRODUCTORY
The following information includes forward-looking statements. Actual results
could differ materially.
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. Launched as a
part-time network in June 1993, The Outdoor Channel progressed to a full-time
channel in April 1994 and since then has continued to develop its management,
programming, distribution and revenue. The Company also owns and operates
related businesses which serve the interests of viewers of The Outdoor Channel
and other outdoor enthusiasts. These related businesses include, LDMA-AU, Inc.
("Lost Dutchman's"), Gold Prospectors' Association of America, Inc. ("GPAA") and
the Trips Division. Lost Dutchman's is a national recreational gold prospecting
campground club with over 5,000 members and properties in California, Oregon,
Alaska, Nevada, Arizona, Colorado, Georgia, North Carolina and South 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 Division sponsors unique recreational
prospecting trips to California's Motherlode area and to the Company's 2300 acre
camp, located 11 miles west of Nome, Alaska. In February 1995, the Company
acquired 100% of GPAA. At the time of the acquisition, GPAA in addition to its
other interests owned The Outdoor Channel. The Company was incorporated in
Alaska on October 22, 1984.
BUSINESS STRATEGY
The Company's principal business strategy is for The Outdoor Channel to
establish a position as a leading provider of entertainment programming relating
to traditional outdoor activities. As a majority owner of the Channel, one of
the goals is for the Company to enhance shareholder value as the Channel grows.
Additionally, the Company seeks to leverage the Channel's position as a means to
market and sell its products and services. An ancillary business strategy is for
the Company to market its products and services outside of the Channel. Key
elements of the Company's business strategy are as follows:
INCREASE THE OUTDOOR CHANNEL'S CARRIAGE ON CABLE TELEVISION SYSTEMS:
The Outdoor Channel intends to increase its carriage on cable television systems
by continuing to provide quality programming on The Outdoor Channel and by
increasing the public's awareness and name recognition of The Outdoor Channel
through intensified public relations and marketing efforts targeting cable
operators and potential subscribers.
MARKET AND SELL PRODUCTS AND SERVICES TO OTHER SPECIALTY OR NICHE
MARKETS THROUGH THE OUTDOOR CHANNEL: Based on a long term programming and
advertising agreement with The Outdoor Channel, the Company intends to utilize
The Outdoor Channel to market and sell outdoor-related products to specialty or
niche markets in addition to recreational gold prospecting, including hunting,
fishing and camping. The Company intends to leverage The Outdoor Channel's
increased distribution and name recognition to market and sell such products and
services to those viewers who identify The Outdoor Channel and related products
and services with quality and integrity.
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INCREASE ADVERTISING REVENUE AND SUBSCRIBER FEES DERIVED FROM THE
OUTDOOR CHANNEL: The Company believes that as the distribution of The Outdoor
Channel increases, the Channel will be able to continue to increase its
advertising rates and increase subscriber fees from cable and direct broadcast
operators.
MARKET AND SELL PRODUCTS AND SERVICES TO OTHER SPECIALTY OR NICHE
MARKETS OUTSIDE THE OUTDOOR CHANNEL: The Company will continue to market and
sell outdoor-related products to specialty or niche markets outside of The
Outdoor Channel utilizing means such as direct marketing and strategic
relationships. In particular, the Company believes that owners of recreational
vehicles are potential customers for the Company's clubs.
THE OUTDOOR CHANNEL
The Outdoor Channel, Inc. ("The Outdoor Channel") was incorporated
under the laws of the State of Nevada on December 10, 1990, under the name Gold
News Network, Inc., as a wholly owned subsidiary of GPAA. Initially, the GPAA
produced the "Gold Prospector Show." In early 1993, due to the success of the
Gold Prospector Show, GPAA decided to launch a satellite television network. Not
wanting to limit the scope of the incipient channel to gold prospecting, it was
decided to name the channel, The Outdoor Channel. To reflect the diversity of
programming The Outdoor Channel had achieved, in July 1994, the Channel's
incorporated name was changed to The Outdoor Network, Inc. In December 1996, the
incorporated name was changed to its present name, The Outdoor Channel, Inc.
During 1998 The Outdoor Channel financed its operations primarily with
increasing revenues and outside investor funds. Since March 1999, the Channel
has supported itself solely through its own revenues. As of March 25, 2000, the
Company owned approximately 84% of the Common Stock of The Outdoor Channel. In
the event all outstanding options to purchase Common Stock in the Channel were
exercised the Company would own approximately 68% of The Outdoor Channel.
The Outdoor Channel is a premier provider of a full range of quality
programming related to traditional outdoor activities and is one of the only
television networks whose programming specifically targets the interests and
concerns of millions of persons interested in traditional outdoor activities.
The Outdoor Channel provides the Company, as well as other advertisers, with a
cost effective means to promote goods and services to a large, focused and
rapidly expanding market. In addition, The Outdoor Channel affords cable
operators the opportunity to both attract subscribers from a significant market
segment not specifically targeted by other programming services and respond to
viewers' demands for more outdoor-related programming.
DISTRIBUTION AND CABLE SUBSCRIBERS
The Outdoor Channel's programming is offered mainly by means of
satellite transmissions and through contractual relationships with operators of
cable television systems. The Company estimates that approximately 66 million
households in the United States have cable television and that the large C-Band
satellite dish ("C-Band") market has attracted another 3 million households. In
addition, "wireless cable" ("MMDS"), new video systems presently being built by
telephone companies and the continued development of direct-broadcast satellite
("DBS") companies provide additional opportunities for the Company to distribute
The Outdoor Channel. New digital programming services offered by many cable
operators has greatly increased the programming capacity for these operators.
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The Outdoor Channel has received and is continuing to receive launches on these
digital services including those provided by Time Warner Cable and AT&T. The
Company believes that The Outdoor Channel is available to approximately 20
million households.
The Outdoor Channel transmits all of its programs from its production
facility located in Temecula, California by means of a master control room that
is linked via fiber optic cable to an earth station transmitting antenna (an
"up-link"), which The Outdoor Channel leases under a service agreement. The
up-link facility transmits The Outdoor Channel's programming signal over an
orbiting PanAmSat Galaxy 10R satellite transponder to cable system head-end
receiving antennae and satellite dishes throughout the United States and Canada.
The Outdoor Channel has editing equipment at its production facility which is
used to assemble programs that are produced in-house, edit acquired programming
and insert advertising spots. The Channel also has several filming sets at its
production facility from which some of its in-house programming is produced.
Commencing March 10, 2000, PanAmSat moved Galaxy 10R into the orbital position
formerly occupied by Galaxy 9. The Outdoor Channel, pursuant to an amendment to
its lease with PanAmSat has a twelve year term on Galaxy 10R. The Channel's
lease with PanAmSat also includes provisions for in-orbit backup of the
Channel's signal, when such backup is available. As of March 10, 2000, no such
backup was available. The Channel believes that PanAmSat will be launching
additional satellites during the year 2000 that will provide for in-orbit backup
upon the successful launch of said satellites.
The Outdoor Channel is currently carried on approximately 1,700
affiliated cable systems representing a potential of approximately 14 million
households, of which, the Channel has approximately 5.1 million subscribers. The
Channel is also available to approximately 3.4 million DBS households, of which
the channel has approximately 250,000 subscribers. In addition, the Channel is
available, unscrambled, on C- Band satellite with approximately 3 million
households. The Outdoor Channel is not dependent on one or a few multiple cable
system operators ("MSOs") due to the numerous different cable systems carrying
The Outdoor Channel. The Outdoor Channel has affiliation agreements with most of
the top 100 MSOs. The Company believes that it will be able to enter into more
agreements with local operators in the future as a result of increased
installation of new cable distribution systems and the expected significant
expansion of channel capacity of existing cable systems. This expansion is being
greatly assisted by the significant expansion of digital cable whereby operators
are able to add more channels to the same bandwidth. In addition, the Company
intends to continue its promotional activities, such as attending regional and
local cable trade shows and advertising in trade magazines in order to increase
cable industry awareness of The Outdoor Channel. The Outdoor Channel has also
commenced a consumer awareness campaign whereby it has taken out full-page
advertisements in selected magazines with a traditional outdoor focus. The
Company has reserved the right to encrypt its signal requiring satellite viewers
to purchase subscriptions.
DBS providers, such as EchoStar and DirecTv represent an additional
means of potential distribution of The Outdoor Channel. The Outdoor Channel
believes that distribution by means of DBS will increase as market acceptance
and the installed base of DBS subscribers increase. The Outdoor Channel has a
DBS distribution agreement with EchoStar and was launched on EchoStar's DISH
Network 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 February 2000, there were approximately
250,000 subscribers to The Outdoor Channel on the DISH Network. The Channel
receives a significant portion of the monthly fees which has dramatically
increased its overall subscriber fees.
The Outdoor Channel has explored international distribution of its
programming. The Outdoor Channel has applied for or received trademarks in
various foreign countries including Canada, France, Taiwan, Hong Kong,
Australia, New Zealand, Germany and The United Kingdom. The Outdoor Channel has
no present agreements for international distribution but will consider
opportunities as they become available.
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ADVERTISING
The Company derived approximately $4.3 million in advertising revenue
for the year ended December 31, 1999, from cash sales of advertising time on The
Outdoor Channel and publications such as the Gold Prospector magazine. The
Channel has a fixed number of commercial spots that can be sold to advertisers.
In January of 1999, approximately 65% of the spots were sold to advertisers.
Currently, there is more demand for the Channel's time than it has available
resulting in 100% of the spots being sold. The Company anticipates that it will
continue to derive a substantial portion of its revenue from the sale of
advertising time and that the rates for advertising time will increase
accordingly.
The Company believes that advertising on The Outdoor Channel is
attractive to advertisers because it allows them to execute both a general
market strategy of reaching more cable television viewers and a target market
strategy of reaching consumers interested in outdoor-related activities. The
Company believes that over the past 15 years, cable television has captured a
greater share of advertising budgets and that during this period, the overall
appeal for the major networks such as ABC, CBS and NBC, and for local broadcast
stations, has declined, while over the same period the overall appeal for basic
cable television programming services has increased. Because quality of
viewership is a significant factor in determining both advertisers' placement
strategy and the pricing of advertising time, cable advertising revenues have
grown significantly faster during this period than those of broadcast networks.
In addition, the Company believes that The Outdoor Channel will benefit
from the trend in advertising strategies toward greater market segmentation. The
Company believes that a significant number of major national advertisers of
outdoor-related products and services are dedicating a larger share of their
advertising budgets to target the consumer interested in outdoor-related
activities, in an effort to increase their share of this large and rapidly
growing market. Industry sources estimate that the outdoor life-style market is
currently worth approximately $190 billion yearly worldwide. Therefore, the
Company believes that advertisers, including manufacturers and providers of
outdoor-related products and services, will increasingly advertise on The
Outdoor Channel because it will provide them with a cost effective means to
reach a significant number of consumers interested in outdoor-related
activities. The Channel delivers a high concentration of males age 25-54, which
is the most coveted demographic to the advertising industry.
Advertising time on The Outdoor Channel is marketed and sold by The
Outdoor Channel's advertising sales department. The Outdoor Channel also
utilizes the services of independent sales representatives.
PROGRAMMING
The Outdoor Channel's programming is focused on providing
entertainment, education, consumer values and a balanced approach to the use of
outdoor natural resources. The Outdoor Channel produces its programs with the
outdoor enthusiast in mind, often after considering suggestions and
recommendations of its viewers. Therefore, The Outdoor Channel believes that its
programming, as opposed to its closest competitors' programming, accurately
represents the values and interests of the outdoor community.
The Outdoor Channel acquires programs from independent film and
television production companies and produces programs utilizing in-house staff
and facilities. The Outdoor Channel exhibits the acquired productions pursuant
to licensing agreements with suppliers who generally own the copyrights to such
programming. Licenses to air acquired programming generally run for a calendar
quarter to one year and entitle The Outdoor Channel to show each episode several
times. Approximately 90% of the Channel's programming is nationally exclusive to
the Channel. Examples of programming acquired from third parties include
"America's Outdoor Journal," "Pillsbury Kids Outdoors," and "American
Outdoorsman." Approximately 10% of the Channel's programming is produced
in-house, examples of which, include "The Outdoor Channel Rodeo Roundup,"
"Saturday Night Special," "Prospecting America," and "Gold Fever."
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In 2000, the Company plans to produce and acquire additional
programming for The Outdoor Channel which the Company believes will enable it to
obtain greater distribution and increase advertising rates.
MARKETING
In 1997, the Company entered a ten year 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 Company has the option to
renew this contract for two five year periods. Because it owns other outdoor-
related businesses, The Outdoor Channel affords the Company the unique
opportunity to market and sell its own outdoor-related products and services. As
the Channel continues to achieve greater name recognition and distribution, the
Company anticipates that it will be able to increase sales of its products and
services, as well as the sale and exclusive distribution of products produced by
third parties. However, there can be no assurance that this will be the case.
The Company believes this contract is presently beneficial to the Company and in
the future will constitute a significant asset of the Company.
Outdoor-related products and services currently marketed by the Company
on The Outdoor Channel include those of Lost Dutchman's, GPAA and the Trips
Division.
The Outdoor Channel has entered into several cross marketing agreements
with outdoor related publications and organizations that have recognized the
value of advertising time on the Channel. This provides the Channel with a very
effective means of increasing consumer awareness and demand for The Outdoor
Channel. In December of 1999, the Channel began an intensified consumer
marketing program to increase the Channel's brand awareness and to increase
penetration of digital cable subscribers and DISH Network subscribers. The plan
was initiated with full-page, color advertisements in selected outdoor
publications with millions of readers. In addition, the Channel increased its
budget for affiliate marketing with full page advertisements in cable industry
trade publications. The Company expects that these marketing efforts will
increase the number of households subscribing to the Channel.
LOST DUTCHMAN'S
Lost Dutchman's is a national recreational gold prospecting campground
club, with campgrounds in California, Oregon, Alaska, Nevada, Arizona, Colorado,
Georgia, North Carolina and South Carolina. Lost Dutchman's currently has over
5,000 members. Lost Dutchman's memberships cost up to $5,000 with annual
maintenance dues presently set at $120; however, significant discounts are
available to those members who purchase memberships at Company sponsored outings
or trade shows.
Lost Dutchman's members are entitled to use any of the fourteen
campgrounds owned by the Company or by an affiliated organization, pursuant to a
mutual use agreement between the Company and such organization. Members are
entitled to keep all gold found while prospecting on any of the Company's
properties. The Company is committed only to those duties which would be
required as an absentee owner of raw land, such as the payment of property
taxes. Eight of the properties have a caretaker which the Company has been able
to retain at a minimal monthly expense advance which averages about $600 per
month. The caretaker's job is to provide minor repairs and maintenance such as
keeping the weeds down, cleaning bathrooms and other facilities, if any, and
generally taking care of the property and the campers. It is worthy of note that
in many instances, when a major improvement has been made to a property such as
a building, a clubhouse or road, that Lost Dutchmans members have contributed
both labor and materials towards its construction so that the Company had very
little cost in the project. It is the Company's intention to actively acquire
and develop additional recreational properties and to add recreational
facilities and improvements at current camps.
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In addition to advertising on The Outdoor Channel, the Company markets
Lost Dutchman's memberships by advertising at trade conventions and in the Gold
Prospector Magazine published by the Company. In addition, the Company targets
the 150,000 former and present members of GPAA as well as participants in the
Trips Division's expeditions as potential members of Lost Dutchman's. As funds
are available, the Company intends to purchase additional properties for use by
Lost Dutchman's members and to intensify its marketing efforts to recruit new
Lost Dutchman's members.
