SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material underss.240.14a-12
Global Entertainment Holdings/Equities, Inc.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1),14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC.
6636 North 48th Street
Paradise Valley, Arizona 85253
--------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on August 17, 2001
-------------------------
August 3, 2001
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of Global
Entertainment Holdings/Equities, Inc. which is hereby called to be held on
August 17, 2001 from 9:00 a.m. to 12:00p.m., Pacific Daylight Time, at Orange
Tree Golf Resort, 10601 N. 56th Street, Scottsdale, Arizona 85254, for the
following purposes:
1. PROPOSAL NO. 1:To elect the Board of Directors, each to serve until the
next Annual Meeting of the shareholders or until their
respective successors are elected and qualify;
2. PROPOSAL NO. 2:To ratify and approve the selection by the Board of
Directors of Clyde Bailey, P.C. as the Company's
independent accountants for the current year;
3. PROPOSAL NO. 3:To consider and vote upon such other business as may
properly come before the meeting or any adjournment
thereof.
The complete text of these proposals and the reasons your directors have
proposed their adoption are contained in the Proxy Statement, and you are urged
to carefully study them. If you do not plan to attend the Annual Meeting, you
are respectfully requested to sign, date and return the accompanying Proxy
promptly.
FOR THE REASONS STATED HEREIN, YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE "FOR" THE NOMINEES AND "FOR" THESE PROPOSALS. YOUR VOTE IS IMPORTANT NO
MATTER HOW MANY SHARES YOU OWN. TO BE SURE THAT YOUR SHARES WILL BE VOTED AT THE
MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY. THIS WILL NOT PREVENT YOU FROM
ATTENDING AND VOTING YOUR SHARES IN PERSON. PROMPT RETURN OF YOUR PROXY WILL
REDUCE THE COMPANY'S EXPENSES IN THIS MATTER.
Only shareholders of record as shown on the books of the Company at the close
of business on July 31, 2001 will be entitled to vote at the Annual Meeting or
any adjournment thereof. A list of the Company's Shareholders entitled to notice
of, and to vote at, the Annual Meeting will be made available during regular
business hours at the Company's Principal Executive Offices at 6636 North 48th
Street, Paradise Valley, Arizona 85253, from the date of this notice for
inspection by any Shareholder for any purpose germane to the Annual Meeting.
The Annual Meeting may adjourn from time to time without notice other than by
announcement at the Annual Meeting, or at any adjournments thereof, and any and
all business for which the Annual Meeting is hereby noticed may be transacted.
By order of the Board of Directors:
Donald J. Lisa, President & CEO
Paradise Valley, Arizona
August 3, 2001
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC.
6636 North 48th Street
Paradise Valley, Arizona 85253
--------------------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
To Be Held on August 17, 2001
-------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
This Proxy Statement is being furnished to shareholders of Global
Entertainment Holdings/Equities, Inc., a Colorado corporation (the "Company"),
in connection with the solicitation of proxies by the Board of Directors of the
Company for use at the Annual Meeting of Shareholders to be held at Orange Tree
Golf Resort, 10601 N. 56th Street, Scottsdale, Arizona 85254, from 9:00a.m. to
12:00p.m., Pacific Daylight Time, on August 17, 2001, and at any and all
adjournments of such meeting (the "Annual Meeting"). The first date on which
this Proxy Statement and the form of Proxy are first being mailed to
Shareholders of the Company is on or about August 3, 2001.
The Board of Directors has fixed July 31, 2001 as the record date for
determining stockholders who are entitled to vote at the Annual Meeting. At the
close of business on July 31, 2001, the Company had issued and outstanding
10,682,538 shares of common stock with par value $0.001 per share (the "Common
Stock"), held of record by approximately 124 stockholders. All shares have equal
voting rights and are non-assessable. Each share of Common Stock is entitled to
one vote on each matter properly coming before the Meeting. Holders of shares of
Common Stock have no cumulative, conversion, preemptive or other subscription
rights, and there are no redemption provisions applicable to the Common Stock.
The Company will not solicit proxies personally, by telephone or facsimile.
The Company, however, may make a request by telephone, facsimile, or mail
strictly limited to confirming the shareholder's receipt of the proxy and
requesting that the shareholder sign and return the proxy solicited by this
statement. The Company does not expect to pay compensation to any party other
than employees (and then only their regular salaries plus expenses) for the
solicitation of proxies, but may reimburse brokers, custodians, nominees and
fiduciaries for the expense of forwarding solicitation material and proxies to
beneficial owners of their outstanding stock. The cost of soliciting proxies,
not expected to exceed $15,000, will be borne by the Company.
All proxies will be voted in accordance with the instructions contained
therein, if properly executed and not revoked. Proxies that are signed by
shareholders but that lack any such specification will be voted in favor of the
proposals set forth in the Notice of the Annual Meeting. The management of the
Company does not know of any other matters which will be presented for action at
the Annual Meeting, but the person, Donald J. Lisa, named in the Proxy
Page 2 of 24
intends to vote or act with respect to any other proposal which may be presented
for action in accordance with his best judgment. Any proxy may be revoked by a
stockholder at any time before it is exercised by giving written notice to that
effect to the Corporate Secretary of the Company or by voting in person at the
Annual Meeting.
The presence in person or by executed proxy of the holders of a majority of
the aggregate voting power represented by the shares of Common Stock, issued and
outstanding and entitled to vote at the meeting, shall constitute a quorum for
transacting business at the meeting. Any shares which are withheld or abstain
from voting will be counted for the purpose of obtaining a quorum. Shares held
in "street name" by brokers or nominees, who indicate that they do not have
discretionary authority to vote such shares as to a particular matter ("broker
non-votes"), will not be counted as votes "for" or "against" the proposals and
will not be counted as shares voted on such matter.
The total number of votes cast "for" will be counted for purposes of
determining whether sufficient affirmative votes have been cast to approve each
proposal. Abstentions from voting on a proposal by a shareholder at the Annual
Meeting, as well as broker non-votes, will be considered for purposes of
determining the number of total votes present at the Annual Meeting. Abstentions
will have the same effect as votes against the proposals but will not affect the
election of Directors.
The affirmative vote of the holders of a plurality of the aggregate voting
power represented by the shares of Common Stock present or represented at the
meeting is required to elect the Board of Directors and to ratify and approve
the selection by the Board of Clyde Bailey, P.C. as the Company's independent
accountants for the current year.
Management of the Company has been informed by the executive officers,
directors, and control persons of the Company that such parties intend to vote
all shares beneficially held with voting rights by such parties FOR the nominees
and FOR all of the proposals set forth in the notice. Together, such parties and
proxies represent approximately 55.2 % of the votes eligible to be cast at the
Annual Meeting. Management believes such votes will be sufficient to elect the
nominees, approve or ratify the proposals, and appoint the Company's independent
accountants as set forth herein. However, since other items to be voted upon may
be presented at the Annual Meeting which require the vote of two-thirds of the
outstanding shares, there is no assurance that the voting rights mentioned above
will guarantee passage of any such other proposals.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of July 31, 2001, based on
information obtained from the persons named below, with respect to the
beneficial ownership of the Common Stock by (i) each person known by the Company
to own beneficially 5% or more of the Common
Page 3 of 24
Stock, (ii) each director and officer of the Company and (iii) all directors and
officers as a group:
Name of Beneficial Owner(1) Shares Owned Beneficially(2) Percent Owned (2)
- ------------------------ ---------------------------- -----------------
Steven Abboud (3) (4) (5) 2,293,845 (6) 21.4%
Joann Abboud (4) 664,260 6.2%
Name of Officers & Director Shares Owned Beneficially(2) Percent Owned (2)
- --------------------------- ---------------------------- -----------------
Bryan Abboud (3) (4) (5) 3,320,079 (7) 31.0%
Donald J. Lisa 121,639 (8) 1.1%
David Wintroub 99,000 (9) *
Thomas Hawkins 3,000 *
Officers & Directors as a group 3,543,718 33.1%
* Less than 1%
(1) No officer, director or security holder listed above owns any warrants,
options or rights, except as otherwise specified in these notes. (See "Certain
Relationships and Related Transactions.")
(2) The number of shares of Common Stock owned, and the percent owned, are those
"beneficially owned" as determined under the rules of the Securities and
Exchange Commission, including any shares of Common Stock as to which a person
has sole or shared voting or investment power and any shares of Common Stock
which the person has the right to acquire within 60 days through the exercise of
any option, warrant or right.
(3) Steven Abboud is a principal beneficial owner of 88% of the voting stock of
Shining Star ("SSI") and Bryan Abboud is a principal beneficial owner of 12% of
the voting stock of SSI. SSI owns a total of 895,358 shares of Global, therefore
787,915 of SSI's shares are owned by Steven Abboud and are included in his
ownership figure in the above table, and the remaining 107,443 shares are owned
by Bryan Abboud and are also included in his ownership figure in the above
table.
(4) Bryan Abboud and Steven Abboud are brothers, and Joann Abboud is the mother
of Bryan and Steven Abboud. Joann Abboud is the principal beneficial owner of
100% of the voting stock of the Abboud Family Trust. The Abboud Family Trust
owns 90,500 shares of Global. The 90,500 shares are reflected in the total
664,260 shares owned by Joann Abboud.
(5) Gene Abboud is the principal and beneficial owner of 50% of the voting stock
of Masadi Financial, which owns a total of 627,001 shares of Global. Gene Abboud
is a second cousin of Bryan and Steven Abboud. Steven Abboud is the beneficial
owner of the remaining 50% of Masadi Financial. Gene and Steven Abboud are thus
each deemed to own 313,501 shares of the 627,001 total shares Masadi owns in
Global. The 313,501 shares owned by Steven Abboud are reflected in his total
ownership figure in the table above.
Page 4 of 24
(6) Includes 90,000 shares beneficially owned by Steven Abboud by virtue of his
ownership of an option to purchase 90,000 shares of common stock through January
25, 2005, at the exercise price of $1.25 per share.
(7) Includes 424,936 shares beneficially owned by Bryan Abboud by virtue of his
ownership of (i) an option to purchase 150,000 shares of common stock through
January 31, 2005, at the exercise price of $1.00 per share, and (ii) an option
to purchase 20,000 shares of common stock through January 29, 2005, at an
exercise price of $1.25 per share, and (iii) an option to purchase 78,936 shares
of common stock through December 31, 2001, at an exercise price of $0.50 per
share, and (iv) an option to purchase 176,000 shares of common stock through
December 31, 2002, at an exercise price of $1.25 per share.
(8) Includes 18,639 shares beneficially owned by Lisa by virtue of his ownership
of an option to purchase 18,639 shares of common stock at any time through
January 29, 2005, at an exercise price of $1.25 per share.
(9) Includes 74,000 shares beneficially owned by Wintroub by virtue of his
ownership of (i) an option to purchase 19,000 shares of common stock through
January 29, 2005, at an exercise price of $1.25 per share, and (ii) an option to
purchase 55,000 shares of common stock through January 29, 2005, at an exercise
price of $2.25 per share.
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of forms 3, 4 and 5 furnished to the Company, the
Company is not aware of any person, who at any time during the fiscal year ended
December 31, 2000, was a director, officer, or beneficial owner of more than ten
percent (10%) of the common stock of the Company, and who failed to file, on a
timely basis, reports required by Section 16(a) of the Securities Exchange Act
of 1934 during such fiscal year, other than Bryan Abboud, who filed Form 3 on
July 26, 2001, David Wintroub, who filed Form 3 on July 17, 2001, Donald J.
Lisa, who filed Form 3 on June 7, 2001, Thomas Hawkins, who filed Form 3 on June
20, 2001, and Thomas Glaza, who has not filed Form 3.
DESCRIPTION OF BUSINESS
Forward-Looking Information-General
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 internet 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 undertakes
no obligation to publicly revise these forward-looking statements to reflect
events or circumstances that may arise after the date hereof.
Page 5 of 24
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.
Company Description
The Company was incorporated in the State of Colorado as Masadi Resources, Inc.
("Masadi") on July 10, 1997. On February 10, 1998, Masadi filed with the State
of Colorado Articles of Amendment to its Articles of Incorporation and changed
its name to International Beverage Corporation. On August 27, 1998,
International Beverage Corporation merged into Global Entertainment
Holdings/Equities, Inc. International Beverage Corporation survived this merger
and, on August 27, 1998, adopted the current name, "Global Entertainment
Holdings/Equities, Inc."
The Company is a holding company, whose primary business focus is on Internet
companies operating in the online gaming software sector. The Company owns 100%
of the issued and outstanding stock of Interactive Gaming and Wagering, N.V.
("IGW") and Prevail Online, Inc. ("Prevail").
Interactive-Gaming & Wagering, N.V.
IGW was incorporated in Curacao, Netherlands Antilles on May 19, 1997, and is
engaged in the development, licensing and hosting of proprietary Internet and
telephonic based gaming software. IGW's corporate Web site is
www.interactive-gaming.com. IGW offers a turnkey and other service solutions to
its software licensees, including gaming license consulting, facilities
services, online casino and sportsbook software, 800 call center sportsbook
software, training, application hosting services, web site design, development
and hosting, and internet telecommunications services. IGW has entered into
licensing contracts with several software licensees for its gaming software.
Prevail Online, Inc.
Prevail operates three independent online services that attract consumers with a
combination of highly focused content and marketing techniques which have made
its sites popular on the Web. Prevail's services deliver gaming directory
information through its Website, www.wheretobet.com, real time sports gaming
news and statistics through www.thesportsdaily.com, and mainstream online
wagering information via www.netbet.org.
Prevail has used the wheretobet.com website to sell banner advertising as its
source of revenue since the acquisition of the website. The wheretobet.com
website and the netbet.org domain name were acquired from an unrelated party for
a total sum of $700,000. At the acquisition date, Prevail tendered a down
payment of $75,000 and issued 120,000 post split shares with a put/call
provision. Prevail also signed a non interest bearing note of $225,000 payable
in nine monthly installments commencing one month from the closing date of the
Agreement. As of December 31, 2000 the notes had been paid in full. The
unrelated party put the 120,000 shares to the Company in 2000 for $400,000. As
of the present time, $235,000 of the $400,000 has been paid leaving an unpaid
balance of $165,000. Due to the resignation of its operating manager, Prevail
Page 6 of 24
temporarily suspended its proactive marketing efforts on June 1, 2001. All three
websites of Prevail are being operated on a maintenance basis until new
management is hired and funding for development is obtained.
