10-Q 1 form10q.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2003 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from _______ to ______ Commission file number: 000-27185 GLOBAL NETWORK, INC. (Exact name of small business issuer as specified in its charter) Nevada 88-0367123 ------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 575 Madison Avenue, 10th Floor, New York, New York 10022 -------------------------------------------------------------------------------- (Address of principal executive offices) 212-605-0431 -------------------------------------------------------------------------------- (Issuer's telephone number) Not Applicable -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the registrant 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 [x] No [ ] State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 49,762,959 Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X] Part I Financial Information Item 1. Financial Statements See financial statements beginning on page F-1. Item 2. Management's Discussion and Analysis or Plan of Operation Except for historical information, the material contained in this Management's Discussion and Analysis or Plan of Operation is forward-looking. This discussion includes, in addition to historical information, forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from the results discussed in these forward-looking statements. For the purposes of the safe harbor protection for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995, readers are urged to review the list of certain important factors set forth in Cautionary Statement for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995, which is set forth below after Liquidity and Capital Resources. Significant Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to accounts receivable, computer equipment, capitalized software development costs, stock based compensation, income taxes and contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The accounting policies and estimates used as of December 31, 2002, which are explained in the notes to the consolidated financial statements in the Company's previously filed Form 10-KSB for the year ended December 31, 2002, have been applied consistently during the six months ended June 30, 2003. Results of Operations: During the second half of 2002, we received patent approval for our proprietary software, completed our marketing plans and began recognizing the benefits of various strategic alliances which are expected to provide for a more continuous revenue stream. Accordingly, we are no longer considered a development stage company for accounting purposes. Three months ended June 30, 2003 as compared to the three months ended June 30, 2002: 1 Revenues: Revenues for the three months ended June 30, 2003 were $180,000 as compared with $70,000 for the three months ended June 30, 2002, representing an increase of $110,000 or 157%. Revenues for the three months ended June 30, 2003 include $67,000 of royalties charged for use of our proprietary software. There was no such revenue for the comparable three months ended June 30, 2002. The increased revenues from advertising were attributable to increased acceptance of our proprietary software, improved methods used for tracking and placement for advertisers and enhanced relationships with major advertising agencies. Cost of Revenues: Cost of revenues for the three months ended June 30, 2003 was $44,000 as compared with $21,000 for the three months ended June 30, 2002, representing an increase of $23,000 or 110%. As a result of the increase in our revenues, our gross profit for the three months ended June 30, 2003 was $136,000 as compared with $49,000 for the three months ended June 30, 2002. The increase in our gross profit as a whole results from the fact that revenues include royalties for which there are no offsetting costs. Cost of revenues associated with advertising were 39% and 30% for the three months ended June 30, 2003 and 2002, respectively. The increase in cost of revenues associated with advertising results from cost increases not passed on to customers. Selling, General and Administrative Expenses: Selling, general and administrative expenses for the three months ended June 30, 2003 was $397,000 as compared with $509,000 for the three months ended June 30, 2002, representing a decrease of $112,000 or 22%. The decrease in these costs is primarily a result of management's effort to better contain costs. In addition, during the three months ended June 30, 2002, we recognized a non-cash charge of $163,600 associated with the issuance of 1,270,000 shares of our common stock which were given to consultants for investment services, public relations and marketing services and assistance with the maintenance and updating of our proprietary software. No such non-cash charges were incurred during the six months ended June 30, 2003. Loss from Operations: Loss from operations for the three months ended June 30, 2003 was $(261,000) as compared with $(460,000) for the three months ended June 30, 2002. The decrease in loss from operations was primarily attributable to our improved gross margins and our reductions in selling, general and administrative expenses as described above. Net Loss: Net loss was $(263,000) for the three months ended June 30, 2003 as compared with $(464,000) for the three months ended June 30, 2002. Six months ended June 30, 2003 as compared to the six months ended June 30, 2002: 2 Revenues: Revenues for the six months ended June 30, 2003 were $322,000 as compared with $121,000 for the six months ended June 30, 2002, representing an increase of $201,000 or 166%. Revenues for the six months ended June 30, 2003 include $130,000 of royalties charged