UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
AMENDMENT NO. 3
GENERAL FORM FOR REGISTRATION OF SECURITIES
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
(State or other jurisdiction (IRS Employer Identification Number)
of incorporation or organization)
6235 South 90th Street, Omaha, NE 68127 (402) 331-3189
(Address of principal executive offices) (Issuer's Telephone Number)
Securities to be registered pursuant to section 12 (b) of the Act:
Title of each class to be registered: Name of each exchange on which each
class is to be registered:
Securities to be registered pursuant to section 12 (g) of the Act:
Title of each class to be registered: Name of each exchange on which each
class is to be registered:
Common stock
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Global Entertainment Holdings/Equities, Inc.
FORM 10-SB
TABLE OF CONTENTS
ITEM 1. DESCRIPTION OF BUSINESS 3
1:1 Company Description 3
1:2 Products and Services 5
1:3 Growth Strategy 5
1:4 Technology 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 8
2:1 Results of Operations 8
2:2 Liquidity and Capital Resources 11
2:3 Impact of Inflation 12
2:4 Contingencies 12
2:5 Year 2000 Risks 12
2:6 13
ITEM 3. DESCRIPTION OF PROPERTY 14
ITEM 4. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS 14
4:1 Security Ownership of Certain Beneficial Owners and Management 14
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS 15
5:1 Officers and Directors 15
ITEM 6. EXECUTIVE COMPENSATION 17
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 17
ITEM 8. LEGAL PROCEEDINGS 18
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 19
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES 19
ITEM 11. DESCRIPTION OF SECURITIES 21
11:1 Common Stock 21
11:2 Preferred Stock 22
11:3 Dividends 22
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS 22
ITEM 13. FINANCIAL STATEMENTS 25
Independent Auditors Report 25
As of June 30, 1999, December 31, 1998 and 1997 F-1 to F-22
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS F-1
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS F-1
For the Period July 1, 1999 to Septermber 30, 1999
and 1998 F-1 to F-14
Independent Auditors Report 26
Financial Statement-Prevail Online, Inc.
period ending 9-30-99 F-1 to F-8
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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 is
currently a wholly owned subsidiary of the Company. Interactive Gaming and
Wagering, was incorporated in Curacao, Netherland 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 Over The Counter Bulletin
Board 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 provides financial advisory services,
including; mergers and acquisitions, capital investment and general
investment banking services to emerging Internet related companies.
Currently, 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
engage in testing and implementation of its proprietary online sportsbook
software through its intial 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 licensing
contracts with several software licensees for its gaming software. The
following is a current list of the Company's ten fully operational software
licensee Websites.
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
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
principle 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) The Company will pursue opportunities
in e-commerce through the Company's wholly owned subsidiary, IGW. The Company
will develop the software to integrate the banking 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
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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 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. Currently, no acquisitions or strategic
alliances have been identified. 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.
Sales and Marketing Strategy
The Company's sales and marketing are conducted through its Curacao offices and
its Omaha, Nebraska headquarters. As of September 20, 1999, the sales and
marketing team was comprised
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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 17 online gaming software
developers and over 300 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 protects 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 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.
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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
General
The Company generates no operating revenues and derives all of its revenues from
its wholly owned subsidiaries, IGW and Prevail. The acquisition of Prevail
added an additional source of revenue for the Company through its website
advertising fees.
For the third quarter, 1999, Prevail generated revenues of over $61,000, which
accounted for approximately 20% of the Company's revenues for that period. The
Company anticipates that over the next three years, 2000, 2001 and 2002 revenues
generated through Prevail are anticipated to increase to $1.3 million, $2.1
million and $2.6 million, respectively.
The Company's subsidiaries, 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.
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. 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.
Seasonal royalty revenue for football season currently represents over 50% of
all Company revenue, however, as new licensees and additional software platforms
are added, the revenues will balance out during the other sport seasons.
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.
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Since the beginning of January 1999, through June 30, 1999, revenues from all
components of the software licensing business, which include software
licensing, Website services and software licensing royalties have undergone
tremendous growth and generated revenues of $1,248,968, representing 125% of the
total revenues for the twelve months ended December 31, 1998.
The following tables set forth selected information from the statements of
operations and balance sheets for the twelve months ended December 31, 1998, and
for purposes of a mid year audit, selected information includes statements of
operations and balance sheets for six months ending June 30, 1999.
Selected Statement of Operations Information
For the Year Ended For Six Months Ended
December 31, 1998 June 30, 1999
Total Revenues $980,563 $1,248,968
Total Expenses 635,380 775,764
Income (Loss) From Operations 345,183 473,204
Total Other Income (Expense) (623,762) (69,472)
Net Profit (Loss) (278,579) 403,732
Selected Balance Sheet Information
For the Year Ended For Six Months Ended
December 31, 1998 June 30, 1999
Total Current Assets (Deficiency) $1,088,155 $1,785,556
Total Current Liabilities 228,767 336,678
Total Property & Equipment 62,923 688,153
Total Liabilities 282,235 666,955
Total Other Assets 280,424 308,790
Total Assets 1,431,502 2,782,499
Net Shareholders' Equity 1,159,267 2,083,573
The Company's revenues increased 27% to $1,248,968 for the six months ended June
30, 1999 as compared to $980,563 for the twelve months ended December 31, 1998.
The growth is primarily due to additional revenues generated from software
licensing, and Website services for licensees. The Company, through IGW, offers
to its licensees Internet based Casino and Sportsbook software as well as
telephone based (call centers) Sportsbook software. Revenue from software
licensing, which is the significant income source, accounts for 100% of the
total revenues for the six months ended June 30, 1999. At June 30, 1999, the
Company had entered into agreements with 6 licensees and as of September 20,
1999, the Company supports 10 fully operational licensee Websites.
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Within the next fiscal year, the Company will seek to contract with twelve (12)
additional licensees. The Company's and IGW's success in contracting with these
additional licensees, may have the potential of generating, through the
combination of a fixed licensee fee, royalty fees and hosting fees, an
additional $3 million in annual revenues for the Company.
The Company expects to attract a minimum of four (4) of the proposed twelve (12)
licensees within the first and second quarters of the year 2000 and to sign the
remaining eight (8) licensees in the second half of the year.
The Company anticipates an investment of an additional $1 million in hardware
and software to accommodate the additional twelve (12) licensee contracts.
During the first nine months of 1999, the Company's net cash provided by
operations was $68,446 compared to cash used by operations of $269,329 during
the first nine months of 1998. The Company realized net proceeds of $177,500
from the sale of its common stock for the nine months ended September 30, 1999,
in 1998, $65.779 was received in the comparable period. In the first nine
months of 1999 the Company invested $307,886 in property and equipment compared
to $10,088 for the comparable period in 1998.
The Company generated $246,323 in royalty fees for the period July 1, 1999 to
September 30, 1999 (third quarter) compared to $121,473 for the comparable third
quarter of 1998. During the third quarter of 1999, the Company produced $15,000
in site maintenance and hosting fees and $61,658 from website advertising. The
Company produced no site maintenance and hosting revenues or website advertising
in the third quarter 1998.
The Company recorded professional fees of $163,752 in the third quarter of 1999,
compared to $15,633 in the third quarter 1998. The increase can be attributed
to the use of outside professional consultants with system maintenance and
enhancement.
Amortization expense for the third quarter 1999 was $37,509 compared to $31,695
in the comparable quarter of 1998. Depreciation expenses of $75,991 was
recorded for the third quarter in 1999, compared to $8,396 for the third quarter
of 1998. The increase is attributable to the increased investment in property
and equipment.
