UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED March 31, 2004
Commission file number: 0-29751
WINMAX TRADING GROUP, INC.
(Exact name of small business issuer as specified in its charter)
FLORIDA
State or other jurisdiction 65-0702554
of incorporation or organization I.R.S. Employer Identification No.
5920 MacLeod Trail, Suite 800
Calgary, Alberta Canada T2H 0K2
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(Address of principal executive offices)
(877) 693-3130
(Issuer's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to filing
requirements for the past 90 days. Yes |_| No |X|
APPLICABLE ONLY TO CORPORATE ISSUERS
As of January 10, 2005, we had
22,641,162 shares of our common stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes |_| No |X|
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Winmax Trading Group, Inc. and Subsidiaries
Consolidated Balance Sheet
March 31, 2004
Assets
Current assets
Cash $ 28,516
Inventory 106,045
Prepaid expenses and other assets 7,553
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Total current assets 142,114
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Property and equipment, net 197,318
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Total Assets $ 339,432
============
Liabilities and Stockholders' Deficiency
Current liabilities
Accounts payable & accrued expenses $ 157,340
Loan Payable - stockholder 1,158,086
------------
Total Liabilities 1,315,426
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Stockholders' Deficiency
Common stock, no par value; 750,000,000 shares
Issued and outstanding 16,156,736 shares $ 16,156
Additional paid-in capital 11,932,195
Accumulated other comprehensive income (45,170)
Accumulated deficit (12,879,175)
------------
Stockholders' deficiency (975,994)
------------
Total Liabilities & Stockholders' Deficiency $ 339,432
============
See the accompanying notes to the consolidated financial statements.
F-1
Winmax Trading Group, Inc. and Subsidiaries
Consolidated Statements of Operations
Three Months Ended March 31, 2004 and 2003
2004 2003
------------ ------------
Revenue:
Sales $ 36,794 $ 38,650
Cost of sales 4,251 8,000
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Gross Profit 32,543 30,650
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Operating Costs and Expenses:
Non cash stock compensation -- 10,000
General and administrative 514,176 89,846
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Total operating expenses 514,176 99,846
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Net loss (481,633) (69,196)
Other comprehensive income (loss) :
Foreign currency translation adjustment 53,719 (5,634)
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Comprehensive loss $ (427,914) $ (74,830)
============ ============
Weighted-average number of common shares
outstanding - basic and diluted 16,156,736 10,358,090
============ ============
Net loss per common share -basic & diluted $ (.03) $ (.01)
============ ============
See the accompanying notes to the consolidated financial statements.
F-2
Winmax Trading Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2004 and 2003
2004 2003
--------- ---------
Cash flows from operating activities:
Net cash provided by operating activities $(442,466) $ 6,700
--------- ---------
Cash flows from investing activities:
Net cash (used in) investing activities (66,023) --
--------- ---------
Cash flows from financing activities:
Net cash provided by financing activities 532,185 --
--------- ---------
Net increase in cash and cash equivalents 23,696 6,700
Cash at beginning of period 4,820 43
--------- ---------
Cash at end of period $ 28,516 $ 6,743
========= =========
See the accompanying notes to the consolidated financial statements.
F-3
WINMAX TRADING GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(UNAUDITED)
(1) Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
(GAAP) for interim financial information and Item 310(b) of Regulation SB. They
do not include all of the information and footnotes for complete financial
statements as required by GAAP. In management's option, all adjustments
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation have been included. The results of operations for the periods
presented are not necessarily indicative of the results to be expected for the
full year. For further information, refer to the Company's financial statements
as of December 31, 2003 and for the two years then ended, including notes
thereto included in the Company's Form 10-KSB.
(2) Earnings Per Share
The Company calculates net income (loss) per share as required by SFAS 128,
"Earnings per Share." Basic earnings (loss) per share are calculated by dividing
net income (loss) by the weighted average number of common shares outstanding
for the period. Diluted earnings (loss) per share are calculated by dividing net
income (loss) by the weighted average number of common shares and dilutive
common stock equivalents outstanding. During periods when they are
anti-dilutive, common stock equivalents, if any, are not considered in the
computation.
(3) Related Party Transactions
During the period ended March 31, 2004 a stockholder of the Company provided
working capital aggregating approximately $532,000 by direct payment of certain
obligations of the Company. These payments are recorded as Loan Payable -
Stockholder.
