<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 2000
------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------ -----------------
Commission file number: 0-17287
-------
GLOBAL OUTDOORS, INC.
--------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Alaska 33-0074499
--------------------------------- ----------------------
(State or other Jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
43445 BUSINESS PARK DRIVE, SUITE 113
TEMECULA, CALIFORNIA 92590
--------------------------------------------------------------------------------
(Address and zip code of principal executive offices)
(909) 699-4749
--------------------------------------------------------------------------------
(Issuer's telephone number, including area code)
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to the filing requirements for at least
the past 90 days. Yes [X] NO [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Number of Shares Outstanding
Class at November 13, 2000
----- ----------------------------
Common Stock, $.02 par value 5,271,073
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
FINANCIAL STATEMENTS
PART I - ITEM 1
--------------------------------------------------------------------------------
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
GLOBAL OUTDOORS, INC.
-2-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30 December 31
------------ ------------
2000 1999
------------ ------------
(unaudited)
Current assets:
Cash and cash equivalents $ 1,434,665 $ 750,351
Accounts receivables, net of allowance for
doubtful accounts of $48,868 and $57,766 1,913,027 965,371
Inventories 52,759 54,810
Deferred tax assets, net 86,550 86,550
Receivable from stockholders 28,775 17,700
Other current assets 64,006 15,035
------------ ------------
Total current assets 3,579,782 1,889,817
------------ ------------
Property, plant and equipment, net:
Membership recreational mining properties 1,375,006 1,352,373
Alaska recreational mining properties 1,295,098 1,338,988
Outdoor Channel equipment and improvements 665,017 505,063
Other equipment and leasehold improvements 341,065 328,226
------------ ------------
Property, plant and equipment, net 3,676,186 3,524,650
------------ ------------
Trademark, net of accumulated amortization of
$53,713 and $42,777 165,010 175,946
Deferred tax assets, net 925,000 1,000,000
Deposits and other assets 126,793 89,062
------------ ------------
Totals $ 8,472,771 $ 6,679,475
============ ============
See Notes to Condensed Consolidated Financial Statements
-3-
<PAGE>
<TABLE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30 December 31
------------ ------------
2000 1999
------------ ------------
(unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses $ 596,873 $ 711,646
Current portion of notes and capital lease
obligations payable 253,954 528,851
Current portion of stockholder loans 1,936 1,936
------------ ------------
Total current liabilities 852,763 1,242,433
Stockholder loans, net of current portion 612,837 435,700
Other notes and capital lease obligations payable,
net of current portion 385,530 661,237
Deferred revenues 1,943,469 1,818,468
Deferred satellite rent obligations 601,535 624,700
Deferred compensation 304,250 300,751
------------ ------------
Total liabilities 4,700,384 5,083,289
------------ ------------
Commitments and contingencies
Minority interest in subsidiary 877,231 390,526
------------ ------------
Stockholders' equity:
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; 5,271,073 and 5,266,073 shares issued
and outstanding, respectively 105,383 105,283
Less common stock subscriptions receivable (221,250) (221,250)
Additional paid-in capital 3,356,133 3,336,233
Accumulated deficit (345,171) (2,014,667)
------------ ------------
Total stockholders' equity 2,895,156 1,205,660
------------ ------------
Totals 8,472,771 6,679,475
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
-4-
<PAGE>
<TABLE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
September 30 September 30
------------ ------------
(unaudited) (unaudited)
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Advertising $ 1,694,393 $ 1,098,442 $ 5,073,272 $ 2,814,760
Subscriber fees 747,996 394,881 2,083,841 837,728
Membership services 714,213 481,533 2,268,740 1,991,460
Trips and outings 807,360 739,700 807,360 739,700
------------- ------------- ------------- -------------
Total revenues 3,963,962 2,714,556 10,233,213 6,383,648