During the third quarter of 1999 the Company recorded $180,030 as a provision
for uncollectible accounts compared to no provision in the third quarter of
1998. This is a result of increased accounts receivable and the aging analysis
of the Company's receivables.
As a result of the production of website advertising in the third quarter of
1999, the Company spent $58,256 in advertising and marketing expenses. In the
comparable quarter of 1998 there were no expenditures for advertising and
marketing.
In the third quarter of 1999, the Company incurred $190,034 in management
consulting and salaries compared to $25,697 in the comparable quarter of 1998.
The increase is due to the use of outsider consultants and increased staff used
to expend the Company's computer capabilities, site maintenance and hosting
activities and its website advertising activities.
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Operating expenses were $635,380 for the twelve months ended December 31, 1998
and $775,764 for the six months ended June 30, 1999. As a percentage of
revenues, operating expenses decreased from 65% to 62% 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, 1998 was
$345,183, excluding a one time extraordinary write off of impaired assets (Note
#3) as compared to $473,204 for the six months ended June 30, 1999. The growth
was primarily the result of an increase in revenues from software licensing.
The Company expects licensing revenues to continue to grow as more licensees
commence operations and royalties from the licensee's Internet gaming operations
increase.
Tax expense for the twelve months ended December 31, 1998 was $0, as compared to
$16,169 for the six months ended June 30, 1999. The majority of the Company's
income is generated from IGW in Curacao.
2:2 Liquidity and Capital Resources
At June 30, 1999, the Company had $232,571 in cash and cash equivalents, as
compared to $122,422 at December 31, 1998. The increase in cash balance is
mainly a result of the increased operating profits and financing activities.
Working capital at June 30, 1999 increased to $1,416,907 as compared to $869,388
at December 31, 1998. Accounts receivable at June 30, 1999 increased to
$1,384,507 as compared to $962,249 at December 31, 1998. 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 generated from operating activities for the six months ended June 30,
1999 increased to $205,679 as compared to a net use of $383,494 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 $670,844 at December 31,
1998 year-end and the increase in revenues.
Net cash used for investing activities for the six months ended June 30, 1999
was $764,310 as compared to $589,175 for the twelve months ended December 31,
1998. The increase was primarily due to increase in purchases of computer
equipment. Net cash provided by financing activities for the six months ended
June 30, 1999, was $668,780, as compared to $965,579 for the year ended December
31, 1998. The decrease was primarily due to the Company's decision not to issue
any additional equity securities.
Revenues 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 set forth above are achieved. Once the arrangement has been
contractually agreed upon there are no customer cancellation privileges. Fees
that the
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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 ecognized 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 has accounts receivable from license fees of $410,000 of which
$290,000 is less than 30 days old and $120,000 that extends beyond 120 days. In
addition the Company has royalties receivable of $974,507 of which $375,542 is
less than 30 days old, $83,470 is 31-60 days old, $235,274 is 61 to 90 days old,
$158,061 is 91 to 120 days old, and $122,160 is 121+ days old.
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.
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2. Third party vendors providing critical services including circuits,
hardware, long distance Internet connectivity and related products. These
include telco 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 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 revenues for year end
December 31, 2000 will be generated through Royalty Fees, License Fees, Site
Maintenance and Hosting Fees, Website
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Advertising and Sponsorships for total revenues of $10,365,000. In addition,
the Company expects operating expenses to total $5,425,910, thus generating
operating income of $4,939,090. Net income after the addition of other income
and the deduction of other expenses will total $4,941,302 or $.44 per share.
(See "Item 15. Financial Statement and Exhibits; Exhibit A".)
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 the date hereof, 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
Bryan Abboud(2)(4) 2,786,700 29%
Steven Abboud(4) 411,429 4%
Joann Abboud(4) 569,760 6%
Masadi Financial(5) 582,900 6%
Shining Star(3) 1,622,358 17%
Thomas Hawkins 3,000 .0003%
Officers, Directors and 5%
shareholders as a group (5 in number) 5,976,147 62%
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.
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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. Ms. Christina Stangar, is the beneficial owner of 3,000
shares of the Company's common stock, and is the beneficial owner of
the remaining 50% of Masadi Financial.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
5:1 Officers and Directors
Name Age Position
David S. Wintroub 32 President/CEO
Bryan Abboud(1) 29 Director, Chairman/Treasurer
Steve Abboud(1) 35 Director, Financial Consultant
Thomas Hawkins 48 Secretary
(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.
David S. Wintroub. Mr. Wintroub was appointed the CEO/President of the Company
on January 18, 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.
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
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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 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.
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, however, he maintains his role as a Director. 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, of 1993.
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
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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.
Each outside Director receives no compensation for attending meetings of the
Board of Directors and all Directors are reimbursed for out-of-pocket expenses
incurred in connection with the Company's business.
ITEM 6. EXECUTIVE COMPENSATION
Name and Principal Other Total
Position Year Annual Salary Compensation Compensation
Steven Abboud
President/CEO 1999 $48,000 $0 $48,000
Bryan Abboud
Chairman/Treasurer 1999 $0 $0 $0
Thomas Hawkins
Corporate Secretary 1999 $1,200 $10,000 $11,200
(Common Stock)
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Steven Abboud, President, CEO and Director of the Company, and Mr. Bryan
Abboud, Chairman of the Board and Treasurer of Global Entertainment Holdings/
Equities, Inc. and President of Interactive Gaming & Wagering, NV, 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.
Ms. Christina Stangar, a shareholder of the Company, is the beneficial owner of
50% of the voting stock of Masadi Financial, a shareholder of the Company.
On December 31. 1998, Mr. Steven Abboud, the 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
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
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<PAGE>
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.
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 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. The first two payments have been made by the
Company and the final payment will be made when due per the Agreement, on
8/18/00. This final payment will resolve all aspects of this litigation.
The Company is not a party to any other litigation and none is contemplated nor
has any been threatened.
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ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock currently trades on the NASD Over The Counter
Bulletin Board under the symbol "GAMM". The Company's high and low trading
price and volume for the past five (5) quarters are listed in the following
table:
Quarterly GAMM Stock Trading Summary
Quarter High Low Close Volume
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* NA NA
* 3:1 forward stock split ex date August 23, 1999.
As of the date of this Registration Statement, the Company has outstanding
options to purchase 700,500 shares of its $0.001 par value common stock as
follows;
Date of Option Grant Options Price Options
December 31, 1998 225,000 $ 1.50 3 Years from Grant
December 31, 1999 422,000 $ 1.25 3 Years from Grant
December 31, 1999 5,300 $ 1.50 3 Years from Grant
December 31, 1999 48,200 $ 1.67 3 Years from Grant
As of June 30, 1999, there were 8,937,651 shares of Common Stock considered to
be restricted, pursuant to Rule 144 under the Securities Act of 1933, as amended
(the "Securities Act").
Holders of Record:
As of June 30, 1999, there were eighty-four (84) holders of record of the
Company's Common Stock, and the number of beneficial holders was approximately
four (4).
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
As of June 30, 1999, 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, and 703,290 shares were issued in transactions exempt by reason of Rule
504 of Regulation D promulgated pursuant to Section 3(b) of the Securities Act
of 1933, as amended.
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,
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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) of the Securities Act of 1933, as
amended.
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) of the Securities Act of 1933, as amended.
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) of the Securities Act of 1933, as amended.
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) of the Securities Act of 1933, as amended.
