SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 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 under 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 011(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.
501 Brickell Key Drive, Suite 603
Miami, Florida 33131
-----------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on July 16, 2002
-------------------------
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of the Shareholders
of Global Entertainment Holdings/Equities, Inc. (hereinafter referred to as the
"Company"), to be held on Tuesday, July 16, 2002 at 10:00 a.m. (CDT) at Harrah's
Council Bluffs Casino Hotel, Harrah's Boulevard, Council Bluffs, Iowa 51501, 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 qualified;
2. PROPOSAL NO. 2: To ratify and approve the selection by the
Board of Directors of Kane, Hoffman &
Danner, P.A. as the Company's independent
accountants for the current year; and
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 May 31, 2002 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 for
inspection by any shareholder for any purpose germane to the Annual Meeting
during regular business hours at the Company's principal executive offices at
501 Brickell Key Drive, Suite 603, Miami, Florida 33131 from the date of this
notice.
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 at any such adjournments.
By order of the Board of Directors,
Bryan Abboud, Chief Executive Officer
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GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC.
501 Brickell Key Drive, Suite 603
Miami, Florida 33131
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
JULY 16, 2002
INFORMATION CONCERNING SOLICITATION AND VOTING
This Proxy Statement is being furnished to shareholders of Global
Entertainment Holdings/ Equities, Inc. (the "Company") in connection with the
Board of Director's solicitation of proxies for use at the annual meeting of
shareholders to be held on July 16, 2002, and at any adjournment of that meeting
(the "Annual Meeting"). The date on which this Proxy Statement and the form of
Proxy are first being mailed to shareholders of the Company is on or about June
24, 2002.
The Board of Directors has fixed May 31, 2002 as the record date for
determining shareholders who are entitled to vote at the Annual Meeting. At the
close of business on May 31, 2002, the Company had issued and outstanding
10,375,776 shares of common stock (the "Common Stock"), held of record by
approximately 124 shareholders. Each share of Common Stock is entitled to one
vote on each matter properly coming before the Annual Meeting.
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 named in the Proxy 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 shareholder 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, together as a single class,
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.
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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, 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 majority of 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 Kane, Hoffman
& Danner, P.A. as the Company's independent accountant for the current year.
Management of the Company has been informed by the executive officers and
directors of the Company that such parties intend to vote all shares they
beneficially hold with voting rights FOR the nominees and FOR all of the
proposals set forth in the notice. Together, such parties and proxies represent
approximately 32.1% of the votes eligible to be cast at the Annual Meeting.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of May 31, 2002, 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 10,375,776 outstanding shares of Common
Stock, (ii) each director and officer of the Company and (iii) all directors and
officers as a group:
Percentage
Name and Address Number of Shares Beneficially
of Beneficial Owner Beneficially Owned Owned (1)
Steven Abboud (2) (3) (4)(5) 2,303,895 22.2%
16569 Summit Drive
Omaha, Nebraska 68136
Joann Abboud (3) 929,280 8.9%
60 Seagate Drive #703
Naples, Florida 34103
Shining Star Investments, Inc. 895,358 8.6%
16569 Summit Drive
Omaha, Nebraska 68136
Executive Officers & Directors (7)
Bryan Abboud (2) (6) 3,320,081 31.9%
Thomas Hawkins 3,000 less than 1%
Thomas Glaza 0 n/a
Dave Stein 0 n/a
James Doukas 6,000 less than 1%
Jonathan Shatz 0 n/a
All Executive Officers & Directors as a Group 3,329,081 32.1%
(1) The number of shares and percentage of class beneficially owned by the
entities above is determined under rules promulgated by the SEC and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares
as to which the individual has sole or shared voting power or investment
power and also any shares which the individual has the right to acquire
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within 60 days through the exercise of any stock option or other right.
The inclusion herein of such shares, however, does not constitute an
admission that the named shareholder is a direct or indirect beneficial
owner of such shares. Unless otherwise indicated, each person or entity
named in the above table has sole voting power and investment power (or
shares such power with his or her spouse) with respect to all shares of
capital stock listed as owned by such person or entity.
(2) Steven Abboud is the beneficial owner of 88% of the voting stock of
Shining Star Investments, Inc. ("SSI") and Bryan Abboud is the beneficial
owner of 12% of the voting stock of SSI. SSI owns a total of 895,358
shares of the Company's Common Stock, 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.
(3) Joann Abboud is the mother of Bryan Abboud and Steven Abboud. Joann
Abboud is the principal beneficial owner of 100% of the voting stock of
the Ronald J. Abboud Family Trust and Camelot Investments, Inc. The
Ronald J. Abboud Family Trust owns 277,601 shares of the Company's Common
Stock. Camelot Investments, Inc. owns 75,913 shares of the Company's
Common Stock. All of these shares are reflected in the total 929,280
shares owned by Joann Abboud.
(4) Gene Abboud is the principal and beneficial owner of 50% of the voting
stock of Masadi Financial, which owns a total of 627,101 shares of the
Company's Common Stock. 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 each own 313,550.50 shares of the
627,101 total shares Masadi owns in the Company. The 313,550.50 shares
owned by Steven Abboud are reflected in his total ownership figure in the
table above.
(5) 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.
(6) Includes 424,938 shares beneficially owned by Bryan Abboud by virtue
of his ownership of options to purchase: (i) 150,000 shares of common
stock through January 31, 2005, at the exercise price of $1.00 per share;
(ii) 20,000 shares of common stock through January 29, 2005, at an
exercise price of $1.25 per share; (iii) 78,938 shares of common stock
through December 31, 2001, at an exercise price of $0.50 per share; and
(iv) 176,000 shares of common stock through December 31, 2002, at an
exercise price of $1.25 per share.
(7) The address for all of the Executive Officers and Directors is 501
Brickell Key Drive, Suite 603, Miami, Florida 33131.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock ("Common Stock") currently trades on the OTC
Bulletin Board under the symbol "GAMM."
The table below sets forth the high and low sales prices for the Common
Stock for each quarter of 2000 and 2001 and the first quarter of 2002. The
quotations below reflect inter-dealer prices, without retail markup, markdown or
commission and may not represent actual transactions:
Year Quarter High Low
---- ------- ---- ---
2000 First $5.00 $1.00
Second $2.00 $1.00
Third $3.95 $0.55
Fourth $1.75 $0.25
2001 First $0.53 $0.31
Second $1.95 $0.30
Third $1.80 $0.41
Fourth $0.90 $0.22
2002 First $0.38 $0.22
The closing trading price on June 10, 2002, was $0.31.
4
FINANCIAL STATEMENTS
The Company's financial statements together with the report thereon of
Clyde Bailey, P.C. for the fiscal year ended December 31, 2001 and the
supplementary quarterly information for the quarter ended March 31, 2002
beginning on page 10 of the Company's Annual Report to Shareholders for the year
ended December 31, 2001, are incorporated herein by reference.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors has determined that there will be four (4)
directors of the Company elected at the Annual Meeting. The Board of Directors
has nominated Bryan Abboud, Dave Stein and James Doukas as directors of the
Company and Thomas Glaza as Chairman of the Board of Directors of the Company.
In the absence of other instructions, the proxies will be voted for each of the
individuals named, 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 voting for
the nominees and a substitute nominee is selected, your shares will be voted for
the election of the substitute nominee.
About the Directors
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.
Name Age Position
Bryan Abboud 31 CEO, President and Director
Thomas Glaza 67 Chairman of the Board of Directors
Dave Stein 55 Director
James Doukas 67 Director
Bryan Abboud was the Chairman of the Board of Directors of the Company
from 1998 to February 2001, has been chief executive officer and president of
the Company since January 2002, and managing director and co-founder of IGW
since 1997. 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 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.
Thomas Glaza accepted his appointment as Chairman of the Company's board
of directors in February 2001. He is expected to serve on the Company's
compensation committee and audit committee once they are formed. He retired from
the MAPICS Corporation in March 2000 but continues to provide occasional
consulting services. Mr. Glaza serves on the boards of directors of two
reporting companies, On Line Power (OTCBB: OPWR) and CEMIS. Between 1988 and
1998, Mr. Glaza held a variety of positions with MAPICS Corporation, including
Vice President of Marketing and
5
Business Development. 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 chief
executive officer and chief operating officer. 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 Bachelor of Business Administration from the University
of Michigan where he majored in marketing and finance.
Dave Stein has been a director of the Company since January 31, 2002. He
is expected to serve as chairman of the Company's audit committee and as a
member of the Company's compensation committee once they are formed. For the
past decade, Mr. Stein has focused on consulting with and coaching sales
executives and their teams in 48 states and 20 countries to win business. He is
the author of How Winners Sell: 21 Proven Strategies to Outsell Your Competition
and Win the Big Sale, which defines the strategies and related tactics for sales
professionals to thrive in our new world of information overabundance, intense
competition, and product and service commodization. Mr. Stein has worked with
large enterprises such as IBM, Hewlett-Packard, ALLTEL, Bayer, NEC, Siemens,
Oracle, Invensys, Pitney Bowes, MCI, AT&T, Unisys, Ciber, and McGraw-Hill, as
well as many smaller companies. He has been the president of The Stein
Advantage, Inc., a sales consulting company, from July 1997 to the present, and
was the Director of Worldwide Business Development for Marcam Corporation from
1995 to 1997. From 1980 until he founded The Stein Advantage in 1997, Mr. Stein
was employed by several leading-edge high technology companies in a number of
roles: programmer, systems engineer, sales representative, sales manager,
Director of Worldwide Sales Development, VP of Sales, VP of Marketing, VP of
International Operations, VP of Client Services and VP of Strategic Alliances.