------------- ------------- ------------- -------------
Expenses:
Satellite transmission fees 531,326 521,593 1,588,098 1,559,067
Advertising and programming 295,462 22,710 910,508 90,264
Trips and outings 507,014 478,890 507,014 478,890
Selling, general and administrative 1,716,215 1,203,867 5,062,473 3,761,457
------------- ------------- ------------- -------------
Total expenses 3,050,017 2,227,060 8,068,093 5,889,678
------------- ------------- ------------- -------------
Income from operations 913,945 487,496 2,165,120 493,970
Other income (expense):
Gain on sale of common stock of subsidiary 408,859
Interest, net (20,375) (31,592) (72,261) (114,601)
------------- ------------- ------------- -------------
Income before provision for income taxes and
minority interest 893,570 455,904 2,092,859 788,228
Provision for income taxes 375,000 75,000 800
------------- ------------- ------------- -------------
Income before minority interest 518,570 455,904 2,017,859 787,428
Minority interest in net income of
consolidated subsidiary 112,328 51,821 348,363 72,164
------------- ------------- ------------- -------------
Net income 406,242 404,083 1,669,496 715,264
============= ============= ============= =============
Net income per share:
Basic $ 0.08 $ 0.08 $ 0.32 $ 0.14
============= ============= ============= =============
Diluted $ 0.07 $ 0.08 $ 0.31 $ 0.13
============= ============= ============= =============
Weighted averge number of common
shares outstanding
Basic 5,266,997 5,266,073 5,266,383 5,259,331
============= ============= ============= =============
Diluted 5,457,515 5,343,990 5,457,539 5,337,248
============= ============= ============= =============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
-5-
<PAGE>
<TABLE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Nine Months Ended September 30
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Operating activities:
Net income $ 1,669,496 $ 715,264
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 186,961 185,229
Provision for doubtful accounts (8,898)
Provision for income taxes 75,000
Interest on stock subscription receivable (11,075) (6,638)
Gains on sale of common stock to the public:
Shares sold by the subsidiary (261,961)
Shares sold by the Company (146,898)
Issuance of stock as compensation 20,000
Minority interest in net income of consolidated
subsidiary 486,705 72,164
Cash supplied (used) by changes in operating assets
and liabilities:
Accounts receivable (938,758) (532,468)
Inventories 2,051 9,668
Income taxes receivable 1,549
Other current assets (48,971) (16,201)
Deposits and other assets (37,731) (28,927)
Accounts payable and accrued expenses (114,773) 28,804
Deferred revenues 125,001 161,651
Deferred satellite rent obligations (23,165) 139,835
Deferred compensation 3,499 10,000
------------ ------------
Net cash provided by operating activities 1,385,342 331,071
------------ ------------
Investing activities:
Purchases of property, plant, and equipment (327,561) (629,827)
Expenditures for trademarks (1,279)
------------ ------------
Net cash used in investing activities (327,561) (631,106)
------------ ------------
Financing activities:
Principal payments on long-term debt and capital leases (550,604) (180,159)
Principal payments on stockholder loans (2,863) (29,674)
Advances from stockholders 180,000
Net proceeds from sale of subsidiary stock to the public 617,502
------------ ------------
Net cash provided by (used in) financing
activities (373,467) 407,669
------------ ------------
Net increase in cash and cash equivalents 684,314 107,634
Cash and cash equivalents, beginning of period 750,351 326,225
------------ ------------
Cash and cash equivalents, end of period $ 1,434,665 $ 433,859
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
-6-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Organization, Management Statement and Reference to Form 10-KSB
Organization
------------
Global Outdoors, Inc. (the "Company") owns a majority interest in The
Outdoor Channel, Inc. ("The Outdoor Channel" or "Channel"), a national
television network devoted primarily to traditional outdoor activities,
such as hunting, fishing, shooting sports, rodeo and recreational gold
prospecting. The Company has a variety of other business activities.
The Company receives revenues from the sale of memberships in a gold
prospecting club, Gold Prospectors' Association of America, Inc.