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) of the Securities Act of 1933, as amended.
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) of the Securities Act of 1933, as amended. As of January 18,
1999, these shares of common stock were cancelled and the certificates returned
to the Company.
Pursuant to a Private Placement Memorandum dated 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) of the Securities Act of 1933, as amended, for a total
consideration of $145,000 in cash.
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) of the Securities Act of 1933, as amended,
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
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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.
Pursuant to a Private Placement Memorandum dated 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) of the Securities Act of 1933, as amended, for a total
consideration of $638,000 in cash.
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)
of the Securities Act of 1933, as amended, in exchange for 30,000 shares of
Interactive Gaming & Wagering, NV.
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) of the Securities Act of 1933, as amended, for a total
consideration of $62,986.
ITEM 11. DESCRIPTION OF SECURITIES
11:1 Common Stock
The authorized capital stock of the Company consists of 100,000,000 shares of
$.001 par value Common Stock. All shares have equal voting rights and are non-
assessable. Voting rights are 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 the date hereof, the Company had outstanding 9,684,437 shares of common
stock.
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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 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 pleas 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
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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
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 meet 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 attorney's 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
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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.
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ITEM 13. FINANCIAL STATEMENTS
Schvaneveldt & Company
Certified Public Accountant
275 East South Temple, Suite #300
Salt Lake City, Utah, 8411
(801) 521-2392
Independent Auditors Report
Board of Directors
Global Entertainment Holdings/Equities, Inc.
I have audited the accompanying consolidated balance sheets of Global
Entertainment Holdings/Equities, Inc., as of June 30, 1999, December 31, 1998
and 1997, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the period ended June 30, 1999 and the years then
ended December 31, 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.
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., as of June 30, 1999, December 31, 1998 and 1997, and
the consolidated results of its operations and its cash flows for the period
ended June 30, 1999 and the years ended December 31, 1998 and 1997, in
conformity with generally accepted accounting principles.
/s/Darrell Schvaneveldt
Salt Lake City, Utah
September 16, 1999
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<TABLE>
Global Entertainment Holdings/Equities, Inc.
Consolidated Balance Sheets
June 30, 1999, December 31, 1998 and 1997
<CAPTION>
June December December
30, 1999 31, 1998 31, 1997
<S> <C> <C> <C>
Assets
Current Assets
Cash & Cash Equivalents (Note #2) $ 232,571 $ 122,422 $ 129,476
License Fees Receivable (Note #4) 1,384,507 962,249 -0-
Prepaid Expenses 123,138 3,484 -0-
Loan Receivable - Related Party (Note #7) -0- -0- 125,000
Interest Receivable 840 -0- -0-
Employee Accounts Receivable 44,500 -0- -0-
Total Current Assets 1,785,556 1,088,155 254,476
Property & Equipment (Note #6)
Automobile - Net 41,128 -0- -0-
Package Software - Net 7,296 4,859 -0-
Office Improvements - Net 24,090 1,970 -0-
Computer Equipment - Net 549,309 40,664 -0-
Furniture & Fixtures - Net 66,330 15,430 -0-
Total Property & Equipment 688,153 62,923 -0-
Other Assets
Cash in Escrow - Restricted (Note #12) 6,348 -0- -0-
Website Development and Design- Net (Note #9) 79,141 -0- -0-
Security Deposit 18,893 13,626 -0-
Software Design & Development - Net (Note #4) 154,408 216,798 -0-
Receivable BSW - Net (Note #3) 50,000 50,000 200,000
Investment - BSW (Note #3) -0- -0- 1,375
Total Other Assets 308,790 280,424 201,375
Total Assets $ 2,782,499 $ 1,431,502 $ 455,851
</TABLE>
F-1
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
Global Entertainment Holdings/Equities, Inc.
Consolidated Balance Sheets -Continued-
June 30, 1999, December 31, 1998 and 1997
<CAPTION>
June December December
30, 1999 31, 1998 31, 1997
<S> <C> <C> <C>
Liabilities & Stockholders' Equity
Current Liabilities
Accounts Payable $ 101,425 $ 23,844 $ -0-
Accrued Expenses 6,328 -0- -0-
Accrual Interest 9,805 12,565 -0-
Accrued Wages 13,350 17,800 -0-
Current Portion - Capital Leases (Note #7) 20,500 9,558 -0-
Current Portion - Notes Payable (Note#7) 165,000 165,000 250,000
Note Payable - Line of Credit 4,101 -0- -0-
Income Taxes Payable 16,169 -0- -0-
Total Current Liabilities 336,678 228,767 250,000
Long Term Liabilities
Capital Lease Payable (Note #7) 55,277 3,468 -0-
Notes Payable (Note #7) 440,000 215,000 -0-
Less Current Portion (Note #7) ( 165,000) ( 165,000) -0-
Net Long Term Liabilities 330,277 53,468 -0-
Total Liabilities 666,955 282,235 250,000
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; 9,621,441; 9,455,682
& 891,963 Shares Issued & Outstanding
Respectively Retroactively Restated 9,624 9,456 891
Paid In Capital 2,009,963 1,450,313 236,883
Retained Earnings (Deficit) 95,957 ( 310,502) ( 31,923)
Net Stockholders' Equity 2,115,544 1,149,267 205,851
Total Liabilities &
Stockholders' Equity $ 2,782,499 $ 1,431,502 $ 455,851
</TABLE>
F-2
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
Global Entertainment Holdings/Equities, Inc.
Consolidated Statement of Operations
For the Period January 1, 1999 to June 30, 1999 and
the Years Ended December 31, 1998 and 1997
<CAPTION>
June December December
30, 1999 31, 1998 31, 1997
<S>
Revenues <C> <C> <C>
License Fees $ 445,000 $ 150,000 $ -0-
Royalty Fees 782,498 812,018 -0-
Hosting Income -0- 600 -0-
Miscellaneous Income 21,470 17,945 -0-
Total Revenues 1,248,968 980,563 -0-
Expenses
Amortization 63,390 110,592 -0-
Depreciation 72,585 35,299 -0-
Rents 83,567 78,855 1,041
Professional Fees 80,739 61,864 30,042
Travel 37,436 47,551 -0-
Administrative Expenses 202,461 153,103 1,865
Management Consulting 272,580 148,116 -0-
Write Off Impaired Asset (Note #3) -0- 607,844 -0-
Total Expenses 812,758 $ 1,243,224 32,948
Income (Loss) from Operations 436,210 ( 262,661) ( 32,948)
Other Income (Expenses)
Interest (Expense) ( 15,156) ( 21,220) ( 500)
Interest Income 1,574 782 1,525
Forgiveness of Debt -0- 4,520 -0-
Total Other Income (Expenses) ( 13,582) ( 15,198) 1,025
Income (Loss) Before Taxes 422,628 ( 278,579 ( 31,923)
Provisions for Income Tax ( 16,169) -0- -0-
Net Income (Loss) $ 406,459 ($ 278,579) ($ 31,923)
Basic Earnings (Loss) Per Share .05 ($ .03) ($ .04)
Diluted Earnings Per Share $ .04 N/A N/A
Weighted Average Shares Outstanding
Retroactively Restated 9,531,057 7,855,533 799,998
Weighted Average Shares & Options Outstanding 10,133,062 -0- -0-
</TABLE>
F-3
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
Global Entertainment Holdings/Equities, Inc.
Statement of Stockholders' Equity
For the Period July 10, 1997 to June 30, 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
03/26/98
Shares Issued for Cash at $9.33
Per Share Retroactively Restated 14,142 14 131,986
</TABLE>
F-4
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
Global Entertainment Holdings/Equities, Inc.