for use of our proprietary software. We had no such revenue for the comparable six months ended June 30, 2002. The increased revenues from advertising were attributable to increased acceptance of our proprietary software, improved methods used for tracking and placement for advertisers and enhanced relationships with major advertising agencies. Cost of Revenues: Cost of revenues for the six months ended June 30, 2003 was $72,000 as compared with $35,000 for the six months ended June 30, 2002, representing an increase of $37,000 or 106%. As a result of the increase in our revenues, our gross profit for the six months ended June 30, 2003 was $250,000 as compared with $86,000 for the six months ended June 30, 2002. The increase in our gross profit is attributable to the inclusion of royalties for which there are no offsetting costs. Cost of revenues associated with advertising was 38% and 29% for the six months ended June 30, 2003 and 2002, respectively. The increase in cost of revenues associated with advertising results from cost increases not passed on to customers. Selling, General and Administrative Expenses: Selling, general and administrative expenses for the six months ended June 30, 2003 was $729,000 as compared with $1,162,000 for the six months ended June 30, 2002, representing a decrease of $433,000 or 37%. The decrease in these costs is primarily a result of management's effort to better contain costs. In addition, during the six months ended June 30, 2002, we recognized a non-cash charge of $572,600 associated with the issuance of 4,420,000 shares of our common stock, of which 2,000,000 shares with a fair value of $260,000 were given to members of our Board of Directors for services rendered and the remaining 2,420,000 shares with a fair value of $312,600 were given to consultants for investment services, public relations and marketing services and assistance with the maintenance and updating of our proprietary software. No such non-cash charges were incurred during the six months ended June 30, 2003. Loss from Operations: Loss from operations for the six months ended June 30, 2003 was $(478,000) as compared with $(1,076,000) for the six months ended June 30, 2002. The decrease in loss from operations was primarily attributable to our improved gross margins and our reductions in selling, general and administrative expenses as described above. Net Loss: Net loss was $(483,000) for the six months ended June 30, 2003 as compared with $(1,084,000) for the six months ended June 30, 2002. 3 Liquidity and Capital Resources Our condensed consolidated financial statements have been prepared assuming that we will continue as a going concern. We only generated revenues of approximately $322,000 during the six months ended June 30, 2003. As a result, in part, of our limited revenues, we incurred a net loss of approximately $483,000 and negative cash flows from operating activities of $369,000 during the six months ended June 30, 2003. We had a cash balance of only $12,000 and an accumulated deficit of approximately $8,631,000 as of June 30, 2003. In addition, we believe that we will continue to incur net losses and negative cash flows from operating activities through at least June 30, 2004. These matters raise substantial doubt about our ability to continue as a going concern. To enable us to continue as a going concern through at least the twelve-month period ending June 30, 2004, we plan to continue to seek opportunities to increase revenues through strategic alliances in the advertising industry, in addition to those already formed, and the licensing or sale of our proprietary software for which we were issued Patent #6,401,075 on June 4, 2002. We intend to execute a series of strategic presentations in New York, Chicago and Los Angeles. We have entered into an agreement with ValuClick affording us additional sales representation and revenue opportunities. During the six months ended June 30, 2003, we raised approximately $114,000 through the sale of shares of common stock and we intend to continue to seek additional equity and/or debt financing for the Company. Because we have limited fixed costs, we believe we will have the ability to curtail our cash usage without causing a material impact on our overall operations during the twelve-month period ending June 30, 2004. As a result, we believe, but cannot assure, that we will have sufficient resources and will be able to continue to operate through at least June 30, 2004. Cash Flow from Operating Activities During the six months ended June 30, 2003 and 2002, we used approximately $369,000 and $394,000, respectively, in our operating activities, primarily to fund our net losses. Cash Flow from Investing Activities During the six months ended June 30, 2003 and 2002, we used approximately $11,000 and $5,000, respectively, in our investing activities for the purchases of computer equipment. Cash Flow From Financing Activities During the six months ended June 30, 2003, we had net cash inflow of $325,000 as compared with $565,000 for the six months ended June 30, 2002. The decrease resulted primarily from a reduction in the proceeds from sales of common stock through private placements. During the six months ended June 30, 2003, we raised $114,000, net of expenses of $4,000, through the sale of 1,846,717 shares of common stock as compared with $581,000, net of expenses of $34,500, through the sale of 7,982,136 shares of common stock during the six months ended June 30, 2002. During the six months ended June 30, 2003, we also received proceeds of $10,000 from the payments of a subscription receivable from a prior sale of common stock. During the six months ended June 30, 2003, we purchased 10,000 shares of our common stock for