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, 2005
Commission file number: 0-29751
WINMAX TRADING GROUP, INC.
(Exact name of small business issuer as specified in its charter)
FLORIDA 65-0702554
State or other jurisdiction I.R.S. Employer Identification No.
of incorporation or organization
5920 MacLeod Trail, Suite 800
Calgary, Alberta Canada T2H 0K2
(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 |X| No |_|
APPLICABLE ONLY TO CORPORATE ISSUERS
As of May 20, 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, 2005
(Unaudited)
Assets
Current assets
Accounts Receivable $ 1,144
Inventory 112,271
Prepaid expenses and other assets 8,472
------------
Total current assets 121,887
------------
Property and equipment, net 216,300
------------
Total Assets $ 338,187
============
Liabilities and Stockholders' Deficiency
Current liabilities
Accounts payable & accrued expenses $ 538,212
Loan Payable - stockholder 1,397,176
------------
Total Liabilities 1,935,388
------------
Stockholders' Deficiency
Common stock;
Authorized, no par value; 750,000,000 shares
Issued and outstanding 22,641,162 shares $ 22,741
Additional paid-in capital 15,224,210
Accumulated other comprehensive loss (346,934)
Accumulated deficit (16,497,218)
------------
Stockholders' deficiency (1,597,201)
------------
Total Liabilities & Stockholders' Deficiency $ 338,187
============
See the accompanying notes to the consolidated financial statements
2
Winmax Trading Group, Inc. and Subsidiaries
Consolidated Statements of Operations
Three Months Ended March 31, 2005 and 2004
(Unaudited)
2005 2004
------------ ------------
Revenue:
Sales - Retail $ 31,561 $ 36,794
Sales - Websites $ 28,250 $ 0
------------ ------------
Gross Profit 59,811 36,794
------------ ------------
Operating Costs and Expenses:
Cost of sales 9,820 4,251
General and administrative 541,276 514,176
------------ ------------
Total operating expenses 541,276 514,176
------------ ------------
Net loss (491,285) (481,633)
Other comprehensive income (loss) :
Foreign currency translation adjustment 35,722 53,719
------------ ------------
Comprehensive loss $ (455,563) $ (427,914)
============ ============
Weighted-average number of common shares
outstanding - basic and diluted 22,641,162 16,156,736
============ ============
Net loss per common share -basic & diluted $ (.02) $ (.03)
============ ============
See the accompanying notes to the consolidated financial statements.
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Winmax Trading Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2005 and 2004
(Unaudited)
2005 2004
------------ ------------
Cash flows from operating activities:
Net cash provided by operating activities $ (366,916) $ (442,466)
------------ ------------
Cash flows from investing activities:
Net cash (used in) investing activities 0 (66,023)
------------ ------------
Cash flows from financing activities:
Net cash provided by financing activities 362,325 532,185
------------ ------------
Effect of exchange rate changes on cash 4,591 0
------------ ------------
Net increase in cash and cash equivalents 0 23,696
Cash at beginning of period 0 4,820
------------ ------------
Cash at end of period $ 0 $ 28,516
============ ============
See the accompanying notes to the consolidated financial statements.
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WINMAX TRADING GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005
(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, 2004 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, 2005 a stockholder of the Company provided
working capital aggregating approximately $333,000 by direct cash advances to
the Company. These advances 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, 2005
and notes thereto. This quarterly report on Form 10-QSB for the period ending
March 31, 2005 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
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"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.
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 (Winmax), Inc. and its
divisions; Winmax Media, WinmaxIS, theGemstore and theGemstore.com. The
Management Discussion and Analysis (MD&A), for the three months ended March 31,
2005, should be read in conjunction with our financial statements and with our
2004 10K-SB filed May 19, 2005.
For the three months period ended March 31, 2005, Winmax's management continued
their efforts to expand Winmax Media's, WinmaxIS's, theGemstore Inc.'s and
theGemstore.com's operations. We have been successful in utilizing the talents
in each of our divisions to build the technical infrastructure needed to support
our planned 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,
www.thegemstore.com. In the quarter ending March 31, 2005, we concluded the
assessment of our various RMU's viability in selling gemstone, jewelry, minerals
and accessories. Management opted to close locations and assess the data
received. As of March 31, 2005 there is one inline RMU in operations.