In the early 1990's Mr. Stein lived and worked in Europe initiating, organizing
and establishing the international operations for Datalogix International. He is
a member of the National Speakers Association and the Strategic Account
Management Association (SAMA). Mr. Stein graduated from the City College of New
York with a Bachelor of Arts degree and pursued postgraduate studies at the City
University of New York.
James Doukas has been a director of the Company since April 9, 2002. Mr
Doukas is expected to serve as chairman of the Company's compensation committee
and as a member of its audit committee, which committees are currently being
structured. Mr. Doukas served in the military for over 32 years and was
responsible for formulating and executing multi-million dollar budgets, leading
large organizations of over 3,500 personnel, negotiating sensitive agreements
with foreign governments, and conducting strategic planning at the national
level. From 1988 to 1998, he was executive vice president of RJ Moore and
Associates, a start up engineering firm for which he had regional responsibility
in sales, marketing, and personnel recruitment. Mr. Doukas received a Bachelor
of Arts degree from St. Benedicts College and a Master of Arts degree from
George Washington University.
Meetings and Committees of the Board of Directors
The Board held eighteen (18) meetings and took action by written consent
ten (10) times during fiscal 2001. All of the directors attended the meeting of
the Board of Directors during fiscal 2001.
6
The Company currently has no standing audit, compensation, or nominating
committees, and no committees performing similar functions, but expects to have
an audit and compensation committee in place before December 31, 2002.
Directors' Compensation
All directors receive annual options to purchase 12,000 shares each of the
Company's common stock per year. Such options bear exercise prices equal to the
weighted average of the common stock's closing price for the three (3) months
prior to the granting of such options. Awarding occurs at the beginning of the
year and vesting occurs as the year transpires or upon termination of the
Director. All Directors are reimbursed for out-of-pocket expenses incurred in
connection with the Company's business.
OTHER EXECUTIVE OFFICERS
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 resign or have been removed. Set forth
below is biographical and other information concerning the Company's executive
officers who are not also members of the Company's Board of Directors.
Name Age Position
- ---- --- --------
Thomas Hawkins 50 Secretary
Jonathan Shatz 42 Chief Financial Officer
Thomas Hawkins has been Secretary of the Company since June of 1999. Mr.
Hawkins has 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. For the past five years, Mr. Hawkins has been 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 Bachelor of Science Degree, in Business and Public Administration. He was
a member of Tip O'Neil's National 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.
Jonathan Shatz has been Chief Financial Officer of the Company since June
3, 2002. Mr. Shatz has over twenty years of international finance, banking,
brokerage and investor relations experience. From 1999 to 2002 he served as the
vice-president in charge of the Miami office of Columbia Financial Group, a
national investor relations firm, where he assisted publicly traded companies in
improving their exposure in the investment community. As senior manager of the
emerging markets consulting division for Ernst & Young from 1995 to 1998, Mr.
Shatz led complex due diligence consulting
7
assignments for banks and financial institutions in Russia, the Middle East,
Eastern Europe and Asia. From 1991 to 1995, Mr. Shatz served as President of AJ
consulting, an international business consulting firm with Corporate, Government
and Non-profit clients. Mr. Shatz also served in senior roles in audit and risk
management for The First National Bank of Chicago from 1985 to 1991, and as a
staff accountant in the audit and tax departments of Price Waterhouse from 1982
to 1985. Mr Shatz received a law degree from the University of Southampton in
England and is a chartered accountant. He has also obtained his securities and
insurance licenses.
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, 2001, was a director, officer, or beneficial owner of more
than ten percent 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. However, Bryan Abboud made two purchases of
Company common stock during January 2002, which was reported on a Form 4 filed
on February 26, 2002.
COMPENSATION AND OTHER BENEFITS
Executive Compensation
The following table provides summary information for the years 2001, 2000
and 1999 concerning cash and non-cash compensation paid or accrued by the
Company to or on behalf of its chief executive officer for the appropriate
years.
SUMMARY COMPENSATION TABLES
Long Term Compensation
Annual Compensation Awards Payouts
----------------------------- ----------------------- -------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Named Officer Year Salary Bonus Compensation Awards Options Payouts Compensation
- ------------- ---- -------- ----- ------------ ---------- ---------- ------- ------------
Bryan Abboud 2001 $120,000 $15,000 $33,708(1) - 0 - - 0 - - 0 - - 0 -
President
Donald J. Lisa 2001 $ 42,500 $ 0 $21,091(1) - 0 - (3) - 0 - - 0 -
President 2000 $ 60,000 $ 0 $ 0 - 0 - - 0 - - 0 - - 0 -
Todd Elmquist 2001 $164,000 $10,000 $44,839(2) - 0 - - 0 - - 0 - - 0 -
Chief Information
Officer of IGW
David Wintroub 2000 $ 48,000 $ 0 $ 0 5,000 (4) - 0 - - 0 -
President
Steven Abboud 1999 $ 34,000 $ 0 $ 0 1,000 - 0 - - 0 - - 0 -
President
(1) Bryan Abboud received reimbursement for living expenses. Don Lisa
received reimbursement for the use of a portion of his home as the temporary
headquarters of the Company.
(2) Todd Elmquist received reimbursement for living and transportation
expenses.
(3) 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.
8
(4) 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 $2.25 per share.
Option/SAR Grants in Last Fiscal Year
(Individual Grants)
Number of Percent of Total
Securities Options/SARs Exercise of
Underlying Granted to Base Price
Name Options/SARS Employees in Fiscal Year Price ($/Sh) Expiration Date
- ------------- ------------ ------------------------ ------------ ---------------
Bryan Abboud 78,938(1) 49.3% $0.50/Share December 31, 2008
Todd Elmquist 55,256(1) 34.5% $0.50/Share December 31, 2008
(1) On February 22, 2002, the term of the options granted to purchase these
shares was extended from December 31, 2001 to December 31, 2008.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Subject to ratification by the shareholders, the Board has selected Kane,
Hoffman & Danner, P.A., independent auditors, to audit the financial statements
of the Company for the fiscal year ending December 31, 2002. Although
shareholder approval of the Board of Directors' selection of Kane, Hoffman &
Danner, P.A. is not required by law, the Board of Directors believes that it is
advisable to give shareholders an opportunity to ratify this selection. If the
shareholders do not approve this proposal at the Annual Meeting, the Board of
Directors may reconsider the selection of Kane, Hoffman & Danner, P.A.
Representatives of Kane, Hoffman & Danner, P.A. and Clyde Bailey, P.C., the
Company's previous auditor for fiscal years ending 2000 and 2001, are not
expected to be present at the Meeting.
The Board recommends a vote FOR the ratification of the appointment of
Kane, Hoffman & Danner, P.A. as independent auditors.
INDEPENDENT PUBLIC ACCOUNTANTS
On June 10, 2002, Kane, Hoffman & Danner, P.A. was selected by the Board as
the Company's independent auditor for the current year. Clyde Bailey, P.C.
("Clyde Bailey") served as the Company's independent auditor for the two most
recent fiscal years. There was no disagreement with Clyde Bailey on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure. Clyde Bailey's financial statements did not contain
an adverse opinion or disclaimer of opinion. The change was prompted by the fact
that the Company has requirements that exceed the capacity of Clyde Bailey to
service those needs and also by the fact that Clyde Bailey is not geographically
located close to the Company, whereas Kane Hoffman & Danner P.A. is a local firm
in Miami that can be responsive to immediate needs.
Audit Fees
Clyde Bailey, P.C. billed the Company an aggregate of $10,200 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, 2001.
9
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, 2001 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
Clyde Bailey, P.C. has not billed the Company any other fees for
professional or 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.
PROPOSAL NO. 3
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 judgment on
such matters.
DESCRIPTION OF BUSINESS
The description of the Company's business beginning on page 3 of the
Company's Annual Report to Shareholders for the year ended December 31, 2001, is
incorporated herein by reference.
The Company spent $458,709 on research and development and $301,059 on
maintenance of its current computer software programs in 2001. In 2000, the
Company spent a combined $613,234 on research and development and maintenance.
As of May 17, 2002, the Company had a total of thirty-nine (39) employees,
all of which were employed full-time.
10
EQUITY COMPENSATION PLAN INFORMATION
Number of Weighted- Number of securities
securities to be average exercise remaining available for
issued upon price of future issuance under
exercise of outstanding equity compensation
outstanding options, plans (excluding
options, warrants warrants and securities reflected in
Plan Category and rights rights column (a))
- ------------------------------------------------------------------------------------------------------------
(a) (b) (c)
- ------------------------------------------------------------------------------------------------------------
Equity compensation plans approved by 0 n/a 0
security holders
- ------------------------------------------------------------------------------------------------------------
Equity compensation plans not approved by 1,899,668 $1.21 0
security holders
- ------------------------------------------------------------------------------------------------------------
Total 1,899,668 $1.21 0
- ------------------------------------------------------------------------------------------------------------
Description of Equity Compensation
During the past several years, employees of the Company have been granted
options to acquire shares of the Company's common stock. These options were not
set forth in a formal stock option plan but were provided as motivation and
incentives to individuals who, in the Company's opinion, were important to the
Company's success. The total number of options granted and their terms for each
year are as follows:
Total Exercise
Year Options Price Expiration Date
---- ------- -------- -----------------
1998 157,875 $0.50 December 31, 2008
2,250 $1.67 December 31, 2008
1999 422,000 $1.25 December 31, 2009
5,300 $1.50 December 31, 2009
48,200 $1.67 December 31, 2009
2000 100,000 $0.60 January 29, 2005
592,383 $1.25 January 29, 2005
15,360 $1.67 January 29, 2005
82,500 $2.00 January 29, 2005
74,000 $2.25 January 29, 2005
31,800 $2.50 January 29, 2005
24,000 $5.00 January 29, 2005
2001 37,500 $0.38 December 31, 2004
271,500 $0.71 December 31, 2004
35,000 $0.82 December 31, 2004
Shareholders
The Company is authorized to issue One Hundred Million (100,000,000) shares
of Common Stock and Twenty-Five Million (25,000,000) shares of preferred stock.
