SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1999
Commission File No. 0-23199
Win-Gate Equity Group, Inc.
(Name of Small Business Issuer in Its Charter)
Florida 65-0669842
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
100 N. Biscayne Blvd., Suite 2500, Miami, Florida 33132
(Address of principal executive offices) (Zip Code)
(305) 371-3300
(Issuer's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Exchange Act: NONE
Securities registered pursuant to Section 12(g) of the Exchange Act : Common
Stock, $.001 Per Share
Check whether the issuer: (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 such filing requirements for the past
90 days:
Yes |_| No |X|
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. |X|
State the issuer's revenues for its most recent fiscal year: $0
State the aggregate market value of the issuer's voting stock held by
non-affiliates of the issuer as of March 27, 2000: $80,132,871
State the number of shares outstanding as of the issuer's classes of common
stock as of March 27, 2000: Common Stock, $.001 par value: 18,150,702
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the issuer's proxy statement for its Annual Meeting of
Stockholders pursuant to Regulation 14A of the Securities Exchange Act of 1934,
which will be filed with the Commission subsequent to the date hereof, are
incorporated by reference into Part III of this Form 10-KSB.
Transitional Small Business Disclosure Format: Yes__ No X
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<PAGE>
PART I
Certain statements in this Form 10-KSB are "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), Section 21E of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), and the Private Securities Litigation Reform Act
of 1995 and involve known and unknown risks, uncertainties and other factors
that may cause our actual results, performance or achievements to be materially
different from the results, performance or achievements expressed or implied by
the forward-looking statements. Forward-looking statements, which involve
assumptions and describe our future plans, strategies and expectations, are
generally identifiable by use of the words "may," "will," "should," "expect,"
"anticipate," "estimate," "believe," "intend," or "project" or the negative of
these words or other variations on these words or comparable terminology. This
report contains forward-looking statements that address, among other things, our
financing plans, regulatory environments in which we operate or plan to operate,
trends affecting our financial condition or results of operations, the impact of
competition, the start-up of certain operations and acquisition opportunities.
These statements may be found under "Business" and "Management's Plan of
Operation," as well as in this Form 10-KSB generally. Factors, risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements herein include (the "Cautionary Statements"),
without limitation: the Company's ability to raise capital; the Company's
ability to execute its business strategy in a very competitive environment; the
Company's degree of financial leverage; risks associated with acquisitions and
the integration thereof; risks associated with rapidly developing technology and
providing services over the Internet; regulatory considerations and risks
related to international economies; risks related to market acceptance of and
demand for the Company's products and services; continued relations with and
pricing dependence on third party suppliers; the impact of competitive services
and pricing; and other risks referenced from time to time in the Company's
filings with the Securities and Exchange Commission. All subsequent written and
oral forward-looking statements attributable to the Company or persons acting on
its behalf are expressly qualified in their entirety by the Cautionary
Statements. The Company does not undertake any obligations to release publicly
any revisions to such forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
ITEM 1. DESCRIPTION OF BUSINESS
Win-Gate Equity Group, Inc. (the "Company") is a Florida corporation, organized
on May 17, 1996, to initially locate and effect business combinations with
existing businesses. On January 21, 2000, the Company entered into and
consummated a stock purchase agreement ("Stock Purchase Agreement") with all of
the shareholders of Globaltron Communications Corporation ("Globaltron").
Pursuant to the Stock Purchase Agreement, the Company acquired 100% of the
issued and outstanding shares of Globaltron, an international telecommunications
company, in exchange for approximately 13.3 million shares of Common Stock. As a
result, Globaltron became a wholly-owned subsidiary of the Company. The
Company's office address is 100 N. Biscayne Blvd., Suite 2500, Miami, Florida,
33132 and its telephone number is (305) 371-3300.
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Globaltron is headquartered in New York, New York and is engaged in
international communications. Globaltron has an ATM/VOIP switching network
operating in the United States and extending to eight countries, and currently
has offices in Miami, Florida, New Jersey and New York. Globaltron is a service
provider of voice, data, video and Internet services. Globaltron has invested in
certain infrastructure for net-to-phone, unified messaging and interactive
e-commerce service, which it expects to market in the near term. Globaltron's
long-term business plan includes substantial network investment combined with
value added service enablers intended to support the convergence of telephony
and Internet services.
