U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly report Pursuant to 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 Securities
Exchange Act of 1934 for the transition period from ____________ to
_____________.
Commission file number: 0-27637
Global Entertainment Holdings/Equities, Inc.
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(Name of small business issuer in its charter)
Colorado 47-0811483
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
703 Waterford Way, Suite 690, Miami, Florida 33126
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(Address of principal executive offices) (Zip Code)
501 Brickell Key Drive, Suite 603, Miami, Florida 33131
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(Former Address of principal executive offices) (Zip Code)
Issuer's telephone number: (305) 374-2036
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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 [ ]
As of August 11, 2003, there were 10,560,296 outstanding shares of the issuer's
common stock, par value $0.001.
INDEX
Page No.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets - June 30, 2003 (Unaudited)
And December 31, 2002...............................................3
Consolidated Unaudited Statements of Operations - For the Three
and Six Months Ended June 30, 2003 and June 30, 2002................4
Consolidated Unaudited Statements of Cash Flows - For the Three
and Six Months Ended June 30, 2003 and June 30, 2002................5
Notes to Consolidated Unaudited Financial Statements..................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.............8
ITEM 3. CONTROLS AND PROCEDURES..............................................11
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.....................................13
ITEM 7. SIGNATURES...........................................................14
CERTIFICATIONS......................................Filed as Exhibits 31 and 32
2
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements.
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC. & SUBSIDIARIES
Consolidated Balance Sheets
As of June 30, As of December 31
2003 2002
(unaudited) (see Note 1)
--------------- ----------------
A S S E T S
Current Assets:
Cash $ 166,321 $ 260,494
Accounts receivable, net of
allowance for doubtful accounts 354,345 749,486
Notes receivable 578,779 1,019,343
Other receivables 14,160 16,031
Prepaid expenses 81,752 84,588
--------------- -----------------
Total Current Assets 1,195,357 2,129,942
Property & Equipment
Office Improvements 38,833 33,297
Computer Equipment 1,994,982 1,846,739
Furniture & Fixtures 278,797 226,480
Other 216,233 201,799
--------------- -----------------
2,528,845 2,308,315
Less accumulated depreciation (1,541,544) (1,324,234)
--------------- -----------------
Total Property & Equipment 987,301 984,081
Other Assets
Software developed for licensing, net 990,128 1,148,063
Other assets 67,208 60,866
--------------- -----------------
Total Other Assets 1,057,336 1,208,929
--------------- -----------------
Total Assets $ 3,239,994 $ 4,322,952
=============== =================
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses 520,256 692,515
Current Portion of Notes Payable 300,269 479,515
Deferred revenue 14,274 129,242
Income Taxes Payable 93,143 84,802
--------------- -----------------
Total Current Liabilities $ 927,941 $ 1,386,074
--------------- -----------------
Long-term debt 16,644 -
Contingencies - -
Stockholders' Equity
Preferred Stock, 25,000,000 Shares Authorized,
None Issued - -
Common Stock, 100,000,000 Shares Authorized 10,561 10,376
Par Value of $.001; 10,560,296 &
10,375,776 Shares Issued and
Outstanding Respectively
Paid in Capital 3,256,819 3,228,899
Retained Earnings(Deficit) (524,671) 144,903
Treasury Stock, at Cost (447,300) (447,300)
--------------- -----------------
Net Stockholders' Equity 2,295,409 2,936,878
--------------- -----------------
Total Liabilities and
Stockholders' Equity $ 3,239,994 $ 4,322,952
=============== =================
See accompanying summary of accounting principles and notes to consolidated
financial statements.