As of May 31, 2002, there were approximately 124 shareholders of record holding
a total of 10,375,776 shares of Common Stock. There are no shares of the
Company's preferred stock outstanding.
11
Dividends on the Common Stock
The Company has not declared a cash dividend on its Common Stock in the
last two fiscal years and it does not anticipate the payment of future
dividends. There are no other restrictions that currently limit the Company's
ability to pay dividends on its Common Stock other than those generally imposed
by applicable state law.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward-looking Information
This information statement contains forward-looking statements. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. These statements relate to
future events or to our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential" or "continue" or the negative of such terms or other
comparable terminology. These statements are only predictions. Actual events or
results may differ materially. There are a number of factors that could cause
our actual results to differ materially from those indicated by such
forward-looking statements.
Although the Company believes that the expectations reflected in the
forward-looking statements are reasonable, it cannot guarantee future results,
levels of activity, performance, or achievements. Moreover, the Company does not
assume responsibility for the accuracy and completeness of such forward-looking
statements. The Company is under no duty to update any of the forward-looking
statements after the date of this information statement to conform such
statements to actual results. The foregoing management's discussion and analysis
should be read in conjunction with the Company's financial statements and the
notes herein.
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.
The Company intends to implement its business strategy by:
(1) Continuing to enhance its technology;
(2) Seeking sales with unidentified companies that are:
(a) in the Internet/Technology/Software industries,
(b) financially stable,
(c) have a seasoned management team, and
(d) are efficiently staffed, and
(3) Developing brand name recognition through cross marketing and
merchandising.
12
Results of Operations
The Company experienced its highest revenues to date and was cash flow
positive for the fiscal year ended December 31, 2001. The Company's revenues
increased to $4,708,468 for the year ended December 31, 2001 as compared to
$4,572,489 for the twelve months ended December 31, 2000, continuing the
Company's unbroken string of substantial year to year top line growth reports
since its inception in 1997.
For the year ended December 31, 2000, the Company reported its first net
profit before taxes of $234,574. Due to an increase in expenses in 2001, the
Company still experienced a net profit, but slightly lower than the same period
in 2000 at $134,414.
The top line growth is primarily due to additional revenues generated from
software licensing, and Website services for licensees (including Royalties).
Revenues from software licensing of $50,000, hosting services of $87,312, and
royalties of $3,862,482, which are the significant income sources, accounted for
85% of the total revenues for the twelve months ended December 31, 2001. As of
December 31, 2001, the Company supported 15 fully operational licensee websites.
For the fiscal year ended December 31, 2001, Prevail generated revenues of
$143,929, as compared to $723,415 for the year ended December 31, 2000. As of
December 31, 2001, Prevail revenue accounted for approximately 3% of the
Company's revenues for that period, as compared to 16% for the year ended
December 31, 2000. The decrease in Prevail's operational results was due to the
Company's temporary suspension of Prevail's website maintenance activities and a
consequent discounting of advertising fees during the redevelopment of its
websites.
Operating expenses were $3,722,796 for the twelve months ended December 31,
2001 as compared to $3,410,044 for December 31, 2000. As a percentage of
revenues, operating expenses increased from 75% to 79% as a result of an
increase in depreciation and amortization expenses to $1,070,713 for the year
ended December 31, 2001 as compared to $762,382 for the same period in 2000.
Tax expenses for tghe twelve months ended December 31, 2001 were $16,667 as
compared to $16,912, for 2000. The majority of the Company's income is generated
from IGW in Curacao and is taxed at the rate of about 3%.
Three Month Period Ended March 31, 2001 Compared to Same Period in 2002
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,
13
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.
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 ended 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 than 1% 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
Year Ended December 31, 2001 Compared to Year Ended December 31, 2000
Cash and cash equivalents were $189,091 for the year ended December 31,
2001. Net cash generated from operating activities for the twelve months ended
December 31, 2001 increased to $910,528 compared to $524,746 for the twelve
months ended December 31, 2000. The increase in cash from operations was
primarily due to payments against Notes Receivable.
Net cash used for investing activities for the twelve months ended December
31, 2001 was $778,700 compared to $753,985 for the twelve months ended December
31, 2000. The increase was primarily due to an increase of proprietary software
investment. Net cash provided by financing activities for the twelve months
ended December 31, 2001, was $107,192, as compared to $157,410 for the twelve
months ended December 31, 2000.
Three Month Period Ended March 31, 2001 Compared to Same Period in 2002
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.
14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Steven Abboud, a shareholder and former officer and director of the
Company, and Mr. Bryan Abboud, Chief Executive Officer and President of the
Company and Managing Director of Interactive Gaming & Wagering, NV, are brothers
and sons of Joann Abboud, and are the principal beneficial owners of 88% and
12%, respectively, of the voting stock of Shining Star Investments, Inc., a
shareholder of the Company.
Mr. Gene Abboud, a shareholder of the Company is a second cousin to Mr.
Steven 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 loaned $20,000 to the Company's wholly
owned subsidiary, IGW. This debt has not yet been repaid and is now in the
amount of $26,115 accruing interest at fifteen percent (15%) per annum.
On August 1, 1998, Bryan Abboud loaned $20,000 to IGW. This debt has not
yet been repaid and is now in the amount of $24,572 accruing interest at fifteen
percent (15%) per annum.
On July 18, 2000, Shining Star Investments, Inc. loaned $40,000 to the
Company, secured by a promissory note requiring monthly payments of fifteen
percent (15%) per annum interest only. This note is convertible into Common
Stock at $0.50 per share on or before August 1, 2002.
On April 30, 2001, Joann Abboud loaned the Company $240,000 for the
purchase of computer equipment which is secured by a promissory note in the same
amount. The note earns interest at the rate of fifteen percent (15%) per year,
and became due and payable in full on April 30, 2002. This note has been
satisfied to the extent of $200,000 and the remainder has been extended until
April 30, 2003.
Joann Abboud loaned the Company $92,145 for operational expenses which is
secured by a promissory note bearing interest at fifteen percent (15%) per year
and due and payable in full on May 1, 2003.
DEADLINE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
Proposals of shareholders that are intended to be presented at the
Company's next Annual Meeting must comply with the requirements of Rule 14a-8
promulgated by the Securities and Exchange Commission under Regulation 14A of
the Securities Exchange Act of 1934, and must be received by the Company no
later than December 15, 2002 in order to be included in the proxy statement and
proxy relating to the meeting.
15
ANNUAL REPORT
The Company will provide without charge to each shareholder of record as of
May 31, 2002, upon the written request of such person, a copy of the Company's
Form 10-KSB, including the financial statements, for the year ending December
31, 2001. A copy of any exhibit to the Company's Form 10-KSB may also be
obtained from the Company at no charge upon written request for each such
exhibit requested. Such written requests should be sent to Bryan Abboud,
President, Global Entertainment Holdings/Equities, Inc., 501 Brickell Key Drive,
Suite 603, Miami, Florida 33131.
BY THE ORDER OF THE BOARD OF DIRECTORS:
/s/ Bryan Abboud
- --------------------------------------
Bryan Abboud, Chief Executive Officer
Miami, Florida
June 19, 2002
16
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC.
501 Brickell Key Drive, Suite 603
Miami, Florida 33131
***PROXY***
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
-----------------------------------------------------------
The undersigned hereby appoints Bryan Abboud 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 Tuesday, July 16, 2002 at 10 a.m. (CDT), at Harrah's Council Bluffs
Casino Hotel, Harrah's Boulevard, Council Bluffs, Iowa 51501, 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 June 19,
2002, and the accompanying Proxy Statement of the Company.
1. Election of the Board of Directors until the next Annual Meeting.
[ ] For all nominees listed below (except as marked to the contrary)
For the nominee Against the nominee Abstain
1. Bryan Abboud [ ] [ ] [ ]
2. Thomas Glaza [ ] [ ] [ ]
3. Dave Stein [ ] [ ] [ ]
4. James Doukas [ ] [ ] [ ]
2. Ratification of the employment of Kane, Hoffman & Danner, P.A. as the
Company's independent auditor for the fiscal year ending December 31,
2002.
For [ ] Against [ ] Abstain [ ]
3. Any other business as may properly come before the meeting or any
adjournment thereof.
For [ ] Against [ ] Abstain [ ]
4. Mark "FOR" to enroll this account to receive certain future
shareholder communications in a single package per household. Mark
"AGAINST" if you do not want to participate. To change your election
in the future, call (305) 374-2036.