The Company intends to provide a complete description of Globaltron's (including
its subsidiaries and affiliates) business by a subsequent amendment to this Form
10-KSB.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's network operations center is located in Miami, Florida, where it
occupies approximately 10,492 square feet under a lease that expires in
November, 2009. The Company pays $20,984 per month (and also pays certain
pass-through expenses).
The Company also leases suites in Miami, Florida for its switch site and
operations office, where it occupies approximately 2,488 square feet under a
lease that expires in May, 2003. The Company pays $3,954 per month (and also
pays certain pass-through expenses).
Additionally, the Company leases approximately 3,750 square feet of space in
Parsippany, New Jersey for its global carrier services business and a sales
office, pursuant to a lease that expires in December, 2004. The Company pays
$6,484 per month (and also pays pass-through expenses).
The Company's corporate headquarters and executive offices are located in New
York, New York, where it occupies approximately 4,749 square feet under a lease
that expires in July, 2010. The Company pays $13,455 per month (and also pays
pass-through expenses).
The Company also leases co-location space for its telephonic switching equipment
in New York and Los Angeles. Such co-location space typically leases on a
short-term basis at approximately $600 per equipment rack. Currently, the lease
cost incurred by the Company for space in New York is $9,500 per month and the
lease cost in Los Angeles is $2,400 per month.
ITEM 3. LEGAL PROCEEDINGS
There are no pending legal proceedings against the Company or any of its
subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock, par value $.001 per share ("Common Stock"), has been
traded on the OTC Bulletin Board ("OTCBB") under the symbol WGEG since the first
quarter of 2000. Prior to such date there was no public trading market for the
Common Stock. Set forth below is the range of the high and low closing bid
quotations of the Common Stock for the first quarter of 2000 as reported on the
OTCBB system. The quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions.
High Low
---- ---
First Quarter of 2000 13.5 7
At March 27, 2000, there were approximately 85 shareholders of record of the
Company's Common Stock. The Company has never declared dividends on its Common
Stock since inception and has no present intention of declaring or paying any
dividends in the foreseeable future. The Company intends to retain any earnings
which the Company may realize in the foreseeable future to finance its
operations. The terms of the Company's loan agreement ("GNB Loan Agreement")
dated February 29, 2000, with GNB Bank Panama, S.A., a Panamanian bank ("GNB
Bank"), restrict the payment of dividends or distributions. For a summary of the
GNB Loan Agreement , please refer to the Company's Current Report on Form 8-K
filed with the Securities and Exchange Commission on March 20, 2000 and Item 6
"Management's Plan of Operation - Liquidity and Capital Resources" below.
ITEM 6. MANAGEMENT'S PLAN OF OPERATION
General
The Company was organized under the laws of the State of Florida on May 17, 1996
in order to seek and effect a merger, acquire the assets or the capital stock of
existing businesses or other similar business combinations. Prior to the
acquisition of Globaltron on January 21, 2000, the Company had not been engaged
in active operations since its organization. Accordingly, the financial
statements included in this Report are not indicative of anticipated future
results of operation of the Company.
Plan of Operation
With the acquisition of Globaltron, the Company entered into the international
facilities-based telecommunications business. The Company intends to build a
facilities-based international grade network outside the traditional settlement
process to offer its customers low cost, highly reliable connectivity. The
Company has initially focused on carrier wholesale termination by leveraging off
of its current strategic agreements, US carrier contracts, and network
build-out. As the Company's foreign operations become established, higher margin
foreign traffic call origination is anticipated to increase. Additionally, the
Company intends to introduce a complete package of enhanced virtual
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services, prepaid calling card programs, international private lines, and
Internet telephony during the year 2000.
For the year 2000, the Company's operational and strategic objectives include
the following:
-> Enter select deregulating international markets
-> Acquire or joint venture with other telecommunications related
providers
-> Aggregate carrier traffic to forge strategic operating
agreements
-> Focus on foreign market traffic origination -> Build a
portfolio of value added services
-> Establish a reliable, fully redundant, technologically
advanced network
-> Invest in network infrastructure
For the 12 months ended December 31, 2000, the Company intends to begin or
expand operations in various locations in Europe, Central and South America, and
the Caribbean. The Company has signed definitive agreements to enter the
Competitive Local Exchange Carrier (CLEC) business in a 5-country area of South
America. Initial operations will begin in Peru and Colombia in the year 2000,
and continue with build-out over the following 3 years.