3
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC. & SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended For the Six Months Ended
June 30 June 30
-------------------------- --------------------------
2003 2002 2003 2002
------------ ----------- ------------ -----------
Total Revenues $ 975,486 $ 1,159,863 $ 2,313,671 $ 2,592,098
Cost of Sales 783,773 818,924 1,577,128 1,613,195
------------ ------------ ------------ ------------
Gross Profit 191,713 340,939 736,543 978,903
Expenses
Uncollectible Fees Written Off - 40,270 - 76,074
Depreciation & Amortization 111,241 198,740 223,595 384,103
Rents 40,162 41,691 81,871 83,684
Professional Fees 101,652 89,538 247,783 138,879
Financial & Investor Relations 10,348 - 25,646 -
Administrative Expenses 46,571 131,016 153,154 211,087
Advertising 28,360 45,860 95,822 128,985
Wages and Salaries 276,640 127,987 578,400 261,886
------------ ------------ ------------ ------------
Total Expenses $ 614,974 $ 675,102 $ 1,406,271 $ 1,284,698
------------ ------------ ------------ ------------
(Loss) from Operations (423,261) (334,163) (669,728) (305,795)
Other Income(Expenses)
Interest(Expense) (6,966) (20,532) (20,036) (51,538)
Interest Income 9,934 353 28,680 1,173
------------ ------------ ------------ ------------
Total Other Income (Expenses) 2,968 (20,179) 8,644 (50,365)
------------ ------------ ------------ ------------
Loss Before Taxes (420,293) (354,342) (661,084) (356,160)
Provisions for Income Tax (8,341) (1,624) (8,490) (15,281)
------------ ------------ ------------ ------------
Net Loss $ (428,634) $ (355,966) $ (669,574) $ (371,441)
============ ============ ============ ============
Basic and Diluted Earnings Per Share $ (0.04) $ (0.03) $ (0.06) $ (0.03)
Weighted Average Shares 10,560,296 10,375,776 10,480,672 10,375,776
See accompanying summary of accounting principles and notes to consolidated
financial statements.
4
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC. & SUBSIDIARIES
Statements of Cash Flows
(Unaudited)
For the Six Months Ended
June 30
-----------------------------
2003 2002
-------------- -------------
Cash Flows from Operating Activities
Net Loss $ (669,574) $ (371,441)
Adjustments to Reconcile Net (Loss) to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 562,357 614,242
Uncollectible Fees Written Off - 66,574
Stock Issued for Services 28,105 2,656
Change in Operating Assets & Liabilities
Decrease in Fees Receivable 395,142 300,788
(Increase) Decrease in Prepaid Expenses 2,835 (58,346)
(Increase) in Security Deposits (5,577) (12,890)
Decrease in Other Receivables 1,872 20,097
Decrease in Notes Receivable 440,565 1,268
Increase (Decrease) in Accounts Payable (181,613) 67,196
Increase in Accrued Expenses 17,694 8,299
Increase (Decrease) in Deferred Revenue (114,968) 106,614
Other - 17,356
-------------- -------------
Net Cash Provided by
Operating Activities $ 476,838 $ 762,413
-------------- -------------
Cash Flows from Investing Activities
Purchase of equipment and software (220,529) (295,276)
Development of software (187,880) (315,454)
Receipts on long term note receivable - 300,000
-------------- -------------
Net Cash Used in Investing Activities $ (408,409) $ (310,730)
-------------- -------------
Cash Flows from Financing Activities
Repayment of Current Notes Payable (179,246) (44,852)
Repayment of Long-Term Debt - (365,404)
Increase in Long-Term Debt 16,644 -
-------------- -------------
Net Cash (Used) by Financing Activities $ (162,602) $ (410,256)
-------------- -------------
Increase (Decrease) in Cash & Cash Equivalents (94,173) 41,427
Cash at Beginning of Period 260,494 189,091
-------------- -------------
Cash at End of Period $ 166,321 $ 230,518
============== =============
Disclosures from Operating Activities:
Interest Expense Paid $ 20,036 $ 51,538
Taxes Paid $ - $ -
See accompanying summary of accounting principles and notes to consolidated
financial statements.