Statement of Stockholders' Equity -Continued-
For the Period July 10, 1997 to June 30, 1999
<CAPTION>
Common Stock Paid In Retained
Shares Amount Capital Earnings
<S> <C> <C> <C> <C>
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 Recission 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
11/03/98
Shares Issued for Cash at $0.42 Per
Share Retroactively Restated 45,000 45 18,705
</TABLE>
F-5
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
Global Entertainment Holdings/Equities, Inc.
Statement of Stockholders' Equity -Continued-
For the Period July 10, 1997 to June 30, 1999
<CAPTION>
Common Stock Paid In Retained
Shares Amount Capital Earnings
<S>
12/14/98 <C> <C> <C> <C>
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) ( 22) 22
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
04/20/99
Shares Returned by Terminated
Employee ( 9,999) ( 9) 9
05/10/99
Shares Issued for Cash at $2.66
Per Share 89,100 90 237,510
</TABLE>
F-6
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
Global Entertainment Holdings/Equities, Inc.
Statement of Stockholders' Equity -Continued-
For the Period July 10, 1997 to June 30, 1999
<CAPTION>
Common Stock Paid In Retained
Shares Amount Capital Earnings
<S> <C> <C> <C>
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 $2.25 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
Net Profit for Period Ended
June 30, 1999 406,459
Balance, June 30, 1999 9,621,441 $ 9,624 $ 2,009,963 $ 95,957
</TABLE>
F-7
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
Global Entertainment Holdings/Equities, Inc.
Statements of Cash Flows
For the Period January 1, 1999 to June 30, 1999 and
the Years Ended December 31, 1998 and 1997
<CAPTION>
June December December
30, 1999 31, 1998 31, 1997
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net Income (Loss) $ 406,459 ($ 278,579) ( 31,923)
Adjustment to Reconcile Net Income (Loss) to
Net Cash Provided by Operating Activities;
Amortization 63,390 110,592 -0-
Depreciation 72,585 35,299 -0-
Write off of Impaired Asset -0- 607,844 -0-
Forgiveness of Debt -0- ( 4,520) -0-
Non Cash Expenses 50,077 8,194 -0-
Rounding -0- ( 2) ( 1)
Change in Operating Assets & Liabilities;
(Increase) Decrease in Fees Receivable ( 422,258) ( 962,249) -0-
(Increase) Decrease in Prepaid Expenses ( 487) ( 3,448) -0-
(Increase) Decrease in Security Deposits ( 5,267) ( 13,626) -0-
Increase in Accounts Payable 77,581 23,844 -0-
Increase in Accrued Expenses 6,328 -0- -0-
Increase in Taxes Payable 16,169 -0- -0-
(Decrease) Increase in Accrued Interest ( 2,760) 12,565 -0-
(Decrease) Increase in Accrued Wages ( 4,450) 17,800 -0-
Increase in Loan Receivable -0- -0- ( 125,000)
(Increase) in Interest Receivable ( 840) -0- -0-
(Increase) in Employee Accounts Receivable ( 44,500) -0- -0-
(Increase) in Cash in Escrow Restricted ( 6,348) -0- -0-
Net Cash Provided (Used) in
Operating Activities 205,679 ( 446,286) ( 156,924)
Cash Flows from Investing Activities
Purchase of Website Design ( 85,279) -0- -0-
Purchase of Software Design & Development -0- ( 70,956) -0-
Purchase of Automobile ( 43,949) -0- -0-
Purchase of Package Software ( 2,812) ( 7,289) -0-
Purchase of Office Improvements ( 22,120) ( 1,970) -0-
Purchase of Computer Equipment ( 546,114) ( 67,173) -0-
Purchase of Furniture & Fixtures ( 64,036) ( 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 ( 764,310) ( 526,347) ( 201,000)
</TABLE>
F-8
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
Global Entertainment Holdings/Equities, Inc.
Statements of Cash Flows -Continued-
For the Period January 1, 1999 to June 30, 1999 and
the Years Ended December 31, 1998 and 1997
<CAPTION>
June December December
30, 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 ( 13,221) ( 6,582) -0-
Increase in Loans 225,000 110,000 240,000
Sale of Common Stock 390,587 842,553 247,400
Net Cash Provided by Financing Activities 668,780 965,579 487,400
Increase (Decrease) in Cash
& Cash Equivalents 110,149 ( 7,054) 129,476
Cash & Cash Equivalents at
Beginning of Period 122,422 129,476 -0-
Cash & Cash Equivalents at End of Period $ 232,571 $ 122,422 $ 129,476
Disclosures from Operating Activities
Interest Expense $ 15,156 $ 21,220 $ 500
Taxes 16,169 -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 Programming 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-
</TABLE>
F-9
The accompanying notes are an integral part of these financial statements
<PAGE>
Global Entertainment Holdings/Equities, Inc.
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 is engaged in, through its wholly owned subsidiary,
Interactive Gaming & Wagering NV., the conception and creation of computer
software programs for the gaming and wagering industry.
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
subsidiary. 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-10
<PAGE>
Global Entertainment Holdings/Equities, Inc.
Notes to Financial Statement -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 probalbe 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. Impairmant write off will be recognized in the
period when impairment is deemed by management to have occurred.
NOTE #3 - Acquisition and Recission 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 or 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 Company believes
that such rescission will be validated by the courts.
The recission 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
F-11
<PAGE>
Global Entertainment Holdings/Equities, Inc.
Notes to Financial Statement -Continued-
NOTE #3 - Acquisition and Recission of Beverage Source Worldwide, Inc.
-Continued-
the Officers of Beverage Source Worldwide, Inc., cast significant doubt on the
Company, as the parent company, to control the subsidiary.
Further, the Company has made the assessment that the recission of the agreement
will be upheld by the courts without additional adverse effects to the Company
and has made provision for impaired assets and collectability losses at
approximately 92% of the fair value of the amounts owed the Company by Beverage
Source Worldwide, Inc.
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.
F-12
<PAGE>
Global Entertainment Holdings/Equities, Inc.
Notes to Financial Statement -Continued-
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.
Stock Options;
The Company will issue to the President 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., has 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,
ifInteractive 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. Interactive Gaming & Wagering, NV, met
the net earnings requirements and will issue the options for 1998 in 1999.
The term net earnings is presented in the financial statements as net
income.
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 June 30, 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.
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.
At June 30, 1999, the Company had issued; 12,000 shares for consulting fees
valued at $37,000; 6,000 shares for interest expense valued at $2,250; and
39,000 shares for current public relation expenses valued at $10,827 and
$119,173 in prepaid public relations cost.
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 June 30, 1999 and
December 31, 1998, the Company had property and equipment as follows:
F-13
<PAGE>
Global Entertainment Holdings/Equities, Inc.
