U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended March 31, 2002.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from ____________ to _____________.
Commission file number: 0-27637
-------
Global Entertainment Holdings/Equities, Inc.
--------------------------------------------
(Name of small business issuer in its charter)
Colorado 47-0811483
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 Brickell Key Drive, Suite 603, Miami, Florida 33131
-------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (305) 374-2036
--------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
As of May 9, 2002, there were 10,415,722 outstanding shares of the issuer's
common stock, par value $0.001.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION................................................3
ITEM 1. Financial Statements............................................3
Consolidated Unaudited Financial Statements...................F-1
ITEM 2. Management's Discussion and Analysis or Plan of Operation.......4
Results of Operations...........................................4
Liquidity and Capital Resources.................................5
PART II - OTHER INFORMATION...................................................5
ITEM 6. Exhibits and Reports on Form 8-K................................5
INDEX TO EXHIBITS.............................................................6
2
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements.
As used herein, the term "Company" refers to Global Entertainment
Holdings/Equities, Inc., and its subsidiaries and predecessors, unless otherwise
indicated. Consolidated, unaudited, condensed interim financial statements
including a balance sheet for the Company as of the quarter ended March 31, 2002
and statements of operations and statements of cash flows for the interim period
up to the date of such balance sheets and the comparable period of the preceding
year are attached hereto beginning on Page F-1 and are incorporated herein by
this reference.
The consolidated financial statements for the Company included herein are
unaudited but reflect, in management's opinion, all adjustments, consisting only
of normal recurring adjustments, that are necessary for a fair presentation of
the Company's financial position and the results of its operations for the
interim periods presented. Because of the nature of the Company's business, the
results of operations for the three months ended March 31, 2002 are not
necessarily indicative of the results that may be expected for the full fiscal
year. The financial statements included herein should be read in conjunction
with the financial statements and notes thereto included in the Form 10-KSB for
the year ended December 31, 2001.
3
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC. & SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
As of March 31, As of December 31
2002 2001
--------------- -----------------
A S S E T S
Current Assets:
Cash & Cash Equivalents 647,366 189,091
Accounts Receivable Net of Provision 887,690 1,401,285
Note Receivable 646,168 644,303
Prepaid Expenses 35,010 33,525
--------------- -----------------
Total Current Assets 2,216,234 2,268,204
Property & Equipment
Propietary Software - Net 1,094,196 1,115,465
Other Software - Net 94,313 94,996
Office Improvements - Net 19,423 22,198
Computer Equipment - Net 212,564 220,147
Furniture & Fixtures - Net 77,821 67,570
--------------- -----------------
Total Property & Equipment 1,498,317 1,520,376
Long-Term Assets
Note Receivable 303,669 453,669
Other Assets
Security Deposit 62,163 63,076
Software Design & Development - Net 33,086 41,764
--------------- -----------------
Total Other Assets 95,249 104,840
--------------- -----------------
Total Assets $ 4,113,469 $ 4,347,089
=============== =================
See accompanying summary of accounting principles and notes to consolidated
financial statements.
F-1
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC. & SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
As of March 31, As of December 31
2002 2001
--------------- -----------------
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 212,229 367,286
Accrued Expenses 24,537 21,549
Current Portion - Notes Payable 904,473 937,369
Note Payable - Line of Credit - 44,852
Income Taxes Payable 71,603 62,583
--------------- -----------------
Total Current Liabilities $ 1,212,842 $ 1,433,639
Long Term Liabilities
Notes Payable 1,047,895 1,080,791
Less Current Portion (904,473) (937,369)
--------------- -----------------
Total Long Term Notes Payable 143,422 143,422
Net Long Term Liabilities 143,422 143,422
--------------- -----------------
Total Liabilities $ 1,356,264 $ 1,577,061
--------------- -----------------
Stockholders' Equity
Preferred Stock, 25,000,000 Shares Authorized,
at $.001 Par Value, None Issued
Common Stock, 100,000,000 Shares Authorized 10,416 10,416
Par Value of $.001; 10,415,722 &
10,415,722 Shares Issued and
Outstanding Respectively
Paid in Capital 3,231,579 3,228,922
Retained Earnings(Deficit) (37,490) (22,010)
Treasury Stock, at Cost (447,300) (447,300)
--------------- -----------------
Net Stockholders' Equity 2,757,205 2,770,028
--------------- -----------------
Total Liabilities and
Stockholders' Equity $ 4,113,469 $ 4,347,089
=============== =================
See accompanying summary of accounting principles and notes to consolidated
financial statements.
