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 June 30, 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
of incorporation or Identification No.
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 August 11, 2005, we had 27,704,162 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
June 30, 2005
(Unaudited)
Assets
Current assets
Cash $ 652
Accounts Receivable 9,990
Employee Receivable 1,542
Inventory 73,227
Prepaid expenses and other assets 7,050
------------
Total current assets 92,461
------------
Property and equipment, net 163,490
------------
Total Assets $ 255,951
============
Liabilities and Stockholders' Deficiency
Current liabilities
Accounts payable & accrued expenses $ 646,435
Loan Payable - stockholder 1,598,777
------------
Total Liabilities 2,245,212
------------
Stockholders' Deficiency
Common stock, $.001 par value authorized
750,000,000 shares
Issued and outstanding 23,841,162 shares $ 23,841
Additional paid-in capital 15,713,010
Accumulated other comprehensive loss (284,620)
Accumulated deficit (17,441,492)
------------
Stockholders' deficiency (1,989,261)
------------
Total Liabilities & Stockholders' Deficiency $ 255,951
============
See the accompanying notes to the consolidated financial statements.
2
Winmax Trading Group, Inc. and Subsidiaries
Consolidated Statements of Operations
Three and Six Months Ended June 30, 2005 and 2004
Three Months Six Months
2005 2004 2005 2004
------------ ------------ ------------ ------------
Revenue:
Sales - Retail $ 25,325 $ 45,318 $ 56,886 $ 82,112
Sales - Web 102,485 165,585 130,735 165,585
Cost of sales - Retail (2,311) (9,580) (12,131) (13,831)
------------ ------------ ------------ ------------
Gross Profit 125,499 201,323 175,490 233,866
------------ ------------ ------------ ------------
Operating Costs and Expenses
Non Cash Compensation 490,000 490,000
General and administrative 579,773 1,532,258 1,121,049 2,044,434
------------ ------------ ------------ ------------
Total Operating Costs and Expenses 1,069,773 1,532,258 1,611,049 2,044,434
------------ ------------ ------------ ------------
Loss from operations (944,274) (1,330,935) (1,435,559) (1,812,568)
------------ ------------ ------------ ------------
Net Loss (944,274) (1,330,935) (1,435,559) (1,812,568)
Foreign currency translation adjustment 62,314 (12,410) 98,036 (41,309)
------------ ------------ ------------ ------------
Comprehensive loss $ (881,960) $ (1,343,345) $ (1,337,523) $ (1,771,259)
============ ============ ============ ============
Weighted-average number of common shares
outstanding - basic 22,760,832 18,455,088 22,656,079 17,305,912
============ ============ ============ ============
Net loss per common share -basic $ (0.04) $ (0.07) $ (0.06) $ (0.10)
============ ============ ============ ============
See the accompanying notes to the consolidated financial statements.
3
Winmax Trading Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2005 and 2004
(Unaudited)
2005 2004
----------- -----------
Cash flows from operating activities:
Net cash provided by operating activities $ (574,881) $(1,350,474)
----------- -----------
Cash flows from investing activities:
Net cash (used in) investing activities 37,775 (138,602)
----------- -----------
Cash flows from financing activities:
Net cash provided by financing activities 535,000 1,464,519
----------- -----------
Effect of exchange rate changes on cash 2,758 41,309
----------- -----------
Net increase in cash and cash equivalents 652 16,752
Cash at beginning of period 4,820
----------- -----------
Cash at end of period $ 652 $ 21,572
=========== ===========
See the accompanying notes to the consolidated financial statements.
4
WINMAX TRADING GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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, 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 six month period ended June 30, 2005 a stockholder of the Company
provided working capital aggregating approximately $535,000 by direct cash
advances to the Company. These advances are recorded as Loan Payable -
Stockholder.
(4) Stockholder's Equity
On June 14, 2005, 100,000 shares were issued for consulting service to a
consultant and 100,000 share purchase warrant exerciseable @1.50 per share for
each warrant shown. On June 29, 2005 100,000 shares were issued for service to a
consultant. Also on June 29, 2005 1,000,000 shares were issued to a vice
president and director of the company persuant to an agreement reached between
the co-directors and the V/P for his services to the company. The shares
constitute validly issued shares of Winmax Trading Group, Inc. and are issued as
restricted 144 shares under section 4(2) of the Securities and Exchange act of
1933 and 1934. Shares were valued at $.50 which was market value on June 14,2005
and shares were valued at $.40 which was market value on June 29, 2005 for a
total value of $490,000 with $1,200 being allocated to common stock and the
balance of $488,800 being allocated to additional paid in capital.
5
(5) Subsequent Events - Stockholder's Equity
On July 7, 2005 the company approved and registered 2005 non-qualified stock and
option plan maximum offering price to be $.40 per share with a maximum of
3,500,000 shares to be issued under an award plan and 3,000,000 under the option
plan for a total of 6,500,000 shares. On July 8th, 2005 the company issued
1,363,000 additional shares under the stock award program to consultant to the
company receiving 1,358,000 shares and 5,000 shares being received by an
employee. These shares are fully paid and non-assessable and fully tradeable
when issued.
