SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-SB
Amendment No. 6
General Form for Registration of Securities of
Small Business Issuers
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Global Entertainment Holdings/Equities, Inc.
(Name of Small Business Issuer in its charter)
Colorado 47-0811483
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State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
6235 South 90th Street, Omaha, Nebraska 68127
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (402) 331-3189
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which to be registered
each class is to be registered:
Securities registered pursuant to Section 12(g) of the Act:
Common stock
Title of class
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TABLE OF CONTENTS
ITEM 1. DESCRIPTION OF BUSINESS......................................1
1:1 Company Description............................1
1:2 Products and Services ..........................3
1:3 Growth Strategy.................................3
1:4 Technology......................................5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION....................................................6
2:1 Results of Operations..........................6
2:2 Liquidity and Capital Resources................8
2:3 Impact of Inflation............................10
2:4 Contingencies..................................10
2:5 Year 2000 Risks................................10
2:6 Year End 2000 Projections.....................11
ITEM 3. DESCRIPTION OF PROPERTY.....................................12
ITEM 4. SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN SECURITY HOLDERS ...................................12
4:1 Security Ownership of Certain
Beneficial Owners and Management..............12
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS............................13
5:1 Officers and Directors........................13
ITEM 6. EXECUTIVE COMPENSATION......................................16
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ............17
ITEM 8. LEGAL PROCEEDINGS...........................................18
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.....................................................18
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.....................21
11:1 Common Stock..................................30
11:2 Preferred Stock...............................30
11:3 Dividends.....................................31
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS...................31
ITEM 13. FINANCIAL STATEMENTS........................................33
ITEM 14. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS..................34
ITEM 15. EXHIBITS....................................................34
INDEX TO EXHIBITS.............................................................36
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ITEM 1. DESCRIPTION OF BUSINESS
1:1 Company Description
Global Entertainment Holdings/Equities, Inc. (the "Company") was incorporated in
the State of Colorado as Masadi Resources, Inc. ("Masadi"), on July 10, 1997. On
February 10, 1998, Masadi filed with the State of Colorado, Articles of
Amendment to its Articles of Incorporation and changed its name to International
Beverage Corporation. On August 27, 1998, pursuant to a Merger Agreement,
International Beverage Corporation merged into Global Entertainment Holdings/
Equities, Inc. (Global). International Beverage Corporation became the surviving
corporation and on August 27, 1998, changed its name to Global Entertainment
Holdings/Equities, Inc. which is now known as the Company.
On June 30, 1998, Global entered into an Agreement of Purchase and Sale whereby
Global acquired 100% of the issued and outstanding shares of Interactive Gaming
and Wagering NV, a Netherlands Antilles Corporation and currently a wholly owned
subsidiary of the Company. Interactive Gaming and Wagering, was incorporated in
Curacao, Netherlands Antilles on May 19, 1997, and is engaged in the business of
conception of software programs for the gaming and wagering industry.
Masadi's purpose for incorporation was to pursue its business activity in the
oil and gas exploration and production business within the geographical
boundaries of the North American Continent with emphasis on the Continental
United States. On November 15, 1997, Masadi's shareholders voted to change its
business direction and pursue opportunities in the Beverage Industry and on
February 10, 1998, changed its name to International Beverage Corporation.
Pursuant to the change in business direction, International Beverage Corporation
entered into a Purchase and Sale Agreement with Beverage Source Worldwide, Inc.
whereby Beverage Source Worldwide, Inc. became a wholly owned subsidiary. The
Purchase and Sale Agreement with Beverage Source Worldwide, Inc. was
subsequently rescinded for non-performance by International Beverage Corporation
and Beverage Source Worldwide, Inc.
International Beverage Corporation began trading on the OTC Bulletin Board on
March 18, 1998, under the symbol "IBVC". The Company, to better reflect its name
change to Global Entertainment Holdings/Equities, Inc., changed its trading
symbol on September 9, 1998, to "GAMM".
The Company's stock is presently traded on the NASD Pink Sheets under the
trading symbol "GAMM." The Company is a holding company, whose primary business
focus is on Internet companies operating in the online gaming software sector.
The Company owns 100% of the issued and outstanding stock of Interactive Gaming
and Wagering (IGW) and as of the September 20, 1999, acquired 100% of the issued
and outstanding stock of Prevail Online, Inc. a Colorado Corporation with
principal offices in San Francisco, CA.
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IGW is the Company's wholly owned subsidiary and is engaged in the development,
licensing and hosting of proprietary Internet gaming software. IGW's corporate
Website is www.interactive-gaming.com. IGW offers a turnkey service solution to
its software licensees, including online casino and sportsbook software, 800
call center sportsbook software, Website development and hosting, training,
gaming license consulting, facilities and telecommunications management.
Beginning in November of 1997, IGW has been engaged in testing and
implementation of its proprietary online sportsbook software through its initial
software licensee-www.VIPsports.com.
At June 30, 1998, IGW completed the testing and implementation of its
proprietary online sportsbook software also through www.VIPsports.com. As a
result, www.VIPsports.com has experienced significant business growth, which can
be directly attributed to the successful testing, and implementation program
provided by IGW.
As of the date of this Registration Statement, IGW has entered into software
licensing contracts with several licensees. The following is a current list of
the gaming sites for which the Company has been contracted to support and host
applicable software:
1. www.vipsports.com
2. www.vipcasinos.com
3. www.5cardcharlie.com
4. www.fairdealsports.com
5. www.fairdealcasino.com
6. www.gamedaycasino.com
7. www.gamedaysportsbook.com
8. www.wssbcasino.com
9. www.wallstreetsuperbook.com
10. www.fivecardcharlie.com
11. www.vipsoccer.com
Prevail Online, Inc.
At September 20, 1999, the Company completed an agreement of purchase and sale
for the purchase and acquisition of 100% of the issued and outstanding stock of
Prevail Online, Inc., ("Prevail") a Colorado Corporation with its principal
office in San Francisco, CA. Pursuant to the terms of the acquisition, the
Company conducted a tax-free exchange of 163,500 shares of its common stock for
100% of the issued and outstanding shares of Prevail. Prevail will operate as a
wholly owned subsidiary of the Company.
Prevail operates three independent online services that attract consumers with a
combination of highly focused content and superior marketing techniques which
has made its sites among the most popular on the Web. Prevail Online's services
deliver gaming directory information through its Website www.wheretobet.com,
real time sports gaming news and statistics through www.thesportsdaily.com, and
mainstream online wagering information via www.netbet.org.
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1:2 Products and Services
Through its wholly owned subsidiaries, the Company develops and provides its
software products, Web publishing services and Web hosting services to the
independent licensees. To its licensees, the Company provides:
Set-up
1. Assistance in procuring of initial Internet gaming license with their
governing body.
2. Concept development and design of virtual casino "theme."
3. Customization and system integration.
4. Hosting of servers.
5. Assistance in procuring secure electronic funds transfer capabilities and
monitoring of all funds flow.
Software Features
1. Real-time functionality.
2. All odds making rules and calculations.
3. Advanced graphical user interface for enhanced visual and audio effects.
4. Preservation and analysis of all gaming data, including win/loss, game
preferences and monitoring of player activities.
5. Accurate reporting of return on advertising Investment to optimize marketing
resources.
6. Provision of credit card processing e-commerce and other banking services.
Java Casino Games
IGW's Java games utilize the Java language to provide easily accessible online
games to the Company's licensees' Websites. The cross-platform nature of Java
makes it possible to play these games on all major operating systems, online,
with no download requirements. IGW software currently provides four (4) casino
style Java Games (Videopoker, Blackjack, Roulette, slots) for players to wager
on, with several additional Java games projected to be released throughout
FY2000.
1:3 Growth Strategy
The development of telecommunications and the emergence of new technology have
created opportunities to develop new, efficient and secure ways to deliver
information and entertainment to consumers. The Company intends to capitalize on
its technological niche and expertise to become a world leader in online gaming
software systems. The Company's key strategic objectives are to: (i) continue
supporting core holdings of Internet gaming software development and licensing;
(ii) expand to other Internet markets, through acquisitions in the content and
publishing markets; and (iii) pursue opportunities in e-commerce through the
Company's wholly owned subsidiary, IGW. The Company will develop the software to
integrate the banking
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operation for e-commerce. The Company will continue to develop software that
enables e-commerce through their licensee's websites as part of the Company's
software solution. The Company proposes to seek a joint venture partner to
facilitate credit card transactions, for their licensee websites. However,
currently no acquisitions or joint ventures have been identified.
The Company intends to implement its business strategy by: (i) continuing to
enhance its technology; (ii) seeking key strategic alliances with unidentified
companies that are in the Internet/Technology/Software based industries,
technologically advanced, that are currently solvent, are beyond the development
stage, have positive operating cash flows/financially stable, have a seasoned
management team, and are efficiently staffed; and (iii) developing brand name
recognition through cross marketing and merchandising.
Expand Market Integration
The Company intends to capitalize on its technological niche and early market
entry to capture a significant share of the Internet gaming software market. The
Company believes that because of the level of satisfaction from its clients and
the history of IGW in the industry as a leader (co-founding member and board
member of the Interactive Gaming Council), it has established brand recognition.
The Company believes that it has accomplished this through the development of
ten (10) licensed websites using its ITSCS (Internet & Telephony Sportsbook &
Casino System), creating market exposure over the Internet; has developed and
licensed software to one of the first operating sportsbooks on the Web,
www.VIPsports.com.; its attendance and exposure at gaming and software
expositions; has received favorable reviews from both financial and industry
publications, i.e. CNNfn, USA Today, and has obtained exposure through various
media outlets, including: multiple national radio interviews, television
exposure, Channel 22 Business News, CNN Financial, Today's Investor, Internet
interviews and Company profile exposure, News Letter exposure, Internet Banner
Advertising, and other Internet Advertising.
Maintain High Quality, Innovative Products and Services
The Company is focused on designing a gaming experience by using leading edge
technology. Additionally, licensees may benefit from other methods of revenue
generation, which traditional gaming machines cannot offer, such as advertising,
data collection and user analysis.
Continue Technology Development
The Company has achieved its technological niche through the development of its
proprietary software. Furthermore, the Company has made a strong commitment to
continue research and development activities to enhance its software and to
develop new applications for new markets. The Company will continue to use such
methods to protect its technology and moderate competition from current and
future entrants.
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Sales and Marketing Strategy
The Company's sales and marketing are conducted through its Curacao offices and
its Omaha, Nebraska headquarters. As of September 1, 2000, the sales and
marketing team was comprised of six (6) sales and marketing professionals and
technicians. The managers hired to date are experienced professionals with
in-depth knowledge of Internet software and the gaming industries.
The Company is committed to maintaining a customer-driven organization and
continues to aggressively recruit and train additional staff for the marketing
department to assist the Company in achieving its sales goals.
Competitive Environment
The Company estimates that there are currently over 20 online gaming software
developers and over 800 gaming websites on the World Wide Web.
Competition in the gaming software development and licensing markets come from
five primary segments:
1. Traditional Land-based Gaming
2. Internet Gaming
3. Electronic Gaming
4. Internet Service Providers
5. Other Entertainment / Media
The Company estimates the following list of companies represent the major
competition in the licensing of Internet gaming software: Starnet
Communications, Microgaming, Atlantic International Entertainment, Ltd.,
Chartwell Technology, Inc., Cryptologic, Inc. and Boss Media AB.
1:4 Technology
Redundant High-Speed Network
IGW has constructed a transaction-oriented server hosting facility with the
licensee in mind. Tightly integrated with the Internet connection, the server
farm offers a dedicated, fully duplexed gateway into the global Internet. Taking
advantage of newly implemented connectivity hardware and security software, the
facility guarantees an unprecedented level of performance and availability. The
system is composed of high speed Dell and Compaq servers and top of the line
Cisco and Nokia networking equipment. The mission critical system components,
such as the database and web servers, are fully fault tolerant, load-balanced,
mirrored and redundant, which protect the licensees from failures due to
malfunctioning equipment.
The highly scalable nature of IGW's system design makes provisioning for
additional capacity seamless. The network monitoring and security staff tracks
the system at all times to maintain
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constant awareness of the system's operating parameters. New equipment and
bandwidth will be procured as necessary to compensate for increased activity or
anticipated peak demands.
The high quality Internet connection at IGW's network facility in Curacao is
provided by Antelecom and Teleglobe and contributes to responsive game play and
uptime for the licensees.
Each gaming transaction is stored on a database that is replicated for
redundancy and backed up online to prevent data loss.
In addition to IGW's digital network serving gaming content for its licensees,
the Company uses a state of the art proprietary e-commerce solution that
provides a high level of security and integrity for transmission of funds over
the Internet. IGW uses Secure Sockets Layer (SSL) to encrypt and protect
transmission of sensitive data like credit card information.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
2:1 Results of Operations
The Company generates operating revenues exclusively from its wholly owned
subsidiaries, IGW and Prevail. IGW and Prevail currently generate revenues from
three (3) primary sources: (i) licensing fees, (ii) monthly website hosting and
maintenance fees, and (iii) royalties and advertising fees. The acquisition of
Prevail added an additional source of revenue for the Company through its
website advertising fees. Prevail has used the wheretobet.com website to sell
banner advertising as its source of revenue since the acquisition of the
website.
On August 20, 1999, Global Entertainment Holdings/Equities, Inc., (Global),
issued 43,500 shares of its common stock to acquire 100% of the issued and
outstanding shares of Prevail OnLine, Inc., (Prevail), a Colorado Corporation,
incorporated on July 21, 1999. Concurrent with the issuance of the 43,500 shares
of stock to acquire Prevail, Global issued 120,000 shares to an unrelated party
to acquire a website known as wheretobet.com and a domain name known as
netbet.org. At the acquisition date Prevail paid a down payment of $75,000 and
signed a non interest bearing note of $225,000 payable in nine monthly
installments commencing one month from the closing date of the Agreement. In
addition, Global issued 120,000 shares of its common stock for a value of
$400,000. The asset purchase and sale agreement contains the following
provision; The stock that is to be transferred to Sellers will contain therewith
a put and call provision as follows; (i) Sellers will have the right to put the
stock to the Purchaser anytime after six (6) months from the closing, but before
twelve (12) months from the closing at the net price of $400,000 (US); (ii) The
Purchaser will have the right to call the stock from Sellers anytime after six
(6) months from the closing but before twelve (12) months from closing at the
net price of $800,000 (US).
In 1999, the Company entered into an agreement with an independent third party
to design and develop a Website page known as "Sports Daily". The Sports Daily
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Website Page is intended to give the Company's current clientele, sport
enthusiast and future customers information about all major sports events, game
times, statistics, weather conditions, injury report and current sports news.
The Sports Daily Website is not a gaming or wagering activity.
Through research and development in the past four years, the Company identified
the opportunity of offering proprietary software and related services to online
gaming operators and successfully launched its first licensee in November 1997.
The Company encourages its licensee's to target only customers in countries that
regulate online gaming. Currently, there are several countries which support the
online gaming industry through regulation and/or taxation, including; such
nations as Sweden, Finland, Australia, Germany, Liechtenstein, the Netherlands
Antilles, Dominica and Antigua.
Historically, approximately 50% of all gaming revenue for "Sportsbook"
operators, in the USA and abroad, are generated during American Professional and
Collegiate football season. This statistic has proven to be steadfast during the
short time that IGW began licensing its Internet Sportsbook software platform,
as fourth quarter royalty revenue represented over 50% of all revenue generated
in 1998 and 1999. This seasonal royalty revenue is anticipated to continue for
the Sportsbook software platform; however, with the recent development,
licensing and introduction of the new Internet based casino software, revenues
should balance out during the off season months as a result of the additional
royalties gained through the licensing of the newly introduced Casino software.
Since the beginning of January 1999, through December 31, 1999, all components
of the software licensing business, which include software licensing, Website
services and software licensing royalties underwent tremendous growth and
generated revenues over $2.8 Million. For the Year ended December 31, 1999,
Prevail generated revenues of over $233,000, which accounted for approximately
8% of the Company's revenues for that period. The Company's revenues increased
over 287% to $2,821,599 for the year ended December 31, 1999 as compared to
$980,563 for the twelve months ended December 31, 1998.
The Company's revenues increased to $976,689 for the quarter ended June 30, 2000
as compared to $610,655 for the quarter ended June 30, 1999. For the Quarter
ended June 30, 2000, Prevail generated revenues of over $216,000, which
accounted for approximately 22% of the Company's revenues for that period. Since
the beginning of January 2000, through June 30, 2000, revenues from all
components of the software licensing business equaled more than $1.6 Million.
The growth is primarily due to additional revenues generated from software
licensing, and Website services for licensees (including Royalties). The
Company, through IGW, offers to its licensees Internet based Casino and
Sportsbook software as well as telephone based (call centers) Sportsbook
software. Revenues from software licensing of $445,000, hosting services of
$159,000 and royalties of $1,983,773 which are the significant income sources,
accounted for 91.7% of the total revenues for the twelve months ended December
31, 1999. Revenue from software licensing services, which is the significant
income source, accounts for 61% of the total revenues for the three months ended
June 30, 2000.