There can be no assurance that the Company will be able to identify, attract,
finance or consummate its operational and strategic objectives (all of which are
heavily dependent upon, among other things, the Company's ability to obtain
additional financing).
Liquidity and Capital Resources
The Company believes that it can satisfy its cash requirements for its existing
business operations through July 2000, on the basis of funds received from the
loan by GNB Bank, but that it will require significant additional financing in
order to achieve its growth and acquisition objectives. Pursuant to the GNB Loan
Agreement, GNB Bank made a loan to the Company in the principal amount of $5.0
million, plus interest at Citibank N.A.'s base rate plus 1%. The GNB Loan is
evidenced by an unsecured convertible promissory note ("Note") due May 29, 2001.
The payment of the obligations under the Note and related agreements and the
performance of the obligations therewith, are unconditionally guaranteed by
Globaltron.
The Company anticipates that it will need to raise significant additional debt
and equity financing during 2000 in order to expand and maintain its business.
The Company is actively seeking additional funding from a variety of sources,
including potential issuances of its securities in one or more private
transactions and various vendor financing arrangements. Depending upon the
Company's ability to rapidly integrate and achieve certain of its expansion and
acquisition objectives, the Company's financing needs could exceed $100 million,
a large portion of which the Company would seek in the form of vendor financing.
Globaltron has entered into vendor financing arrangements with two separate
lenders for an aggregate of approximately $16 million. The Company and
Globaltron are currently negotiating various other vendor financing arrangements
and have signed a preliminary financing proposal for $31 million. The terms upon
which the Company
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may obtain additional funding are restricted by the GNB Loan Agreement and the
consent of GNB Bank may be necessary to accomplish certain funding objectives of
the Company. There can be no assurance that the Company will be successful in
its efforts to obtain any of such financing, including consummating the $31
million vendor financing proposal described above. Any financing activities by
the Company could result in substantial dilution of existing equity positions
and increased interest expense. Transaction costs to the Company in connection
with such activities are also anticipated to be significant.
At such time as the Company files an amendment to this Form 10-KSB in which it
provides a complete description of Globaltron's current and prospective business
(including its subsidiaries and affiliates), the Company intends to provide
additional information relative to the Company's funding plans and Globaltron's
current equipment financing arrangements.
ITEM 7. FINANCIAL STATEMENTS
The financial statements are included under Item 13(a) of this Form 10-KSB.
These financial statements precede the acquisition of Globaltron and accordingly
do not reflect the historical financial statements of Globaltron. The Company
intends to file an amendment in the near future to its Current Report on Form
8-K filed on January 31, 2000 (as amended on March 24, 2000) which will include
financial information relating to Globaltron.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Effective May 28, 1999, the Company replaced Millward & Co., with London Witte &
Company, P.A., as its independent auditors when Millward & Co., Inc. declined to
stand for re-election or appointment. Millward & Co.'s report on the financial
statement since the Company's inception did not contain any adverse opinion, any
disclaimer of opinion, nor has any opinion been modified as to uncertainty,
audit scope or accounting principles.
During the Company's two most recent fiscal years and subsequent interim periods
preceding the change in independent auditors, the Company had no disagreements
with Millward & Co. on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure.
London Witte & Company, P.A. was selected by management to replace Millward &
Co. as the Company's independent auditors, and was determined as such by the
Company's then sole director and executive officer, Debra Janssen.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT
The information required in response to this Item is incorporated herein by
reference from the Company's Definitive Proxy Statement to be filed with the
Securities and Exchange Commission in connection with the Company's 2000 Annual
Meeting of Shareholders.
ITEM 10. EXECUTIVE COMPENSATION
The information required in response to this Item is incorporated herein by
reference from the Company's Definitive Proxy Statement to be filed with the
Securities and Exchange Commission in connection with the Company's 2000 Annual
Meeting of Shareholders.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information required in response to this Item is incorporated herein by
reference from the Company's Definitive Proxy Statement to be filed with the
Securities and Exchange Commission in connection with the Company's 2000 Annual
Meeting of Shareholders.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required in response to this Item is incorporated herein by
reference from the Company's Definitive Proxy Statement to be filed with the
Securities and Exchange Commission in connection with the Company's 2000 Annual
Meeting of Shareholders.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The financial statements listed on the index to financial statements on page
F-1 are filed as part of this Form 10-KSB.
