W TECHNOLOGIES, INC. - 10KSB - 20021028 - NOTES_TO_FINANCIAL_STATEMENT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[1] ORGANIZATION AND CHANGES IN CONTROL OF COMPANY
Prior to July 11, 2001, the corporation was known as IMSCO Technologies, Inc.
["IMSCO" or the "Company"]. On July 11, 2001, Global Sports & Entertainment,
Inc., a Delaware corporation ["Global Sports"], completed a reverse acquisition
of the Company in which the Company acquired all of the outstanding shares of
Global Sports stock in exchange for a controlling interest in IMSCO [the
"Reorganization"]. As the Company is a public shell, the transaction has been
reflected as a recapitalization of the accounting acquiror, Global Sports (See
Note 8).
Initially, the reverse acquisition included a California corporation,
TurfClub.com ["TurfClub"] [See Note 10].
On August 27, 2001, Global Sports changed its name to Global SportsEDGE, Inc.
["EDGE"] and the Company changed its name to Global Sports & Entertainment, Inc.
[the "Company" or "Global"]. The Company also initiated a reverse stock split of
1:4 and increased the number of authorized common shares to 50,000,000. All
share numbers have been changed to reflect the reverse stock split.
The consolidated financial statements of the Company reflect the results of
operations of EDGE and GLOBAL from July 11, 2001 through December 31, 2001. The
financial statements prior to July 11, 2001 reflect the results of operations
and financial position of EDGE. Pro forma information on this transaction is not
presented as, at the date of this transaction, Global Sports & Entertainment,
Inc. [formerly known as IMSCO Technologies, Inc.] was considered a public shell
and accordingly, the transaction was not considered a business combination.
Global Sports & Entertainment, Inc. is a Delaware corporation located in Las
Vegas, Nevada. The Company primarily develops, produces and markets sports
handicapping analysis and information via television and the internet.
On August 22, 2002 the Company changed its name from Global Sports &
Entertainment, Inc. to GWIN, Inc. ("GWIN") to settle a lawsuit brought by the
management of an unrelated corporation named Global Sports, Inc.
On May 23, 2002, the Company filed a Form 8-K to report that the Board of
Directors had approved a change in our fiscal year from a calendar year to one
beginning August 1 and ending July 31. That change was effective July 31, 2002.
The Company is engaged in a highly seasonal business, with the majority of sales
related to football and basketball handicapping. Due to this seasonality,
quarterly results may vary materially between the football and basketball
seasons [concentrated in the first and second fiscal quarters] and the remainder
of the year [the third and fourth fiscal quarters].
[2] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of the Company and its subsidiary, EDGE, as well as several inactive
subsidiaries. All significant inter-company accounts and transactions have been
eliminated in consolidation.
REVENUE RECOGNITION - Revenue is recognized as services are rendered. On July
31, 2002, the Company had received approximately $263,000 in payments for
handicapping services not rendered by that date. This amount is recorded as a
current liability.
Revenue from advertising agreements is recognized ratably over the period of the
agreements. As of July 31, 2002 deferred revenue from advertising agreements was
approximately $133,000. This amount is recorded as a current liability.
OPERATING COSTS & EXPENSES - Handicappers' fees and sales representatives'
compensation and related expenses are charged to operations as incurred.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid investments,
with a maturity of three months or less when purchased, to be cash equivalents.
At July 31, 2002, the Company did not have any cash equivalents.
PROPERTY AND EQUIPMENT AND DEPRECIATION - Property and equipment are stated at
cost. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets, which range from 3 to 5 years.
Routine maintenance and repair costs are charged to expense as incurred and
renewals and improvements that extend the useful life of the assets are
capitalized. Upon sale or retirement, the cost and related accumulated
depreciation are eliminated from the respective accounts and any resulting gain
or loss is reported as income or expense.
BASIC AND DILUTED LOSS PER COMMON SHARE - The Company has adopted Statement of
Financial Accounting Standards ["SFAS"] No. 128, "Earnings Per Share." Under
SFAS 128, loss per common share is computed by dividing net loss available to
common stockholders by the weighted-average number of common shares outstanding
during the period. Shares issued in the reverse acquisition are reflected as
outstanding for all periods presented. In the Company's present position,
diluted loss per share is the same as basic loss per share. Securities that
could potentially dilute EPS in the future include the issuance of common stock
in settlement of notes payable and the exercise of stock options and warrants.
For the seven months ended July 31, 2002 and the years ended December 31, 2001
and 2000 the number of common stock equivalents excluded from the calculation
was 16,429,558, 14,281,245 and 4,440,445, respectively.
STOCK OPTIONS AND SIMILAR EQUITY INSTRUMENTS - The Company has adopted the
disclosure requirements of SFAS No. 123, "Accounting for Stock-Based
Compensation," for stock options and similar equity instruments [collectively
"Options"] issued to employees and directors. However, the Company will continue
to apply the intrinsic value based method of accounting for options issued to
employees prescribed by Accounting Principles Board ["APB"] Opinion No. 25,
"Accounting for Stock Issued to Employees" rather than the fair value based
method of accounting prescribed by SFAS No. 123. SFAS No. 123 also applies to
transactions in which an entity issues its equity instruments to acquire goods
and services from non-employees. Those transactions must be accounted for based
on the fair value of the consideration received or the fair value of the equity
instruments issued, whichever is more reliably measurable.
BENEFICIAL CONVERSION FEATURES - The Company has sold certain 5% three year
convertible debentures with a beneficial conversion feature [See Note 8]
representing a 50% imputed discount. The value of such features is recorded by
the Company as interest expense of $-0- for the seven months ended July 31, 2002
and $757,090 and $-0- for the years ended December 31, 2001 and 2000,
respectively.
INCOME TAXES - Pursuant to SFAS No. 109, "Accounting for Income Taxes," income
tax expense [or benefit] for the year is the sum of deferred tax expense [or
benefit] and income taxes currently payable [or refundable]. Deferred tax
expense [or benefit] is the change during the year in a company's deferred tax
liabilities and assets. Deferred tax liabilities and assets are determined based
on differences between financial reporting and tax basis of assets and
liabilities, and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
ADVERTISING EXPENSES - The Company expenses advertising costs as incurred. Total
advertising costs for the seven month period ended July 31, 2002 and the years
ended December 31, 2001 and 2000 amounted to approximately $195,000, $2,160,000
and $3,172,000, respectively.
CAPITALIZATION OF SOFTWARE DEVELOPMENT COSTS - The costs of developing the
Company's websites and internal computer software are accounted for in
accordance with SOP 98-1, "Accounting for the Cost of Computer Software
Developed or Obtained for Internal Use", as software developed for internal use.
SOP 98-1 requires that all costs related to the preliminary project stage in
which the nature of the project and the strategy to attain the objectives is
explored are expensed. The next stage, the application development stage,
includes external directs costs of materials and services as well as internal
costs for payroll and other costs, which are capitalized.