Management is enthusiastic about our retail operation's potential gross profit
margins and continues to support the retailing of gemstone, jewelry, minerals
and accessories. Management believes, after assessing the test retail merchant
units, Winmax can achieve a profitable growth strategy opening RMU's in
strategic locations. The future focus for kiosk style RMU's will shift to
selling minerals and accessories, whereas our inline style RMU's will continue
to focus on selling our gemstones and Jewelry.
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Risks and Uncertainties
For the three months ended March 31, 2005 we incurred a net loss of $491,285
compared to a net loss of $481,633 for the same period in 2004. We expect to
continue to generate losses until our revenues increase. Our revenue and total
operating expenses for the three months ended March 31, 2005 were $59,811 and
$541,276 respectively, compared to revenue of $36,794 and operating expenses of
$514,176 for the same period in 2004.
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, 2005, we had zero cash, which is insufficient to meet our
operational goals and overall 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 made
through the issuance of 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.
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 no longer be able to operate as a going concern.
Material Changes in Results of Operations for the quarter ended March 31, 2005
compared to March 31, 2004.
Revenues
Revenues for the three months ended March 31, 2005 increased to $59,811 from
$36,784 for the same period in 2004. Fifty-three percent (53%) of our revenue
was derived by theGemstore, Forty-seven percent (47%) was derived from our media
division. WinmaxIS and Winmax Media continue to support theGemstore's e-commerce
and media needs.
Cost of Sales
Cost of sales increased to $9,820 for the quarter ended March 31, 2005 from
$4,251 for the same period in 2004. The increase in cost of sales is due to
increased revenue from our retail operations. Our gross profit margin decreased
slightly to 84% from 88% in the same period for the previous year. The decrease
in gross profit margin reflects the increase in the cost of silver. Management
believes there is enough flexibility in our pricing and profit margins to
weather any adverse changes in commodity prices.
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General and Administrative Expenses
Total operating expenses increased to $541,276 for the three months ended March
31, 2005 from $514,176 for the same period in 2004. This increase in operational
expenses is directly attributed to the number of theGemstore test retail
merchant units.
Net Loss
Net loss was $491,285 for the three months ended March 31, 2005 compared to a
net operating loss of $481,633 for the same period in 2004. The increase in net
loss is due to closure of several test retail merchant units and increase in
revenue.
Material Changes in Financial Condition as of March 31, 2005
Consolidated Balance Sheet as of March 31, 2005 compared to December 31, 2004.
Current assets increased to $121,887 as of March 31, 2005, compared to $115,814
as of December 31, 2004. This increase arose as a direct result of management
desire to increase inventory.
Liabilities
Our current liabilities increased to $538,217 as of March 31, 2005 from $427,120
at December 31, 2004. The increase in current liabilities was attributable to an
increase in accounts payables.
Our total liabilities increased to $1,935,388 for the quarter ending March 31,
2005 from $1,491,363 as of December 31, 2004.
Liquidity and Capital Resources as of March 31, 2005
Net cash provided by all activities (operational, investing and financing
cashflow) for the three months ending March 31, 2005 was nil compared to $23,696
in all activities for the same period in 2004. Cash flow from operations
decreased to ($362,325) in the first three months of 2005 from ($442,466) in the
first three months of 2004.
We have experienced significant losses from our operations. For the three months
ended March 31, 2005, we incurred a comprehensive net loss of $455,563 and we
have a accumulated deficit of $16,497,218. Our ability to continue operations is
contingent upon our ability to expand our Winmax Media and WinamxIS revenues,
increase sales from our retail divisions 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.
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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.
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 Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
WINMAX TRADING GROUP, INC.
Date: May 16, 2005
By: /s/ Gerald E. Sklar /s/ Robert S. Kergan
--------------------------- ------------------------------------------
Gerald E. Sklar, President, Robert S. Kergan, Chief Financial Officer,
Chief Executive Officer, and Principal Accounting Officer
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