("GPAA") and from the sale of memberships in Lost Dutchman's (LDMA-AU,
Inc.) which entitle members to engage in recreational prospecting on
its California, Oregon, Alaska, Nevada, Arizona, Colorado, Georgia,
North Carolina and South Carolina properties. The Company has signed a
mutual use agreement with another organization whose members are
entitled to engage in recreational mining on certain of each other's
properties. The Company receives revenues from its trips and outings
division which includes its "Alaska Trip," a recreational gold mining
expedition to the Company's Cripple River property located near Nome,
Alaska, advertising revenue in a bi-monthly magazine, advertising
revenues through cable television programming on The Outdoor Channel,
Inc. and through merchandise sales. Effective July 23, 1996, the
Company changed its name from Global Resources, Inc. to Global
Outdoors, Inc.
Note 2. Unaudited Interim Financial Statements
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting
of normal recurring accruals, necessary to present fairly the financial
position of the Company as of September 30, 2000 and its results of
operations for the three and nine months ended September 30, 2000 and
1999 and cash flows for the nine months ended September 30,2000 and
1999. Information included in the condensed consolidated balance sheet
as of December 31, 1999 has been derived from, and certain terms used
herein are defined in, the audited financial statements of the Company
as of December 31, 1999 and for the years ended December 31, 1999 and
1998 (the "Audited Financial Statements") included in the Company's
Annual Report on Form 10-KSB (the "10-KSB") for the year ended December
31, 1999 that was previously filed with the Securities and Exchange
Commission (the "SEC"). Pursuant to the rules and regulations of the
SEC, certain information and disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from these financial
statements unless significant changes have taken place since the end of
the most recent fiscal year. Accordingly, these unaudited condensed
consolidated financial statements should be read in conjunction with
the Audited Financial Statements and the other information also
included in the 10-KSB.
The results of the Company's operations for the three and nine months
ended September 30, 2000 are not necessarily indicative of the results
of operations for the full year ending December 31, 2000.
-7-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 3. Stockholders' Equity
On September 12, 1994, the company effected a 2 for 1 forward split of
its common stock. On March 4, 1992, the company effected a 1 for 20
reverse split of its common stock. On May 1, 1989, the Company
distributed a 10% common stock dividend. Share amounts herein reflect
the foregoing activity.
Note 4. 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.
The computation of diluted earnings per common share for the three and
nine months ended September 30, 2000 and the three and nine months
ended September 30, 1999 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 the three and nine months ended
September 30, 2000:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, 2000 September 30, 2000
-------------------------- --------------------------
Earnings Earnings
Per Per
Shares Share Shares Share
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding and basic
earnings per common share 5,266,997 $ .08 5,266,383 $ .32
============ ============
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 129,843 130,481
------------ ------------
Diluted weighted average common shares
outstanding and diluted earnings per
common share 5,457,515 $ .07 5,457,539 $ .31
============ ============= ============ ============
</TABLE>
-8-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 5. Income taxes
The Company had income tax provisions of $375,000 and $75,000 in the
three months and nine months ended September 30, 2000, respectively.
The Company had no provisions or credits for income taxes for the three
or nine months ended September 30, 1999.
During the nine months ended September 30, 2000, 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 (see Note 7 in the 10-KSB). 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 of the company's remaining net operating loss
carryforwards available of approximately $1,000,000 as of September 30,
2000. Accordingly, the Company reduced its net deferred tax asset
valuation allowance by approximately $500,000 in the first six months
of the nine months ended September 30, 2000.