RECLASSIFACTION - Certain prior year amounts have been reclassified to conform
to current year's financial statement presentation.
[3] GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplates continuation of the
Company as a going concern and realization of assets and settlement of
liabilities and commitments in the normal course of business. For the
seven-month period ended July 31, 2002, the Company has a loss from operations
of approximately $1,371,000, a working capital deficiency of approximately
$3,013,000 and an accumulated deficit of approximately $14,858,000. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. Consistent with its original business plan, management plans to
secure additional financing through equity issuances. The financial statements
do not include any adjustments relating to the recoverability and classification
of recorded assets, or the amounts and classification of liabilities that might
be necessary in the event the Company cannot continue in existence.
[4] CONCENTRATIONS OF CREDIT RISKS
The Company places its cash and cash equivalents with high credit quality
institutions to limit its credit exposure. At July 31, 2002, the Company had
approximately $180,000 in a financial institution that is subject to normal
credit risk beyond insured amounts. At December 31, 2001, the Company did not
have any amounts in a financial institution that were subject to normal credit
risk beyond insured amounts. The Company routinely assesses the credit
worthiness of its customers before a sale takes place and believes its credit
risk exposure is limited. The Company performs ongoing credit evaluations of its
customers but does not require collateral as a condition of service.
[5] PROPERTY AND EQUIPMENT
The following details the composition of property and equipment:
Accumulated
At July 31, 2002 Cost Depreciation Net
---- ------------ ---
Television Studio Set $151,603 $ 102,637 $ 48,966
Website & other 264,818 172,549 92,269
-------- --------- ---------
TOTALS $416,421 $ 275,186 $ 141,235
======== ========= =========
At December 31, 2001
Television Studio Set $151,603 $ 73,159 $ 78,442
Website & other 250,000 123,718 126,282
-------- --------- ---------
TOTALS $401,601 $ 196,877 $ 204,724
======== ========= =========
Depreciation expense, excluding assets under capital lease obligations, for the
seven-month period ended July 31, 2002 and the years ended December 31, 2001 and
2000 amounted to $78,309, $133,847 and $63,080 respectively.
[6] DEPOSITS AND OTHER ASSETS
Deposits and other assets comprised the following:
July 31, December 31,
------- -----------
2002 2001
-------- --------
Deposits with credit card processors $165,081 $136,225
Pre-paid contract for financial services 186,667 221,667
-------- --------
Total $351,748 $357,892
======== ========
[7] LONG - TERM DEBT
Long - term debt is as follows:
July 31, December 31,
----------- -----------
2002 2001
----------- -----------
Convertible Debentures (5%) due August 31, 2003 $ 820,000 $ 870,000
Convertible Note (13%) payable in monthly installments of
$50,000 commencing September 28, 2002 750,000 --
Convertible Debentures (5%) due August 31, 2004 175,000 --
Capital leases 95,049 129,912
----------- ----------
Total 1,840,049 999,912
Less - amounts reflected as current liabilities (643,303) (89,176)
----------- ----------
1,196,746 910,736
Less - unamortized debt discount (805,913) (647,237)
----------- ----------
TOTAL LONG - TERM DEBT $ 390,833 $ 263,499
=========== ==========
Long - term debt at July 31, 2002 matures as follows:
The 13% Convertible Note ($750,000, of which $550,000 is due in the year ending
July 31, 2003) may, at the discretion of the Company, be repaid by the issuance
of common stock of the Company (See Note 8).
[8] STOCKHOLDERS' DEFICIT
CONVERTIBLE DEBT and WARRANTS - During the seven-month period ended July 31,
2002, the Company sold a convertible note with a principal amount of $750,000.
The note bears interest at annual rate of 13%, matures in November, 2003, and
may be repaid, at the option of the Company, by issuance of shares of common
stock valued at market price at the time of each installment payment. The lender
has the right to request repayment by issuance of shares of common stock with a
valuation of $0.80 per share. The Company also issued to the lender a warrant
for the purchase of 250,000 shares of common stock at an average price of $0.99
per share which expires on June 27, 2007.
In addition, the Company sold four convertible debentures with an aggregate
principal amount of $175,000. The debentures bear interest at an annual rate of
5% and the principal amount plus accrued interest will automatically convert to
an aggregate of approximately 385,000 shares of common stock in August, 2004.
The detachable warrants issued in conjunction with this debt have been valued at
$96,348 by management. The value of these warrants is being charged to interest
expense over the life of the related debt.
After deducting fees and expenses paid to the buyers and other agents, the
net proceeds for the sale of the convertible note and the convertible debentures
amounted to $791,500.
During the year ended December 31, 2001 the following securities activity
occurred:
COMMON STOCK - The Company sold 400,000 shares of common stock and granted a
warrant to purchase 400,000 shares of common stock at $1.00 per share to a
member of its Board of Directors for $200,000.
CONVERTIBLE PREFERRED STOCK - The Company issued approximately 475,050 shares of
Series B convertible preferred stock as part of the recapitalization of the
Company on July 11, 2001 (See Note 1). These shares included 4,800 shares of
Series B convertible preferred stock [convertible to 150,000 shares of common
stock], which were issued as payment for a brokers' commission resulting in a
charge to operations of $150,000. All of our Series B preferred stock was
converted on August 27, 2001 into common stock on a 31.25:1 basis.
On July 11, 2001, the Company sold 64,000 units of the Company's Series C
convertible preferred stock for $1,324,000 (net of broker's commission of
$176,000 including $150,000 paid to a related party). Each unit consists of one
share of Series C convertible preferred stock and one warrant with an exercise
price of $31.25 for an additional share of Series C stock. The Series C
convertible preferred stock has a conversion rate that varies with dilution. The
base conversion rate of 31.25:1 has subsequently increased to 46.875:1 due to
anti-dilution provision adjustments of the stock. The beneficial conversion
feature representing that 50% imputed discount and totaling $1,092,000 was
charged to retained earnings in a manner analogous to a dividend.
The agreement for sale of the Company's Series C convertible preferred stock
includes a provision which requires the issuance of additional shares of that
stock in the event that the Company fails to register the common shares
underlying the Company's Series C convertible preferred stock by June 20, 2002.
The financial statements for the seven months ended July 31, 2002 include a
non-cash financing charge of $236,239 to reflect the obligation to issue those
additional shares. That amount is reflected in current liabilities at July 31,
2002.
WARRANTS AND CONVERTIBLE DEBENTURES - The Company issued warrants to purchase
1,815,400 shares at $1.00 per share and 5% convertible debentures to investors
for approximately $936,000 during the year ended December 31, 2001. The
debentures will convert upon demand to 1,815,400 shares of common stock. The
detachable warrants issued in conjunction with this debt have been valued at
$719,232 by management. The value of these warrants is being charged to
operating expense over the life of the related debt.
On November 2, 2001, the Company also issued a warrant to purchase 600,000
shares of stock at $0.10 per share as payment for financial advisory services
for a period of 4 years. These services were valued at $240,000 and are to be
amortized over the life of the agreement. The charge to operations totaled
$18,333 for the year ended December 31, 2001.