GPAA
GPAA is the largest recreational gold prospecting club in the world,
with approximately 35,000 active members. GPAA publishes and sells the Mining
Guide, which contains detailed information on mining claims comprising
approximately 100,000 acres and is updated annually, as well as the bi-monthly
Gold Prospector magazine, which has a distribution of approximately 65,000
copies. GPAA also operates gold prospecting trade shows and conventions, from
which the Company derives revenue from admissions and booth rentals, and sells
recreational gold prospecting-related merchandise.
GPAA's initial memberships cost $67.50. Members are entitled to receive
a 14" gold pan, an annual subscription to the Gold Prospector magazine, an
annual subscription to the quarterly Pick & Shovel Gazette, the GPAA Mining
Guide which currently contains over 500 pages of information and a Prospecting
Permit as well as related merchandise. Annual renewal membership fees range from
$20 to $59. The Company markets and advertises GPAA memberships and products on
The Outdoor Channel. GPAA also produces the Gold Fever and Prospecting America
television shows which air on The Outdoor Channel, as well as, several other
selected markets. GPAA also owns approximately 50 hours of original programming
of the Gold Prospectors Show which the Company intends on re-editing and airing
on The Outdoor Channel.
THE TRIPS DIVISION
The Trips Division offers unique recreational gold prospecting trips to
residents of the United States and Canada. The principal trip offered by the
Trips Division is the annual trip to Alaska, the fees for which are up to $1,950
per week and $950 per additional week, including round-trip transportation to
and from Seattle, Washington. The Alaska Trip crew usually arrives in early June
with the camp closing in mid August. The Alaskan expedition begins in Nome,
Alaska where participants are taken to the Company's 2,300-acre camp on the
Cripple River adjacent to the Bering Sea. In 1999, the Alaska trip had
approximately 345 participants, and the Company expects that the number of
participants will increase in the future due to the Company's increased
advertising and marketing efforts on The Outdoor Channel, as well as
advertisements in the Gold Prospector magazine and on the Gold Prospectors' Show
and Gold Fever Show.
The Trips Division also offers the Mother Lode Expedition in September
and October. The destination of the Motherlode Expedition is the heart of the
historic Motherlode area in central California. Participation is generally
limited to 20 persons per week with a weekly fee of $950. The Motherlode
Expedition runs three to four weeks depending upon demand. Due to the size of
the Motherlode Expedition camp site, it is not anticipated that this trip will
be significantly expanded. As circumstances and opportunities warrant, the
Company will consider offering trips to other locations.
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COMPETITION
There is intense competition for viewers among companies providing
programming services via cable television and through other video delivery
systems. More than 120 programming services are currently distributed nationwide
by satellite to cable systems. The Outdoor Channel competes for advertising
revenues with other national cable programming services, broadcast networks,
local over-the-air television stations, broadcast radio and the print media. The
Outdoor Channel's closest direct competitors are the Outdoor Life Network and to
a lesser extent, The Nashville Network and ESPN. The Outdoor Channel believes
that while its closest competitor has a similar name there is a substantial
difference between the two networks. The Outdoor Channel emphasizes traditional
outdoor activities such as fishing and hunting while the other network features
a significant amount of outdoor competitive sports and nature observation. The
Outdoor Channel believes that its closest competitor is well funded and well
connected but believes this benefits The Outdoor Channel since it will serve as
a barrier to competition for future programmers in this niche. More generally,
The Outdoor Channel competes with various other leisure-time activities such as
home videos, movie theaters, and other alternative forms of information and
entertainment.
The Outdoor Channel also competes for available channel space on cable
television systems with other cable programming services and nationally
distributed and local television stations.
Increased competition in the cable industry may result from
technological advances, such as digital compression, which allows cable systems
to expand channel capacity, and "multiplexing," which allows programming
services to offer more than one feed of their programming. As a result of the
increased segmentation made possible by these advances, other programming
services might be able to provide programming that targets the Company's viewing
audience.
The Outdoor Channel has positioned itself with cable operators as the
lower cost provider in its niche. The Company believes that The Outdoor Channel
is receiving higher advertising rates than its closest competitor due to a
higher percentage of viewership. The Company believes that it has an advantage
over its competitors in attracting advertisers of outdoor-related products and
services because the Company, unlike its competitors, broadcasts The Outdoor
Channel to approximately 3 million direct to home large dish satellite receivers
and offers its advertisers exposure through a programming format which focuses
exclusively on the traditional outdoor lifestyle of hunting, fishing, camping
and related outdoor activities. In addition, while developments such as digital
compression and new distributors in the cable marketplace may have the effect of
increasing competition for The Outdoor Channel, they also create tremendous
potential for additional distribution for the network.
The Company is not aware of any other company that is in direct
competition for the type of recreational activity it provides through the Alaska
Trip. Global believes it has an advantage in promoting its trip in Alaska due to
its association with the GPAA and its ability to utilize the Gold Prospector
magazine, The Outdoor Channel and the Company's gold shows. Persons planning an
Alaska gold prospecting venture would be expected to evaluate other camps in
Alaska, as well as the option of undertaking a trip not associated with a group.
The table below lists the approximate number of participants in the "Alaska
Trip" since 1991 by Global.
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Year Participants
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1991 220
1992 215
1993 579
1994 538
1995 369
1996 378
1997 430
1998 317
1999 345
In a broad sense, the Company's "Alaska Trip" is an expedition for
study in Alaskan geology with equal emphasis on the educational and recreational
aspects of this far northern property. Its competition thus includes other
sources of recreational activities.
While Lost Dutchman's has numerous campground competitors, it is the
only campground club the Company is aware of that has a theme, namely gold
prospecting. It has been estimated that there are approximately 15,000
campgrounds in the United States of which approximately 600 are membership
campgrounds such as Lost Dutchman's. For instance, there is Thousand
Trails/NACO, Outdoor World and Thousand Adventures. It is believed that these
companies compete primarily by quality of facilities and amenities offered. By
contrast, Lost Dutchman's has rustic facilities and few amenities and seeks to
attract persons who are interested in gold prospecting, hands on outdoor
activities and wish to be part of a club in a safe family oriented environment.
EMPLOYEES
As of December 31, 1999, the Company, not including The Outdoor
Channel, had a total of 29 employees of which 27 were full time. The Outdoor
Channel had a total of 26 employees all of which were full time. The Company
also engages the services of additional employees during the Alaskan trip
offered by the Trips Division. During 1999, the Company engaged the services of
approximately eight such seasonal employees. None of the Company's employees is
covered by a collective bargaining agreement. The Company considers its
relationship with its employees to be good.
GOVERNMENT REGULATION
The Company's operations are subject to various government regulations.
The operations of cable television systems, satellite distribution systems and
broadcast television program distribution companies are subject to the
Communications Act of 1934, as amended, and to regulatory supervision thereunder
by the Federal Communications Commission (the "FCC"). The Company's leased
uplink facility in Perris, California is licensed by the FCC and must be
operated in conformance with the terms and conditions of that license. Cable
systems are also subjected to local franchise authority regulation.
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.
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FEDERAL CABLE REGULATION
In 1992, Congress enacted the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act"), which provides, among other
things, for a "must carry" regime for local broadcast stations (which requires
the mandatory carriage of certain broadcast stations and payments by cable
operators to other broadcast stations for retransmission of their signals in
some instances), for channel positioning rights for certain local broadcast
stations, for limits on the size of MSOs, for limits on carriage by cable
systems and other video distributors of affiliated program services, for a
prohibition on programmers in which cable operators have an "attributable
interest" from discriminating between cable operators and their competitors, or
among cable operators, and for increased competition in video programming
distribution (both within the cable industry and between cable and competing
video distributors). In addition, the 1992 Cable Act requires the FCC to
establish national guidelines for the rates that cable operators subject to rate
regulation may charge for basic cable service and certain other services and to
establish guidelines for determining when cable programming may not be provided
exclusively to cable system operators. In 1996, Congress enacted the most
comprehensive rewrite of telecommunications law since the Communications Act of
1934, reversing or modifying many of the provisions of the 1992 Act. Among other
things, the legislation allows cable and telephone industries into each other's
markets and phased out federal cable rate regulation in most instances. The
Company believes these developments are positive for The Outdoor Channel, as
they will result in significantly expanded channel capacity, new distributors to
whom the Company can market the network, and new pressures on cable operators to
launch new programming services, both for competitive reasons and because they
will once again be able to recover the costs of new programming through rate
actions. Congress and the FCC may, in the future, adopt new laws, regulations
and policies regarding a wide variety of matter which could affect The Outdoor
Channel. The Company is unable to predict the outcome of future federal
legislation or the impact of any such laws or regulations on The Outdoor
Channel's operations.
LOST DUTCHMAN'S REGULATIONS
To operate its campgrounds, the Company must comply with discretionary
permits or approvals issued by local governments under local zoning ordinances
and other state laws. In addition, to construct improvements at campgrounds, the
Company has usually been required to obtain permits such as building and
sanitary sewage permits. Some states in which the Company sells memberships have
laws regulating campground memberships. These laws sometimes require
comprehensive disclosure to prospective purchasers. Some states have laws
requiring the Company to register with a state agency and obtain a permit to
market. The Company has undertaken a comprehensive program to ensure compliance
with applicable laws in all 50 states.
OTHER REGULATIONS
In addition to the regulations applicable to the cable television and
campground industries in general, the Company is also subject to various local,
state and federal regulations, including, without limitation, regulations
promulgated by federal and state environmental, health and labor agencies. The
Company's mining clubs and Trips Division are subject to various local, state
and federal statutes, ordinances, rules and regulations concerning, zoning,
development, and other utilization of its properties.
INTELLECTUAL PROPERTY
The Company neither holds nor depends upon any material patent,
trademark, license or other proprietary right except "The Outdoor Channel(R)"
which is a registered trademark of The Outdoor Channel.
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ITEM 2. DESCRIPTION OF PROPERTIES.
Information with respect to the location and general character of
Global's materially important properties is as follows.
CRIPPLE RIVER
The Cripple River property which now includes the Arctic Creek property
consists of approximately 2300 patented (*See definition of "patented," below)
acres and is located in the Cape Nome area of Alaska. The Cripple River property
is the principal destination of the "Alaska Trip" participants. It is the former
location of a large historic gold mining operation. The Company has constructed
over 130 rooms on the property for trip participants. Also, Global has
constructed a chow hall, Saloon (non-alcoholic), general store, gold recovery
plant, small commercial gold mining plant, drinking and wastewater treatment
facilities and other buildings. In addition to recreational gold mining, the
Cripple River property has excellent fishing including yearly runs of pink and
silver salmon.
LOUD MINE
The Loud Mine is located in White County, Georgia, near the eastern end
of Georgia's famous Dahlonega Gold Belt, which stretches diagonally (southwest
to northeast) across the north end of the state. The camp's office is staffed
with a caretaker. Campground facilities include a clubhouse, bathrooms, showers
and a dump station. Camping is available for 250 or more persons. Approximately
one-third mile of Town Creek and one of its smaller tributaries meander through
this 38 deeded acre property. Dredges of up to 4" intake may be used in Town
Creek. Highbanking, sluicing and panning also are popular. Deep layers of
alluvial gravels, separated by dense clay layers, overlay soft bedrock
(saprolite) throughout this region. Numerous gold-bearing quartz veins run
through the Loud Mine property. Some "Loud" gold is smooth, but coarse gold is
mostly found, indicating that it is still relatively close to its source.
STANTON PROPERTY
The Stanton property consists of 35 patented acres and is located
approximately 50 miles northwest of Phoenix, Arizona. It is contiguous with 85
acres owned by an affiliated organization with which the Company has a mutual
use agreement. Either on the Company's property or the other organization's
property there are sanitary facilities, showers, club house, pool room, card
room, library, kitchen area with sink, water and electric outlets, 70 sites for
hookups and parking for several hundred self contained units. The camp's office
is staffed with a caretaker. Gold is present throughout the property from
surface to bedrock. The Stanton camp has reopened after completion of
significant sanitary facility and other improvements.
BURNT RIVER/CAVE CREEK
The Burnt River Camp consists of 135 patented acres and the adjacent
Cave Creek property consists of 32 patented acres. These properties are located
in eastern Oregon and have a clubhouse, sanitary facilities, dump station,
restrooms, showers and a caretaker who lives on site. There is dredging and
excellent Highbanking along the Burnt River. The Cave Creek property is a
slender parcel of land that takes in about one mile of Cave Creek, providing
abundant ground for recreational prospecting.
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VEIN MOUNTAIN CAMP
The Vein Mountain Camp, located in West Central North Carolina
approximately 7 miles from the town of Marion, was acquired in February 1996.
The Camp consists of 130 deeded acres located in the middle of North Carolina's
Motherlode. Between 1829 and 1830 seven pound nuggets were reported to have been
taken from the property. During the same era a 28 pound nugget and 200 pound
mass of gold and quartz were reported to have been taken within several miles of
the property. There presently are some improvement to the property including two
pole barns, outhouse, water well and telephone. Vein mountain has a caretaker
who lives on site. Future plans include bathrooms, showers, water and a
clubhouse. Completion of some improvements is estimated in 1 to 2 years. There
is camping for up to 250 self-contained recreational vehicles.
JUNCTION BAR PLACER
The Junction Bar Placer is located at the confluence of the Klamath and
Scott Rivers in northern California. Fourteen of the property's 26 acres of
patented land are zoned Highway Commercial. With frontage on both Highway 96 and
Scott River Road, this property has excellent development potential. Future
plans include bathrooms, showers, water and a clubhouse. The Company has begun
to develop the Junction Bar Placer. The Company has conducted a survey of the
property as well as contracted an architect to draw plans for a campground
facility. The Company commenced work on obtaining local approval to construct
facilities in 1995. Junction Bar Placer has a caretaker who lives on site.
Completion of some improvements is estimated in 1 to 2 years.
OCONEE CAMP
The Oconee Camp, located in the northwest corner of South Carolina and
just north of Walhalla, was acquired in June 1995. This camp consists of 120
acres of deeded property. Oconee is a primitive campground with minimal
facilities including twelve sites for hookups, outhouse and telephones. Oconee
has a caretaker who lives on site. Future plans include bathrooms, showers,
water and a clubhouse. Completion of some improvements is estimated in 1 to 2
years. There is Camping for up to 250 self-contained recreational vehicles.
LEADVILLE PROPERTY
The Leadville property, located in Lake County, Colorado was acquired
in August 1995. The camp is comprised of approximately 60 patented acres in the
heart of Colorado's historic mining area. At over 11,000 feet in elevation, it
has spectacular scenery including views of the two highest peaks in Colorado.
This is a primitive campground with no facilities. Future plans include
bathrooms, showers and a clubhouse. Completion of future improvements is
dependent upon obtaining local regulatory approval. If the Company continues to
have problems obtaining local regulatory approval, it will dispose of this
property. There is camping for up to 200 self-contained recreational vehicles.
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OMILAK SILVER MINE
The Omilak Silver Mine consists of approximately 40 acres of patented
land and is located about 80 miles northeast of Nome, Alaska. The property has
on it previously existing equipment, mine shafts, rail and mine cars and several
buildings including a two-story bunk house constructed by the Company. The
Omilak Silver Mine, in addition to recreational uses, has the potential for
being reactivated as a commercial silver mine. At such time, as the Company has
sufficient resources, the price of silver warrants and the Company believes it
is timely, the Company may evaluate the Omilak property for commercial use.