our treasury on the open market at a cost of $3,500. During the six months ended 4 June 30, 2002, we purchased 21,000 shares of our common stock for our treasury on the open market at a cost of $4,582. During the six months ended June 30, 2003, we also received proceeds of $218,000 from loans that are payable through the issuance of 2,030,500 shares of common stock at such time as we become authorized to issue these shares through an increase in our authorized capital. We will require additional capital during the remainder of 2003 to continue to implement our business strategy. Such additional capital may be raised through public or private financings, as well as through borrowings and other resources. To the extent that additional capital is raised through the sale of equity or equity-related securities, the issuance of such securities could result in dilution to our stockholders. No assurance can be given, however, that we will have access to the capital markets in the future, or that financing will be available on acceptable terms to satisfy our cash requirements to implement our business strategy. If we are unable to access the capital markets or obtain acceptable financing, our results of operations and financial conditions could be materially and adversely affected. If adequate funds are not available to us, we may be required to curtail operations significantly or to obtain funds through entering into arrangements with collaborative partners or others that may require us to relinquish rights to our technology. While we have begun to receive commercial revenues, there can be no assurance that our revenue growth will continue or that we will be able to provide adequate cash to sustain our operations. Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995 Certain statements contained in our Form 10-QSB contain "forward-looking statements" within the meaning of the private Securities Litigation Reform Act of 1995. These are statements that do not relate strictly to historical or current facts. Such forward-looking statements involve known and unknown risks and uncertainties. Our actual results could differ materially from the results discussed in the forward-looking statements. Factors that could cause or contribute to such differences are discussed below. These risks and uncertainties include, without limitation: o the rate of market development and acceptance of our technology; o the limited revenues and significant operating losses we have granted to date; o the possibility of significant ongoing capital requirements; o the loss of any significant customer; o our ability to compete successfully with current or future competitors; o our ability to secure additional financing as and when necessary; o our ability to retain the services of our key management, and to attract new members of the management team; o our ability to effect and retain appropriate patent, copyright and trademark protection of our products; and 5 o our ability to achieve adequate levels of revenue to recover our investment in capitalized software development costs. For the purpose of the safe harbor protection for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995, readers are urged to review the list of certain important factors set forth in Cautionary Statement for Purpose of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995. We undertake no obligation to release publicly any revisions to the forward-looking statements or to reflect events or circumstances occurring after the date of this Form 10-QSB. Item 3. Controls and Procedures (a) Evaluation of disclosure controls and procedures. As of the end of the period covered by this report, management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon, and as of the date of that evaluation, our principal executive officer and principal financial officer concluded that other than improvements over controls with respect to the issuance and sale of common stock and other equity instruments, our disclosure controls and procedures effectively provided reasonable assurance that information required to be disclosed in the reports that we file or submit under the Securities and Exchange Act of 1934 are recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission's rules and forms. (b) Changes in internal controls. There was no change in internal controls over financial reporting during the quarter ended June 30, 2003 that has materially affected, or that is reasonably likely to materially affect, our internal control over financial reporting. 6 Part II Other Information Item 1. Legal Proceedings None. Item 2. Changes in Securities During the six months ended June 30, 2003, we received proceeds of $114,000, net of payments for related costs and expenses of $4,000, from the sale and issuance of 1,280,917 shares of common stock that were made through private placements intended to be exempt from registration under the Securities Act of 1933. In addition, a total of 565,800 shares were issued for financial services related to private placements. Defaults Upon Senior Securities Not applicable. Item 3. Submission of Matters to a Vote of Security Holders None. Item 4. Other Information None. Item 5. Exhibits and Reports on Form 8-K (a) Exhibits. Exhibit 31.1 Certification of Chief Executive/Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Exhibit 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K We did not file any reports on Form 8-K during the quarter for which this report is filed. 7 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. August 19, 2003 Global Network, Inc. /s/ James C. Mason -------------------------------------------- James C. Mason, CEO, President, Treasurer and Director (Principal Executive, Financial and Accounting Officer) 8 GLOBAL NETWORK, INC. AND SUBSIDIARY I N D E X PAGE CONDENSED CONSOLIDATED BALANCE SHEET JUNE 30, 2003 (Unaudited) F-2 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2003 AND 2002 (Unaudited) F-3 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) SIX MONTHS ENDED JUNE 30, 2003 F-4 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 2003 AND 2002 (Unaudited) F-5 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) F-6/10 * * * F-1 GLOBAL NETWORK, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEET JUNE 30, 2003 (Unaudited)