The provision for income taxes reflected in the accompanying condensed
consolidated statements of income for the three and nine months ended
September 30, 2000 is different than it would be computed based on the
applicable statutory Federal income tax rate of 34% primarily as a
result of the changes in the valuation allowance as shown below:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, 2000 September 30, 2000
------------------ ------------------
<S> <C> <C>
Federal income tax provisions
at statutory income tax rate $ 303,800 $ 711,600
State tax provision net of Federal
tax benefit 71,500 160,000
Effect of utilization of net operating
loss carryforwards (307,758)
Effect of reduction in valuation
allowance for recognition of future
utilization of net operating loss
carryforwards (500,000)
Other (300) 11,158
------------ ------------
Provision for income taxes $ 375,000 $ 75,000
============ ============
</TABLE>
-9-
<PAGE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 6. Segment information
The Company has 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
three months and nine months ended September 30, 2000 is as follows:
<TABLE>
<CAPTION>
Income (Loss) Depreciation Additions to
Before Total and Property, Plant
Revenues Income Taxes Assets Amortization and Improvements
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Three months ended September 30, 2000
Trips and Outings $ 807,360 $ 300,346 $ 1,295,098 $ 23,022 $ 27,828
The Outdoor Channel 2,431,369 598,007 3,593,523 33,444 62,142
Membership sales
of recreational
prospecting and
mineral rights and
merchandise sales 725,233 (4,783) 3,584,150 7,031 49,431
------------ ------------ ------------ ------------ ------------
Totals $ 3,963,962 $ 893,570 $ 8,472,771 $ 63,497 $ 139,401
============ ============ ============ ============ ============
Nine months ended September 30, 2000
Trips and Outings $ 807,360 $ 300,346 $ 1,295,098 $ 71,718 $ 27,828
The Outdoor Channel 6,861,733 1,864,319 3,593,523 100,332 254,706
Membership sales
of recreational
prospecting and
mineral rights and
merchandise sales 2,564,120 (71,806) 3,584,150 14,912 45,027
------------ ------------ ------------ ------------ ------------
Totals $10,233,213 $ 2,092,859 $ 8,472,771 $ 186,962 $ 327,561
============ ============ ============ ============ ============
</TABLE>
-10-
<PAGE>
<TABLE>
GLOBAL OUTDOORS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<CAPTION>
Information with respect to these reportable business segments for the three
months and nine months ended September 30, 1999 is as follows:
Income Depreciation Additions to
Before Total and Property, Plant
Revenues Income Taxes Assets Amortization and Improvements
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Three months ended September 30, 1999
Trips and Outings $ 580,618 $ 121,626 $ 1,465,893 $ 20,886 $ 36,872
The Outdoor Channel 1,396,088 231,079 1,763,049 23,136 39,040
Membership sales
of recreational
prospecting and
mineral rights and
merchandise sales 737,860 103,199 1,730,075 17,721 87,548
------------ ------------ ------------ ------------ ------------
Totals $ 2,714,566 $ 455,904 $ 4,959,017 $ 61,743 $ 163,460
============ ============ ============ ============ ============
Nine months ended September 30, 1999
Trips and Outings $ 580,618 $ 121,626 $ 1,465,893 $ 62,658 $ 75,912
The Outdoor Channel 3,477,370 178,163 1,763,049 69,408 178,807
Membership sales
of recreational
prospecting and
mineral rights and
merchandise sales 2,325,660 488,439 1,730,075 53,163 469,868
------------ ------------ ------------ ------------ ------------
Totals $ 6,383,648 $ 788,228 $ 4,959,017 $ 185,229 $ 724,587
============ ============ ============ ============ ============
</TABLE>
-11-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This report on Form 10-QSB contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The Company intends that such forward-looking
statements be subject to the safe harbors created thereby. This report should be
read in conjunction with the Company's report on Form 10-KSB for the year ended
December 31, 1999.
COMPARISON OF QUARTERS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
REVENUES. The Company's revenues include revenues from advertising
fees, subscriber fees, GPAA and Lost Dutchman's membership sales, product sales
and trips and outings sales. Advertising fees result from the sale of
advertising time on The Outdoor Channel and from advertising space in
publications such as the Gold Prospector magazine. Revenues for the quarter
ended September 30, 2000 were $3,963,962, an increase of $1,249,406, or 46%,
compared to revenues of $2,714,556 for the quarter ended September 30, 1999.
This increase was the result of changes in several items composing revenue.
Advertising increased significantly to $1,694,393 for the quarter ended
September 30, 2000 from $1,098,442 for the quarter ended September 30, 1999,
primarily due to an increase in advertising revenue on The Outdoor Channel.