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Operating expenses were $2,801,520 for the twelve months ended December 31, 1999
and $1,243,224 for December 31, 1998. As a percentage of revenues, operating
expenses decreased from 127% (inclusive of a one time charge) to 98% as a result
of substantial revenue growth and efficiencies gained as the Company handled a
greater level of activity. Income from operations for the twelve months ended
December 31, 1999 was $20,079 as compared to an operating loss of ($262,661)
(inclusive of a one time extraordinary write off) for December 31, 1998.
Tax expense for the twelve months ended December 31, 1999 was $11,571, as
compared to $0 for 1998. The majority of the Company's income is generated from
IGW in Curacao and is taxed at the rate of 2.4%.
Operating expenses were $1,029,889 for the three months ended June 30, 2000 and
$306,380 for June 30, 1999. Loss from operations for the three months ended June
30, 2000, was ($53,200) as compared to income from operations of $304,275 for
the three months ended June 30, 1999.
During the three months ended June 30, 2000 there were significant increases in
operating expenses due to the continuing operational and employment expansion of
Interactive Gaming and Wagering, NV. (IGW) More specifically, depreciation
expense was $83,619 at June 30, 2000 compared to $59,423 at June 30, 2000. Both
of these expense increases are attributed to the increase in an investment in
assets during the last fiscal year. Rent expense at June 30, 2000, was $81,816,
increasing from $43,123 at June 30, 1999 because of larger facilities in Curacao
for IGW. Administrative expenses increased to $241,494 at June 30, 2000 compared
to $72,668 at June 30, 1999, which reflects the cost of the expanded employment
force at IGW and the additional administrative costs of Prevail Online.
Additionally, the Company has intensified its efforts to refine and enhance its
computer programs and operations at IGW in Curacao. This resulted in an increase
in consulting expenses from $38,057 at June 30, 1999 to $366,942 at June 30,
2000.
The Company expects licensing revenues to continue to grow as more licensees
commence operations and royalties from existing licensees' Internet gaming
operations increase.
2:2 Liquidity and Capital Resources
At December 31, 1999, the Company had $236,184 in cash and cash equivalents, as
compared to $122,422 at December 31, 1998. The increase in cash balance was
mainly a result of the increased operating profits and financing activities.
Working capital at December 31, 1999 increased to $1,107,274 as compared to
$869,388 at December 31, 1998. Accounts receivable at December 31, 1999
increased to $1,511,226 as compared to $962,249 at December 31, 1998. The
majority of the receivables were from new licensees that were offered an
installment payment plan on the initial licensing fees and from operating
licensees, which have a 30-day term agreement for royalties.
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Net cash generated from operating activities for the twelve months ended
December 31, 1999 increased to $560,607 as compared to a net use of $383,458 for
the twelve months ended December 31, 1998. The increase in cash from operations
was primarily due to the write off of impaired assets of $607,844 at December
31, 1998 year-end and the increase in revenues.
Net cash used for investing activities for the twelve months ended December 31,
1999 was $1,492,616 as compared to $589,175 for the twelve months ended December
31, 1998. The increase was primarily due to an increase in purchases of computer
equipment and the purchase of Website domains www.wheretobet.com and
www.netbet.org. Net cash provided by financing activities for the twelve months
ended December 31, 1999, was $1,045,771, as compared to $965,579 for the twelve
months ended December 31, 1998.
Revenues and directly related expenses are recognized in the period in which
they occur. Revenues and related expenses are recognized from the sale of the
licenses when persuasive evidence of an arrangement exists, delivery of access
to the software has occurred, the license fee has been determined and
collectability of the license fee is probable. License fees are billed to be
paid in three installments over a relatively short period of time, usually
within ninety days. Once the arrangement has been contractually agreed upon
there are no customer cancellation privileges. Fees that the Company may be
entitled to are referred to as royalties and are not recognized until such time
as the licensee has actually earned revenues through the use of the software and
in accordance with the licensing agreement has notified the Company of its
sales. Once the Company has been notified that royalties are due from the
licensing of its software and collectability is probable, royalty income is
recognized. Revenues earned from efforts to assist a purchaser establish and
maintain a base for operations are known as hosting revenues and are recognized
upon receipt of funds. Costs incidental to royalty income and hosting activities
are recognized in the same period as the related revenues are recognized.
At December 31, 1999, the Company had accounts receivable from License fees,
Royalties, Hosting and Maintenance services of $1,511,226 of which $585,245 were
less than 30 days old and $925,981 that extended beyond 30 days.
At June 30, 2000, the Company had $113,564 in cash and cash equivalents, as
compared to $232,571 at June 30, 1999.
Accounts receivable at June 30, 2000 increased to $1,990,767 as compared to
$1,384,587 at June 30, 1999. The majority of the receivables are from new
licensees that were offered an installment payment plan on the initial licensing
fees and from operating licensees, which have a 30-day term agreement for
royalties.
Net cash used from operating activities for the six months ended June 30, 2000,
was $78,750 as compared to a net provided of $205,679 for the six months ended
June 30, 1999.
Net cash used for investing activities for the six months ended June 30, 2000,
was $236,854 as compared to $764,310 for the six months ended June 30, 1999.
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Net cash provided by financing activities for the six months ended June 30,
2000, was $192,984, as compared to $668,780 for the six months ended June 30,
1999.
2:3 Impact of Inflation
The Company believes that inflation has not had a material effect on its past
business.
2:4 Contingencies
The Company is not the subject of any lawsuit, except that which is indicated in
Note #3 in the consolidated financial statements.
2:5 Year 2000 Risks
Currently, many computer systems, hardware and software products are coded to
accept only two digit entries in the date code field and, consequently, cannot
distinguish 21st century dates from 20th century dates. The interactions between
various software and hardware platforms often rely upon the date coding system.
As a result, many companies' software and computer systems may need to be
upgraded or replaced in order to function properly after the turn of the
century. The Company, its licensees and suppliers are reliant on computers and
related automated systems for daily business operations.
Failure to achieve at least a minimum level of Year 2000 systems compliance by
both the company and its suppliers would have a material adverse effect on the
Company.
The Company has completed the process of identifying computer systems that could
be affected by the Year 2000 issue as it relates to the Company's internal
hardware and software, as well as third parties that provide the Company with
goods or services. Three categories or general areas have been identified for
review and analysis:
1. Systems providing licenses services. These include hardware and software
systems that are used to provide services to the Company's customers in the form
of Internet connectivity, e-mail servers, authentication servers, gaming
servers, database servers, etc. Hardware in the form of routers and switches are
also included in this area.
2. Third party vendors providing critical services including circuits, hardware,
long distance Internet connectivity and related products. These include
telephone company providers, suppliers of routers, modems, switches, odd feeds,
etc.
3. Critical internal systems that support the Company's administrative systems
for billing and collecting, general accounting systems, computer networks, and
communication systems.
The Company has completed its Year 2000 compliance review and asset
inventorying. The critical systems are computer hardware, business critical
off-the-shelf software, and
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telecommunications. The Company's critical hardware is no more than one-year-old
and Y2K compliance information from the manufacturers has been obtained and
documented. The existing critical hardware is 100% compliant. Critical
development, operating systems and application off-the-shelf software is
approximately 90% from Microsoft and statements of compliance have been attained
by those who are compliant. The Company also has statements of compliance from
Setel N.V. and Antelecom N.V., their telecommunications providers - both warrant
100% compliance. The Company will continue to monitor critical vendors for any
changes in their compliance statements. All newly acquired hardware systems,
operating systems, and software are required to be vendor certified for Year
2000 compliance.
The Company has implemented redundancy into the critical internal systems as a
contingency plan for potential Year 2000 failures, as well as other types of
unforeseen disasters. All active critical hardware and software have duplicate
backup hardware and software for equipment or software failure. All critical
equipment is protected by virtue of Uninterruptible Power Supplies and an
electrical generator is available in the event of total electrical power
failure.
Additionally, the Company has tested the existing systems for Year 2000
compliance. It has been determined that the existing billing and billing
presentment systems are Year 2000 compliant.
Based on growth, the Company plans to implement new hardware platforms and
software systems that should be Year 2000 compliant and therefore costs
specifically allocated to Year 2000 compliance may not be significant, and have
not been significant to date.
The nature of the Company's business makes it dependent on computer hardware,
software, and operating systems that are susceptible to Year 2000 issues.
Failure to attain at least minimum levels of Year 2000 compliance would have a
material adverse effect on the Company's ability to deliver services.
The Company believes that its banking relationships, and transfer agent are Year
2000 Compliant. Should any of these third party vendors not be Year 2000
Compliant, the Company will experience little to no adverse material impact on
its cash flow or prohibit its ability to continue operations.
2:6 Year End 2000 Projections
The Company anticipates that a substantial portion of its revenue for year end
December 31, 2000 will be generated through Royalty Fees, License Fees, Site
Maintenance and Hosting Fees, Website.
The Company expects its revenues and expenses to continue to increase materially
during the year end December 31, 2000. (See "Item 15. Financial Statement and
Exhibits".)
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ITEM 3. DESCRIPTION OF PROPERTY
The Company's principal offices are located at 6235 S. 90th Street, Omaha,
Nebraska 68127. The Company currently leases 2,000 sq. ft. from 90th Street. The
lease is for a period through February 28, 2004 at a rate of $1,300 per month
and adjusts upward to $1,500 in the year 2004.
ITEM 4. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY
HOLDERS
4:1 Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of September 1, 2000, based on
information obtained from the persons named below, with respect to the
beneficial ownership of the Common Stock by (i) each person known by the Company
to own beneficially 5% or more of the Common Stock, (ii) each director and
officer of the Company and (iii) all directors and officers as a group:
Name of Beneficial Owner Shares owned Beneficially(1) % Owned
Steven Abboud(4)(5)(6) 2,216,855 21.4%
Joann Abboud(4) 569,760 5.5%
Masadi Financial(5) 582,900 5.6%
Shining Star(3) 922,358 15.7%
Name of Officers & Directors Shares owned Beneficially(1) % Owned
Bryan Abboud(2)(4) 2,781,700 26.9%
David Wintroub 5,000 *
Donald J. Lisa 103,000 *
Thomas Hawkins 3,000 *
Officers & Directors as a group 2,892,700 27.9%
* Less than 1%
Note (1) The number of shares of Common Stock owned are those "beneficially
owned" as determined under the rules of the Securities and Exchange Commission,
including any shares of Common Stock as to which a person has sole or shared
voting or investment power and any shares of Common Stock which the person has
the right to acquire within 60 days through the exercise of any option, warrant
or right.
Note (2) No officer, director or security holder listed above owns any warrants,
options or rights, with the exception of Mr. Bryan Abboud, who has options to
purchase an additional 78,939 shares of the Company's common stock. (See
"Certain Relationships and Related Transactions.")
Note (3) Mr. Steven Abboud is a principal beneficial owner of 88% of the voting
stock of Shining Star and Mr. Bryan Abboud is a principal beneficial owner of
12% of the voting stock of Shining Star.
Note (4) Bryan Abboud and Steven Abboud are brothers and Joann Abboud is the
mother of Bryan and Steven Abboud.
Note (5) Mr. Gene Abboud is the principal and beneficial owner of 50% of the
voting stock of Masadi Financial and is a second cousin of Bryan and Steven
Abboud. Mr. Steven Abboud is the beneficial owner of the remaining 50% of Masadi
Financial.
Note (6) Includes 811,675, or 88%, of the shares held by Shining Star, as
described in note 3, and 291,450 shares, or 50%, of the shares held by Masadi,
as described in note 5. Mr. Abboud disclaims beneficial ownership of these
shares.
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<PAGE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
5:1 Officers and Directors
Name Age Position
Bryan Abboud 29 Director, Chairman/Treasurer
Donald J. Lisa 65 Director, President/CEO
David S. Wintroub 33 Director
Thomas Hawkins 48 Secretary
Steven Abboud 35 Former Director & President
(1) These persons may be deemed "promoters" of the Company as that term is
defined under the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
All Directors of the Company will hold office until the next annual meeting of
shareholders of the Company or until successors are duly elected and qualified.
The Officers of the Company are elected by the Board of Directors at the first
meeting after each annual meeting of the Company's shareholders, and hold office
until their death, or until they shall resign or have been removed.
Bryan Abboud. Mr. Bryan Abboud is a co-founder of Global Entertainment
Holdings/Equities, Inc., and from September, of 1998, to the present, Mr. Abboud
has been a Director and Chairman of the Board of Directors of the Company. Mr.
Abboud in 1995 to the present, co-founded Interactive Gaming & Wagering, N.V.
(IGW), which is now a wholly owned subsidiary of Global Entertainment
Holdings/Equities, Inc. Mr. Abboud assembled personnel, arranged financing, and
directed IGW into the Internet Gaming Software Industry. From 1993 to 1995, Mr.
Abboud worked with Multi-Vision Electronics as a Vice President of Marketing.
Mr. Abboud increased company sales 200%, represented his company at trade shows,
created strategies and managed all persons in sales, public relations and
graphic design. From 1990 to 1993, Mr. Abboud co-founded Vista International,
and worked as a Vice President of Marketing where he was responsible for all
U.S. sales, advertising and promotions. Mr. Abboud successfully created and
implemented marketing and public relation strategies for Vista
13
<PAGE>
International focusing on both the consumer and the industry. In 1995, Mr.
Abboud earned a Masters in International Management at the American Graduate
School of International Management (Thunderbird). In May of 1993, Mr. Abboud
received a Bachelor of Science Degree in Commerce accelerating in Marketing, at
Santa Clara University and attended Sup de Co in Rouen, France.
Donald J. Lisa. Mr. Lisa was appointed as a Director of the Company in August
2000, and was appointed the Company's President/CEO on November 1, 2000. Since
1987, Mr. Lisa has continued his own intellectual property law firm and his own
mergers and acquisitions consulting business, Lisa & Company, both of which
businesses has been diligently pursued for the last 13 years. From 1974 through
1987, Mr. Lisa worked for Motorola, Inc. in Schaumburg, Illinois, where he held
positions of Division Patent Counsel to the Automotive Products Division,
Executive Director Technology Asset Management, Vice President Patent Department
and Corporate Staff General Patent Counsel, Vice President and Proprietary
Rights Litigation Counsel, and finally, Vice President and Director of
Acquisitions where he was responsible for all acquisitions, joint ventures, and
divestiture activities, and for coordination of appropriate corporate support
functions and sector/group representation in such activities, including
accounting, international and domestic finance, human resources, and law. From
1965- 1974, Mr. Lisa rose to become a general partner in the New York City based
patent law firm of Kenyon & Kenyon. Mr. Lisa received his Masters of Business
Administration Degree from the University of Chicago Graduate School of Business
in 1987, his Juris Doctor Degree from Harvard Law School in 1965, and his
Bachelor Of Science in Engineering Degree from the U.S. Naval Academy in 1957.
Mr. Lisa was a U.S. Naval Officer between 1957 -1962 serving as an all-weather
jet fighter pilot rising to the rank of Lieutenant and accumulating 1200 hours
of first pilot time in high performance military jet aircraft with 350 total
carrier landings (150 at night) aboard the USS Forrestal and USS Independence.
David S. Wintroub. Mr. Wintroub has served as a Director since January 18, 2000.
He also served as the Company's CEO/President from January 18, 2000 until he
resigned on October 31, 2000. Mr. Wintroub from 1995 to the present has worked
with the firm of Wintroub, Rinden, Sens & McCreary, with offices in Omaha,
Chicago, Minneapolis, Des Moines and Austin, Texas, as an attorney and
specialized in Corporate and Internet Law. Mr. Wintroub has had significant
experience with many start-up internet companies, including on-line gaming,
on-line lottery, on- line sports handicapping, on-line news, on-line
broadcasting and many on-line retail sites selling items ranging from women's
shoes to wine. Mr. Wintroub's experience in on-line gaming included the initial
legal research into the legality of on-line gaming for several on-line gaming
clients all of whom have active and prosperous sites. Mr. Wintroub has also had
significant experience working on capitalization projects for his on-line
clients. Additionally, Mr. Wintroub has been heavily involved in lottery
projects and on-line lottery start-ups on the continent of Africa for one of his
corporate clients. Mr. Wintroub also has experience representing land-based and
online gaming clients like Harvey's Resorts and Casino, Inc. Mr. Wintroub earned
his undergraduate degree in English from the University of Nebraska at Lincoln
in 1990 and his Juris Doctor from Creighton University in 1995.
14
<PAGE>
Thomas Hawkins. Mr. Thomas Hawkins has been the Corporation Secretary since June
of 1999. From 1994 to the present, Mr. Hawkins has been self-employed as a small
business financial consultant for both private and public companies. In such
capacity, Mr. Hawkins organizes and works with client companies in preparing and
conducting Annual and/or Special Shareholders Meetings, acts as Inspector of
Election and Balloting and assists in the preparation of the minutes of the
meetings. In 1996, Mr. Hawkins co-founded the Americana Corporate Finance
Reporter, and until 1998, held the position of Acting Publisher. The Americana
Corporate Finance Reporter is a national magazine focusing on corporate finance
strategies for small to medium sized companies. From 1990 to 1994, Mr. Hawkins
co-founded La Coupole Cafe, a French restaurant in Denver, Colorado and worked
as the Operations Manager. From 1977 to 1990, Mr. Hawkins worked in Investment
Banking, and Financial Business Consulting and has participated in raising debt
and equity venture capital for start-up to small business concerns through
private placements and public offerings. Mr. Hawkins graduated from the
University of Arizona with a BS Degree, in Business and Public Administration.