See Notes to Condensed Consolidated Financial Statements. F-2 GLOBAL NETWORK, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS SIX AND THREE MONTHS ENDED JUNE 30, 2003 AND 2002 (Unaudited)

See Notes to Condensed Consolidated Financial Statements. F-3 GLOBAL NETWORK, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY SIX MONTHS ENDED JUNE 30, 2003 (Unaudited)

F-4 See Notes to Condensed Consolidated Financial Statements. GLOBAL NETWORK, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 2003 AND 2002 (Unaudited)

See Notes to Condensed Consolidated Financial Statements. F-5 GLOBAL NETWORK, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1 - Organization and business: Global Network, Inc. ("GNI") and its subsidiary (collectively, the "Company") began to develop business operations comprised of packaging and selling online banner advertising on newspaper web sites to national advertisers on April 26, 1999. The Company has developed a proprietary software system that allows national advertisers and their ad agencies to place ads on multiple newspaper web sites at one time and to target a specific demographic by having the advertisement posted in the section of the newspaper that they choose. During the period from the inception of its operations on April 26, 1999 through June 30, 2002, the Company did not generate any significant revenues and, accordingly, it was in the development stage during that period for accounting purposes and was required to make certain disclosures related to such development. During the period from July 1, 2002 to December 31, 2002, the Company received patent approval for its proprietary software, completed its marketing plans and began recognizing the benefits of various strategic alliances that are expected to provide a more continuous revenue stream. Accordingly, the Company is no longer considered a development stage company for accounting purposes. 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 June 30, 2003, its results of operations for the six and three months ended June 30, 2003 and 2002, its changes in stockholders' equity for the three months ended June 30, 2003 and its cash flows for the six months ended June 30, 2003 and 2002. Pursuant to the rules and regulations of the United States Securities and Exchange Commission (the "SEC"), certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed in or omitted from these condensed consolidated 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 consolidated financial statements as of and for the periods ended December 31, 2002 and the notes thereto (the "Audited Financial Statements") and the other information included in the Company's Annual Report on Form 10-KSB (the "Form 10-KSB") for the year ended December 31, 2002 that was previously filed with the SEC. The results of the Company's operations for the six and three months ended June 30, 2003 are not necessarily indicative of the results of operations for the full year ending December 31, 2003. F-6 GLOBAL NETWORK, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 2 - Net earnings (loss) per common share: The Company presents "basic" earnings (loss) per common share and, if applicable, it will present "diluted" earnings per common share pursuant to the provisions of Statement of Financial Accounting Standards No. 128, "Earnings per Share". Generally, basic earnings (loss) per common share is calculated by dividing net income or loss 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 issuable upon the exercise of options, were issued during the period. The Company had options for the purchase of 100,000 shares of common stock outstanding during a portion of the six months ended June 30, 2003 and 295,000 shares of common stock during all of the six months ended June 30, 2002. Since the Company had losses for the six and three months ended June 30, 2003 and 2002, the assumed effects of the exercise of the outstanding options and the application of the treasury stock method would have been anti-dilutive and, therefore, diluted per share amounts have not been presented in the accompanying condensed consolidated statements of operations for those periods. As of June 30, 2003, the Company had no potentially dilutive equity instruments outstanding. Note 3 - Basis of presentation: The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company only generated revenues of approximately $322,000 during the six months ended June 30, 2003. As a result, in part, of its limited revenues, the Company incurred a net loss of $483,000 and negative cash flows from operating activities of $369,000 during the six months ended June 30, 2003. The Company had a cash balance of approximately $12,000 and an accumulated deficit of approximately $8,631,000 as of June 30, 2003. In addition, management believes that the Company will continue to incur net losses and negative cash flows from operating activities through at least June 30, 2004. These matters raise substantial doubt about the Company's ability to continue as a going concern. F-7 GLOBAL NETWORK, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 3 - Basis of presentation (concluded): To enable the Company to continue as a going concern