UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2005
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to __________
Commission File Number 000-24520
GWIN, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 04-3021770
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
5092 South Jones Boulevard, Las Vegas, Nevada 89118
(Address of principal executive offices)
(702) 967-6000
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
As of April 30, 2005 the Company had 96,241,464 shares of its $.0001 par value
common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
GWIN, INC.
Index to Form 10-QSB
Page
Part I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet at April 30,
2005 (Unaudited) ..................................... 3
Consolidated Statements of Operations for the
three and nine month periods ended April 30, 2005
and 2004 (Unaudited) ................................. 4
Consolidated Statements of Cash Flows for the
nine month periods ended April 30, 2005 and 2004
(Unaudited) .......................................... 5
Notes to Consolidated Financial Statements
(Unaudited) .......................................... 7
Item 2. Management's Discussion and Analysis or Plan of
Operation ............................................ 10
Item 3. Controls and Procedures .............................. 14
Part II: OTHER INFORMATION
Item 1. Legal Proceedings .................................... 15
Item 2. Unregistered Sales of Equity Securities and
Use of Proceeds ...................................... 15
Item 3. Defaults Upon Senior Securities ...................... 15
Item 4. Submission of Matters to a Vote of Security
Holders .............................................. 15
Item 5. Other Information .................................... 15
Item 6. Exhibits and Reports on Form 8-K ..................... 15
Signatures .................................................... 16
2
PART 1: FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
GWIN, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
April 30,
2005
----------
ASSETS
Current assets:
Cash $ 293,899
Accounts receivable 93,490
Deferred financing fees 5,167
-----------
Total current assets 392,556
-----------
Property & equipment (net) 82,508
Equipment held under capital leases (net) 2,233
Deposits & other assets 843,242
Deferred financing fees 20,667
-----------
Total assets $ 1,341,206
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of long-term debt $ 305,678
Accounts payable - related parties 33,207
Notes payable - related parties 174,922
Deferred revenue 578,000
Accounts payable 378,437
-----------
Total current liabilities 1,470,244
-----------
Long term debt, less unamortized discount of $132,525 742,473
-----------
Total liabilities 2,212,717
-----------
Stockholders' deficit:
Preferred stock - $0.0001 par value; 5,000,000 shares
authorized; 0 shares issued & outstanding -
Common stock - $0.0001 par value; 150,000,000 shares
authorized; 96,241,464 shares issued & outstanding 9,632
Additional paid in capital 26,176,548
Accumulated deficit (27,036,024)
Prepaid expenses - related parties (21,667)
-----------
Total stockholders' deficit $ (871,511)
-----------
Total liabilities and stockholders' deficit $ 1,341,206
===========
The accompanying notes are an integral part of these financial statements.
3
GWIN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
April 30, April 30,
2005 2004 2005 2004
----------- ----------- ----------- -----------
Net revenue - services $ 1,139,801 $ 955,219 $ 4,523,238 $ 5,144,541
Revenues - advertising 65,000 58,000 564,704 635,076
----------- ----------- ----------- -----------
Total revenues 1,204,801 1,013,219 5,087,942 5,779,617
----------- ----------- ----------- -----------
Handicapping fees 37,098 36,553 150,400 208,627
Handicapping fees - related party 97,871 65,668 364,365 331,253
Advertising expense 91,393 176,024 1,422,917 1,755,223
Commissions 440,027 253,246 1,734,878 1,668,386
Salaries & wages 285,741 296,169 840,748 925,072
Professional fees 30,928 26,797 90,449 163,844
General & administrative 196,419 211,481 974,047 1,034,784
Depreciation expense 15,038 10,513 45,734 33,371
----------- ----------- ----------- -----------
Total operating expense 1,194,515 1,076,451 5,623,537 6,120,560
----------- ----------- ----------- -----------
Operating income (loss) 10,286 (63,232) (535,595) (340,943)
----------- ----------- ----------- -----------
Interest (expense), including amortization
of debt discount (51,308) (58,186) (280,147) (221,591)
Other non-cash costs of financing (52,440) (317,104) (479,796) (412,104)
Interest (expense) - related parties (27,139) (3,114) (39,407) (68,340)
----------- ----------- ----------- -----------
Net (loss) $ (120,600) $ (441,636) $(1,334,946) $(1,042,978)
=========== =========== =========== ===========
Basic and diluted (loss) per share