For [ ] Against [ ]
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 SHAREHOLDER, 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.
Dated ______, 2002
- ------------------------------ ---------------------- ----------------------
Please Print or Type Your Name Signature Number of Shares Voted
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY TO THE ADDRESSEE IN
THE ENCLOSED STAMPED ENVELOPE. --------
If you have had a change of Address, please print or type your new
address(s) in the space below:
GLOBAL ENTERTAINMENT HOLDINGS/EQUITIES, INC.
501 Brickell Key Drive, Suite 603
Miami, Florida 33131
Telephone: (305) 374-2036
Consent to Electronic Delivery of Corporate Information to Shareholders
For your convenience, we are now offering you, as a Global Entertainment
Holdings/Equities, Inc. ("GAMM") shareholder, the option of viewing future GAMM
corporate information, including Annual Reports and Proxy Statements, on the
Internet. You can access them at your convenience and easily print them if you
wish. The best part is that you would receive the information earlier than ever
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Please note that this is a global consent to receive all corporate information
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If you would like to receive future corporate information via GAMM's web site,
http://www.globalentertainment.com, rather than receiving hard copies in the
- ----------------------------------
mail, please enter your name and Tax Payer ID # or Social Security # below:
Tax Payer ID# or Social Security #: __________________________
Name(s) on Account: _____________________________________
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I (we) consent to use GAMM's Internet site to receive all future corporate
information, including but not limited to, Annual Reports and Proxy Statements
as they become available. I understand that this consent will remain in effect
until I notify GAMM by mail that I wish to resume mail delivery of corporate
documents.
By signing below and returning this card to GAMM at the address listed herein, I
agree with the above.
Date: ____________________ ________________________________
Signature
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e-mail alert service, please write to:
Global Entertainment Holdings/Equities, Inc.
501 Brickell Key Drive, Suite 603
Miami, Florida 33131
Global
Entertainment Holdings/Equities, Inc.
A n n u a l R e p o r t
2001
A LETTER TO OUR SHAREHOLDERS
Dear Shareholder,
Global Entertainment and its subsidiaries, Interactive Gaming & Wagering, NV
(IGW) and Prevail Online (Prevail), achieved many successes in 2001 that have
set the stage for more rapid business expansion in coming years. Positive signs
can be seen in almost all areas: product development goals have been attained,
financial results were near the mark, new, more focused leadership has been
installed, and for the second year in a row, the company was marginally
profitable.
IGW's operations were particularly successful in 2001. A major debt issue with
the company's leading client was resolved. This enabled re-investment into
product development on our award winning software and contributed to easing the
company's historic cash flow issues. IGW was also able to release more than 10
new casino games in 2001. This helped fuel a 66% casino royalty increase from
the previous year. Back office improvements have made the sportsbook product an
example for the industry to follow due to its ease of use and integrated
marketing technology. Most product development is now focused on increasing
client profitability. Everything from creating entirely unique casino games to
improved database-mining techniques have been made with the operator in mind,
and, in many cases, with direct involvement from our cooperative clients. New
development is also aimed at getting and retaining players through improved
interfaces, new sports wagering options for globalization, and customer support
software and facilities upgrades. International currency and multi-lingual
software offerings by IGW are expected to greatly expand client revenues this
year. These developments will give our sales efforts in 2002 a well-needed
competitive advantage. As well, improved client revenue generation ability
helped GAMM achieve its first year of positive cash flow with no outside paid-in
capital, partially due to IGW's royalty based earnings in clients' net win.
Unfortunately, Prevail Online fell well short of targeted revenue in 2001 and
posted a loss of close to $300,000 although the vast majority of which was
depreciation from the purchase of www.wheretobet.com in mid 1999. A management
change at the end of the 2000 and the subsequent re-structuring of the
organization was felt for longer than anticipated. New management is in place
and development at Prevail is currently focused on an expanded gaming search
directory and the re-design of its principal web portal, www.wheretobet.com.
2002 revenue targets have been adjusted to more accurately reflect the potential
during this turn-around year for Prevail although it is not certain whether
these efforts will result in profitability.
Lack of financial resources has been an ongoing inhibitor to growth for GAMM and
it's subsidiaries since inception. However, the restructuring of our receivables
in 2001 allowed the company to make long-overdue operational improvements and
support itself independently through internal cash flow. This significant
accomplishment was primarily achieved through increases in royalty revenue,
reaching over $3.8 million in 2001, almost a 40% increase from 2000. Although
our commitment to providing current clients with superior products and services
will not change, more time and resources will be dedicated to sales and
marketing efforts aimed at expanding the client base, particularly focused on
prospects already established in the gaming industry with less emphasis on
recruiting entrepreneurs.
1
Other changes for GAMM in 2001 were the appointment of new Board members with
more experience in sales and marketing, technology, and strategy. The offices of
CEO and COO of Global were combined with the Managing Director role at IGW. This
has resulted in the elimination of an unnecessary senior management position.
The new Board has lead the development-both initial and ongoing-of a sound
business strategy while shifting focus to a more sales oriented model. I cannot
emphasize enough my delight with our new Board members. They have allowed me to
make the move to CEO with much less trepidation then I might have had if this
had been done in earlier years. With the new Board in place, both the company
and I have become more effective. We are actively looking to enlarge the Board
by adding members with experience in land-based casino operations and corporate
finance; expanding into the land based casino market, as well as international
markets in general, is recognized as an important aspect in the future growth
of the company.
Please note that GAMM's new headquarters is in Miami, Florida. With Donald
Lisa's resignation last year as CEO there was no longer reason to have the
offices in his home city of Phoenix. The Miami office facilities currently house
both GAMM and Prevail Online, who share a support staff. This location also
offers significantly easier access to IGW's operation in Curacao.
The future prospects for the business look promising and we are doing everything
in our power to make GAMM a leader in the industry. 2002 should be a year of
continued growth and development. New software products and upgrades, continued
industry growth and hopefully a number of new clients will make for an
exciting year resulting in increased revenue and profit.
Sincerely,
/s/ Bryan P. Abboud
Bryan P. Abboud
President and
Chief Executive Officer
May 2002
2
OUR BUSINESS
OVERVIEW
Global Entertainment Holdings / Equities, Inc. (GAMM), through its subsidiaries,
Interactive Gaming and Wagering, NV (IGW) and Prevail Online, Inc. (Prevail), is
primarily in the business of providing software and support services to clients
who operate Internet-based live action gambling websites.
TURN-KEY OPERATIONS FOR CLIENTS
IGW offers a flexible "turn-key" solution to its clients. That is, IGW provides
not only the gaming software but also the back end support necessary to
operating an effective gaming site which includes a) marketing services for
business volume expansion, b) communications, networking and hardware facility
and support that allows for uninterrupted up-time and c) customer service
operations through IGW's strategic partner, VIP Services.
GAMING SOFTWARE FOR PLAYERS
Two basic types of gaming software are provided:
1. Casino games including blackjack, craps, slots, roulette, video poker, and
keno.
2. A Sportsbook that allows wagering on many worldwide sporting events including
football, basketball, hockey, baseball, and horses.
BACK-OFFICE CLIENT SUPPORT
Front end games used by players are fully integrated with a state-of-the-art
back-office system that allows the client to effectively operate while
minimizing support, marketing and administrative costs. This aspect of IGW's
product is a primary differentiation from the competition.
This support system allows real-time risk management for clients. This includes
functions like quickly adjusting lines based on the balance of the play on a
sporting event or monitoring the play-by-play action of high stakes players.
Security of all client and player data is a built in feature with regular
updates that prevent unauthorized access and malicious hacking attempts.
The back-office system also provides advanced business management facilities
such as evaluation of marketing programs and real-time perspectives of business
volumes and gross profit or loss by event, player, time and game type.
MARKETING SUPPORT SERVICES
IGW provides fee-based marketing support services that assist clients in
expanding their business. Services based on advanced pattern recognition and
demographics help clients provide customized marketing messages for current and
prospective players. The website design team offers a look and feel that
differentiates Global clients from other gaming sites to more effectively reach
their target audiences.
3
OVERVIEW - continued
HOSTING SERVICES
IGW provides hosting services composed of high-speed communication lines and
computer hardware assets for all of its clients as well as the manpower to
monitor the status and respond to problems on a 24x7 basis. In 2001, IGW
experienced total systems availability of 99.9%, a figure comparable to major
international corporations.
PREVAIL
GAMM's wholly owned subsidiary, Prevail Online, owns and operates gaming portals
such as www.wheretobet.com (WTB). As Prevail's flagship site, WTB is an
Internet-based portal aimed at providing gaming information to prospective and
current online casino and sportsbook players. WTB offers such information as
tips and strategies on how to play games more effectively, a searchable
directory of online casino and sportsbook sites, promotional offers, news, and a
selection of free-play casino games. Revenues are earned through advertising
fees.
Prevail's other gambling portals include www.thesportsdaily.com, a site which
provides information focused on the sportsbook player, and www.netbet.org, a
general information on site about the online gaming industry.
4
THE GAMING INDUSTRY
FUTURE PROSPECTS FOR ONLINE WAGERING
The outlook for the online gaming industry is attractive. Followers of the
industry place revenue growth at about 30% year over year. Since financial
participation in this growth is achieved by receiving a royalty based on net
win, GAMM expects to grow at a rate similar to, if not higher than, the industry
average. GAMM anticipates these growth rates due to its emphasis on Sportsbook
gaming products whose use and demand, according the industry experts, are
growing at a higher rate than casino-based gaming.