He was a member of Tip O'Neil's National Democratic Speakers Club and has
co-sponsored events surrounding the National Democratic Black Caucuses in
Washington, D.C. Mr. Hawkins has also coordinated and conducted Investment
Seminars.
Steven Abboud. Mr. Steven Abboud, is a co-founder of Global Entertainment
Holdings/Equities, Inc., and from June, of 1998, the time of the Company's
inception, to January of 2000, Mr. Abboud had been a Director and President of
the Company. In January of 2000, Mr. Abboud resigned as President of the
Company, and he resigned as a director in August 2000. His expertise in
investment banking, has brought the Company from a position of insolvency in
June of 1998 to a current equity value of approximately $2.0 million and a
market capitalization of $30 million. Mr. Abboud has been instrumental in
providing equity and debt financing, audit coordination and cost accounting to
Interactive Gaming & Wagering (IGW), a wholly owned subsidiary of the Company.
In 1989, Mr. Abboud founded Shining Star Investments, Inc. and to the present
time, Mr. Abboud holds the positions of President and Director. Mr. Abboud was
responsible for numerous venture capital fund raising activities, mergers and
acquisitions, and various other investment banking services. Mr. Abboud from
1990 to 1994 was the co-founder and managed Vista International, a consumer
electronics import/export mail order distribution center. Mr. Abboud serves as a
financial consultant to Masadi Financial Services, Inc., Camelot Investments,
Inc., and Shining Star Investments, Inc. Mr. Abboud received his Bachelor of
Science in Finance from Arizona State University in May 1993.
All directors receive annual options to purchase 20,000 shares of the Company's
common stock. Such options bear exercise prices equal to the weighted average of
the common stock's closing price for the 30 days prior to the granting of such
options. Granting occurs at the annual shareholder meeting. All Directors are
reimbursed for out-of-pocket expenses incurred in connection with the Company's
business.
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<PAGE>
ITEM 6. EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts All Other Comp.
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Other Restricted Securities All
Principal Annual Stock Underlying LTIP Other
Position Yr. Salary Bonus Comp Award Options/SARs Payouts Compensation
<S> <C> <C> <C> <C> <C> <C>
Steve Abboud(1) 1999 $48,000 1,000
Director/Consultant
Bryan Abboud(2) 1999 $58,338 1,000 176,000
Director/Treasurer
Thomas Hawkins(4) 1999 $11,200 3,000
Corporate Secretary
--------------------------------------------------- ---------------------------- ----------- ------------------
</TABLE>
(1) On December 31, 1999 Mr. Steve Abboud received 1,000 shares of the Company's
restricted common stock at a market value of $1,000.00.
(2) On December 31, 1999 Mr. Bryan Abboud received 1,000 shares of the Company's
restricted common stock at a market value of $1,000.00. In addition, on December
31, 1999, per the Purchase and Sale Agreement between the Company and
Interactive Gaming and Wagering, Mr. Abboud at a cost of $118.00 was issued
176,000 options to purchase the Company's common stock at an exercise price of
$1.25 per share.
(3) On June 28, 1999, Mr. Thomas Hawkins received 1,000 shares of the Company's
restricted stock at a market value of $10,000 and on August 20, 1999, Mr.
Hawkins received additional 2,000 shares of the Company's restricted stock to
reflect a 3 for 1 stock split.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Steven Abboud, served as the Company's President, CEO until January 18,
2000, and as a Director of the Company until August 2000. Steve Abboud and Mr.
Bryan Abboud, the Company's Chairman of the Board of Directors and Treasurer and
IGW's President, are brothers and are the principal beneficial owners of 88% and
12%, respectively, of the voting stock of Shining Star, a shareholder of the
Company.
Mr. Gene Abboud, a shareholder of the Company is a second cousin to Mr. Steven
Abboud and Mr. Bryan Abboud, and is the principal and beneficial owner of 50% of
the voting stock of Masadi Financial, a shareholder of the Company. Mr. Steven
Abboud acquired the other 50% of Masadi from Ms. Christina Stanger in April
2000.
On December 31, 1998, Mr. Steven Abboud, then President of the Company, loaned
to IGW $20,000 at an accrued interest of eight percent (8%) per annum, which is
due on demand.
On August 1, 1998, Mr. Bryan Abboud, the President of Interactive Gaming &
Wagering, N.V. and Chairman of the Company, loaned to IGW $20,000 at an accrued
interest of eight percent (8%) per annum, which is due on demand.
Ms. Joann Abboud, a shareholder of the Company, is the mother to Mr. Steven
Abboud and Mr. Bryan Abboud, and is the beneficial owner of 100% of the voting
16
<PAGE>
stock of Camelot Investments Inc., a shareholder of the Company. In addition, on
July 1, 1997, Ms. Abboud by virtue of a Loan Agreement, loaned to Interactive
Gaming & Wagering, NV, a wholly owned subsidiary of the Company, $75,000 at
eight percent (8%) interest per annum and is due on demand. On June 21, 1999,
Ms. Abboud, by virtue of a Promissory Note, loaned the Company $225,000 with an
interest rate of ten percent (10%) per annum. A payment consisting of principle
and interest is due the first of each month and the final payment due on August
1, 2000. In addition, as further inducement to make the loan, Ms. Abboud
received 6,000 (post-split) unregistered shares of the Company's restricted
$.001 par value common stock.
On July 21, 1998, Mr. James Zilligen, by virtue of a Subscription Lending
Agreement with a Stock Option "Kicker", loaned the Company $100,000. In the 13th
through the 23rd month of the loan, the Company is to make principle and
interest payments with a balloon due in July of 2000. As further inducement to
make the loan, Mr. Zilligen received an option to purchase 45,000 (post-split)
unregistered shares of the Company's restricted $.001 par value common stock at
a strike price of $1.25 per share. On October 20, 1998, the market price for the
Company's common stock was approximately $8.00 per share and Mr. Zilligen
exercised his option by paying to the Company, $18,750. On March 22, 2000, Mr.
Zilligen agreed, by virtue of a Letter of Understanding, to a 12 month extension
for payment due on the $100,000 Note with the condition that GAMM is to begin
interest payments at the end of each month with the first payment beginning on
April 30, 2000 based on the principal plus accrued interest on the Note through
March 31, 2000.
The Company on December 31, 1999, pursuant to the Purchase and Sale Agreement
between the Company and IGW, issued to a total of thirteen (13) employees of IGW
options to purchase 225,000 shares of the Company's common stock as follows:
Seven (7) employees of IGW received options to purchase 206,325 shares of the
Company's common stock at an exercise price of $0.50 per share and six (6)
employees of IGW received options to purchase 18,675 shares of the Company's
common stock at an exercise price of $1.67 per share.
The above transactions with related parties were made on no less favorable terms
as would have been from independent third parties. The Company pursued third
party funding, however, as a start-up company, it was unsuccessful in obtaining
the necessary funding. Consequently, the Company pursued other opportunities for
additional funding, but was unsuccessful in its efforts. As a start-up
operation, funding outside of the related party transactions listed were
non-existent.
ITEM 8. LEGAL PROCEEDINGS
On November 26, 1997, the Company as Masadi Resources, Inc. ("Company") entered
into an Agreement of Purchase and Sale ("Agreement") to purchase Beverage Source
Worldwide, Inc. ("BSI"). On May 5, 1998, the Company filed a Complaint in the
Superior Court of California, County of San Diego, asking the Court to declare
the Agreement rescinded. The Company further alleged that various individuals
including Mark Darnell ("Darnell") had breached the Agreement and alleged, the
individuals, including Darnell had breached their fiduciary duties and
17
<PAGE>
had committed other malfeasance and illegal acts. All parties to the lawsuit
other than Darnell were dismissed prior to Trial. The trial was held on November
8-10, 1999, in the Superior Court of San Diego. In a Minute Order dated December
23, 1999, the Court ruled against the Company on all counts and further ordered
that a rescission had not taken place and ordered that Darnell retained all
previously held stock interest in the company. Subsequent to the Court's ruling,
the Company and Darnell entered into a Settlement Agreement and Mutual Release
of all Claims ("Settlement Agreement") wherein the Company paid Darnell $75,000
and Darnell agreed to rescind the Agreement. The $75,000 per the Settlement
Agreement was to be paid as follows: $35,000 on 2/23/00; $20,000 on 5/18/00; and
$20,000 on 8/18/00. All payments were made in accordance with the settlement
agreement and this issue is fully resolved to the best of the Company's
knowledge.
The Company is not a party to any other litigation and none is contemplated nor
has any been threatened.
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock currently trades on the NASD Pink Sheets under the
symbol "GAMM." The stock's symbol has been "GAMM," except for the period between
November 5, 1999 to December 2, 1999 during the 4th Quarter, 1999, when the
Company's common stock traded under the symbol "GAMME." The high, low and
closing trading price, as well as the aggregate volume, for the Company's common
stock for each fiscal quarter since July 1, 1998, are listed in the following
table:
<TABLE>
Quarterly GAMM Stock Trading Summary
<CAPTION>
Quarter High Low Close Volume
------------------------- --------------- ---------------- ------------------------ --------------------------
<S> <C> <C> <C> <C>
3rd Quarter 1998 $6.50 $5.0625 $5.375 10,400
------------------------- --------------- ---------------- ------------------------ --------------------------
4th Quarter 1998 $13.125 $5.375 $8.125 83,800
------------------------- --------------- ---------------- ------------------------ --------------------------
1st Quarter 1999 17.875 $6.25 $14.125 136,500
------------------------- --------------- ---------------- ------------------------ --------------------------
2nd Quarter 1999 $17.625 $10.125 $12.50 85,400
------------------------- --------------- ---------------- ------------------------ --------------------------
3rd Quarter 1999 $7.00* $1.87* $2.875* 311,800
------------------------- --------------- ---------------- ------------------------ --------------------------
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<PAGE>
------------------------- --------------- ---------------- ------------------------ --------------------------
4th Quarter 1999 4.00 1.125 1.50 80,200
------------------------- --------------- ---------------- ------------------------ --------------------------
GAMME
4th Quarter 1999 2.625 1.3125 1.50 50,100
------------------------- --------------- ---------------- ------------------------ --------------------------
1st Quarter 2000 5.00 1.00 1.5625 255,900
------------------------- --------------- ---------------- ------------------------ --------------------------
2nd Quarter 2000 2.00 1.00 1.35 57,700
------------------------- --------------- ---------------- ------------------------ --------------------------
</TABLE>
* 3:1 forward stock split executed on August 23, 1999.
Stock Options
As of October 5, 2000, the Company had outstanding options to purchase 700,500
shares of its common stock. Options to purchase 225,000 shares were granted as
of December 31, 1998, all of which expire on December 31, 2001, if not
previously exercised. The remaining options to purchase 475,500 shares were
granted as of December 31, 1999, all of which expire on December 31, 2002, if
not previously exercised. These options are held by the following individuals:
List of Options Which Were Granted as of 12/31/98,
All of Which Expire 12/31/01
Name of Optionee # of Shares Exercise Price
--------------------------------------------------------------------------------
Bryan Abboud 78,936 $0.50
Todd Elmquist 55,257 0.50
Denny Walker 31,575 0.50
Scott Van Kirk 23,682 0.50
Ramirez Valeriano 2,250 1.67
Jeff Imray 7,875 0.50
Matt Olden 6,750 1.67
Tim Shanahan 2,250 1.67
Michael Shepherd 6,000 0.50
Ron Pereira 4,500 1.67
Mike Terrell 3,000 0.50
Brenda Tuller 2,250 1.67
Paul Pereira 675 1.67
----------------------
Total 225,000
19
<PAGE>
List of Options Which Were Granted as of 12/31/99,
All of Which Expire 12/31/02
Name of Optionee # of Shares Exercise Price
--------------------------------------------------------------------------------
Bryan Abboud 176,000 $1.25
Todd Elmquist 124,000 1.25
Scott Van Kirk 84,000 1.25
Jeff Imray 28,000 1.25
Ramirez Valeriano 5,300 1.67
Guy Moss 2,350 1.67
Brian Bruce 5,300 1.50
Edvar Pereira 1,000 1.67
Tim Shanahan 5,000 1.67
Denny Walker 5,000 1.67
David McIntosh 5,000 1.25
Ricardo Carvajal 5,000 1.25
Erik Van Maren 8,050 1.67
Rui Barbosa 500 1.67
Nancy Urselita 1,000 1.67
Alistair Assheton 20,000 1.67
----------------------
Total 475,500
As of September 1, 2000, there were 8,423,719 shares of restricted Common Stock,
pursuant to Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act").
Holders of Record:
As of September 1, 2000, there were one hundred thirty-six (136) holders of
record of the Company's Common Stock
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
As of September 30, 2000, the Company had 9,621,441 shares of its $.001 par
value common stock issued and outstanding of which 8,918,151 shares were issued
in transactions exempt by reason of Section 4(2) of the Securities Act of 1933,
as amended ("Section 4(2)"), and 703,290 shares were issued in transactions
exempt by reason of Rule 504 ("Rule 504") of Regulation D ("Regulation D")
promulgated pursuant to Section 3(b) of the Securities Act of 1933, as amended
("Section 3(b)").
20
<PAGE>
On July 15, 1997, the Company authorized the issuance to Mr. Michael A. Abboud
21,428.57 shares of Common Stock for consideration of $50.00 in cash and on July
16, 1997, the Company issued to Mr. Michael Abboud, an additional 42,857.14
shares of common stock at par value, representing a total value of $100.00, as
an inducement to make a $20,000 loan to the Company. The combined 64,285.71
shares of common stock were issued in an exempt transaction by virtue of Section
4(2). These shares were sold without a general solicitation, to a family member
of the Company's management, and pursuant to Blue Sky limited offering
exemptions. The shares were issued with a legend restricting resale.
On July 15, 1997, the Company authorized the issuance to Mr. Steven M. Abboud,
64,285.71 shares of Common Stock for a cash consideration of $150.00. The
64,285.71 shares of common stock were issued in an exempt transaction by virtue
of Section 4(2). These shares were sold without a general solicitation, to a
family member of the Company's management, and pursuant to Blue Sky limited
offering exemptions. The shares were issued with a legend restricting resale.
On July 15, 1997, the Company authorized the issuance to Mr. Gene J. Abboud,
64,285.71 shares of Common Stock for a cash consideration of $150.00. The
64,285.71 shares of common stock were issued in an exempt transaction by virtue
of Section 4(2). These shares were sold without a general solicitation, to a
family member of the Company's management, and pursuant to Blue Sky limited
offering exemptions. The shares were issued with a legend restricting resale.
On July 15, 1997, the Company authorized the issuance to Ms. Brenda J. Abboud,
21,428.57 shares of Common Stock for a cash consideration of $50.00. The
21,428.57 shares of common stock were issued in an exempt transaction by virtue
of Section 4(2). These shares were sold without a general solicitation, to a
family member of the Company's management, and pursuant to Blue Sky limited
offering exemptions. The shares were issued with a legend restricting resale.
On July 15, 1997, the Company authorized the issuance to Mr. Michael S. Luther,
21,428.57 shares of Common Stock for a cash consideration of $50.00. The
21,428.57 shares of common stock were issued in an exempt transaction by virtue
of Section 4(2). These shares were sold without a general solicitation, to a
friend of the Company's management, and pursuant to Blue Sky limited offering
exemptions. The shares were issued with a legend restricting resale.
On July 15, 1997, the Company authorized the issuance to Mr. Christopher P.
Murray, 21,428.57 shares of Common Stock for a cash consideration of $50.00. The
21,428.57 shares of common stock were issued in an exempt transaction by virtue
of Section 4(2). As of January 18, 1999, these shares of common stock were
cancelled and the certificates returned to the Company. These shares were sold
without a general solicitation, to a friend of the Company's management, and
pursuant to Blue Sky limited offering exemptions. The shares were issued with a
legend restricting resale.
21
<PAGE>
On July 28, 1997, the Company, between July 30, 1997 and August 28, 1997, as
Masadi Resources, Inc., sold to twenty-one (21) individuals an aggregate of
621,428.55 shares of its $.001 par value common stock at $.23 each by virtue of
Rule 504 of Regulation D and pursuant to Section 3(b), for a total consideration
of $145,000 in cash. These shares were sold without a general solicitation, to
friends or family members of the Company's management, and pursuant to Blue Sky
limited offering exemptions. The shares were issued with a legend restricting
resale.
On December 1, 1997, the Company authorized the issuance of 589,285.1 shares of
the Company's $.001 par value Common Stock to Mark Darnell in an exempt
transaction by virtue of Section 4(2), in exchange for 1,500 shares (100%) of
the issued and outstanding shares in BSW as it related to the Agreement of
Purchase and Sale between the Company and Beverage Source Worldwide. On May 5,
1998, the Company filed a Complaint in the Superior Court of California, County
of San Diego, alleging that from the date of the closing of the Agreement of
Purchase, officers and directors of Beverage Source Worldwide, Inc., had
breached their respective duties, obligations and agreements with the Company,
the Company's Board of Directors and its shareholders, therefore, rescinded the
589,285.71 shares of stock issued to BSW shareholders including Mark Darnell.
The recission was agreed by mutual consent by both parties. These shares were
sold without a general solicitation, to a friend of the Company's management,
and pursuant to Blue Sky limited offering exemptions. The shares were issued
with a legend restricting resale.