(b) Reports on Form 8-K
(i) Subsequent to December 31, 1999, the Company filed on January 31,
2000, a Current Report on Form 8-K announcing the acquisition of all of the
issued and outstanding shares of Globaltron Communications Corporation.
(ii) Subsequent to December 31, 1999, the Company filed on March 20,
2000, a Current Report on Form 8-K announcing a loan agreement between the
Company and GNB Bank Panama, S.A.
(iii) Subsequent to December 31, 1999, the Company filed on March 24,
2000, an amendment to the Current Report on Form 8-K filed January 31, 2000.
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(c) Exhibits
2 Stock Purchase Agreement between Win-Gate Equity Group, Inc. and the
Shareholders of Globaltron Communications Corporation dated January 21,
2000. (1)
3.1 Articles of Incorporation. (2)
3.2 By-Laws. (2)
4.1 Specimen Common Stock Certificate. (2)
4.2 Warrant Certificate. (2)
4.3 Warrant Agreement. (2)
10.1 Forms of Subscription Documentation for prospective investors. (2)
10.2 1996 Stock Option Plan. (2)
10.3 Loan Agreement. (2)
10.4 Loan Agreement dated February 29, 2000, by and among Win-Gate Equity
Group, Inc. Globaltron Communications Corporation and GNB Bank Panama,
S.A. (4)
11 Escrow Agreements. (2)
27.1 Financial Data Schedule. (5)
(1) Filed as an exhibit to the Company's Current Report on Form 8-K (File
No. 333-05188-A), as filed with the Securities and Exchange Commission
on January 31, 2000.
(2) Filed as an exhibit to the Company's Registration Statement on Form
SB-2 (File No. 333- 5188-A), as filed with and declared effective by
the Commission on October 10, 1997.
(3) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1998 (File No. 333- 5188-A), filed
with the Commission on October 27, 1999.
(4) Filed as an exhibit to the Company's Current Report on Form 8-K (File
No. 333-05188-A), as filed with the Securities and Exchange Commission
on March 20, 2000.
(5) Filed herewith.
8
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
WIN-GATE EQUITY GROUP, INC.
By: /s/ Gary D. Morgan
--------------------------------
Gary D. Morgan, Chief Executive Officer
Date: April 26, 2000
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In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
/s/ Gary D. Morgan Date: April 26, 2000
- -------------------------------
Gary D. Morgan
Chief Executive Officer and
Chairman of the Board of Directors
(Principal Executive Officer)
/s/ David Walsh Date: April 26, 2000
- --------------------------------
David Walsh
(Principal Financial Officer)
/s/ Roman Fisher Date: April 26, 2000
- --------------------------------
Roman Fisher
Director
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CONTENTS
--------
INDEPENDENT AUDITORS' REPORT F-1
- ----------------------------
FINANCIAL STATEMENTS
- --------------------
BALANCE SHEETS F-2
STATEMENTS OF INCOME F-3
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY F-4
STATEMENTS OF CASH FLOWS F-5
NOTES TO FINANCIAL STATEMENTS F-6-11
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Win-Gate Equity Group, Inc.
We have audited the accompanying balance sheets of Win-Gate Equity Group, Inc.
(a development stage company) as of December 31, 1999 and 1998 and the related
statements of income, changes in stockholders' equity, and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Win-Gate Equity Group, Inc. (a
development stage company) as of December 31, 1999 and 1998, and the results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
LONDON WITTE & COMPANY, P.A.