of common stock $ 0.00 $ (0.01) $ (0.01) $ (0.02)
=========== =========== =========== ===========
Basic and diluted weighted shares of
common stock outstanding 95,834,495 70,024,958 90,031,346 63,511,100
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
4
GWIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
April 30,
2005 2004
----------- -----------
Cash flows - operating activities:
Net (loss) $(1,334,946) $(1,042,979)
Adjustments to reconcile net (loss) to
net cash used in operations:
Depreciation 45,734 33,371
Services & settlements paid with common
stock and warrants 568,806 520,821
Amortization of prepaid expense - related
parties 45,000 45,000
Interest expense - issuance of common stock 34,510 -
Interest expense - amortization of debt discount 162,838 126,765
Decrease (increase) in:
Accounts receivable (55,996) (166,979)
Prepaid expenses 23,719 347
Other assets (521,065) (315,713)
Deferred Financing Fees (20,667) -
Increase (decrease) in:
Deferred revenue 265,809 (50,744)
Accounts payable (56,735) (79,451)
Accounts payable - related parties (58,219) 126,000
Total adjustments 433,734 239,417
----------- -----------
Total cash (used in) operating activities (901,212) (803,562)
----------- -----------
Cash flows - investing activities:
Purchase of fixed assets (18,829) (56,810)
----------- -----------
Total cash (used in) investing activities (18,829) (56,810)
Cash flows - financing activities:
Proceeds from issuance of notes payable -
related parties - 23,143
Proceeds from the issuance of notes payable 569,000 -
Payments on long-term debt & lease obligations (91,528) (373,839)
Proceeds from issuance of common stock 297,000 1,091,643
----------- -----------
Total cash provided by financing activities 774,472 740,947
----------- -----------
Net (decrease in) cash (145,569) (119,425)
Cash - beginning of the periods 439,468 420,814
----------- -----------
Cash - end of the periods $ 293,899 $ 301,389
=========== ===========
For the nine months ended April 30, 2005 and 2004, the Company paid $0 for
taxes and $57,566 for interest and $0 for taxes and $86,396 for interest,
respectively.
The accompanying notes are an integral part of these financial statements.
5
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING & FINANCING ACTIVITIES
The Company issued stock and warrants in payment for professional services and
settlement costs. For the nine months ended April 30, 2005 and 2004, the
amount of professional services and settlement costs paid in stock were
$427,356 and $ 520,821, respectively. During the nine months ended April 30,
2005, the Company incurred deferred financing charges of $31,000 which was
paid by a reduction in the cash received from an offering.
The accompanying notes are an integral part of these financial statements.
6
GWIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - Organization and Operations
GWIN, Inc. (the "Company") is headquartered in Las Vegas, Nevada. The
Company primarily develops, produces and markets sports handicapping analysis
and information via television, radio and the Internet.
The Company is engaged in a highly seasonal business, with the majority
of sales related to football and basketball handicapping with a smaller amount
related to baseball handicapping. Due to this seasonality, quarterly results
may vary materially between the football, basketball, and baseball seasons,
with sales higher in the first and the second quarter of the Company's fiscal
year, and lower sales during the remainder of the year. The Company also
spends the majority of its advertising and promotional budgets during the
first and second quarter with only minimal advertising and promotional
expenditures during the remainder of the year.
In addition to revenues from the sales of handicapping analysis,
information, and advice, the Company also generates revenues from the sale of
advertising on its television, radio, and Internet shows and properties.
NOTE 2 - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary in order to
make the interim financial statements not misleading have been included.
Results for the interim periods are not necessarily indicative of the results
that may be expected for the fiscal year. For further information, refer to
the consolidated financial statements and notes thereto included in the
Company's annual report on Form 10-KSB for the year ended July 31, 2004. The
results of the three and nine month periods ended April 30, 2005 are not
necessarily indicative of the results to be expected for the full year ending
July 31, 2005.
Principles of Consolidation - The consolidated financial statements
include the accounts of the Company and its subsidiary, Global Sports EDGE, as
well as several inactive subsidiaries. All significant inter-company accounts
and transactions have been eliminated in consolidation.