HIGH DIVIDE PROPERTY
The High Divide property consists of 20 acres of patented land and is
located in Esmeralda County, Nevada. This property is remote and there are no
facilities. It was patented for lode mining but placer gold is present in the
area.
NEDERLAND PROPERTY
The Nederland property consists of 5 patented acres located in Boulder
County, Colorado. There are no facilities on this property. The area around the
Nederland property has produced over 1 million ounces of gold since 1858. This
property has mostly silver with small amounts of gold.
* Patented land is United States public land that has been transferred to
private fee simple ownership. Mining claims can be perfected into
patented land which is what occurred on some of the Company's
properties before the Company acquired those properties.
ITEM 3. LEGAL PROCEEDINGS.
From time to time the Company is a party to litigation arising in the
normal course of its business, none of which existing on the date hereof in the
opinion of management will have a material effect on the Company's operations or
financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) Not Applicable.
(b) Not Applicable.
(c) Not Applicable.
(d) Not Applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Global's Common Stock is listed for trading on the NASD's over the counter
Bulletin Board under the trading symbol "GLRS". The following table sets forth
for the quarters indicated the reported high and low closing sales prices.
High Low
---- ---
1998 First Quarter 3.00 1.38
Second Quarter 3.12 2.00
Third Quarter 2.75 1.50
Fourth Quarter 2.50 1.06
1999 First Quarter 2.50 1.44
Second Quarter 3.75 1.62
Third Quarter 5.50 1.94
Fourth Quarter 4.00 2.00
On September 12, 1994, Global effected a 2 for 1 forward split of its
Common Stock. On March 4, 1992, Global effected a 1 for 20 reverse split of its
Common Stock. Share amounts and prices herein have been restated to reflect the
foregoing splits. On May 1, 1989, Global distributed a special Common Stock
dividend payable at the rate of one share of Common Stock for every ten shares
of Common Stock held.
Shareholders who purchased Common Stock before the aforementioned stock
splits and dividend need to be mindful that their holdings have been adjusted to
reflect these splits and dividend.
In October 1991, February 1993, April 1994, November 1995, December 1996,
December 1997 and May 1999, Global authorized paying a dividend payable in
Common Stock to Global's Preferred Stockholders for the years 1991, 1992, 1993,
1994, 1995, 1996, 1997 and 1998. In 2000 Global intends to pay a dividend to its
Preferred Stockholders for 1999.
No other dividends have been declared with respect to Global's common
shares since inception. It is not likely Global will pay any cash dividends in
the foreseeable future. Global intends to reinvest earnings, if any, in its
operations.
At present, Global has 60,675 shares of Preferred Stock outstanding. Each
share of Preferred Stock is convertible to 1 share of Common Stock which
conversion would afford greater liquidity for a Preferred shareholder.
As of approximately December 31, 1999, Global had 1,088 shareholders of
record of its Common Stock and 208 shareholders of its Preferred Stock.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following information includes forward-looking statements, the realization
of which may be impacted by certain factors discussed in Item I. Description of
Business-Important Factors Related to Forward-Looking Statements and Associated
Risks.
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 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. Prior to being a wholly-owned subsidiary of the
Company, GPAA was an affiliated company which owned the Outdoor Channel. The
Company acquired 100% of the stock of GPAA in February 1995. The Company's Trips
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, 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.
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.
To accomplish the objective of obtaining increased distribution 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 are broad based and include an
emphasis on areas where there are the greatest number of outdoor enthusiasts.
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As of February 2000, The Outdoor Channel was carried on approximately
1,700 affiliated cable systems representing a potential of approximately 14
million households, of which, the Channel has approximately 5.1 million
subscribers. The Channel is also available to approximately 3.4 million DBS
households, of which the channel has approximately 250,000 subscribers. In
addition, the Channel is available, unscrambled, on C-Band satellite with
approximately 3 million households. The Outdoor Channel is not dependent on one
or a few multiple cable system operators ("MSOs") due to the numerous different
cable systems carrying The Outdoor Channel. The Outdoor Channel has affiliation
agreements with most of the top 100 MSOs representing over 40 million potential
households. The Channel's list of affiliates includes AT&T Corp., which acquired
Tele-Communications Inc., and Time Warner, the two largest cable operators in
the country. In addition, the Channel is in active negotiations with most of the
other unsigned cable operators. The Company believes that it will be able to
enter into more agreements with local operators in the future as a result of
increased installation of new cable distribution systems and the expected
significant expansion of channel capacity of existing cable systems. This
expansion is being greatly assisted by the significant expansion of digital
cable whereby operators are able to add more channels to the same bandwidth. In
addition, the Company intends to continue its promotional activities, such as
attending regional and local cable trade shows and advertising in trade
magazines in order to increase cable industry awareness of The Outdoor Channel.
The Outdoor Channel has also commenced a consumer awareness campaign whereby it
has taken out full-page advertisements in selected magazines with a traditional
outdoor focus.
In February 1999, The Outdoor Channel launched on an a la carte basis
(i. e. stand alone) for a fee of $1.99 per month with EchoStar Satellite
Corporation's ("EchoStar") DISH Network. EchoStar is one of the largest direct
broadcast satellite companies ("DBS") in the U.S. with approximately 3.4 million
subscribers. Through February 2000, there were approximately 250,000 subscribers
to The Outdoor Channel on the DISH Network. The Channel receives a significant
portion of the monthly subscriber fees. For the month of February 2000 the
Channel's portion was approximately $164,000.
On March 5, 1999, the private placement of The Outdoor Channel common
stock was closed. Between January 1 and March 5, 1999, approximately $617,000
was raised in the private placement. The Company owns approximately 84% of The
Outdoor Channel. In the event all outstanding options to purchase Common Stock
in the Channel were exercised, as of March 25, 2000, the Company would own
approximately 68% of The Outdoor Channel (See Note 8 to the Consolidated
Financial Statements).
In April 1999, The Outdoor Channel became profitable with ensuing
months through the date hereof showing a trend of increasing profitability.
In November 1999, The Outdoor Channel renewed its media placement
agreement with Frederiksen Television, Inc. for the placement of direct response
programming on The Outdoor Channel, primarily during off hours. The Outdoor
Channel receives significant revenues under this agreement.
In December 1999, the Channel launched a consumer awareness program
with full page color advertisements in selected traditional outdoor
publications. The budget for this program is $3 million over two years.
The Company's Common Stock is traded on the NASD's over the counter
Bulletin Board under trading 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 numerous internet sites such as America
On Line, Yahoo Finance and cnbc.com.
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COMPARISON OF YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998
REVENUES. The Company's revenues include revenues from advertising
fees, GPAA and Lost Dutchman's membership sales, product sales and the Trips and
Outings Division sales. Advertising fees result from the sale of advertising
time on The Outdoor Channel and from advertising space in publications such as
the Gold Prospector magazine. Revenues for the year ended December 31, 1999 were
$8,976,442, an increase of $2,290,529 or 34%, compared to revenues of $6,685,913
for the year ended December 31, 1998. This increase was primarily the result of
an increase in advertising revenues and subscriber fees. Advertising revenues
increased substantially to $4,273,581 for the year ended December 31, 1999
compared to $2,213,660 for the year ended December 31, 1998, due primarily to an
increase in advertising revenue at The Outdoor Channel. Subscriber fees
increased exceptionally to $1,317,340 for the year ended December 31, 1999
compared to $124,434 for the year ended December 31, 1998, due primarily to the
receipt of subscriber fees from the DISH Network by The Outdoor Channel.
Membership services decreased significantly to $2,611,605 for the year ended
December 31, 1999, compared to $3,577,522 for the year ended December 31, 1998,
due primarily to the cumulative effect of the average life of Lost Dutchman's
memberships being changed from ten to seven years to reflect actual operating
experience for 1998. Revenues from the trips and outings was virtually the same
at $773,916 for the year ended December 31, 1999 compared to $770,297 for the
year ended December 31, 1998.
EXPENSES. Expenses consist primarily of the cost of the Company's
satellite transponder and uplink facilities, programming, advertising and
promotion, trips and outings expenses, sales and administrative salaries, office
expenses and general overhead. Expenses for the year ended December 31, 1999
were $8,182,783, a significant increase of $1,535,063, or 23%, compared to
$6,647,720 for the year ended December 31, 1998. This substantial increase in
expenses was due primarily to the Company expanding its selling, general and
administrative expenses which increased substantially to $5,185,741 for the year
ended December 31, 1999, compared to $3,577,444 for the year ended December 31,
1998. This increase was due primarily to the expansion of The Outdoor Channel
and related increases in such areas as marketing and personnel. Satellite
transmission fees remained nearly the same at $2,062,403 for the year ended
December 31, 1999, compared to $2,278,956 for the year ended December 31, 1998,
due to the stabilization of transponder and uplink costs for The Outdoor
Channel. Trips and outings expenses decreased marginally to $483,967 for the
year ended December 31, 1999, compared to $516,283 for the year ended December
31, 1998, despite an increase in participation on the Alaska trip.
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST IN NET (INCOME) LOSS
OF CONSOLIDATED SUBSIDIARY. Income before income taxes and minority interest in
net (income) loss of consolidated subsidiary remained the same as a percentage
of revenues at 11% for the years ended December 31, 1999 and December 31, 1998.
Certain components of this percentage changed dramatically. Income from
operations was $793,659 for year ended December 31, 1999 compared to only
$38,193 for the year ended December 31, 1998. Also, gain on the sale of common
stock of subsidiary decreased significantly to $408,860 for the year ended
December 31, 1999, compared to $903,423 for the year ended December 31, 1998,
due to The Outdoor Channel closing its private placement on March 5, 1999.
INCOME TAXES. The income tax credit for the year ended December 31,
1999, was $1,086,550 compared to $0 for the year ended December 31, 1998. This
was due to recognition of the high probability that the Company will be able to
utilize its loss carryforwards in future years that was present at December 31,
1999 and not present at December 31, 1998.
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<PAGE>
COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
REVENUES. The Company's revenues include revenues from advertising
fees, GPAA and Lost Dutchman's membership sales, product sales and the Trips and
Outings Division sales. Advertising fees result from the sale of advertising
time on The Outdoor Channel and from advertising space in publications such as
the Gold Prospector magazine. Revenues for the year ended December 31, 1998 were
$6,685,913, an increase of $758,248 or 13%, compared to revenues of $5,927,665
for the year ended December 31, 1997. This increase was primarily the result of
an increase in advertising revenues. Advertising revenues increased
substantially to $2,213,660 for the year ended December 31, 1998 compared to
$1,563,985 for the year ended December 31, 1997, due primarily to an increase in
advertising revenue at The Outdoor Channel. Membership services increased
modestly to $3,577,522 for the year ended December 31, 1998, compared to
$3,336,326 for the year ended December 31, 1997, due primarily to the cumulative
effect of the average life of Lost Dutchman's memberships being changed from ten
to seven years to reflect actual operating experience. Revenues from the trips
and outings was down notably at $770,297 for the year ended December 31, 1998
compared to $1,027,354 for the year ended December 31, 1997, due to decreased
participation on the Alaska trip and Motherlode expedition. Allocation of
significant time and resources to financing, distribution and revenue for The
Outdoor Channel continued to adversely affect revenues of other divisions in
1998.
EXPENSES. Expenses consist primarily of the cost of the Company's
satellite transponder and uplink facilities, programming, advertising and
promotion, trips and outings expenses, sales and administrative salaries, office
expenses and general overhead. Expenses for the year ended December 31, 1998
were $6,646,920, a significant decrease of $1,201,354, or 15%, compared to
$7,849,074 for the year ended December 31, 1997. This substantial drop in
expenses was due primarily to the Company lowering its selling, general and
administrative expenses which decreased substantially to $3,578,244 for the year
ended December 31, 1998, compared to $4,853,032 for the year ended December 31,
1997. This decrease was due to the Company's significant efforts to control its
personnel and administrative costs. Satellite transmission fees remained nearly
the same at $2,278,956 for the year ended December 31, 1998, compared to
$2,120,369 for the year ended December 31, 1997, due to the stabilization of
transponder and uplink costs for The Outdoor Channel. Trips and outings expenses
decreased significantly to $516,283 for the year ended December 31, 1998,
compared to $655,834 for the year ended December 31, 1997, due to the decreased
participation on the Alaska trip and Motherlode expedition.
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST IN NET LOSS OF
CONSOLIDATED SUBSIDIARY. Income before income taxes and minority interest in net
loss of consolidated subsidiary increased very substantially as a percentage of
revenues to 11% for the year ended December 31, 1998 from a loss of (31)% for
the year ended December 31, 1997. This was due primarily to the Company having
operating income of $38,193 for the year ended December 31, 1998, compared to an
operating loss of $(1,921,409) for the year ended December 31, 1997. Also, gain
on the sale of common stock of subsidiary increased to $903,423 for the year
ended December 31, 1998, compared to $363,660 for the year ended December 31,
1997, due to the Company selling approximately 9% of The Outdoor Channel common
stock to outside investors in 1998 compared to approximately 4% in 1997.
INCOME TAXES. The Company did not have any income taxes payable for the
year ended December 31, 1998, due to the availability of its loss carryforwards.
The income tax credit for the year ended December 31, 1997 was due to
availability of an income tax carryback refund.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company supplied cash from operations of $937,900 in 1999, compared
to utilizing cash from operations of $681,675 in 1998 and had a cash and cash
equivalents balance of $750,351 at December 31, 1999, which was an increase of
$424,126 from the balance of $326,225 at December 31, 1998. Current assets
increased to $1,889,817 in 1999 compared to $788,850 in 1998. Current
liabilities decreased to $1,242,433 for 1999 compared to $1,572,037 for 1998.
Net working capital increased to $647,384 in 1999, compared to a deficit of
$(783,187) in 1998.
In 1999, the Company generated an operating profit of $793,659 compared
to a modest operating profit of $38,193 in 1998. The Company also obtained cash
from the sale of a 3% and a 9% interest in The Outdoor Channel, and recognized
gains on such sales of $408,860 and $903,423 in 1999 and 1998, respectively.
In December 1997, the Company instituted a plan to make The Outdoor
Channel self supporting. From December 1997 through March 1999, The Outdoor
Channel financed its activities with its cash flow from operations and outside
investor funds. The Outdoor Channel private placement raised $617,502 from
January 1, 1999 through its closing on March 5, 1999. From April 1999 through
the present, The Outdoor Channel has financed its activities primarily from cash
flow from operations and to a lesser degree equipment and improvement financing.
As of December 31, 1999, The Outdoor Channel owed the Company approximately
$724,801.
As of December 31, 1999, the Company had a note in the amount of
$648,000 payable to a bank outstanding at interest rate of 11.625%. This note is
secured by substantially all of the Company's assets and is personally
guaranteed by Perry T. Massie, Thomas H. Massie and Wilma M. Massie.
As of December 31, 1999, the Company had four notes payable to
unaffiliated individuals, with balances outstanding as of that date of $42,466,
$59,438, $92,180 and $45,191. The notes bear interest rates that range from 7.5%
to 9.5% and are due in August 2000, April 2000, December 2000 and January 2000,
respectively.