Products and Services
Through its wholly owned subsidiaries, the Company develops and provides its
software products and Web hosting services to the independent licensees and its
web publishing services to its players, customers and advertising clients.
Java Casino Games
IGW's Java games utilize the Java programming language to provide easily
accessible online games to the Company's licensees' Web sites. The
cross-platform nature of Java makes it possible to play these games on all major
operating systems, online, with no download requirements. IGW software currently
provides seven (7) casino style Java Games (Videopoker, Blackjack, Roulette,
slots, stud poker, craps and pokerjack) for players to wager on, with several
additional Java games projected to be released throughout the fiscal year ending
December 31, 2001.
Sales and Marketing Strategy
The Company's administrative sales and marketing functions are conducted through
Curacao and Phoenix, Arizona. Management has hired experienced professionals
with in-depth knowledge of finance, management, Internet solutions, software
design and development and the gaming industries. The Company is committed to
maintaining a customer-driven organization and continues to aggressively recruit
and train additional staff for the marketing department to assist the Company in
achieving its sales goals.
Competition
The Company estimates that there are currently over 20 online gaming software
developers and over 800 gaming Websites on the World Wide Web.
Competition in the gaming software development and licensing markets comes from
five primary segments:
1. Traditional Land-based Gaming;
2. Internet Gaming;
3. Electronic Gaming;
4. Internet Service Providers; and
5. Other Entertainment / Media.
The Company estimates the following list of companies represent the major
competition in the licensing of Internet gaming software: Starnet
Communications, Microgaming, Atlantic International Entertainment, Ltd.,
Chartwell Technology, Inc., Cryptologic, Inc. and Boss Media AB.
Page 7 of 24
Technology
Development
The Company has achieved its current technological niche through the development
of its proprietary software. Furthermore, the Company has made a strong
commitment to continue research and development activities to enhance its
software and to develop new applications for new markets. The Company will
continue to use such methods to protect its technology and moderate competition
from current and future entrants.
Redundant High-Speed Network
IGW has constructed a transaction-oriented server hosting facility in Curacao.
Tightly integrated with the Internet connection, the server farm offers a
dedicated, fully duplexed gateway into the global Internet. Taking advantage of
newly implemented connectivity hardware and security software, the facility
guarantees an unprecedented level of performance and availability. The system is
composed of high speed Dell and Compaq servers and top of the line Cisco and
Nokia networking equipment. The mission critical system components, such as the
database and web servers, are fully fault tolerant, load-balanced, mirrored and
redundant, which protects the licensees from failures due to malfunctioning
equipment.
The highly scalable nature of IGW's system design makes provision for additional
capacity seamless. The network monitoring and security staff tracks the system
at all times to maintain constant awareness of the system's operating
parameters. New equipment and bandwidth will be procured as necessary to
compensate for increased activity or anticipated peak demands.
The high quality Internet connection at IGW's network facility in Curacao
contributes to responsive game play and uptime for the licensees. Each gaming
transaction is stored on a database that is replicated for redundancy and backed
up online to prevent data loss.
In addition to IGW's digital network serving gaming content for its licensees,
the Company uses a state of the art proprietary e-commerce solution that
provides a high level of security and integrity for transmission of funds over
the Internet. IGW uses Secure Sockets Layer (SSL) to encrypt and protect
transmission of sensitive data like credit card information.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock currently trades on the OTC Bulletin Board under the
symbol "GAMM." The common stock began trading on the OTC Bulletin Board on March
18, 1998, when the Company was known as International Beverage Corporation, and
accordingly, traded under the symbol "IBVC."
The high and low trading price for the Company's common stock for each fiscal
quarter since January 1, 1999, are listed in the following table. Such prices
reflect the 3 for 1 stock split which became effective on August 23, 1999. The
prices in the table reflect inter-dealer prices, without retail markup, markdown
or commission and may not represent actual transactions.
Page 8 of 24
Fiscal Quarter High Low
1st Quarter 1999 $17.875 $6.25
2nd Quarter 1999 $17.625 $10.125
3rd Quarter 1999 $7.00 $1.87
4th Quarter 1999 $4.00 $1.125
1st Quarter 2000 $5.00 $1.00
2nd Quarter 2000 $2.00 $1.00
3rd Quarter 2000 $3.95 $0.55
4th Quarter 2000 $1.75 $0.25
1st Quarter 2001 $1.688 $0.30
2nd Quarter 2001 $1.95 $0.30
The closing trading price on July 31, 2001, was $0.66.
As of July 31, 2001, one hundred twenty-four (124) entities held the Company's
Common Stock of record.
Dividends
The Company has not declared any cash dividends on its Common Stock for the last
three years and does not anticipate paying any dividends on its Common Stock in
the foreseeable future. The payment of dividends on the Common Stock is within
the discretion of the board of directors and will depend on our earnings,
capital requirements, financial condition and other relevant factors. The
Company intends to fully honor its future obligation to pay dividends on any
shares of Common Stock issued pursuant to this Offering.
Page 9 of 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
General
The Company generates operating revenues exclusively from its wholly owned
subsidiaries, IGW and Prevail. The Company's subsidiaries, IGW and Prevail
currently generate revenues from three (3) primary sources: (i) licensing fees,
(ii) monthly website hosting and maintenance fees, and (iii) royalties and
advertising fees.
Historically, approximately 50% of all gaming revenue for "Sportsbook"
operators, in the USA and abroad, are generated during American Professional and
Collegiate football season. However, IGW expects this seasonality to diminish as
licensees' operations expand abroad. This seasonal royalty revenue is
anticipated to continue for the Sportsbook software platform; however, with the
development, licensing and introduction of the Internet based casino software,
revenues should balance out during the off season months as a result of the
additional royalties gained through the licensing of the Casino software.
Seasonal royalty revenue for football season currently represents over 50% of
all Company revenue, however, as new licensees and additional software platforms
are added, the revenues are expected to balance out during the other sport
seasons.
Through research and development in the past four years, the Company identified
the opportunity of offering proprietary software and related services to online
gaming operators and successfully launched its first licensee in November 1997.
The Company encourages its licensee's to target only customers in countries that
regulate online gaming. Currently, there are several countries which support the
online gaming industry through regulation and/or taxation, including such
nations as Sweden, Finland, Australia, Germany, Liechtenstein, the Netherlands
Antilles, Dominica and Antigua and several other countries.
Growth Strategy
The development of telecommunications and the emergence of new technology have
created opportunities to develop new, efficient and secure ways to deliver
information and entertainment to consumers. The Company intends to capitalize on
its technological niche and expertise to become a world leader in online gaming
software systems. The Company's key strategic objectives are to: (i) continue
supporting core holdings of Internet gaming software development and licensing;
(ii) expand to other Internet markets, through acquisitions in the content and
publishing markets; and (iii) the Company will pursue opportunities in
e-commerce through the Company's wholly owned subsidiary, IGW. The Company will
develop the software to integrate the banking operation for e-commerce. The
Company will continue to develop software that enables e-commerce through their
licensee's web sites as part of the Company's software solution. The Company
proposes to seek a joint venture partner to facilitate credit card transactions,
for their licensee web sites. However, currently no acquisitions or joint
ventures have been identified.
Page 10 of 24
Results of Operations
For The Year Ended December 31, 2000
The Company's revenues increased over 62% to $4,572,489 for the year ended
December 31, 2000 as compared to $2,821,599 for the twelve months ended December
31, 1999, continuing the Company's unbroken string of substantial year to year
top line growth reports since its inception in 1997.
Importantly, for the year ended December 31, 2000, the Company reported its
first net profit before taxes of $234,574 compared to a loss of $35,346 for the
year ended 1999, continuing its string of three consecutive years of improved
bottom line performance, yielding a return on stockholder equity of over 8% for
the year 2000.
The following tables set forth selected information from the statements of
operations and balance sheets for the twelve months ended December 31, 2000, and
1999.
Selected Statement of Operations Information
For the Year Ended For the Year Ended
Dec. 31, 2000 Dec. 31, 1999
Total Revenues $4,572,489 $2,821,599
Total Expenses $4,360,573 $2,801,520
Income (Loss) From Operations $211,916 $20,079
Total Other Income (Expense) $22,658 ($55,425)
Net Profit (Loss) before taxes $234,574 ($35,346)
Selected Balance Sheet Information
For the Year Ended For the Year Ended
Dec. 31, 2000 Dec. 31, 1999
Total Current Assets $1,373.648 $1,869,295
Total Current Liabilities $1,542,461 $762,021
Total Property & Equipment $1,641,094 $1,640,135
Total Liabilities $1,571.594 $1,122,416
Total Notes Receivables $1,053,669 $0
Total Other Assets $142,464 $135,195
Total Assets $4,210,875 $3,644,625
Net Shareholders' Equity $2,639,281 $2,522,209
The top line growth is primarily due to additional revenues generated from
software licensing, and Website services for licensees (including Royalties).
The Company, through IGW, offers to its licensees Internet based Casino and
Sportsbook software as well as telephone based (call centers) Sportsbook
software. Revenues from software licensing of $909,031, hosting services of
$113,325, and royalties of $2,826,718, which are the significant income sources,
accounted for 84% of the total revenues for the twelve months ended December 31,
2000. As of December 31, 2000, the Company supported 11 fully operational
licensee web sites.
Page 11 of 24
For the fiscal year ended December 31, 2000, Prevail generated revenues of
$723,415, as compared to $233,736 for the year ended December 31, 1999. As of
December 31, 2000, Prevail revenue accounted for approximately 16% of the
Company's revenues for that period, as compared to 8% for the year ended
December 31, 1999.
Prevail is attempting to replace its operating manager who resigned on June 1,
2001. Upon the appointment of a new operating manager, it may resume proactive
marketing and advertising efforts. The Company is also considering selling
Prevail.
During the year 2000, the Company introduced a new version 2.0 of its Integrated
and Telephony Sportsbook and Casino System ("ITSCS") software. This new release
provides IGW clients broad control over their websites to enable them to create
a customized, attractive and entertaining experience for their users, while
offering more games, seamless transfers between casino and Sportbook wagering,
and improved back office administration features.
During the year 2000, the Company also introduced a new Casino Hook Sportsbook
Software Product which can interface with another company's existing casino
software product. The Casino Hook product allows the clients of IGW's licensees
to wager on sports and seamlessly shift between Casino and Sportsbook wagering.
The Company believes the two new products will significantly expand its markets
and attract many new licensees. Early in 2001, the Company initiated the
implementation of its Casino Hook program by announcing an important strategic
partnership with Sunny Group Company, which will enable Sunny Group's casino
customer base to wager on sports, using the Casino Hook software.
In addition to the Sunny Group company, within the next fiscal year, the Company
will seek to contract with six (6) additional licensees. The success of the
Company and IGW in contracting with these additional licensees may have the
potential of generating additional revenue for the Company's fiscal year ending
December 31, 2001, of $1.1 million, through the combination of a fixed licensee
fee, royalty fees and hosting fees.
The Company expects to attract two (2) of the proposed six (6) additional
licensees by the end of the second quarter of the year 2001, and to sign the
remaining four (4) licensees in the second half of the year. The Company
anticipates requiring an asset investment of an additional $1 million in
hardware and software to accommodate the additional six (6) licensee contracts.
Accordingly, the Company expects IGW licensing revenue growth to expand as more
licensees sign licenses and commence operations. IGW's royalties from licensees'
internet gaming operations should significantly increase during the next several
years.
Operating expenses were $4,360,573 for the twelve months ended December 31, 2000
and $2,801,520 for December 31, 1999. As a percentage of revenues, operating
expenses decreased from 99% to 95% as a result of substantial revenue growth and
efficiencies gained as the Company handled a greater level of activity. Thus,
while revenues increased 62%, expenses increased only 55%, improving the
Company's margin.
Tax expense for the twelve months ended December 31, 2000 was $16,912 as
compared to $11,571, for 1999. The majority of the Company's income is generated
from IGW in Curacao and is taxed at the rate of about 3%.
Page 12 of 24
For The Quarter Ended March 31, 2001
The Company enjoyed a net profit from operations of $58,965 for the quarter
ending March 31, 2001, as compared to a net profit from operations of $81,289
for the quarter ended March 31, 2000. This performance continues the Company's
string of three consecutive years of improved bottom line performance and
yielded a return on stockholder equity of over 8% for the first quarter of the
year 2001.
The top line revenue of the Company is primarily derived from software licensing
and Website services for licensees (including royalties) generated by the wholly
owned subsidiary, Interactive Gaming & Wagering ("IGW"), and advertising and
sponsorship revenues generated by the Company's other wholly owned subsidiary,
Prevail Online, Inc. ("Prevail"). The Company's revenues decreased slightly to
$1,102,253 for the quarter ended March 31, 2001 as compared to $1,111,582 for
the quarter ended March 31, 2000.
IGW offers its licensees the ITSCS and the Casino Hook software platforms. IGW
revenues showed continued growth from license fees, hosting income, marketing
services, loyalty program and bandwidth services of $244,214 and royalties of
$777,374, representing 93% of the total Company revenues for the quarter ending
March 31, 2001 compared to $159,109 and $718,746 for the quarter ending March
31, 2000. Royalty fees grew 8% despite recent reductions in royalty rates while
the other revenue sources, including new sources, grew 54%. As of July 31, 2001,
IGW supported 12 fully operational licensee web sites.
IGW's continued improvement is evidenced by the 79% increase of its net income
from operations, which was $224,174 during the quarter ended March 31, 2001, as
compared to $124,939 during the quarter ended March 31, 2000. Correspondingly,
IGW's gross income increased 16% for the quarter ended March 31, 2001, to
$1,022,028 from $878,059 for the same period of 2000.
Prevail generated revenues of only $80,665 for the quarter ended March 31, 2001,
compared to $233,727 for the quarter ended March 31 2000. Prevail revenue
accounted for approximately 7% of the Company's revenues for the period ended
March 31, 2001, as compared to 21% for the period ended March 31, 2000. The
decrease in Prevail revenue is attributed to the replacement of the former
management and the interruption in business operations caused by the movement of
Prevail's principal office to Phoenix, Arizona.
As a result of an aggressive cost cutting effort, Prevail substantially reduced
its expenses in the quarter ending March 31, 2001, thereby substantially
offsetting its revenue loss during the same period. For the quarter ended March
31, 2000, Prevail experienced a net profit from operations of $39,589 as
compared to a net loss from operations of $43,805 for the quarter ended March
31, 2001.
The Company believes its new products will significantly expand its markets and
attract many new licensees. Accordingly, the Company expects IGW licensing
revenue growth to expand as more licensees sign licenses and commence
operations. Additionally, IGW's royalties from existing licensees Internet
gaming operations is expected to increase on an annual basis.