On December 10, 1997, the Company, between December 19, 1997 and March 16, 1998,
as Masadi Resources, Inc., sold to twenty (20) individuals an aggregate of
68,357.14 shares of its $.001 par value common stock at $9.33 each by virtue of
Rule 504 of Regulation D and pursuant to Section 3(b), for a total consideration
of $638,000 in cash. These shares were sold without a general solicitation, to
friends or family members of the Company's management, and pursuant to Blue Sky
limited offering exemptions. The shares were issued with a legend restricting
resale.
On June 30, 1998, the Company pursuant to an Agreement of Purchase and Sale,
issued to Interactive Gaming & Wagering, NV, 5,134,500 shares of the Company's
$.001 par value common stock, in an exempt transaction by virtue of Section
4(2), in exchange for 30,000 shares of Interactive Gaming & Wagering, NV. These
shares were sold without a general solicitation, to a friend of the Company's
management, and pursuant to Blue Sky limited offering exemptions. The shares
were issued with a legend restricting resale.
From February 26, 1999 to March 19, 1999, the Company caused to have exercised
the warrants issued in the Private Placement Offering dated, December 10, 1997.
The Company as a result, issued 13,497, shares of its $.001 par value common
stock at $4.66 per share by virtue of Rule 504 of Regulation D and pursuant to
Section 3(b), for a total consideration of $62,986. These shares were sold
without a general solicitation, to a friend of the Company's management, and
pursuant to Blue Sky limited offering exemptions. The shares were issued with a
legend
22
<PAGE>
restricting resale.
On February 27, 1998, the Company sold an aggregate of 40,821 shares of its
common stock to nine persons. The purchase price for these shares was $9.33 per
share, or $381,000 in aggregate. These shares were issued in reliance upon
exemptions from registration, including but not limited to, Section 4(2) and
Regulation D. These shares were sold without a general solicitation, only to
friends or family members of the Company's management, and pursuant to Blue Sky
limited offering exemptions. The shares were issued with a legend restricting
resale.
On February 27, 1998, the Company sold Mark Abboud 5,694 shares of its common
stock in exchange for his service as a member of the Company's board of
directors. These shares were valued at $.001 per share. These shares were issued
in reliance upon exemptions from registration, including but not limited to,
Section 4(2) and Regulation D. These shares were sold without a general
solicitation and pursuant to Blue Sky limited offering exemptions. The shares
were issued with a legend restricting resale.
On February 27, 1998, the Company sold seven (7) persons an aggregate of 589,287
shares of its common stock in exchange for the assets of Beverage Worldwide,
Inc. The shares were valued at $.001 each, for a total cash consideration of
$589. These shares were issued in reliance upon exemptions from registration,
including but not limited to, Section 4(2) and Regulation D. These shares were
sold without a general solicitation, only to friends or family members of the
Company's management, and pursuant to Blue Sky limited offering exemptions. The
shares were issued with a legend restricting resale. These shares were returned
and cancelled on August 13, 1998 when this acquisition was rescinded.
On March 11, 1998, the Company sold Mike Luther 4,287 shares of its common stock
in consideration for his service as a member of the Company's board of
directors. These shares were valued at $.001 per share. These shares were issued
in reliance upon exemptions from registration, including but not limited to,
Section 4(2) and Regulation D. These shares were sold without a general
solicitation, and pursuant to Blue Sky limited offering exemptions. The shares
were issued with a legend restricting resale.
On March 26, 1998, the Company sold six (6) individuals an aggregate of 14,142
shares of its common stock at $9.33 each, for a total consideration of $132,000
in cash. These shares were issued in reliance upon exemptions from registration,
including but not limited to, Section 4(2) and Regulation D. These shares were
sold without a general solicitation, only to friends or family members of the
Company's management, and pursuant to Blue Sky limited offering exemptions. The
shares were issued with a legend restricting resale.
On April 6, 1998, the Company sold eight (8) persons an aggregate of 1,423,500
shares of its common stock in exchange for assets of Global Entertainment
Holdings. The shares were valued
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<PAGE>
at $.0003 each, for a total consideration of $474 in cash. These shares were
issued in reliance upon exemptions from registration, including but not limited
to, Section 4(2) and Regulation D. These shares were sold without a general
solicitation, only to friends or family members of the Company's management, and
pursuant to Blue Sky limited offering exemptions. The shares were issued with a
legend restricting resale.
On April 6, 1998, the Company sold two (2) accredited individuals an aggregate
of 105,674 shares of its common stock in consideration for their services as
members of the Company's board of directors. These shares were valued at $.0003
each, for a total consideration of $29 in cash. These shares were issued in
reliance upon exemptions from registration, including but not limited to,
Section 4(2) and Regulation D. These shares were sold without a general
solicitation and pursuant to Blue Sky limited offering exemptions. The shares
were issued with a legend restricting resale.
On June 25, 1998, the Company sold three (3) persons an aggregate of 720,000
shares of its common stock at $.22 each, for a total consideration of $160,000
in cash. These shares were issued in reliance upon exemptions from registration,
including but not limited to, Section 4(2) and Regulation D. These shares were
sold without a general solicitation, only to friends or family members of the
Company's management, and pursuant to Blue Sky limited offering exemptions. The
shares were issued with a legend restricting resale.
On June 30, 1998, the Company issued five persons an aggregate of 5,134,500
shares of its common stock as consideration for the acquisition of IGW. The
shares were valued at $.029 each, for a total consideration of $148,887. These
shares were issued in reliance upon exemptions from registration, including but
not limited to, Section 4(2) and Regulation D. These shares were sold without a
general solicitation, only to friends or family members of the Company's
management, and pursuant to Blue Sky limited offering exemptions. The shares
were issued with a legend restricting resale.
On August 27, 1998, the Company sold fourteen (14) individuals an aggregate of
888,696 shares of its common stock for programming services. The shares were
valued at $.25 each, for a total consideration of $222,364. These shares were
issued in reliance upon exemptions from registration, including but not limited
to, Section 4(2) and Regulation D. These shares were sold without a general
solicitation, only to friends or family members of the Company's management, and
pursuant to Blue Sky limited offering exemptions. The shares were issued with a
legend restricting resale.
On August 27, 1998, the Company sold eight persons an aggregate of 107,670
shares of its common stock at $.61 each, for a total consideration of $65,803 in
cash. These shares were issued in reliance upon exemptions from registration,
including but not limited to, Section 4(2) and Regulation D. These shares were
sold without a general solicitation, only to friends or
24
<PAGE>
family members of the Company's management, and pursuant to Blue Sky limited
offering exemptions. The shares were issued with a legend restricting resale.
On August 28, 1998, the Company sold Poulton & Yordan 8,160 shares of its common
stock in exchange for their legal services. The shares were valued at $.33 each,
for a total consideration of $2,723. These shares were issued in reliance upon
exemptions from registration, including but not limited to, Section 4(2) and
Regulation D. These shares were sold without a general solicitation and pursuant
to Blue Sky limited offering exemptions. The shares were issued with a legend
restricting resale.
On November 3, 1998, the Company sold James Zilligen an aggregate of 45,000
shares of its common stock for $0.42 per share, for a total consideration of
$18,750 in cash. These shares were issued in reliance upon exemptions from
registration, including but not limited to, Section 4(2) and Regulation D. These
shares were sold without a general solicitation, to a friend of the Company's
management, and pursuant to Blue Sky limited offering exemptions. The shares
were issued with a legend restricting resale.
On December 14, 1998, the Company sold Mathew Olden an aggregate of 15,000
shares of its common stock for services rendered. The shares were valued at
$0.33 each. These shares were issued in reliance upon exemptions from
registration, including but not limited to, Section 4(2) and Regulation D. These
shares were sold without a general solicitation, to a friend of the Company's
management, and pursuant to Blue Sky limited offering exemptions. The shares
were issued with a legend restricting resale.
On December 30, 1998, the Company sold five persons an aggregate of 51,000
shares of its common stock at $1.67 per share, for a total consideration of
$85,000 in cash. These shares were issued in reliance upon exemptions from
registration, including but not limited to, Section 4(2) and Regulation D. These
shares were sold without a general solicitation, only to friends or family
members of the Company's management, and pursuant to Blue Sky limited offering
exemptions. The shares were issued with a legend restricting resale.
On March 5, 1999, the Company issued Masadi Financial Services 9,000 shares of
its common stock in exchange for consulting services. The shares were valued at
$3.00 each. These shares were issued in reliance upon exemptions from
registration, including but not limited to, Section 4(2) and Regulation D. These
shares were sold without a general solicitation, to a friend of the Company's
management, and pursuant to Blue Sky limited offering exemptions. The shares
were issued with a legend restricting resale.
On April 19, 1999, the Company sold Abboud Family Trust 30,000 shares of its
common stock in exchange for $67,500 in cash, or $2.25 per share. These shares
were issued in reliance upon exemptions from registration, including but not
limited to, Section 4(2) and Regulation D.
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<PAGE>
These shares were sold without a general solicitation, to a friend of the
Company's management, and pursuant to Blue Sky limited offering exemptions. The
shares were issued with a legend restricting resale.
On April 19, 1999, the Company sold Masadi Financial Services 9,000 shares of
its common stock in exchange for $22,500 in cash, or $2.50 per share. These
shares were issued in reliance upon exemptions from registration, including but
not limited to, Section 4(2) and Regulation D. These shares were sold without a
general solicitation, only to friends or family members of the Company's
management, and pursuant to Blue Sky limited offering exemptions. The shares
were issued with a legend restricting resale.
On April 19, 1999, the Company sold four (4) individuals an aggregate of 13,497
shares of its common stock at $4.66 per share, for a total consideration of
$62,985 in cash. These shares were issued in reliance upon exemptions from
registration, including but not limited to, Section 4(2) and Regulation D. These
shares were sold without a general solicitation, only to friends or family
members of the Company's management, and pursuant to Blue Sky limited offering
exemptions. The shares were issued with a legend restricting resale.
On May 10, 1999, the Company sold six persons an aggregate of 89,100 shares of
its common stock at $2.66 per share, for a total consideration of $237,600 in
cash. These shares were issued in reliance upon exemptions from registration,
including but not limited to, Section 4(2) and Regulation D. These shares were
sold without a general solicitation, only to friends or family members of the
Company's management, and pursuant to Blue Sky limited offering exemptions. The
shares were issued with a legend restricting resale.
On June 17, 1999, the Company sold Market Pathways 39,000 shares of its common
stock in exchange for public relations services. The shares were valued at $3.33
each. These shares were issued in reliance upon exemptions from registration,
including but not limited to, Section 4(2) and Regulation D. These shares were
sold without a general solicitation, to a friend of the Company's management,
and pursuant to Blue Sky limited offering exemptions. The shares were issued
with a legend restricting resale.
On June 21, 1999, the Company issued Joann Abboud 6,000 shares of its common
stock as a promissory note incentive. The shares were valued at $0.375 each.
These shares were issued in reliance upon exemptions from registration,
including but not limited to, Section 4(2) and Regulation D. These shares were
sold without a general solicitation, a family member of the Company's
management, and pursuant to Blue Sky limited offering exemptions. The shares
were issued with a legend restricting resale.
On June 25, 1999, the Company issued Thomas Hawkins 3,000 shares of its common
stock in exchange for consulting services rendered. The shares were valued at
$3.33. These shares were
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<PAGE>
issued in reliance upon exemptions from registration, including but not limited
to, Section 4(2) and Regulation D. These shares were sold without a general
solicitation, to a friend of the Company's management, and pursuant to Blue Sky
limited offering exemptions. The shares were issued with a legend restricting
resale.
On August 19, 1999, the Company issued Installation Technologies 690 shares of
its common stock in exchange for furniture. The shares were valued at $3.33
each. These shares were issued in reliance upon exemptions from registration,
including but not limited to, Section 4(2) and Regulation D. These shares were
sold without a general solicitation, to a friend of the Company's management,
and pursuant to Blue Sky limited offering exemptions. The shares were issued
with a legend restricting resale.
On August 19, 1999, the Company issued Rodriguez & Associates 6,000 shares of
its common stock in exchange for legal services. The shares were valued at $3.33
each. These shares were issued in reliance upon exemptions from registration,
including but not limited to, Section 4(2) and Regulation D. These shares were
sold without a general solicitation, to a friend of the Company's management,
and pursuant to Blue Sky limited offering exemptions. The shares were issued
with a legend restricting resale.
On August 19, 1999, the Company sold Robert Defibaugh 30,000 shares of its
common stock at $3.25 per share, for a total consideration of $97,500 in cash.
These shares were issued in reliance upon exemptions from registration,
including but not limited to, Section 4(2) and Regulation D. These shares were
sold without a general solicitation, to a friend of the Company's management,
and pursuant to Blue Sky limited offering exemptions. The shares were issued
with a legend restricting resale.
On August 27, 1999, the Company sold James and Kelley Spooner 30,000 shares of
its common stock at $2.67 per share, for a total consideration of $80,000 in
cash. These shares were issued in reliance upon exemptions from registration,
including but not limited to, Section 4(2) and Regulation D. These shares were
sold without a general solicitation, to a friend of the Company's management,
and pursuant to Blue Sky limited offering exemptions. The shares were issued
with a legend restricting resale.
On August 27, 1999, the Company sold Don Lisa 9,000 shares of its common stock
at $.89 each, for a total consideration of $8,000 in cash. These shares were
issued in reliance upon exemptions from registration, including but not limited
to, Section 4(2) and Regulation D. These shares were sold without a general
solicitation, to a friend of the Company's management, and pursuant to Blue Sky
limited offering exemptions. The shares were issued with a legend restricting
resale.
On September 22, 1999, the Company sold Wolfgang Hahn 1,000 shares of its common
stock in exchange for legal services. The shares were valued at $4.00 each.
These shares were issued in
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<PAGE>
reliance upon exemptions from registration, including but not limited to,
Section 4(2) and Regulation D. These shares were sold without a general
solicitation, to a friend of the Company's management, and pursuant to Blue Sky
limited offering exemptions. The shares were issued with a legend restricting
resale.
On September 23, 1999, the Company sold Ricardo Carvajal 1,500 shares of its
common stock in exchange for technical services. The shares were valued at $4.00
each. These shares were issued in reliance upon exemptions from registration,
including but not limited to, Section 4(2) and Regulation D. These shares were
sold without a general solicitation, to a friend of the Company's management,
and pursuant to Blue Sky limited offering exemptions. The shares were issued
with a legend restricting resale.
On October 19, 1999, the Company sold Charlene Charles 3,000 shares of its
common stock at $1.83 each, for a total consideration of $5,500 in cash. These
shares were issued in reliance upon exemptions from registration, including but
not limited to, Section 4(2) and Regulation D. These shares were sold without a
general solicitation, to a friend of the Company's management, and pursuant to
Blue Sky limited offering exemptions. The shares were issued with a legend
restricting resale.
On September 23, 1999, the Company sold two (2) individuals an aggregate of
163,500 shares of its common stock in exchange for all of the equity in Prevail
Online. These shares were issued in reliance upon exemptions from registration,
including but not limited to, Section 4(2) and Regulation D. The shares were
valued at $2.45 each. These shares were sold without a general solicitation,
only to friends or family members of the Company's management, and pursuant to
Blue Sky limited offering exemptions. The shares were issued with a legend
restricting resale.
On November 5, 1999, the Company sold Mark Celano 500 shares of its common stock
in exchange for consulting services. The shares were valued at $3.81 each. These
shares were issued in reliance upon exemptions from registration, including but
not limited to, Section 4(2) and Regulation D. These shares were sold without a
general solicitation, to a friend of the Company's management, and pursuant to
Blue Sky limited offering exemptions. The shares were issued with a legend
restricting resale.
On November 5, 1999, the Company sold Cathy Vigneri 700 shares of its common
stock in exchange for accounting services. The shares were valued at $2.85 each.
These shares were issued in reliance upon exemptions from registration,
including but not limited to, Section 4(2) and Regulation D. These shares were
sold without a general solicitation, to a friend of the Company's management,
and pursuant to Blue Sky limited offering exemptions. The shares were issued
with a legend restricting resale.
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<PAGE>
On November 5, 1999, the Company sold two (2) individuals an aggregate of 9,000
shares of its common stock in exchange for their waiver of accrued interest. The
shares were valued at $2.37 each. These shares were issued in reliance upon
exemptions from registration, including but not limited to, Section 4(2) and
Regulation D. These shares were sold without a general solicitation, only to
friends or family members of the Company's management, and pursuant to Blue Sky
limited offering exemptions. The shares were issued with a legend restricting
resale.
On November 5, 1999, the Company sold Yogesh Patel 5,000 shares of its common
stock at $2.75 per share, for a total consideration of $13,750 in cash. These
shares were issued in reliance upon exemptions from registration, including but
not limited to, Section 4(2) and Regulation D. These shares were sold without a
general solicitation, to a friend of the Company's management, and pursuant to
Blue Sky limited offering exemptions. The shares were issued with a legend
restricting resale.
On December 31, 1999, the Company sold twenty-seven (27) individuals, who are
employees, for bonuses an aggregate of 16,300 shares of its common stock at
$1.00 each, for a total consideration of $16,300 in cash. These shares were
issued in reliance upon exemptions from registration, including but not limited
to, Section 4(2) and Regulation D. These shares were sold without a general
solicitation and pursuant to Blue Sky limited offering exemptions. The shares
were issued with a legend restricting resale.