Subscriber fees nearly doubled at $747,996 for the quarter ended September 30,
2000 compared to $394,881 for the quarter ended September 30, 1999, primarily
due to carriage of The Outdoor Channel on the Dish Network. Membership services
increased to $714,213 for the quarter ended September 30, 2000 from $481,533 for
the quarter ended September 30, 1999, due principally to the Company devoting
increased resources to membership development and retention. Trips and outings
increased noticeably to $807,360 for the quarter ended September 30, 2000 from
$739,700 for the quarter ended September 30, 1999, due primarily to increased
participation on the Company's Alaska trip expedition.
EXPENSES. The Company's expenses consist primarily of the cost of
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 quarter ended September 30, 2000
were $3,050,017, an increase of $822,957, or 37%, compared to $2,227,556 for the
quarter ended September 30, 1999. This increase was primarily the result of an
increase in selling, general and administrative expenses and an increase in
advertising and programming expenses. Selling, general and administrative
expenses increased significantly to $1,716,215 for the quarter ended September
30, 2000, compared to $1,203,867 for the quarter ended September 30, 1999. This
increase was due primarily to growth at The Outdoor Channel. Advertising and
programming expenses increased to $295,462 for the quarter ended September 30,
2000, compared to $22,710 for the quarter ended September 30, 1999, due to The
Outdoor Channel's consumer and trade awareness campaigns. Satellite transmission
fees stabilized at $531,326 for the quarter ended September 30, 2000 compared to
$521,593 for the quarter ended September 30, 1999, due to satellite transponder
expenses plateauing. Trips and outings expenses remained near the same level at
$507,014 for the quarter ended September 30, 2000 compared to $478,890 for the
quarter ended September 30, 1999, due to the Company controlling Alaska trip
expenses.
INCOME BEFORE PROVISION FOR INCOME TAXES AND MINORITY INTEREST. Income
before provision for income taxes and minority interest was higher as a
percentage of revenues at 23% for the quarter ended September 30, 2000 compared
to 17% for the quarter ended September 30, 1999. This was due primarily to the
Company having significantly higher income from operations of $913,945 for the
quarter ended September 30, 2000, compared to $487,496 for the quarter ended
September 30, 1999.
-12-
<PAGE>
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
REVENUES. The Company's revenues include revenues from advertising
fees, subscriber fees, GPAA and Lost Dutchman's membership sales, product sales
and trips and outings sales. Advertising fees result from the sale of
advertising time on The Outdoor Channel and from advertising space in
publications such as the Gold Prospector magazine. Revenues for the nine months
ended September 30, 2000 were $10,233,213, an increase of $3,849,565, or 60%,
compared to revenues of $6,383,648 for the nine months ended September 30, 1999.
This increase was the result of changes in several items composing revenue.
Advertising increased significantly to $5,073,272 for the nine months ended
September 30, 2000 from $2,814,760 for the nine months ended September 30, 1999,
primarily due to an increase in advertising revenue on The Outdoor Channel.
Subscriber fees more than doubled to $2,083,841 for the nine months ended
September 30, 2000 from $837,728 for the nine months ended September 30, 1999,
primarily due to carriage of The Outdoor Channel on the Dish Network. Membership
services increased to $2,268,740 for the nine months ended September 30, 2000
from $1,991,460 for the nine months ended September 30, 1999, due principally to
the Company devoting increased resources to membership development and
retention. Trips and outings increased noticeably to $807,360 for the nine
months ended September 30, 2000 from $739,700 for the nine months ended
September 30, 1999, due primarily to increased participation on the Company's
Alaska trip expedition.
EXPENSES. The Company's expenses consist primarily of the cost of
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 nine months ended September 30,
2000 were $8,068,093, an increase of $2,178,415, or 37%, compared to $5,889,678
for the nine months ended September 30, 1999. This increase was primarily the
result of an increase in selling, general and administrative expenses and an
increase in advertising and programming expenses. Selling, general and
administrative expenses increased significantly to $5,062,473 for the nine
months ended September 30, 2000, compared to $3,761,457 for the nine months
ended September 30, 1999. This increase was due primarily to growth at The
Outdoor Channel. Advertising and programming expenses increased substantially to
$910,508 for the nine months ended September 30, 2000, compared to $90,264 for
the nine months ended September 30, 1999, due to The Outdoor Channel's consumer
and trade awareness campaigns. Satellite transmission fees remained near the
same level at $1,588,098 for the nine months ended September 30, 2000 compared
to $1,559,067 for the nine months ended September 30, 1999, due to satellite
transponder expenses plateauing. Trips and outings expenses remained near the
same level at $507,014 for the nine months ended September 30, 2000 compared to
$478,890 for the nine months ended September 30, 1999, due to the Company
controlling Alaska trip expenses.