Page 13 of 24
Operating expenses increased 1% to $1,043,288 for the quarter ended March 31,
2001 compared to $1,030,293 for the first quarter of the year 2000.
The Company has adopted modified accounting procedures, which has consolidated
some of the older accounts, in order to clarify accounting for various
components of employee's compensation, and the capitalization and
amortization/depreciation of its software development. These two expense
categories account for 66% of the Company's total expenses consistent with the
importance of their roles in the Company's strategic plan and operations.
The Company has secured contracts for two (2) additional websites, and
anticipates securing five (5) additional licensees for the year ending December
31, 2001. The Company anticipates requiring an asset investment of an additional
$1 million in hardware and software to accommodate the additional six (6)
licensee contracts.
Accordingly, the Company expects IGW licensing revenue growth to expand as more
licensees sign licenses and commence operations. IGW's royalties from licensees'
Internet gaming operations should significantly increase during the next several
years. The Company expects its net profits, before tax, for the fiscal year
ending December 31, 2001, to at least double that of the fiscal year 2000 net
profits, before tax, which was $256,497.
Liquidity and Capital Resources
For The Year Ended December 31, 2000
The Company's single largest source of revenue has been one of IGW's software
licensees. As of December 31, 2000, this licensee owed IGW approximately $1.6
million in past due royalties. As the licensee became incapable of maintaining
payments at the current royalty rate, the Company has agreed to a reduction in
the royalty rate in exchange for a conversion of the account receivable to a
long term note receivable of equivalent amount, with an accelerated fixed
repayment schedule of $50,000 per month, in addition to the current royalty.
Although the monthly royalty rate to this licensee has decreased per month,
effective January 1, 2001, IGW firmly believes such a decrease will not decrease
total revenue from this licensee because a decrease in royalty rate will allow
the licensee to increase its advertising and marketing efforts, thereby
increasing their revenues. If the licensee generates higher revenues, it will
pay IGW higher total royalty payments despite a lower royalty rate. However the
company cannot guarantee that revenues from this licensee will increase under
any circumstances, irrespective of the royalty rate.
Working capital at December 31, 2000 temporarily decreased to a negative
($168,813) compared to a positive $1,107,274 at December 31, 1999. The decrease
in working capital is mainly attributable to the account receivable conversion
to a long term note receivable referenced above and to the long term notes
payable becoming currently due. However, this temporary condition is expected to
be alleviated shortly because, of the $983,000 of notes payable currently due,
65% has been verbally restructured into long term notes payable, leading to a
positive working capital of $470,137 in the first quarter of 2001.
As a result of the account receivable conversion, the Company's accounts
receivable as of December 31, 2000, decreased to $556,085, as compared to
$1,511,226 at December 31, 1999.
Page 14 of 24
The majority of the receivables are from operating licensees, which have a 30
day term agreement for royalties. As a result of the restructure of the accounts
receivable described above, the average period of collection decreased from 193
days to 43 days, and the Company is further committed to reducing the aging to a
conventional 30 day period.
Net cash generated from operating activities for the twelve months ended
December 31, 2000 decreased slightly to $524,746 compared to $560,607 for the
twelve months ended December 31, 1999. The decrease in cash from operations was
primarily due to the increase in Notes Receivable to $1,653,669, referenced
above.
Net cash used for investing activities for the twelve months ended December 31,
2000 was $753,885 compared to $1,492,616 for the twelve months ended December
31, 1999. The decrease was primarily due to a decrease of computer equipment
purchases, indicating IGW is beginning to realize economies of scale from prior
asset investments. Net cash provided by financing activities for the twelve
months ended December 31, 2000, was $157,410, as compared to $1,045,771 for the
twelve months ended December 31, 1999, indicating that the Company has become
profitable and can support itself from internally generated funds.
For The Quarter Ended March 31, 2001
As a result of the account receivable conversion, the Company's accounts
receivable as of March 31, 2001, substantially decreased to $911,336, as
compared to $1,935,790 at March 31, 2000. The majority of the receivables are
from operating licensees, which have a 30-day term agreement for royalties. As a
result of the restructure of the accounts receivable described above, the
average period of collection substantially decreased from 193 days to 74 days,
and the Company is further committed to reducing the aging to a conventional 30
day period.
Net cash generated from operating activities for the three months ended March
31, 2001 increased to $189,362 compared to $71,103 for the three months ended
March 31, 2000. The increase in cash from operations was primarily due to the
decrease in notes receivable and the cash savings from depreciation expense.
The working capital of $1,445,674 as of March 31, 2000 decreased temporarily to
($218,813) as of December 31, 2000 due to the conversion of a large account
receivable of one IGW licensee to a long term note receivable, and then
increased sharply to $639,931 as of March 31, 2001, as amended, because a large
portion of the current portion of notes payable became long term notes payable
as the company had successfully negotiated a restructuring of about 65% of the
current notes payable as long term debt.
Net cash used for investing activities for the three months ended March 31, 2001
was $331,732 compared to $239,907 for the three months ended March 31, 2000. The
increase was primarily due to investment in the capitalization of software
development expenses and in the purchase of computer equipment. Net cash
provided by financing activities for the three months ended March 31, 2001, was
$140, as compared to $151,321 for the three months ended March 31, 2000. This
March 31, 2001 balance of cash provided by financing activities is the result of
the Company's repayment of $78,870 in debt and the Company's borrowing of
$79,010. This nominal level of financing indicates that the Company has become
profitable and can support itself from internally generated funds. Nevertheless,
the Company continues to seek outside
Page 15 of 24
financing, through either the sale of equity or debt, to more quickly facilitate
expansion of the Company's operations.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Steve Abboud, Financial Consultant and Director of the Company, and Mr.
Bryan Abboud, Chairman of the Board and Treasurer of Global Entertainment
Holdings/Equities, Inc. and Managing Director of Interactive Gaming & Wagering,
NV, are brothers and are the principal beneficial owners of 88% and 12%,
respectively, of the voting stock of Shining Star, a shareholder of the Company.
Mr. Gene Abboud, a shareholder of the Company is a second cousin to Mr. Steve
Abboud and Mr. Bryan Abboud, and is the principal and beneficial owner of 50% of
the voting stock of Masadi Financial, a shareholder of the Company.
On December 31, 1998, Steve Abboud, Financial Consultant of the Company, loaned
to IGW $20,000 at an accrued interest of eight percent (8%) per annum. This debt
has not yet been repaid.
On August 1, 1998, Bryan Abboud, the Managing Director of Interactive Gaming &
Wagering, N.V. and Chairman of the Company, loaned to IGW $20,000 at an accrued
interest of eight percent (8%) per annum. This debt has not yet been repaid.
Ms. Joann Abboud, a shareholder of the Company, is the mother to Mr. Steve
Abboud and Mr. Bryan Abboud, and is the beneficial owner of the voting stock of
Camelot Investments Inc., a shareholder of the Company. In addition, on July 1,
1997, Ms. Abboud by virtue of a Loan Agreement, loaned to Interactive Gaming &
Wagering, NV, a wholly owned subsidiary of the Company, $75,000 at eight percent
(8%) interest per annum. This loan is due on demand. On June 21, 1999, Ms.
Abboud, by virtue of a Promissory Note, loaned the Company $225,000 with an
interest rate of ten percent (10%) per annum, due August 1, 2000. In addition,
Ms. Abboud received 2,000 shares of the Company's $.001 par value common stock
for $2.00. On March 22, 2000, Ms. Abboud agreed, by virtue of a Letter of
Understanding, to a 12 month extension for payment due on the $225,000 Note with
the condition that GAMM is to begin interest payments at the end of each month
with the first payment beginning on April 30, 2000 based on the principal plus
accrued interest on the Note through March 31, 2000.
On July 21, 1998, Mr. James Zilligen, by virtue of a Subscription Lending
Agreement with a Stock Option "Kicker", loaned the Company $100,000. In the 13th
through the 23rd month of the loan, the Company is to make principle and
interest payments with a balloon due in July of 2000. As further inducement to
make the loan, Mr. Zilligen received an option to purchase 45,000 (post-split)
unregistered shares of the Company's restricted $.001 par value common stock at
a strike price of $0.41 per share. On October 20, 1998, the market price for the
Company's common stock was approximately $2.66 per share and Mr. Zilligen
exercised his option by paying to the Company, $18,750. On March 22, 2000, Mr.
Zilligen agreed, by virtue of a Letter of Understanding, to a 12 month extension
for payment due on the $100,000 Note with the condition that GAMM is to begin
interest payments at the end of each month with the first payment beginning on
April 30, 2000 based on the principal plus accrued interest on the
Page 16 of 24
Note through March 31, 2000.
The Company on December 31, 1999, pursuant to the Purchase and Sale Agreement
between the Company and IGW, issued to a total of thirteen (13) employees of IGW
options to purchase 225,000 shares of the Company's common stock as follows:
Seven (7) employees of IGW received options to purchase 206,325 shares of the
Company's common stock at an exercise price of $0.50 per share and six (6)
employees of IGW received options to purchase 18,675 shares of the Company's
common stock at an exercise price of $1.67 per share.
The above transactions with related parties were made on no less favorable terms
as would have been made with independent third parties. The Company pursued
third party funding, however, as a start-up company, it was unsuccessful in
obtaining the necessary funding. Consequently, the Company pursued other
opportunities for additional funding, but was unsuccessful in its efforts. As a
start-up operation, funding outside of the related party transactions listed
were non-existent.
FINANCIAL STATEMENTS
Audited financial statements for the year ended December 31, 2000 are found
herein on page F-1. Consolidated, unaudited, condensed interim financial
statements including a balance sheet for the Company as of the quarter ended
March 31, 2001 and statements of operations and statements of cash flows for the
interim period up to the date of such balance sheet and the comparable period of
the preceding year are attached hereto following the audited financial
statements for the year ended December 31, 2000.
Changes In and Disagreements with Accountants on Accounting and Financial
Disclosure
On August 30, 2000, the Company's shareholders approved a proposal to select
Clyde Bailey, P.C. as the Company's auditor for the fiscal year ended December
31, 2000. This appointment represented a change in the Company's auditor, which
was necessitated by the recent death of the principal of the Company's previous
auditor, Mr. Darrell Schvaneveldt, of Darrell Schvaneveldt & Company Certified
Public Accountant ("Schvaneveldt"). Mr. Schvaneveldt died on September 8, 2000.
More information regarding this change in accountant may be obtained from the
Company's Form 8-K filed with the Securities and Exchange Commission on December
4, 2000.
Page 17 of 24
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors has determined that there will be four directors of the
Company elected at the Annual Meeting. The Board of Directors has nominated
Bryan Abboud, Donald J. Lisa, David S. Wintroub and Thomas Glaza. In the absence
of other instructions, the proxies will be voted for each of the individuals
named below, each of whom the Board proposes for election as a director of the
Company. If elected, such individuals will serve until the next Annual Meeting
of Shareholders or until their successors are duly elected and qualified. All of
the nominees are members of the present Board of Directors.
The Board recommends a vote FOR the election of each of the nominees listed
below.
The Board has no reason to believe that any nominee would be unable or unwilling
to serve if elected. If a nominee becomes unable or unwilling to accept
nomination or election, the Board will either select a substitute nominee or
will reduce the size of the Board. If you have submitted a proxy and a
substitute nominee is selected, your shares will be voted for the election of
the substitute nominee.
Directors
Name Age Position
Bryan Abboud 30 Director, Chairman/Treasurer
Donald J. Lisa 66 Director, President/CEO
David S. Wintroub 34 Director
Thomas Glaza 66 Director
All Directors of the Company will hold office until the next annual meeting of
shareholders of the Company or until successors are duly elected and qualified.
The Officers of the Company are elected by the Board of Directors at the first
meeting after each annual meeting of the Company's shareholders, and hold office
until their death, or until they shall resign or have been removed.
Director Information
Set forth below is biographical and other information about the persons who will
make up the Board following the annual meeting, presuming election of the
nominees named above.
Bryan Abboud. Bryan Abboud is a co-founder and Chairman of the Board of
Directors of the Company and founder and Managing Director of IGW. Mr. Abboud
is also a co-founder and current board member of the Interactive Gaming Council,
the online gaming industry's premier trade association. Starting as an online
gaming industry pioneer in 1995, he has assembled personnel, arranged financing,
and led the Company successfully into the online gaming software industry.
Earlier, Mr. Abboud was involved in upper management of a company in the high-
tech consumer electronics industry. Before this he served as vice president of
marketing and co-founded Vista International, Inc. where he was responsible for
all U.S. sales, advertising and promotions. Mr. Abboud earned a Masters in
International Management at the American
Page 18 of 24
Graduate School of International Management (Thunderbird) and received a
Bachelor of Science Degree in Commerce, with emphasis in Marketing at Santa
Clara University. He also attended Sup de Co in Rouen, France.
Donald J. Lisa. Donald J. Lisa was appointed as a Director of the Company in
August 2000, and was appointed the Company's President/CEO on November 1, 2000.
Since 1987, Mr. Lisa has continued his own intellectual property law firm and
his own mergers and acquisitions consulting business, Lisa & Company, both of
which businesses haves been diligently pursued for the last 13 years. From 1974
through 1987, Mr. Lisa worked for Motorola, Inc. in Schaumburg, Illinois, where
he held positions of Division Patent Counsel to the Automotive Products
Division, Executive Director Technology Asset Management, Vice President Patent
Department and Corporate Staff General Patent Counsel, Vice President and
Proprietary Rights Litigation Counsel, and finally, Vice President and Director
of Acquisitions where he was responsible for all acquisitions, joint ventures,
and divestiture activities, and for coordination of appropriate corporate
support functions and sector/group representation in such activities, including
accounting, international and domestic finance, human resources, and law. From
1965- 1974, Mr. Lisa rose to become a general partner in the New York City based
patent law firm of Kenyon & Kenyon. Mr. Lisa received his Masters of Business
Administration Degree from the University of Chicago Graduate School of Business
in 1987, his Juris Doctor Degree from Harvard Law School in 1965, and his
Bachelor of Science in Engineering Degree from the U.S. Naval Academy in 1957.
Mr. Lisa was a U.S. Naval Officer between 1957 -1962 serving as an all-weather
jet fighter pilot rising to the rank of Lieutenant and accumulating 1200 hours
of first pilot time in high performance military jet aircraft with 350 total
carrier landings (150 at night) aboard the USS Forrestal and USS Independence.