On December 31, 1999, the Company sold David Leberknight, who is a contractor,
for technology an aggregate of 15,012 shares of its common stock at $.66 each,
for a total consideration of $10,000 in cash. These shares were issued in
reliance upon exemptions from registration, including but not limited to,
Section 4(2) and Regulation D. These shares were sold without a general
solicitation, to a friend of the Company's management, and pursuant to Blue Sky
limited offering exemptions. The shares were issued with a legend restricting
resale.
On December 31, 1999, the Company sold five (5) individuals, who are
contractors, for technology an aggregate of 34,903 shares of its common stock at
$.75 each, for a total consideration of $26,175 in cash. These shares were
issued in reliance upon exemptions from registration, including but not limited
to, Section 4(2) and Regulation D. These shares were sold without a general
solicitation, only to friends or family members of the Company's management, and
pursuant to Blue Sky limited offering exemptions. The shares were issued with a
legend restricting resale.
ITEM 11. DESCRIPTION OF SECURITIES
11:1 Common Stock
The authorized capital stock of the Company consists of 100,000,000 shares of
$0.001 par value Common Stock. All shares have equal voting rights and are
non-assessable. Voting rights are
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<PAGE>
not cumulative, and therefore, the holders of more than fifty percent (50%) of
the Common Stock of the Company could, if they chose to do so, elect all the
Directors.
Upon liquidation, dissolution or winding up of the Company, the assets of the
Company, after the payment of liabilities, will be distributed pro rata to the
holders of the Common Stock. The holders of the Common Stock do not have
preemptive rights to subscribe for any securities of the Company and have no
right to require the Company to redeem or purchase their shares. The shares of
Common Stock presently outstanding are fully paid and non-assessable.
Holders of Common Stock are entitled to share equally in dividends when, and if
declared by the Board of Directors of the Company, out of funds legally
available thereof. The Company has not paid any cash dividends on its Common
Stock, and it is unlikely that any such dividends will be declared in the
foreseeable future.
As of September 30, 2000, the Company had outstanding 9,621,441 shares of common
stock.
11:2 Preferred Stock
The Company is authorized to issue 25,000,000 shares of Preferred Stock, no par
value, of which there have been no shares issued or outstanding as of the date
hereof.
In general, any of the Company's Preferred Stock may be issued in series from
time to time with such designation, rights, preferences and limitations as the
Board of Directors of the Company may determine by resolution. The rights,
preferences and limitations of separate series of Preferred Stock may differ
with respect to such matters as may be determined by the Board of Directors.
This is to include, without limitation, the rate of dividends, method and nature
of payment of dividends, terms of redemption, amounts payable on liquidation,
sinking fund provisions (if any), conversion rights (if any), and voting rights.
The potential exists therefore, that additional preferred stock might be issued
which would grant additional dividend preferences and liquidation preferences to
preferred shareholders. Unless the nature of a particular transaction and
applicable statutes require such approval, the Board of Directors has the
authority to issue these shares without shareholder approval. The issuance of
Preferred Stock may have the effect of delaying or preventing change in control
of the Company without any further action by shareholders.
11:3 Dividends
The Company has never paid a cash dividend on its Common Stock nor does the
Company anticipate paying cash dividends on its Common Stock in the near future.
It is the present policy of the Company not to pay cash dividends on the Common
Stock but to retain earnings, if any, to fund growth and expansion. Under
Colorado law, a company is prohibited from paying
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<PAGE>
dividends if the company, as a result of paying such dividends, would not be
able to pay its debts as they come due, or if the company's total liabilities
and preferences to preferred shareholders exceed total assets. Any payment of
cash dividends of the Common Stock in the future will be dependent upon the
Company's financial condition, results of operations, current and anticipated
cash requirements, plans for expansion, as well as other factors the Board of
Directors deems relevant.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative, (other
than an action by or in the right of the corporation) by reason of the fact that
he is or was a director, officer, employee, fiduciary or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against expenses
(including attorney fees), judgments, fines, and amounts paid in settlement
actually and reasonably believed to be in the best interests of the corporation
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The termination of any action, suit, or
proceeding by judgment, order, settlement, or conviction or upon a plea of nolo
contenders or its equivalent shall not of itself create a presumption that the
person did not act in good faith and in a manner which he reasonably believed to
be in the best interests of the corporation and, with respect to any criminal
action or proceeding, had reasonable cause to believe his conduct was unlawful.
The corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending, or completed action or suit by or
in the right of the corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee, or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorney fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in the best interests of the
corporation; but no indemnification shall be made in respect of any claim,
issue, or matter as to which such person has been adjudged to be liable for
negligence or misconduct in the performance of his duty to the corporation
unless and only to the extent that the court in which such action or suit was
brought determines upon application that, despite the adjudication of liability,
but in view of all circumstances of the case, such person is fairly and
reasonably entitled to indemnification for such expenses which such court deems
proper.
To the extent that a director, officer, employee, fiduciary or agent of a
corporation has been successful on the merits in defense of any action, suit, or
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proceeding referred to in (a) or (b) of this Article VII or in defense of any
claim, issue, or matter therein, he shall be indemnified against expenses
(including attorney fees) actually and reasonably incurred by him in connection
therewith.
Any indemnification under (a) or (b) of this Article VII (unless ordered by a
court) and as distinguished from (c) of this Article shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee, fiduciary or agent is proper
in the circumstances because he has met the applicable standard of conduct set
forth in (a) or (b) above. Such determination shall be made by the board of
directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit, or proceeding, or, if such a quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs.
Expenses (including attorneys' fees) incurred in defending a civil or criminal
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding as authorized in Section
(d) of this Article, upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount, unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this Article.
The board of directors may exercise the corporation's power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liability under this Article.
The indemnification provided by this Article shall not be deemed exclusive of
any other rights to which those seeking indemnification may be entitled under
these Articles of Incorporation, the Bylaws, agreements, vote of the
shareholders or disinterested directors, or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs and
personal representatives of such a person.
ITEM 13. FINANCIAL STATEMENTS
The following information is being provided supplementally to the Company's
audited financial statements found herein on page F-1 and should be read in
conjunction with such statements.
1. The Company agreed to grant options to purchase 225,000 shares of the
Company's
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<PAGE>
common stock to employees of one of the Company's subsidiaries, Interactive
Gaming & Wagering, NV ("IGW"), if IGW attained net income, or net earnings,
of $207,000 for the year ended December 31, 1998. IGW realized net income
in excess of $207,000 for this fiscal year. In accordance with this
performance bonus, on April 24, 2000, pursuant to the instructions of IGW's
managing director, the Company granted options to purchase 225,000 shares
of common stock to certain IGW employees, of which 18,675 possess an
exercise price of $1.67, with the remaining 206,325 are exercisable at
$0.50 per share. All options must be exercised with three (3) years of the
date of the April 24, 2000 grant.
IGW and the Company had a similar performance based option agreement for
IGW's net income, or net earnings, for the years ended December 31, 1999
and 2000. However, IGW was not going to reach these performance standards.
Therefore, the Company and IGW mutually agreed that the Company would
grant, as of December 31, 1999, options to purchase 475,500 shares of the
Company's common stock at exercise prices between $1.25 and $1.67 per
share. All of these options expire on December 31, 2002, if not previously
exercised.
As of September 1, 2000, the Company had outstanding options to purchase
700,500 shares of its common stock. A summary schedule of the outstanding,
unexercised options granted as of December 31, 1998, and a schedule of
those granted as of December 31, 1999 is found in Item 9 above
2. A 34% discount was applied to the cost of certain options granted for the
year ended December 31, 1999, as specified in Note 5 to the audited
financial statements for the Company's fiscal year ended December 31, 1999.
The Company believes that this 34% discount was and is still consistent
with the accounting required by SFAS 123's "fair value pricing model." This
discount was applied because as of December 31, 1999, (1) the Company's
common stock had been de-listed from the OTC-BB to the Pink Sheets, (2) the
trading volume was so low as to greatly diminish liquidity, and (3) the
stock underlying the option will be unregistered, restricted shares upon
issuance.
The following schedule details these options and the expense charges
comprising the difference in market value based on trading price and the
discounted per share price.
<TABLE>
<CAPTION>
Market Discount Present Cost of
Description Price Rate Value Option Expense
<S> <C> <C> <C> <C> <C>
225,000 Options, expiring 12/31/01 $1.00 5.5% $.8516 $ .098 $22,027
475,500 Options, expiring 12/31/02 $1.00 5.5% $.8985 $ .067 $46,598
Total Expense Recognized for year ended December 31, 1999 $68,625
</TABLE>
3. The Company is actively pursuing web-site development. The Company has
adopted "Financial Accounting Standards Board Emerging Task Force Consensus
00-2 (FASB EITF 00-2): Accounting for Website Development Costs." The
adoption of this procedure relates to the accounting for costs of internal
software, requires that costs of developing web applications and
infrastructure, as well as cost of graphic development be capitalized,
rather than the historical common practice of same period expense. Costs of
website planning and operation continue to be expensed as normal.
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Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Consolidated Financial Statements
December 31, 1999, 1998 & 1997
<PAGE>
[Letterhead of Schvaneveldt & Company]
Independent Auditors Report
________________________________________________________________________________
The Company's auditor for its fiscal year ended December 31, 1999, Mr. Darrell
Schvaneveldt, of Darrell Schvaneveldt & Company Certified Public Accountant
("Schvaneveldt"), died on September 8, 2000, and therefore, will not be
providing any updates to his last audit report on May 10, 2000 or a consent to
use his audit report. Schvaneveldt rendered his audit and accounting services
through a sole proprietorship, Schvaneveldt & Company, which, upon his death,
discontinued rendering audit and accounting services.
At the Company's annual meeting on August 30, 2000, the shareholders approved a
proposal to select Clyde Bailey, P.C. as the Company's auditor for the fiscal
year ended December 31, 2000. Prior to the annual meeting, the auditor for the
fiscal year ended December 31, 1999, Schvaneveldt, had become terminally ill and
consequently incapable of rendering auditing services. Therefore, the Company's
board of directors effectively and implicitly dismissed Schvaneveldt when it
recommended that the shareholders approve Bailey as new auditor.
Because Schvaneveldt has not consented to the use of his audit report in future
filings, investors in the Company's securities may face limitations on their
rights to sue Schvaneveldt under Section 11 of the Securities Act of 1933, as
amended ("33 Act"), for false and misleading financial statements, if any. Such
limitation of liability may occur because any liability Schvaneveldt would face
personally or through his sole proprietorship would have to be satisfied from
Schvaneveldt's estate, which may not possess sufficient assets to satisfy any
such liability.
Where Schvaneveldt has not consented to the use of his audit report in future
filings, investors should also recognize the effect of the lack of
Schvaneveldt's consent on the due diligence defense of directors and officers.
Investors also should recognize that Schvaneveldt will not be performing
subsequent event audit procedures, which may preclude full and accurate
disclosure. However, the Company knows of no material event that would require
restatement of the financial statements prepared by Schvaneveldt.
________________________________________________________________________________
Board of Directors
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
I have audited the accompanying consolidated balance sheets of Global
Entertainment Holdings/Equities, Inc., & Subsidiaries, as of December 31, 1999,
1998 and 1997, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years then ended December 31, 1999,
1998 and 1997. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit. As described in Note #18, to the
financial statements, subsequent to the issuance of the report the financial
statements of the Company for the year ended December 31, 1999 were restated.
<PAGE>
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. 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 the significant estimates made by
management, as well as evaluating the overall financial statements presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the aforementioned consolidated financial statements present
fairly, in all material respects, the financial position of Global Entertainment
Holdings/Equities, Inc., & Subsidiaries, as of December 31, 1999, 1998 and 1997,
and the consolidated results of their operations and their cash flows for the
years ended December 31, 1999, 1998 and 1997, in conformity with generally
accepted accounting principles.
/s/Darrell Schvaneveldt
Salt Lake City, Utah
March 10, 2000
Except as to Note #18 which is May 10, 2000
F-1
<PAGE>
<TABLE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Consolidated Balance Sheets
December 31, 1999, 1998 and 1997
<CAPTION>
December December December
31, 1999 31, 1998 31, 1997
--------------- ---------------- ---------------
Assets
<S> <C> <C> <C>
Current Assets
Cash & Cash Equivalents (Note #2) $ 236,184 $ 122,422 $ 129,476
Accounts Receivable (Note #12) Net of
Provision for Bad Debts of $71,800 1,511,226 962,249 -0-
Prepaid Expenses 67,941 3,484 -0-
Loan Receivable - Related Party -0- -0- 125,000
Interest Receivable 2,632 -0- -0-
Employee Accounts Receivable 51,312 -0- -0-
--------------- -------------- ------------
Total Current Assets 1,869,295 1,088,155 254,476
Property & Equipment (Note #6)
Automobile - Net 59,484 -0- -0-
Package Software - Net 108,951 4,859 -0-
Office Improvements - Net 21,696 1,970 -0-
Computer Equipment - Net 590,819 40,664 -0-
Furniture & Fixtures - Net 121,288 15,430 -0-
Websites (Note #9) 737,897 -0- -0-
--------------- -------------- ------------
Total Property & Equipment 1,640,135 62,923 -0-
Other Assets
Security Deposit 17,220 13,626 -0-
Software Design & Development - Net (Note #4) 117,975 216,798 -0-
Receivable BSW - Net (Note #3) -0- 50,000 200,000
Investment - BSW (Note #3) -0- -0- 1,375
--------------- -------------- ------------
Total Other Assets 135,195 280,424 201,375
--------------- -------------- ------------
Total Assets $ 3,644,625 $ 1,431,502 $ 455,851
=============== ============== ============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-2
<PAGE>
<TABLE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Consolidated Balance Sheets -Continued-
December 31, 1999, 1998 and 1997
<CAPTION>
December December December
31, 1999 31, 1998 31, 1997
--------------- ---------------- ---------------
Liabilities & Stockholders' Equity
<S> <C> <C> <C>
Current Liabilities
Accounts Payable $ 304,021 $ 23,844 $ -0-
Accrued Expenses 13,471 -0- -0-
Accrued Interest 40,170 12,565 -0-
Accrued Wages 49,930 17,800 -0-
Customer Deposits 35,880 -0- -0-
Current Portion - Capital Leases (Note #7) 31,285 9,558 -0-
Current Portion - Notes Payable (Note#7) 240,000 165,000 250,000
Note Payable - Line of Credit 35,693 -0- -0-
Income Taxes Payable 11,571 -0- -0-
--------------- ---------------- ---------------
Total Current Liabilities 762,021 228,767 250,000
Long Term Liabilities
Notes Payable (Note #7) 565,000 215,000 -0-
Less Current Portion (Note #7) (240,000) (165,000) -0-
--------------- ---------------- ---------------
Total Long Term Notes Payable 325,000 50,000 -0-
Capital Lease Payable (Note #7) 35,395 3,468 -0-
--------------- ---------------- ---------------
Net Long Term Liabilities 360,395 53,468 -0-
--------------- ---------------- ---------------
Total Liabilities 1,122,416 282,235 250,000
Stockholders' Equity
Preferred Stock, 25,000,000 Shares Authorized,
at $.001 Par Value, None Issued
Common Stock 100,000,000 Shares Authorized,
Par Value of $.001; 9,940,353; 9,455,682 &
891,963 Shares Issued & Outstanding
Respectively Retroactively Restated 9,940 9,456 891
Paid In Capital 2,869,688 1,450,313 236,883
Retained Earnings (Deficit) (357,419) (310,502) (31,923)
--------------- ---------------- ---------------
Net Stockholders' Equity 2,522,209 1,149,267 205,851
--------------- ---------------- ---------------
Total Liabilities &
Stockholders' Equity $ 3,644,625 $ 1,431,502 $ 455,851
=============== ================ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-3
<PAGE>
<TABLE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Consolidated Statement of Operations
For the Years Ended December 31, 1999, 1998 and 1997
<CAPTION>
December December December
31, 1999 31, 1998 31, 1997
--------------- ---------------- ---------------
<S> <C> <C> <C>
Revenues
License Fees $ 445,000 $ 150,000 $ -0-
Royalty Fees 1,983,773 812,018 -0-
Hosting Income 159,090 18,545 -0-
Advertising Revenues 233,736 -0- -0-
--------------- ---------------- ---------------
Total Revenues 2,821,599 980,563 -0-
Expenses
Bad Debt Provision 71,800 -0- -0-
Uncollectible Fees Written Off 180,030 -0- -0-
Amortization 191,696 110,592 -0-
Depreciation 233,857 35,299 -0-
Rents 225,593 78,855 1,041
Professional Fees 138,058 61,864 30,342
Travel 57,904 47,551 -0-
Financial & Investor Relations 149,829 -0- -0-
Administrative Expenses 461,797 153,103 1,865
Consulting 749,334 148,116 -0-
Advertising 72,906 -0- -0-
Write Off Impaired Asset (Note #3) -0- 607,844 -0-
Litigation Settlement (Note #15) 75,000 -0- -0-
Bandwidth Expenses 125,091 -0- -0-
Options Issued Expense (Note #5) 68,625 -0- -0-
--------------- ---------------- ---------------
Total Expenses 2,801,520 1,243,224 32,948
--------------- ---------------- ---------------
Income (Loss) from Operations 20,079 (262,661) (32,948)
--------------- ---------------- ---------------
Other Income (Expenses)
Interest (Expense) (59,353) (21,220) (500)
Interest Income 3,928 782 1,525
Forgiveness of Debt -0- 4,520 -0-
--------------- ---------------- ---------------
Total Other Income (Expenses) (55,425) (15,918) 1,025
--------------- ---------------- ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
<TABLE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Consolidated Statement of Operations -Continued-
For the Years Ended December 31, 1999, 1998 and 1997
<CAPTION>
December December December
31, 1999 31, 1998 31, 1997
--------------- ---------------- ---------------
<S> <C> <C> <C>
Income (Loss) Before Taxes (35,346) (278,579) (31,923)
Provisions for Income Tax (Note #10) (11,571) -0- -0-
--------------- ---------------- ---------------
Net (Loss) $ (46,917) $ (278,579) $ (31,923)
=============== ================ ===============
Basic Earnings (Loss) Per Share $ N/A ($ .03) $ (.04)
Diluted Earnings Per Share $ N/A N/A N/A
Weighted Average Shares Outstanding
Retroactively Restated 10,338,897 7,855,533 799,998
Weighted Average Shares & Options
Outstanding 10,338,897 7,855,533 799,998
</TABLE>
The accompanying notes are an integral part of these financial statements
F-5
<PAGE>
<TABLE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Statement of Stockholders' Equity
For the Period July 10, 1997 to December 31, 1999
<CAPTION>
Common Stock Paid In Retained
Shares Amount Capital Earnings
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, July 10, 1997 -0- $ -0- $ -0- $ -0-
09/11/97
Shares Issued to Incorporators
for Cash at $.002 Per Share
Retroactively Restated 257,142 257 343
09/11/97
Shares Issued for Cash at $0.23
Per Share Retroactively Restated 621,429 621 134,379
12/31/97
Shares Issued for Cash at $9.33
Per Share Retroactively Restated 13,392 13 124,987
Cost of Shares Sold (22,826)
Net Loss for the Year Ended
December 31, 1997 (31,923)
---------------------------------------------------------------
Balance, December 31, 1997 891,963 891 236,883 (31,923)
02/27/98
Shares Issued for Cash at $9.33
Per Shares Retroactively Restated 40,821 41 380,959
02/27/98
Shares Issued to Directors at
$0.001 Per Share 5,694 6
02/27/98
Shares Issued Pursuant to
Agreement of Purchase & Sale
of Beverage Worldwide, Inc. 589,287 589
03/11/98
Shares Issued to Directors at
$0.001 Per Share 4,287 4
</TABLE>
The accompanying notes are an integral part of these financial statements
F-6
<PAGE>
<TABLE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Statement of Stockholders' Equity -Continued-
For the Period July 10, 1997 to December 31, 1999
<CAPTION>
Common Stock Paid In Retained
Shares Amount Capital Earnings
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
03/26/98
Shares Issued for Cash at $9.33
Per Share Retroactively Restated 14,142 14 131,986
04/06/98
Shares Issued to Incorporators of
Global Entertainment Holdings, Inc.