5
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2003 and 2002
(Unaudited)
NOTE 1 - GENERAL
The Company was incorporated on July 10, 1997, in Colorado as Masadi Resources,
Inc. On February 10, 1998, the name was changed to International Beverage
Corporation. On August 27, 1998, International Beverage Corporation merged with
Global Entertainment Holdings/Equities, Inc., and subsequently the surviving
corporation became known as Global Entertainment Holdings/Equities, Inc.
Principles of Consolidation
The Company currently has two wholly owned subsidiaries; IGW Software, Inc.,
(IGW), a Netherlands Antilles Corporation in Curacao, Netherlands Antilles, and
Prevail Online, Inc., (Prevail), a Colorado Corporation. IGW is engaged in the
conception and creation of computer software programs for the gaming and
wagering industry. Prevail was purchased in August of 1999 and it was engaged in
the creation and operation of websites. The accompanying consolidated financial
statements include the accounts of the company and its wholly-owned
subsidiaries. Inter-company transactions and balances have been eliminated in
consolidation.
NOTE 2 - BASIS OF PRESENTATION
The unaudited financial statements included herein have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six months ended June 30, 2003 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2003. The December 31, 2002 balance sheet was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles. Certain information and note disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations relating to interim consolidated financial statements. For
further information, the statements should be read in conjunction with the
financial statements and notes thereto included in the Company's financial
statements and notes included in Form 10-KSB, as amended, for the year ended
December 31, 2002.
The Company adopted Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share," which simplifies the computation of earnings per share requiring the
restatement of all prior periods. Basic earnings per share are computed on the
basis of the weighted average number of common shares outstanding during each
year. Diluted earnings per share are computed on the basis of the weighted
average number of common shares and dilutive securities outstanding. Dilutive
securities having an anti-dilutive effect on diluted earnings per share are
excluded from the calculation.
Certain reclassifications were made to the period ended June 30, 2002, financial
statements, in order to conform to the 2003 presentation.
6
NOTE 3 - COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries are not directly involved in internet gaming.
However, the Company has entered into royalty agreements with licensees who are
involved in internet gaming. Some governmental jurisdictions have adopted or are
in the process of reviewing legislation to regulate or prohibit internet gaming.
The uncertainty surrounding the regulation or prohibition of internet gaming
could have a material adverse effect on the Company's business, revenues,
operating results and financial condition.
NOTE 4 ECONOMIC DEPENDENCE
Two licensees accounted for 76.2% of consolidated net revenues for the six month
period ending June 30, 2003. In the corresponding period of fiscal year 2002,
85.2% of consolidated revenues were accounted for by these two licensees. The
loss of one or both of these licensees would have a detrimental effect on
operating results.
NOTE 5 SEGMENT INFORMATION
The Company groups its business into two geographic segments; The United States
of
America and Curacao, Netherlands Antilles.
Software
Management Development
and Marketing (Netherlands
Services (USA) Antilles) Total
-------------- ------------ -----------
Six Months Ended June 30, 2003
Revenues $ - $ 2,313,671 $ 2,313,671
Operating Income(Loss) (953,162) 283,435 (669,728)
Total Assets 279,614 2,960,378 3,239,992
Depreciation and Amortization 18,764 543,593 562,357
Six Months Ended June 30, 2002
Revenues $ 1,853 $ 2,590,245 $ 2,592,098
Operating Income(Loss) (615,306) 309,511 (305,795)
Total Assets 487,520 3,262,637 3,750,157
Depreciation and Amortization 23,486 590,755 614,242
NOTE 6 STOCK OPTIONS
There were no stock options issued during the six months ended June 30, 2003 and
2002.
NOTE 7 RELATED PARTY DEBT
Of the total $300,269 current portion of notes payable, $90,000 is due to a
relative of the company's President and Chief Executive Officer.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
As used herein, the term "Company," "we," "our," and "us" refers to Global
Entertainment Holdings/Equities, Inc., and its subsidiaries and predecessors,
unless otherwise indicated.