David S. Wintroub. Mr. Wintroub has served as a Director since January 18,
2000. He also served as the Company's CEO/President from January 18, 2000 until
he resigned on October 31, 2000. Mr. Wintroub from 1995 to the present has
worked with the firm of Wintroub, Rinden, Sens & McCreary, with offices in
Omaha, Chicago, Minneapolis, Des Moines and Austin, Texas, as an attorney and
specialized in Corporate and Internet Law. Mr. Wintroub has had significant
experience with many start-up internet companies, including on-line gaming, on-
line lottery, on-line sports handicapping, on-line news, on-line broadcasting
and many on-line retail sites selling items ranging from women's shoes to wine.
Mr. Wintroub's experience in on-line gaming included the initial legal research
into the legality of on-line gaming for several on-line gaming clients all of
whom have active and prosperous sites. Mr. Wintroub has also had significant
experience working on capitalization projects for his on-line clients.
Additionally, Mr. Wintroub has been heavily involved in lottery projects and on-
line lottery start-ups on the continent of Africa for one of his corporate
clients. Mr. Wintroub also has experience representing land-based and online
gaming clients like Harvey's Resorts and Casino, Inc. Mr. Wintroub earned his
undergraduate degree in English from the University of Nebraska at Lincoln in
1990 and his Juris Doctor from Creighton University in 1995.
Thomas Glaza. Mr. Glaza accepted his appointment to the Company's board of
directors in February 2001. Mr. Glaza recently retired from the MAPICS Corp.,
where he continues to provide occasional consulting services. Mr. Glaza serves
on the boards of directors of one reporting company, On Line Power (NASDAQ. BB:
OPWR), a public start-up company that has patented a new type of power supply
which significantly reduces there size and heat dissipation while dramatically
increasing efficiency. Between 1988 and 1998, Mr. Glaza held a variety of
Page 19 of 24
positions, up to Vice President of Business Development and Strategy, for MAPICS
Corp. His duties involved contract negotiations, establishing internal corporate
strategy, traditional activities of marketing, and co-ordination programs with
the corporate marketing organization. From 1981 to 1988, Mr. Glaza founded GMD,
a private software development and services firm servicing implementations of
MAPICS and CAD systems where he served as CEO / COO. From 1973 to 1980, Mr.
Glaza held various managerial positions in the Manufacturing Industry Marketing
Department of the General Systems Division of the IBM Corp. in Atlanta, which
led to the development of MAPICS. From 1970 to 1973, he was the marketing
manager for the IBM Branch Office in Portland, Oregon. In 1959, Mr. Glaza
received his MBA from the University of Michigan, majoring in statistics and
marketing. In 1957, Mr. Glaza graduated with a BBA from the U of Michigan where
he majored in marketing and finance.
Additional Information About the Board of Directors
The Board held 42 meetings and took action by written consent 26 times during
fiscal 2000. All of the directors attended at least 75% or more of the meetings
of the Board of Directors during fiscal 2000.
The Company has no audit, compensation, or nominating committees, and no
committees performing similar functions.
Non-Director, Executive Officers and Control Persons
Name Age Position
Thomas Hawkins 49 Secretary
Steven Abboud 37 Control Person
Set forth below is biographical and other information about the person(s) who
will serve as non- director executive officer(s):
Thomas Hawkins. Mr. Thomas Hawkins has been the Corporation Secretary since June
of 1999. Mr. Hawkins has had twenty years experience in Investment Banking, and
Financial Business Consulting and has participated in raising debt and equity
venture capital for start-up to small business concerns through private
placements and public offerings. Currently, Mr. Hawkins is employed as a small
business financial consultant for both private and public companies. In such
capacity, he organizes and works with client companies in preparing and
conducting their Annual and/or Special Shareholders Meetings, acts as Inspector
of Election and Balloting and assists in the preparation of the minutes of the
meetings. He is currently assisting Marina Capital, Inc. (a Utah corporation)
and Beeper Plus, Inc., (a publicly traded Nevada corporation) in the development
of their Proxy Statements for their scheduled Annual Shareholders Meetings. Mr.
Hawkins has been responsible for pricing, negotiating and structuring private
placement offerings and initial public offerings. He was a branch manager and
stock-trader for Citiwide Securities, Inc. As a stock-trader, he attained the
distinction of being one of the first minority OTC stock-traders in the country.
In addition, Mr. Hawkins was publisher for the Americana Corporate Finance
Reporter, a national magazine focusing on corporate finance strategies for small
to medium sized companies. Mr. Hawkins graduated from the University of Arizona
with a BS Degree, in Business and Public Administration. He was a member of Tip
O'Neil's National
Page 20 of 24
Democratic Speakers Club and has co-sponsored events surrounding the National
Democratic Black Caucuses in Washington, D.C. Mr. Hawkins has also coordinated
and conducted Investment Seminars.
Steven Abboud. Mr. Steven Abboud, is a co-founder of the Company, and from the
Company's inception in June 1998, until January 2000, Mr. Abboud served as a
Director and President of the Company. In January 2000, Mr. Abboud resigned as
President of the Company, and he resigned as a director in August 2000. His
expertise in investment banking, has brought the Company from a position of
insolvency in June 1998 to an equity value of approximately $2.0 million and
a market capitalization of $30 million in August 1998, shortly after going
public. Mr. Abboud has been instrumental in providing equity and debt
financing, audit coordination and cost accounting to Interactive Gaming &
Wagering (IGW), a wholly owned subsidiary of the Company. In 1989, Mr. Abboud
founded Shining Star Investments, Inc. and to the present time, Mr. Abboud holds
the positions of President and Director. Mr. Abboud was responsible for
numerous venture capital fund raising activities, mergers and acquisitions, and
various other investment banking services. Mr. Abboud from 1990 to 1994 was the
co-founder and managed Vista International, a consumer electronics import/export
mail order distribution center. Mr. Abboud serves as a financial consultant to
Masadi Financial Services, Inc., and Camelot Investments, Inc. Mr. Abboud
received his Bachelor of Science in Finance from Arizona State University in May
1993.
COMPENSATION AND OTHER BENEFITS
Director Compensation
All directors receive annual options to purchase 20,000 shares of the Company's
common stock. Such options bear exercise prices equal to the weighted average of
the common stock's closing price for the 30 days prior to the granting of such
options. Granting occurs at the annual shareholder meeting. All Directors are
reimbursed for out-of-pocket expenses incurred in connection with the Company's
business.
Executive Compensation
No compensation in excess of $100,000 was awarded to, earned by, or paid to any
executive officer of the Company during the fiscal years 2000, 1999 or 1998. The
following table provides summary information for the years 2000, 1999 and 1998
concerning cash and noncash compensation paid or accrued by the Company to or on
behalf of its chief executive officer for the appropriate years.
Page 21 of 24
SUMMARY COMPENSATION TABLES
Annual Compensation
------------------------------------------------------
Name and Other Annual
Principal Position Year Salary Bonus ($) Compensation ($)
($)
- -------------------------------------------------------------------------------
Donald J. Lisa, President 2000 $60,000 - 0 - (1)
- -------------------------------------------------------------------------------
David Wintroub, President 2000 $48,000 - 0 - (2)
- -------------------------------------------------------------------------------
Steven Abboud, President 1999 $34,000 - 0 - - 0 -
- -------------------------------------------------------------------------------
Steven Abboud, President 1998 - 0 - - 0 - - 0 -
- -------------------------------------------------------------------------------
Long Term Compensation
-----------------------------------------------
Awards Payouts
-----------------------------------------------
Restricted Securities LTIP Payouts All Other
Name and Principal Position Stock Underlying ($) Compensation
Year Award(s)($) Options/SARs(#) ($)
- -------------------------------------------------------------------------------------
Donald J. Lisa, President 2000 - 0 - - 0 - - 0 - - 0 -
- -------------------------------------------------------------------------------------
David Wintroub, President 2000 5,000 - 0 - - 0 - - 0 -
- -------------------------------------------------------------------------------------
Steven Abboud, President 1999 1,000 - 0 - - 0 - - 0 -
- -------------------------------------------------------------------------------------
(1) For his services, Lisa was granted an option to purchase 18,639 shares of
common stock through January 29, 2005, at an exercise price of $1.25 per share.
(2) For his services, Wintroub was granted (i) an option to purchase 19,000
shares of common stock through January 29, 2005, at an exercise price of $1.25
per share, and (ii) an option to purchase 55,000 shares of common stock through
January 29, 2005, at an exercise price of $2.25 per share.
(3) On December 31, 1999, Abboud received 1,000 restricted shares of the
Company's common stock, which, when valued at the common stock's prevailing
market price of $1.00 per share, was valued at $1,000.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Subject to ratification by the stockholders, the Board has selected Clyde
Bailey, P.C., independent accountants ("Clyde Bailey"), to audit the financial
statements of the Company for the fiscal year ending December 31, 2001. Clyde
Bailey served as the Company's independent accountant for the year ended
December 31, 2000. Although stockholder approval of the Board of Directors'
selection of Clyde Bailey is not required by law, the Board of Directors
believes that it is advisable to give stockholders an opportunity to ratify this
selection. If the stockholders do not approve this proposal at the Annual
Meeting, the Board of Directors may reconsider the selection of Clyde Bailey.
The Board recommends a vote FOR the ratification of the appointment of Clyde
Bailey, P.C. as independent accountants.
Page 22 of 24
INDEPENDENT AUDITORS FEES AND OTHER MATTERS
AUDIT FEES
Clyde Bailey, P.C. billed the Company an aggregate of $13,595 in fees for
professional services rendered in connection with the audit of the Company's
financial statements for the most recent fiscal year ended December 31, 2000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
Clyde Bailey, P.C. did not bill the Company for any professional services
rendered to the Company and its affiliates for the fiscal year ended December
31, 2000 in connection with financial information systems design or
implementation, the operation of the Company's information system or the
management of its local area network.
ALL OTHER FEES
From January 1, 2000 through July 25, 2001, Clyde Bailey, P.C. has billed the
Company an aggregate of $6,375 in fees for professional services rendered in
connection with review of financial statements for Forms 10-QSB and other
related services.
The Company's board of directors has determined that the provision of services
by Clyde Bailey, P.C., as set forth above, is compatible with maintaining Clyde
Bailey's independence.
OTHER BUSINESS
The Board of Directors is not aware of any business to come before the meeting
other than those matters described above in this proxy statement. If, however,
any other matters should properly come before the meeting, it is intended that
holders of proxies will act in accordance with their judgement on such matters.
DEADLINE FOR SUBMISSION FOR SUBMISSION OF SHAREHOLDER PROPOSALS
Proposals of shareholders that are intended to be presented at the Company's
2002 Annual Meeting must be received by the Company not later than March 1, 2002
in order to be included in the proxy statement and proxy relating to the
meeting.
Stockholders who wish to make a proposal at the 2002 Annual Meeting of
Stockholders other than one that will be included in the Company's proxy
materials should notify the Company not later than March 1, 2002 and no earlier
than February 15, 2002. If a stockholder who wished to present a proposal fails
to notify the Company by this date, the proxies that management solicits for
that meeting will have discretionary authority to vote on the stockholder's
proposal if it is properly brought before that meeting. If a stockholder makes
timely notification, the proxies may still exercise discretionary authority
under circumstances consistent with the Securities and Exchange Commission's
proxy rules.
Page 23 of 24
ANNUAL REPORT
A copy of the Company's audited financial statements for the year ended December
31, 2000 is being furnished with this Notice of Annual Meeting and Proxy
Statement to each shareholder of record as of July 31, 2001. The Company will
provide without charge to each such shareholder, upon the written request of
such person, a copy of the Company's Form 10-KSB for the year ending December
31, 2000. Such written requests should be sent to Larry Panyon, Office
Administrator, Global Entertainment Holdings/Equities, Inc., 6636 North 48th
Street, Paradise Valley, Arizona 85253.
BY THE ORDER OF THE BOARD OF DIRECTORS:
/s/ Donald J. Lisa
- -------------------------------
Donald J. Lisa, President & CEO
Paradise Valley, Arizona
August 3, 2001
Page 24 of 24
CLYDE BAILEY P.C.
- ------------------------------------------------------------------------------
Certified Public Accountants
10924 Vance Jackson #404
San Antonio, Texas 78230
(210) 699-1287(ofc.)
(888) 699-1287 (210) 691-2911 (fax)
Member:
American Institute of CPA's
Texas Society of CPA's
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors and Shareholders
Global Entertainment Holdings/Equities, Inc.
We have audited the accompanying consolidated balance sheet of Global
Entertainment Holdings/Equities and subsidiaries ("Company") as of December 31,
2000 and the related consolidated statement of operations, changes in
stockholders' equity, and statement of cash flows for the year ended December
31, 2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements based on our audit. The financial statements of the Company, as of
December 31, 1999, were audited by other auditors who have ceased operations and
whose report dated March 10, 2000, expressed an unqualified opinion on those
statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Company and
subsidiaries as of December 31, 2000, and the consolidated results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ Clyde Bailey
Clyde Bailey
Certified Public Accountant
January 15, 2001
F-1
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC. & SUBSIDIARIES
Consolidated Balance Sheet
As of December 31, 2000
A S S E T S
Current Assets:
Cash & Cash Equivalents $ 164,455
Accounts Receivable Net of Provision 556,085
for Bad Debts of $119,590
Note Receivable 550,000
Prepaid Expenses 21,685
Interest Receivable 2,933
Employee Accounts Receivable 28,490
---------------
Total Current Assets $ 1,323,648
Property & Equipment
Automobile- Net 45,295
Proprietary Software- Net 490,552
Other Software - Net 103,448
Office Improvements- Net 22,433
Computer Equipment- Net 434,755
Furniture & Fixtures- Net 88,934
Websites - Net 455,677
---------------
Total Property & Equipment 1,641,094
Long-Term Assets
Note Receivable 1,103,669
Other Assets
Security Deposits 34,045
Software Design & Development-Net 108,419
---------------
Total Other Assets 142,464
---------------
Total Assets $ 4,210,875
===============
See Accompanying summary of accounting principles and notes to consolidated
financial statements.