OPTIONS AND WARRANTS AT JULY 31, 2002
As of the date of the reverse merger, the Company and its subsidiary, EDGE,had
2,194,246 options outstanding after giving effect to the one-for-four reverse
split and merger adjustments. The following is a summary of option transactions
for the period after the reverse merger:
Weighted-Average
Shares Exercise Price
------ ----------------
Outstanding at July 11, 2001 2,194,246 $2.22
Granted -- --
Exercised (33,830) 1.41
Canceled -- --
--------- --------
OUTSTANDING AT JULY 31, 2002 2,160,416 $2.24
========== ========
EXERCISABLE AT JULY 31, 2002 2,160,416 $2.24
========== ========
The following table summarizes information about stock options at July 31, 2002:
Weighted Average Outstanding and Exercisable Stock Options
Remaining Weighted-Average
Exercise Prices Shares Contractual Life Exercise Price
--------------- ------ ---------------- ----------------
$1.00 - $7.50 2,160,416 4 years $2.24
The Black-Scholes option valuation model was developed for use in estimating the
fair value of options. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility. Due
to the effects of the reverse merger, the Company believes that for options
granted prior to the reverse merger date, the results of the Black-Scholes
computation are not meaningful. There were no options granted during the seven
months ended July 31, 2002 or for the year ended December 31, 2001.
As of the date of the reverse merger, the Company and its subsidiary, EDGE, had
2,246,199 warrants to purchase common stock outstanding. The following is a
summary of warrant transactions for the period after the reverse merger:
Weighted-Average
Shares Exercise Price
------ --------------
Outstanding at July 11, 2001 2,041,519 $1.77
Issued for services 1,988,889 0.63
Issued with convertible debt 3,144,367 0.90
Issued with Series C Preferred Stock 2,000,000 1.00
------------ -----------
OUTSTANDING AT JULY 31, 2002 9,174,775 $1.06
------------ -----------
EXERCISABLE AT JULY 31, 2002 9,174,775 $1.06
------------ -----------
On June 18, 2002, shareholders of the Company approved an Equity Incentive
Plan ( the "Plan"). Under the Plan, a sub-committee of the Board of Directors is
authorized to grant, at its discretion, options to purchase shares of common
stock at a set price greater than market price as of the date of the grant. The
Company has reserved 3,000,000 shares for issuance under the Plan. At July 31,
2002, no options had been granted under the plan.
[9] PROVISION FOR INCOME TAXES
The operating loss carry forwards at July 31, 2002, [assuming all operating loss
carry forwards will be available] amount to approximately $13,000,000. Such loss
carry forwards will expire as follows: approximately $6,000,000 in 2020,
$5,000,000 in 2021 and $2,000,000 in 2022. At July 31, 2002 based on the amount
of operating loss carry forwards, the Company would have had a deferred tax
asset of approximately $4,080,000. Because of the uncertainty that the Company
will generate income in the future sufficient to fully or partially utilize
these carry forwards, a valuation allowance of $4,080,000 has been established.
Accordingly, no deferred tax asset is reflected in these financial statements.
The corresponding amounts at December 31, 2001 were $3,740,000.
As part of the reverse acquisition (Note 1), the Company acquired net operating
losses of IMSCO of approximately $10,640,000. Pursuant to Section 382 of the
Internal Revenue Code, utilization of these losses will be limited to
approximately $285,000 subject to a maximum annual utilization of approximately
$15,000 per year through 2021. At July 31, 2002, the Company would have a
deferred tax asset of approximately $97,000 from these acquired losses.
Because of the uncertainty that the Company would generate income in the future
sufficient to fully or partially utilize these carry forwards, a valuation
allowance of $97,000 has been established. Accordingly, no deferred tax asset
is reflected in these financial statements.
[10] NON-RECURRING CHARGES
During the seven months ended July 31, 2002, the Company reached a settlement
with an individual who is both a shareholder and executive officer of
TurfClub.com. This settlement represents the final action required to conclude
the rescission of the 2001 reverse merger as it relates to TurfClub.com. The
settlement provides for payment of $90,000, $15,000 of which was paid on October
16, 2002, and the remaining $75,000 payable in increments of $5,000 per month
over the next 15 months, the issuance of a warrant to purchase 450,000 shares of
common stock for $0.50 per share and the issuance of 166,650 shares of common
stock. The estimated cost of approximately $287,000 has been charged to
operations. The settlement agreement was executed on September 26, 2002.
The Company also reached an agreement in the matter of a breach of contract
litigation with a former landlord and concluded arbitration with an individual
regarding a sports celebrity agreement from 2000. The financial statements for
the seven months ended July 31, 2002 reflect a non-recurring charge of $ 227,000
for the excess of the estimated aggregate costs of those settlements over
amounts previously recorded.
During the year ended December 31, 2001, the Company incurred certain
non-recurring charges related to the rescission of the merger with TurfClub.com.
These charges include approximately $377,000 advanced to the management of
TurfClub.com for normal operating expenses. Management has deemed these amounts
uncollectible from TurfClub, and has charged the items to operations as bad debt
expense. The statements for that period also reflect estimated costs of
settlements with shareholders of TurfClub who were not involved in management or
in the matters which gave rise to the decision to rescind the element of the
reverse merger that involved TurfClub. The agreements provided for issuance of
shares of common stock and warrants in exchange for mutual releases from all
parties. The amount provided for these costs was approximately $866,000.
[11] CHANGE IN FISCAL YEAR.
As described in Note 1, the Company adopted a new fiscal year effective July 31,
2002. The seven month period ended July 31, 2002 effects the transition to that
new fiscal year. Summarized statement of operations information for the
transition period is as follows:
Seven Months ended July 31,
---------------------------
(Unaudited)
2002 2001
---- ----
Revenues $ 3,027,230 $ 993,143
Operating (loss) (1,371,117) (1,052,831)
Net (loss) $(2,075,443) $(1,092,511)
(Loss) per share, basic and diluted $ (0.10) $ (0.06)
[12] NEW AUTHORITATIVE ACCOUNTING PRONOUNCEMENTS
The Company does not anticipate the adoption of recently issued accounting
pronouncements to have a significant on the Company's results of operations,
financial position or cash flows.
[13] RELATED PARTY TRANSACTIONS
In September 2001, we entered into a financial advisory agreement with Keating
Investments, LLC, an entity related to one of our Directors. In consideration
for the services to be rendered pursuant to this agreement, we issued Keating
Investments, LLC a warrant to purchase 600,000 shares of our common stock at a
purchase price of $0.10 per share, exercisable until September 10, 2006.
In November, 2001, the Company entered into note payable agreements with an
officer and a member of the Board of Directors of the Company for $50,000 each
plus interest accrued at 12% annually. At July 31, 2002 and December 31, 2001,
the Company had a balance of $100,000 outstanding under this agreement, with
accrued interest of $7,323 and $2,323, respectively. The notes plus accrued
interest were payable on June 30, 2002 and are therefore classified as current
liabilities.