Also on July 8th, 2005 the company issued 2,500,000 shares of the company
persuant to a three year contract for consulting services. These shares are
fully paid and non-assessable, and are issued as restricted 144 shares under
section 4 2) of the Securities and Exchange Act of 1933 and 1934.
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 June 30, 2005 and
notes thereto. This quarterly report on Form 10-QSB for the period ending June
30, 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 "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.
6
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 six month ended June 30, 2005, should be
read in conjunction with our financial statements and with our 2004 10K-SB filed
May 19, 2005.
For the six month period ended June 30, 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.
theGemstore and theGemstore.com continues to expand our platform for marketing
gemstone, gemstone jewelry and accessories.
Subsequent Events
During the six month period ended June 30, 2005, to date, Winmax re-grouped its
market testing strategies by closing all of its kiosk RMU's leaving the company
with 1 inline RMU store. New locations with greater potential are now being
considered by management.
Risks and Uncertainties
For the six months ended June 30, 2005 we incurred a net loss of $1,435,559
compared to a net loss of $1,812,568 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 six months ended June 30, 2005 was $187,621 and
$1,611,049 respectively, compared to revenue of $247,697 and total operating
expenses of $2,044,434 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 June 30, 2005, we had $652 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.
7
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.
Revenues
Revenues for the 6 months ended June 30, 2005 decreased to $187,621 from
$247,697 for the same period in 2004. Revenues for the 3 months period ended
March 31, 2005 decreased to $127,810 from $210,903 for the same period in 2004.
Cost of Sales
Cost of sales decreased to $12,131 for the six months ended June 30, 2005 from
$13,831 for the same period in 2004. The cost of sales decreased to $2,311 for
the 3 months period ended March 31, 2005 from $9,580 for the same period in
2004. The decrease in cost of sales is attributed to the decrease in revenue.
Total Operating Expenses
Total operating expenses decreased to $1,611,049 for the six months ended June
30, 2005 from $2,044,434 for the same period in 2004. The decrease is attributed
to the Company ceasing operations from its Kiosk locations. Total operating
expenses decreased to $1,069,773 for the 3 months period ended March 31, 2005
from $1,532,258 for the same period in 2004 for the reason as noted above.
Net Operating Loss
Net operating loss was $1,435,559 for the six months ended June 30, 2005
compared to a net operating loss of $1,812,568 for the same period in 2004. The
decrease in net operating loss is attributed to the Company ceasing its test
phase operations in Kiosk retail.
Material Changes in Financial Condition
Consolidated Balance Sheet
Current assets declined to $92,461 as of June 30, 2005, compared to $349,625 as
of Dec 31, 2004. The decrease in current assets is attributable to the Company
electing to close its Kiosk locations at the conclusion of the market viability
phase of operations. This cessation of operations allowed the Company to
consolidate retail inventory at its store location resulting in it not having to
purchase further inventory for the period. In addition, the Company divested
itself of it's Kiosk assets such as display stands and alike.
8
Property and Equipment, Net
Property and equipment declined to $163,490 as of June 30, 2005 as compared to
$233,811 on Dec 31, 2004. The decrease in property and equipment was primarily a
result of abandonment of assets due to the closed Gemstore RMU locations.
Liabilities
Our accounts payable and accrued expenses increased to $646,635 on June 30, 2005
compared to $427,120 for Dec 31, 2004. The increase in payables and accrued
expenses is related to the increase in operating costs.
Loan Payable to stockholders was $1,598,777 for June 30, 2005, an increase from
$1,064,423 on Dec 31, 2004. Winmax's operations are primarily being funded by
loans from our major shareholder and CEO. The increase in loan payable to stock
holder is related to the increase in operational costs.
Liquidity and Capital Resources as of June 30, 2005
Net cash provided by all activities (operational, investing and financing
cashflow) for the six months ending June 30, 2005 was $652 compared to $16,752
in all activities for the same period in 2004. Cash flow from operations
decreased to ($574,881) in the first six months of 2005 from $(1,350,474) in the
first six months of 2004.
We have experienced significant losses from our operations. For the six months
ended June 30, 2005, we incurred a comprehensive net loss of $881,960 and we
have a accumulated deficit of ($17,441,492). Our ability to continue operations
is contingent upon our ability to expand our Winmax Media and WinamxIS revenues,
increase sale 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.
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.
9
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.
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: Aug 12, 2005
By: /s/ Gerald E. Sklar /s/ Robert S. Kergan
------------------------------ ------------------------------
Gerald E. Sklar, President, Robert S. Kergan, Chief Financial
Chief Executive Officer, Officer, and Principal Accounting
Officer