INCOME BEFORE PROVISION FOR INCOME TAXES AND MINORITY INTEREST. Income
before provision for income taxes and minority interest was significantly higher
as a percentage of revenues at 20% for the nine months ended September 30, 2000
compared to 12% for the nine months ended September 30, 1999. This was due
primarily to the Company having income from operations of $2,165,120 for the
nine months ended September 30, 2000, compared to $493,970 for the nine months
ended September 30, 1999.
GENERAL
Global Outdoors, Inc. (the "Company" or "Global") is the principal owner of
The Outdoor Channel, Inc. which owns and operates The Outdoor Channel ("The
Outdoor Channel" or "Channel"), the first national television network devoted
primarily to traditional outdoor activities, such as hunting, fishing, shooting
sports, rodeo and recreational gold prospecting. The Company also owns and
operates related businesses which serve the interests 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,
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Inc. ("GPAA") and the Trips Division. Lost Dutchman's is a national recreational
gold prospecting campground club with properties in California, Alaska, Oregon,
Nevada, Arizona, Colorado, Georgia, South Carolina and North Carolina. GPAA is
the largest recreational gold prospecting club in the world. GPAA also sells
products and services related to recreational gold prospecting and is the
publisher of the Gold Prospector magazine. The Company's Trips and Outings
Division sponsors unique recreational prospecting trips to the historic Mother
Lode area of California and to the Company's 2300 acre camp, located 11 miles
west of Nome, Alaska.
The Company has been selling its GPAA club memberships since its
incorporation in 1984. From 1968 to 1984, GPAA memberships were sold by the
proprietorship owned by the Company's founders. GPAA membership sales took a
marked upswing in 1992 in conjunction with the airing of the "Gold Prospector
Show," a show the Company has owned and produced since 1990. During 1992, the
"Gold Prospector Show" was broadcast on various television and cable channels,
for which the Company purchased air time. In 1993, GPAA launched The Outdoor
Channel and, since then, broadcasts of the "Gold Prospector Show" and related
sales of GPAA memberships have occurred principally through The Outdoor Channel.
The Company intends that The Outdoor Channel be used as a primary vehicle to
promote the Company's services and products and anticipates that it will be a
factor in the future growth of GPAA, Lost Dutchman's and the Trips Division. In
that regard, in 1998 the Company entered into a long term contract with The
Outdoor Channel whereby the Company has the rights to ten hours of programming
time and thirty sixty second advertising spots per week. The Outdoor Channel
became profitable and cash flow positive in the second quarter of 1999.
Subsequently, the Company has directed more resources to other Company
divisions. For example, in September 1999, the Company commenced airing
"Prospecting America" on The Outdoor Channel. Prospecting America, hosted by
Perry Massie, is a new series produced by the Company's television production
unit.
Although The Outdoor Channel is not aligned with any sizable
entertainment or cable company, as are many emerging channels, it has achieved
substantial visibility in the cable industry. The Outdoor Channel is committed
to converting visibility for the Channel's programming into greater distribution
in cable households. Greater distribution will allow The Outdoor Channel to
charge higher advertising rates, command higher subscriber fees from cable
affiliates, attract more advertisers and receive greater revenues for the
Company's products.