Long - term debt includes convertible debentures held by officers and a member
of the Board of Directors of the Company with a face value of $176,666. See Note
7 on long - term debt.
During 2001, Global paid approximately $227,000 to Wayne Root for handicapping
services, Mr. Root is an Officer and Director of the Company. The $227,000 was
charged to handicapping fees.
The Company also sold 400,000 shares of common stock and granted 400,000 stock
warrants with an exercise price of $1.00 per share to an entity related to a
member of its Board of Directors for $200,000 (See Note 8).
In connection with the reorganization and sale of Series C Preferred Stock in
July 2001, Keating Investments, LLC received a placement fee of $150,000 for
services rendered in connection with the private placement of our Series C
preferred stock. Timothy J. Keating, a director of our company and our former
President and Chief Executive Officer, is the Managing Member and President of
Keating Investments, LLC (See Note 8).
[14] COMMITMENTS AND CONTINGENCIES
CAPITAL LEASES - The Company is the lessee of office and computer equipment
under nine (9) capital leases expiring within the next two (2) years. These
capital leases are collateralized by the related assets. The liabilities under
capital leases are recorded at the present value of the net future minimum lease
payments and the assets are recorded at the purchase price which approximates
fair market value on the date of the purchase.
Following is a summary of property held under capital leases:
Accumulated
Cost Depreciation Net
----- ------------ ----
Office Fixtures and Equipment
At July 31, 2002 $ 291,390 $ 191,239 $ 100,151
At December 31, 2001 $ 291,390 $ 134,580 $ 156,810
Depreciation of assets under capital leases charged to expense for the
seven-month period ended July 31, 2002 and the years ended December 31, 2001 and
2000 was $56,660, $97,130 and $37,450 respectively.
Minimum future lease payments under capital leases for each of the next two
fiscal years and in the aggregate are:
Present Value of Net Minimum Lease Payments 95,049
Less: Current Portion (93,303)
LONG-TERM PORTION $ 1,746
OPERATING LEASES - At July 31, 2002, the Company has two operating leases
for office space that expire in November 2003 and January 2004. One lease
grants an option for renewal for an additional three (3) years. The leases have
monthly payment obligations of $3,278 and $8,520, increasing annually, based on
the CPI.
Approximate minimum future rental payments under non-cancelable operating leases
having remaining terms in excess of one year as of July 31, 2002 are as follows:
Year ending Operating
July 31, Leases
------------ ---------
2003 $148,000
2004 63,000
Thereafter 0
---------
Total $211,000
=========
Rent expense for the seven months ended July 31, 2002 and for the years ended
December 31, 2001 and 2000 was approximately $80,000, $138,000 and $145,000,
respectively, and was charged to operations.
[15] LEGAL MATTERS
In the normal course of business, the Company is exposed to a number of asserted
and unasserted potential claims. Management, after review and consultation with
counsel, believes it has meritorious defenses and considers that any liabilities
from these matters would not materially affect the financial position, liquidity
or results of operations of the Company.
[16] FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company adopted Statement of Financial Accounting Standards ["SFAS"] No.
107, "Disclosure About Fair Value of Financial Instruments," which requires
disclosing fair value, to the extent practicable, for financial instruments
which are recognized or unrecognized in the balance sheet. The fair value of the
financial instruments disclosed herein is not necessarily representative of the
amount that could be realized or settled, nor does the fair value amount
consider the tax consequences of realization or settlement.
In assessing the fair value of these financial instruments, the Company used a
variety of methods and assumptions, which were based on estimates of market
conditions and risks existing at that time. For certain instruments, including
cash and cash equivalents, related party and trade and notes payable, it was
assumed that the carrying amount approximated fair value for the majority of
these instruments because of their short maturities.
The fair value of long-term debt is based upon current rates at which the
Company could borrow funds with similar remaining maturities. It was assumed
that the carrying amount approximated fair value for these instruments.
[17] SUBSEQUENT EVENTS (UNAUDITED)
Subsequent to year end, we entered into an agreement with Newmarket Investments
plc (formerly The British Bloodstock Agency, plc ("BBA")), an existing debenture
holder. BBA currently holds a $500,000 5% Convertible Debenture, maturing in
August 2004, convertible at BBA's option to 1,000,000 shares of common stock,
and a warrant to purchase 1,000,000 shares of common stock, exerciseable at
$1.00 and expiring on August 31, 2005.
BBA has invested an additional $700,000, in exchange for which the principal
amount of their currently outstanding debenture was increased to $1,200,000
which is convertible into 3,428,571 shares of common stock. The exercise price
for the debt conversion was reduced to $0.35 per share, and the price is subject
to further adjustment based on operating income and net revenue for the fiscal
year ending July 31, 2003. This beneficial conversion will result in a non-cash
financing charge in the first quarter of fiscal 2003 of approximately $425,000.
In addition, BBA has extended an unsecured standby credit facility of $250,000,
payable on March 31, 2003 and bearing interest at an annual rate of 16%. As
consideration for these investments, the Company has also agreed to exchange the
warrant currently held by BBA for a warrant to purchase 3,000,000 shares of
common stock at $0.35 expiring on August 31, 2005. The exercise price of both
the warrants and the convertible debt is subject to modification based on any
other conversions by any other shareholders or noteholders which result in
conversion to common stock at an exercise price of less than $0.35 per share.
The Company also agreed to engage an executive of BBA as an operational
consultant for 90 days and as a senior executive officer at the conclusion of
that period. An executive of BBA will also be nominated for election to the
Board of Directors of the Company.
ITEM 8. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
NONE
PART III
ITEM 9. IDENTIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below is certain information concerning our executive
officers and directors, including their age as of October 25, 2002. Our
directors serve for a term of one year or until their successors are elected and
qualified. Our officers serve at the discretion of our board of directors. There
are no family relationships among our Directors and Officers.
The resignation of Mr. Ralph Papitto on September 9, 2002 has left one
vacancy on our Board of Directors, which we intend to fill by appointing Mr.
Simon Hayes as a Director. Mr. Hayes' appointment will become effective upon the
closing of our agreement with Newmarket Investments plc (formerly British
Bloodstock Agency). For further discussion, please refer to the section titled
"Certain Relationships and Related Party Transactions."
NAME AGE TITLE
---- --- -----
Wayne Allyn Root . . . . . . . . . 40 Chairman of the Board and Chief Executive Officer
Douglas R. Miller . . . . . . . . 55 President, Chief Operating Officer, Chief Financial Officer,
Secretary and Director
David P. Hanlon . . . . . . . . 56 Director
Edward J. Fishman . . . . . . . . 58 Director
Timothy J. Keating . . . . . . . . 39 Director
John T. Manner . . . . . . . . . 55 Director
Simon Hayes . . . . . . . . . . . 41 Director and (untitled) Senior Executive Officer (both nominated)
WAYNE ALLYN ROOT has served as our chief executive officer and chairman of
our board of directors since our reorganization in July 2001. From 1999 to 2001,
Mr. Root served as chairman and chief executive officer of our subsidiary,
Global Sports Edge, Inc. From 1990 to 1999, Mr. Root served as a sports
handicapper for National Sports Service. Mr. Root holds a B.A. from Columbia
University. Mr. Root does not hold a directorship in any other public company.