F-2
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC. & SUBSIDIARIES
Consolidated Balance Sheet
As of December 31, 2000
L I A B I L I T I E S & S T O C K H O L D E R S' E Q U I T Y
Current Liabilities
Accounts Payable 445,312
Accrued Expenses 28,262
Accrued Interest 33,704
Current Portion- Capital Leases 17,856
Current Portion- Notes Payable 983,000
Note Payable- Line of Credit 5,844
Income Taxes Payable 28,483
---------------
Total Current Liabilities $ 1,542,461
Long Term Liabilities -
- ---------------------
Notes Payable 983,000
Less Current Portion (983,000)
---------------
Total Long Term Notes Payable -
Capital Lease Payable 29,133
---------------
Net Long Term Liabilities 29,133
--------------
Total Liabilities 1,571,594
--------------
Stockholders' Equity
Preferred Stock, 25,000,000 Shares Authorized,
at $.001 Par Value, None Issued
Common Stock, 100,000,000 Shares Authorized 10,406
Par Value of $.001;
10,406,540 Shares Issued with Outstanding
Paid in Capital 3,215,932
Retained Earnings(Deficit) (139,757)
Treasury Stock, at Cost (447,300)
---------------
Net Stockholders' Equity 2,639,281
--------------
Total Liabilities and Stockholders' Equity $ 4,210,875
==============
See Accompanying summary of accounting principles and notes to consolidated
financial statements.
F-3
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC. & SUBSIDIARIES
Consolidated Statement of Operations
For the Twelve Months Ended December 31, 2000 and 1999
2000 1999
------------ ------------
Revenues:
License Fees 909,031 445,000
Royalty Fees 2,826,718 1,983,773
Hosting Income 113,325 159,090
Advertising Revenues 723,415 233,736
------------ ------------
Total Revenues $ 4,572,489 $ 2,821,599
------------ ------------
Expenses
Bad Debt Provision 47,790 71,800
Uncollectible Fees Written Off 81,152 180,030
Depreciation & Amortization 762,382 425,553
Rents 340,538 225,593
Professional Fees 119,297 138,058
Travel 122,814 57,904
Financial & Investor Relations 87,880 149,829
Administrative Expenses 502,779 461,797
Consulting 1,379,441 749,334
Advertising 316,696 72,906
Litigation Settlement - 75,000
Bandwidth Expenses 599,804 125,091
Options Issued Expenses - 68,625
------------ ------------
Total Expenses $ 4,360,573 $ 2,801,520
------------ ------------
Income (Loss) from Operations 211,916 20,079
Other Income(Expenses)
Interest(Expense) (29,760) (59,353)
Interest Income 4,935 3,928
Other Income(Expense) 47,483 -
------------ ------------
Total Other Income(Expenses) 22,658 (55,425)
------------ ------------
Income Before Taxes 234,574 (35,346)
Provisions for Income Tax (16,912) (11,571)
------------ ------------
Net Income $ 217,662 $ (46,917)
============ ============
Basic Earnings Per Share $ 0.021 $ (0.005)
Diluted Earnings Per Share $ 0.018 $ (0.004)
Weighted Average Shares Outstanding 10,289,578 10,301,282
Retroactively Restated
Weighted Average Shares & Options 12,062,120 11,001,782
Outstanding
See Accompanying summary of accounting principles and notes to consolidated
financial statements.
F-4
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC. & SUBSIDIARIES
Statements of Cash Flows
For the Twelve Month Period Ended December 31, 2000 and 1999
Cash Flows from Operating Activities
Net Income (Loss) $ 217,662 (46,917)
Adjustments to Reconcile Net Income (Loss) to
Net Cash Provided(Used) to Operating Activities;
Depreciation & Amortization 762,382 425,553
Write off Uncollectible Fees Receivable 81,152 180,030
Options Issued Expense - 68,625
Provisions for Bad Debt 47,790 71,800
Non Cash Expenses 110,481 131,654
Change in Operating Assets & Liabilities
(Increase) Decrease in Fees Receivable 832,150 (548,977)
(Increase) Decrease in Prepaid Expenses 46,256 (64,457)
(Increase) Decrease in Security Deposits (16,825) (3,594)
(Increase) Decrease in Interest Receivable (301) (2,632)
(Increase) Decrease in Employee Receivable 22,822 (51,312)
(Increase) Decrease in Notes Receivable (1,653,669) -
(Decrease) Increase in Accounts Payable 135,419 280,177
(Decrease) Increase in Accrued Expenses 14,791 13,471
(Decrease) Increase in Taxes Payable 16,912 11,571
(Decrease) Increase in Customer Deposits (35,880) 35,880
(Decrease) Increase in Accrued Interest (6,466) 27,605
(Decrease) Increase in Accrued Wages (49,930) 32,130
------------ -----------
Net Cash Provided (Used in) to Operating Activities $ 524,746 $ 560,607
------------ -----------
Cash Flows from Investing Activities
Purchase of Websites - (402,813)
Purchase of Software Design & Development (2,565) (27,857)
Purchase of Proprietary Software (615,800) -
Purchase of Automobile - (70,949)
Purchase of Package Software (16,813) (110,151)
Purchase of Office Improvements (7,396) (23,931)
Purchase of Computer Equipment (94,255) (725,035)
Purchase of Furniture & Fixtures (17,156) (131,780)
------------ -----------
Net Cash (Used) in Investing Activities $ (753,985) $(1,492,516)
------------ -----------
See Accompanying summary of accounting principles and notes to consolidated
financial statements.
F-5
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC. & SUBSIDIARIES
Statements of Cash Flows
For the Twelve Month Period Ended December 31, 2000 and 1999
Cash Flows from Financing Activities
Increase( Decrease) in Capital Lease Liabilities - 66,414
Payment on Capital Leases (19,691) (12,760)
Increase (Decrease) in Notes Payable 418,000 525,000
Payment on Notes Payable (29,849) (175,000)
Treasury Stock (447,300) -
Contributed Capital - 46,782
Sale of Common Stock 236,250 595,335
------------ -----------
Net Cash Provided(Used) by Financing Activ$ties 157,410 1,045,771
------------ -----------
Increase (Decrease) in Cash & Cash Equivalents (71,829) 113,862
Cash & Cash Equivalents at Beginning of Period 236,284 122,422
------------ -----------
Cash & Cash Equivalents at End of Period $ 164,455 $ 236,284
------------ -----------
Supplemental cashflow information:
Interest Expense 29,760 59,353
Income Taxes - -
See Accompanying summary of accounting principles and notes to consolidated
financial statements.
F-6
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC. & SUBSIDIARIES
Statement of Stockholders Equity
As of December 31, 2000
Common Stock Treasury Stock
------------------------------------
$0.001 Paid-In Accumulated Stockholders'
--------
Shares Par Value Shares Amount Capital Deficit Equity
--------------------------------------------------------------------------------
Balance, December 31, 1999 9,455,682 9,456 1,450,313 (310,502) 1,149,267
1/18/99
Shares Returned & Cancelle (22,839) (23) 23
3/05/99
Shares Issued for Consulting 9,000 9 26,991 27,000
Fees at $3.00 Per Share
4/19/00
Shares Issued for Cash at 30,000 30 67,470 67,500
$2.25 per Share
4/19/00
Shares Issued for Cash at 9,000 9 22,491 22,500
$2.50 per Share
4/19/99
Shares Issues for Cash at 13,497 13 62,972 62,985
$4.66 per Share
4/20/99
Shares Returned by Terminat (9,999) (10) (10) -
Employee
5/10/99
Shares Issued for Cash at 89,100 89 237,511 237,600
$2.66 per Share
6/17/99
Shares Issued for Prepaid 39,000 39 129,944 129,983
Public Relations at $3.33
per Share
6/21/99
Shares Issued for Note Payable 6,000 6 2,244 2,250
Incentive at $.375 per Share
See Accompanying summary of accounting principles and notes to consolidated
financial statements.
F-7
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC. & SUBSIDIARIES
Statement of Stockholders Equity
As of December 31, 2000
Common Stock Treasury Stock
------------------------------------
$0.001 Paid-In Accumulated Stockholders'
--------
Shares Par Value Shares Amount Capital Deficit Equity
--------------------------------------------------------------------------------
6/25/99
Shares Issued for Consulting 3,000 3 9,997 10,000
Services at $3.33 per Share
8/19/99
Shares Issued for Furniture 690 2,300 2,300
at $3.33 per Share
8/19/99
Shares Issued for Legal Service 6,000 6 19,996 20,002
at $3.33 per Share
8/19/99
Shares Issued for Cash 30,000 30 97,470 97,500
at $3.25 per Share
8/19/99
Shares Issued for Cash 30,000 30 79,970 80,000
at $2.67 per Share
8/27/99
Shares Issued for Cash 9,000 9 7,991 8,000
at $.89 per Share
9/22/99
Shares Issued for Legal 1,000 1 3,999 4,000
Services at $4.00 per Share
9/23/99
Shares Issued for Technology 1,500 1 5,999 6,000
$4.00 per Share
9/23/99
Shares Issued to Acquire 163,500 163 399,837 400,000
Prevail Online Inc., at
$2.45 per share
10/19/99
Shares Issued for Cash at 3,000 3 5,497 5,500
$1.83 per share
See Accompanying summary of accounting principles and notes to consolidated
financial statements.
F-8
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC. & SUBSIDIARIES
Statement of Stockholders Equity
As of December 31, 2000
Common Stock Treasury Stock
------------------------------------
$0.001 Paid-In Accumulated Stockholders'
--------
Shares Par Value Shares Amount Capital Deficit Equity
--------------------------------------------------------------------------------
11/05/99
Shares Issued for Consulting 500 1 1,904 1,905
at $3.81 per share
11/05/99
Shares Issued for Accounting 700 1 1,999 2,000
Services at $2.85 per share
11/05/99
Issued Shares for Accrued 9,000 9 21,311 21,320
Interest Expense at $2.37 per Share
11/05/99
Shares Issued for Cash at $2.75 5,000 5 13,745 13,750
per share
11/05/99
Shares Issued for Misc Services 500 1 1,624 1,625
at $3.25 per share
12/31/99
Shares Issued for Employee 16,300 16 16,284 16,300
Bonus at $1.00 per share
12/31/99
Shares Issued for Technology 15,012 15 9,985 10,000
at $.66 per Share
12/31/99
Shares Issued for Technology 34,903 35 26,160 26,195
at $,75 per Share
Shares returned and Cancell (7,613) (7) 7
Rounding (80) (20)
Paid in Capital - Options 68,625 68,625
Contributed Capital 75,039 75,039
See Accompanying summary of accounting principles and notes to consolidated
financial statements.
F-9
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC. & SUBSIDIARIES
Statement of Stockholders Equity
As of December 31, 2000
Common Stock Treasury Stock
------------------------------------
$0.001 Paid-In Accumulated Stockholders'
--------
Shares Par Value Shares Amount Capital Deficit Equity
--------------------------------------------------------------------------------
Net Income (Loss) (46,917) (46,917)
Balance December 31, 1999 9,940,353 9,940 2,869,688 (357,419) 2,522,209
1/18/00
Shares Issued for Consulting 5,000 5 6,245 6,250
Services at $1.25 per Share
3/7/00
Shares Issued for Consulting 20,000 20 14,980 15,000
Services at $.75 per Share
3/18/00
Shares Issued for Cash at 315,000 315 235,935 236,250
$.75 per share
3/18/00
Shares Issued for Technology 1,787 2 2,679 2,681
at $1.50 per Share
3/18/00
Shares Issued for Note Extension 75,000 75 14,925 15,000
at $.50 per share
8/23/00
Shares Issued for Technology 49,400 49 71,501 71,550
at $1.45 per share
Rounding (20) (21)
Treasury Stock, at Cost 174,500 (447,300) (447,300)
Net Income (Loss) 217,662 217,662
-------------------------------------------------------------------------------
Balance December 31, 2000 10,406,540 $10,406 174,500 $(447,300) $3,215,932 $(139,757) $2,639,281
===============================================================================
See Accompanying summary of accounting principles and notes to consolidated
financial statements.
F-10
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements
NOTE #1 - ORGANIZATION
The Company was incorporated on July 10, 1997, under the laws of the state of
Colorado using the name Masadi Resources, Inc. On February 10, 1998, Articles of
Amendment were filed changing the name to International Beverage Corporation.
Pursuant to a Merger Agreement dated 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. The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the laws of
the state of Colorado.
Principles of Consolidation
The Company currently has two wholly owned subsidiaries; Interactive Gaming and
Wagering NV, (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 1999, engages in
the creation and operation of websites which publish Internet gaming and
wagering related information and derives its revenues from banner advertising.
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 - SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Revenues and directly related expenses are recognized in the period in which
they occur. Revenues and related expenses are recognized from the sale of the
licenses when persuasive evidence of an arrangement exists, delivery of access
to the software has occurred, the license fee has been determined and
collectability of the license fee is probable. License fees are billed to be
paid in three installments over a relatively short period of time, usually
within ninety days.
During 2000, the Company adopted the U.S. Securities and Exchange Commission's
("SEC") Staff Accounting Bulletin 101, "Revenue Recognition" ("SAB 101"), which
provides guidance on the recognition, presentation, and disclosure of revenue in
financial statements filed with the SEC. The adoption of SAB 101 did not have a
material effect on the Company's business, financial condition, results of
operations or cash flows.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure on
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting. Revenues are recognized when earned and expenses when incurred.
Fixed assets are stated at cost. Depreciation and amortization using the
straight-line method for financial reporting purposes and accelerated methods
for income tax purposes.
Earnings per Common Share
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.
Uninsured Cash Balances
The Company maintains its cash balances at several financial institutions.
Accounts at the institutions are secured by the Federal Deposit Insurance
Corporation up to $100,000. Periodically, balances may exceed this amount. At
December 31, 2000, uninsured balances aggregated $159,136.
F-11
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with a maturity of
three months or less at the time of purchase to be cash equivalents. Cash and
cash equivalents consist of checking accounts and money market funds.
Fair Value of Financial Instruments
The carrying amounts of financial instruments including cash and cash
equivalents, accounts receivable and payable, accrued and other current
liabilities and current maturities of long-term debt approximate fair value due
to their short maturity.
Fixed Assets
The cost of property and equipment is depreciated over the estimated useful
lives of the related assets. The cost of leasehold improvements is amortized
over the lesser of the length of the lease of the related assets of the
estimated lives of the assets. Depreciation and amortization is computed on the
straight line method.
Foreign Currency:
All cash transactions in the Netherlands Antilles are conducted from the
Antilles Banking Corporation in United States dollars.
Stock-Based Compensation Plans
SFAS No. 123, "Accounting for Stock-Based Compensation," allows for either the
adoption of a fair value method for accounting for stock- based compensation
plans or for the continuation of accounting under Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations with supplemental disclosures.