As of March 2000, the Company is generating sufficient cash flow from
operations to meet its short- term cash flow requirements. The Outdoor Channel
is generating cash flow in excess of its short-term cash flow requirements and
is continuing the trend of increased revenues. Management believes that the
Company's existing cash resources and anticipated cash flows from operations
will be sufficient to fund the Company's operations at current levels and
anticipated increased levels through January 1, 2001. To the extent that such
amounts are 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 stockholders as a result of any such financing. At the
current level of operations, the Company is retiring some existing debt, has
made substantial improvements at its Stanton Camp in 1999 and is planning modest
improvements to its other properties. The Outdoor Channel commenced retiring
some of its debt with the Company in 1999 and it is anticipated that a
significant portion of that debt will be retired in 2000. The Company intends to
utilize such funds to be in a position to retire portions of its bank loan and
make Lost Dutchman's and GPAA acquisitions and improvements.
ITEM.7 FINANCIAL STATEMENTS
Following are consolidated financial statements of the registrant for
the years ended December 31, 1999 and 1998.
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GLOBAL OUTDOORS, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
WITH
INDEPENDENT AUDITORS' REPORTS THEREON
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GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
I N D E X
---------
PAGE
----
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 23
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998 24
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999 AND 1998 25
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED DECEMBER 31, 1999 AND 1998 26
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998 27/28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 29/47
* * *
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Stockholders and Board of Directors
Global Outdoors, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of GLOBAL OUTDOORS,
INC. AND SUBSIDIARIES as of December 31, 1999 and 1998, and the related
consolidated statements of income, stockholders' equity (deficiency) and cash
flows for the years then ended. 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 audits.
We conducted our audits 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 audits provide 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, 1999 and 1998, and their results of
operations and cash flows for the years then ended, in conformity with generally
accepted accounting principles.
/S/ J.H. COHN LLP
San Diego, California
February 15, 2000, except for note 5
which is as of March 28, 2000
-23-
<PAGE>
<TABLE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<CAPTION>
1999 1998
ASSETS ------------ ------------
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 750,351 $ 326,225
Accounts receivable, net of allowance for doubtful
accounts of $57,766 and $54,766 965,371 405,350
Inventories 54,810 45,454
Income tax refund receivable 1,549
Deferred tax assets, net 86,550
Receivable from stockholders 17,700 8,850
Other current assets 15,035 1,422
------------ ------------
Total current assets 1,889,817 788,850
------------ ------------
Property, plant and equipment, net:
Membership recreational mining properties 1,352,373 1,025,850
Alaska recreational mining properties 1,338,988 1,355,161
Outdoor Channel equipment and improvements 505,063 263,769
Other equipment and leasehold improvements 328,226 168,189
------------ ------------
Property, plant and equipment, net 3,524,650 2,812,969
------------ ------------
Trademark, net of accumulated amortization of $42,777 and $28,196 175,946 188,471
Deferred tax assets, net 1,000,000
Deposits and other assets 89,062 42,200
------------ ------------
Totals $ 6,679,475 $3,832,490
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
-------------------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 711,646 $ 571,229
Current portion of notes and capital lease obligations payable 528,851 999,038
Current portion of stockholder loans 1,936 1,770
------------ ------------
Total current liabilities 1,242,433 1,572,037
Stockholder loans, net of current portion 435,700 462,637
Other notes and capital lease obligations payable, net of current portion 661,237 339,217
Deferred revenue 1,818,468 1,431,823
Deferred satellite rent obligations 624,700 474,920
Deferred compensation 300,751 260,000
------------ ------------
Total liabilities 5,083,289 4,540,634
------------ ------------
Commitments and contingencies
Minority interest in subsidiary 390,526 40,102
------------ ------------
Stockholders' equity (deficiency):
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;
5,266,073 and 5,253,937 shares issued and outstanding 105,283 105,041
Less common stock subscriptions receivable (221,250) (221,250)
Additional paid-in capital 3,336,233 3,289,815
Accumulated deficit (2,014,667) (3,921,913)
------------ ------------
Total stockholders' equity (deficiency) 1,205,660 (748,246)
------------ ------------
Totals $ 6,679,475 $ 3,832,490
============ ============
</TABLE>
See Notes To Consolidated Financial Statements
-24-
<PAGE>
<TABLE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999 AND 1998
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Revenues:
Advertising $ 4,273,581 $ 2,213,660
Subscriber fees 1,317,340 124,434
Membership services 2,611,605 3,577,522
Trips and outings 773,916 770,297
------------ ------------
Total revenues 8,976,442 6,685,913
------------ ------------
Expenses:
Satellite transmission fees 2,062,403 2,278,956
Advertising and programming 450,672 274,237
Trips and outings 483,967 516,283
Selling, general and administrative 5,185,741 3,578,244
------------ ------------
Total expenses 8,182,783 6,647,720
------------ ------------
Income from operations 793,659 38,193
Other income (expense):
Gain on sale of common stock of subsidiary 408,860 903,423
Interest expense (218,894) (246,503)
Interest income
27,125 28,988
------------ ------------
Income before credit for income taxes
and minority interest 1,010,750 724,101
Credit for Federal income taxes 1,086,550 --
------------ ------------
Income before minority interest 2,097,300 724,101
Minority interest in net (income) loss of consolidated subsidiary (165,782) 99,815
------------ ------------
Net income $ 1,931,518 $ 823,916
============ ============
Earnings per common share:
Basic $ .37 $ .18
============ ============
Diluted $ .35 $ .15
============ ============
Weighted average number of common shares outstanding:
Basic 5,260,612 4,457,593
============ ============
Diluted 5,501,487 5,541,768
============ ============
</TABLE>
See Notes To Consolidated Financial Statements
-25-
<PAGE>
<TABLE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED DECEMBER 31, 1999 AND 1998
<CAPTION>
Less
Common
Convertible Stock Additional
Preferred Stock Common Stock Subscriptions Paid-in Accumulated
Shares Amount Shares Amount Receivable Capital Deficit Total
--------- --------- --------- --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1998 60,675 $ 61 4,248,561 $ 84,933 $ (221,250) $ 3,292,419 $(4,745,829) $(1,589,666)
Common stock
issued in
connection with
"Earn Out" formula 1,000,000 20,000 (20,000)
Common stock
issued for services 5,376 108 21,396 21,504
Return of funds to
investors (4,000) (4,000)
Net income 823,916 823,916
--------- --------- --------- --------- ------------ ------------ ------------ ------------
Balance, December 31,
1998 60,675 61 5,253,937 105,041 (221,250) 3,289,815 (3,921,913) (748,246)
Common stock issued as
dividend on preferred stock 12,136 242 24,030 (24,272)
Common stock options
issued for services 22,388 22,388
Net income 1,931,518 1,931,518
--------- --------- --------- --------- ------------ ------------ ------------ ------------
Balance, December 31,
1999 60,675 $ 61 5,266,073 $ 105,283 $ (221,250) $ 3,336,233 $(2,014,667) $ 1,205,660
========= ========= ========= ========= ============ ============ ============ ============
</TABLE>
See Notes To Consolidated Financial Statements
-26-
<PAGE>
<TABLE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Operating activities:
Net income $ 1,931,518 $ 823,916
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 257,182 237,850
Provision for doubtful accounts 3,000 5,808
Common stock issued for services 21,504
Common stock options granted for services 22,388
Rent expense paid through offsets against
stockholder note receivable 40,206
Deferred tax credit (1,086,550)
Interest on stock subscription receivable (8,850) (8,850)
Gains on sale of subsidiary stock to the public:
Shares sold by the subsidiary (261,961) (903,423)
Shares sold by the Company (146,899)
Minority interest in net income (loss) of consolidated subsidiary 165,782 (99,815)
Cash supplied (used) by changes in operating assets
and liabilities:
Accounts receivable (563,021) (252,089)
Inventories (9,356) 60,281
Other current assets (13,613) 17,686
Income tax refund receivable 1,549 308,666
Deposits and other assets (46,862) (8,200)
Accounts payable and accrued expenses 116,417 (433,923)
Deferred revenue 386,645 (783,292)
Deferred satellite rent obligations 149,780 191,658
Deferred compensation 40,751 100,342
------------ ------------
Net cash provided by (used in) operating activities 937,900 (681,675)
------------ ------------
Investing activities:
Purchases of property, plant and equipment (954,282) (174,809)
Expenditures for trademarks (2,056) (2,529)
Net proceeds from sale of investment in subsidiary 308,751
------------ ------------
Net cash used in investing activities (647,587) (177,338)
------------ ------------
Financing activities:
Principal payments on long-term debt and capital leases (148,167) (295,738)
Net proceeds from (payments of) stockholder loans (26,771) 108,608
Return of funds to investors (4,000)
Net proceeds from sale of subsidiary stock to the public 308,751 1,003,000
------------ ------------
Net cash provided by financing activities 133,813 811,870
------------ ------------
Net increase (decrease) in cash and cash equivalents 424,126 (47,143)
Cash and cash equivalents, beginning of year 326,225 373,368
------------ ------------
Cash and cash equivalents, end of year $ 750,351 $ 326,225
============ ============
</TABLE>
-27-
<PAGE>
<TABLE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONCLUDED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Supplemental disclosures of cash flow information - interest paid $ 311,825 $ 310,031
============ ============
Supplemental disclosures of noncash investing and
financing activities - acquisition of equipment under capital
lease obligations $ 201,644 $ 64,197
============ ============
</TABLE>
See Notes To Consolidated Financial Statements
-28-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and business:
Description of operations:
Global Outdoors, Inc. ("Global Outdoors") was incorporated
under the laws of the State of Alaska on October 22, 1984.
Global Outdoors receives revenues from the sale of
memberships in The Gold Prospectors Association of America,
Inc. ("GPAA"), from advertisements in its bi-monthly
magazine, THE GOLD PROSPECTOR, from merchandise sales and
from sponsored outings to prospect for gold. GPAA also
operates gold prospecting trade shows and conventions from
which it derives revenue from admissions and booth rentals
and sells recreational gold prospecting-related merchandise.
Other business activities of Global Outdoors consist of the
promotion and sale of an "Alaska trip", a recreational gold
mining expedition to the Cripple River property located near
Nome, Alaska, and the sale of memberships in the Lost
Dutchman's Association, Inc. ("LDMA-AU") which entitle
members to engage in recreational prospecting on its
California, Oregon, Alaska, Nevada, Arizona, Colorado,
Georgia, North Carolina and South Carolina properties. Global
Outdoors has also signed an agreement with another
organization for the mutual use of recreational mining
properties.
Global Outdoors also owns a majority interest (84% and 88% at
December 31, 1999 and 1998, respectively) in the Outdoor
Channel, Inc. (the "Outdoor Channel"), a national television
network devoted to traditional outdoor activities, such as
hunting, fishing, shooting sports, rodeo and recreational
gold prospecting. The Outdoor Channel was incorporated under
the laws of the State of Nevada in 1990 under the name Gold
News Network, Inc. In 1996, the incorporated name was changed
to its present name.
Note 2 - Summary of significant accounting policies:
Principles of consolidation:
The consolidated financial statements include the accounts of
Global Outdoors, LDMA-AU, GPAA and the Outdoor Channel
(collectively, the "Company"). All material intercompany
accounts and transactions have been eliminated in
consolidation.
Use of estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect reported
amounts and disclosures. Accordingly, actual results could
materially differ from those estimates.
-29-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Summary of significant accounting policies (continued):
Inventories:
Inventories are stated at the lower of cost or market. Cost
is determined using the first-in, first-out ("FIFO") method.
Depreciation and amortization:
Depreciation and amortization of costs of property and
equipment are provided using the straight-line method over
the estimated useful lives of the assets which range from
five to 15 years.
Trademarks:
The Outdoor Channel has the exclusive right to the trademark
bearing its name. The costs of acquiring the trademark are
being amortized on a straight-line basis over an estimated
useful life of 15 years.
Advertising:
The Company expenses the cost of advertising and promotions
as incurred. Advertising costs charged to operations totaled
$450,672 and $274,237 in 1999 and 1998, respectively.
Revenue recognition:
The Company generates revenues from membership sales, sales
of television advertising time, Alaska trips, gold shows and
member and prospective member outings.
LDMA-AU memberships are contractual arrangements that provide
members with recreational prospecting and mineral rights and
the use of land and facilities for camping and recreational
vehicle parking. LDMA-AU memberships sold by the Company
generally have payment terms that provide for a down payment
and monthly installments and are non-interest bearing and
unsecured. Revenues are generally recognized on a
straight-line basis over the estimated average life of the
LDMA-AU membership. The Company does not record any
receivables arising under these contracts due to the
uncertainty of collection. Accordingly, revenues recognized
do not exceed the total of the cash payments received and
cash received in excess of revenue earned is recorded as
deferred revenue. During 1998, based on a review of
membership turnover, the Company changed its estimate of the
average life of the LDMA-AU memberships from ten years to
seven years. Management believes this term more accurately
reflects the economics of the business and provides a better
measure of operating results.
The Company also sells one to four year and lifetime ("Gold
Life") GPAA memberships. The majority of the memberships are
for one year. Multi-year GPAA membership revenues are
recognized on a straight-line basis over the life of a
membership or an estimated life of 15 years for a lifetime
membership.
-30-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Summary of significant accounting policies (continued):
Revenue recognition (concluded):
Advertising revenues for the Outdoor Channel are recognized
based on when the advertisement is aired. Advertising
revenues from advertisements in the Company's bi-monthly
magazine is recognized when the magazine is distributed.
Revenues from the "Alaska trip" are recognized when trips are
taken in June through August each year. Revenues from outings
and gold shows are recognized at the time of the event.
Income taxes:
The Company accounts for income taxes pursuant to the asset
and liability method which requires deferred income tax
assets and liabilities to be computed annually for temporary
differences between the financial statement and tax bases of
assets and liabilities that will result in taxable or
deductible amounts in the future based on enacted laws and
rates applicable to the periods in which the temporary
differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred
tax assets to the amounts expected to be realized. The income
tax provision or credit is the tax payable or refundable for
the period plus or minus the change during the period in
deferred tax assets and liabilities.
Impairment of long-lived assets:
The Company has adopted the provisions of Statement of
Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" ("SFAS 121"). Under SFAS 121, the impairment
of long-lived assets, such as property and equipment and
intangible assets, is recognized when events or changes in
circumstances indicate that the undiscounted cash flows
estimated to be generated by such assets are less than their
carrying value and, accordingly, all or a portion of such
carrying value may not be recoverable. Impairment losses are
then measured by comparing the fair value of assets to their
carrying amounts. The Company did not record any charges for
the impairment of long-lived assets in 1999 and 1998.
Earnings per share:
The Company has presented "basic" earnings per common share
in the accompanying consolidated statements of income in
accordance with the provisions of Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS
128"). Basic earnings per common share is calculated by
dividing net income applicable to common stock by the
weighted average number of common shares outstanding during
each period. The calculation of diluted earnings per common
share is similar to that of basic earnings per common share,
except that the denominator is increased to include the
number of additional common shares that would have been
outstanding if all potentially dilutive common shares, such
as those that could be issued upon the exercise of stock
options and warrants and the conversion of preferred stock,
were issued during the period.
-31-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Summary of significant accounting policies (continued):
Earnings per share (concluded):
For the purpose of computing diluted earnings per common
share for 1998, the additional 1,000,000 "Earn Out Shares"
issued to the former stockholders of GPAA effective December
31, 1998 as a result of the resolution of an acquisition
contingency (see Note 8) have been included in the weighted
average number of common shares outstanding for the entire
year. In addition, the computation of diluted earnings per
share for 1999 and 1998 takes into account the effects on the
weighted average number of common shares outstanding of the
assumed exercise of all of the Company's outstanding stock
options and warrants, adjusted for the application of the
treasury stock method, and the conversion of all of the
Company's outstanding shares of preferred stock.