DOUGLAS R. MILLER has served as our president, chief operating officer,
secretary and director since our reorganization in July 2001. Mr. Miller has
also served as our chief financial officer since November 2001. From 1999 to
2001, Mr. Miller served as president of our subsidiary, Global Sports Edge, Inc.
From 1998 to 1999, Mr. Miller was the chief financial officer of Body Code
International, an apparel manufacturer. Mr. Miller holds a B.A. degree in
economics from the University of Nebraska, and an MBA degree from Stanford
University. Mr. Miller does not hold a directorship in any other public company.
DAVID P. HANLON has served as a director since September 2001. Mr. Hanlon
has been employed as an independent business consultant since 1998. From 1996 to
1998, Mr. Hanlon served as president and chief operating officer of Rio Suites
Hotel & Casino. Mr. Hanlon holds a degree from Cornell University and a MBA from
the Wharton School of Business at the University of Pennsylvania. Mr. Hanlon
does not hold a directorship in any other public company.
EDWARD J. FISHMAN has served as a director since August 2001. Between 1998
and 2001, Mr. Fishman was employed as an independent marketing and gaming
consultant. Mr. Fishman has over 18 years experience in the gaming industry and
has served as a marketing and strategic planning consultant to casinos
worldwide. Mr. Fishman currently holds directorships in two other public
companies, Laserlock, Inc. and Interactive Solutions Company.
TIMOTHY J. KEATING served as our chief executive officer from August 1999
to July 2001, and has served as our director since August 2001. Mr. Keating is
currently the president of Keating Investments, LLC, a licensed broker-dealer
and registered investment advisor, a position he has held since 1989. Mr.
Keating holds an A.B. degree in economics from Harvard College. Mr. Keating does
not hold a directorship in any other public company.
JOHN T. MANNER has served as a director since September 2001. Mr. Manner
has served as president of John Manner Insurance Agency Inc since 1972. Mr.
Manner holds a B.S. degree from Milliken University and an M.S. degree from
Indiana University. Mr. Manner does not hold a directorship in any other public
company.
SIMON HAYES has been nominated to fill a vacancy on our Board of Directors,
and to fill an unnamed Senior Executive Officer position, both positions to be
effective upon closing our agreement with Newmarket Investments plc. Mr. Hayes
has served as Chief Executive Officer and Director of Newmarket Investments plc,
a publicly traded investment company (on the London Stock Exchange), since 2001.
He intends to maintain his positions as officer and director to Newmarket, as
they are require complementary time commitments. From 1998 to 2001, Mr. Hayes
was retired. From 1997 to 1998, Mr. Hayes served as Managing Director to UBS
Securities (East Asia) Ltd., an international brokerage firm.
There are no family relationships among our executive officers and
directors.
None of the foregoing Directors or Executive Officers during the past
five years:
(1) Had any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer
either at the time of the bankruptcy or within two years prior to
that time;
(2) Been convicted in a criminal proceeding or subject to a pending
criminal proceeding;
(3) Been subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities, futures, commodities or banking activities;
and
(4) Been found by a court of competent jurisdiction (in a civil
action), the Securities and Exchange Commission or the Commodity
Futures Trading Commission to have violated a federal or state
securities or commodities law, and the judgment has not been
reversed, suspended, or vacated.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file certain reports
regarding ownership of, and transactions in, the Company's securities with the
Securities and Exchange Commission (the "SEC"). Such officers, directors and 10%
stockholders are also required by SEC rules to furnish the Company with copies
of all Section 16(a) forms that they file.
Based solely on its review of copies of Forms 3 and 4 and amendments
thereto furnished to the company pursuant to Rule 16(a)-(e) and Forms 5 and
amendments thereto furnished to the company with respect to the last fiscal
year, and any written representations referred to in Item 405(b)(2)(i) of
Regulation S-B stating that no Forms 5 were applicable to the company's
officers, directors and 10% stockholders, the company has determined that
there were deficiencies in compliance.
Based upon our review, the following individuals and entities have not
Filed Section 16 reports in a timely manner. We do not have specific information
Regarding the number of transactions which may have been performed by each or
all Of the following individuals or entities:
Wayne Allyn Root - Forms 3, 4 and 5
Douglas R. Miller - - Forms 3, 4 and 5
David P. Hanlon - - Forms 3, 4 and 5
Edward J. Fishman - Forms 3, 4 and 5
Ralph R. Papitto - Forms 3, 4 and 5
Timothy J. Keating - one undisclosed transaction on Form 4
John T. Manner - Forms 3, 4 and 5
Newmarket Investment, plc - Forms 3, 4 and 5
Trilium Holdings Ltd. - Forms 3, 4 and 5
Laurus Master Fund, Ltd - Forms 3, 4 and 5
ITEM 10: EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to our Chief
Executive Officer and our other executive officers during the fiscal period
ended July 31, 2002 and the fiscal years ended December 31, 2001 and 2000.
COMPENSATION FOR THE LONG-TERM
PERIOD COMPENSATION
SECURITIES
UNDERLYING
OPTIONS ALL OTHER
NAME & POSTION YEAR SALARY OTHER GRANTED COMPENSATION
Wayne Allyn Root; Chairman &
Chief Executive Officer 2002 $68,077 $163,262 -- --
2001 $165,000 $227,000 -- --
2000 $180,000 $70,000 106,551 --
Douglas R. Miller; President
& Chief Financial Officer 2002 $92,115 -- -- --
2001 $173,845 -- -- --
2000 $180,000 -- 106,551 --
Timothy J. Keating; former
Chief Executive Officer 2002 -- -- -- --
2001 -- -- -- --
2000 -- $75,000 -- --
- The amounts set forth above for Mr. Root represent compensation paid to
him beginning on December 6, 1999 when he become an executive officer
of Global SportsEDGE, Inc., which became a wholly-owned subsidiary of
our company as a result of our reorganization in July 2001. Other
compensation represents handicapping fees earned.
- Other compensation for Mr. Root in 2001 includes $74,000 earned but not
paid.
- The amounts set forth above for Mr. Miller represent compensation paid
to him beginning on December 6, 1999 when he became an executive
officer of Global SportsEDGE, Inc.
- Mr. Keating served as our Chief Executive Officer from August 1999 to
July 2001. As compensation for serving as our Chief Executive Officer,
we granted Mr. Keating, on October 13, 2000, a total of 200,000 shares
of our common stock, which had a fair market value of approximately
$75,000 on the date of grant.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth option grants to our Chief Executive
Officer and our other executive officers during the fiscal period ended July
31, 2002.