Earnings (Loss) Per Share - "Basic" earnings (loss) per common share
equals net income (loss) divided by weighted average common shares outstanding
during the period. "Diluted" earnings (loss) per common share equals net
income (loss) divided by the sum of weighted average common shares outstanding
during the period plus common stock equivalents if dilutive. For the nine
months ended April 30, 2005 and 2004, the number of common stock equivalents
excluded from the calculation was 16,256,726 and 8,048,123 respectively.
7
GWIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 - Basis of Presentation (continued)
Stock Options and Similar Equity Instruments - The Company has adopted
the disclosure requirements of Statement of Financial Accounting Standards
("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. No employee options
were granted during the three and nine month periods ended April 30, 2005 and
2004.
Revenue Recognition - Handicapping Service Agreements - Revenue from
handicapping service agreements is recognized ratably, as services are
rendered in proportion to the total services to be provided under the
agreements. At April 30, 2005 the Company had received approximately $412,000
for handicapping services not rendered by that date; this amount is classified
as a component of current liabilities on the Balance Sheet.
Advertising Agreements - Revenue from advertising agreements is recognized
over the term of the agreements based on individual showings of the
advertising in proportion to the total showings during the term of the
agreement. At April 30, 2005 the Company had received approximately $166,000
for advertising services not rendered by that date.
Operating Costs & Expenses - Handicappers' fees and sales representatives'
compensation and related expenses are charged to operations as incurred
because the Company believes these costs have no future economic benefit.
Convertible Debentures - The Company has outstanding a total of $1,175,000 in
convertible debentures as of April 30, 2005, including a $600,000 debenture
entered into during the nine months ended April 30, 2005.
Convertible Preferred Stock - The Company has no convertible preferred stock
issued and outstanding at April 30, 2005.
NOTE 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.
8
GWIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 3 - Going Concern (continued)
The Company incurred a net loss of $1,334,946 for the nine months ended
April 30, 2005 and has an accumulated deficit of $27,036,024 at April 30,
2005. The operating losses, as well as uncertain sources of financing, create
an uncertainty about the Company's ability to continue as a going concern.
Management of the Company plans to generate sufficient cash to support
operations by raising additional financing by selling shares of our common
stock through private offerings to accredited investors. 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.
NOTE 4 - Commitments and Contingencies
Legal Matters - In the normal course of business, the Company is exposed
to a number of asserted and unasserted potential claims. The Company is not
currently a party to any legal proceedings either as a defendant or as a
plaintiff.
NOTE 5 - Tax Expense
The Company has not accrued income tax expense for the periods ended
April 30, 2005 and 2004 at its statutory rates due to unused net operating
losses and acquired net operating losses.
NOTE 6 - Shares Issued
During the nine months ended April 30, 2005, 12,950,968 shares of the
Company's common stock were issued, compared to 25,747,592 shares for the
nine-month period ended April 30, 2004. During the three month period ended
April 30, 2005 1,325,652 shares of the Company's common stock were issued
compared to 12,272,185 for the three-month period ended April 30, 2004. These
shares were sold to accredited investors through a private placement; the
valuation of the shares was determined by the proceeds of these private
placements.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview
We provide sports handicapping information and analysis to sports bettors
through direct marketing channels such as television, radio, the Internet, and
print media. The handicapping information that we currently provide includes
commentary, analysis and selections from leading sports handicappers for
professional and college football, professional and college basketball, and
professional baseball.
One of the attractive aspects of our business is that we generate
revenues from multiple sources. The two primary sources are Services Revenues
and Advertising Revenues.
Services Revenues are generated by selling the handicapping advice and
analysis of our professional handicappers. Services Revenue is generated
from respondents to our various media promotions including the telephone
numbers advertised on our weekly 30-minute television infomercial program
called Wayne Allyn Root's WinningEDGE, which, during the 2004 football season
aired nationally on Spike T V. We also produced an hour long radio program
called The WinningEDGE that aired on selected radio stations nationwide as
well as on our flagship station, XTRA in Southern California.
In addition to The WinningEDGE television and radio programs we also
advertise our services on radio in various markets and in selected print
media. During the 2004 football season that included the week-end edition of
USA Today. We receive phone calls in response to our various offers. These
calls are returned by our team of sports account representatives. The account
representative offers the caller a variety of handicapping packages for the
services of our handicappers. Our handicapping services are also offered and
sold on our Web site, www.WinningEDGE.com. The Web site provides free odds,
scores, schedules, injury and weather reports, and free picks from our
professional handicappers, as well as the opportunity for visitors to purchase
a broad selection of picks and services offered through the site.