Item 2. Management's Discussion and Analysis.
Forward-Looking Statements
The following discussion and analysis of our operations should be read in
conjunction with our financial statement for the period ending March 31, 2004
and notes thereto. This quarterly report on Form 10-QSB for the period ending
March 31, 2004 contains "forward-looking statements", within the meaning of such
term in Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors that could cause the actual
financial or operating results of the Company to be materially different from
the historical results or from any future results expressed or implied by such
forward-looking statements. Winmax Trading Group, Inc. is referred to herein as
"we," "our" , "us.", "the company" or "Winmax". The words or phrases "would be",
"may allow," "intends to," "may likely," "are expected to," "may continue," "is
anticipated," "estimate," "project," or similar expressions are intended to
identify "forward-looking statements". Such statements include those concerning
our expected financial performance, our corporate strategy and operational
plans. Actual results could differ materially from those projected in the
forward-looking statements as a result of a number of risks and uncertainties,
including: (a) intense competition in the web development design, web casting,
Internet solutions, e-commerce, and retail business; (b) whether we are able to
manage our planned growth efficiently, including whether our management will be
able to identify, hire, train, retrain, motivate, and manage required personnel
or that management will be able to manage and exploit existing and potential
market opportunities successfully, and (c) whether we are able to generate
sufficient revenues or obtain financing to sustain and grow our operations. We
are in the early stage of building and expanding the company and have not
generated sufficient revenues to maintain day to day operations.
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Statements made herein are as of the date of the filing of this Form 10-QSB with
the Securities and Exchange Commission and should not be relied upon as of any
subsequent date. Unless otherwise required by applicable law, we do not
undertake, and we specifically disclaim any obligation, to update any
forward-looking statements to reflect occurrence, developments, unanticipated
events or circumstances after the date of such statement.
Overview of Operations
This discussion relates to Winmax Trading Group, Inc. and its divisions "Winmax
Media, WinmaxIS, theGemstore and thegemstore.com". The Management Discussion and
Analysis (MD&A) should be read in conjunction with our financial statements and
with our 2003 10K-SB filed November 3, 2004.
For the three month period ended March 31, 2004, Winmax's management continued
their efforts to expand Winmax Media's, WinmaxIS's and theGemstore Inc.'s
operations. We have been successful in utilizing the talents in each of our
divisions to build the technical infrastructure needed to support our intended
growth. Winmax Media and WinmaxIS have been instrumental in building Winmax
Trading Group, Inc.'s accounting system, computer network, theGemstore's Point
of Sale system and the building and maintaining of our e-commerce site.
TheGemstore and thegemstore.com continue to expand our platform for marketing
gemstone, gemstone jewelry and accessories. For the quarter ended March 31, 2004
we opened 3 retail merchant units (RMU's). We opened one in Canada and two in
the United States. Entry into these markets is part of management's overall
expansion strategy. As of March 31, 2004 we had six RMU's in operations which
accounted for 100 percent of our first quarter revenue.
Subsequent Events
Post quarter ended March 31, 2004 Winmax Trading Group, Inc continued its
expansion strategy. theGemstore now has operations in both the United Sates and
Canada. To date theGemstore operates 8 RMU's.
Risks and Uncertainties
For the three months ending March 31, 2004 we incurred a net loss of $481,633
compared to a net loss of $69,196 for the same period in 2003. We expect to
continue to generate losses until our revenues increase. Our revenue and
operating expenses for the quarter ended March 31, 2004 was $36,794 and $514,176
respectively, compared to revenue of $38,650 and operating expenses of $99,846
for the same period in 2003.
Year to year comparisons may not be indicative of future performance due to the
change in revenue sources and sporadic sales from our Media and IT divisions.
As of March 31, 2004, we had $28,516 in cash, which is insufficient to meet our
operational goals and business plan. We have required, and continue to require,
substantial capital to fund our business operations.
We have no commitments, agreements or understandings regarding additional
financing and we may be unable to obtain additional financing either on
satisfactory terms or at all. We expect to pursue additional financing through
debt or equity financing. If additional funds are raised or acquisitions are
made by issuing our equity securities there will be dilution to our existing
shareholders. We may also incur debt or assume substantial indebtedness. If we
are unable to obtain financing, such inability could have a material adverse
effect on our business, financial condition and results of operations.