PERCENT OF
NUMBER OF TOTAL OPTIONS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES IN PRICE EXPIRATION
OPTIONS GRANTED FISCAL PERIOD PER SHARE DATE
2002
---------------- --------------- ----------- ------------
Wayne Allyn Root -- N/A
Chairman and Chief Executive Officer
Douglas R. Miller -- N/A
President and Secretary
Timothy J. Keating -- N/A
Former Chief Executive Officer
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUES AS OF JULY
31, 2002
The following table sets forth information concerning option exercises
and option holdings for the year ended July 31, 2002 with respect to our
Chief Executive Officer and each of our other executive officers.
SHARES
ACQUIRED NUMBER OF SECURITIES VALUE OF UNEXERCISED
ON VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
NAME EXERCISE REALIZED OPTIONS AT JULY 31,2002 AT JULY 31, 2002
EXERCISABLE UNEXERCISABLE
Wayne Allyn Root -- -- 106,551 -- --
Douglas R. Miller -- -- 106,551 -- --
Timothy J. Keating -- -- -- -- --
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of October 25, 2002 with respect to the
shares of Common Stock beneficially owned by (i) each director; (ii) each person
(other than a person who is also a director) who is an executive officer; (iii)
all executive officers and directors as a group and (iv) each beneficial owner
(other than directors and named executive officers) of more than 5% of our
Common Stock. The term "executive officer" is defined as the President, Chief
Operating Officer/Treasurer, any vice-president in charge of a principal
business function (such as administration or finance), or any other person who
performs similar policy making functions for the Company.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock subject to options,
warrants or convertible securities exercisable or convertible within 60 days are
deemed outstanding for computing the percentage of the person or entity holding
such options, warrants or convertible securities but are not deemed outstanding
for computing the percentage of any other person, and is based on 37,715,261
shares issued and outstanding on a fully diluted basis, as of October 25, 2002.
NUMBER OF PERCENTAGE
COMMON SHARES HELD OF CLASS
TITLE OF CLASS NAME AND ADDRESS (1) OR CONVERTIBLE OWNED
Common and 5%
Convertible Debt Wayne Allyn Root (2) 5,010,024 13.3%
Common and 5%
Convertible Debt Douglas R. Miller (3) 3,889,019 10.3%
Common and Series C
Preferred Timothy J. Keating (4) 5,225,874 13.8%
Common Edward J. Fishman 532,756 1.4%
Common and 5%
Convertible Debt John T. Manner (5) 1,265,772 3.4%
Common David P. Hanlon (6) 106,551 *
Common Simon Hayes (7) * *
Directors and executive
Officers as a group
(7 persons) 16,029,996 42.5%
Common and 5%
Convertible Debt Newmarket Investment, plc (8) 2,000,000 5.3%
Series C Preferred Trilium Holdings Ltd. (9) 1,666,667 4.4%
Common and 13%
Convertible Note Laurus Master Fund, Ltd. (10) 2,125,000 5.6%
(1) Unless otherwise noted, the address for each of the named directors and
officers is: 5092 South Jones Blvd., Las Vegas, Nevada 89188.
(2) Amount also includes Mr. Root's stock options to acquire 106,551 shares of
common stock at an exercise price of $1.41, warrants to purchase 400,000
shares at an exercise price of $0.50, 106,552 shares of common stock owned
by Mr. Root's minor children, 100,000 common shares to be issued upon
conversion of a 5% Convertible Debenture and warrants to purchase 100,000
shares at an exercise price of $1.00 related to that Debenture.
(3) The shares are held in the name of Kerlee Inter Vivos Trust for which Mr.
Miller is a beneficiary. Amount also includes Mr. Miller's stock options to
acquire 106,551 shares of common stock at an exercise price of $1.41,
33,333 common shares to be issued upon conversion of a 5% Convertible
Debenture held by Mr. Miller's wife and warrants to purchase 33,333 shares
at an exercise price of $1.00 related to that Debenture.
(4) Amount also includes Mr. Keating's shares of Series C Preferred Stock, that
are held by him and through an affiliated entity, that are convertible into
1,720,000 shares of common stock and related warrants to purchase 1,146,667
shares of common stock at an exercise price of $1.00. Also includes
warrants held by him through an affiliated entity to acquire 600,000 shares
of common stock at an exercise price $0.10, 400,000 common shares held by
him through an affiliated entity and a related warrant to purchase 400,000
shares of common stock at an exercise price of $1.00 and a warrant to
purchase 400,000 shares at an exercise price of $0.50 per share.
(5) Amount also includes Mr. Manner's stock options to acquire 168,465 shares
of common stock at an exercise price of $1.41, 220,000 common shares to be
issued upon conversion of a 5% Convertible Debenture and warrants to
purchase 220,000 shares at an exercise price of $1.00 related to that
Debenture.
(6) Amount also includes Mr. Hanlon's stock options to acquire 106,551 shares
of common stock at an exercise price of $1.41.
(7) Mr. Hayes has been nominated to serve as both a director and a senior
executive officer. He is Chief Executive Officer of Newmarket Investments,
plc, but does not hold a control ownership position in the company. His
address is: Queensberry House, 129 High Street, Newmarket, Suffolk, CB8
9WP, UK.
(8) Represents 1,000,000 shares underlying a 5% Convertible Debenture, maturing
in August 2004, and 1,000,000 shares of common stock underlying a warrant,
exerciseable at $1.00 and expiring on August 31, 2005. The address for
Newmarket Investments is: Queensberry House, 129 High Street, Newmarket,
Suffolk, CB8 9WP, UK
(9) Represents 21,333 shares of Series C convertible preferred stock that are
convertible into 1,000,000 common shares and an associated warrant to
purchase 666,667 shares at an exercise price of $1.00. The address for
Trilium Holdings is: Charlotte House, Charlotte Street, P.O. Box 9204,
Nassau, Bahamas.