Certified Public Accountants
Fort Lauderdale, Florida
April 13, 2000
F-1
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<TABLE>
<CAPTION>
WIN-GATE EQUITY GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
December 31, 1999 and 1998
A S S E T S
1999 1998
-------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 7,746 $ 0
-------------- --------------
TOTAL CURRENT ASSETS 7,746 0
-------------- --------------
OTHER ASSETS
Restricted cash 0 64,000
Organization costs 400 400
-------------- --------------
TOTAL OTHER ASSETS 400 64,400
-------------- --------------
TOTAL ASSETS $ 8,146 $ 64,400
============== ==============
L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y
CURRENT LIABILITIES
Accrued expenses $ 3,049 $ 7,811
Accrued interest 986 0
Loan Payable 12,971 0
Stockholder loan 50 12,281
Note payable - current 20,000 0
-------------- --------------
TOTAL CURRENT LIABILITIES 37,056 20,092
-------------- --------------
STOCKHOLDERS' EQUITY
Common stock offering subject to rescission
shares issued and outstanding:
0 as of 12/31/99 and 64,000 as of 12/31/98 0 64,000
Common stock, par value $.001 per share;
20,000,000 shares authorized; 4,900,000
shares issued and outstanding 4,900 4,900
Preferred stock, par value $.001 per share;
5,000,000 shares authorized; no shares
issued and outstanding 0 0
Additional paid-in capital 2,000 2,000
Deficit accumulated during the development
stage (35,810) (26,592)
-------------- --------------
TOTAL STOCKHOLDERS' EQUITY (28,910) 44,308
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,146 $ 64,400
============== ==============
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-2
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<TABLE>
<CAPTION>
WIN-GATE EQUITY GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF INCOME
For the years ended December 31, 1999 and 1998
and the Period from May 17, 1996 (Date of Inception) to December 31, 1999
INCEPTION
TO
1999 1998 1999
------------- -------------- ------------
<S> <C> <C> <C>
REVENUES $ 0 $ 0 $ 0
OPERATING EXPENSES:
General and administrative 6,949 563 7,750
OTHER EXPENSE
Stock offering costs 2,269 25,791 28,060
------------- -------------- ------------
NET LOSS BEFORE INCOME TAXES (9,218) (26,354) (35,810)
INCOME TAX EXPENSE (BENEFIT) 0 0 0
------------- -------------- ------------
NET INCOME (LOSS) (9,218) (26,354) (35,810)
============= ============== =============
NET LOSS PER SHARE - BASIC (0.00) (0.01)
============= ==============
NET LOSS PER SHARE - DILUTED (0.00) (0.00)
============= ==============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING:
Basic 4,932,000 4,948,000
============= ==============
Diluted 5,252,000 5,428,000
============= ==============
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-3
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<TABLE>
<CAPTION>
WIN-GATE EQUITY GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the period from May 17, 1996 (Date of Inception)
to December 31, 1999
COMMON STOCK AND
CAPITAL IN EXCESS
OF PAR VALUE
------------
RETAINED
SHARES AMOUNT EARNINGS TOTAL
--------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
BALANCES AT MAY 17, 1996 0 $ 0 $ 0 $ 0
Net Loss - - (173) (173)
Issuance of common shares 4,900,000 6,900 - 6,900
--------- ----------- ------------ -----------
BALANCES AT DECEMBER 31, 1996 4,900,000 6,900 (173) 6,727
Net Loss - - (65) (65)
--------- ----------- ------------ -----------
BALANCES AT DECEMBER 31, 1997 4,900,000 6,900 (238) 6,662
Net Loss - - (26,354) (26,354)
Issuance of common shares
subject to rescission 64,000 64,000 - 64,000
--------- ----------- ------------ -----------
BALANCES AT DECEMBER 31, 1998 4,964,000 70,900 (26,592) 44,308
Net Loss - - (9,218) (9,218)
Common shares rescinded (64,000) (64,000) 0 (64,000)
--------- ----------- ------------ -----------
BALANCES AT DECEMBER 31, 1999 4,900,000 $ 4,900,000 $ (35,810) $ (28,910)
========= =========== ============ ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
WIN-GATE EQUITY GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1999 and 1998
and the Period from May 17, 1996 (Date of Inception) to December 31, 1999
INCEPTION
TO
1999 1998 1999
---------- ----------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (9,218) $ (26,354) $ (35,810)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Changes in assets and liabilities:
Deferred offering costs 0 18,902 0
Organizational costs 0 0 (400)
Accrued expenses (3,776) 310 4,035
---------- ----------- ---------
Net cash used by operating activities (12,994) (7,142) (32,175)
---------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used by investing activities 0 0 0
---------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stockholder loan 50 7,129 50
Proceeds from loan payable 690 12,971
Proceeds from note payable 20,000 0 20,000
Proceeds from common stock issuance 0 0 6,900
Proceeds from common stock offering
of 64,000 subject to rescission 0 64,000 64,000
Cash deposited into escrow account for
stock offering subject to rescission 0 (64,000) (64,000)
Rescission of common stock offering (64,000) 0 (64,000)
Cash withdrawn from escrow account 64,000 0 64,000
---------- ----------- ---------
Net cash provided by financing
activities 20,740 7,129 39,921
---------- ----------- ---------
NET INCREASE (DECREASE) IN CASH 7,746 (13) 7,746
CASH AND EQUIVALENTS, BEGINNING 0 13 0
---------- ----------- ---------
CASH AND EQUIVALENTS, ENDING $ 7,746 $ 0 $ 7,746
========== =========== =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-5
<PAGE>
WIN-GATE EQUITY GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Nature of Activities
Win-Gate Equity Group, Inc. is a Florida corporation formed on May 17, 1996, to
seek and make one or more business combinations to the extent its limited
resources will allow. The Company is in the development stage and has no
operating history.