The Company has chosen to account for its stock options using the intrinsic
value based method prescribed in APB Opinion No. 25 and, accordingly, does not
recognize compensation expense for stock option grants made at an exercise price
equal to or in excess of the fair market value of the stock at the date of
grant.
Websites
Internal and external costs incurred to develop websites are capitalized. Costs
are capitalized when it is probable that the website will be completed and will
be used to perform the function intended. When it is probable that upgrades and
enhancements will result in additional functionality such costs are capitalized.
Websites will be considered to be impaired when it no longer provides
substantial service potential, or significant changes occur in the extent or
manner in which the website is used. Impairment write off will be recognized in
the period when impairment is deemed by management to have occurred.
The Company is actively pursuing web-site development. The Company has adopted
"Financial Accounting Standards Board Emerging Task Force Consensus 00-2 (FASB
EITF 00-2): Accounting for Website Development Costs." The adoption of this
procedure relates to the accounting for costs of internal software, requires
that costs of developing web applications and infrastructure, as well as cost of
graphic development, be capitalized, rather than the historical common practice
of same period expense. Costs of website planning and operation continue to be
expensed as normal.
Advertising
The Company expensed Advertising and Marketing expenditures in the amount of
$316,696 and $72,906 for the years ended December 31, 2000 and 1999,
respectively.
Comprehensive Income
SFAS No. 130, "Reporting Comprehensive Income" establishes standards for the
reporting and display of comprehensive income and its components in the
financial statements. The following types of items, among others, are to be
considered in computing comprehensive income: foreign currency translation
adjustments, pension liability adjustments and unrealized gain/loss on
securities available for sale. For all periods presented herein, there were no
differences between net income (loss) available to common shareholders and
comprehensive income (loss).
Reclassifications
Certain reclassifications were made to the 1999 financial statements and notes
thereto in order to conform to the 2000 presentation.
F-12
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Investments
and Hedging Activities" ("SFAS No 133") which establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
The statement also requires that changes in the derivative's fair value be
recognized in earnings unless specific hedge accounting criteria are met. SFAS
No. 133, as extended by SFAS No. 137 and amended by SFAS No. 138, is effective
for all fiscal quarters beginning after June 15, 2000. The Company does not
expect adoption of SFAS No. 133 to have an effect on its financial statements.
In December 1999, the Securities and Exchange Commission issues Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB 101), which
provides guidance on the recognition, presentation and disclosure of revenue in
financial statements of all public registrants. The provisions of SAB 101 are
effective for transactions beginning in fiscal year after September 30, 2000.
The Company does not expect adoption of SAB 101 to have an effect on its
financial statements.
NOTE #3 - ACQUISITION AND RESCISSION OF BEVERAGE SOURCE WORLDWIDE, INC.
Pursuant to an Agreement of Purchase between Masadi Resources, Inc., and
Beverage Source Worldwide, Inc., dated November 26, 1997, the Company issued
589,287 shares of its $.001 par value common stock in exchange for 1,500 shares
of Beverage Sources Worldwide, Inc. At December 31, 1997, the Company had
advanced to its subsidiary, Beverage Source Worldwide, Inc., $200,000 and in the
early months of 1998 the Company advanced an additional $457,844 to Beverage
Source Worldwide, Inc. Minutes of an Emergency Meeting of the Board of Directors
of the Company dated April 2, 1998, noted that Beverage Source Worldwide, Inc.,
was without funds and was currently facing bankruptcy if the Company did not
advance substantial working capital funds. On May 5, 1998, the Company filed a
Complaint in the Superior Court of California, County of San Diego, alleging
that from the closing of the Agreement of Purchase, officers of Beverage Source
Worldwide, Inc., have breached their respective duties, obligations and
agreements with the Company, secreting and/or attempting to secret the Companies
assets, moving, transferring, assigning conveying encumbrances, sequestering,
using, disposing of, or shifting, any and all of the assets and property of the
Company, wrongfully withdrawing monies from the Corporate bank accounts,
misappropriating company funds, co-mingling the operating expenses and cost of
International Beverage Corporation or its wholly owned subsidiary Beverage
Source Worldwide, Inc., with independent business of the officers and directors
named in the suit.
The rescission action taken with the filing of the complaint on May 5, 1998, and
the cessation of business activities by Beverage Source Worldwide, Inc., the
Company believes its control of Beverage Source Worldwide, Inc. was temporary
and that the cessation of business activities by the Officers of Beverage Source
Worldwide, Inc., cast significant doubt on the Company, as the parent company,
to control the Subsidiary.
In March 2000, the Company has reached an agreement with the former Officers of
Beverage Source Worldwide, Inc., whereby for $75,000 he withdrew his objection
to the rescission of the agreement dated May 26, 1997.
NOTE #4 - SOFTWARE DEVELOPMENT FOR LICENSING & RECOGNITION OF INCOME FROM
SOFTWARE LICENSING
The Company has expensed costs to internally create computer software until such
time as technological feasibility was established. Technological feasibility is
considered to be established when a detail program design is completed. After
the detailed program design has been established the Company has capitalized the
costs of its software products it intends to license to the gaming and wagering
industry. Software development costs will be amortized on a ratio of the current
revenue to anticipated total revenue from the sales of the product or a
straight-line amortization of the product cost over the estimated three years
useful life of the product master. Because the product is subject to rapid
technological advances the Company has elected to amortize its computer programs
software held for licensing over a three-year period.
Revenue from the licensing of software programs is recognized when there is
persuasive evidence of an arrangement, delivery of access to the software, the
fee is fixed and determined and collectability is probable. The license
arrangements are not multiple elements and license fees are recorded when the
four conditions above are achieved. Once the arrangement has been contractually
agreed upon there are no customer cancellation privileges. Fees that the Company
may be entitled to are referred to as royalties and are not recognized until
such time as the licensee has actually earned revenues through the use of the
F-13
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements
software and in accordance with the licensing agreement has notified the Company
of its sales. Once the Company has been notified that royalties are due from the
licensing of its software and collectability is probable, royalty income is
recognized. Revenues earned from efforts to assist a purchaser establish and
maintain a base for operations are known as hosting revenues and are recognized
upon receipt of funds. Costs incidental to royalty income and hosting activities
are recognized in the same period as the related revenues are recognized.
During the year ended December 31, 2000, the Company capitalized $613,235 in
Proprietary Software including the Casino software, Customer Support software,
and other new project software that IGW is developing. These capitalized
expensed will be depreciated or amortized over a three year period.
The Company does not engage in any gaming or wagering activities.
NOTE #5 - STOCKHOLDERS' EQUITY
Preferred Stock
The Company has 25,000,000 shares of preferred stock $.001 par value authorized.
These preferred shares may be issued in one or more series at the discretion of
the Board of Directors. As of December 31, 2000, there are no preferred stock
outstanding.
Common Stock
The Company has 100,000,000 shares of common stock $.001 par value authorized.
Each shareholder of record shall have one vote for each share of common stock
outstanding in his or her name on the books of the Corporation. Cumulative
voting shall not be allowed. No shareholder shall have pre-emptive or similar
rights.
Common Shares in Treasury
The Company accounts for purchases of treasury shares under the cost method with
the aggregate cost recorded as a reduction of shareholders' equity.
Stock Options
The Company agreed to grant options to purchase 225,000 shares of the Company's
common stock to employees of one of the Company's subsidiaries, Interactive
Gaming & Wagering, NV ("IGW"), if IGW attained net income, or net earnings, of
$207,000 for the year ended December 31, 1998. IGW realized net income in excess
of $207,000 for this fiscal year. In accordance with this performance bonus, on
April 24, 2000, pursuant to the instructions of IGW's managing director, the
Company granted options to purchase 225,000 shares of common stock to certain
IGW employees, of which 18,675 possess an exercise price of $1.67, with the
remaining 206,325 are exercisable at $0.50 per share. All options must be
exercised with three (3) years of the date of the April 24, 2000 grant.
IGW and the Company had a similar performance based option agreement for IGW's
net income, or net earnings, for the years ended December 31, 1999 and 2000.
However, IGW was not going to reach these performance standards. Therefore, the
Company and IGW mutually agreed that the Company would grant, as of December 31,
1999, options to purchase 475,500 shares of the Company's common stock at
exercise prices between $1.25 and $1.67 per share. All of these options expire
on December 31, 2002, if not previously exercised.
A 34% discount was applied to the cost of certain options granted for the year
ended December 31, 1999. The Company believes that this 34% discount was and is
still consistent with the accounting required by SFAS 123's "fair value pricing
model." This discount was applied because as of December 31, 1999, (1) the
Company's common stock had been de-listed from the OTC-BB to the Pink Sheets,
(2) the trading volume was so low as to greatly diminish liquidity, and (3) the
stock underlying the option will be unregistered, restricted shares upon
issuance.
The following schedule details these options and the expense charges comprising
the difference in market value based on trading price and the discounted per
share price.
Market Discount Present Cost of
Description Price Rate Value Option Expense
225,000 Options, expiring 12/31/01 $ 1.00 5.5% $.8516 $.098 $ 2,027
475,500 Options, expiring 12/31/02 $ 1.00 5.5% $.8985 $.067 $46,598
-------
Total Expense Recognized for year ended December 31, 1999 $68,625
=======
F-14
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements
The Company approved the issuance of 568,293 stock options to key IGW employees
and 252,750 to directors pursuant to the Company's 2000 ESOP plan. The exercise
price range from $1.00 to $2.50, which was in excess of the trading price on the
date of grant with expiration dates beginning in December 2003 to January 29,
2005.
As of December 31, 2000, the Company had outstanding options to purchase
1,521,543 shares of its common stock and no options have been exercised.
The following information is presented with respect to the Company's stock
options:
Number Weighted Average
Of Shares Exercise Price
--------- ----------------
Outstanding at December 31, 1997 - -
Granted 225,000 0.60
Exercised - -
Cancelled - -
---------- ----------------
Outstanding at December 31, 1998 225,000 0.60
Granted 475,500 1.29
Exercised - -
Cancelled - -
---------- ----------------
Outstanding at December 31, 1999 700,500 1.07
Granted 821,043 1.46
Exercised - -
Cancelled - -
---------- ----------------
Outstanding at December 31, 2000 $1,521,543 $1.28
========== ================
Had compensation expense been recorded for the Company's awards based on fair
value at the grant dates consistent with the methodologies of SFAS No. 123, the
Company's reported net income (loss) available to common shareholders and
earnings per share would have been reduced to the pro forma amounts indicated
below:
For the Years Ended December 31,
2000 1999
Net income (loss) available to common shareholders:
As reported............................. $ 217,662 $ (46,917)
Pro forma............................... 206,167 (46,917)
Basic earnings (loss) per share:
Common share as reported...................... 0.021 (0.005)
Common share pro forma........................ 0.020 (0.005)
Diluted earnings (loss) per share:
Common share as reported and pro forma........ 0.018 (0.004)
Under SFAS 123, the value of each option granted during 2000 and 1999 was
estimated on the date of grant using the Black Scholes model with the following
assumptions: Risk-free interest rate - 6.5%, dividend yield - 0%, volatility -
19.3% and expected life of the option - 5 years.
F-15
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements
Stock Split
On August 19, 1998, International Beverage Corp., effected a one for seven
reverse stock split of its outstanding shares. Effective August 27, 1999, all
outstanding common shares of stock were split on a three for one basis. In the
financial statements presented at December 31, 1999 retroactive restatement of
the outstanding shares on the balance sheet, statement of stockholders' equity,
and the shares used to compute basic earnings per share and fully diluted
earnings per share has been made.
Non-Cash Investing & Financing Activities
The following is provided as additional disclosure to the Statement of
Cashflows:
During the year ended December 31, 2000, the Company issued; 5.000 shares for
consulting services valued at $6,250; 20,000 shares valued at $15,000; 1,787
shares for technology valued at $2,681; 75,000 shares for note extension valued
at $15,000; and 49,400 shares for technology valued at $ 71,550.
During the year ended December 31, 1999, the Company issued; 12,500 shares for
consulting fees valued at $38,925; 6,000 shares for interest expense valued at
$2,250; and 39,000 shares for current public relations expense valued at $10,827
and $119,172 in prepaid public relations cost; 7,000 shares for legal fees
valued at $24,000; 700 shares for accounting services valued at $2,000; 16,300
shares for employee bonuses valued at $16,300; 49,915 shares for expensed
technology services valued at $36,175; 500 shares for miscellaneous expenses
valued at $1,625; 9,000 shares in settlement of accrued interest valued at
$21,320; 690 shares for furniture valued at $2,300, 1,500 shares for capitalized
technology services valued at $6,000 and 163,500 shares to acquire Prevail
Online, Inc., and the websites valued at $400,000.
NOTE #6 - PROPERTY, EQUIPMENT AND DEPRECIATION
Capitalized amounts are depreciated over the estimated useful life of the asset
using the straight line method of depreciation. At December 31, 2000 and 1999,
the Company had property and equipment as follows:
Assets 2000 1999 2000 1999 Accumulated
Cost Cost Life Depreciation Depreciation Depreciation Basis
Automobile 70,949 70,949 3 14,189 11,465 25,654 45,295
Proprietary Software 613,235 -0- 3 122,683 -0- 122,683 490,55
Other Software 134,253 117,440 3 22,316 28,222 30,805 103,448
Office Improvements 33,297 25,901 5 6,659 4,205 10,864 22,433
Computer Equipment 910,124 801,234 3 264,954 183,906 475,369 434,755
Websites 790,643 802,813 3 270,050 64,916 334,966 455,677
Furniture & Fixtures 173,026 155,870 3 49,510 28,222 84,092 88,934
Total 2,725,527 1,974,207 750,361 298,773 1,084,433 1,641,094
Software Design for
Licensing 357,812 355,347 3 12,021 126,780 249,393 108,419
NOTE #7 - NOTES PAYABLE
The Company has the following notes payable obligations.
2000 1999
Note Payable to an Individual, Interest at 10%,
Due Date March 31, 2001 $ 115,000 $ 100,000
Note to a Related Party at 8% Interest, Due on Demand 115,000 115,000
Note to a Related Party 10% Interest, Due March 31,2001 25,000 225,000
Note to an Unrelated Party, No Interest, Due June 2000 -0- 125,000
Note to Seller of Website, Due on Demand 250,000 -0-
F-16
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements
Convertible Debt
Note to Related Party, dated July 18, 2000, 10% interest 40,000 -0-
paid monthly, Convertible at $.50 per share before
August 1, 2001.