The second major source of revenue is advertising revenue. Advertising
revenues are revenues generated from payments made to the Company from third
party advertisers on our various television, radio, print, and Internet
properties. They also include revenues generated from the rental of our
databases to noncompetitive advertisers.
The Company has built a significant telemarketing/direct mail database.
The Company considers these unrecorded intangible assets to be extremely
valuable both as a continuing lead source for Services Revenue and as an
additional source of Advertising Revenue. This database and the loyal viewing
and listening audience that the Company has built for its television, radio,
print, and Internet properties has enabled the Company to attract a number of
paid advertisers for these various media. The Company believes that it is
well positioned to continue to grow both Services and Advertising Revenues.
On May 11, 2005 the Company announced that its television show "Wayne Allyn
Root's WinningEDGE" had been accepted to air fall of 2005 on the WGN Super
Station, nationally. The show will reach 86 million cable and satellite
households and air at 10 am EST/9 am Central for a minimum of 13 weeks
beginning September 10th.
10
CRITICAL ACCOUNTING POLICIES
In preparing our financial statements, we make estimates, assumptions and
judgments that can have a significant effect on our revenues and net income or
net loss, as well as on the value of certain assets on our balance sheet. We
believe that there are several accounting policies that are important to an
understanding of our historical and future performance as these policies
affect the reported amounts of revenues, expenses, and significant estimates
and judgments applied by management. While there are a number of accounting
policies, methods and estimates affecting our financial statements, two areas
of particular significance are identified. One of theses areas is the
deferral estimate applied to revenues and the other area is the pricing of
options and warrants issued by the Company. In addition, please refer to Note
2 to the accompanying consolidated financial statements for further discussion
of our accounting policies.
Revenue Recognition - Our service contracts with clients vary
substantially in length from a single sporting event to entire seasons. We
recognize the revenue from service contracts ratably, as the services are
rendered in proportion to the total services to be provided under the
contracts. It is important to note that while revenue from service contracts
is deferred and recognized as the service is delivered, the bulk of the costs
associated with generating that revenue including advertising, commissions,
and handicapping fees are expensed in the quarter that the service contract is
generated.
Stock Options and Equity Instruments - Historically, we have issued
substantial amounts of warrants and options to purchase common stock in
connection with financing activities and as payment for services and other
items. We record the cost attributable to those issuances on the basis of the
Black-Scholes option valuation model. The use of this model requires some
highly subjective assumptions including expected stock price volatility.
COMPARISON OF NINE MONTHS ENDED APRIL 30, 2005 TO THE NINE MONTHS ENDED APRIL
30, 2004
REVENUES. Total revenues decreased to $5,087,942 for the nine months
ended April 30, 2005 compared to $5,779,617 in the nine months ended April 30,
2004. Revenues from advertising decreased to $564,704 for the nine months
ended April 30, 2005 compared to $635,076 for the same period in 2004, a
decrease of 11%. This decrease in advertising revenues is a result of the
Company's decision to eliminate advertising on our broadcasts by our
competitors. Net revenues from sports handicapping services (after
charge-backs and deferred revenue adjustments) decreased to $4,523,238 for the
nine months ended April 30, 2005 compared to $5,144,541 for the same period in
2004, a decrease of 12%. This decrease is attributable to loss of sales
opportunities brought on in late November when the Company was the victim of a
security breach with an outside computer hacker gaining access to our
proprietary customer and lead database and clandestinely selling it to a
number of our competitors. We estimate the extent of the loss in reduced
revenues and increased chargebacks is in the $500,000 to $1,000,000 range. We
have substantially reduced the risk of a recurrence of this type theft by
upgrading the Company's computer servers and software and hiring an IT
security consultant for ongoing monitoring of the Company's systems.
11
OPERATING COSTS AND EXPENSES. Total operating costs and expenses,
excluding non-recurring items were $5,623,537 for the nine months ended April
30, 2005 versus $6,120,560 for the same period in 2004, a decrease of 8%.