through at least the twelve-month period ending June 30, 2004, management plans to continue to seek opportunities to increase revenues through strategic alliances in the advertising industry, in addition to those already formed, and the licensing or sale of the Company's proprietary software that received patent approval during the second half of 2002. The Company raised $114,000 through the sale of shares of common stock during the six months ended June 30, 2003 (see Note 6 herein) and $1,304,000 through the sale of shares of common stock during the year ended December 31, 2002. Management intends to continue to seek additional equity and/or debt financing for the Company. Since the Company has limited fixed costs, management believes it will have the ability to curtail the Company's cash usage without causing a material impact on its overall operations during the twelve-month period ending June 30, 2004. As a result, management believes, but cannot assure, that the Company will have sufficient resources and will be able to continue to operate through at least June 30, 2004. The accompanying condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue its operations as a going concern. Note 4 - Advances to officer: Advances to officer of $154,020 as of June 30, 2003 were noninterest bearing and due on demand. Note 5 - Income taxes: As of June 30, 2003, the Company had net operating loss carryforwards of approximately $8,375,000 available to reduce future Federal taxable income which, if not used, will expire at various dates through 2023. The Company had no other material temporary differences as of that date. Due to the uncertainties related to, among other things, the changes in the ownership of the Company, which could subject those loss carryforwards to substantial annual limitations, and the extent and timing of its future taxable income, the Company offset the deferred tax assets attributable to the potential benefits of approximately $3,350,000 from the utilization of those net operating loss carryforwards by an equivalent valuation allowance as of June 30, 2003. The Company had also offset the potential benefits from net operating loss carryforwards by equivalent valuation allowances during the years ended December 31, 2002 and 2001. As a result of the increases in the valuation allowance of $160,000 and $68,000 during the six and three months ended June 30, 2003, respectively, and $725,000 and $197,000 during the six and three months ended June 30, 2002, respectively, there are no credits for income taxes reflected in the accompanying condensed consolidated statements of operations to offset pre-tax losses. F-8 GLOBAL NETWORK, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 6 - Other notes payable: Other notes payable, which had a balance of $218,050 at June 30, 2003, bear interest at an annual rate of 5%. The Company has agreed to repay the notes through the issuance of 2,030,500 shares of its common stock at such time as it becomes authorized to issue a sufficient number of shares to make the payment. Note 7 - Stockholders' equity: Preferred stock authorized: The Company's Articles of Incorporation authorize the issuance of up to 5,000,000 shares of preferred stock with a par value of $.001 per share. The preferred stock may be issued in one or more series, with terms and preferences to be determined by the Company's Board of Directors. No shares of preferred stock had been issued as of June 30, 2003 although certain shares of common stock issued during the year ended December 31, 2002 will be converted into shares of preferred stock as explained below. Issuances of common stock: During the six months ended June 30, 2003, the Company received proceeds of $114,092, net of payments for related costs and expenses of $4,000, from the sale and issuance of 1,280,917 shares of common stock that were made through private placements intended to be exempt from registration under the Securities Act of 1933 (the "Act"). In addition, a total of 565,800 shares were issued for financial services related to the private placements. A total of 4,500,000 shares of common stock sold through private placements in prior years will be converted into 4,500,000 shares of preferred stock upon the proper filing of the certificate of designation with respect to the preferred stock. Holders of the preferred shares will be entitled to receive dividends at the annual rate of 8% and will have voting rights equivalent to those of a holder of common stock. Treasury stock: During 2001 and 2000, the Board of Directors authorized the repurchase by the Company of up to 300,000 additional shares of its outstanding common stock. During the six months ended June 30, 2003, the Company repurchased 10,000 shares at a cost of $3,500. As of June 30, 2003, the Company had repurchased a total of 166,000 shares pursuant to the authorization by the Board of Directors. F-9 GLOBAL NETWORK, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 8 - Other related party transactions: Selling, general and administrative expenses include charges by related parties for client entertainment, office and secretarial services and other office expenses totaling approximately $134,000 and $73,000 for the six and three months ended June 30, 2003, respectively, and $66,000 and $19,000 for the six and three months ended June 30, 2002, respectively. Note 9 - Subsequent event: During the period from July 1, 2003 through August 11, 2003, the Company agreed to sell 220,000 shares of common stock for $18,000 through a private placement. The sale will be consummated and the shares will be issued at such time as the Company becomes authorized to issue a sufficient number of shares to make the payment. * * * F-10

GLOBAL NETWORK INC 10-Q