Notes to Financial Statement -Continued-
NOTE #6 - Property, Equipment and Depreciation -Continued-
<TABLE>
<CAPTION>
Depreciation Accumulated
Cost Cost Expenses Depreciation
Assets 1999 1998 Life 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C> <C>
Office Improvements $ 24,090 $ 1,970 3-5 $ -0- $ -0- $ -0- $ -0-
Computer Equipment 626,933 67,173 2-3 51,116 26,509 77,625 26,509
Furniture & Fixtures 85,826 21,790 3 13,136 6,360 19,496 6,360
Packages Software 10,101 7,289 3 375 2,430 2,805 2,430
Automobile 43,949 -0- 4 2,822 -0- 2,822 -0-
Totals $ 790,899 $ 98,222 $ 67,449 $ 35,299 $102,748 $ 35,299
Software Design for
Licensing $ 328,390 $ 327,390 3 $ 63,390 $ 110,592 $173,982 $110,592
Website Design &
Development 84,279 -0- 3 5,137 -0- 5,137 -0-
</TABLE>
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 July 21, 2000 $ 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 August 2000 225,000 -0- -0-
Total Notes Payable $ 440,000 $ 215,000 $ 250,000
Less Current Portion (165,000) (165,000) (250,000)
Net Long Term Debt $ 275,000 $ 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 recission 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;
Current
Asset Cost Balance Portion
Pentium Computer $ 14,348 $ 8,250 $ 4,782
Dell Computer 5,260 4,776 4,776
Automobile 43,949 42,095 3,922
Dell Computer 21,085 20,654 7,020
Total $ 84,642 $ 75,777 $ 20,500
F-14
<PAGE>
Global Entertainment Holdings/Equities, Inc.
Notes to Financial Statement -Continued-
NOTE #7 - Notes Payable-Continued-
Following are maturities of long term debt for each of the next five years.
Year Notes Payable Capital Lease
1999 $ 105,000 $ 18,044
2000 335,000 22,338
2001 -0- 17,556
2002 -0- 13,454
2003 -0- 4,385
Total $ 440,000 $ 75,777
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 Recission 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, paragraph 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, NV, (IGW), a privately held corporation, was
incorporated on May 16, 1997, under the laws of the Netherlands Antilles,
domiciled in Curacoa. 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.
F-15
<PAGE>
Global Entertainment Holdings/Equities, Inc.
Notes to Financial Statement -Continued-
NOTE #8 - Acquisition of Global Entertainment Holdings/Equities, Inc.-Continued-
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, paragraph 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. 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 - Website Purchase
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 all the 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.
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:
F-16
<PAGE>
Global Entertainment Holdings/Equities, Inc.
Notes to Financial Statement -Continued-
NOTE #10 - Income Taxes - Continued -
Expiration
Year of Loss Amount Date
1997 $ 31,923 2017
1998 278,579 2018
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.
06-30-99 12-31-98
Deferred Tax Asset Balance Beginning of Period $ -0- $ -0-
Net Operating Loss Carryforwards 374,040 296,473
374,040 296,473
Valuation Allowance ( 374,040) ( 296,473)
Net Deferred Tax Asset $ -0- $ -0-
Deferred Tax Liability $ -0- $ -0-
<TABLE>
<CAPTION>
Netherlands
TOTAL USA Antilles
<S> <C> <C> <C>
Net Income (Loss) $ 406,459 ($ 228,137) $ 634,596
Add Non Deductible Permanent Adjustments 15,787 15,787 -0-
422,246 ( 212,350) 634,596
Net Operating Loss Carryforwards ( 871,980) ( 871,980) -0-
Adjusted Taxable Income ($ 499,734) ($ 1,084,330) $ 634,596
Current Income Taxes Payable $ 16,169 $ -0- $ 16,169
</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 $16,169 in taxes due to the
Netherlands Antilles based on earnings in Curacao.
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;
F-17
<PAGE>
Global Entertainment Holdings/Equities, Inc.
Notes to Financial Statement -Continued-
NOTE #11 - Operating Lease Obligations - Continued -
Year Amount
1999 $ 13,000
2000 15,850
2001 16,150
2002 16,450
2003 16,750
2004 1,400
Total $ 79,600
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
1999 $ 102,427
2000 124,760
2001 124,760
2002 69,698
Total $ 421,645
NOTE #12 - Concentration of Credit Risks
The Company maintains cash balances at several banks. Accounts at institutions
within the United States are insured by the Federal Deposit Insurance
Corporation up to $100,000. Deposits on occasion may exceed the insured
amounts.
Cash deposited in the Antilles Banking Corporation is held in United States
dollars and all payments from the account and deposits to the account are made
in U.S. dollars. This account is not insured but subject to the provisions of
the Netherlands Antilles banking regulations.
The Company has accounts receivable from license fees of $410,000 of which
$290,000 is less than 30 days old and $120,000 that extends beyond 120 days. In
addition the Company has royalties receivable of $974,507 of which $375,542 is
less than 30 days old, $83,470 is 31-60 days old, $235,274 is 61 to 90 days old,
$158,061 is 91 to 120 days old, and $122,160 is 121+ days old.
NOTE #13 - Cash Set Aside for Property Acquisition
An employee of Interactive Gaming and Wagering, NV., imported an automobile from
the United States to Curacao. The Company placed in an escrow fund $6,348 for
possible custom duties on the employee's auto. Interactive Gaming & Wagering,
NV., has requested a waver of such custom duties from the government of Curacao.
F-18
<PAGE>
Global Entertainment Holdings/Equities, Inc.
Notes to Financial Statement -Continued-
NOTE #14 - Related Party Transactions
The President 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 the
Company $20,000 and interest has been accrued at 8% per annum.
A related party of the President of Interactive Gaming & Wagering, NV and 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 August 1, 2000.
NOTE #15 - Litigation
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 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. The first two payments have been made by the
Company and the final payment will be made when due per the Agreement, on
8/18/00. This final payment will resolve all aspects of this litigation.
NOTE #16 - Subsequent Events -
The Company is negotiating to acquire 100% of the issued and outstanding stock
of Prevail Online, Inc., a Colorado Corporation, incorporated July 21, 1999,
with principle offices in San Francisco, California.
The Company has completed its Year 2000 Compliance review and testing. Systems
providing customer services, the Company's critical existing systems are no more
than one year old and none of these systems have Year 2000 problems. These
systems have been inventoried and a systems test has been completed. Many of
the critical systems have been migrated to new hardware and software platforms
to increase reliability and capacities. All newly acquired hardware systems,
operating systems, and software are required to have vendor certification for
Year 2000 compliance. Additionally, the Company has tested the existing systems
for Year 2000 Compliance. It has been determined that the existing billing and
billing presentment
F-19
<PAGE>
Global Entertainment Holdings/Equities, Inc.
Notes to Financial Statement -Continued-
NOTE #16 - Subsequent Events - Continued -
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.
F-20
<PAGE>
Global Entertainment Holdings/Equities, Inc.
Notes to Financial Statement -Continued-
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.
Netherlands
USA Antilles Total
License Fees 1999 $ -0- $ 445,000 $ 445,000
1998 -0- 150,000 150,000
1997 -0- -0- -0-
Royalty Fees 1999 -0- 782,498 782,498
1998 -0- 812,018 812,018
1997 -0- -0- -0-
Hosting Income 1999 -0- -0- -0-
1998 -0- 600 600
1997 -0- -0- -0-
Miscellaneous Income 1999 2,564 18,906 21,470
1998 17,945 -0- 17,945
1997 -0- -0- -0-
Operating Expenses 1999 219,376 593,382 812,758
1998 842,083 401,141 1,243,224
1997 32,948 -0- 32,948
Other Income (Expenses) 1999 ( 9,385) ( 1,947) ( 11,332)
1998 ( 15,918) -0- ( 15,918)
1997 1,025 -0- 1,025
Provisions for Taxes 1999 -0- 16,169 16,169
1998 -0- -0- -0-
1997 -0- -0- -0-
Net Income (Loss) 1999 (228,137) 634,596 406,459
1998 (840,057) 561,477 ( 278,579)
1997 ( 31,923) -0- ( 31,923)
Cash 1999 93,295 139,276 232,571
1998 80,444 41,978 122,422
1997 129,476 -0- 129,476
Accounts Receivable 1999 -0- 1,384,507 1,384,507
1998 -0- 962,249 962,259
1997 -0- -0- -0-
Property of Equipment (Net) 1999 67,084 621,069 688,153
1998 1,099 61,824 62,923
Other Assets 1999 134,922 173,868 308,790
1998 50,000 230,424 280,424
1997 201,375 -0- 201,375
F-21
<PAGE>
Global Entertainment Holdings/Equities, Inc.