F-2
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC. & SUBSIDIARIES
Consolidated Statement of Operations
(Unaudited)
For the Three Months Ended
March 31
--------------------------
2002 2001
------------ -----------
Revenues:
License Fees 7,500 35,000
Royalty Fees 1,115,111 777,374
Hosting Income 14,312 27,425
Special Projects 197,248 95,886
Other Revenues 88,364 85,903
Sponsorship Income 9,700 80,665
------------ ------------
Total Revenues $ 1,432,235 $ 1,102,253
------------ ------------
Cost of Revenues:
Special Projects 171,948 67,056
Bandwidth 93,461 94,875
Royalty Costs 99,292 -
Sponsorship Expenses 2,456 13,521
------------ ------------
Total Cost of Revenues 367,157 175,452
Gross Profit 1,065,078 926,801
Expenses
Uncollectible Fees Written Off 35,805 -
Depreciation & Amortization 293,560 251,763
Rents 41,993 37,423
Professional Fees 49,340 70,668
Financial & Investor Relations 21,110 14,532
Administrative Expenses 96,080 112,419
Advertising 38,890 43,972
Wages and Salaries 452,814 336,759
------------ ------------
Total Expenses $ 1,029,592 $ 867,536
------------ ------------
Income (Loss) from Operations 35,486 59,265
Other Income(Expenses)
Interest(Expense) (31,009) (19,873)
Interest Income 820 721
Other Income(Expense) (11,758) (5,194)
------------ ------------
Total Other Income (Expenses) (41,947) (24,346)
------------ ------------
See accompanying summary of accounting principles and notes to consolidated
financial statements.
F-3
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC. & SUBSIDIARIES
Consolidated Statement of Operations
(Unaudited)
For the Three Months Ended
March 31
--------------------------
2002 2001
------------ ------------
Income Before Taxes (6,461) 34,919
Provisions for Income Tax (9,019) (3,031)
------------ ------------
Net Income $ (15,480) $ 31,888
============ ============
Basic Earnings Per Share $ (0.00) $ 0.00
Diluted Earnings Per Share $ (0.00) $ 0.00
Weighted Average Shares 10,415,722 10,414,207
Outstanding Retroactively Restated
Weighted Average Shares & Options 12,189,263 12,187,748
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
(Unaudited)
For the Three Months Ended
March 31
-----------------------------
2002 2001
-------------- -------------
Cash Flows from Operating Activities
Net Income $ (15,480) $ 31,888
Adjustments to Reconcile Net Income (Loss) to
Net Cash Provided by Operating Activities;
Depreciation 293,560 251,763
Provisions for Bad Debt - -
Uncollectible Fees Written Off 35,805 -
Stock Issued for Services - 7,656
Change in Operating Assets & Liabilities
(Increase) Decrease in Fees Receivable 473,331 (355,251)
(Increase) Decrease in Prepaid Expenses (18,916) (977)
(Increase) Decrease in Security Deposits 912 (1,014)
(Increase) Decrease in Interest Receivable - (440)
(Increase) Decrease in Employee Receivable 17,430 1,082
(Increase) Decrease in Notes Receivable 152,594 150,000
Increase in Accounts Payable (148,680) 128,317
Increase in Software Design - (39,333)
Increase in Accrued Expenses 2,989 9,243
Increase in Taxes Payable 5,300 3,030
(Decrease) Increase in Accrued Interest - 3,698
-------------- -------------
Net Cash Provided (Used) in
Operating Activities $ 798,845 $ 189,662
-------------- -------------
Cash Flows from Investing Activities
Purchase of Fixed Assets (262,823) (332,032)
-------------- -------------
Net Cash (Used) in Investing Activities $ (262,823) $ (332,032)
-------------- -------------
See accompanying summary of accounting principles and notes to consolidated
financial statements.
F-5
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC. & SUBSIDIARIES
Statements of Cash Flows
(Unaudited)
For the Three Months Ended
March 31
-----------------------------
2002 2001
-------------- -------------
Cash Flows from Financing Activities
Payment on Long-Term Debt (77,748) (78,870)
Increase (Decrease) in Notes Payable - 79,010
-------------- -------------
Net Cash Provided by Financing Activities $ (77,748) $ 140
-------------- -------------
Increase (Decrease) in Cash & Cash Equivalents 458,274 (142,230)
Cash & Cash Equivalents at Beginning of Period 189,092 164,455
-------------- -------------
Cash & Cash Equivalents at End of Period $ 647,366 $ 22,225
============== =============
Disclosures from Operating Activities:
Interest Expense $ 31,009 $ 26,065
Taxes $ - $ -
Significant Non-Cash Transactions:
Issued 8,500 shares for Consulting and Legal $ 7,656
See accompanying summary of accounting principles and notes to consolidated
financial statements.
F-6
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2002 and 2001
(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, 2002 and
2001 are not necessarily indicative of the results that may be expected for the
years ended December 31, 2002 and 2001. The December 31, 2001 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.
F-7
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2002 and 2001
(Unaudited)
NOTE 2 - BASIS OF PRESENTATION (con't)
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-8
ITEM 2. Management's Discussion and Analysis or Plan of Operation
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
interactive gaming industry. These forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from historical results or those anticipated. In this report, the
words "anticipates", "believes", "expects", "intends", "future", "plans",
"targets" and similar expressions identify forward-looking statements. Readers
are cautioned to not place undue reliance on the forward-looking statements
contained herein, which speak only as of the date hereof. The Company makes no
obligation to publicly revise these forward-looking statements, to reflect
events or circumstances that may arise after the date hereof.