In 1998, The Outdoor Channel signed an affiliation agreement with
EchoStar Satellite Corporation ("EchoStar"), one of the largest direct broadcast
satellite companies ("DBS") in the U.S. with approximately four million
subscribers. The Outdoor Channel's launch on EchoStar's Dish Network occurred in
December 1998. Commencing February 1, 1999, The Outdoor Channel has been
available on the Dish Network on an al a carte basis (i.e stand alone) for a fee
of $1.99 per month. The Channel receives a significant portion of the monthly a
la carte subscriber fees. In April 2000, The Outdoor Channel was also launched
on the Dish Network's America's Top 150 package. As of November 2000 there were
approximately 1,000,000 Dish Network subscribers that received The Outdoor
Channel.
In May 2000, The Outdoor Channel signed a national affiliation
agreement with Cox Communications one of the largest multi system cable
operators ("MSOs") in the U.S.
A primary objective of the Company is for The Outdoor Channel to obtain
distribution. To accomplish this objective the Channel seeks to sign national
carriage agreements with MSOs and thereafter carriage agreements with the MSOs'
individual cable affiliates. Efforts to obtain distribution for The Outdoor
Channel to date have largely been focused on areas where there are the greatest
number of outdoor enthusiasts, mainly in rural areas of the United States. As of
November 2000 The Outdoor Channel was launched on approximately 2,500 cable
systems with approximately 6.2 million subscribers. The Outdoor Channel is under
contract with or has signed national carriage agreements with over 75 of the top
100 multi-system cable operators representing over 40 million potential
households.
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On October 19, 2000 the Board of Directors of The Outdoor Channel
authorized the purchase by The Outdoor Channel of up to 100,000 shares of the
common stock of Global Outdoors in the over the counter public market. As of
November 13, 2000, The Outdoor Channel had purchased approximately 30,000 shares
of Global Outdoors common stock pursuant to this authorization.
On October 27, 2000, the Company announced that The Outdoor Channel is
exploring strategic alternatives to bolster its growth and enhance value. These
alternatives include strategic investment or equity financing. As of November
13, 2000, The Outdoor Channel had not entered into any strategic alternative
agreements. However, The Outdoor Channel is actively evaluating its strategic
alternative options.
As of November 2000, the Company is generating sufficient cash flow
from operations to meet its short- term cash flow requirements. The Outdoor
Channel is also meeting its short-term cash flow requirements and is profitable.
Management believes that the Company's existing cash resources and anticipated
cash flow from operations will be sufficient to fund the Company's operations at
current and moderately expanded levels for the next twelve months. In the event
that the Company desires to grow at an accelerated rate, to the extent that its
anticipated cash flow is insufficient to finance the Company's working capital
requirements, the Company could be required to seek financing. There can be no
assurance that equity or debt financing will be available if needed, or, if
available, will be on terms favorable to the Company or its shareholders.
Significant dilution may be incurred by present shareholders as a result of any
such financing. At the current level of operations, the Company is retiring some
of its existing debt and intends to make further improvements to some of its
other properties. At the current level of operations, the Channel has increased
its promotional activities and has augmented its professional staff. The Outdoor
Channel has retired some of its debt with the Company in the first nine months
of 2000 and intends on retiring the remaining portions of said debt in the
fourth quarter of 2000. The Company presently intends to utilize such funds for
working capital, to be in a position to retire a portion of its loans and to
make Lost Dutchman's and GPAA acquisitions and improvements.
Since July 30, 1997, the Company's Common Stock has been traded on the
NASD's over the counter Bulletin Board under the symbol "GLRS." Price quotes on
the Company's Common Stock can be obtained from any stockbroker. Also, price
quotes can be obtained from a number of other sources including internet sites
on America On Line, Yahoo Finance and cnbc.com.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
Exhibit
Number
------
27 Financial Data Schedule (SEC filing only).
(b) Reports on Form 8-K
-------------------
None.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GLOBAL OUTDOORS, INC.
(Registrant)
Dated: November 14, 2000 By: /s/ PERRY T. MASSIE
-----------------------------------
PERRY T. MASSIE,
President and Chief
Executive Officer
Dated: November 14, 2000 By: /s/ RONALD D. WARD
-----------------------------------
RONALD D. WARD,
Controller
(Principal Financial Officer)
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