Notes to Financial Statement -Continued-
NOTE #18 - Corrections of Errors
The Company has made changes to the financial statements at June 30, 1999 as
follows:
Corrected Original
Statement Statement
Non Cash Expenses Paid by Issuance of Shares
of Common Stock March 5, 1999, Issued 9,000
(Post-split) Shares for Consulting Services 27,000 3
June 21, 1999, Issued 6,000 (Post-split) Shares
as an Incentive to a Related Party to Make a Loan
of $225,000 to the Company Incentive at 1% of
Loan Value. 2,250 2
June 25, 1999, Issued 3,000 (Post Split) Shares
for Consulting Services 10,000 1
Accrued Tax Expense
The Company Received Opinion from Two Tax Sources
that Earnings in the Netherlands Antilles are not
subject to IRS Code Section 951, Sub Part F Income
in the United States. Accrued Taxes has been changed
to Provide for Tax in the Netherlands Antilles. 16,169 58,140
Total $ 55,419 $ 58,146
Net Increase to Net Income $ 2,727
F-22
<PAGE>
ITEM 14. CHANGES AND DISAGREEMENTS WITH ACCOUNTS
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
Global Entertainment Holdings/Equities, Inc.
Consolidated Balance Sheets (Unaudited)
September 30, 1999 and 1998
September September
30, 1999 30, 1998
Assets
Current Assets
Cash & Cash Equivalents $ 154,339 $ 46,845
License, Maintenance &
Royalties Fees Receivable 1,102,959 525,169
Accounts Receivable 16,438 6,690
Prepaid Expenses 130,434 -0-
Interest Receivable 840 -0-
Employee Loan Receivable 42,000 -0-
Total Current Assets 1,447,010 578,704
Property & Equipment
Package Software - Net 73,825 4,826
Office Improvements - Net 26,016 -0-
Computer Equipment - Net 604,380 44,614
Furniture & Fixtures - Net 80,819 9,475
Vehicles - Net 37,465 -0-
Total Property & Equipment 822,505 58,915
Other Assets
Cash in Escrow Restricted 6,348 -0-
Website Development & Design - Net 79,465 -0-
Security Deposit 23,866 6,187
Website - Net 700,000 -0-
Software Design & Development - Net 191,911 236,163
Receivable BSW - Net 50,000 50,000
Total Other Assets 1,051,590 292,350
Total Assets $3,321,105 $ 929,969
F-1
The accompanying notes are an integral part of these financial statements
<PAGE>
Global Entertainment Holdings/Equities, Inc.
Consolidated Balance Sheets (Unaudited) -Continued-
September 30, 1999 and 1998
September September
30, 1999 30, 1998
Liabilities & Stockholders' Equity
Current Liabilities
Accounts Payable $ 160,969 $ 3,766
Deferred Income 31,426 -0-
Accrued Interest 9,805 -0-
Accrued Expenses -0- -0-
Accrued Wages 15,191 -0-
Current Portion - Capital Leases 20,500 -0-
Current Portion - Notes Payable 50,000 50,000
Loans - Related Entities 115,000 105,500
Note Payable Line of Credit 19,912 -0-
Income Taxes Payable Foreign 9,207 -0-
Total Current Liabilities 432,010 159,266
Long Term Liabilities
Capital Lease Payable 23,174 500
Notes Payable 640,000 205,000
Less Current Portion ( 165,000) ( 50,000)
Net Long Term Liabilities 498,174 155,500
Total Liabilities 930,184 314,766
Stockholders' Equity
Preferred Stock, 25,000,000 Shares Authorized;
at $0.001 Par Value, None Issued
Common Stock, 100,000,000 Shares Authorized;
at $0.001 Par Value, 9,621,460 & 9,344,673 Shares
Issued and Outstanding Respectively 9,621 9,345
Paid In Capital 2,669,656 855,941
Retained Earnings (Deficit) ( 288,356) ( 250,083)
Total Stockholders' Equity 2,390,921 615,203
Total Liabilities & Stockholders' Equity $3,321,105 $ 929,969
F-2
The accompanying notes are an integral part of these financial statements
<PAGE>
Global Entertainment Holdings/Equities, Inc.
Consolidated Statement of Operations (Unaudited)
For the Period July 1, 1999 to September 30, 1999 and
the Period July 1, 1998 to September 30, 1998
September September
30, 1999 30, 1998
Revenues
Royalty Fees $ 246,323 $ 121,473
Site Maintenance & Hosting 15,000 -0-
Website Advertising 61,658 -0-
Total Revenues 322,981 121,473
Expenses
Amortization 37,509 31,695
Depreciation 75,991 8,396
Rents 63,709 18,975
Professional Fees 163,752 15,633
Travel 36,352 2,795
Administrative Expenses 52,473 25,901
Management Consulting & Salaries 190,034 25,697
Provisions for Uncollectible Accounts 180,030 -0-
Advertising & Marketing 58,256 -0-
Total Expenses ( 858,106) ( 129,092)
Income (Loss) From Operations ( 535,125) ( 7,619)
Other Income (Expenses)
Interest Expense ( 1,222) -0-
Interest Income 1,150 44
Sale of Security 46,782 -0-
Rental Income 13,403 -0-
Other Income - Miscellaneous 1,564 -0-
Total Other Income (Expenses) 61,677 44
Income (Loss) Before Taxes ( 473,448) ( 7,575)
Excess Foreign Tax Accrual 6,962 -0-
Net Income (Loss) ($ 466,486) ($ 7,575)
Basic Earnings Per Share ($ 0.005) ($ 0.001)
Diluted Earnings Per Share ( 0.005) ( 0.001)
Weighted Average Shares Outstanding 9,579,224 5,588,700
Weighted Average Shares & Options Outstanding 10,133,000 5,588,700
F-3
The accompanying notes are an integral part of these financial statements
<PAGE>
Global Entertainment Holdings/Equities, Inc.