Additionally, these statements are based on certain assumptions that may
prove to be erroneous and are subject to certain risks including, but not
limited to, the Company's dependence on limited cash resources, and its
dependence on certain key personnel within the Company. Accordingly, actual
results may differ, possibly materially, from the predictions contained herein.
General
The Company generates operating revenues exclusively from its wholly owned
subsidiaries, IGW and Prevail. 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.
The Company intends to implement its business strategy by:
(1) Continuing to enhance and improve its technology;
(2) Seeking sales with unidentified companies that:
(a) Are in the Internet/Technology/Software based industries,
(b) Are financially stable, (c) Have a seasoned management
team, and (d) Are efficiently staffed;
(3) Developing brand name recognition through cross marketing and
merchandising.
Results of Operations
The Company's revenues increased to $1,432,235 for the quarter ended March
31, 2002 as compared to $1,102,253 for the three months ended March 31, 2001,
representing an increase of 30%. Cost of revenues also increased for the three
months ended March 31, 2002, from $175,452 during 2001, as compared to $367,157
during 2002. The higher cost of revenue was more than offset by the Company
increased revenues, allowing the Company's gross profit to improve 15%, rising
to $1,065,078 for the three months ended March 31, 2002, as compared to a gross
profit of $926,801 for the three months ended March 31, 2001.
Increased operating expenses for the three months ended March 31, 2002, of
$1,029,592 as compared to $867,536 for the quarter ended March 31, 2001, offset
the increase in gross profit. Accordingly, income from operations decreased
slightly to $35,486 for the three months ended March 31, 2002, as compared to
income from operations of $59,265 for the quarter ended March 31, 2001. The
primary reason behind the increase in operating expenses was an increase in
wages and salaries, from $336,759 in the first quarter of 2001, versus $452,814
for the quarter ended March 31, 2002 - this was a result of employing an
additional 12 people compared to 2001. Also, the Company's depreciation expense
increased 17% from $251,763 to $293,560.
4
Total other expenses for the quarter ended March 31, 2002 rose slightly to
$41,947, as compared to $24,346 for the quarter ended March 31, 2001. This
slight increase resulted in a net loss of $15,480 for the quarter ended March
31, 2002 as compared to the Company's net income of $31,888 for the quarter
ended March 31, 2001.
For the quarter March 31, 2002, Prevail generated revenues of $9,700, as
compared to $80,665 for the quarter ended March 31, 2001. As of March 31, 2002,
Prevail revenue accounted for less than1% of the Company's revenues for that
period, as compared to 7% for the quarter ended March 31, 2001. Because Prevail
is spending very little resources in marketing itself, the revenues are
commensurately lower and it is still in the process of restructuring. The
Company is making efforts under new management to enhance its current position
in the online gaming portal market.
Liquidity and Capital Resources
The Company's cash position significantly improved during the quarter
ended March 31, 2002, as a result of one of its largest clients tendering the
majority of its fees receivable. Thus, cash and cash equivalents were $647,366
at March 31, 2002, as compared to $22,225 as of December 31, 2001. The reduction
in accounts receivable from $1,401,285 on March 31, 2001, to $887,690 on March
31, 2002, and the resultant $313,885 from non-cash expenses (primarily
depreciation), were the predominant reasons behind the Company's solid cash
position. The provision of net cash generated from operating activities for the
three months ended March 31, 2002 increased to $798,845, as compared to $189,662
for the three months ended March 31, 2001.
Net cash used for investing activities for the three months ended March
31, 2002 was $262,823 compared to $332,032 for the three months ended March 31,
2001. Net cash used in financing activities for the three months ended March 31,
2002, was $77,748, as compared to net cash provided by financing activities of
$140 for the three months ended March 31, 2001.
The Company expects to continue to finance its ongoing operations and
expansion through working capital. However, it may seek some financing in the
event it chooses to expand its operations more aggressively than its cash flow
will allow.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. Exhibits required to be attached by Item 601 of Regulation S-B
are listed in the Index to Exhibits beginning on page 6 of this Form
10-QSB, which is incorporated herein by reference.
(b) No reports on Form 8-K were filed on the Company's behalf during the
quarter ended March 31, 2002.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Quarterly
Report on Form 10-QSB to be executed on its behalf by the undersigned, hereunto
duly authorized.
Global Entertainment Holdings/Equities, Inc.
/s/ Bryan Abboud
- --------------------------------------------
Bryan Abboud, CEO
May 10, 2002
5
INDEX TO EXHIBITS
Exhibits marked with an asterisk have been filed previously with the Commission
and are incorporated herein by reference.
EXHIBIT PAGE
NO. NO. DESCRIPTION
3.1 * Articles of Incorporation
3.2 * Bylaws
6