Forward-Looking Information
This report contains a number of forward-looking statements, which reflect the
Company's current views with respect to future events and financial performance
including statements regarding the Company's projections, and the interactive
gaming industry. These forward-looking statements are subject to certain risks
and uncertainties that could cause actual results to differ materially from
historical results or those anticipated. In this report, the words
"anticipates", "believes", "expects", "intends", "future", "plans", "targets"
and similar expressions identify forward-looking statements. Readers are
cautioned to not place undue reliance on the forward-looking statements
contained herein, which speak only as of the date hereof. The Company makes no
obligation to publicly revise these forward-looking statements, to reflect
events or circumstances that may arise after the date hereof.
Additionally, these statements are based on certain assumptions that may prove
to be erroneous and are subject to certain risks including, but not limited to,
the Company's dependence on limited cash resources, and its dependence on
certain key personnel within the Company. Accordingly, actual results may
differ, possibly materially, from the predictions contained herein.
Business Overview
- -----------------
We are in the business of providing entertainment based software and services.
Our licensees depend upon our software to improve their success in the online
gaming industry through effective management of the activities on their websites
and player ease of use and enjoyment. Our services are technology based only. We
do not engage in any gaming or wagering activity.
We generate our operating revenues exclusively from Interactive Gaming and
Wagering, N.V., ("IGW") our wholly owned subsidiary, a Netherlands Antilles
corporation. IGW is engaged in the development, licensing and hosting of
proprietary Internet and telephony based gaming software. Other services offered
to licensees include custom software development and professional services. IGW
derives its revenues from licensing fees, software royalties and consulting
services.
Prevail Online, Inc., ("Prevail") our wholly owned subsidiary, a Colorado
corporation, provided information about the online gaming industry through four
website locations. During the six months ended June 30, 2003, Prevail had no
revenues from advertising activities. On May 16, 2003, we transferred the
websites owned by Prevail in exchange for the buyer's release of Prevail's
obligation under a prepaid advertising contract to the buyer. The pre-payment
totaled $21,000 and is included as an offset to administrative expenses
associated with the disposition costs of those assets. Management is currently
re-evaluating Prevail's business activities.
We have created a suite of gaming software products to offer our licensees
better risk management, ease of use and a back office product that simplifies
player and gaming oversight. Our software offers a fully automated online
entertainment experience for the licensee's player. Our online Sportsbook,
Horsebook and Casino software systems are complemented by the player Loyalty
software, the Webmaster Affiliate software and the Call Center software. All
software products are integrated, enabling players to access all of an
operator's affiliated websites seamlessly, using a single account. This
integrated feature results in higher revenues for our licensees, as a result of
giving players easier access to a larger variety of activities.
8
During this reporting period, we have placed greater emphasis on enhancing the
reliability of our existing product suite, primarily addressing concerns and
requested modifications to our products by our licensees. New development has
taken a back seat to the above focus until management feels that our licensees'
expectations and needs are met. We have completed our licensees requests and
have resumed development of new products in June, 2003. Additionally, we have
entered into an agreement with a software provider to co-market their casino
products. This re-prioritization resulted in reduced resources employed in new
products and version releases and shifted to maintenance and enhancement of our
existing software products. Costs incurred in maintenance and enhancements are
expensed as incurred, whereas new products and releases are capitalized and
amortized over three years. The reduced capitalization has contributed to higher
current period expenses which significantly impacted our loss from operations.
Outlook
- -------
Overall revenues for 2003 are expected to be significantly lower than 2002
levels. The anticipated decline in revenue is attributable to various factors.
The primary reason results from the discontinuation of our Marketing Services
activities and the transfer of the four websites out of our Prevail subsidiary.