The following table reconciles the calculation of basic
earnings per share to diluted earnings per share in 1999 and
1998:
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
Earnings Earnings
Per Per
Shares Share Shares Share
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding and basic
earnings per common share 5,260,612 $ .37 4,457,593 $ .18
===== ======
Dilutive effect of potential common shares issued in
connection with earn out contingency (Note 8) 1,000,000
Dilutive effect of potential common shares issuable
upon conversion of preferred stock 60,675 60,675
Dilutive effect of potential common shares issuable
upon exercise of stock options and warrants,
as adjusted for the application of the treasury
stock method 180,200 23,500
--------- ----------
Diluted weighted average common shares
outstanding and diluted earnings per
common share 5,501,487 $ .35 5,541,768 $ .15
========= ====== ========== ======
</TABLE>
Stock-based compensation:
Statement of Financial Accounting Standards No. 123 ("SFAS
123"), "Accounting for Stock-Based Compensation", provides
for the use of 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 value
method of accounting prescribed by Accounting Principles
Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued
to Employees". Entities electing to continue to use the
intrinsic value method must make pro forma disclosures of net
income or loss and earnings or loss per share as if a fair
value method of accounting had been applied. The Company has
elected to continue to account for its stock-based
compensation to employees under APB 25.
-32-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Summary of significant accounting policies (concluded):
Recent accounting pronouncements:
The Financial Accounting Standards Board and the Accounting
Standards Executive Committee of the American Institute of
Certified Public Accountants had issued certain accounting
pronouncements as of December 31, 1999 that will become
effective in subsequent periods; however, management of the
Company does not believe that any of those pronouncements
would have significantly affected the Company's financial
accounting measurements or disclosures had they been in
effect during 1999 and 1998.
Limitation on dividends:
Pursuant to state laws, the Company is currently restricted,
and may be restricted for the forseeable future, from paying
dividends to its stockholders as a result of its accumulated
deficit as of December 31, 1999.
Reclassifications:
Certain amounts in the 1998 consolidated financial
statements have been reclassified to conform to the 1999
presentations.
-33-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Deferred revenues:
As of December 31, 1999, scheduled payments to be recognized as
income, assuming such amounts are collected in future years from
existing LDMA-AU sales contracts, are as follows:
Year Ending
December 31, Amount
------------ -----------
2000 $1,140,491
2001 1,248,765
2002 1,080,214
2003 749,632
2004 430,482
Thereafter 400,077
-----------
Total $5,049,661
===========
<TABLE>
<CAPTION>
Note 4 - Equipment and improvements:
Equipment and improvements at December 31, 1999 and 1998 consist
of the following:
1999 1998
------------- -------------
<S> <C> <C>
Membership recreational mining properties:
Land $ 926,378 $ 926,378
Equipment 18,463
Buildings and improvements 488,471 174,455
------------- -------------
1,433,312 1,110,833
Less accumulated depreciation and amortization (80,939) (74,983)
------------- -------------
Subtotals 1,352,373 1,025,850
------------- -------------
Alaska recreational mining properties:
Land 1,129,773 1,129,773
Buildings and improvements 479,076 531,566
Vehicles and equipment 971,923 843,522
------------- -------------
2,580,772 2,504,861
Less accumulated depreciation and amortization (1,241,784) (1,149,700)
------------- -------------
Subtotals 1,338,988 1,355,161
------------- -------------
Outdoor Channel:
Equipment 834,897 492,520
Furniture and fixtures 80,122 67,551
Leasehold improvements 38,301 25,626
------------- -------------
953,320 585,697
Less accumulated depreciation and amortization (448,257) (321,928)
------------- -------------
Subtotals 505,063 263,769
------------- -------------
</TABLE>
-34-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Equipment and improvements (concluded):
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Other equipment and leasehold improvements:
Furniture and fixtures 13,765 11,625
Equipment 347,210 229,230
Vehicles 167,983 150,283
Leasehold improvements 47,026 6,578
------------- -------------
575,984 397,716
Less accumulated depreciation and amortization (247,758) (229,527)
------------- -------------
Subtotals 328,226 168,189
------------- -------------
Totals $ 3,524,650 $ 2,812,969
============= =============
</TABLE>
<TABLE>
<CAPTION>
Note 5 - Long-term debt:
Long-term debt (including capital lease obligations) at December
31, 1999 and 1998 consists of the following:
1999 1998
------------ ------------
<S> <C> <C>
Note payable to a bank, secured by substantially all of the
Company's assets, guaranteed by three major
stockholders, with interest due monthly at the prime
rate plus 3.125% (an effective rate of 11.625% and
10.875% at December 31, 1999 and 1998,
respectively), due January 10, 2000 (A) $ 652,394 $ 648,000
Notes payable to individuals, secured by deed of trust,
payable in monthly installments of $811 including
interest at 8.5%, balance due December 2000 92,180 93,926
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 2000 42,466 56,523
Note payable to an individual, secured by first deed of
trust on land, payable in monthly installments of $900
including interest at 9%, balance due April 2000 59,438 66,260
Note payable to individuals, secured by first deed of trust
on land, payable in annual installments of $50,000
beginning in 1997, with interest at 7.5%,
balance due January 2000 45,191 95,191
Note payable to the major stockholder, secured by
a motor home, payable at $520 per month
including interest at 9% 48,608 50,378
Note payable to two major stockholders, due on
demand, maturing December 31, 2002, with
interest at 10% 389,029 414,029
Note payable to a finance company, secured by a
vehicle, payable in monthly installments of $564
including interest at 10.3% 8,549 14,430
Note payable to a finance company secured by a
trailer, payable in monthly installments of $354
including interest at 9% 11,672
</TABLE>
-35-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Note 5 - Long-term debt (concluded):
Long-term debt (including capital lease obligations) at December
31, 1999 and 1998 consists of the following (concluded):
1999 1998
------------ ------------
<S> <C> <C>
Installment note payable to a bank, secured by
substantially all of the Company's assets, guaranteed by
three major stockholders, paid in full, October 1999 $ 112,500
Installment note payable to a bank, paid in full in
December 1999 72,637
Note payable to a vendor, payable in annual installments
of $2,000 $ 4,000
------------ ------------
Total notes payable 1,353,527 1,623,874
Capital lease obligations (see Note 6) 274,197 178,788
------------ ------------
Totals 1,627,724 1,802,662
Less current maturities 530,787 1,000,808
------------ ------------
Long-term debt $ 1,096,937 $ 801,854
============ ============
(A) On March 28, 2000, the Company and the bank agreed to
restructure the debt. Under the new terms, $269,600 of the
balance at December 31, 1999 is due in 2000 with the remainder
due on various dates through 2005. Accordingly, a total of
$383,794 has been included in long-term debt at December 31,
1999.
</TABLE>
The aggregate principal payments of long-term notes and capital
lease obligations in years subsequent to December 31, 1999 (as
adjusted for the effects of the restructuring of the note payable
on March 28, 2000) are as follows:
Year Ending
December 31, Amount
------------ -----------
2000 $ 530,787
2001 341,029
2002 327,838
2003 125,707
2004 103,965
Thereafter 198,398
-----------
Total $1,627,724
===========
Interest expense on stockholder loans aggregated $45,866 and
$54,184 in 1999 and 1998, respectively.
-36-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - Commitments and contingencies:
Operating leases:
The Company leases facilities and equipment, including access
to satellites for television transmission, under
non-cancelable operating leases that expire at various dates
through 2010. Generally, the most significant leases are
satellite leases that require escalating rental payments.
Rent expense is recognized on a straight-line basis over each
lease term. The excess of the expense accrued over the
amounts currently payable is reflected as deferred satellite
rent obligations in the accompanying consolidated balance
sheets.
The Company leases its office space from a stockholder under
a lease which required annual rental payments of $88,500 and
$99,000 during 1999 and 1998, respectively. The lease was
scheduled to expire on December 31, 2001. In February 2000,
the Company renegotiated certain provisions of the lease. As
a result, the Company will be leasing additional space, and
its monthly rental payments will increase from $12,250 per
month to $12,743 per month over the remainder of its term.
The lease will still expire on December 31, 2001.
Rent expense totaled $2,248,939 and $2,431,524, including the
charges for office rent under leases with related parties,
during 1999 and 1998, respectively.
Total rental commitments under the operating lease agreements
(including rentals under the terms of the amended office
lease) described above for years ending subsequent to
December 31, 1999 are as follows:
Year Ending
December 31, Amount
------------ -------------
2000 $ 2,137,472
2001 2,142,028
2002 1,992,145
2003 1,982,636
2004 1,840,000
Thereafter 9,390,000
-------------
Total $ 19,484,281
=============
-37-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - Commitments and contingencies (concluded):
Capital leases:
The Company leases certain equipment under capital leases
which expire on various dates through 2004. At December 31,
1999, the Company's future minimum lease payments are as
follows:
Year Ending
December 31, Amount
------------ ----------
2000 $ 131,792
2001 76,791
2002 61,281
2003 43,159
2004 25,474
----------
338,497
Less amount representing interest at rates
ranging from 11% to 21.7% (64,300)
----------
Present value of minimum lease payments 274,197
Less current portion (104,953)
----------
Long-term portion $ 169,244
==========
The current and long-term portions of capital lease
obligations are included in notes and capital lease
obligations in the accompanying consolidated balance sheets
(see Note 5).
Note 7 - Income taxes:
The credit for income taxes of $1,086,550 included in the
accompanying 1999 consolidated statement of income was comprised
of a deferred credit for Federal income taxes. The Company had no
provision or credit for income taxes in 1998.
The tax effects of the temporary differences that give rise to
significant portions of the deferred tax assets and liabilities
are presented below:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $1,103,900 $1,288,300
Cash basis of accounting for income taxes 595,450 588,900
Bad debts 15,500 14,500
----------- -----------
1,714,850 1,891,700
Less valuation allowance (571,200) (1,856,500)
----------- -----------
Deferred tax assets, net of valuation allowance 1,143,650 35,200
Deferred tax liabilities - depreciation (57,100) (35,200)
----------- -----------
Deferred tax assets, net $1,086,550 $ -
=========== ===========
</TABLE>
-38-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7 - Income taxes (concluded):
As of December 31, 1999 and 1998, the Company had available
Federal net operating loss carryforwards of approximately
$3,247,000 and $3,789,000, respectively, and state net operating
loss carryforwards of approximately $1,624,000 and $1,895,000,
respectively. The net operating loss carryforwards available as
of December 31, 1999 expire in 2013.
Due to the uncertainties related to, among other things, the
extent and timing of its future taxable income and its ability to
realize the potential benefits from the net operating loss
carryforwards, the Company had offset its deferred tax assets by
equivalent valuation allowances of $1,856,500 and $1,900,000 at
December 31, 1998 and 1997, respectively. Accordingly, although
the Company had pre-tax income in 1998, it did not recognize a
provision for income taxes as a result of the $43,500 decrease in
the valuation allowance.
During 1999, the Company was able to increase revenues
substantially, generate pre-tax income for financial statement
and tax reporting purposes and utilize a portion of its net
operating loss carryforwards as shown above. In addition,
management believes that it is more likely than not that the
Company will be able to generate sufficient future taxable income
to enable it to utilize all but approximately $571,000 of the
remaining net operating loss carryforwards available as of
December 31, 1999. Accordingly, the Company reduced its
valuation allowance by $1,086,550 and recognized a credit for
Federal income taxes in 1999.
The provision (credit) for income taxes reflected in the
accompanying consolidated statements of income are different than
those computed based on the applicable statutory Federal income
tax rate of 34% in 1999 and 1998 primarily as a result of the
changes in the valuation allowance as shown below:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Federal income tax provisions
at statutory income tax rate $ 198,750 $ 43,500
Effect of reduction in valuation allowance
based on pre-tax income or loss (198,750) (43,500)
Effect of reduction in valuation allowance for
recognition of future utilization of net
operating loss carryforwards (1,086,550)
------------ ------------
Credit for income taxes $(1,086,550) $ -
============ ============
</TABLE>
Note 8 - Equity transactions:
Convertible preferred stock:
Each share of preferred stock is convertible into one share of
common stock of the Company. Accordingly, at December 31, 1999
and 1998, there were 60,675 shares of the Company's common
stock reserved for issuance on the conversion of the
outstanding preferred shares.
Issuances of common stock by the Company:
During 1997, the Company sold 52,034 units at $8.00 per unit.
Each unit consisted 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, that were exercisable over the two-year period that
expired on January 31, 1999. All of the warrants expired
without being exercised.
-39-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Equity transactions (continued):
Issuances of common stock by the Company (concluded):
On February 10, 1995, the Company acquired 100% of the
outstanding common stock of GPAA in exchange for 2,500,000
shares of its common stock (the "Acquisition"). GPAA was 100%
owned at the date of the Acquisition by the majority
stockholders of the Company. Accordingly, the Acquisition was
accounted for in a manner similar to a pooling of interests in
1995 and the assets and liabilities of GPAA were recorded at
their historical carrying values. At the date of the
Acquisition, GPAA owned the Outdoor Channel and also generated
revenues from, among other activities, sales of memberships in
the gold prospecting club and sales of related merchandise.
The Acquisition agreement provided for the issuance of up to
an additional 1,500,000 shares of common stock (the "Earn Out
Shares") to the former stockholders of GPAA contingent upon
GPAA achieving certain earnings or valuation milestones
subsequent to its acquisition. During 1998, the Company issued
an additional 1,000,000 shares of its common stock to the
former stockholders of GPAA based on the results of an
appraisal, and its obligation to issue the remaining 500,000
shares terminated. Since the Acquisition had been accounted
for as the equivalent of a pooling of interests, the shares
were recorded at their par value of $20,000 and additional
paid-in capital was reduced by an equivalent amount.
During 1998, the Company issued 5,376 shares of its common
stock primarily for services rendered and recorded $21,504 as
expense for such services.
During 1998, the Company returned funds totaling $4,000 to
various investors in connection with a public offering
conducted during 1997 in compliance with state securities
laws.
During 1999, the Company issued 12,136 shares of common stock
to preferred stockholders as stock dividends.
Common stock subscriptions receivable by the Company:
On June 22, 1993, certain stockholders and other individuals
exercised stock options for the purchase of a total of 104,069
shares of common stock. In connection therewith, these
individuals issued promissory notes to the Company whereby
they are obligated to pay a total of $221,250, plus interest
at 4% per annum, on June 30, 1999. The due date for the
payment of these notes has been extended until June 30,
2001.
The Company's stock option plans:
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 (the "1995 Plan"). It also granted stock options
that are not covered under any of the stock option plans. A
summary of the status of the Company's three stock option
plans and the other options granted outside of the plan as of
December 31, 1999 and 1998 and changes during the years then
ended is presented in the table that follows:
-40-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Equity transactions (continued):
The Company's stock option plans (continued):
<TABLE>
<CAPTION>
1999 1998
---------------------- ---------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 415,000 $2.45 378,000 $2.42
Options granted (a)(b) 294,000 $3.24 50,000 $3.00
Options canceled or expired (a) (30,000) $3.00 (13,000) $3.83
--------- ---------
Options outstanding at end of year 679,000 $2.78 415,000 $2.45
========= =========
</TABLE>
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Option price range at end of year $2.25 - $4.00 $2.25 - $3.25
Options available for grant at end of year 221,000 485,000
Weighted average fair value of options
granted during the year $1.49 $.89
</TABLE>
(a) During 1999, the Company granted options to purchase 147,000
and 54,000 shares of common stock at exercise prices of $3.00
and $4.00, respectively, to various employees and directors of
the Company.