Competitive pressure is quickly becoming a major concern for online casino
operators and general overcrowding of the market is expected to foment
consolidation as those companies without proper funding, management, or with
uncompetitive software systems are bought up by larger companies or simply go
out of business. There are now an estimated 1,200 web sites with live action,
real money, traditional casino games but only about 400 of those offer a
sportsbook product to their clientele. This is directly related to sportsbooks
being significantly more complex from both the operational and software points
of view. Casino table games have built in mathematical advantages and unvarying
rules whereas sports wagering requires detailed game-by-game management. This,
alongside the necessity of bearing sports wagerings' cyclical revenue stream
through extremely slow periods of revenue prevents many casino operators from
entering the sports market. GAMM plans to target companies with existing casino
websites that are going to need a high-end, user-friendly sportsbook product in
order to stay competitive.
Major US land-based casino corporations have yet to enter the domestic online
wagering market due to unclear US laws and the potential risk to current
operating licenses. International casino companies outside of US jurisdiction
present a major market for GAMM. These companies are currently expanding
operations in gaming-friendly jurisdictions around the world, including
Australia, various Caribbean nations, South Africa, Isle of Man, and Gibraltar.
The global market for online wagering is expanding rapidly, especially in Europe
and Southeast Asia and GAMM is currently working to gain share in this market
through new, multi-lingual gaming products and aggressive promotion of its
services in those markets.
5
LEGAL ENVIRONMENT
Some US government agencies regard online wagering to be illegal and there is
pending legislation in the US Congress specifically aimed at the prohibition of
Internet wagering by US citizens. Other similar bills have failed in the past
but near-future outlooks see no cease by at least some legislators in pressing
for an outright ban. Current pending legislation is aimed at the restriction of
E-commerce. Specifically, a law would prevent credit card issuing banks from
allowing their customers to use their cards to send money to, or receive money
from, online wagering websites. The law would also make the operation of online
wagering websites within US jurisdiction illegal (it is important to note that
there are currently no known casino websites that are operated within US
jurisdiction). Past history indicates that limiting yet another method of fund
transfer will only result in new avenues opening up. For example, in the late
1990's Western Union, under pressure from the Florida Attorney General,
eliminated direct cash transfers to casino and sportsbook operations. Although
for many operations this was the primary method of receiving player money other
methods were quickly implemented and accepted by the overwhelmingly sympathetic
and flexible gaming public. The same should hold true in the future, especially
with the recent proliferation of reliable and anonymous cash transfer companies
such as Paypal and Firecash.
Land-based US casinos have not pushed for legalization and at one time lobbied
against online wagering because it was considered a competitive threat. Rather
than risk profitable licenses with still undetermined legal interpretations they
have stayed out of online casino operations. This is expected to change as more
international casino companies, that see additional revenue and a hugely
expanded client base, move into the online market and begin to profit over the
next several years.
6
FINANCIAL OVERVIEW
Global Entertainment Holdings/Equities Inc. has ended the year 2001 with its
second consecutive profitable year. The net profit of $117,747 in 2001 follows a
profit of $217,662 for the year ending December 31, 2000. The Company's
consistently positive results in a market where many competitors are realizing
net losses provides evidence of the competitive advantage Global has achieved
with IGW's user-friendly software system and a formalized organizational
structure.
ROYALTY INCOME
[Graphic chart has been deleted due to electronic filing. The deleted graphic
traces Global's varying royalty income, which in tabular form, is as follows:]
Date Amount of Income
------------------ ----------------
March 31, 1999 $243,539
June 30, 1999 ($8,265)
September 30, 1999 $172,446
December 31, 1999 $430,969
March 31, 2000 $275,341
June 30, 2000 $160,824
September 30, 2000 $355,643
December 31, 2000 $359,898
March 31, 2001 $304,370
June 30, 2001 $262,382
September 30, 2001 $211,707
December 31, 2001 $700,179
7
During the twelve months ended December 31, 2001 the Company's revenues
increased 3% from $4,572,489 in 2000 to $4,708,468 in 2001. Global's wholly
owned subsidiary Interactive Gaming and Wagering, N.V. (IGW) is the primary
source of revenue growth. During the fourth quarter of 2001 it experienced its
highest level of operations since its inception in 1997, posting revenues of
$1,837,589. This is nearly a 60% increase as compared to the same quarter in
2000. The most important revenue source for IGW is software licensing, producing
a total of $3,862,482 during 2001, an increase of 37% from the $2,826,718
received during the year ended on December 31, 2000. Software licensing fees
represent 82% of IGW's total revenues followed by bandwidth fees that
constituted 7% of total revenues. Special projects, a line item for the
marketing services department, contributed about 5% of total revenues, hosting
fees 2%, and initial installation licensing fees added about 1%. As of December
31, 2001, IGW supported 15 fully operational licensee web sites.
Two consecutive profitable years and the restructuring of the accounts
receivable enabled the Company to significantly improve its cash position.
NET CASH FLOW
[Graphic chart has been deleted due to electronic filing. The deleted graphic
identifies Global's varying net cash flow, which in tabular form, is as
follows:]
Quarter Ended Net Revenues
------------------ ------------
December 31, 2001 $189,091
September 30, 2001 $92,697
June 30,2001 $84,125
March 31, 2001 ($6,672)
8
[Graphic chart has been deleted due to electronic filing. The deleted graphic
traces Global's decreasing average period of collection, which in tabular form,
is as follows:]
AVERAGE PERIOD OF COLLECTION
Quarter Ended Number of Days to Collect
------------------ -------------------------
December 31, 2000 173
March 31, 2001 53
June 30, 2001 55
September 30, 2001 34
December 31, 2001 56
The Company expects its revenue and net profits to substantially increase year
to year moving forward, supported primarily by IGW's royalty growth, marketing
services and an active, new Prevail. The Company's other wholly owned
subsidiary, Prevail Online, Inc. ("Prevail"), generated revenues of $143,929 for
the fiscal year ended December 31, 2001; this was a drop of 80% from the year
2000. As of December 31, 2001, Prevail revenue accounted for approximately 3% of
The Company's revenues for that period, as compared to 16% for the year ending
December 31, 2000. Prevail showed limited activity during the period in question
for several reasons including, 1) management change 2) the flagship website,
www.wheretobet.com, was shelved for several months, and 3) the online gaming
advertising market dropped dramatically and became more competitive.
Global's operating expenses increased from 75% to 79% as a percentage of revenue
from $3,410,044 in the year 2000 to $3,722,796 in 2001. Expense growth is
attributable to 46% increase in software development investment of $607,364 for
2001 and heavier marketing expenses for IGW of $125,000 for year 2001 which is
25% greater than the previous year and relays the Company's interim strategy of
more investment in development, sales and marketing. Tax expenses for the twelve
months ended December 31, 2001 were $16,667 as compared to $16,912 for 2000. The
majority of the Company's income is generated from IGW in Curacao and is taxed
in that jurisdiction at a rate of about 3%. IGW's net income is not taxed in the
United States while Prevail and Global's net
The Company expects its revenue and net profits to substantially increase year
to year moving forward, supported primarily by IGW's royalty growth, marketing
services and an active, new Prevail.
9
AUDIT LETTER
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,
2001 and the related consolidated statement of operations, changes in
stockholders' equity, and statement of cash flows for the year ended December
31, 2001 and 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.
We conducted our audit in accordance with generally accepted auditing standards
in the United States. 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, 2001, and the consolidated results of their
operations and their cash flows for the years ended December 31, 2001 and 2000
then ended in conformity with accounting principles generally accepted in the
United States.