In 2002, Marketing Services and Prevail were not profitable, although together
they generated $835,151 in revenue during 2002. Additionally, our revenues are
seasonal. Historically, the second and third quarters have been lower revenue
periods in comparison to the first and fourth quarters. The market conditions
for our licensee's in the online gaming industry are not as attractive as they
have been historically. Specifically, online gamers who seek entertainment at
our licensees' websites have a more difficult situation in depositing funds
today. This constriction on Ecommerce invariably decreases the amount of revenue
produced by our licensees and is a significant factor in our diminished growth
for 2003; moreover, there is a possibility that anti-online gaming Ecommerce
legislation may pass in 2003 which could further curtail revenue. Finally, under
an agreement negotiated in 2002, with one of our major licensees, our royalty
rate is subject to a reduction that will occur in 2003. Management has taken
steps to reduce costs, consolidate operations and adjust activities to coincide
with anticipated revenue levels. It is not anticipated that these factors will
influence our liquidity.
On February 19, 2003, we executed a lease for 7,074 square feet of office space
in Miami, Florida. We completed occupying this space as our corporate
headquarters in July, 2003. We have made arrangements to sublease our current
executive offices in Miami, Florida, under which our lease obligation continues
until December, 2004. The new offices will house our executive and
administrative personnel, client support services and software development
activities. We anticipate considerable long term cost savings by consolidating
these activities from our Curacao offices into the Miami office. In the
short-term however, wages and salaries should be higher than normal given the
required redundancies in the anticipated moves. The sublease of our current
offices will result in an estimated $33,000 loss over the remaining term of the
existing lease.
Results of Operations
- ---------------------
Revenues for the six months ending June 30, 2003 and 2002 were composed of the
following elements:
2003 2002
---------- ----------
Royalty Income $2,012,896 $1,970,752
License Fees 72,500 95,000
Bandwidth Services 173,877 170,180
Other Revenue 54,398 356,166
---------- ----------
Total $2,313,671 $2,592,098
9
Royalty income increased two percent to $2,012,896 from $1,970,752 for the six
months ending June 30, 2003 compared to 2002. The decrease in Other Revenue
represents the discontinuation of Marketing Services.
Cost of sales increased nine percent from seventy one percent of sales for the
three months ended June 30, 2002, to eighty percent for the three months ended
June,30 2003. For the six months ended June 30, 2002 compared to the same period
in 2003, the increase was six percent. The increase was primarily due to
activities of the marketing services business and higher amortization of
software development costs. Additionally, software support costs in the first
quarter of this fiscal year were higher than the same period in 2002, as a
result of less development efforts coupled with more effort in product
enhancements. Bandwidth costs were substantially lower in the three month period
ended June 30, 2003 compared to the same time frame in 2002, due to a
renegotiation with our principal supplier to adjust the billing amount to our
seasonal income periods. The following amounts compose cost of sales for each
period:
Three months ended 6/30 Six months ended 6/30
2003 2002 2003 2002
----------------------- --------------------
Amortization of
Proprietary Software $ 172,174 $121,942 $ 338,762 $ 230,139
Bandwidth 58,539 91,640 176,168 185,101
Software support and maintenance 170,574 110,248 357,072 209,540
Salaries 376,268 323,912 683,013 642,828
Marketing Services - 168,883 21,645 340,831
Sponsorship Projects 6,219 2,299 468 4,756
--------- -------- --------- --------
Total $ 783,774 $818,924 $1,577,128 $1,613,195
Expenses increased $121,573 for the six months ended June 30, 2003 compared to
2002. This increase was generated from the increased costs in Professional fees
and Wage expenses. Professional fees increased as a result of legal and
accounting services connected with the complaint we have filed against a former
officer and shareholder, as further described in Part II, Item 1, Legal
Proceedings in our report for the period ended March 31, 2003. Wages and
Salaries increased $316,514 for the six months ended June 30, 2003 as a result
of increased employment levels in the sales, administrative and technical
operations. The following table represents the number of personnel employed in
all departments, for the respective periods:
2003 2002
---- ----
January 46 36
February 45 38
March 43 41
April 43 40
May 39 40
June 36 43
Expenses for the three months ended June 30, 2003 compared to June 30, 2002,
decreased $60,128, primarily due to lower administrative expenses and the
absence of bad debt writeoffs.