(Private Corporation) $0.0003 Per Share 1,423,500 1,423 (949)
04/06/98
Shares Issued for Directors Fees at
$0.0003 Per Share Retroactively Restated 105,674 106 (77)
06/25/98
Shares Issued for Cash at $0.22 Per
Share Retroactively Restated 720,000 720 159,280
06/30/98
Shares Issued to Acquire Interactive
Gaming & Wagering, Inc., NV, by
Global Entertainment Holdings/Equities,
Inc., (Private Corporation) at $0.029
Per Share 5,134,500 5,135 143,752
08/13/98
Shares Canceled for Rescission of
Beverage Source Worldwide, Inc. (589,287) (589)
08/27/98
Shares Issued for Programming Services
at $0.25 Per Share Retroactively Restated 888,696 889 221,475
08/27/98
Shares Issued for Cash at $0.61 Per Share
Retroactively Restated 107,670 108 65,695
08/28/98
Shares Issued for Legal Services at $0.33
Per Share Subsequent to Reverse Merger
Takeover Retroactively Restated 8,160 8 2,715
</TABLE>
The accompanying notes are an integral part of these financial statements
F-7
<PAGE>
<TABLE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Statement of Stockholders' Equity -Continued-
For the Period July 10, 1997 to December 31, 1999
<CAPTION>
Common Stock Paid In Retained
Shares Amount Capital Earnings
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
11/03/98
Shares Issued for Cash at $0.42 Per
Share Retroactively Restated 45,000 45 18,705
12/14/98
Shares Issued for Services at $0.33
Per Share Retroactively Restated 15,000 15 4,940
12/30/98
Shares Issued for Cash at $1.67 Per
Share Retroactively Restated 51,000 51 84,949
Rounding Adjustment (425)
Net Loss for the Year Ended
December 31, 1998 (278,579)
--------------------------------------------------------------------
Balance, December 31, 1998 9,455,682 9,456 1,450,313 (310,502)
01/18/99
Shares Returned & Canceled (22,839) (23) 23
03/05/99
Shares Issued for Consulting
Fees at $3.00 Per Share 9,000 9 26,991
04/19/99
Shares Issued for Cash at $2.25
Per Share 30,000 30 67,470
04/19/99
Shares Issued for Cash at $2.50
Per Share 9,000 9 22,491
04/19/99
Shares Issued for Cash at $4.66
Per Share 13,497 13 62,972
</TABLE>
The accompanying notes are an integral part of these financial statements
F-8
<PAGE>
<TABLE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Statement of Stockholders' Equity -Continued-
For the Period July 10, 1997 to December 31, 1999
<CAPTION>
Common Stock Paid In Retained
Shares Amount Capital Earnings
-------------------------------------------------------------------
<S> <C> <C> <C>
04/20/99
Shares Returned by Terminated
Employee (9,999) (10) 10
05/10/99
Shares Issued for Cash at $2.66
Per Share 89,100 89 237,511
06/17/99
Shares Issued for Prepaid Public
Relations at $3.33 Per Share 39,000 39 129,944
06/21/99
Shares Issued for Note Payable
Incentive at $0.375 Per Share 6,000 6 2,244
06/25/99
Shares Issued for Consulting
Services at $3.33 Per Share 3,000 3 9,997
08/19/99
Shares Issued for Furniture at $3.33
Per Share Retroactively Restated 690 2,300
08/19/99
Shares Issued for Legal Services at
$3.33 Per Share Services Retroactively
Restated 6,000 6 19,996
08/19/99
Shares Issued for Cash at $3.25
Per Share Retroactively Restated 30,000 30 97,470
08/27/99
Shares Issued for Cash at $2.67
Per Share Retroactively Restated 30,000 30 79,970
08/27/99
Shares Issued for Cash at $0.89 Per
Share Retroactively Restated 9,000 9 7,991
</TABLE>
The accompanying notes are an integral part of these financial statements
F-9
<PAGE>
<TABLE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Statement of Stockholders' Equity -Continued-
For the Period July 10, 1997 to December 31, 1999
<CAPTION>
Common Stock Paid In Retained
Shares Amount Capital Earnings
--------------------------------------------------------------------
<S> <C> <C> <C>
09/22/99
Shares Issued for Legal Services
at $4.00 Per Share 1,000 1 3,999
09/23/99
Shares Issued for Technology at
$4.00 Per Share 1,500 1 5,999
09/23/99
Issued Share to Acquire Prevail
Online, Inc., and Websites at
$2.45 Per Share 163,500 163 399,837
10/19/99
Issued Shares for Cash at $1.83
Per Share 3,000 3 5,497
11/05/99
Issued Shares for Consulting at
$3.81 Per Share 500 1 1,904
11/05/99
Issued Shares for Accounting
Services at $2.85 Per Share 700 1 1,999
11/05/99
Issued Shares for Accrued Interest
Expenses at $2.37 Per Share 9,000 9 21,311
11/05/99
Issued Shares for Cash at $2.75
Per Share 5,000 5 13,745
11/05/99
Issued Shares for Miscellaneous
Services at $3.25 Per Share 500 1 1,624
12/31/99
Issued Shares for Employee
Bonuses at $1.00 Per Share 16,300 16 16,284
</TABLE>
The accompanying notes are an integral part of these financial statements
F-10
<PAGE>
<TABLE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Statement of Stockholders' Equity -Continued-
For the Period July 10, 1997 to December 31, 1999
<CAPTION>
Common Stock Paid In Retained
Shares Amount Capital Earnings
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/99
Issued Shares for Technology at
$0.66 Per Share 15,012 15 9,985
12/31/99
Issued Shares for Technology at
$0.75 Per Share 34,903 35 26,140
Shares Returned to Company
and Canceled (7,613) (7) 7
Rounding Adjustment (80)
Paid In Capital - Options 68,625
Contributed Capital 75,039
Net Profit for Year Ended
December 31, 1999 (46,917)
--------------------------------------------------------------------
Balance, December 31, 1999 9,940,353 $ 9,940 $ 2,869,688 $ (357,419)
====================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-11
<PAGE>
<TABLE>
<CAPTION>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Statements of Cash Flows
For the Years Ended December 31, 1999, 1998 and 1997
December December December
31, 1999 31, 1998 31, 1997
--------------- ---------------- ---------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net (Loss) $(46,917) $(278,579) $(31,923)
Adjustment to Reconcile Net Income (Loss) to
Net Cash Provided by Operating Activities;
Amortization 191,696 110,592 -0-
Depreciation 233,857 35,299 -0-
Write off of Impaired Asset -0- 607,844 -0-
Forgiveness of Debt -0- (4,520) -0-
Non Cash Expenses 131,654 8,194 -0-
Rounding -0- (2) ( 1)
Provisions for Bad Debt 71,800 -0- -0-
Write Off Uncollectible Fees Receivable 180,030 -0- -0-
Options Issued Expense 68,625 -0- -0-
Change in Operating Assets & Liabilities;
(Increase) Decrease in Fees Receivable (548,977) (962,249) -0-
(Increase) Decrease in Prepaid Expenses (64,457) (3,448) -0-
(Increase) Decrease in Security Deposits (3,594) (13,626) -0-
(Increase) Decrease in Interest Receivable (2,632) -0- -0-
(Increase) Decrease in Employee Receivable (51,312) -0- -0-
Increase in Accounts Payable 280,177 23,844 -0-
Increase in Accrued Expenses 13,471 -0- -0-
Increase in Taxes Payable 11,571 -0- -0-
(Decrease) Increase in Accrued Interest 27,605 12,565 -0-
(Decrease) Increase in Accrued Wages 32,130 17,800 -0-
Increase in Loan Receivable -0- -0- (125,000)
Increase in Customer Deposits 35,880 -0- -0-
--------------- ---------------- ---------------
Net Cash Provided (Used) in Operating Activities 560,607 (446,286) (156,924)
Cash Flows from Investing Activities
Purchase of Websites (Note #9) (402,813) -0- -0-
Purchase of Software Design & Development (27,957) (70,956) -0-
Purchase of Automobile (70,949) -0- -0-
Purchase of Package Software (110,151) (7,289) -0-
Purchase of Office Improvements (23,931) (1,970) -0-
Purchase of Computer Equipment (725,035) (67,173) -0-
Purchase of Furniture & Fixtures (131,780) (21,790) -0-
Loan to BSW -0- (456,844) (201,000)
Cash from Interactive Gaming & Wagering, Inc.,
NV, Purchase Acquisition by Stock Issued -0- 99,675 -0-
--------------- ---------------- ---------------
Net Cash (Used) in Investing Activities (1,492,616) (526,347) (201,000)
</TABLE>
The accompanying notes are an integral part of these financial statements
F-12
<PAGE>
<TABLE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Statements of Cash Flows -Continued-
For the Years Ended December 31, 1999, 1998 and 1997
<CAPTION>
December December December
31, 1999 31, 1998 31, 1997
--------------- ---------------- ---------------
<S> <C> <C> <C>
Cash Flows from Financing Activities
Increase in Capital Lease Liabilities 66,414 19,608 -0-
Payments on Capital Lease Liabilities ( 12,760) ( 6,582) -0-
Increase in Notes Payable 525,000 110,000 240,000
Payment on Notes Payable ( 175,000) -0- -0-
Sale of Common Stock 595,335 842,553 247,400
Contributed Capital 46,782 -0- -0-
--------------- ---------------- ---------------
Net Cash Provided by Financing Activities 1,045,771 965,579 487,400
--------------- ---------------- ---------------
Increase (Decrease) in Cash & Cash
Equivalents 113,762 ( 7,054) 129,476
Cash & Cash Equivalents at Beginning
of Period 122,422 129,476 -0-
--------------- ---------------- ---------------
Cash & Cash Equivalents at End of Period $ 236,184 $ 122,422 $ 129,476
=============== ================ ===============
Disclosures from Operating Activities
Interest Expense $ 59,353 $ 21,220 $ 500
Taxes -0- -0- -0-
Significant Non Cash Transactions
Issued 5,134,500 Shares to Acquire
Interactive Gaming & Wagering, Inc., NV. $ -0- $ 148,887 -0-
Issued 1,423,500 Shares to Incorporators -0- 474 -0-
Issued 8,160 Shares for Legal Services -0- 2,720 -0-
Issued 888,696 Shares for Programing Services -0- 222,174 -0-
Issued 15,000 Shares for Services -0- 5,000 -0-
Issued 39,000 Shares for Prepaid Public Relations 130,000 -0- -0-
Issued 6,000 Shares for Interest Expense 2,250 -0- -0-
Issued 9,000 Shares for Consulting Services 27,000 -0- -0-
Issued 3,000 Shares for Consulting Services 10,000 -0- -0-
Issued 690 Shares for Furniture 2,300 -0- -0-
Issued 6,000 Shares for Legal Services 20,000 -0- -0-
Issued 1,000 Shares for Legal Services 4,000 -0- -0-
Issued 1,500 Shares for Technology 6,000 -0- -0-
Issued 163,500 Shares for Acquisition of
Prevail OnLine, Inc. 400,000 -0- -0-
Issued 500 Shares for Consulting Services 1,905 -0- -0-
</TABLE>
The accompanying notes are an integral part of these financial statements
F-13
<PAGE>
<TABLE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Statements of Cash Flows -Continued-
For the Years Ended December 31, 1999, 1998 and 1997
<CAPTION>
December December December
31, 1999 31, 1998 31, 1997
--------------- ---------------- ---------------
<S> <C> <C> <C>
Significant Non Cash Transactions -Continued-
Issued 700 Shares for Accounting Services 2,000 -0- -0-
Issued 9,000 Shares for Accrued Interest Payable 21,320 -0- -0-
Issued 500 Shares for Miscellaneous Services 1,625 -0- -0-
Issued 16,300 Shares for Employee Bonuses 16,300 -0- -0-
Issued 15,012 Shares for Technology 10,000 -0- -0-
Issued 34,903 Shares for Technology 26,175 -0- -0-
</TABLE>
The accompanying notes are an integral part of these financial statements
F-14
<PAGE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statement
NOTE #1 - Organization
The Company was incorporated on July 10, 1997, under the laws of the state of
Colorado using the name Masadi Resources, Inc. On February 10, 1998, Articles of
Amendment were filed changing the name to International Beverage Corporation.
Pursuant to a Merger Agreement dated August 27, 1998, International Beverage
Corporation merged with Global Entertainment Holdings/Equities, Inc., and
subsequently the surviving corporation became known as Global Entertainment
Holdings/Equities, Inc.
The purpose of the Corporation is to engage in any lawful act or activity for
which corporations may be organized under the laws of the state of Colorado. The
Company currently has two wholly owned subsidiaries; Interactive Gaming and
Wagering NV, (IGW), a Netherlands Antilles Corporation in Curacao, Netherlands
Antilles, and Prevail Online, Inc., (Prevail), a Colorado Corporation. IGW, is
engaged in the conception and creation of computer software programs for the
gaming and wagering industry. Prevail, was purchased in August of 1999 and it is
engaged in the creation and operation of websites and derives its revenues from
banner advertising.
NOTE #2 - Significant Accounting Policies
A. The Company uses the accrual method of accounting.
B. Revenues and directly related expenses are recognized in the period in
which they occur. Revenues and related expenses are recognized from the
sale of the licenses when persuasive evidence of an arrangement exists,
delivery of access to the software has occurred, the license fee has been
determined and collectability of the license fee is probable. License fees
are billed to be paid in three installments over a relatively short period
of time, usually within ninety days.
C. The Company considers all short term, highly liquid investments that are
readily convertible, within three months, to known amounts as cash
equivalents. The Company currently has no cash equivalents.
D. Basic Earnings Per Shares are computed by dividing income available to
common stockholders by the weighted average number of common shares
outstanding during the period. Diluted Earnings Per Share shall be computed
by including contingently issuable shares with the weighted average shares
outstanding during the period. When inclusion of the contingently issuable
shares would have an antidilutive effect upon earnings per share no diluted
earnings per share shall be presented.
E. Consolidation Policies: The accompanying consolidated financial statements
include the accounts of the company and its wholly-owned subsidiaries.
Inter-company transactions and balances have been eliminated in
consolidation.
F. Depreciation: The cost of property and equipment is depreciated over the
estimated useful lives of the related assets. The cost of leasehold
improvements is amortized over the lesser of the length of the lease of the
related assets of the estimated lives of the assets. Depreciation and
amortization is computed on the straight line method.