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There is no assurance we can increase our revenue sources and it is unlikely
that we can lower our expenses in our present mode of operations. We may never
earn a profit. If we continue to lose money over a protracted period of time we
may be forced to discontinue our operations.
Material Changes in Results of Operations - Three months ended March 31, 2004
compared with March 31, 2003
In 2003, we abandoned all plans to acquire, explore, produce or process gems
from any property and entered into the business of retailing gemstones, gemstone
jewelry and accessories. We have focused our attention on building relationships
with our suppliers and plan to continue expanding theGemstore Inc operation in
2004.
Revenues
Revenues for the 3 months ended March 31, 2004 decreased to $36,784 from $38,650
for the same period in 2003. Our revenue, as of March 31, 2004, was derived from
100% of sales by theGemstore compared with 100% of our revenue being derived
from WinmaxIS and Winmax Media in 2003. WinmaxIS and Winmax Media continue to
support theGemstore's e-commerce and media needs, developing and designing
material for theGemstore's marketing campaigns.
Cost of Sales
Cost of sales decreased to $4,251 for the quarter ended March 31, 2004 from
$8,000 for the same period in 2003. This decrease in cost of good sold was
derived from the change in our revenue source. The increase in gross profit
margin to 88% in 2004 emphasizes the potential for theGemstore and
thegemstore.com.
General and Administrative Expenses
Total operating expenses increased to $514,176 for the quarter ended March 31,
2004 from $99,846 for the quarter ended March 31, 2003. This increase in
operational expenses is directly attributed to building the infrastructure to
grow theGemstore and thegemstore.com.
Net Loss
Net loss was $481,633 for March 31, 2004 compared to a net loss of $69,196 for
the same quarter in 2003. The increase in operations and operational cost is
responsible for the increase in net loss from 2003.
Material Changes in Financial Condition
Consolidated Balance Sheet
Current assets grew to $142,114 as of March 31, 2004, compared to $84,619 as of
March 31, 2003. The increase in our current assets is attributable to an
increase in cash and inventory.
Property and Equipment, Net
Property and equipment grew to $197,318 as of March 31, 2004 as compared to
$84,619 as of March 31, 2003. The increase in property and equipment was a
result of the addition of six Retail Merchant Units since the first quarter of
2003.
3
Liabilities
Our current liabilities decreased to $157,340 as of March 31, 2004 from $693,455
in our first quarter 2003. The decrease in currently liabilities was
attributable to: 1. Classification of our stockholder loan from current to loan
payable and 2. a general decrease in Accounts payable and accrued expenses.
Our total liabilities increased to $1,315,426 for the quarter ending March 31,
2004.
Liquidity and Capital Resources as of March 31, 2004
Net cash provided by all activities (operational, investing and financing
cashflow) for the three months ended March 31, 2004 was $23,696 compared to
$6,700 in all activities for the same period in 2003. Cash flow from operations
decreased to ($442,466) in the first quarter of 2004 from $6,700 in the first
quarter of 2003.
We have experienced significant losses from our operations. For the three months
ended March 31, 2004, we incurred a comprehensive net loss of ($427,914) and we
have an accumulated deficit of $12,879,175. Our ability to continue operations
is contingent upon our ability to expand our Winmax Media and WinamxIS revenues,
increase sale from our RMU's division and to secure financing. Although we are
pursuing financing to expand our operations, there are no assurances that we
will be successful in obtaining such financing. Our failure to secure financing
and/or expand our operations may result in our not being able to continue
business.
Item 3. Controls and Procedures
Our management, with the participation of our principal executive and financial
officer, evaluated our disclosure controls and procedures as of the end of the
period covered by this quarterly report. Based upon this evaluation, the Chief
Executive Officer/Chief Financial Officer/Principal Accounting Officer concluded
that our disclosure controls and procedures are effective to ensure that
information required to be disclosed in the reports that we file, or submit
under with the Securities Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms.
During the quarter covered by this report, there were no significant changes in
our internal controls over financial reporting that materially affected, or is
reasonably likely to materially affect, these controls.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submissions of Matters to a Vote of Security Holders
Not Applicable.
Item 5. Other Information
Not Applicable.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1937, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: January 21, 2005
Winmax Trading Group, Inc.
By: /s/ Gerald Sklar
-----------------------------------------
Gerald E. Sklar,
President, Chief Executive Officer,
Chief Financial Officer And Principal
Officer
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