Clyde Bailey
Certified Public Accountant
February 5, 2002
San Antonio, Texas
10
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2001
Amount
CURRENT ASSETS ----------
Cash & Cash Equivalents.......................................$ 189,091
Accounts Receivable Net of
Provision for Bad Debts of $88,398............................$1,401,285
Notes Receivable..............................................$ 644,303
Prepaid Expenses..............................................$ 33,525
TOTAL CURRENT ASSETS.......................................$2,268,204
PROPERTY & EQUIPMENT
Proprietary Software - Net....................................$1,115,465
Other Software - Net..........................................$ 94,996
Office Improvements - Net.....................................$ 22,198
Computer Equipment - Net......................................$ 220,147
Furniture & Fixtures - Net....................................$ 67,570
TOTAL PROPERTY & EQUIPMENT.................................$1,520,376
LONG-TERM ASSETS
Note Receivable...............................................$ 453,669
TOTAL LONG-TERM ASSETS.....................................$ 453,669
OTHER ASSETS
Security Deposits.............................................$ 63,076
Software Design & Development - Net...........................$ 41,764
TOTAL OTHER ASSETS.........................................$ 104,840
TOTAL ASSETS.....................................................$4,347,089
CURRENT LIABILITIES
Accounts Payable..............................................$ 367,286
Accrued Expenses..............................................$ 21,549
Current Portion - Notes Payable...............................$ 937,369
Note Payable - Line of Credit.................................$ 44,852
Income Current Liabilities....................................$ 62,583
TOTAL CURRENT LIABILITIES..................................$1,433,639
LONG TERM LIABILITIES
Notes Payable.................................................$1,080,791
Less Current Portion.........................................($ 937,369)
Total Long Term Notes Payable.................................$ 143,422
Net Long Term Liabilities.....................................$ 143,422
TOTAL LIABILITIES..........................................$1,577,061
STOCKHOLDERS EQUITY
Preferred Stock, 25,000,000 Shares Authorized
at $0.001 Par Value........................................$ 0
Common Stock, 100,000,000 Shares Authorized
Par Value of $0.001........................................$ 10,682
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY........................$4,347,089
See Notes to Consolidated Financial Statements
11
CONSOLIDATED STATEMENTS OF OPERATIONS
2001 2000
----------- -----------
REVENUES
License Fees....................................$ 50,000 $ 29,400
Royalty Fees....................................$ 3,862,482 $ 2,826,718
Hosting Fees....................................$ 87,312 $ 113,325
Sponsorship Income..............................$ 143,929 $ 723,415
Bandwidth.......................................$ 341,859 $ 511,124
Special Projects................................$ 222,886 $ 368,507
TOTAL REVENUES...............................$ 4,708,468 $ 4,572,489
COST OF REVENUES
Special Projects................................$ 146,500 $ 280,068
Bandwidth.......................................$ 365,380 $ 599,804
Royalty Costs...................................$ 200,118 -
Sponsorship Projects............................$ 26,348 $ 65,458
TOTAL COST OF REVENUES.......................$ 738,346 $ 945,330
GROSS PROFIT.................................$ 3,970,122 $ 3,627,159
EXPENSES
Uncollectible Fees Written Off..................$ 92,362 $ 128,942
Depreciation & Amortization.....................$ 1,070,713 $ 762,382
Rents...........................................$ 139,373 $ 343,226
Professional Services...........................$ 238,423 $ 539,273
Advertising.....................................$ 170,619 $ 384,640
Financial & Investor Relations..................$ 73,352 $ 142,774
Administrative Expenses.........................$ 288,029 $ 289,644
Personnel Expenses..............................$ 1,538,850 $ 740,092
Communications..................................$ 111,075 $ 79,071
TOTAL EXPENSES...............................$ 3,722,796 $ 3,410,044
INCOME (LOSS) FROM OPERATIONS................$ 247,326 $ 217,115
OTHER INCOME (EXPENSES)
Internet (Expense).............................($ 79,182) ($ 29,760)
Interest Income.................................$ 21,698 $ 4,935
Other Income (Expense).........................($ 55,428) $ 42,284
TOTAL OTHER INCOME (EXPENSES)...............($ 112,912) $ 17,459
Income Before Taxes.............................$ 134,414 $ 234,574
Provisions for Income Tax......................($ 16,667) ($ 16,912)
NET INCOME...................................$ 117,747 $ 217,662
Basic Earnings Per Share........................$ 0.011 $ 0.021
Diluted Earnings Per Share......................$ 0.009 $ 0.018
Weighted Average Shares Outstanding.............$10,422,814 $10,289,578
Weighted Average Shares & Options Outstanding...$12,450,157 $12,062,120
See Notes to Consolidated Financial Statements
12
STATEMENTS OF CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES 2001 2000
---------- ----------
Net Income (Loss)..................................$ 117,747 $ 217,662
ADJUSTMENT TO RECONCILE NET INCOME (LOSS) TO
NET CASH PROVIDED (USED) TO OPERATING ACTIVITIES:
Depreciation & Amortization.....................$1,070,713 $ 762,382
Write off Uncollectible Fees Receivable.........$ 92,362 $ 81,152
Provisions for Bad Debt......................... - $ 47,790
Non Cash Expenses...............................$ 13,000 $ 110,481
CHANGE IN OPERATING ASSETS & LIABILITIES
(Increase) Decrease in Fees Receivable.........($ 845,200) $ 832,150
(Increase) Decrease in Prepaid Expenses........($ 11,840) $ 46,256
(Increase) Decrease in Security Deposits.......($ 29,031) ($ 16,825)
(Increase) Decrease in Interest Receivable......$ 2,933 ($ 301)
(Increase) Decrease in Employee Receivable......$ 28,490 $ 22,822
(Increase) Decrease in Notes Receivable.........$ 555,697 ($1,653,669)
(Decrease) Increase in Accounts Payable........($ 78,026) $ 135,419
(Decrease) Increase in Accrued Expenses........($ 6,713) $ 14,791
(Decrease) Increase in Taxes Payable............$ 34,100 $ 16,912
(Decrease) Increase in Customer Deposits........ - ($ 35,880)
(Decrease) Increase in Accrued Interest........($ 33,704) ($ 6,466)
(Decrease) Increase in Accrued Wages............ - ($ 49,930)
NET CASH PROVIDED (USED IN) TO
OPERATING ACTIVITIES...........................$ 910,528 $ 524,746
CASH FLOWS FROM INVESTING ACTIVITIES 2001 2000
----------- ------------
Purchase of Proprietary Software..................($ 778,700) ($ 753,985)
NET CASH (USED) IN INVESTING ACTIVITIES...........($ 778,700) ($ 753,985)
See Notes to Consolidated Financial Statements
13
CASH FLOWS FROM FINANCING ACTIVITIES 2001 2000
---------- -----------
Increase (Decrease) in Capital Lease Liabilities... - -
Payment on Capital Leases.........................($ 36,375) ($ 19,691)
Increase (Decrease) in Notes Payable...............$ 39,008 $ 418,000
Payment on Notes Payable..........................($ 109,825) ($ 29,849)
Treasury Stock..................................... - ($ 447,300)
Sale of Common Stock............................... - $ 236,250
Net Cash Provided (Used) by Financing Activities..($ 107,192) $ 157,410
Increase (Decrease) in Cash & Cash Equivalents.....$ 24,636 ($ 71,829)
Cash & Cash Equivalents at Beginning of Period.....$ 164,455 $ 236,284
Cash & Cash Equivalents at End of Period...........$ 189,091 $ 164,455
SUPPLEMENTAL CASHFLOW INFORMATION 2001 2000
--------- ---------
Interest Expense...................................$ 45,478 $ 29,760
Income Taxes....................................... - -
See Notes to Consolidated Financial Statements
14
STATEMENT OF STOCKHOLDERS EQUITY
AS OF DECEMBER 31, 2001
COMMON STOCK TREASURY STOCK
SHAREHOLDERS EQUITY Shares Par Value Shares Amount Paid-In Accumulated Stockholders
Capital Deficit Equity
Balance December 31, 1999 9,940,353 $9,940 - - $2,869,688 (357,419) $2,522,209
1/18/00 5,000 $5 - - $ 6,245 - $ 6,250
Shares Issued for Consulting
Services at $1.25 per Share
3/7/00 20,000 $20 - - $ 14,980 - $ 15,000
Shares Issued for Consulting
Services at $0.75 per Share
3/18/00 315,000 $315 - - 235,935 - $ 236,250
Shares Issued for Cash
at $0.75 per Share
3/18/00 1,787 $2 - - 2,679 - $ 2,681
Shares Issued for Technology
at $1.50 per Share
3/18/00 75,000 $75 14,925 - $ 15,000
Shares Issued for Note
Extension at $0.50 per Share
8/23/00 49,400 $49 - - 71,501 - $ 71,550
Shares Issued for Technology
at $1.45 per Share
Rounding (31) - - - - - (21)
Treasury Stock, at Cost (23,787) - 183,533 ($447,300) ($20) - ($ 447,300)
Net Income (Loss) - - - - - $217,662 $ 217,662
Balance December 31, 2000 10,382,722 $10,406 183,533 ($447,300) $3,215,932 ($139,757) $2,639,281
---------- ------- ------- ---------- ---------- ---------- ----------
Shares Issued for Services 33,000 $33 - - $ 12,967 - $ 13,000
Net Income (Loss) - - - - - $ 117,747 $ 117,747
Balance December 31, 2001 10,415,722 $10,439 $183,533 ($447,300) $3,228,899 ($ 22,010) $2,770,028
---------- ------- ------- ---------- ---------- ---------- ----------
See Notes to Consolidated Financial Statements
15
AUDIT NOTES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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, and the license fee has been determined and
collectability of the license fee is probable.
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.
16
SIGNIFICANT ACCOUNTING POLICIES - continued
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, 2001, uninsured balances aggregated $159,220.
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 or the estimated lives of the assets.
Depreciation and amortization is computed on the straight line method.
17
SIGNIFICANT ACCOUNTING POLICIES - continued
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 website 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 $170,619 for the years ended December 31, 2000 and 2001,
respectively. The amount of advertising expense is lower in 2001 because Prevail
spent over 253,000 in 2000 compared to 45,000 in 2001.
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).
18
SIGNIFICANT ACCOUNTING POLICIES - continued
RECLASSIFICATION
Certain reclassifications were made to the 2000 financial statements and notes
thereto in order to conform to the 2001 presentation.
GOODWILL AND OTHER INTANGIBLE ASSETS
In July 2001, the Financial Accounting Standards Board issued Statements of
Financial Standards ("SFAS") No. 141, "Business Combinations" and No. 142,
"Goodwill and Other Intangible Assets". SFAS No. 141 established accounting and
reporting standards for business combinations and eliminates the pooling-of-
interests method of accounting for combinations for those combinations initiated
after July 1, 2001. SFAS No. 141 also includes new criteria to recognize
intangible assets separately from goodwill. SFAS No. 142 establishes the
accounting and reporting standards from goodwill and intangible lives. Goodwill
and intangibles with indefinite lives will no longer be amortized, but,
alternatively will be reviewed periodically for indicators of impairment.