It also granted options to purchase 49,000 and 44,000 shares
of common stock at exercise prices of $3.00 and $3.50,
respectively, to various outside consultants. Compensation
expense of $22,388 associated with the options granted to
consultants was charged to operations. Of the options to
purchase 50,000 shares granted during 1998, options to
purchase 30,000 shares expired or were canceled during 1999.
(b) During 1998, the Company granted options to purchase 50,000
shares of common stock at an exercise price of $3.00 to an
executive of the Company.
-41-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Equity transactions (continued):
The Company's stock option plans (concluded):
The following table summarizes information about stock
options outstanding at December 31, 1999, all of which are at
fixed prices:
<TABLE>
<CAPTION>
Options Options
Outstanding Exercisable
------------------------ -----------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
-------- ----------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$2.25 - $2.50 350,000 3.5 years $2.33 350,000 $2.33
$3.00 - $3.25 231,000 4.1 years $3.31 231,000 $3.15
$3.50 - $4.00 98,000 4.5 years $3.80 98,000 $3.80
----------- ----------
679,000 679,000
=========== ==========
</TABLE>
Changes in outstanding Outdoor Channel common shares and shares
owned by the Company:
The changes in the number of outstanding common shares of the
Outdoor Channel and the changes in the number of shares and
the percentage owned by the Company during 1999 and 1998 are
summarized below:
<TABLE>
<CAPTION>
Outdoor
Channel
Common Owned by the Company
Shares ---------------------------
Outstanding Shares Percent
-------------- -------------- ----------
<S> <C> <C> <C>
Balance January 1, 1998 9,380,000 9,000,000 96%
=====
Effect of shares sold
through private placement
in 1998:
The Outdoor Channel (A) 877,000 -
-------------- --------------
Balance December 31, 1998 10,257,000 9,000,000 88%
=====
Effects of shares sold
through private placement
in 1999:
The Outdoor Channel (B) 182,084
The Company (B) (182,084)
-------------- --------------
Balance December 31, 1999 10,439,084 8,817,916 84%
============== ============== =====
</TABLE>
(A) During 1998, the Outdoor Channel sold 877,000 shares of its
common stock at prices ranging from $1.00 to $1.50 per share
pursuant to a private placement that was exempt from
registration under the Securities Act of 1933 and received
proceeds of $1,003,000.
(B) During 1999, both the Outdoor Channel and the Company sold
182,084 shares of Outdoor Channel common stock at prices
ranging from $1.50 to $2.00 per share pursuant to a private
placement that was exempt from registration under the
Securities Act of 1933 and each received proceeds of $308,751
from their respective sales.
-42-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Equity transactions (continued):
Changes in outstanding Outdoor Channel common shares and shares
owned by the Company:
The Company recognizes non-operating gains or losses from
sales of common stock by its subsidiaries directly to third
parties where the Company's ownership percentage in the
subsidiaries is reduced by the issuance of such stock and the
amount received per share is more or less than the Company's
carrying amount per share. The Company recorded gains from
sales of common stock by the Outdoor Channel of $261,961 in
1999 and $903,423 in 1998. It also recorded increases in
minority interests as a result of such sales of $46,790 and
$99,815 in 1999 and 1998, respectively. The Company also
recognized a gain of $146,899 on the shares of Outdoor
Channel common stock it sold through the private placement in
1999.
In connection with the private placement memorandum, the
Outdoor Channel authorized the issuance of 21,700 shares of
common stock valued at $33,200 (or $1.50 per share) as a
syndication fee and 16,000 shares valued at $24,000 (or $1.50
per share) as a bonus to two employees. As of December 31,
1999 and 1998, these shares had not been issued and
accordingly, the aggregate liability of $57,200 has been
included in accounts payable and accrued expenses in the
accompanying consolidated balance sheets.
The Outdoor Channel's stock option plans (continued):
During 1997, the Outdoor Channel established a stock option
plan (the "1997 Plan") under which it may grant incentive and
non-qualified stock options to its employees, directors,
consultants and service providers to purchase up to an
aggregate of 3,000,000 shares of its common stock at an
exercise price determined by the administrator subject to one
of the following: (a) the exercise price of an incentive
option shall not be less than 100% of the fair market value
of the common stock at the date of the grant; and (b) the
exercise price of a non-qualified option shall not be less
than 85% of the fair market value of the common stock at the
date of the grant.
A summary of the status of the Outdoor Channel's stock option
plan at December 31, 1999 and 1998 and changes during the
years then ended is presented in the table below:
<TABLE>
<CAPTION>
1999 1998
------------------------- ---------------------------
Weighted Weighted
Shares Average Shares Average
or Price Exercise or Price Exercise
Per Share Price Per Share Price
------------ -------- ------------ ---------
<S> <C> <C> <C> <C>
Options outstanding at beginning of year 2,300,000 $1.50 1,750,000 $1.50
Options granted 204,460 (a) $2.50 2,300,000 (b) $1.50
Options cancelled (3,000) $1.50 (1,750,000) (b) $1.50
------------ ------------
Options outstanding at end year 2,501,460 $1.55 2,300,000 $1.50
============ ============
Option price range at end of year $1.50-$2.50 $1.50
Options available for grant at end of year 548,540 750,000
Weighted average fair value of options
granted during the year $1.29 $1.21
</TABLE>
-43-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Equity transactions (continued):
The Outdoor Channel's stock option plan (concluded):
(a) On April 15, 1999, the Outdoor Channel granted options
for the purchase of 4,460 shares of common stock at an
exercise price of $2.00 per share to outside
consultants. The fair value of these options was
immaterial and, accordingly, there was no charge to
operations in 1999.
(b) On December 1, 1999, the terms of the options for the
purchase of 1,750,000 shares of common stock granted to
directors and executive officers in 1997 and 1998 were
modified to extend their expiration date to December
31, 2007. There was no charge to operations in 1998 as
a result of this modification of terms.
The following table summarizes information about the Outdoor
Channel's stock options outstanding at December 31, 1999, all
of which are at fixed prices:
<TABLE>
<CAPTION>
Options Options
Outstanding Exercisable
------------------------ -----------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
-------- ----------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$1.50 2,297,000 7.9 years $1.50 2,297,000 $1.50
$2.00 4,460 8.3 years $2.00 4,460 $2.00
$2.50 200,000 8.9 years $2.50 200,000 $2.50
----------- -----------
2,501,460 2,501,460
=========== ===========
</TABLE>
-44-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Equity transactions (concluded):
Additional required disclosures related to the stock option
plans of the Company and the Outdoor Channel:
The Company has adopted the disclosure-only provisions of SFAS
123. Accordingly, no earned or unearned compensation cost was
recognized in the accompanying consolidated financial
statements for the stock options granted by either the Company
or the Outdoor Channel to their employees. The Company's
historical net income and earnings per common share and pro
forma net income and earnings per share assuming compensation
cost had been determined in 1999 and 1998 based on the fair
value at the grant date for all awards by the Company and the
Outdoor Channel consistent with the provisions of SFAS 123 are
set forth below.
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Net income:
As reported $1,931,518 $ 823,916
Pro forma $1,152,720 $ 240,616
Basic earnings per share:
As reported $ .37 $ .18
Pro forma $ .22 $ .05
Diluted earnings per common share
As reported $ .35 $ .15
Pro forma $ .21 $ .04
</TABLE>
The fair value of each option granted by the Company and the
Outdoor Channel in 1999 and 1998 was estimated on the date of
grant using the Black-Scholes options pricing model with the
following assumptions:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Risk-free interest rate 6.3% 6.3%
Dividend yield 0% 0%
Expected life of the option (years): The Company 1-5 1-5
The Outdoor Channel 1-7 1-5
Volatility factor: The Company 46% 59%
The Outdoor Channel 60% 0%
</TABLE>
Note 9 - Related party transactions:
The Company has an agreement with a director, who is also one
of its officers, pursuant to which it is compensating the
officer at the rate of $10,000 per month for legal and certain
other services. A portion of the compensation has to be paid
each month in cash and the remainder is deferred. The deferred
portion may be paid by the Company in cash or shares of the
common stock of the Company and/or the Outdoor Channel at a
future date, subject to the mutual agreement of the Company
and the director. If they agree to payments in the form of
shares, such payments shall be based on the market value of
the shares at the time the services were rendered. Deferred
compensation under the agreement totaled $300,750 and $260,000
as of December 31, 1999 and 1998, respectively. If the parties
had agreed to the payment of the entire deferred compensation
balance in the form of shares at December 31, 1999, the
Company and the Outdoor Channel would have been required to
issue 131,226 and 47,861 shares, respectively, to satisfy
their obligations to the director as of that date.
-45-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 - Segment information:
During 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 131, Disclosures about
Segments of an Enterprise and Related Information ("SFAS 131").
Pursuant to the provisions of SFAS 131, the Company is
reporting segment information in the same format reviewed by
the Company's management (the "management approach"). The
Company segregates its business activities into the major areas
that generate revenues. LDMA-AU and GPAA membership sales and
related activities are reported separately as they deal with
recreational prospecting and rights to use land and facilities
for camping and recreational vehicle parking. Trips and outings
constitute another business activity of the Company whereby
members can participate in a group prospecting activity at a
Company site, usually lasting for a week or less. The annual
Alaska trip, included in this category, allows members to
travel to the Company's Alaska property from one to six weeks
to participate in prospecting activities. The Outdoor Channel
is a separate business activity whereby the subsidiary
broadcasts television programming on "The Outdoor Channel" 24
hours a day, seven days a week, and recognizes advertising and
subscription revenues.
Information with respect to these reportable business segments
for the years ended December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Income (Loss) Depreciation Additions to
Before Total and Property, Plant
Revenues Income Taxes Assets Amortization and Improvements
-------- ------------ ------ ------------ ----------------
1999
- ----
<S> <C> <C> <C> <C> <C>
Trips and Outings $ 773,916 $ 174,131 $ 1,338,988 $ 83,544 $ 75,911
The Outdoor Channel 5,300,002 606,968 2,389,463 133,772 367,623
Membership sales
of recreational
prospecting and
mineral rights and
merchandise sales 2,902,524 229,651 2,951,024 39,866 510,748
------------ ------------ ------------ ------------ ------------
Totals $ 8,976,442 $ 1,010,750 $ 6,679,475 $ 257,182 $ 954,282
============ ============ ============ ============ ============
1998
- ----
Trips and Outings $ 770,617 $ 170,991 $ 1,452,640 $ 83,540 $ 70,085
The Outdoor Channel 2,533,315 (1,228,524) 960,138 105,373 44,302
Membership sales
of recreational
prospecting and
mineral rights and
merchandise sales 3,381,981 1,781,634 1,419,712 48,937 60,422
------------ ------------ ------------ ------------ ------------
Totals $ 6,685,913 $ 724,101 $ 3,832,490 $ 237,850 $ 174,809
============ ============ ============ ============ ============
</TABLE>
-46-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 - Fair value of financial instruments:
The Company's financial instruments consist of its cash and cash
equivalents, accounts receivable, accounts payable, long-term
debt, capital lease obligations and related party receivables
and payables. The carrying amounts of the Company's financial
instruments generally approximated their fair values at December
31, 1999 and 1998. The fair market value of financial
instruments classified as current assets or liabilities
approximated their carrying value due to the short-term maturity
of the instruments. It is not practicable to obtain the fair
value of the Company's related party receivables and payables,
as market comparable information is not available for such
instruments.
Note 12 - Contingencies:
Concentrations of credit risk:
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of
temporary cash investments and accounts receivable. The
Company reduces credit risk by placing its temporary cash
investments (which, at times, may exceed Federal insurance
limits) with major financial institutions with high credit
ratings. At December 31, 1999, the Company had cash balances
that exceeded Federal insured limits by approximately
$550,000.
The Company reduces credit risk related to accounts
receivable by routinely assessing the financial strength of
its customers and maintaining an allowance for doubtful
accounts that management believes will adequately provide for
credit losses.
Major customers:
During 1999, two customers generated approximately 27% and
17% of the Outdoor Channel's total revenues. During 1998, one
customer generated approximately 17% of the Outdoor Channel's
total revenues.
* * *
-47-
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
The directors, executive officers and key employees of the Company are
as follows:
Name Age Position
---- --- --------
Perry T. Massie 37 Chief Executive Officer, President,
Chairman of the Board, Co-President
and Chairman of the Board of The
Outdoor Channel
Thomas H. Massie 35 Executive Vice President, Secretary
and Vice Chairman of the Board
Richard K. Dickson II 54 Chief Operating Officer, General
Counsel and Director
Andrew J. Dale 45 Chief Executive Officer and
Co-President of The Outdoor Channel
Jacob J. Hartwick 46 Executive Vice President of The
Outdoor Channel
Wade E. Sherman 29 Vice President of Business
Development of The Outdoor Channel
Ronald D. Ward 41 Controller
Amy L. Hendrickson 29 Vice President of Affiliate Sales and
Marketing of The Outdoor Channel
The term of each director will expire at the 2000 annual meeting of
stockholders and when a successor is elected and qualified or upon his earlier
death, resignation or removal. Officers serve at the discretion of the Board of
Directors.
PERRY T. MASSIE has served as Chief Executive Officer of the Company
since 1986, has served as President and Chairman of the Board since 1994. From
1986 until January 1996, Mr. Massie served as Chief Financial Officer of the
Company. He has been the Managing Editor of the Gold Prospector Magazine since
1988. Mr. Massie earned a Bachelor of Science degree in Mining Engineering from
the University of Alaska, Fairbanks. Perry T. Massie is the brother of Thomas H.
Massie.
THOMAS H. MASSIE has served as Secretary and a director of the Company
since 1984. He has served as Executive Vice President of the Company and the
President of Gold Prospectors' Association of America, Inc. since 1994 and Vice
Chairman since 1999. Mr. Massie is also the host of the "Gold Fever Show." He
attended the University of Alaska, Fairbanks, studying business administration.
Thomas H. Massie is the brother of Perry T. Massie.
RICHARD K. DICKSON II has served as Chief Operating Officer since April
1999 and has served as General Counsel and a director of the Company since 1994.
From 1994 to April 1999 he was Senior Vice President of the Company. From
-48-
<PAGE>
November 1984 until 1994, Mr. Dickson served as the Company's corporate counsel
and has been a practicing attorney, specializing in corporate and securities
law, with his own firm since 1979. Mr. Dickson served as an attorney with the
California Department of Corporations from 1976 to 1979. He earned a Bachelor of
Science degree in Business Administration from the University of California at
Berkeley, a Masters in Business Administration from the University of Southern
California and a law degree from the University of the Pacific.
ANDREW J. DALE has served as Chief Executive Officer and Co-President
since September 1998 and was President from November 1997 to September 1998. He
was Chief Operating Officer of The Outdoor Channel from November 1997 to
September 1998. From 1994 to November 1997 he was Senior Vice President
Operations of The Outdoor Channel. From 1990 to 1993, he was a video and
television consultant to both Global Outdoors, Inc. and The Outdoor Channel.
From 1989 to 1994, Mr. Dale was a production manager at Vidfilm Services, a
major Hollywood post-production facility, whose clients include Disney, MCA,
Columbia and a host of other major studios. Mr. Dale was born and raised in the
United Kingdom.
JACOB J. HARTWICK has served as Executive Vice President of The Outdoor
Channel since November 1997. From 1994 through 1999, he was Vice President of
Sales and Promotions of the Company. From 1994 to November 1997, Mr. Hartwick
was Vice President Sales and Promotions of The Outdoor Channel. From 1991 to
1994, he served as a Vice President of the Company. From 1986 through 1991, Mr.