G. Estimates: The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
H. Foreign Currency: All cash transactions in the Netherlands Antilles are
conducted from the Antilles Banking Corporation in United States dollars.
F-15
<PAGE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements -Continued-
NOTE #2 - Significant Accounting Policies -Continued-
I. Stock Options are valued at the difference in the market price of the
shares on the day of the grant and the present value of the shares at a
risk free discounted rate for the option period. When restricted shares
are to be acquired by exercise of the options the Company may apply a
marketability discount to the deemed value of the options.
J. Websites; Internal and external costs incurred to develop websites are
capitalized. Costs are capitalized when its probable that the website
will be completed and will be used to perform the function intended.
When it is probable that upgrades and enhancements will result in
additional functionality such costs are capitalized. Websites will be
considered to be impaired that it no longer provides substantial
service potential, or significant changes occur in the extent or manner
in which the website is used. Impairment write off will be recognized
in the period when impairment is deemed by management to have occurred.
NOTE #3 - Acquisition and Rescission of Beverage Source Worldwide, Inc.
-----------------------------------------------------------------------
Pursuant to an Agreement of Purchase between Masadi Resources, Inc., and
Beverage Source Worldwide, Inc., dated November 26, 1997, the Company issued
589,287 shares of its $.001 par value common stock in exchange for 1,500 shares
of Beverage Sources Worldwide, Inc. At December 31, 1997, the Company had
advanced to its subsidiary, Beverage Source Worldwide, Inc., $200,000 and in the
early months of 1998 the Company advanced an additional $457,844 to Beverage
Source Worldwide, Inc. Minutes of an Emergency Meeting of the Board of Directors
of the Company dated April 2, 1998, noted that Beverage Source Worldwide, Inc.,
was without funds and was currently facing bankruptcy if the Company did not
advance substantial working capital funds. On May 5, 1998, the Company filed a
Complaint in the Superior Court of California, County of San Diego, alleging
that from the closing of the Agreement of Purchase, officers of Beverage Source
Worldwide, Inc., have breached their respective duties, obligations and
agreements with the Company, secreting and/or attempting to secret the Companies
assets, moving, transferring, assigning conveying encumbrances, sequestering,
using, disposing of, or shifting, any and all of the assets and property of the
Company, wrongfully withdrawing monies from the Corporate bank accounts,
misappropriating company funds, co-mingling the operating expenses and cost of
International Beverage Corporation or its wholly owned subsidiary Beverage
Source Worldwide, Inc., with independent business of the officers and directors
named in the suit. Further, that the named defendant officers engaged in an
extensive pattern of discussion with various entities for the specific purpose
of merging one or all of the said entities, without disclosing to such entities
and their representatives that Beverage Source Worldwide, Inc., was a wholly
owned subsidiary of the Company. In addition to the above general categories of
the complaint there are numerous specific allegations of Malfeasance and Breach
of Fiduciary Duty. The complaint specifically intends that service of the
summons and complaint serve as notice of rescission of the agreement dated
November 26, 1997.
The rescission action taken with the filing of the complaint on May 5, 1998, and
the cessation of business activities by Beverage Source Worldwide, Inc., the
Company believes its control of Beverage Source Worldwide, Inc., was temporary
and that the cessation of business activities by the Officers of Beverage
Sources Worldwide, Inc., cast significant doubt on the Company, as the parent
company, to control the subsidiary.
F-16
<PAGE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements -Continued-
NOTE #3 - Acquisition and Rescission of Beverage Source Worldwide, Inc.
-Continued-
In March 2000, the Company has reached an agreement with the former Officers of
Beverage Source Worldwide, Inc., whereby for $75,000 he has withdrawn his
objection to the rescission of the agreement dated May 26, 1997.
NOTE #4 - Software Development for Licensing & Recognition of Income from
Software Licensing
The Company has expensed costs to internally create computer software until such
time as technological feasibility was established. Technological feasibility is
considered to be established when a detail program design is completed. After
the detailed program design has been established the Company has capitalized the
costs of its software products it intends to license to the gaming and wagering
industry. Software development costs will be amortized on a ratio of the current
revenue to anticipated total revenue from the sales of the product or a straight
line amortization of the product cost over the estimated three years useful life
of the product master. Because the product is subject to rapid technological
advances the Company has elected to amortize its computer programs software held
for licensing over a three year period.
Revenue from the licensing of software programs is recognized when there is
persuasive evidence of an arrangement, delivery of access to the software, the
fee is fixed and determined and collectability is probable. The license
arrangements are not multiple elements and license fees are recorded when the
four conditions above are achieved. Once the arrangement has been contractually
agreed upon there are no customer cancellation privileges. Fees that the Company
may be entitled to are referred to as royalties and are not recognized until
such time as the licensee has actually earned revenues through the use of the
software and in accordance with the licensing agreement has notified the Company
of its sales. Once the Company has been notified that royalties are due from the
licensing of its software and collectability is probable, royalty income is
recognized. Revenues earned from efforts to assist a purchaser establish and
maintain a base for operations are known as hosting revenues and are recognized
upon receipt of funds. Costs incidental to royalty income and hosting activities
are recognized in the same period as the related revenues are recognized.
The Company does not engage in any gaming or wagering activities.
NOTE #5 - Stockholders' Equity
Preferred Stock;
The Company has 25,000,000 shares of preferred stock $.001 par value authorized.
These preferred shares may be issued in one or more series at the discretion of
the Board of Directors.
Common Stock;
The Company has 100,000,000 shares of common stock $.001 par value authorized.
Each shareholder of record shall have one vote for each share of common stock
outstanding in his or her name on the books of the Corporation. Cumulative
voting shall not be allowed. No shareholder shall have pre-emptive or similar
rights.
F-17
<PAGE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements -Continued-
NOTE #5 - Stockholders' Equity -Continued-
Stock Options;
The Company will issue to the Managing Director of Interactive Gaming &
Wagering, NV, Stock Purchase Options, to be assigned at his discretion, which
vest according to the following: At year end 1998, if Interactive Gaming and
Wagering, Inc., had net earnings of $207,000, a three (3) year option to
purchase 225,000 shares of the Company's $.001 non-assessable, par value common
stock at a price not less than $1.50 per share. At year end 1999, if Interactive
Gaming and Wagering, Inc., has net earnings of $5,666,000, a three (3) year
option to purchase 1,800,000 shares of the Company's $.001 non-assessable, par
value common stock at a price not less than $1.50 per share. At year end 2000,
if Interactive Gaming and Wagering, Inc., has net earnings of $14,959,000, a
three (3) year option to purchase 2,475,000 shares of the Company's $.001
non-assessable, par value common stock at a price not less than $1.50 per share.
The Company agreed to grant to the President of Interactive Gaming and Wagering,
NV, (IGW) options for 225,000 post split shares of its common stock if net
income of $207,000 was attained. IGW attained that net income for 1998. Pursuant
to a Board of Directors Resolution dated April 24, 2000 effective December 31,
1999, 225,000 options were issued. The term net earnings is presented in the
financial statements as net income.
The Company recognized cost of options issued of $22,027 as expense in 1999 with
an offset increase to paid in capital of $22,027. The value of the option was
derived by taking the market price of the shares at December 31, 1999 which was
$1.00, applying a discount rate of 5.5%. The present value of the shares is
$.8516 (1.00 / 1.0553 = .8516). The deemed value of the options is the current
market price minus the present value ($1.00 - .8516 = $.1484). Because shares to
be received will be restricted shares, the option cost has been discounted by
34% to $0.0979 per option. If options are not exercised by December 31, 2001 no
adjustment to future earnings would be made and paid in capital will remain as
presented immediately following the grant of the options.
At December 31, 1999, the Company granted 475,500 options to purchase 422,000
shares of common stock at $1.25, 5,300 shares of common stock at $1.50 and
48,200 shares of common stock at $1.67. All of the options expire December 31,
2002. The Company booked as an expense for the options $46,598. The cost was
computed using the following methodology. A discount rate of .055% was used to
compute the present value of the shares to be acquired no later than December
31, 2002. Using the discount rate and the market price of $1.00 per shares the
present value of the shares was $.902. The value of the options is therefore
$.098.
Stock Split;
On August 19, 1998, International Beverage Corp., effected a one for seven
reverse stock split of its outstanding shares. Effective August 27, 1999, all
outstanding common shares of stock were split on a three for one basis. In the
financial statements presented at December 31, 1999 retroactive restatement of
the outstanding shares on the balance sheet, statement of stockholders' equity,
and the shares used to compute basic earnings per share and fully diluted
earnings per share has been made.
F-18
<PAGE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements -Continued-
NOTE #5 - Stockholders' Equity -Continued-
Non Cash Investing & Financing Activities;
At December 31, 1998, the Company had issued; 1,423,500 post split shares of
stock to incorporators for services valued at $474; 8.160 post split shares to
an attorney for legal fees valued at $2,720; 15,000 shares for sundry services
valued at $5,000; and 888,696 shares for capitalized programming services valued
at $222,174.
During the year ended December 31, 1999, the Company issued; 12,500 shares for
consulting fees valued at $38,925; 6,000 shares for interest expense valued at
$2,250; and 39,000 shares for current public relations expense valued at $10,827
and $119,172 in prepaid public relations cost; 7,000 shares for legal fees
valued at $24,000; 700 shares for accounting services valued at $2,000; 16,300
shares for employee bonuses valued at $16,300; 49,915 shares for expensed
technology services valued at $36,175; 500 shares for miscellaneous expenses
valued at $1,625; 9,000 shares in settlement of accrued interest valued at
$21,320; 690 shares for furniture valued at $2,300, 1,500 shares for capitalized
technology services valued at $6,000 and 163,500 shares to acquire Prevail
Online, Inc., and the websites valued at $400,000.
NOTE #6 - Property, Equipment and Depreciation
The Company capitalized the purchase of equipment for purchase in excess of $300
per item. Capitalized amounts are depreciated over the estimated useful life of
the asset using the straight line method of depreciation. At December 31, 1999
and 1998, the Company had property and equipment as follows:
<TABLE>
<CAPTION>
Depreciation Accumulated
Expenses Depreciation
-----------------------------------------------------------
Assets 1999 Cost 1998 Cost Life 1999 1998 1999 1998
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Office Improvements $ 25,901 $ 1,970 3-5 $ 4,205 $ -0- $ 4,205 $ -0-
Computer Equipment 801,234 67,173 2-3 183,906 26,509 210,415 26,509
Furniture & Fixtures 155,870 21,790 3 28,222 6,360 34,582 6,360
Packages Software 117,440 7,289 3 6,059 2,430 8,489 2,430
Automobiles 70,949 -0- 4 11,465 -0- 11,465 -0-
------------------------------------------------------------------------------------------------
Totals $ 1,171,394 $ 98,222 $ 233,857 $ 35,299 $ 269,156 $ 35,299
================================================================================================
Software Design for
Licensing $ 355,347 $ 327,390 3 $ 126,780 $ 110,592 $ 237,372 $ 110,592
Websites 802,813 -0- 3 64,916 -0- 64,916 -0-
</TABLE>
F-19
<PAGE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements -Continued-
NOTE #7 - Notes Payable
<TABLE>
<CAPTION>
The Company has the following notes payable obligations.
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Note Payable to an Individual, Interest at 10%,
Due Date March 31, 2001 $ 100,000 $ 100,000 $ -0-
Note #1 to an Officer at 8% Interest, Due on Demand 20,000 20,000 -0-
Note #2 to an Officer at 8% Interest, Due on Demand 20,000 20,000 -0-
Note #3 to a Related Party at 8% Interest, Due on Demand 75,000 75,000 115,000
Note #4 to a Related Party 0% Interest -0- -0- 135,000
Note #5 to a Related Party 10% Interest, Due March 31, 2001 225,000 -0- -0-
Note #6 to a Unrelated Party, No Interest, Due June 2000 125,000 -0- -0-
------------- ------------- -------------
Total Notes Payable $ 565,000 $ 215,000 $ 250,000
Less Current Portion ( 240,000) ( 165,000) ( 250,000)
------------- ------------- -------------
Net Long Term Debt $ 325,000 $ 50,000 $ -0-
============= ============= =============
</TABLE>
During 1997, the Company issued a $125,000 Note Payable to a Stockholder for
25,000 Shares of Restricted Stock. As a result of the restriction the estimated
fair value of the stock cannot be determined at December 31, 1997. Management
elected to record the Restricted Shares at the same value as the note. The
Company intended to sell the securities in 1998 when the restriction period
expired in July. If the proceeds of the sale exceeded $196,000, which would be
paid to the stockholder, and the Company would keep the excess. As a result of
the rescission of the Beverage Source Worldwide, Inc., Agreement, (Note #3), the
Restricted Shares were returned to the shareholders and the note payable was
canceled.
The Company has lease assets as follows;
Asset Cost Balance
----------------------------------------------------------------------
Pentium Computer $ 14,348 $ 6,000
Dell Computer 5,260 3,717
Automobile 43,949 41,117
Dell Computer 21,085 15,846
---------------------------------
Total $ 84,642 $ 66,680
=================================
Current Portion $ 31,285
Long Term Portion 35,395
Following are maturities of long term debt for each of the next five years.
Year Note Payable Capital Lease
----------------------------------------------------------------------
2000 $ 240,000 $ 31,285
2001 325,000 17,556
2002 -0- 13,454
2003 -0- 4,385
---------------------------------
Total $ 565,000 $ 66,680
=================================
F-20
<PAGE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements -Continued-
NOTE #8 - Acquisition of Global Entertainment Holdings/Equities, Inc.
Pursuant to an Agreement of Purchase and Sale between Masadi Resources, Inc.,
(MRI) and Beverage Source Worldwide, Inc., (BSW) dated November 26, 1997, MRI
committed to issue 589,287 post-split shares to acquire 100% of BSW, (1,375,000
pre-split shares, split 1 for 7 on August 13, 1998 and forward split 3 for 1 on
August 23, 1999). On December 1, 1997, the Board of Directors changed the name
of Masadi Resources, Inc., to International Beverage Corporation, (IBC).
On February 27, 1998, IBC issued 589,287 shares to the shareholders of BSW. In
March 1998, IBC suspended financing for BSW and the Board of Directors
authorized a Rescission of the Agreement of Purchase and Sale. On August 13,
1998, IBC believes it only had temporary control of BSW and in accordance with
FASB 94, P. 13, has not presented consolidated financial statements to include
BSW.
Global Entertainment Holdings/Equities, Inc., a privately held corporation, was
incorporated on April 6, 1998, under the laws of the state of Colorado.
Interactive Gaming and Wagering, Inc., NV, (IGW), a privately held corporation,
was incorporated on May 16, 1997, under the laws of the Netherlands Antilles,
domiciled in Curacao. Pursuant to an Agreement of Purchase and Sale dated June
30, 1998, the shareholders of IGW exchanged 100% of the issued and outstanding
shares of IGW for 5,134,500, post 3 for 1 split, shares of Global Entertainment
Holdings/Equities, Inc., (a privately held corporation). At the date of the
stock exchange neither corporation had any established market for its shares and
no shares had been publicly traded.
Pursuant to a Merger Agreement dated August 27, 1998, Global Entertainment
Holdings/Equities, Inc., the Legal Acquiree and a privately owned corporation,
agreed to exchange one share of its issued and outstanding stock for 1.5 of
International Beverage Corporation, (IBC), a publically held corporation. From
April 6, 1998 to August 27, 1998, Global Entertainment Holdings/ Equities, Inc.,
had issued 5,586,688 shares (retroactively restated) under the terms of the
Merger Agreement these shares become 8,380,040 retroactively restated shares.
The exchange of the shares gave the shareholders of Global Entertainment
Holdings/Equities, Inc., control of IBC, the Legal Acquirer. For statement
presentation Global Entertainment Holdings/Equities, Inc., has been considered
to be the accounting acquirer. On September 30, 1998, IBC changed its name to
Global Entertainment Holdings/Equities, Inc.
The share exchange of a private operating Company, (Global Entertainment
Holdings/Equities, Inc.,) into a non-operating public shell corporation
(International Beverage Corporation), with no significant assets or liabilities
resulted in the shareholders of the private company having actual operating
control of the combined company after the transaction, and the shareholders of
the former public shell continuing only as passive investors.
This transaction is considered to be a capital transaction in substance, rather
than a business combination. That is, the transaction is equivalent to the
issuance of stock by the private company for the net monetary assets of the
shell corporation, accompanied by a recapitalization. The accounting is
identical to that resulting from a reverse acquisition, except no goodwill of
other intangible is recorded.
ABP, No., 16, P. 70, states that, "Presumptive evidence of the acquiring
corporation in combinations effected by an exchange of stock is obtained by
identifying the former common stockholder interest of a combined company which
either retains or receives the larger portion of the voting rights of the
combined corporation.
F-21
<PAGE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements -Continued-
NOTE #8 - Acquisition of Global Entertainment Holdings/Equities, Inc.-Continued-
That corporation should be treated as the acquirer unless other evidence clearly
indicates that another corporation is the acquirer."
Staff Accounting Bulletin Topic 2A, affirms the above principle and gives
guidelines that the post reverse- acquisition comparative historical financial
statements furnished for the Legal Acquirer should be those of the Legal
Acquiree. Accordingly, the financial statements herewith are those of Global
Entertainment Holdings/Equities, Inc.