Basis of Presentation
The Company prepares its financial statements on the accrual basis of accounting
and accordingly reflects all receivables, payables, and other liabilities.
Fiscal Year
The Company's year-end is December 31.
Cash and Cash Equivalents
For purposes of the financial statements, the Company considers all unrestricted
highly liquid investments with an original maturity of three months or less to
be cash equivalents. Cash equivalents are carried at cost, which approximates
market value.
Income Taxes
Deferred tax assets and liabilities are determined based upon differences
between the financial statement and tax bases assets and liabilities using
enacted tax rates in effect for the year which differences are expected to
reverse.
The Company provides a valuation allowance against deferred tax assets if, based
on the weight of evidence available, it is more likely than not that some or all
of the deferred tax assets will not be realized.
F-6
<PAGE>
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Loss Per Share
In 1998, the Company adopted Financial Accounting Standards Board Statement No.
128, "Earnings Per Share," (SFAS 128). Under SFAS 128, basic net income (loss)
per common share is computed by dividing net income (loss) available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted income (loss) per common share reflect the maximum dilution that
would have resulted from the assumed exercise related to dilutive stock options
and is computed by dividing net income (loss) by the weighted average number of
common shares and all dilutive securities outstanding.
Financial Statement Estimates
The preparation of financial statements in conformity with Generally Accepted
Accounting Principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
NOTE 2 -- DEFERRED TAXES
- -----------------------
Under current tax law, all start up costs must be amortized over a period of not
less than 60 months starting with the month in which the business begins. As of
December 31, 1999 and 1998 the amount of start up costs were $35,810 and $26,592
respectfully. Since operations have not commenced as of December 31, 1999, the
start up costs are a non-amortizable asset for income tax reporting. Based on
the evidence available, the Company has provided a valuation allowance to offset
any deferred tax asset arising from the future tax benefits from the
amortization of its start up costs.
F-7
<PAGE>
NOTE 3 -- LOAN PAYABLE AND STOCKHOLDER LOAN
- ------------------------------------------
During 1998 and 1999, the President and Chief Executive Officer for that time
period made advances to the Company to pay certain offering costs. Such amounts
are non-interest bearing and are payable on demand. In accordance with Financial
Accounting Standards Board Statement No. 107 "Disclosures about Fair Value of
Financial Instruments,"(SFAS 107), market value is estimated at cost because of
the nature of the loan. The loan balances of the current stockholder are $50 and
$0 as of December 31, 1999 and 1998. The loan balances of the prior stockholder
are $12,971 and $12,281 as of December 31, 1999 and 1998.
NOTE 4 -- NOTE PAYABLE
- ---------------------
During 1999, the Company was advanced $20,000 in exchange for a note payable.
The note bears interest at a rate of 7.75% per annum and is payable on demand.
Accrued interest as of December 31, 1999 is $986. In accordance with Financial
Accounting Standards Board Statement No. 107 "Disclosures about Fair Value of
Financial Instruments,"(SFAS 107), market value is estimated at cost because of
the nature of the loan.
NOTE 5 - STOCKHOLDERS' EQUITY
- -----------------------------
Common Stock Offering Subject to Rescission
On April 7, 1998, the Company sold 64,000 units pursuant to a Blank Check
Offering at $1 per unit. Each unit consists of one share of Common Stock and 10
Common Stock purchase warrants to purchase Common Stock at $1.20 per warrant
exercisable over a 5 year period. The gross proceeds from the offering was
$64,000. All costs incurred with the blank check offering were categorized as
deferred offering costs in 1997 and subsequently expensed during 1998.
The Company was obligated under Securities and Exchange Commission's Rule 419 of
Regulation C under the Securities Act of 1933, as amended, to complete an
acquisition meeting specified criteria. As of June 30, 1999 no acquisition had
been identified. Pursuant to Rule 419, $64,000 was refunded to the investors and
64,000 shares of common stock and 640,000 common stock purchase warrants were
canceled.