Interest expense decreased $13,566 to $6,966 from $20,532 for the three months
ending June 30, 2003 compared to 2002, and $31,502, to $20,036 from $51,538 for
the six months ending June 30, 2003 compared to 2002. The lower interest expense
is due to the principal payments made on notes payable during the year 2002 and
the six months ending June 30, 2003.
10
Interest income increased to $9,934 from $353 for the three months ended June
30, 2003 compared to 2002 and to $28,680 from $1,173 for the six months ending
June 30, 2003 versus 2002. The $9,581 and $27,507 increases for those respective
periods was earned on the conversion of an account receivable to an interest
bearing note receivable during 2002.
The increase in net loss incurred for the three months ending June 30, 2003 of
$72,668, compared to the net loss for the three months ending June 30, 2002 and
the increase in net loss of $298,133 for the six months ending June 30, 2003
compared to 2002, can be attributed to increased wage and salary expense. This
increase in wage and salary expense resulted from lower software capitalization
during these periods due to management's decision to focus resources on
stabilization and improved reliability of our software products in lieu of new
product development.
Liquidity and Capital Resources
- -------------------------------
We do not have any material commitments for capital expenditures. However, we
are committed to moving our corporate headquarters and our data center in July,
2003. These moves will incur expenditures in capital assets and costs of
relocation. We anticipate the impact to cash flow, expenses and assets as
follows:
Direct moving expenses incurred $ 36,700
Deposits required by landlords 85,000
New equipment purchases 303,625
We anticipate funding these costs through a combination of current operating
cash flow and external financing, such as short term leases and demand notes. In
the event we are unable to obtain the required financing, arrangements will be
made with the vendors to extend payment terms to coincide with current operating
cash flow.
We have been advised by a licensee, that a recalculation of prior royalties may
occur in the third or fourth quarter of this year. This is as a result of
certain defalcations occurring to their activities under which they believe
there exists a claim to adjust our previously earned royalties. Because
management believes the licensee is not entitled to recalculate previous
royalties, under the circumstances described by the licensee, and the amount of
the loss cannot be determined at this time, no provision has been recorded to
reflect such an adjustment.
Our principal source of short term liquidity is operating cash flow. A
substantial decrease in revenues could impact the funds from operating cash flow
and jeopardize our ability to meet current obligations. We do not have a credit
line or any alternative means of short term funding. Management is taking steps
to correct this situation.
During the current fiscal year ending December 31, 2003, $395,864 of notes
payable will be due for payment. Of this amount, we have already paid $229,246
during the six months ended June 30, 2003. We anticipate satisfying the balance
of this debt from collections on the notes receivable of $578,779.
Net cash provided from operating activities was $476,838 for the six months
ended June 30, 2003 as compared to $762,413 for the six months ended June 30,
2002. The primary source of cash from operations in the current period was
derived from collections on notes receivable, whereas for the same period in
2002 the primary source was collections on fees receivable as previously
discussed.
11
Net cash used in investing activities in the amount of $408,409 and $310,730 for
the six months ended June 30, 2003 and 2002, respectively, represented primarily
the purchase of fixed assets and the capitalization of software development
costs in both periods.
The following table summarizes the Company's contractual payments and
obligations by period (amounts in thousands):
Contractual Obligations Payment Due by Period
Less Than After
Total 1 year 1-3 years 4 - 5 years 5 years
----- ------ --------- ----------- -------
Operating Leases 1,716 304 1,126 286 -
Total Contractual Cash Obligations $ 1,716 $ 304 $ 1,126 $ 286 $ -
Amounts presented represent real estate leases without offset for anticipated
sub lease of the former executive offices located in Miami, Florida.
Critical Accounting Policies and Estimates
- ------------------------------------------
Our significant accounting policies are described in Note 1 to the consolidated
financial statements included in our annual report filed on form 10-KSB for the
year ended December 31, 2002. The accounting policies used in preparing our
interim 2003 consolidated financial statements are the same as those described
in our annual report.
We believe the critical accounting policies listed below affect significant
judgments and estimates used in the preparation of our consolidated financial
statements, although they are not all inclusive.