Separate intangible assets that are not deemed to have an indefinite life will
continue to be amortized over their useful lives. The Company does not
anticipate that the adoption of SFAS No. 141 and SFAS No. 142 will have a
significant effect on its results of operations or financial position.
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures about
Segments of an Enterprise and Related Information, supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise." SFAS 131
establishes standards for the way that public companies report information about
operating segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial statements
issued to the public. It also establishes standards for disclosures regarding
products and services, geographic areas and major customers. SFAS 131 defines
operating segments as components of a company about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. The Company has evaluated this SFAS and has made the necessary
disclosures to conform to this SFAS.
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.
19
ACQUISITION AND RESCISSION OF
BEVERAGE SOURCE WORLDWIDE, INC. - continued
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., had breached their respective duties, obligations and agreements with the
Company, secreting and/or attempting to secret the company's 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, commingling 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.
In light of the rescission of the agreement of purchase 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 reached an agreement with the former officers of
Beverage Source Worldwide, Inc., whereby in exchange $75,000 they withdrew their
objection to the rescission of the agreement dated May 26, 1997.
SOFTWARE DEVELOPMENT FOR LICENSING & RECOGNITION OF
INCOME FROM SOFTWARE LICENSING
The Company 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 capitalizes 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 year
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 collectibility 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
software and in accordance with the licensing agreement has notified the Company
of its sales.
20
SOFTWARE DEVELOPMENT FOR LICENSING & RECOGNITION OF
INCOME FROM SOFTWARE LICENSING - continued
Once the Company notifies the licensee 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 years ended December 31, 2001 and 2000, the Company capitalized
$607,364 and $613,235 in Proprietary Software including the Casino software,
Customer Support software, and other new project software that IGW is
developing. These capitalized expenses will be depreciated or amortized over a
three year period.
The Company does not engage in any gaming or wagering activities.
STOCKHOLDERS' EQUITY
PREFERRED STOCK
The Company has 25,000,000 shares of preferred stock, $.001 par value authorized
by issuance. These preferred shares may be issued in one or more series at the
discretion of the Board of Directors. As of December 31, 2001, there is no
preferred stock outstanding.
COMMON STOCK
The Company has 100,000,000 shares of common stock, $.001 par value authorized
for issuance. 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.
21
SOFTWARE DEVELOPMENT FOR LICENSING & RECOGNITION OF
INCOME FROM SOFTWARE LICENSING - continued
The Company approved the issuance of 568,293 stock options to key IGW employees
and 252,750 to directors of the Company pursuant to the Company's Stock Option
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.
For the year of 2001, the Company approved its annual option plan to issue
318,675 options at an exercise price of $.71 per share with an expiration date
of December 31, 2011 to certain employees and directors.
As of December 31, 2001, the Company had in the aggregate, outstanding options
to purchase 1,775,343 shares of its common stock and no options have been
exercised.
The following information is presented with respect to the Company's stock
options:
WEIGHTED AVERAGE NUMBER 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................................... 478,500 1.29
Exercised................................. - -
Cancelled................................. - -
Outstanding at December 31, 1999............. 700,500 1.07
Granted................................... 821,043 1.49
Exercised................................. - -
Cancelled................................. - -
WEIGHTED AVERAGE NUMBER OF SHARES EXERCISE PRICE
Outstanding at December 31, 2000.............1,521,543 $1.28
Granted................................... 478,800 .64
Exercised................................. - -
Cancelled................................. - -
Expired................................... (225,000) (.60)
Outstanding at December 31, 2001.............1,775,343 $1.26
22
SOFTWARE DEVELOPMENT FOR LICENSING & RECOGNITION OF
INCOME FROM SOFTWARE LICENSING - continued
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 YEAR ENDED DECEMBER 31: 2000 2001
Net Income (loss) available to common shareholders: -------- --------
As reported................................... $217,662 $117,747
Pro forma..................................... $206,167 $ 89,021
Basic earnings (loss) per share:
Common share as reported...................... $ 0.021 $ 0.011
Common share pro forma........................ $ 0.020 $ 0.008
Diluted earnings (loss) per share:
Common share as reported and pro forma........ $ 0.018 $ 0.010
Under SFAS 123, the value of each option granted during 2000 and 2001 was
estimated on the date of grant using the Black Scholes model with the following
assumptions: Risk-free interest rate - 6.5% for 2000 and 6.0% for 2001, dividend
yield - 0%, volatility - 19.3% and expected life of the option - 5 years.
NON-CASH INVESTING & FINANCING ACTIVITIES
The following is provided is 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, 2001, the Company issued; 33,000 shares for
consulting fees valued at $13,000.
23
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, 2001 and 2000,
the Company had property and equipment as follows:
ASSETS 2001 2000 Life Depreciation Depreciation Depreciation Basis
Cost Cost 2001 2000 Accumulated
Automobile 0,00 43,949 3 8,790 6,952 0,00 0,00
Proprietary Software 1,220,599 613,235 3 265,580 0,00 265,580 955,019
Other Software 149,492 134,253 3 26,191 21,996 54,496 94,996
Office Improvements 33,297 33,297 5 11,099 0,00 11,099 22,198
Computer Equipment 1,009,166 910,124 3 319,650 285,802 789,019 220,147
Websites 717,534 717,534 3 239,253 264,097 557,088 160,446
Furniture & Fixtures 188,430 203,679 3 55,956 49,831 120,860 67,570
Total 3,318,518 2,656,071 - 926,519 628,678 1,798,142 1,520,376
Software Design 459,486 457,451 3 144,194 133,704 417,721 41,765
for Licensing
24
NOTES PAYABLE
The Company has the following notes payable obligations.
PAYABLE OBLIGATIONS 2000 2001
--------- ---------
Note Payable to an Individual, Interest at 15%,
Due Date April 30, 2002........................... $ 115,000 $ 115,000
Note to a Related Party 15% Interest,
Due April 30, 2002................................ 225,000 240,000
Notes to Related Parties, 15% Interest, Due on demand. - 143,422
Note to Seller of Website, Due on Demand.............. 250,000 152,675
Note to Developer..................................... -0- 125,579
Other ................................................ -0- 26,115
Convertible Debt...................................... - -
Note to Related Party, dated July 18, 2000,
15% Interest 40,000 40,000
Note to Related Party, dated August 11, 2002,
15% Interest paid monthly, Convertible at
$1.50 per share before October 1, 2002............. 50,000 50,000
Note to Related Party, dated August 2, 2002,
15% Interest paid monthly, Convertible at
$50 per share before March 31, 2002................ 10,000 10,000
Note to Unrelated Parties, dated August 30, 2000,
15% Interest paid monthly, Convertible at
$1.50 per share before September 1, 2002........... 178,000 178,000
Total Notes Payable................................... $983,000 $1,080,791
Less Current Portion.................................. (983,000) (937,369)
Net Long Term Debt.................................... -0- $143,422
25
ACQUISITIONS OF PREVAIL ONLINE, INC. AND WEBSITES PURCHASE
On August 20, 1999, the Company 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 were 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).
As of December 31, 2001, the Company had paid the Seller $247,325 on the right
of redemption option of the contract with a balance of $152,675 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 at the time of issuance.
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.
26
EARNINGS PER SHARE- continued
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 2001 Per Share
Amount Amount
EARNINGS PER COMMON SHARE
Net income (loss) available to common shareholders $217,662 - $ 117,747 -
Weighted average common shares outstanding 10,289,578 0.021 10,422,814 0.011
Dilutive effect of convertible debt subordinated
shares outstanding 252,000 0.001 252,000 0.001
Dilutive effect of weighted average stock options 1,520,543 0.002 1,775,343 0.001
outstanding
Diluted common shares outstanding $12,062,120 0.018 12,450,157 0.009
INCOME TAXES
The Company has incurred losses from United States operations that can be
carried forward to offset future earnings if all provisions of the Internal
Revenue Code are met. These losses are as follows:
YEAR OF LOSS Expiration Amount Expiration Date
1997 $31,923 2017
1998 $278,579 2018
1999 $733,239 2019
2000 $589,102 2020
2001 $775,565 2021
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, 2001
------------- -------------
Deferred Tax Asset Balance Beginning of Period $0 $0
Net Operating Loss Carryforwards $1,632,843 $2,408,518
$555,167 $818,896
Valuation Allowance ($555,167) ($818,896)
Net Deferred Tax Asset $0 $0
Deferred Tax Liability $0 $0
27
INCOME TAXES - continued
Total USA Netherlands
Antilles
-------- ---------- -----------
Net Income (Loss) $117,747 ($775,565) $893,312
Permanent Adjustments - $0 ($893,312)
Net Operating Loss Carryforwards - $1,632,843 $0
Adjusted Taxable Income - $2,408,518 $0
Current Income Taxes Payable $16,667 $0 $16,667
The Company has computed U.S. federal income taxes without the revenue of its
wholly owned foreign subsidiary, IGW. 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
$16,667 in taxes due to the Netherlands Antilles based on earnings in Curacao
for the years ended December 31, 2000 and 2001, respectively.
OPERATING LEASE OBLIGATIONS
The Company has come to an agreement to terminate the office lease in Omaha
Nebraska that calls for a termination fee in the amount of $ 20,000 be paid to
settle all past and future obligations under this lease.
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
2002 $69,698
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 leased an office on a month-to-month basis for $1,000 per month.