F-8
<PAGE>
NOTE 5 - STOCKHOLDERS' EQUITY
- -----------------------------
Common Stock
The Company is authorized to issue 20,000,000 shares of common stock having a
per share par value of $.001. As of December 31, 1999 and 1998, the Company has
issued 4,900,000 common shares to its shareholders in exchange for an aggregate
of $6,900. Each share of common stock entitles its owner to one vote. The common
shares carry no preemptive rights and are not redeemable. Cumulative voting is
not permitted.
Preferred Stock
The Company has authorized the issuance of 5,000,000 shares of preferred stock
with a par value of $.001 per share, bearing such voting, dividend, conversion,
liquidation and other rights and preferences as the Board of Directors may
determine. There has been no issuance of preferred stock.
NOTE 6 - STOCK OPTION PLAN
- --------------------------
On June 25, 1996, the Board of Directors and shareholders approved a stock
option plan entitled the "1996 Stock Option Plan" (the "plan"). Under the plan,
the Company has reserved an aggregate of 500,000 shares of common stock for
issuance pursuant to options granted under the plan. The Options Committee of
the Board of Directors of the Company administers the plan including, without
limitation, the selection of the persons who will be granted options under the
plan, the type of options to be granted, and the number of shares subject to
each plan option and plan option price.
Options granted under the plan may either be options qualifying as incentive
stock options under Section 422 of the Internal Revenue Code of 1996, as amended
or non-qualified options. In addition, the plan also allows for the inclusion of
a reload option provision which permits an eligible person to pay the exercise
price of the plan option with shares of common stock owned by the eligible
person and receive a new plan option to purchase additional shares of common
stock in the same quantity as the shares tendered. Any incentive option granted
under the plan must provide for
F-9
<PAGE>
NOTE 6 - STOCK OPTION PLAN
- --------------------------
an exercise price of not less than 100% of the fair market value of the
underlying shares on the day of such grant. However, the exercise price of any
incentive option granted to an eligible employee owning more than 10% of the
Company's common stock must be at least 110% of such fair market value as
determined on the date of the grant. The term of each plan option and the manner
in which it may be exercised is determined by the Board of Directors or the
Option Committee provided that no plan option may be exercisable more than 10
years after the date of its grant, and in the case of an incentive option
granted to an eligible employee owning more than 10% of the Company's common
stock, no more than five years after the date of the grant.
No plan options have been granted as of December 31, 1999.
NOTE 7 - RELATED PARTY TRANSACTIONS
- -----------------------------------
During 1998 and 1999 the Company leased office space on a month to month,
rent-free basis from the Company's President and Chief Executive Officer. The
Company also has an interest free loan payable to this person as described in
note 3.
In addition, in May, 1996 the company issued 400,000 shares of common stock to
Atlas Pearlman, P.A. in consideration for legal services rendered to the
Company. The Company paid Atlas et al $0 in 1999 and $3,500 in 1998 for legal
services.
NOTE 8 - SUBSEQUENT EVENT
- --------------------------
On January 21, 2000, the Company entered into and consummated a Stock Purchase
Agreement with all of the shareholders of Globaltron Communications Corporation
("GCC"). Pursuant to the Stock Purchase Agreement, the Company acquired all of
the issued and outstanding shares of Globaltron Communications Corporation
("GCC") and GCC has become a wholly-owned subsidiary of the Company. As
F-10
<PAGE>
NOTE 8 - SUBSEQUENT EVENT
- -------------------------
consideration for the GCC shares, the Company issued an aggregate of
approximately 13.3 million shares of the Company's common stock to the former
GCC shareholders. Following the closing, there were approximately 18.2 million
issued and outstanding shares.
F-11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 12 THROUGH 14 OF THE COMPANY'S FORM 10-KSB FOR THE YEAR AND IS
QUALIFIED IN ITS ENTIRETY BY SUCH REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 7,746
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 400
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,146
<CURRENT-LIABILITIES> 37,056
<BONDS> 0
0
0
<COMMON> 6,900
<OTHER-SE> (35,810)
<TOTAL-LIABILITY-AND-EQUITY> 8,146
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 6,949
<OTHER-EXPENSES> 2,269
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (9,218)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,218)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,218)
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