Hartwick served in various sales, marketing and administrative positions with
Global Outdoors and its subsidiaries.
WADE E. SHERMAN has been Vice President of Business Development of The
Outdoor Channel since November 1997. In February 1996, he was hired by The
Outdoor Channel as an Advertising Sales Representative and was promoted to
Director of Advertising Sales in July 1996. From April 1995 to February 1996,
Mr. Sherman was an Advertising Sales Representative for Comcast Cablevision.
From May 1994 to April 1995, he worked at radio station KMNY, as a news anchor
and an advertising sales representative. From 1993 to April 1994, he worked
part-time at radio station KMNY. He earned a B.S. Degree in Television/Film from
California State University at Fullerton.
RONALD D. WARD has served as the Controller of the Company since August
1998. From 1994 to August 1998, he was an independent consultant advising
clients on a variety of accounting and financial matters. From 1978 to 1994, Mr.
Ward was employed by Southern Distributors Corporation, a multi-state building
materials distributor with annual sales of $70 million. From 1993 to 1994, he
was Vice President of Finance and Controller of that company supervising a staff
of twelve. Mr. Ward earned a B.A. degree in Accounting from California State
University at Fullerton.
AMY L. HENDRICKSON has been Vice President Affiliate Sales and
Marketing of The Outdoor Channel since December 1999. From July 1998 to December
1999, she served as Director of Affiliate Sales and Marketing for the Channel.
From 1997 to July 1998, Ms. Hendrickson worked in the national sales department
of a broadcast station owned by Cox Communications. From 1994 to 1997, she was a
Traffic Manager for a pair of broadcast stations owned by Clear Channel
Communications. Ms. Hendrickson is an active member of the Cable Television
Administration and Marketing Society and Women in Cable and Telecommunications.
She attended Eastern Michigan University where she studied Political Science and
Communications.
-49-
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Based solely upon its review of the copies of reports furnished to the
Company, or representations that no annual Form 5 reports were required, the
Company believes that all filing requirements under Section 16(a) of the
Exchange Act applicable to its directors, officers and any persons holding ten
percent (10%) or more of the Company's Common Stock with respect to the
Company's fiscal year ended December 31, 1999, were satisfied.
BOARD OF DIRECTORS
The Board of Directors of the Company took action by unanimous written
consent or held meetings six (6) times during the fiscal year ended December 31,
1999. Each incumbent Director attended at least seventy-five percent (75%) of
the aggregate of the number of meetings of the Board and the number of meetings
held by all committees of the Board on which he served. The Company does not
have any standing committees. There are presently three members of the Board of
Directors. Company's Articles of Incorporation, as amended, authorize the Board
of Directors to be increased to a maximum of seven directors.
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth compensation received for the fiscal
years ended December 31, 1999, 1998 and 1997 by the Company's Chief Executive
Officer, and the other executive officers whose salary and bonus exceeded
$100,000 for fiscal years 1999, 1998 and 1997 (collectively, the "Named
Executive Officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
Annual Compensation Long Term Compensation
------------------- ----------------------
Securities
Other Under-
Annual Restricted laying All Other
Compen- Stock Options/ LTIP Compen-
Name and Principal Year Salary($) Bonus($) sation($) Awards /SARS Payouts sation
- ------------------ ---- --------- -------- --------- ------ ----- ------- ------
Position
--------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Perry T. Massie, CEO 1999 83,043 3,462 - - - - -
1998 68,000 - - - - - -
1997 69,231 - - - - - -
Richard K. Dickson II, COO 1999 120,000 10,000 - - - - -
1998 120,000 - - - - - -
1997 120,000 - - - - - -
Wade E. Sherman,
Vice President 1999 127,947 500 - - - - -
</TABLE>
-50-
<PAGE>
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
-------------------------------------
% of Total
Options
Number of Granted
Securities to Exercise
Underlying Employees or Base
Options in Fiscal Price Expiration
Name Granted (#) Year(1) ($/Share) Date
---- ----------- ------- --------- ----
<S> <C> <C> <C> <C>
Perry T. Massie, CEO - - - -
Richard K. Dickson II 60,000 20% $3.00 3-31-09
Ronald D. Ward 30,000 10% $3.00/ 3-31-04
$3.50
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
---------------------------------
Number of Securities Underlying Value of Unexercised
Unexercised Options in-the-Money Options
Shares at Fiscal Year-End(#) at Fiscal Year-End($)
Acquired On Value --------------------- ---------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Perry T. Massie, CEO - - 85,000 - $118,750 -
Thomas H. Massie - - 85,000 - 118,750 -
Richard K. Dickson II - - 70,000 15,000 71,250 11,250
Ronald D. Ward - - 6,000 20,000 7,500 10,000
</TABLE>
The exercise price of the options listed above for Messrs. Perry T.
Massie and Thomas H. Massie are $2.25 per share for 50,000 shares and $2.50 per
share for 35,000 shares. The exercise price of the options listed above for Mr.
Dickson is $2.25 for 25,000 shares and $3.00 for 60,000 shares. The exercise
price of the options listed above for Mr. Ward is $3.00 for 20,000 shares and
$3.50 for 10,000 shares. The Closing Price of Global's Common Stock at 1999
fiscal year-end was $3.75 per share.
STOCK OPTION PLANS
On May 26, 1993, the Company adopted two stock option plans ("Plan 1
Stock Options" and "Plan 2 Stock Options"). Plan 1 Stock Options are for persons
who held stock options prior to the adoption of Plan 1 Stock Options. There are
presently four persons who hold Plan 1 Stock Options for 115,000 shares of
Common Stock exercisable at a price of $2.50 per share. Plan 1 Stock Options are
non-qualified stock options and no further grants will be made under this plan.
Plan 2 Stock Options may be granted to provide incentives to executive officers,
employees and independent consultants. Options to purchase 285,000 may be
granted under Plan 2 Stock Options. Options to purchase 235,000 shares are
outstanding at an exercise price of $2.25 per share leaving options to purchase
50,000 shares available for grant. Plan 1 Stock Options are non-qualified stock
options.
-51-
<PAGE>
In September 1995, the Company authorized another stock option plan
(the "1995 Stock Option Plan"). The 1995 Stock Option Plan was approved by the
shareholders of the Company at the Company's 1996 Annual Meeting held on July
16, 1996. The 1995 Stock Option Plan provides for the grant of options to
purchase up to 500,000 shares of Common Stock in order to enhance the Company's
ability to attract and retain the services of qualified employees, officers,
directors, consultants and other service providers. The Company may grant
incentive stock options and nonqualified stock options under the 1995 Stock
Option Plan. As of December 31, 1999, there were options to purchase 329,000
shares of Common Stock outstanding under the 1995 Stock Option Plan with options
to purchase 171,000 shares of Common Stock available for grant. The options
granted under the 1995 Stock Option Plan are exercisable at prices ranging from
$3.00 to $4.00 per share.
DIRECTOR'S FEES
The directors of the Company are also executive officers of the
Company. For 1999 directors were not compensated separately or reimbursed for
expenses incurred in attending meetings of the Board of Directors.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
The Board of Directors has responsibility for matters that would be
handled by the Compensation Committee if Global had such a committee. The Board
has attempted to conserve Global's cash. The Company considers services
rendered, nature of the services, quality of performance, past practice,
conservation of cash and amount of present stock ownership in determining
executive compensation. The Company desires to encourage performance by stock
ownership.
EMPLOYMENT CONTRACTS
As of December 31, 1999 the Company had an employment contract with
Richard K. Dickson II, its Chief Operating Officer (See "Certain Relationships
and Related Transactions," herein).
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of February 29, 2000 by
each director and executive officer of the Company, each person known to the
Company to be the beneficial owner of more than 5% of the outstanding Common
Stock, and all directors and executive officers of the Company as a group.
Except as otherwise indicated below, the Company believes that each person
listed below has sole voting and investment power with respect to the shares
owned, subject to applicable community property laws.
-52-
<PAGE>
NAME AND ADDRESS OF BENEFICIAL SHARES BENEFICIALLY
OWNER OR IDENTITY OF GROUP(1) OWNED(2)
-------------------------- --------
NUMBER PERCENT
------ -------
Wilma M. Massie (3)......................... 1,729,326 32%
Perry T. Massie (4)(5)...................... 1,581,996 30%
Thomas H. Massie (6)(7)..................... 1,597,000 30%
Richard K. Dickson II (8)................... 461,550 9%
Ronald D. Ward (9).......................... 6,100 *%
Andrew J. Dale (10)......................... 25,100 *%
Jacob J. Hartwick (11)...................... 20,112 *%
All directors and Named
Executive Officers as a
group (6 persons) (12)...................... 3,691,858 66%
- -------------
(1) The address of each shareholder is c/o Global Outdoors, Inc., 43445
Business Park Dr., Suite 113, Temecula, California 92590.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to options or warrants currently exercisable or convertible, or
exercisable or convertible within 60 days of March 20, 2000, are deemed
outstanding for computing the percentage of the persons holding such
options but are not deemed outstanding for computing the percentage of
any other person.
(3) Includes 95,000 shares subject to options from the Company exercisable
within 60 days of March 20, 2000.
(4) Includes 85,000 shares subject to options from the Company and 224,000
shares subject to options from Wilma M. Massie exercisable within 60
days of March 20, 2000.
(5) 11,900 of the shares shown are owned jointly by Perry T. Massie and his
wife, Sandy Massie, who share voting and investment power with respect
to such shares.
(6) Includes 85,000 shares subject to options from the Company and 224,000
shares subject to options from Wilma M. Massie exercisable within 60
days of March 20, 2000.
(7) 11,900 of the shares shown are owned jointly by Thomas H. Massie and his
wife, Cindy Massie, who share voting and investment power with respect
to such shares.
(8) Includes 85,000 shares subject to options from the Company and 300,000
shares subject to options from Wilma M. Massie exercisable within 60
days of March 20, 2000.
(9) Includes 6,000 shares subject to options from the Company exercisable
within 60 days of March 20, 2000.
(10) Includes 20,000 shares subject to options from the Company exercisable
within 60 days of March 20, 2000.
(11) Includes 20,000 shares subject to options from the Company exercisable
within 60 days of March 20, 2000.
(12) Includes directors' and executive officers' shares listed above,
including 301,000 shares subject to options from the Company and 748,000
shares subject to options from Wilma M. Massie exercisable within 60
days of March 20, 2000.
-53-
<PAGE>
The following table sets forth certain information regarding the
beneficial ownership of The Outdoor Channel's Common Stock as of March 15, 2000
by each director and executive officer of The Outdoor Channel, each person known
to the Company to be the beneficial owner of more than 5% of the outstanding
Common Stock, and all directors and executive officers of The Outdoor Channel as
a group. Except as otherwise indicated below, the Company believes that each
person listed below has sole voting and investment power with respect to the
shares owned, subject to applicable community property laws.
NAME AND ADDRESS OF BENEFICIAL SHARES BENEFICIALLY
OWNER OR IDENTITY OF GROUP(1) OWNED(2)
-------------------------- --------
NUMBER PERCENT
------ -------
Gold Prospector's Association of
America, Inc. (3)......................... 8,817,916 84%
Elizabeth J. Sanderson-Burke (4)............ 862,000 8%
Ray V. Miller (5)........................... 616,668 6%
Jerry R. Berglund (6)....................... 400,000 4%
Andrew J. Dale (7).......................... 250,000 2%
Perry T. Massie (8)......................... 200,000 2%
Thomas H. Massie (9)........................ 200,000 2%
Wilma M. Massie (10)........................ 200,000 2%
Richard K. Dickson II (11).................. 200,000 2%
Jacob J. Hartwick (12)...................... 200,000 2%
Wade E. Sherman (13)........................ 100,000 1%
All directors and Named
Executive Officers as a
group (10 persons) (14)..................... 3,228,668 25%
- -------------
(1) The address of each shareholder is c/o The Outdoor Channel, Inc., 43445
Business Park Dr., Suite 103, Temecula, California 92590.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to options or warrants currently exercisable or convertible, or
exercisable or convertible within 60 days of March 20, 2000, are deemed
outstanding for computing the percentage of the persons holding such
options but are not deemed outstanding for computing the percentage of
any other person.
(3) Gold Prospector's Association of America, Inc. is 100% owned by Global
Outdoors, Inc.
(4) Includes 500,000 shares subject to options from The Outdoor Channel
exercisable within 60 days of March 20, 2000. She is a director of The
Outdoor Channel.
-54-
<PAGE>
(5) Includes 400,000 shares subject to options from The Outdoor Channel
exercisable within 60 days of March 20, 2000 and 50,000 shares owned by
Ray Miller's wife. He is a director of The Outdoor Channel.
(6) Includes 200,000 shares subject to options from The Outdoor Channel
exercisable within 60 days of March 20, 2000 and 110,000 shares owned by
Jerry Berglund's wife and four children. He is a director of The Outdoor
Channel.
(7) Includes 250,000 shares subject to options from The Outdoor Channel
exercisable within 60 days of March 20, 2000.
(8) Includes 200,000 shares subject to options from The Outdoor Channel
exercisable within 60 days of March 20, 2000. He is a director of The
Outdoor Channel.
(9) Includes 200,000 shares subject to options from The Outdoor Channel
exercisable within 60 days of March 20, 2000. He is a director of The
Outdoor Channel.
(10) Includes 200,000 shares subject to options from The Outdoor Channel
exercisable within 60 days of March 20, 2000. She is a director of The
Outdoor Channel.
(11) Includes 200,000 shares subject to options from The Outdoor Channel
exercisable within 60 days of March 20, 2000. He is a director of The
Outdoor Channel.
(12) Includes 200,000 shares subject to options from The Outdoor Channel
exercisable within 60 days of March 20, 2000.
(13) Includes 100,000 shares subject to options from The Outdoor Channel
exercisable within 60 days of March 20, 2000.
(14) Includes directors' and executive officers' shares listed above,
including 2,450,000 shares subject to options from The Outdoor Channel
exercisable within 60 days of March 20, 2000.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company is leasing its administrative facilities from Wilma M.
Massie, a principal shareholder of the Company and the mother of Perry T. Massie
and Thomas H. Massie, under lease agreements currently requiring monthly rent
payments of $12,287 of which $5,445 is attributable to a separate lease The
Outdoor Channel entered into with the lessor in January 2000. Rent expense for
the Company totaled $88,500 and $99,000 for the years ended December 31, 1999
and 1998, respectively. Both leases expire on December 31, 2001.
In November 1996, Wilma M. Massie, obtained a letter of credit for
$80,000 that was utilized as security for performance under the Agreement with
PanAmSat for The Outdoor Channel's Galaxy 9 satellite transponder. The Outdoor
Channel has agreed to reimburse Mrs Massie for expenses in maintaining that
letter of credit. From January 1997 through August 1997, Wilma M. Massie loaned
the Company $324,000 on notes bearing interest at 10%. From January 1997 through
August 1997, Perry T. Massie loaned the Company $136,000 on notes bearing
interest at 10%. In September 1997, Wilma M. Massie invested $40,000 in the
Company's public offering and Perry T. Massie invested $24,000 in the Company's
public offering. They paid the same price as other purchasers which was $8.00
per Unit, each Unit consisting of two (2) shares of Common Stock and one (1)
Class F Warrant to purchase Common Stock. In July 1998, Wilma M. Massie loaned
the Company $30,000 on a note bearing interest at 10% for the purpose of
purchasing two large all terrain vehicles for Alaska. In 1998, the rent expense
owed by the Company to Wilma M. Massie was applied as a reduction of a note
receivable from Wilma M. Massie, the balance outstanding on which was $154,579
at December 31, 1998. At the end of 1998, the note receivable from Wilma M.