These savings were across the board, with key components as follows:
Advertising Expenses, including production costs, decreased to $1,422,917 for
the nine months ended April 30, 2005 compared to $1,755,223 for the same
period in 2004. These reduced media expenditures are a direct result of the
decision to focus on near-term profitability. The majority of our advertising
expense is incurred from September to December, during the football season and
the early part of the basketball season.
Commission Expense increased to $1,734,878 for the nine months ended
January 31, 2005 compared to $1,668,386 for the same period in 2004, an
increase of 4% based upon changes in the handicapping agreements and
commission overrides. Salaries and Wages decreased to $840,748 for the nine
months ended April 30, 2005 decreased to $925,072 for the same period in 2004,
a change of 9%. This savings was accomplished by operating with a slightly
reduced staff and replacing selected staff with lower paid employees.
Professional Fees also decreased to $90,449 for the nine months ended April
30, 2005 compared to $163,844 for the same period in 2004, a 44 % reduction.
The Company does not have any ongoing litigation and expenses are in line with
stabilized costs involving a publicly traded company.
Finally, General and Administrative Expenses decreased to $974,047 for
the nine months ended April 30, 2005 compared to $1,034,784 for the same
period in 2004, a decrease of 6%. This reduction is primarily due to lower
telephone charges and credit card fees. These two major expenses vary directly
with sales activity and are consistent with revenues.
OPERATING RESULTS. For the nine months ended April 30, 2005, the
Company's operating loss increased to $535,595 compared to $340,943 for the
same period in 2004. As described above, this increased loss was due to a
slow first quarter resulting from a theft of the Company's data base causing
sales to be negatively impacted. Since the breech was shut down, the Company
has had great success in matching and increasing sales activity for the months
of January, February, March and April.
COMPARISON OF THREE MONTHS ENDED April 30, 2005 TO THREE MONTHS ENDED April
30, 2004
REVENUES. Total revenues increased 19%, to $1,204,801 for the three
months ended April 30, 2005 from $1,013,219 for the same period in 2004. This
is due to a 19% increase in Net Revenues from sports handicapping services
(after charge-backs and deferred revenue adjustment) to $1,139,801 for the
three months ended April 30, 2005 compared to $955,219 for the same period in
2004. Advertising revenues increased to $65,000 for the three months ended
April 30, 2005 compared to $58,000 for the same period in 2004, an increase of
12%
OPERATING COSTS AND EXPENSES. Total operating costs and expenses,
excluding non-recurring items were $1,194,515 for the three months ended April
30, 2005 compared to $1,076,451 for the same period in 2004, an increase of
11%. Advertising expenses decreased to $91,393 for the three months ended
April 30, 2005 compared to $176,024 for the same period in 2004 a 48%
decrease. Commission Expense increased to $440,027 for the three months ended
April 30, 2005 compared to $253,246 for the same period in 2004, an increase
of 74%. This increase in Commission Expense is primarily due to commissions
12
paid for sales that will be recognized as Revenue in future quarters but that
are currently recorded as Deferred Revenue on the Balance Sheet. Salaries and
Wages decreased to $285,741 for the three months ended April 30, 2005 compared
to $296,169 for the same period in 2004, a decrease of 4%. Professional Fees
increased to $30,928 for the three months ended April 30, 2005 compared to
$26,797 for the same period in 2004, an increase of 15%. General and
Administrative Expenses decreased to $196,419 for the three months ended April
30, 2005 compared to $211,481 for the same period in 2004, a decrease of 7%.
OPERATING RESULTS. The Company recorded an operating profit of $10,286
for the three months ended April 30, 2005 versus an operating loss of $63,232
for the same period last year.
Our business is highly seasonal. Because football and basketball are the
most popular sports for wagering, the demand for the handicapping analysis for
these sports is substantially higher than for any other sporting events. As a
result, approximately 75% of our sales occur in the first and second quarters
of the fiscal year. Because of these factors, our quarterly operating results
are difficult to predict and are likely to vary in the future. We have
traditionally experienced lower net sales in the third and fourth quarters of
the fiscal year, and higher net sales in the first and second quarters of the
fiscal year. We expect this seasonality to continue for the foreseeable
future. If we are ultimately successful in pursuing our strategy to expand
our handicapping services to cover other sports that are popular
internationally, such as soccer and cricket, we may reduce the seasonality of
our business. However, there can be no assurance that future seasonal
fluctuations will not adversely affect the business or results of operations.