(10) Represents 1,875,000 shares of common stock underlying 13% Convertible Note
and 250,000 shares of common stock issuable upon exercise of warrant issued
in connection with the 13% Convertible Note. The address for Laurus is:
P.O. Box 1234 Queensgate House, South Church Street, Grand Cayman, Cayman
Islands
* Represents less than 1% owned
Equity Compensation Plan Information
Number of
securities to be
issued upon Number of
exercise of Weighted average securities
outstanding exercise price of remaining
options, warrants outstanding options, available for
Plan category and rights warrants and rights future issuance
(a) (b) (c)
Equity compensation
plans approved by security holders 3,000,000 Common Not determinable 3,000,000 Common
Equity compensation
plans not approved by
security holders None N/A none
Total 3,000,000 Common Not determinable 3,000,000 Common
ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 21, 2002, we entered into an agreement with Newmarket Investments
plc (formerly The British Bloodstock Agency, plc ("BBA")), an existing
shareholder. BBA currently holds a $500,000 5% Convertible Debenture, maturing
in August 2004, convertible at BBA's option to 1,000,000 shares of common stock,
and a warrant to purchase 1,000,000 shares of common stock, exerciseable at
$1.00 and expiring on August 31, 2005. BBA has invested an additional $700,000,
in exchange for which we have increased the principal amount of their currently
outstanding debenture to $1,200,000, convertible into 3,428,571 shares of common
stock. The exercise price for the debt conversion was reduced to $0.35 per
share, and the price is subject to further adjustment based on our operating
income and net revenue for the fiscal year ending July 31, 2003, as described in
Section 6.5 of the modified agreement. All other terms,including the maturity
date, remained undisturbed. BBA has extended an unsecured standby credit
facility of $250,000, with a 16% annual interest rate and payable on March 31,
2003. In consideration for these investments, we have also agreed to exchange
the warrant currently held by BBA with a warrant to purchase 3,000,000 shares of
common stock, exerciseable at $0.35, and expiring on August 31, 2005. The
exercise price of both the warrants and the convertible debt are subject to
modification based on any other conversions by any other shareholders, including
the Laurus Fund, which results in conversion to our common stock at an exercise
price of less than $0.35 per share. These terms are described more fully in
Section 7.1 of the modified agreement. We have also agreed to approve the
appointment of BBA's Chief Executive Officer, Simon Hayes, as an operational
consultant for 90 days, at a salary of $15,000 per month. Mr. Hayes will also be
appointed to fill a vacancy in our Board of Directors, and will stand for
election at our next annual meeting, as well as being appointed a senior
executive officer, both events to occur no later than December 31, 2002. We
executed this agreement on September 13, 2002.
In connection with the reorganization and sale of Series C preferred
stock in July 2001, Keating Investments, LLC received a placement fee of
$150,000 for services rendered in connection with the private placement of our
Series C preferred stock. Timothy J. Keating, a director of our company and our
former President and Chief Executive Officer, is the Managing Member and
President of Keating Investments, LLC.
On September 4, 2001, we sold to Keating Partners, L.P., for an aggregate
purchase price of $200,000, a total of 400,000 shares of our common stock,
together with a warrant to purchase an additional 400,000 shares at an exercise
price of $1.00 per share expiring on August 31, 2004. This transaction triggered
the anti-dilution adjustment provisions of our Series C preferred stock, of
which 36,694 shares are beneficially owned by Mr. Keating, resulting in an
increase in the conversion rate for the Series C preferred stock from 31.25 to
46.875 shares of common stock for every one share of Series C preferred stock.
In September 2001, we entered into a financial advisory agreement with
Keating Investments, LLC. In consideration for the services to be rendered
pursuant to this agreement, we issued Keating Investments, LLC a warrant to
purchase 600,000 shares of our common stock at a purchase price of $0.10 per
share, exercisable until September 10, 2006. The cost of this agreement has been
recorded at $240,000 and is being charged to operations over 48 months. The
holders of the Series C preferred stock executed a waiver of the anti-dilution
adjustment to the conversion rate of the Series C preferred stock that otherwise
would have been triggered by this transaction.
In November, 2001, we entered into note payable agreements with Mr. Root,
an officer and director, and Mr. Keating, a director, for $50,000 each plus
interest accrued at 12% annually. At December 31, 2001, we had a balance of
$100,000 outstanding under this agreement with accrued interest of $2,323. The
notes plus accrued interest were payable on June 30, 2002 and are therefore
classified as current liabilities.
ITEM 13: EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are filed as part of this annual report:
(a) EXHIBITS.
-------------------------------------------------------------------------------
Exhibit Description
No.
-------------------------------------------------------------------------------
2.1 Agreement and Plan of Reorganization dated July 6, 2001 between Global
Sports & Entertainment, Inc. and Turfclub.com, Inc. (1)
3.1 Certificate of Incorporation of GWIN, as amended (1)
3.2 Bylaws of GWIN (5)
4.1 Certificate of Designations of Series C Preferred Stock and Series C
Stock Purchase Agreement (1)
4.2 Form of Indenture representing 5% Convertible Debentures (1)
4.3 Form of Indenture representing 13% Convertible Debentures (4)
4.4 Form of Common Stock Purchase Warrant included with 5% Convertible
Debenture Units (4)
10.1 Financial Advisory Agreement dated September 10, 2001 between the
GWIN and Keating Investments, LLC (1)
10.2 Executive Services Agreement dated December 6, 1999 between GWIN
and Mr. Miller (1)
10.3 Executive Services Agreement dated December 6, 1999 between GWIN
and Mr. Root (1)
10.4 Sports Personality Agreement dated March 2, 2000 between GWIN and Mr.
Root (1)
10.5 Term sheet with British Bloodstock Agency, dated August 21, 2002 (4)
10.6 Agreement describing voting agreement between Mr. Manner and Mr.
Root regarding Mr. Keating's board rights (2)
10.7 Common Stock Purchase Warrant issued to Keating Investments, LLC (1)
10.8 Debenture Purchase Agreement dated September 19, 2001 between GWIN and
Mr. Root (1)
10.9 5% Convertible Debenture dated September 19, 2001 issued to Wayne Allyn
Root (1)
10.11 Common Stock Purchase Warrant issued to Mr. Root (1)
10.12 Debenture Purchase Agreement dated August 31, 2001 between GWIN and Mr. Manner (1)
10.13 5% Convertible Debenture dated September 19, 2001 issued to Mr. Manner (1)
10.14 Common Stock Purchase Warrant issued to Mr. Manner (1)
10.15 Common Stock Purchase Warrant dated September 4, 2001 between GWIN and
Keating Partners, L.P. (1)
10.16 Common Stock Purchase Warrant issued to Keating Partners, L.P. (1)
10.17 Promissory Note dated October 23, 2000 issued to Mr. Root (1)
10.18 Letter Agreement dated July 5, 2001 between GWIN and Keating Investments,
LLC (1)
10.19 Series C Preferred Stock Purchase Agreement dated July 10, 2001 between
Trilium Holdings Ltd. and the Company (1)
10.20 Promissory Note dated November 12, 2001 issued to Mr. Keating. (3)
10.21 Promissory Note dated November 12, 2001 issued to Mr. Root. (3)
10.22 Securities Purchase Agreement dated June 29, 2002 between Laurus Master
Fund, Ltd. and GWIN (4)
10.23 2002 Equity Incentive Plan (6)
21.1 List of Subsidiaries (4)
23.1 Consent of Simon Hayes
99.1 Certifications pursuant to section 906 of the Sarbanes-Oxley Act of 2002
99.2 Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(1) Incorporated by reference to the similarly described exhibit included with
the registrant's Quarterly Report for quarter ended September 30, 2001
filed with the SEC on November 19, 2001.
(2) Described in Exhibit 2.1
(3) Incorporated by reference to the similarly described exhibit included with
the registrant's Annual Report for the year ended December 31, 2001 filed
with the SEC on April 1, 2002 and amended on May 15, 2002.