Massie was applied against the above listed loan amounts plus interest owed to
Wilma M. Massie, resulting in $255,250 owed Wilma M. Massie at December 31,
1998. As of December 31, 1999, the amount owed Wilma M. Massie was $275,775
including accrued interest. The amount owed Perry T. Massie, including accrued
interest, at December 31, 1999 and December 31, 1998 , was $149,656 and
$158,779, respectively. Interest due Wilma M. Massie on loans by her referred to
above was $20,525 for 1999 and $32,400 for 1998. Interest due Perry T. Massie on
the loans by him referred to above was $15,878 for 1999 and $13,600 for 1998.
The maturity dates of the loans from Wilma M. Massie and Perry T Massie are
December 31, 2002 and bear interest at the rate of 10%.
-55-
<PAGE>
As of December 31, 1999, the Company owed Wilma M. Massie an additional
$48,608, secured by a motor home purchased in October 1996. The Company is
paying this obligation at the rate of $520 per month including interest at 9%.
The maturity date for this loan is November 2011.
In January 1998, the Company entered a ten year 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 Company has the
option to renew this contract for two five year periods. For the first five
years of the contract, the Company is paying $7,400 per week under the contract.
The Company believes that the contract was initially beneficial to The Outdoor
Channel but that in the future will constitute a significant asset to the
Company. This contract was made in furtherance of the Company's plan of
establishing The Outdoor Channel as an independent and self supporting company.
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 ("Acquisition Agreement") provided for the issuance of up
to an additional 1,500,000 shares of Common Stock ("Earn Out Shares") to the
former shareholders of GPAA if GPAA achieved certain earnings or valuation
milestones. The former shareholders of GPAA, Perry T. Massie, Thomas H. Massie,
and Wilma M. Massie, are shareholders of the Company and Messrs. Perry and
Thomas Massie are officers of the Company. For purposes of the Acquisition, the
value of the Global Common Stock was deemed to be $3.50 per share with the
initial total acquisition cost being $8,750,000. Since GPAA was a commonly
controlled company, its assets and liabilities were recorded in 1995 at their
historical cost basis in a manner similar to a pooling of interests. In December
1998, 1,000,000 Earn Out Shares were issued to the former shareholders of GPAA
pursuant to the Acquisition Agreement. These additional shares were recorded at
their par value (See "Note 8 to the Consolidated Financial Statements"). The
primary basis for issuing the Earn Out shares was the Prospective Fair Market
valuation of The Outdoor Channel made by BIA Consulting, Inc. ("BIA"). BIA
concluded that the Prospective Fair Market Value of the Channel as of December
31, 1998, was $30 million. GPAA owned 88% of The Outdoor Channel as of December
31, 1998.
Perry T. Massie and Thomas H. Massie each have an option to purchase
224,000 shares of the Company owned by Wilma M. Massie. Mr. Dickson has an
option to purchase 300,000 shares of the Common Stock of the Company owned by
Wilma M. Massie. In January 1996, Mr. Dickson exercised part of his option from
Wilma M. Massie and purchased 50,000 shares from her.
Effective April 14, 1999, the Company entered into an employment
agreement with Richard K. Dickson II, its Chief Operating Officer. The agreement
is for one year and has been automatically been extended for another year. The
agreement provides for a salary of $10,000 per month of which $1,500 per month
is presently being deferred. The agreement also provides that Mr. Dickson shall
receive options to purchase 60,000 shares of Common Stock at an exercise price
of $3.00 per share.
Perry T. Massie, Thomas H. Massie and Richard K. Dickson II are
officers and directors of the Company and The Outdoor Channel, Inc. Wilma M.
Massie is a principal shareholder of the Company and a director of The Outdoor
Channel, Inc. In December 1997, Messrs. P. Massie, T. Massie, Dickson, and Wilma
M. Massie were granted options to purchase 200,000 shares, each, of Common Stock
in The Outdoor Channel, Inc. The options are exercisable a $1.50 per share and
expire on December 31, 2007. At the time of the grants, The Outdoor Channel was
selling Common Stock in its private placement at $1.00 per share.
The transactions between the Company and the Company's management and
significant shareholders are believed by management of the Company to have been
on terms no less favorable to the Company than those that could have been
obtained from unaffiliated parties.
-56-
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit
Number Description
- ------ -----------
3 Articles of Incorporation and by-laws, as amended*
4 Instruments defining the rights of securityholders, including
debentures*
10.1 Form of Plan 1 Stock Option Agreement (incorporated by
reference to Exhibit 10.1 to the Company's Form 10-Q for the
quarter ended September 30, 1993).
10.2 Form of Plan 2 Stock Option Agreement (incorporated by
reference to Exhibit 10.2 to the Company's Form 10-Q for the
quarter ended September 30, 1993).
10.3 Form of loan agreement for the exercise of Stock Options
(incorporated by reference to Exhibit 10.3 to the Company's
Form 10-Q for the quarter ended September 30, 1993).
10.4 Letter of intent dated August 27, 1993, regarding the proposed
acquisition of Gold Prospector's Association of America, Inc.
by the Company (incorporated by reference to Exhibit 10.4 to
the Company's Form 10-Q for the quarter ended September 30,
1993).
10.5 Agreement and Plan of Reorganization dated February 13, 1995,
by and between the Registrant and Gold Prospector's
Association of America, Inc. (incorporated by reference to
Exhibit B to the Company's Form 8-K dated February 13, 1995).
10.6 The Company's 1995 Stock Option Plan (incorporated by
reference to Exhibit 10.6 to the Company's Form 10-KSB for the
year ended December 31, 1995).
10.7 Employment Agreement dated October 16, 1995 between the
Company and Christopher B. Forgy (incorporated by reference to
Exhibit 10.7 to the Company's Form 10-KSB for the year ended
December 31, 1995).
10.8 Stock Option Agreement dated February 6, 1996 between the
Company and Christopher B. Forgy (incorporated by reference to
Exhibit 10.8 to the Company's Form 10-KSB for the year ended
December 31, 1995).
10.9 Employment Agreement dated April 14, 1999 between the Company
and Richard K. Dickson II.
16 Letter re change in certifying accountant (incorporated by
reference to Exhibit 16 to the Company's Form 8-K Amendment
No.1 dated March 26, 1996).
16.1 Letter re change in certifying accountant (incorporated by
reference to Exhibit 16.3 to the Company's Form 8-K Amendment
No.1 filed December 3, 1996).
-57-
<PAGE>
16.2 Letter re change in certifying accountant (incorporated by
reference to Exhibit 16.1 to the Company's Form 8-K filed
March 10, 1998).
21 Subsidiaries of Registrant*
27 Financial Data Schedule (SEC only).
* Incorporated by reference from S-1 Registration Statement filed with the SEC
June 21, 1989; Amendment No.1 thereto filed on November 28, 1989; Amendment No.
2 thereto filed on January 10, 1990; Amendment No. 3 thereto filed on February
7, 1990; SB-2 Registration Statement filed with the SEC August 5, 1996;
Amendment No. 1 thereto file on January 27, 1997; and Amendment No. 2 thereto
filed January 30, 1997.
(b) The company filed the following reports on Form 8-K during the quarter ended
December 31, 1999, as follows: None
-58-
<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: March 28, 2000
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated:
By: (Signature and Title) /s/Perry T. Massie
-----------------------------------
Perry T. Massie, President, CEO, and Director
Dated: March 28, 2000
By: (Signature and Title) /s/Thomas H. Massie
-----------------------------------
Thomas H. Massie, Executive VP, Secretary and Director
Dated: March 28, 2000
By: (Signature and Title) /s/Richard K. Dickson II
-----------------------------------
Richard K. Dickson II, COO, General Counsel and
Director
Dated: March 28, 2000
By: (Signature and Title) /s/Ronald D. Ward
-----------------------------------
Ronald D. Ward, Controller
Dated: March 28, 2000
-59-
EXHIBIT 10.9
EMPLOYMENT AGREEMENT DATED APRIL 14, 1999 BETWEEN
THE COMPANY AND RICHARD K. DICKSON II
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is effective as of the 14th
day of April 1999, by and between Global Outdoors, Inc., an Alaska corporation
(the "Company") and Richard K. Dickson II ("Dickson").
WHEREAS, Dickson has performed services for the Company for
approximately 14 years; and
WHEREAS, the Company desires to employ Dickson pursuant to a written
contract and Dickson desires to be so employed by the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. EMPLOYMENT AGREEMENT.
(a) From April 15, 1999, and for the balance of the Term of
this Agreement (the "Employment Period"), the Company appoints Dickson as Chief
Operating Office, General Counsel and a Director. Mr. Dickson will perform such
duties consistent with such positions and as are from time to time delegated to
Dickson by the Board of Directors or Chief Executive Officer of the Company.
Specifically, Dickson's duties shall include the responsibility for an expanded
marketing effort.
(b) During the Employment Period the Company shall provide
Dickson as his principal office with private office(s), secretarial and
administrative assistance, office equipment, supplies and other facilities and
services suitable to Dickson's position. It is understood by the parties hereto
that there will be a transition period of approximately nine months for Dickson
to complete his relocation to Temecula from Orange County.
2. TERM. The term ("Term") of this Agreement shall commence on April
15, 1999 and shall continue until April 14, 2000, and the Employment Period
thereafter shall be automatically extended for twelve month periods upon the
same terms and subject to the same conditions as herein set forth, until
terminated or modified, or unless either party has delivered written notice at
least ninety (90) days prior to the end of the Term or of any extension thereof
to the effect that the term should not be further extended.
3. COMPENSATION. In consideration of the services to be rendered by
Dickson to the Company, the Company hereby agrees to pay or otherwise provide
Dickson the following compensation and benefits:
(a) SALARY. During the Employment Period, Dickson shall receive:
-1-
<PAGE>
(i) A salary of $10,0000 per month, payable monthly in
arrears;
(ii) From April 1 to September 1, 1999, $7,500 of that amount
shall be paid in cash with the balance accruing as deferred compensation. From
September 1, 1999 forward $8,500 of that amount shall be paid in cash with the
balance accruing as deferred compensation.
(iii) Amounts accrued as deferred compensation may be paid at
the election of Dickson either in cash or Common Stock, however in the event
Dickson elects to receive payment in cash, such payment may be further deferred,
in part or in whole, by the Company until such time as the Company has
sufficient cash reserves to make such payments. In the event Dickson elects to
be paid in Common Stock, the price of such stock shall be the price the stock
was trading at when the compensation was earned, if it is deemed legal to do so.
(b) STOCK OPTIONS. The Company hereby grants Dickson an option to
purchase 60,000 shares of Common Stock at a purchase price of $3.00 per share.
This is an amount of shares approximately equivalent to the deferred
compensation Dickson has earned and is anticipated to earn during the initial
Term, hereof, that could be utilized by Dickson to pay the purchase price of
said shares. 45,000 of said shares are exercisable immediately and 15,000 shares
shall vest on April 1, 2000. The options shall be for ten (10) years and shall
expire on March 31, 2009.
(c) BONUSES. Bonuses shall be payable at least once a year in amounts
reasonably determined in good faith by the Company. It is the Company's intent
to establish goals and objectives for Dickson as a partial basis for bonuses.
The Company shall make a good faith effort to pay Dickson a special bonus of
$100,000 in five years from the date hereof, which special bonus is intended to
be paid to Dickson so that he can retire a portion of his home mortgage.
(d) INDUCEMENTS. The following are inducements for Dickson to be
employed by the Company:
(i) The Company shall pay Dickson $19,000 plus accumulated
interest at 6% from April 1, 1999, on February 1, 2001.
(ii) In the event that the Company, for any reason, terminates
Mr. Dickson or reduces his salary, the Company shall make the monthly payments
to Dickson of $1,500 for a period of three (3) years (potential $54,000 benefit
to Dickson). To be used to pay home mortgage.
(iii) The Company will obtain term life and disability
insurance for Dickson in the amount of at least $75,000.
(e) BENEFIT PLANS. In addition to the fees and compensation set forth
above, Dickson shall be entitled to participate in all benefit programs provided
by the Company, including, without limitation, any health, accident, disability
and life insurance programs, retirement programs, vacation and sick leave
benefits, and any other fringe benefit program, including an automobile
-2-
<PAGE>
and/or cellular phone allowance, which the Company may adopt and implement for
the benefit of the Company's officers or employees.
(f) MOVING EXPENSES. Payment of reasonable expenses relating to the
packing, moving and unpacking of Dickson's household goods and furnishings to
the Temecula, California area, limited to $2,000.00 maximum.
(g) THE OUTDOOR CHANNEL. Salary paid and accrued by The Outdoor Channel
to Dickson shall reduce the monthly salary due Dickson.
4. INDEPENDENT ADVICE. The Company has been advised by Dickson in
writing that the Company may seek the advice of an independent lawyer of the
Company's choice regarding this Agreement and has been given a reasonable
opportunity consisting of at least ten (10) days to seek such advice and , in
fact, has sought such advice.
5. COMPETITIVE ACTIVITIES.
(a) During the term of this Agreement Dickson shall not, directly or
indirectly, either as an employee, employer, consultant, agent, principal,
partner, stockholder, corporate officer, director, or in any other individual or
representative capacity, engage or participate in any business that is in
competition in any manner whatsoever with the business of Global.
(b) Dickson agrees that during the term of this Agreement and for a
period of one year after termination of this Agreement, Dickson shall not
directly or indirectly solicit, hire, recruit, or encourage any other employee
of Global to leave Global.
6. CONFIDENTIALITY. Dickson recognizes and acknowledges that in the
course of his employment with the Company, as contemplated by this Agreement,
and as a result of the position of trust that he will hold under this Agreement,
he will obtain private and confidential information and proprietary data
relating to the Company, including without limitation, financial information,
product and design information, marketing information, customer lists and other
data that are valuable assets and property rights of the Company (collectively
referred to as "Confidential Information"). Dickson agrees that he will not,
during the Term or any time after the termination of the Term, either directly
or indirectly, disclose or use any Confidential Information acquired during his
employment with the Company, unless (i) the Confidential Information has been
made public through no action or fault of Dickson, or (ii) its disclosure is
requested or compelled by applicable law or regulatory agency. Dickson further
agrees that after the termination of this Agreement, or at such other time as
the Company requests, Dickson will return to the Company all documents, papers
and records constituting Confidential Information, and all copies of same in
Dickson's possession and control.
8. INDEMNIFICATION OF LOSSES OF DICKSON. The Company shall indemnify
Dickson for all losses sustained by Dickson in direct consequences of the
discharge of his duties on the Company's behalf.
-3-
<PAGE>
9. SUMS DUE UPON DEATH. If Dickson dies prior to the expiration of the
term of his employment, any sums that may be due him from the Company under this
Agreement as of the date of death shall be paid to Dickson's executors,
administrators, heirs, personal representatives, successors and assigns.
10. COUNTERPARTS. This Agreement may be signed in counterparts.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
GLOBAL OUTDOORS, INC.
By: /S/PERRY T. MASSIE
-----------------------------
Perry T. Massie, Chairman and
Chief Executive Officer
/S/RICHARD K. DICKSON II
----------------------------------
Richard K. Dickson II
-4-
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