Note to Unrelated Party, dated August 11, 2000, 50,000 -0-
10% Interest, paid monthly, Convertible at $1.50
per share before October 1, 2001.
Note to Related Party, dated August 2, 2000, 10% Interest 10,000 -0-
paid monthly, Convertible at $.50 per share before
March 31, 2001.
Note to Unrelated Parties, dated August 30, 2000, 178,000 -0-
10% Interest, paid monthly, Convertible at $1.50
per share before September 1, 2001.
Total Notes Payable $ 983,000 $ 565,000
Less Current Portion (983,000) ( 240,000)
----------------------
Net Long Term Debt $ -0- $ 325,000
======================
The Convertible Notes Payable contains a provision that the Note Holder can
convert the note payable to common at any time prior to the due date.
The Company has leased assets as follows:
Asset Cost Balance
----- ---- -------
Pentium Computer $ 14,348 $ -0-
Dell Computer 5,260 -0-
Automobile 43,949 34,853
Dell Computer 21,085 12,136
----------------------
Total $ 84,642 $46,989
Current Portion 17,856
Long Term Portion 29,133
Following are maturities of debt for each of the three years.
Year Note Payable Capital Lease
---- ------------ -------------
2001 $ 983,000 $ 13,454
2002 -0- 11,294
2003 -0- 4,385
------------ -------------
Total $ 983,000 $ 29,133
NOTE #8 - ACQUISITION OF GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC.
Pursuant to an Agreement of Purchase and Sale between Masadi Resources, Inc.,
(MRI) and Beverage Source Worldwide, Inc., (BSW) dated November 26, 1997, MRI
committed to issue 589,287 post-split shares to acquire 100% of BSW, (1,375,000
pre-split shares, split 1 for 7 on August 13, 1998 and forward split 3 for 1 on
August 23, 1999). On December 1, 1997, the Board of Directors changed the name
of Masadi Resources, Inc., to International Beverage Corporation, (IBC).
On February 27, 1998, IBC issued 589,287 shares to the shareholders of BSW. In
March 1998, IBC suspended financing for BSW and the Board of Directors
authorized a Rescission of the Agreement of Purchase and Sale. On August 13,
1998, IBC believes it only had temporary control of BSW and in accordance with
FASB 94, paragraph 13, has not presented consolidated financial statements to
include BSW. Global Entertainment Holdings/Equities, Inc., a privately held
corporation, was incorporated on April 6, 1998, under the laws of the state of
Colorado. Interactive Gaming and Wagering, Inc., NV, (IGW), a privately held
corporation, was incorporated on May 16, 1997, under the laws of the Netherlands
Antilles, domiciled in Curacao. Pursuant to an Agreement of Purchase and Sale
dated June 30, 1998, the shareholders of IGW exchanged 100% of the issued and
outstanding shares of IGW for 5,134,500, post 3 for 1 split, shares of Global
Entertainment Holdings/Equities, Inc., (a privately held corporation). At the
date of the stock exchange neither corporation had any established market for
its shares and no shares had been publicly traded.
Pursuant to a Merger Agreement dated August 27, 1998, Global Entertainment
Holdings/Equities, Inc., the Legal Acquiree and a privately owned corporation,
agreed to exchange one share of its issued and outstanding stock for 1.5 of
F-17
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements
International Beverage Corporation, (IBC), a publicly held corporation. From
April 6, 1998 to August 27, 1998, Global Entertainment Holdings/ Equities, Inc.,
had issued 5,586,688 shares (retroactively restated) under the terms of the
Merger Agreement these shares become 8,380,040 retroactively restated shares.
The exchange of the shares gave the shareholders of Global Entertainment
Holdings/Equities, Inc., control of IBC, the Legal Acquirer. For statement
presentation Global Entertainment Holdings/Equities, Inc., has been considered
to be the accounting acquirer. On September 30, 1998, IBC changed its name to
Global Entertainment Holdings/Equities, Inc.
The share exchange of a private operating Company, (Global Entertainment
Holdings/Equities, Inc.,) into a non-operating public shell corporation
(International Beverage Corporation), with no significant assets or liabilities
resulted in the shareholders of the private company having actual operating
control of the combined company after the transaction, and the shareholders of
the former public shell continuing only as passive investors.
This transaction is considered to be a capital transaction in substance, rather
than a business combination. That is, the transaction is equivalent to the
issuance of stock by the private company for the net monetary assets of the
shell corporation, accompanied by a recapitalization. The accounting is
identical to that resulting from a reverse acquisition, except no goodwill of
other intangible is recorded.
APB16, paragraph 70, states that, "Presumptive evidence of the acquiring
corporation in combinations effected by an exchange of stock is obtained by
identifying the former common stockholder interest of a combined company which
either retains or receives the larger portion of the voting rights of the
combined corporation. That corporation should be treated as the acquirer unless
other evidence clearly indicates that another corporation is the acquirer."
Staff Accounting Bulletin Topic 2A, affirms the above principle and gives
guidelines that the post reverse-acquisition comparative historical financial
statements furnished for the Legal Acquirer should be those of the Legal
Acquiree.
In accordance with this guideline the outstanding shares of Global Entertainment
Holdings/Equities, Inc., have been retroactively restated on the balance sheet,
and the statement of stockholders' equity. The retroactively restated shares
have been used in the Computations for Earnings (Losses) Per Share to preserve
comparability of those figures.
NOTE #9 - ACQUISITION OF PREVAIL ONLINE, INC., AND WEBSITES PURCHASE
On August 20, 1999, Global Entertainment Holdings/Equities, Inc., (Global),
issued 43,500 shares of its common stock to acquire 100% of the issued and
outstanding shares of Prevail OnLine, Inc., (Prevail), a Colorado Corporation,
incorporated on July 21, 1999. Concurrent with issuance of the 43,500 shares of
stock to acquire Prevail, Global issued 120,000 shares to an unrelated party to
acquire a website known as wheretobet.com and a domain name known as netbet.org.
In 1999, the Company entered into an agreement with an independent third party
to design and develop a Website page known as "Sports Daily". The Sports Daily
Website Page is intended to give the Company's current clientele, sport
enthusiast and future customers information about all major sports events, game
times, statistics, weather conditions, injury reports, major sports events, and
current sports news. The Sports Daily Website is not a gaming or wagering
activity. The Company estimates that the Website as designed and developed at
June 30, 1999 will have a useful life of three years.
Prevail, has used the wheretobet.com, website to sell banner advertising as its
source of revenue since the acquisition of the website.
The wheretobet.com website and the netbet.org domain name where acquired from an
unrelated party for a total sum of $700,000. At the acquisition date Prevail
paid a down payment of $75,000 and signed a non interest-bearing note of
$225,000 payable in nine monthly installments commencing one month from the
closing date of the Agreement. In addition, Global issued 120,000 shares of its
common stock for a value of $400,000. The asset purchase and sale agreement
contains the following provision.
The stock that is to be transferred to Sellers contained therewith a put and
call provision as follows; (i) Sellers will have the right to put the stock to
the Purchaser anytime after six (6) months from the closing, but before twelve
(12) months from the closing at the net price of $400,000 (US); (ii) The
Purchaser will have the right to call the stock from Sellers anytime after six
(6) months from the closing but before twelve (12) months from closing at the
net price of $800,000 (US).
F-18
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements
As of December 31, 2000, the Company had paid the Seller $150,000 on the right
of redemption option of the contract with a balance of $250,000 owed at the end
of the year. The shares of stock have been redeemed by the Company. The 120,000
shares of stock were valued at $400,000.
Earnings per Share
Basic earnings (loss) per share is computed by dividing the earnings and losses
allocated to each class of equity by the weighted average number of shares
outstanding for each class during the period. Diluted earnings (loss) per share
is computed the same as basic earnings (loss) per share except the denominator
is adjusted for the effect of common share equivalents outstanding.
The following additional information is presented with respect to the Company's
earnings per share amounts:
For the Years Ended December 31,
--------------------------------
2000 Per Share 1999 Per Share
Amount Amount
EARNINGS PER COMMON SHARE
Net income (loss) available to common
shareholders........................ $ 217,662 $ (46,917)
Weighted average common shares:
outstanding......................... 10,289,578 0.021 10,301,282 (0.005)
Dilutive effect of convertible debt
subordinated shares outstanding......... 252,000 0.001 - -
Dilutive effect of weighted average stock
options outstanding..................... 1,520,543 0.002 700,500 (0.001)
Diluted common shares outstanding...... $12,062,120 0.018 11,001,782 (0.004)
NOTE #10 - INCOME TAXES
The Company has incurred losses that can be carried forward to offset future
earnings if all provisions of the Internal Revenue Code are met. These losses
are as follows:
Expiration
Year of Loss Amount Date
------------ ------------ ------
1997 $ 31,923 2017
1998 278,579 2018
1999 733,239 2019
2000 589,102 2020
The Company has adopted FASB 109 to account for income taxes. The Company
currently has no issues that create timing differences that would mandate
deferred tax expense. Net operating losses would create possible tax assets in
future years. Due to the uncertainty as to the utilization of the net operating
loss carryforward, a valuation allowance has been made to the full extent of any
tax benefit that net operating losses may generate.
Dec. 31, 2000 Dec. 31, 1999
Deferred Tax Asset Balance Beginning of Period $ -0- $ -0-
Net Operating Loss Carryforwards 1,632,843 1,043,741
555,167 54,872
Valuation Allowance (555,167) (354,872)
Net Deferred Tax Asset $ -0- $ -0-
Deferred Tax Liability $ -0- $ -0-
F-19
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements
Netherlands
Total USA Antilles
Net Income (Loss) $ 217,662 $ (589,102) $ 806,767
Permanent Adjustments -0- (806,767)
Net Operating Loss Carryforwards (1,043,741) -0-
Adjusted Taxable Income (1,632,843) -0-
Current Income Taxes Payable $ 16,912 $ -0- $ 16,912
The Company has computed U.S. federal income taxes without the revenue of its
wholly owned foreign subsidiary. Federal taxes are computed on current period
revenues net of net operating losses carried forward from proceeding period and
credit for foreign taxes. The Company has also recorded $16,912 and $11,571 in
taxes due to the Netherlands Antilles based on earnings in Curacao for the years
ended December 31, 2000 and 1999, respectively.
NOTE #11 - OPERATING LEASE OBLIGATIONS
The Company leases office facilities in Omaha, Nebraska. The lease commenced
February 1, 1999 and terminates January 31, 2004. Lease obligations for the term
of the lease are as follows:
Year Amount
---- ------
2001 16,150
2002 16,150
2003 16,750
2004 1,400
------ -------
Total $50,450
The subsidiary leases office facilities in Curacao, Netherlands Antilles. The
lease commences January 1, 1999 and terminates December 31, 2002. Lease
obligations for the term of the lease are as follows:
Year Amount
2001 124,760
2002 69,698
--------
Total $194,458
In November of 2000, the Company moved its principal office from Omaha Nebraska
to Paradise Valley, Arizona. In connection with the change of principal office,
the Company is leasing an office on a month-to- month basis for $1,000 per
month.
For the years ended December 31, 2000 and 1999 total rent expense was $140,910
per year.
NOTE #12 - ACCOUNTS AND NOTES RECEIVABLES
The Company has the following accounts receivable as follows as of December 31,
2000:
Amount
------
Current 316,056
31-60 Days 194,423
1-90 Days 165,196
Over 90 Days -0-
Total $675,675
The Company has agreed to a notes receivable payout of an accounts receivable
balance from a major customer. The terms of the note receivable call for a
payment of $50,000 per month on the balance of $1,653,669. Of the balance due,
$550,000 has been shown as a current asset with the balance shown as long-term
asset.
The Company has provided a provision for bad debt in the amount of $119,590.
F-20
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements
NOTE #13 - COMMITMENTS AND CONTINGENCIES
Effective October 20, 1999 and expiring on October 20, 2000, IGW signed an
agreement with Antelcom, N.V., for a 2 Mb digital offshore leased line
connection, between Curacao and Canada Teleglobe. The contract is written for
payment in U.S. dollars at $35,500 per month. The contract is payable as
follows:
Payments in 1999 $ 82,833
Payments in 2000 343,167
----------
Total Contract $ 426,000
==========
In October of 2000, the Company switched to A T & T for its bandwidth service.
The agreement calls for a monthly charge of $28,597 and does not have an
expiration date.
NOTE #14 - RELATED PARTY TRANSACTIONS
The Managing Director of Interactive Gaming & Wagering, N.V., has loaned the
Company $20,000. The Company has accrued interest on the loan at 8% interest
per annum. The former President of Global Entertainment Holdings/Equities,
Inc., has loaned to Interactive Gaming and Wagering, Inc., NV, $60,000 and
interest has been accrued or paid at 8% per annum.
A related party of the Managing Director of Interactive Gaming & Wagering, NV
and former President of Global Entertainment Holdings/Equities, Inc., has loaned
to Interactive Gaming & Wagering, NV $75,000 at 8% interest per annum. This loan
is due on demand. In addition this related party has loaned to Global
Entertainment Holdings/Equities, Inc., $225,000 with interest at 10% per annum
due March 31, 2001.
In November 2000, the Company began leasing its principal office from its
current President, Don Lisa, for $1,000 per month.
NOTE #15 - LITIGATION
On November 26, 1997, the Company as Masadi Resources, Inc. ("Company") entered
into an Agreement of Purchase and Sale ("Agreement") to purchase Beverage Source
Worldwide, Inc. ("BSI"). On May 5, 1998, the Company filed a Complaint in the
Superior Court of California, County of San Diego, asking the Court to declare
the Agreement rescinded. The Company further alleged that various individuals
including Mark Darnell ("Darnell") had breached the Agreement and alleged, the
individuals, including Darnell had breached their fiduciary duties and had
committed other malfeasance and illegal acts. All parties to the lawsuit other
than Darnell were dismissed prior to Trial. The trial was held on November 8-10,
1999, in the Superior Court of San Diego. In a Minute Order dated December 23,
1999, the Court ruled against the company on all counts and further ordered that
a rescission had not taken place and ordered that Darnell retained all
previously held stock interest in the company. Subsequent to the Court's ruling,
the Company and Darnell entered into a Settlement Agreement and Mutual Release
of all Claims ("Settlement Agreement") wherein the Company paid Darnell $75,000
and Darnell agreed to rescind the Agreement. The $75,000 per the Settlement
Agreement was to be paid as follows: $35,000 on 2/23/00; $20,000 on 5/18/00; and
$20,000 on 8/18/00. This final payment will resolve all aspects of this
litigation.