(4) Incorporated by reference to the similarly described exhibit included with
the registrant's registration statement on Form SB-2, 333-99599, filed on
September 13, 2002.
(5) Unavailable in electronic format, but will be mailed upon request free of
charge.
(6) Incorporated by reference to the Registrants Definitive Information
Statement filed with the SEC on July 21, 2002.
(b) REPORTS ON FORM 8-K
On May 23, 2002, we filed a Form 8-K to report that our Board of Directors
had approved a change in our fiscal year from a calendar year to one beginning
August 1 and ending July 31. That change was effective July 31, 2002.
On July 24, 2001, we filed a Form 8-K to report (i) the changes in control
and (ii) the proposed amendments to the Certificate of Incorporation as
described in Item 5 of our Quarterly Report filed with the Securities and
Exchange Commission on Form 10 - QSB on November 19, 2001. On February 26, 2002,
we filed a Form 8-K/A amending the above filing to include the audited financial
statements of Global SportsEDGE.
SIGNATURES
In accordance with Section 13 of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized on October 28, 2002
GLOBAL SPORTS & ENTERTAINMENT, INC.
By: /s/ Wayne Allyn Root
-----------------------------------------
Wayne Allyn Root, Chief Executive Officer
In accordance with the requirements of Section 13 of the Exchange Act, this
Report has been signed below by the following persons on behalf of the
Registrant on October 28, 2002 and in the capacities indicated.
/s/ Wayne Allyn Root
-----------------------------------------------------
Wayne Allyn Root, Chairman, Chief Executive Officer
(Principal Executive Officer)
/s/ Douglas Miller
-----------------------------------------------------
Douglas Miller, Director and Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ Timothy J. Keating
-----------------------------------------------------
Timothy J. Keating, Director
/s/ Edward J. Fishman
-----------------------------------------------------
Edward J. Fishman, Director
EXHIBIT 23.1
CONSENT OF SIMON HAYES
I hereby consent to the use of my name and reference to my name and my position
with Newmarket Investments plc, and inclusion of material and relevant documents
referred to herein, for the purposes of filing the Annual Report on Form 10-KSB
(File 0-24520) and the reference to any of the above in and by incorporation of
the Company's registration statement on Form SB-2 (File 333-99599).
/s/ Simon Hayes
_______________________
Simon Hayes
October 28, 2002
EXHIBIT 99.1
CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of GWIN, Inc. (the "Company") on Form
10-KSB for the period ended July 31, 2002, as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Wayne Allyn Root,
Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
(1) The Report fully complies with the requirements of section 13(a) [or
15(d)] of the Securities and Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ Wayne Allyn Root
_________________________________
By: Wayne Allyn Root
Chief Executive Officer
October 28, 2002
In connection with the Annual Report of GWIN, Inc. (the "Company") on Form
10-KSB for the period ended July 31, 2002, as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Douglas Miller, Chief
Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(2) The Report fully complies with the requirements of section 13(a) [or
15(d)] of the Securities and Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ Douglas Miller
_________________________________
By: Douglas Miller
Chief Financial Officer
October 28, 2002
EXHIBIT 99.2
CERTIFICATIONS PURSUANT TO
RULE 13A-14 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of GWIN, Inc. (the "Company") on Form
10-KSB for the period ending July 31, 2002, as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Wayne Allyn Root,
Chief Executive Officer (the "Officer") of the Company, certify, pursuant to
Rule 13a-14 of the Securities Exchange Act of 1934, as amended, that:
(1) the Officer has reviewed the report;
(2) Based on the Officer's knowledge, the report does not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements made, in light of the circumstances under
which such statements were made, not misleading;
(3) Based on the Officer's knowledge, the financial statements, and other
financial information included in the report, fairly present in all
material respects the financial condition and results of operations of the
issuer as of, and for, the periods presented in the report;
(4) The Officer and the other certifying officers:
- Are responsible for establishing and maintaining "disclosure controls
and procedures," as that term is defined by the Securities and
Exchange Commission, for the Company;
- Have designed such disclosure controls and procedures to ensure that
material information is made known to them, particularly during the
period in which the periodic report is being prepared;
- Have evaluated the effectiveness of the Company's disclosure controls
and procedures within 90 days of the date of the report;
- Have presented in the report their conclusions about the effectiveness
of the disclosure controls and procedures based on the required
evaluation; and
- Have disclosed to the Company's auditors and to the audit committee of
the board of directors (or persons fulfilling the equivalent
function):
o all significant deficiencies in the design or operation of
internal controls, as that term is defined by the Securities and
Exchange Commission, (a pre-existing term relating to internal
controls regarding financial reporting) which could adversely
affect the Company's ability to record, process, summarize and
report financial data and have identified for the Company's
auditors any material weaknesses in internal controls; and
o any fraud, whether or not material, that involves management or
other employees who have a significant role in the Company's
internal controls; and
o have indicated in the report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of their evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
/s/ Wayne Allyn Root
_________________________________
By: Wayne Allyn Root
Chief Executive Officer
Date: October 28, 2002
In connection with the Annual Report of GWIN, Inc. (the "Company") on Form
10-KSB for the period ending July 31, 2002, as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Douglas Miller, Chief
Financial Officer (the "Officer") of the Company, certify, pursuant to Rule
13a-14 of the Securities Exchange Act of 1934, as amended, that:
(5) the Officer has reviewed the report;
(6) Based on the Officer's knowledge, the report does not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements made, in light of the circumstances under
which such statements were made, not misleading;
(7) Based on the Officer's knowledge, the financial statements, and other
financial information included in the report, fairly present in all
material respects the financial condition and results of operations of the
issuer as of, and for, the periods presented in the report;
(8) The Officer and the other certifying officers:
- Are responsible for establishing and maintaining "disclosure controls
and procedures," as that term is defined by the Securities and
Exchange Commission, for the Company;
- Have designed such disclosure controls and procedures to ensure that
material information is made known to them, particularly during the
period in which the periodic report is being prepared;
- Have evaluated the effectiveness of the Company's disclosure controls
and procedures within 90 days of the date of the report; and
- Have presented in the report their conclusions about the effectiveness
of the disclosure controls and procedures based on the required
evaluation;
- Have disclosed to the Company's auditors and to the audit committee of
the board of directors (or persons fulfilling the equivalent
function):
o all significant deficiencies in the design or operation of
internal controls, as that term is defined by the Securities and
Exchange Commission, (a pre-existing term relating to internal
controls regarding financial reporting) which could adversely
affect the Company's ability to record, process, summarize and
report financial data and have identified for the Company's
auditors any material weaknesses in internal controls; and
o any fraud, whether or not material, that involves management or
other employees who have a significant role in the Company's
internal controls; and
o have indicated in the report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of their evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
/s/ Douglas Miller
_________________________________
By: Douglas Miller
Chief Financial Officer
Date: October 28, 2002
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