In December of 2001, the Company moved its principal office from Paradise
Valley, Arizona to Miami, Florida to be closer to its principle operations in
Curacao, Netherlands. The Company has signed a three-year lease on 1,999 square
feet in Miami Florida with base monthly payments of $5,414.
For the years ended December 31, 2001 and 2000 total rent expense was $139,373
and $343,226, respectively per year.
28
ACCOUNTS AND NOTES RECEIVABLES
The Company has the following accounts receivable as follows as of December 31,
2001:
ACCOUNTS RECEIVABLES Amount
-------------------- ----------
Current $749,943
31 - 60 Days $351,024
61 - 90 Days $255,999
Over 90 Days $132,717
Total $1,489,683
Of the total accounts receivable, a major customer owed $1,047,731. As of March
20, 2002, this balance had been paid with the exception of approximately
$150,000.
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 as of December 31,
2000. As of December 31, 2001, the balance due on the note receivable is
$1,053,669 with $600,000 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 $88,398 as of
December 31, 2001.
COMMITMENTS AND CONTINGENCIES
LEGISLATIVE RISKS AND UNCERTAINTIES
The Company and its subsidiaries are subject to applicable laws in the
jurisdictions in which they operate or offer services. While some jurisdictions
have attempted to restrict or prohibit Internet gaming, other jurisdictions,
such as several Caribbean countries, Australia and certain native Indian
territories, have taken the position that Internet gaming is legal and/or have
adopted, or are in the process of reviewing, legislation to regulate Internet
gaming in such jurisdictions. As companies and consumers involved in Internet
gaming are located around the globe, there is uncertainty regarding exactly
which government has jurisdiction or authority to regulate or legislate with
respect to various aspects of the industry. Furthermore, it may be difficult to
identify or differentiate gaming-related transactions from other Internet
activities and link those transmissions to specific users, in turn making
enforcement of legislation aimed at restricting Internet gaming activities
difficult. The uncertainty surrounding the regulation of Internet gaming could
have a material adverse effect on the Company's business, revenues, operating
results and financial condition. Although the Company and its subsidiaries are
not directly involved in internet gaming, their customers where 100% of the
revenue is derived are involved in internet gaming.
29
COMMITMENTS AND CONTINGENCIES - continued
PENDING UNITED STATES LEGISLATION AND OTHER EXISTING LAWS
Some US government agencies regard online wagering to be illegal and there is
pending legislation in the US Congress specifically aimed at the prohibition of
Internet wagering by US citizens. Other similar bills have failed in the past
but near-future outlooks see no cease by at least some legislators in pressing
for an outright ban. Current pending legislation is aimed at the restriction of
E-commerce. Specifically, a law would prevent a credit card issuing banks from
allowing their customers to use their cards to send money to, or receive money
from, online wagering websites. The law would also make the operation of online
wagering websites within US jurisdictions illegal (it is important to note that
there are currently no known casino websites that are operated within US
jurisdiction).
Accordingly there is a risk that criminal or civil proceedings could be
initiated in the United States or other jurisdictions against the Company and/or
its employees, and such proceedings could involve substantial litigation
expenses, penalties, fines, diversion of the attention of key executives,
injunctions or other prohibitions being invoked against the Company and/or its
employees. Such proceedings could have a material adverse effect on the
Company's business, revenues, operating results and financial condition.
RELATED PARTY TRANSACTIONS
The Managing Director of Interactive Gaming & Wagering, N.V., has loaned the
Company $24,572. The Company has accrued interest on the loan at 15% interest
per annum.
The former President of Global Entertainment Holdings/Equities, Inc., has loaned
to Interactive Gaming and Wagering, Inc., NV, $66,705 and interest has been
accrued or paid at 15% 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 $92,145 at 8% interest per annum. This loan
is due on demand. In addition this related party has loaned to Global
Entertainment Holdings/Equities, Inc., $240,000 with interest at 10% per annum
due April 30, 2002.
In November 2000, the Company began leasing its principal office from its
current President, Don Lisa, for $1,000 per month until December 31, 2001.
LITIGATION
The Company is not a party to any other litigation at December 31, 2001.
ECONOMIC DEPENDENCY
IGW receives a substantial portion of its royalty fees revenues from one
customer. In 2000 and 2001, royalties and other fees from that customer were
$2,257,514 and $2,497,112 respectively. At December 31, 2000 and 2001, accounts
and notes receivable from that customer were $1,873,757 and $2,101,400. This
major customer represents 55% of Gross Revenues and 88% of total Account
Receivable and Notes Receivable for IGW.
30
SEGMENT INFORMATION
The Company has adopted FASB Statements No. 131, "Disclosure About Segments of a
Business Enterprise and Related Information." The Company is managed in two
geographical Segments; The United States of America and Curacao, Netherlands
Antilles.
Global USA Prevail USA Netherlands Total
Antilles
License Fees 2001 - - $614,746 $614,746
License Fees 2000 - - $909,031 $909,031
Royalty Fees 2001 - - $3,862,482 $3,862,482
Royalty Fees 2000 - - $2,826,718 $2,826,718
Hosting Income 2001 - - $87,313 $87,313
Hosting Income 2000 - - $113,325 $113,325
Advertising Income 2001 - $143,929 - $143,929
Advertising Income 2000 - $723,415 - $723,415
Operating Expenses 2001 $486,972 $424,731 $3,611,715 $4,523,660
Operating Expenses 2000 $568,384 $745,634 $3,046,555 $4,360,573
Other Income (Expenses) 2001 ($8,916) ($1,511) ($23,302) ($33,726)
Other Income (Expenses) 2000 $1,443 $57 $49,476 $50,976
Provisions for Income Taxes 2001 - - $16,667 $16,667
Provisions for Income Taxes 2000 - - $16,912 $16,912
Net Income (Lost) 2001 ($476,596) ($282,302) $893,312 $134,414
Net Income (Lost) 2000 ($566,940) ($22,162) $806,764 $217,662
Cash 2001 $4,524 $23,547 $161,021 $189,092
Cash 2000 ($7,055) $12,409 $159,136 $164,490
Notes Receivable 2001 - - $1,057,387 $1,057,387
Notes Receivable 2000 - - $1,653,669 $1,653,669
Property & Equipment (Net) 2001 $11,350 $167,996 $1,341,030 $1,520,376
Property & Equipment (Net) 2000 $53,104 $4,528 $1,583,462 $1,641,094
Other Assets (Net) 2001 - - $104,840 $104,840
Other Assets (Net) 2000 - - $142,464 $142,464
SUBSEQUENT EVENTS
There have been no subsequent events that have occurred since the balance sheet
date that warrant disclosure.
31
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned; thereunto duly authorized, in Miami, Florida, on May 10, 2002.
Global Entertainment Holdings/Equities, Inc.
By: /s/ Bryan P. Abboud
-------------------------------------
Bryan P. Abboud
President and Chief Executive Officer
KNOWN ALL PERSONS BY THESE PRESENT that the persons whose signatures appear
below, constitute and appoint Bryan P. Abboud, as their true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for them and their names, places and steads, in any and all capacities, to sign
the Annual report on Form 10KBS for the fiscal year ended December 31, 2001, and
any and all amendments to the Form 10KBS, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as they might or could do in person, thereby ratifying and
confirming all that said attorney-in-fact and agent, or any of them, or their or
his or her substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities as of May 10, 2002.
Signature Title
/s/ Bryan P. Abboud President and Chief Executive Officer
Bryan P. Abboud
/s/ Thomas Glaza Director
Thomas Glaza
/s/ Dave Stein Director
Dave Stein
/s/ Thomas Hawkins Corporate Secretary
Thomas Hawkins
32
TRANSFER AGENT HEAD OFFICE
Carolyn Bell - President Global Entertainment Holdings/
Corporate Stock Transfer, Inc. Equities, Inc.
3200 Cherry Creek Drive South, Suite 430 501 Brickell Key Drive, Suite 603
Denver, CO 80209 Miami, FL 33131
Ph: (303) 282-4800 Tel: (305) 374-2036
Fax: (303) 282-5800 Fax: (305) 373-4668
Website address: www.corporatestock.com Website address:
Email: cyoude@corporatestock.com www.globalentertainmentinc.com
SECURITIES COUNSEL CERTIFIED PUBLIC ACCOUNTANTS
Kevin S. Woltjen, Esq. Kane, Hoffman & Danner, P.A.
3333 Elm Street, Suite 101 1101 Brickel Avenue
Dallas, TX 75226 Miami, Florida 33131
Ph: (214) 742-5555 Telephone: 305-789-7900
Fax: (214) 742-5545 Fax: 305-789-7901
Email: kevin@woltjenlaw.com
STOCK EXCHANGE SUBSIDIARIES
Global Entertainment's shares are Interactive Gaming & Wagering
publicly traded on the OTC BB stock Bon Bini Business Center
exchange. Stock trading symbol is GAMM. Schottegatweg Oost 10 Suite 12
Willemstad, Curacao
Tel: +599-9-737-4788
Fax: +599-9-733-1249
Website address:
www.interactive-gaming.com
Prevail Online
501 Brickell Key Drive, Suite 603
Miami, FL 33131
Tel: (305) 374-2082
Fax: (305) 373-4668
Website address: www.prevailonline.com
33
Global
Entertainment
Holdings/Equities, Inc.
501 Brickell Key Dr. Suite 603
Miami, FL 33131
www.GLOBALENTERTAINMENTINC.com