The Company had accrued the $75,000 Settlement as expense in the year ended
December 31, 1999 and the $75,000 was paid in 2000.
The Company is not a party to any other litigation at December 31, 2000.
NOTE #16 - ECONOMIC DEPENDENCY
IGW receives a substantial portion of its royalty fees revenues from one
customer. In 2000 and 1999, royalties and other fees from that customer were
$2,257,514 and $1,861,267 respectively. At December 31, 2000 and 1999, accounts
and notes receivable from that customer were $1,873,757 and $1,270,205. This
represents 71% of Gross Revenues and 88% of total Account Receivable and Notes
Receivable for IGW.
F-21
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements
NOTE #17 - SEGMENT INFORMATION
The Company has adopted FASB Statement No. 131, "Disclosures About Segments of a
Business Enterprise and Related Information." The Company is managed in two
geographical Segments; The United State of America and Curacao, Netherlands
Antilles.
Global Prevail Netherlands
USA USA Antille Total
License Fees 2000 909,031 909,031
1999 445,000 445,000
Royalty Fees 2000 2,826,718 2,826,718
1999 1,983,773 1,983,773
Hosting Income 2000 113,325 113,325
1999 159,090 159,090
Advertising Income 2000 723,415 - 723,415
1999 233,736 233,736
Operating Expenses 2000 568,384 745,634 3,046,555 4,360,573
1999 658,329 196,322 1,910,102 2,764,753
Other Income (Expenses) 2000 1,443 57 49,476 50,976
1999 (59,353) 107 3,821 (55,425)
Provisions for Income Taxes 2000 16,912 16,912
1999 - - 11,571 11,571
Net Income (Loss) 2000 (566,940) (22,162) 806,764 217,662
1999 (755,939) 37,521 671,501 (46,917)
Cash 2000 (7,055) 12,409 159,136 164,490
1999 19,625 2,921 213,638 236,184
Notes Receivable 2000 - - 1,653,669 1,653,669
1999 - - - -
Property & Equipment (Net) 2000 53,104 4,528 1,583,462 1,641,094
1999 66,300 579,893 993,942 1,640,135
Other Assets (Net) 2000 142,464 142,464
1999 - - 135,195 135,195
NOTE #18 - SUBSEQUENT EVENTS
There have been no subsequent event that have occurred since the balance sheet
date that warrant disclosure.
F-22
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC. & SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2001 (Unaudited) and December 31, 2000
As of March 31 As of December 31,
2001 2000
---------------- ------------------
(Unaudited) (Audited)
---------------- ------------------
A S S E T S
Current Assets:
Cash & Cash Equivalents 22,225 164,455
Accounts Receivable Net of Provision 911,336 556,085
Note Receivable 600,000 550,000
Prepaid Expenses 22,662 21,685
Interest Receivable 3,373 2,933
Employee Accounts Receivable 27,408 28,490
---------------- ------------------
Total Current Assets 1,587,004 1,323,648
Property & Equipment
Automobile- Net 28,567 45,295
Proprietary Software - Net 750,032 490,552
Package Software- Net 104,716 103,448
Office Improvements- Net 30,522 22,433
Computer Equipment- Net 363,891 434,755
Furniture & Fixtures- Net 103,505 88,934
Websites - Net 339,830 455,677
---------------- ------------------
Total Property & Equipment 1,721,063 1,641,094
Long-Term Assets
Note Receivable 903,669 1,103,669
Other Assets
Security Deposit 35,059 34,045
Software Design & Development-Net 147,752 108,419
---------------- ------------------
Total Other Assets 182,811 142,464
---------------- ------------------
Total Assets $ 4,394,547 $ 4,210,875
================ ==================
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-23
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC. & SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2001 (Unaudited) and December 31, 2000
As of March 31 As of December 31,
2001 2000
--------------- ---------------
(Unaudited) (Audited)
--------------- ---------------
L I A B I L I T I E S & S T O C K H O L D E R S' E Q U I T Y
Current Liabilities
Accounts Payable 573,629 445,312
Accrued Expenses 37,505 28,262
Accrued Interest 37,402 33,704
Current Portion- Capital Leases 14,285 17,856
Current Portion- Notes Payable 200,788 983,000
Note Payable- Line of Credit 51,951 5,844
Income Taxes Payable 31,513 28,483
--------------- ---------------
Total Current Liabilities $ 947,073 $ 1,542,461
Long Term Liabilities
Notes Payable 940,903 983,000
Less Current Portion (200,788) (983,000)
--------------- ---------------
Total Long Term Notes Payable 740,115 -
Capital Lease Payable 28,834 29,133
--------------- ---------------
Net Long Term Liabilities 768,949 29,133
--------------- ---------------
Total Liabilities $ 1,716,022 $ 1,571,594
--------------- ---------------
Stockholders' Equity
Preferred Stock, 25,000,000 Shares Authorized,
at $.001 Par Value, None Issued
Common Stock, 100,000,000 Shares Authorized 10,418 10,406
Par Value of $.001;
10,418,040 & 10,406,540 Shares Issued and
Outstanding Respectively Retroactively Restated
Paid in Capital 3,223,576 3,215,932
Retained Earnings(Deficit) (108,169) (139,757)
Treasury Stock, at Cost (447,300) (447,300)
--------------- ---------------
Net Stockholders' Equity 2,678,525 2,639,281
--------------- ---------------
Total Liabilities and Stockholders' Equity $ 4,394,547 $ 4,210,875
=============== ===============
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-24
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC. & SUBSIDIARIES
Consolidated Statement of Operations (Unaudited)
For the Three Months Ended
March 31
---------------------------
2001 2000
----------- ------------
Revenues:
License Fees 35,000 -
Royalty Fees 777,374 718,746
Hosting Income 27,425 159,109
Special Projects 95,886 -
Other Revenues 85,903 -
Sponsorship Income 80,665 233,727
----------- ------------
Total Revenues $ 1,102,253 $ 1,111,582
----------- ------------
Cost of Revenues:
Special Projects 67,056 -
Bandwidth 94,875 69,510
Sponsorship Expenses 13,521 71,516
----------- ------------
Total Cost of Revenues 175,452 141,026
Gross Profit 926,801 970,556
Expenses
Bad Debt Provision - 47,790
Uncollectible Fees Written Off - 25,000
Depreciation & Amortization 251,763 164,418
Rents 37,423 113,619
Professional Fees 70,668 27,181
Travel 6,651 31,481
Financial & Investor Relations 14,532 32,499
Administrative Expenses 103,412 206,930
Consulting 2,656 153,192
Advertising 43,972 53,371
Wages and Salaries 336,759 33,786
----------- ------------
Total Expenses $ 867,836 $ 889,267
----------- ------------
Income (Loss) from Operations 58,965 81,289
Other Income(Expenses)
Interest(Expense) (19,873) (10,389)
Interest Income 721 1,211
Other Income(Expense) (5,194) 35,597
----------- ------------
Total Other Income(Expenses) (24,346) 26,419
----------- ------------
Income Before Taxes 34,619 107,708
Provisions for Income Tax (3,031) (13,698)
----------- ------------
Net Income $ 31,588 $ 94,010
=========== ============
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-25
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC. & SUBSIDIARIES
Consolidated Statement of Operations (Unaudited)
For the Three Months Ended
March 31
---------------------------
2001 2000
----------- ------------
Basic Earnings Per Share $ 0.003 0.009
Diluted Earnings Per Share $ 0.003 0.009
Weighted Average Shares Outstanding 10,414,207 10,108,741
Retroactively Restated
Weighted Average Shares & Options 12,187,748 10,108,741
Outstanding
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-26
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC. & SUBSIDIARIES
Statements of Cash Flows (Unaudited)
For the Three Months Period January 1, 2001 to March 31, 2001
For the Three Months Ended
March 31
---------------------------
2001 2000
------------- ----------
Cash Flows from Operating Activities
Net Income $ 31,588 $ 94,010
Adjustments to Reconcile Net Income (Loss) to
Net Cash Provided by Operating Activities;
Depreciation 251,763 164,418
Provisions for Bad Debt - 47,790
Uncollectible Fees Written Off - 25,000
Stock Issued for Services 7,656 -
Change in Operating Assets & Liabilities
(Increase) Decrease in Fees Receivable (355,251) (424,564)
(Increase) Decrease in Prepaid Expenses (977) 31,890
(Increase) Decrease in Security Deposits (1,014) (1,428)
(Increase) Decrease in Interest Receivable (440) (873)
(Increase) Decrease in Employee Receivable 1,082 7,692
(Increase) Decrease in Notes Receivable 150,000 -
Increase in Accounts Payable 128,317 147,131
Increase in Software Design (39,333) -
Increase in Accrued Expenses 9,243 1,155
Increase in Taxes Payable 3,030 13,698
(Decrease) Increase in Accrued Interest 3,698 10,917
(Decrease) Increase in Accrued Wages - (26,323)
(Decrease) Increase in Cash in Escrow Restricted - (19,410)
----------- -----------
Net Cash Provided (Used) in Operating Activities 189,362 71,103
----------- -----------
Cash Flows from Investing Activities
Purchase of Fixed Assets (331,732) (239,907)
----------- -----------
Net Cash (Used) in Investing Activities $ (331,732) (239,907)
----------- -----------
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-27
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC. & SUBSIDIARIES
Statements of Cash Flows (Unaudited)
For the Three Months Period January 1, 2001 to March 31, 2001
For the Three Months Ended
March 31
--------------------------
2001 2000
------------- ---------
Cash Flows from Financing Activities
Increase (Decrease) in Capital Lease Liabilities (3,870) (5,414)
Payment on Long-Term Debt (75,000) -
Increase (Decrease) in Notes Payable 79,010 (97,196)
Sale of Common Stock - 253,391
------------- ----------
Net Cash Provided by Financing Activities$ $ 140 151,321
------------- ----------
Increase (Decrease) in Cash & Cash Equivalents (142,230) (17,483)
Cash & Cash Equivalents at Beginning of Period 164,455 236,184
------------- ----------
Cash & Cash Equivalents at End of Period $ 22,225 218,701
============= ==========
Disclosures from Operating Activities:
Interest Expense 26,065 10,389
Taxes 13,698 10,698
Significant Non-Cash Transactions:
Issued 39,000 for Prepaid Public Relations - 130,000
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-28
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2001 and 2000
(Unaudited)
NOTE 1 - GENERAL
The Company was incorporated on July 10, 1997, under the laws of the state of
Colorado using the name Masadi Resources, Inc. On February 10, 1998, Articles of
Amendment were filed changing the name to International Beverage Corporation.
Pursuant to a Merger Agreement dated 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. The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the laws of
the state of Colorado.
Principles of Consolidation
The Company currently has two wholly owned subsidiaries; Interactive Gaming and
Wagering NV, (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 is
engaged in the creation and operation of websites and derives its revenues from
banner advertising. 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 301(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 three months ended March 31, 2001 and
2000 are not necessarily indicative of the results that may be expected for the
years ended December 31, 2001 and 2000. The December 31, 2000 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 registration statement on Form 10KSB, as amended.
Shares of common stock issued by the Company for other than cash have been
assigned amount equivalent to the fair value of the service or assets received
in exchange.
Start-up and organization costs are recorded in accordance with the provisions
of Statement of Position 98-5, "Reporting Costs of Start-up Activities" ("SOP
98-5"). SOP 98-5 requires that the costs of start-up activities, including
organization costs, be expensed as incurred.
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.
NOTE 3 - COMMITMENTS AND CONTINGENCIES
The Company, from time to time, may be subject to legal proceedings and claims
that arise in the ordinary course of its business. Currently, the Company is not
subject to any legal proceedings or other claims.
F-29
Global Entertainment Holdings/Equities, Inc.
6636 North 48th Street
Paradise Valley, Arizona 85253
***PROXY***
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Donald J. Lisa as Proxy, with full power
of substitution and revocation, the true and lawful attorney and proxy of the
undersigned at the Annual Meeting of Shareholders (the "Meeting") of the Company
to be held August 17, 2001 from 9:00 a.m. to 12:00p.m., Pacific Daylight Time,
at Orange Tree Golf Resort, 10601 N. 56th Street, Scottsdale, Arizona 85254, or
any adjournments thereof, to vote the shares of Common Stock of the Company
standing in the name of the undersigned on the books of the Company, or such
shares of Common Stock of the Company as the undersigned may otherwise be
entitled to vote on the record date for Meeting with all powers the undersigned
would possess if personally present at the Meeting, with respect to the matters
set forth below and described in the Notice of the Annual Meeting of
Shareholders dated August 3, 2001, and the accompanying Proxy Statement of the
Company.
1. Election of the Board of Directors until the next Annual Shareholders
Meeting.
[ ] For all nominees listed below (except as marked to the contrary)
For the nominee Against the nominee Abstain
1. Bryan Abboud [ ] [ ] [ ]
2. Donald J. Lisa [ ] [ ] [ ]
3. David S. Wintroub [ ] [ ] [ ]
4. Thomas Glaza [ ] [ ] [ ]
2. Ratification of the employment of Clyde Bailey, P.C. as the Company's
independent accountant for the fiscal year ending December 31, 2001.
For [ ] Against [ ] Abstain [ ]
3. Any other business as may properly come before the meeting or any
adjournment thereof.
For [ ] Against [ ] Abstain [ ]
In His Discretion, the Proxy Is Authorized to Vote upon Such Other Business
That May Properly Come Before the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL PROPOSALS LISTED. IF NO
DIRECTIONS ARE GIVEN BY THE PERSON(S) EXECUTING THIS PROXY, THE SHARES WILL BE
VOTED IN FAVOR OF ALL LISTED PROPOSALS. THIS PROXY WHEN PROPERLY EXECUTED WILL
BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER, AND
UNLESS OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED FOR ALL PROPOSALS.
Please sign exactly as your name appears on your certificate. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such and submit
powers of attorney or other appropriate document. If a corporation, please sign
in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Page 1 of 2
Dated , 2001
-----------------------
- ------------------------------ --------------------------- -----------------
Please Print or Type Your Name Signature Number of Shares
Voted
PLEASE SIGN AND RETURN TO THE ADDRESSEE IN THE ENCLOSED
STAMPED ENVELOPE. ALL PROXIES ARE TO BE MAILED TO CORPORATE STOCK
TRANSFER, INC., ATTN: RHONDA SINGLETON, 3200 CHERRY CREEK DR. SOUTH,
STE 430, DENVER, CO. 80209, (303) 282-4800.
If you have had a change of Address, please print or type your new
address(s) in the space below:
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY.
--------
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