In accordance with this guideline the outstanding shares of Global Entertainment
Holdings/Equities, Inc., have been retroactively restated on the balance sheet,
and the statement of stockholders' equity. The retroactively restated shares
have been used in the Computations for Earnings (Losses) Per Share to preserve
comparability of those figures.
NOTE #9 - Acquisition of Prevail OnLine, Inc., and Websites Purchase
On August 20, 1999, Global Entertainment Holdings/Equities, Inc., (Global),
issued 43,500 shares of its common stock to acquire 100% of the issued and
outstanding shares of Prevail OnLine, Inc., (Prevail), a Colorado Corporation,
incorporated on July 21, 1999. Concurrent with issuance of the 43,500 shares of
stock to acquire Prevail, Global issued 120,000 shares to an unrelated party to
acquire a website known as wheretobet.com and a domain name known as netbet.org.
In 1999, the Company entered into an agreement with an independent third party
to design and develop a Website page known as "Sports Daily". The Sports Daily
Website Page is intended to give the Company's current clientele, sport
enthusiast and future customers information about the all major sports events,
game times, statistics, weather conditions, injury report, major sports events,
and current sports news. The Sports Daily Website is not a gaming or wagering
activity. The Company estimates that the Website as designed and developed at
June 30, 1999 will have a useful life of three years.
Prevail, has used the wheretobet.com, website to sell banner advertising as its
source of revenue since the acquisition of the website.
The wheretobet.com website and the netbet.org domain name where acquired from an
unrelated party for a total sum of $700,000. At the acquisition date Prevail
paid a down payment of $75,000 and signed a non interest bearing note of
$225,000 payable in nine monthly installments commencing one month from the
closing date of the Agreement. In addition, Global issued 120,000 shares of its
common stock for a value of $400,000. The asset purchase and sale agreement
contains the following provision; The stock that is to be transferred to Sellers
will contain therewith a put and call provision as follows; (i) Sellers will
have the right to put the stock to the Purchaser anytime after six (6) months
from the closing, but before twelve (12) months from the closing at the net
price of $400,000 (US); (ii) The Purchaser will have the right to call the stock
from Sellers anytime after six (6) months from the closing but before twelve
(12) months from closing at the net price of $800,000 (US).
F-22
<PAGE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements -Continued-
NOTE #10 - Income Taxes
The Company has incurred losses that can be carried forward to offset future
earnings if all provisions of the Internal Revenue Code are met. These losses
are as follows:
Expiration
Year of Loss Amount Date
-------------------------------------------------------------
1997 $ 31,923 2017
1998 824,270 2018
1999 765,016 2019
The Company has adopted FASB 109 to account for income taxes. The Company
currently has no issues that create timing differences that would mandate
deferred tax expense. Net operating losses would create possible tax assets in
future years. Due to the uncertainty as to the utilization of the net operating
loss carryforward, an evaluation allowance has been made to the full extent of
any tax benefit that net operating losses may generate.
<TABLE>
<CAPTION>
12-31-99 12-31-98
---------------- ---------------
<S> <C> <C> <C>
Deferred Tax Asset Balance Beginning of Period $ -0- $ -0-
Net Operating Loss Carryforwards 540,357 296,473
---------------- ---------------
540,357 296,473
Valuation Allowance ( 540,357) ( 296,473)
---------------- ---------------
Net Deferred Tax Asset $ -0- $ -0-
================ ===============
Deferred Tax Liability $ -0- $ -0-
================ ===============
Netherlands
Total USA Antilles
--------------- ---------------- ---------------
Net Income (Loss) ($ 46,917) ($ 765,016) $ 718,099
Add Non Deductible Permanent Adjustments 4,352 4,352 -0-
--------------- ---------------- ---------------
Net Operating Loss Carryforwards ( 856,193) ( 856,193) -0-
--------------- ---------------- ---------------
Adjusted Taxable Income ($ 898,758) ($ 1,616,857) ($ 718,099)
=============== ================ ===============
Current Income Taxes Payable $ 11,571 $ -0- $ 11,571
</TABLE>
Income earned by the wholly-owned subsidiary in the Netherlands Antilles is not
considered to be Sub-Part F Income under Internal Revenue Code Section 951 and
is therefore not subject to U.S. Income Taxes.
The Company has computed U.S. federal income taxes on the revenue of its wholly
owned foreign subsidiary. Federal taxes are computed on current period revenues
net of net operating losses carried forward from proceeding period and credit
for foreign taxes. The Company has also recorded $11,571 in taxes due to the
Netherlands Antilles based on earnings in Curacao.
F-23
<PAGE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements -Continued-
NOTE #11 - Operating Lease Obligations
The Company leases office facilities in Omaha, Nebraska. The lease commenced
February 1, 1999 and terminates January 31, 2004. Lease obligations for the term
of the lease are as follows;
Year Amount
----------------------------------
2000 15,850
2001 16,150
2002 16,450
2003 16,750
2004 1,400
----------------
Total $ 66,600
================
The subsidiary leases office facilities in Curacao, Netherlands Antilles. The
lease commences January 1, 1999 and terminates December 31, 2002. Lease
obligations for the term of the lease are as follows:
Year Amount
----------------------------------
2000 124,760
2001 124,760
2002 69,698
----------------
Total $ 319,218
================
NOTE #12 - Accounts Receivable
<TABLE>
The Company has the following accounts receivable as follows;
<CAPTION>
Software
Maintenance License Bandwidth &
Current Total Royalties Fees Fees Advertising
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Current $ 585,245 $ 430,970 $ 26,600 $ -0- $ 127,675
0-30 Days 196,991 194,491 2,500 -0- -0-
31-60 Days 288,031 288,031 -0- -0- -0-
61-90 Days 172,446 172,446 -0- -0- -0-
91-120 Days -0- -0- -0- -0- -0-
121-150 Days 144,993 69,993 -0- 75,000 -0-
151-180 Days 80,714 80,714 -0- -0- -0-
181-210 Days 88,979 88,979 -0- -0- -0-
211-240 Days 25,627 25,627 -0- -0- -0-
-------------------------------------------------------------------------------------
Total $ 1,583,026 $ 1,351,251 $ 29,100 $ 75,000 $ 127,675
=====================================================================================
</TABLE>
The Company has provided a provision of $71,800.
F-24
<PAGE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements -Continued-
NOTE #13 - Commitments and Contingencies
Effective October 20, 1999 and expiring on October 20, 2000, IGW signed an
agreement with Antelcom, N.V., for a 2 Mb digital offshore leased line
connection, between Curacao and Canada Teleglobe. The contract is written for
payment in U.S. dollars at $35,500 per month. The contract is payable as
follows;
Payments in 1999 $ 82,833
Payments in 2000 343,167
---------------
Total Contract $ 426,000
===============
NOTE #14 - Related Party Transactions
The Managing Director of Interactive Gaming & Wagering, N.V., has loaned the
Company $20,000. The Company has accrued interest on the loan at 8% interest per
annum. The President of Global Entertainment Holdings/Equities, Inc., has loaned
to Interactive Gaming and Wagering, Inc., NV, $20,000 and interest has been
accrued at 8% per annum.
A related party of the Managing Director of Interactive Gaming & Wagering, NV
and the President of Global Entertainment Holdings/Equities, Inc., has loaned to
Interactive Gaming & Wagering, NV $75,000 at 8% interest per annum. This loan is
due on demand. In addition this related party has loaned to Global Entertainment
Holdings/Equities, Inc., $225,000 with interest at 10% per annum due March 31,
2001.
NOTE #15 - Litigation
Pursuant to an Agreement of Purchase between Masadi Resources, Inc., and
Beverage Source Worldwide) Inc., dated November 26, 1997, the Company issued
1,375,000 (pursuant to a three (3) for one (1) stock split) shares of its $.001
par value common stock in exchange for 1,500 shares of Beverage Sources
Worldwide, Inc. At December 31, 1997, the Company had advanced to its
subsidiary, Beverage Source Worldwide, Inc., $200,000 and in the early months of
1998 the Company advanced an additional $457,844 to Beverage Source Worldwide,
Inc. Minutes of an Emergency Meeting of the Board of Directors of the Company
dated April 2, 1998, noted that Beverage Source Worldwide, Inc. was without
funds and was currently facing bankruptcy if the Company did not advance
substantial working capital funds. By mutual consent, the parties to the
purchase and Sale Agreement, dated November 26, 1997, agreed to a rescission. On
May 5, 1998, the Company filed a Complaint in the Superior Court of California,
County of San Diego, alleging that from the closing of the Agreement of
Purchase, officers and directors of Beverage Source Worldwide, Inc., had
breached their respective duties, obligations and agreements with the Company,
secreting and/or attempting to secret the Companies assets, moving,
transferring, assigning conveying encumbrances, sequestering, using, disposing
of, or shifting, any and all of the assets and property of the Company,
wrongfully withdrawing monies from the Corporate bank accounts, misappropriating
company funds, co-mingling the operating expenses and costs of International
Beverage Corporation or its wholly owned subsidiary Beverage Source Worldwide,
Inc., with independent business of the officers and directors named in the suit.
The Company filed suit against Beverage Source Worldwide, Inc. and the trial
took place on November 8, 1999.
F-25
<PAGE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements -Continued-
NOTE #15 - Litigation -Continued-
By Minute Order dated December 1, 1999, the Superior Court of California, County
of San Diego denied the Plaintiffs' (Company's) Request for Statement of
Decision due to the fact that the request was not made timely. The Court's oral
tentative decision that was announced on November 9, 1999, thus the Court's
tentative decision becomes its statement of the Decision.
On December 23, 1999, the Court by Minute Order, considered the Plaintiff's
objections to the Judgement submitted by Defendant Mark A. Darnell. However, the
Plaintiff's objections were overruled. The Superior Court of California, County
of San Diego Central Division on December 23, 1999, Ordered, Adjudged and
Decreed that:
1. Plaintiffs INTERNATIONAL BEVERAGE CORPORATION, (now known as Global
Entertainment Holdings, Inc.), and BEVERAGE SOURCE WORLDWIDE shall take nothing
by way of their Complaint for (1) Rescission; (2) Breach of Fiduciary Duty; (3)
Conspiracy; (4) Accounting; (5) Injunctive Relief; and (6) Declaratory Relief;
2. Plaintiffs INTERNATIONAL BEVERAGE CORPORATION, (now known as Global
Entertainment Holdings, Inc.), and BEVERAGE SOURCE WORLDWIDE Complaint for
Rescission of the parties Stock Purchase Agreement is denied; defendant, MARK A.
DARNELL retains all previously held stock interest in INTERNATIONAL BEVERAGE
CORPORATION, (now known as Global Entertainment Holdings, Inc.).
The decision by the Court was based on Rescission by Fraud; however, the parties
by mutual consent, agreed to the Rescission of the Agreement of Purchase & Sale.
The Company held a Special Shareholders Meeting and ratified a Mutual Agreement
of Rescission on August 19, 1999.
On February 22, 2000, Mark A. Darnell, entered into a Settlement Agreement,
Compromise and Mutual Release of Claim setting aside the Superior Court's ruling
of November 9, 1999, with a Request for Dismissal with Prejudice of San Diego,
County Superior Court Case No., 721-027 and to indemnify, defend, and hold
Global harmless and free from and against any and all liability, loss, cost,
damage and expense (including, without limitation, reasonable attorneys' fees
and court costs) directly or indirectly arising out of or based upon any breach,
by Darnell, of any of the terms of this Settlement Agreement, Compromise and
Release of Claim and/or Darnell's failure to keep, perform, fulfill, and observe
all of the terms, covenants, obligations, agreements, and conditions required to
be kept, performed, fulfilled, or observed by him, under, or with respect to,
this Agreement from and after execution and delivery of this Agreement.
Global agreed to do the following; Global shall make payments to Darnell in a
total sum of Seventy-Five Thousand Dollars ($75,000), payable as follows;
Thirty-Five Thousand Dollars ($35,000) payable via wire transfer on February 23,
2000, Twenty Thousand ($20,000), payable via wire transfer on or before May 18,
2000 and Twenty Thousand Dollars ($20,000) payable via wire transfer on or
before August 18, 2000.
The Company has accrued the $75,000 Settlement as expense in the year ended
December 31, 1999.
The Company is not a party to any other litigation at December 31, 1999.
F-26
<PAGE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements -Continued-
NOTE #16 - Economic Dependency
IGW receives a substantial portion of its royalty fees revenues from one
customer. In 1999 and 1998, royalties and other fees from that customers were
$1,861,267 and $812,018 respectively. At December 31, 1999 and 1998, accounts
receivable from that customer were $1,270,205 and $814,467. Payments received
are applied to the oldest outstanding amounts.
NOTE #17 - Segment Information
The Company has adopted FASB Statement No. 131, "Disclosures About Segments of a
Business Enterprise and Related Information." The Company is managed in two
geographical Segments; The United State of America and Curacao, Netherlands
Antilles.
<TABLE>
<CAPTION>
Prevail Global Netherlands
USA USA Antilles Total
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
License Fees 1999 $ -0- $ -0- $ 445,000 $ 445,000
1998 -0- -0- 150,000 150,000
1997 -0- -0- -0- -0-
Royalty Fees 1999 -0- -0- 1,983,773 1,983,773
1998 -0- -0- 812,018 812,018
1997 -0- -0- -0- -0-
Hosting Income 1999 -0- -0- 159,090 159,090
1998 -0- -0- 18,545 18,545
1997 -0- -0- -0- -0-
Advertising Income 1999 233,736 -0- -0- 233,736
Operating Expenses 1999 196,322 695,094 1,910,102 2,801,520
1998 -0- 842,083 401,141 1,243,224
1997 -0- 32,948 -0- 32,948
Other Income (Expenses) 1999 107 ( 59,353) 3,821 ( 55,425)
1998 -0- ( 15,918) -0- ( 15,918)
1997 -0- 1,025 -0- 1,025
Provisions for Taxes 1999 -0- -0- 11,571 11,571
1998 -0- -0- -0- -0-
1997 -0- -0- -0- -0-
Net Income (Loss) 1999 37,521 ( 856,352) 786,908 ( 31,923)
1998 -0- ( 840,057) 561,477 ( 46,917)
1997 -0- ( 31,923) -0- ( 31,923)
Cash 1999 19,625 2,921 213,638 236,184
1998 -0- 80,444 41,978 122,422
1997 -0- 129,476 -0- 129,476
Accounts Receivable 1999 $ 7,200 $ -0- $ 1,504,026 $ 1,511,226
1998 -0- -0- 962,249 962,259
1997 -0- -0- -0- -0-
Property of Equipment (Net) 1999 579,893 66,300 993,942 1,640,135
1998 -0- 1,099 61,824 62,923
Other Assets 1999 -0- -0- 135,195 135,195
1998 -0- 50,000 230,424 280,424
1997 -0- 201,375 -0- 201,375
</TABLE>
F-27
<PAGE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statements -Continued-
NOTE #18 - Restatement
Subsequent to the issuance of the Company's 1999 financial statements,
management determined that it should restate its 1999 financial statements and
related disclosures to reflect options issued pursuant to commitments made to
the managing directors of IGW for net income achievements in 1998.
A summary of the significant effects of the restatement is as follows;
As Previously As
Reported Restated
---------------- ---------------
Options Expense 31,858 53,885
Income (Loss) from Operations (10,150) (32,177)
Paid In Capital 2,832,921 2,854,948
F-28
<PAGE>
ITEM 14. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS
On August 30, 2000, the Company's shareholders approved a proposal to select
Clyde Bailey, P.C. as the Company's auditor for the fiscal year ended December
31, 2000. This appointment represents a change in the Company's auditor, which
was necessitated by the recent death of the principal of the Company's previous
auditor, Mr. Darrell Schvaneveldt, of Darrell Schvaneveldt & Company Certified
Public Accountant.
ITEM 15. EXHIBITS
Exhibits required to be attached hereto are listed in the Index to Exhibits
beginning on page 28 of this Form 10-SB, which is incorporated herein by
reference.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: December 4, 2000
/s/ Donald J. Lisa
-------------------------------------
Global Entertainment Holdings/Equities, Inc.
By: Donald J. Lisa, President/CEO
34
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
2.0 Merger Agreement IBC-Global Entertainment Holdings/Equities, Inc.*
2.1 Agreement of Purchase Global Entertainment Holdings/Equities, Inc.-IGW*
2.2 Agreement Global Entertainment Holdings/Equities, Inc. and Prevail
Online, Inc.*
3.0 Masadi Resources, Inc. Articles*
3.1 Amendment name change Masadi Resources, Inc. to IBC*
3.2 Transfer Masadi Resources, Inc. name and tradename to IBC*
3.3 Amendment name change IBC to Global*
3.4 Masadi Resources, Inc. Bylaws*
4.0 Specimen form of Stock Certificate*
10.0 Promissory Note Steven Abboud--$20,000*
10.1 Promissory Note Bryan Abboud--$20,000*
10.2 Promissory Note Joann Abboud--$75,000*
10.3 Promissory Note Joann Abboud--$225,000*
10.4 Subscription Agreement James Zilligen*
10.5 Promissory Note James Zilligen--$100,000*
10.6 Global Entertainment Holdings/Equities, Inc. Lease*
21.0 List of Subsidiaries*
27.0 Financial Data Schedule*
* Exhibits filed previously with Form 10-SB.
35