LIQUIDITY AND CAPITAL RESOURCES
Our working capital deficit as of April 30, 2005, was $1,077,688 as
compared to a deficit of $1,028,546 as of July 31, 2004. Of the April 30,
2005 amount, approximately $578,000 represents revenues from sales which will
not be recognized until after April 30, 2005. During the nine months ended
April 30, 2005, we raised approximately $297,000 from accredited investors.
In order to reduce our working capital deficit and to finance our
continuing operations, management is in the process of or intends in the
future to take the following actions. We expect to be able to generate
sufficient cash to support our operations during the twelve month period
following the date of the financial statements by raising additional financing
by the sale of shares of our Common Stock in a private offering to accredited
investors through the offshore investment banker who has raised capital for us
in the past, and we may attempt to use other investment bankers to sell our
Common Stock.
SUMMARY OF CASH FLOWS FOR THE NINE MONTHS ENDED APRIL 30, 2005
GWIN's cash decreased $7,490 during the nine months ended April 30, 2005,
to approximately $293,899 on April 30, 2005. The decrease was a result of the
operating loss of $1,334,946 which was offset by the approximately $866,000 in
proceeds from the issuance of equity and debt in order to fund operations.
OPERATING ACTIVITIES
Net cash used in operating activities increased from $803,562 in the nine
months ended April 30, 2004 to $880,544 in the nine months ended April 30,
2005. The primary reason for the increase was the increase in the net loss
from $1,042,979 in the nine months ended April 30, 2004 to $1,334,946 in the
nine months ended April 30, 2005.
13
INVESTING ACTIVITIES
Net cash used in investing activities decreased to $18,829 during the
nine months ended April 30, 2005 from $56,810 during the nine months ended
April 30, 2004, due to reduced purchases of fixed assets.
FINANCING ACTIVITIES
Net cash provided by financing activities increased to $743,472 during
the nine months ended April 30, 2005 from $740,947 during the nine months
ended April 30, 2004.
FORWARD LOOKING STATEMENTS
This report contains "forward-looking statements." These forward-looking
statements are based on our management's beliefs as well as assumptions and
information currently available to us. When used in this report, the words
"believe," "expect," "anticipate," "estimate" and similar expressions are
intended to identify forward-looking statements. These statements are subject
to risks, uncertainties and assumptions, including, without limitation, our
present financial condition, the risks and uncertainties concerning the
availability of additional capital as and when required, the risks and
uncertainties concerning general economic conditions. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those anticipated,
estimated, or projected. We caution you not to place undue reliance on any
forward-looking statements, all of which speak only as of the date of this
report. You should refer to and carefully review the information in future
documents we file with the Securities and Exchange Commission.
ITEM 3. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and other procedures that are
designed to ensure that information required to be disclosed in our reports
filed pursuant to the Securities Exchange Act of 1934, as amended the
("Exchange Act"), is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms, and that such information is accumulated and communicated to our
management, including our Chief Executive Officer, who is our principal
executive officer, and our Chief Financial Officer, who is our principal
financial officer, to allow timely decisions regarding required disclosure.
In designing and evaluating the disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired
control objectives, and management necessarily is required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
During February and March 2004, we sold an aggregate of 1,116,667 shares
of common stock at a price of $.06 per share to 2 persons living outside of
the United States, in reliance on the exemption provided by Regulation S
promulgated under the Securities Act of 1933, as amended. The shares were
sold to investors introduced by a Netherlands investment banking firm which we
paid a fee of 12% of the principal amount of the shares sold.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Inapplicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit No. Description
31.1 Certification of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 - filed
herewith electronically
31.2 Certification of Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 - filed
herewith electronically
32.1 Certification of Chief Executive Officer Pursuant to
18 U.S.C. Section 1350 - filed herewith electronically
32.2 Certification of Chief Financial Officer Pursuant to
18 U.S.C. Section 1350 - filed herewith electronically
(b) Reports on Form 8-K. None.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GWIN, INC.
(Registrant)
Dated: June 14, 2005 By: /s/ Jeffrey Johnson
Jeffrey Johnson
Chief Financial Officer
Dated: June 14, 2005 By: /s/ Wayne Allyn Root
Wayne Allyn Root
Chairman and Chief Executive Officer
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