Statements of Cash Flows (Unaudited) -Continued-
For the Period July 1, 1999 to September 30, 1999 and
the Period July 1, 1998 to September 30, 1998
September September
30, 1999 30, 1998
Cash Flows from Operating Activities
Net Income (Loss) ($ 466,486) ($ 7,575)
Adjustment to Reconcile Net Income (Loss) to
Net Cash Provided by Operating Activities;
Amortization 37,509 31,695
Depreciation 75,991 8,396
Provisions for Uncollectible Accounts 180,030 -0-
Non Cash Expenses 72,034 -0-
Changes in Operating Assets & Liabilities;
(Increase) Decrease in Fees Receivable 111,518 ( 287,634)
(Increase) Decrease in Other Receivables ( 13,938) -0-
(Increase) Decrease in Security Deposits ( 4,973) -0-
(Increase) Decrease in Deferred Income 31,426 -0-
Increase (Decrease) in Accounts Payable 59,544 ( 14,211)
Increase (Decrease) in Taxes Payable ( 6,962) -0-
Increase (Decrease) in Accrued Interest ( 2,760) -0-
Increase (Decrease) in Accrued Expenses ( 6,328) -0-
Increase (Decrease) in Accrued Wages 1,841 -0-
Net Cash Provided (Used) in Operating Activities 68,446 ( 269,329)
Cash Flows from Investing Activities
Purchase of Software Design & Development ( 59,379) ( 8,195)
Purchase of Package Software ( 63,960) ( 1,893)
Purchase of Office Improvements ( 22,120) -0-
Purchase of Computer Equipment ( 133,839) -0-
Purchase of Furniture & Fixtures ( 28,588) -0-
Net Cash (Used) in Investing Activities ( 307,886) ( 10,088)
Cash Flows from Financing Activities
Payments on Capital Lease Liabilities ( 32,103) -0-
Increase in Loans 15,811 205,500
Sale of Common Stock 177,500 65,779
Net Cash Provided by Financing Activities 161,208 271,279
Increase (Decrease) in Cash & Cash Equivalents ( 78,232) ( 8,138)
Cash & Cash Equivalents at Beginning of Period 232,571 54,983
Cash & Cash Equivalents at End of Period $ 154,339 $ 46,845
F-4
The accompanying notes are an integral part of these financial statements
<PAGE>
Global Entertainment Holdings/Equities, Inc.
Statements of Cash Flows (Unaudited) -Continued-
For the Period July 1, 1999 to September 30, 1999 and
the Period July 1, 1998 to September 30, 1998
September September
30, 1999 30, 1998
Disclosures from Operating Activities
Interest Expenses $ 1,222 $ -0-
Significant Non Cash Transactions
Issued 3,423,000 Shares to Acquire
Interactive Gaming & Wagering, NV $ -0- $ 148,887
Issued 2,793,352 Shares to Shareholders
of Global Entertainment Holdings/Equities, Inc. -0- 2,793
Issued 1,423,500 Shares to Incorporators -0- 654
Issued 8,160 Shares for Legal Services -0- 2,720
Issued 80,431 Shares for Director Fees -0- 81
Issued 592,464 Shares for Program Services -0- 222,174
Issued 15,000 Shares for Program Services -0- 5,000
Issued 39,000 Shares for Prepaid Public Relations 130,000 -0-
Issued 3,000 Shares for Legal Services 10,000 -0-
Issued 6,000 Shares for Loan Incentive 2,250 -0-
Issued 9,000 Shares for Consulting Services 27,000 -0-
Issued 230 Shares for Technical Consulting 2,285 -0-
Issued 2,000 Shares for Legal Services 20,000 -0-
Issued 3,000 Shares for Consulting Services 8,000 -0-
Issued 1,000 Shares for Legal Services 4,000 -0-
Issued 1,500 Shares for Consulting Services 5,250 -0-
Issued 163,500 Shares for Acquisition of
Prevail Online, Inc. 400,000 -0-
F-5
The accompanying notes are an integral part of these financial statements
<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.
F-6
<PAGE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statement -Continued-
NOTE #2 - Significant Accounting Policies -Continued-
H. Foreign Currency: All cash transactions in the Netherlands Antilles are
conducted from the Antilles Banking Corporation in United States dollars.
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.
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.
F-7
<PAGE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statement -Continued-
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 - Accounts Receivable
The Company has the following accounts receivable as follows;
<TABLE>
<CAPTION>
Software
Maintenance License Advertising
Period Total Royalties Fees Fees & Other
<S. <C> <C> <C> <C> <C>
Current $ 212,646 $ 172,446 $ 4,000 $ -0- $ 36,200
0-30 Days 100,000 -0- -0- 100,000 -0-
31-60 Days 144,993 144,993 -0- -0- -0-
61-90 Days 80,714 80,714 -0- -0- -0-
91-120 Days 88,979 88,979 -0- -0- -0-
121-150 Days 83,470 83,470 -0- -0- -0-
151-180 Days 31,136 31,136 -0- -0- -0-
181-210 Days 361,021 361,021 -0- -0- -0-
---------------------------------------------------------------------------
Total $ 1,102,959 $ 962,759 $ 4,000 $ 100,000 $ 36,200
</TABLE>
The Company has provided a provision for bad debts of $71,800.
F-8
<PAGE>
Gobal Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statement -Continued-
NOTE #6 - Notes Payable
<TABLE>
<CAPTION>
The Company has the following notes payable obligations.
1999 1998
<S> <C> <C>
Note Payable to an Individual, Interest at 10%,
Due Date March 31, 2001 $ 100,000 $ 100,000
Note #1 to an Officer at 8% Interest, Due on Demand 20,000 10,000
Note #2 to an Officer at 8% Interest, Due on Demand 20,000 20,000
Note #3 to a Related Party at 8% Interest, Due on Demand 150,000 75,000
Note #5 to a Related Party 10% Interest, Due March 31, 2001 225,000 -0-
Note #6 to a Unrelated Party, No Interest, Due June 2000 125,000 -0-
Total Notes Payable $ 640,000 $ 205,000
Less Current Portion ( 165,000) ( 50,000)
Net Long Term Debt $ 475,000 $ 155,000
</TABLE>
NOTE #7 - 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.
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.
F-9
<PAGE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statement -Continued-
NOTE #7 - Stockholders' Equity -Continued-
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.
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 196,429 post-split shares to acquire 100% of BSW, (1,375,000
pre-split shares, split 1 for 7 on August 13, 1998. 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 196,429 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, paragraph 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 1,711,500, 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 publicaly held corporation.
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.
F-10
<PAGE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statement -Continued-
NOTE #8 - Acquisition of Global Entertainment Holdings/Equities, Inc.
-Continued-
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, paragraph 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, 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.
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.
F-11
<PAGE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statement -Continued-
NOTE #9 - Acquisition of Prevail OnLine, Inc., and Websites Purchase -Continued-
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).
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 278,579 2018
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.
12-31-98
--------
Deferred Tax Asset Balance Beginning of Period $ -0-
Net Operating Loss Carryforwards 296,473
--------
296,473
Valuation Allowance ( 296,473)
------------
Net Deferred Tax Asset $ -0-
Deferred Tax Liability $ -0-
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-12
<PAGE>
Global Entertainment Holdings/Equities, Inc., & Subsidiaries
Notes to Financial Statement -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 - 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, $10,000 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 #13 - Litigation
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 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.
F-13
<PAGE>
NOTE #13 - Litigation - Continued -
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. The first two
payments have been made by the Company and the final payment will be made when
due per the Agreement, on 8/18/00. This final payment will resolve all aspects
of this litigation.
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.
NOTE #14 - 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.
F-14
<PAGE>
Schvaneveldt & Company
Certified Public Accountant
275 East South Temple, #300
Salt Lake City, Utah 84111
(801) 521-2392
Darrell T. Schvaneveldt, C.P.A.
Independent Auditors Report
Board of Directors
Prevail Online, Inc.
I have audited the accompanying balance sheets of Prevail Online, Inc., as of
December 31, 1999, and the related statements of operations, stockholders'
equity, and cash flows for the period July 21, 1999 (Inception) to December 31,
1999. 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.
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 financial statements present fairly, in all
material respects, the financial position of Prevail Online, Inc., as of
December 31, 1999, and the results of its operations and its cash flows for the
period July 21, 1999 (Inception) to December 31, 1999, in conformity with
generally accepted accounting principles.
/S/ Schvaneveldt & Company
Salt Lake City, Utah
June 21, 2000
26
<PAGE>
Prevail ONline, Inc.