Revenue Recognition. We recognize revenues in accordance with the provisions of
the American Institute of Certified Public Accountants' Statement of Position
(SOP) 97-2, "Software Revenue Recognition," as amended by SOP 98-4 and SOP 98-9,
as well as Technical Practice Aids issued from time to time by the American
Institute of Certified Public Accountants, and in accordance with the Securities
and Exchange Commission Staff Accounting Bulletin No. 101, "Revenue Recognition
in Financial Statements." We license software under non-cancelable royalty
agreements and provide related professional services, including consulting,
training, and implementation services, as well as ongoing customer support and
maintenance. Consulting and training services are not essential to the
functionality of our software products
Software Development Costs. Software development costs are expensed as incurred
until technological feasibility is established. Software development costs
incurred subsequent to establishing technological feasibility are capitalized
and amortized over their three year estimated useful lives. Management is
required to use professional judgment in determining whether development costs
meet the criteria for immediate expense or capitalization.
Allowance for Doubtful Accounts. We maintain allowances for doubtful accounts
for estimated losses resulting from the inability of our licensees to make
required payments. If the financial condition of our licensees were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required or revenue could be deferred until
collectibility becomes probable.
Contingencies. We are subject to the possibility of various loss contingencies
in the normal course of business. We accrue for loss contingencies when a loss
is estimable and probable.
12
ITEM 3. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Within 90 days prior to the filing of this quarterly report, the Company's Chief
Executive Officer and its Chief Financial Officer evaluated the Company's
disclosure controls and procedures as required pursuant to Rule 13a-14 under the
Securities and Exchange Act of 1934, as amended. Under rules promulgated by the
SEC, disclosure controls and procedures are defined as those "controls or other
procedures of an issuer that are designed to ensure that information required to
be disclosed by the issuer in the reports filed or submitted by it under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the Commission's rules and forms." Based on this
evaluation, the Chief Executive Officer and Chief Financial Officer determined
that such controls and procedures are effective in timely alerting them to
material information relating to the Company required to be included in the
Company's periodic SEC filings. There were no significant changes in internal
controls that could significantly affect the disclosure controls and procedures
since the date of the evaluation.
13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
See Item 3 of Part II of Form 10-KSB for the year ended December 31, 2002. There
are no new developments related to this previously reported item.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are included herewith:
EXHIBIT NO. DOCUMENT
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Exhibit 31.1 Certification of the Chief Executive Officer required
by Rule 13a-14(a) or Rule 15d-14(a)
Exhibit 31.2 Certification of Chief Financial Officer required by Rule
13a-14(a) or Rule 15d-14(a)
Exhibit 32.1 Certification of Periodic Report by the Chief Executive
Officer as required by Rule 13a-14(b) or Rule 15d-14(b)
and Section 906 of the Sarbanes-Oxley Act of 2002,
18 U.S.C. Section 1350
Exhibit 32.2 Certification of Periodic Report by the Chief Financial
Officer as required by Rule 13a-14(b) or Rule 15d-14(b) and
Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350
(b) The Company filed the following reports on Form 8-K during the quarter for
which this form is filed:
Form 8-K dated May 13, 2003 reporting:
Item 5, Other Events - Disclosure of the Board of Directors resolution
adopting the Certificate of Designation for Series A Preferred Stock.
Additionally, the Board granted the Company's chief executive officer
and Director, preferred share purchase rights by amendment to an
employment agreement.
There were no financial statements filed with this Form 8-K
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this Quarterly Report on
Form 10-QSB to be executed on its behalf by the undersigned, hereunto duly
authorized.
Date: August 14, 2003
Global Entertainment Holdings/Equities, Inc.
/s/ Bryan P. Abboud
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Bryan P. Abboud
President, Chief Executive Officer
and Director (Principal Executive Officer)
/s/ Clinton H. Snyder
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Clinton H. Snyder
Chief Financial Officer
(Principal Financial and Accounting Officer)