Financial Statements
July 21, 1999 to December 31, 1999 (audited)
Prevail Online, Inc.
Balance Sheets
December 31, 1999
December
31,1999
Assets
Current Assets
Cash in Bank $ 19,625
Accounts Receivable 7,200
Prepaid Expenses 3,000
Total Current Assets 29,825
Property & Equipment
Computer Equipment - Net 1,100
Furniture - Net 1,175
Websites - Net 737,897
Total Property & Equipment 740,172
Total Assets $ 769,997
Liabilities & Stockholders' Equity
Current Liabilities
Accounts Payable $ 2,300
Payroll Taxes Payable 9,017
Customer Deposits 35,880
Notes Payable - Websites 125,000
Advance from Parent Corporation 560,179
Total Current Liabilities 732,376
Stockholders' Equity
100,000,000 Shares of Common Stock
at $0.001 Par Value Authorized
100,000 Shares Issued & Outstanding 100
Retained Earnings 37,521
Total Stockholders' Equity 37,621
Total Liabilities & Stockholders' Equity $ 769,997
The accompanying notes are an integral part of these financial statements
F-1
<PAGE>
Prevail Online, Inc.
Statement of Operations
For the Period July 21, 1999 (Inception) to December 31, 1999
December
31,1999
Revenues
Advertising Revenues $ 233,736
Operating Expenses
Websites Amortization 64,916
Depreciation Expenses 207
Advertising Expenses 65,432
Websites Development Expense 22,708
Salaries & Expenses 26,296
Rent 3,150
Office & Telephone 3,858
Repairs & Maintenance 4,362
General & Administrative Expenses 5,393
Total Operating Expenses 196,322
Other Income
Interest Income 107
Net Income before Taxes 37,521
Provisions for Taxes -0-
Net Income $ 37,521
Income Per Share $ 0.375
Shares Outstanding 100,000
The accompanying notes are an integral part of these financial statements
F-2
<PAGE>
Prevail Online, Inc.
Statement of Stockholders' Equity
From July 21, 1999 (Inception) to December 31, 1999
Common Stock Paid-In Retained
Shares Amount Capital Earnings
Balance, July 21, 1999,
(Inception) -0- $ -0- $ -0- $ -0-
Shares Issued for Websites
at $4.00 Per Share 100,000 100 399,900
Net Earnings for Period
Ended December 31, 1999 37,521
Balance, December 31, 1999 100,000 $ 100 $ 399,900 $ 37,521
The accompanying notes are an integral part of these financial statements
F-3
<PAGE>
Prevail Online, Inc.
Statements of Cash Flows
From July 21, 1999 (Inception) to December 31, 1999
December
31,1999
Cash Flows from Operating Activities
Net Income $ 37,521
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities;
Amortization 64,916
Depreciation 207
Rounding ( 1)
Changes in Operating Assets & Liabilities;
(Increase) in Accounts Receivable ( 7,200)
(Increase) in Prepaid Expenses ( 3,000)
Increase in Accounts Payable 2,300
Increase in Payroll Taxes Payable 9,017
Increase in Customer Deposits 35,880
Net Cash Provided by Operating Activities 139,640
Cash Flows from Investing Activities
Purchase of Property & Equipment ( 2,481)
Purchase of Websites ( 402,813)
Net Cash Used by Investing Activities ( 405,294)
Cash Flows from Financing Activities
Proceeds of Advance from Parent Company 160,279
Proceeds from Loans with Seller of Websites 300,000
Payment on Loan with Seller of Websites ( 175,000)
Net Cash Provided by Financing Activities 285,279
Increase in Cash & Cash Equivalent 19,625
Cash at Beginning of Period -0-
Cash at End of Period $ 19,625
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
Prevail Online, Inc.
Statements of Cash Flows
From July 21, 1999 (Inception) to December 31, 1999
December
31,1999
Disclosures from Operating Activities
Interest $ -0-
Taxes -0-
Significant Non Cash Transactions
Common Shares Issued for Website Development
to Scott Logan $ 400,000
The accompanying notes are an integral part of these financial statements
F-5
<PAGE>
Prevail Online, Inc.
Notes to Financial Statements
NOTE #1 - Organization
Prevail Online, Inc., was incorporated on July 21, 1999, under the laws of the
state of Colorado. The Articles of Incorporation state the purpose of the
Company 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 is currently
involved in selling advertising banners on its websites.
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 when the
advertising is displayed upon the websites; customers may prepay for a
period beyond an accounting measurement date, when this occurs that portion
of a customers payment is recognized as a customer deposit in the current
liabilities and recognized in the period that advertising is displayed on
the websites.
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. Inventories: Inventories are stated in the lower of cost, determined by the
FIFO method or market.
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 for 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.
NOTE #3 - Depreciation
The Company capitalizes the purchase of equipment and fixtures for purchases in
excess of $300 per item. Capitalized amounts are depreciated over the useful
life of the assets using the straight-line method of depreciation. At December
31, 1999, the Company had property and equipment as follows;
F-6
<PAGE>
Prevail Online, Inc.
Notes to Financial Statements -Continued-
NOTE #3 - Depreciation -Continued-
Depreciation Accumulated
1999 Expenses Depreciation
Assets Cost Life 1999 1999
Computer Equipment $ 1,200 3 $ 100 $ 100
Furniture & Fixtures 1,281 5 107 107
Totals 2,481 207 207
Websites and Domain Name $ 802,813 $ 64,916 $ 64,916
NOTE #4 - Websites and Domain Name
On August 20, 1999, the Shareholders of Prevail Online, Inc., exchanged 100% of
the issued and outstanding shares of Prevail Online, Inc., for 163,500 shares of
Global Entertainment Holdings/ Equities, Inc. The President of Prevail Online,
Inc., transferred 120,000 shares of the Global Entertainment Holdings/Equities,
Inc's stock to Mr. Scott Logan, a citizen of Austria (unrelated party) to
acquire the two websites known as wheretobet.com and a domain name known as
netbet.org.
The wheretobet.com websites and the netbet.org domain name were 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. 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).
The Company's parent corporation had paid an unrelated party $85,279 to develop
a website known as Thesportsdaily.com. This asset was transferred from Global
Entertainment Holdings/Equities, Inc., to Prevail Online, Inc. Prevail Online,
Inc., has recorded as a current liability the $85,279 it owes the parent
corporation for the websites. Since the transfer from the parent corporation to
Prevail Online, Inc., capital enhancements have been made of $11,931 to the
websites.
NOTE #5 - Income Taxes
The Company and the Company's parent corporation have adopted FASB 109 to
account for income taxes. The Company will file consolidated tax returns with
its parent corporation and expects to owe no current income taxes.
F-7
<PAGE>
Prevail Online, Inc.
Notes to Financial Statements -Continued-
NOTE #6 - Stockholders' Equity
Common Stock;
The Company has 100,000,000 shares of common stock at $0.001 par value
authorized.
Non Cash Investment Activities;
The Company has issued 100,000 shares of its common stock as partial payment
for two websites known as wheretobet.com and netbet.org valued at $400,000.
NOTE #7 - Rent Obligations
The Company rents on a month to month arrangement office facilities from its
President in San Francisco, California at a cost of $600 per month.
F-8
<PAGE>
Exhibit No.
Description of Document
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*
DESCRIPTION OF EXHIBITS
* Exhibits filed previously with Form 10-SB.
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: July 24, 2000
Global Entertainment Holdings/Equities, Inc.
By: /s/Thomas Hawkins/Secretary
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