Tuesday, December 03, 2002 5:52:32 PM
8-K 5/15/00
http://www.freeedgar.com/search/ViewFilings.asp?CIK=1045181&...
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<DESCRIPTION>FORM 8-K
<TEXT>
<PAGE> 1
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Act of 1934
Date of Report (Date of earliest event reported) May 9, 2000
WINNERS INTERNET NETWORK, INC.
(Name of registrant in its charter)
<TABLE>
<S> <C> <C>
NEVADA 000-26665 91-1844567
(State of incorporation) (Commission (I. R. S. Employer Identification No.)
File Number)
</TABLE>
145 OVIEDO STREET
ST. AUGUSTINE, FLORIDA 32084
(Address and telephone number of principal executive offices
and principal place of business)
(904)824-7447
(Registrant's telephone number including area code)
GLENNAIRE FINANCIAL SERVICES, INC.
(Former name of registrant, if changed since last report)
3158 REDHILL AVE., SUITE 240
COSTA MESA, CALIFORNIA 92626
(Former address of registrant, if changed since last report)
<PAGE> 2
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Act of 1934
References in this document to "us," "we," or "the Company" refer to Winners
Internet Network, Inc. and its subsidiary.
Safe Harbor Statement
This Form 8-K contains certain forward-looking statements. For this
purpose any statements contained in this Form 8-K that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, words such as may, will, expect, believe, anticipate, estimate or
continue or comparable terminology are intended to identify forward-looking
statements. These statements by their nature involve substantial risks and
uncertainties, and actual results may differ materially depending on a variety
of factors, many of which are not within our control. These factors include but
are not limited to economic conditions generally and in the industries in which
we may participate; competition within our chosen industry, including
competition from much larger competitors; technological advances and failure by
us to successfully develop business relationships.
Item 1. Changes in Control of Registrant.
We completed our acquisition of 100% of the issued and outstanding common shares
of Glennaire Financial Services, Inc., a private Utah public reporting company
(GFS), in exchange for approximately 10,000 shares of us. We plan to merge GFS
into us in the future. At the present time,GFS is a wholly-owned subsidiary.
INVESTMENT RISKS
LIMITED OPERATING HISTORY
We have recorded revenues and a profit for the fiscal year ended
December 31, 1999. However, we recorded losses for the past two fiscal years. An
investment in our stock is very risky. Potential investors should carefully
consider the factors discussed in this registration statement before purchasing
our common stock.
COMPETING TECHNOLOGICAL DEVELOPMENT
Internet industries are subject to rapid technological change and our
ability to successfully market our products, improve our products and to respond
effectively to new technological changes or new product announcements will
affect our results of operations. Other companies may develop new technology and
systems similar to ours which could materially affect our results in operation.
RELIANCE ON A THIRD PARTY MAINTAINED SYSTEM
We rely on the CyberLink Monetary System to complete the processing of
Internet transactions using our Winners Processing System. The CyberLink
Monetary System is a data processing center based in Vaduz, Liechtenstein and is
the entity that provides the link between the customer, merchant and banking
credit card authorization centers. Our Winners processing System software
interfaces with the CyberLink Monetary System data processing which is the link
between the credit card company and the issuing credit card banking institution.
<PAGE> 3
POTENTIAL REGULATION OF INTERNET GAMING
Internet gaming legislation is pending before the United States
Congress. Regulation could require us to modify our software and that of the CMS
Debit Card described below to accommodate regulatory restrictions. AS OF THE
DATE OF THIS FILING CONGRESS HAS FAILED TO MAKE A DEFINITIVE DECISION. We cannot
provide assurances that if regulations are imposed that we will be able to
modify our software to comply with such regulation or that such regulation would
not have an adverse effect on the market for our software in general by
curtailing Internet gaming.
UNPROVEN TECHNOLOGY AND SOFTWARE APPLICATIONS
We estimate that the time frame for the CMS Debit Card is on or about
the 4th quarter of 2000 through the 1st quarter of 2001.
We cannot assure that the CMS Debit Card will interface with our
customers or other vendors, nor that our CMS Debit Card can compete with debit
cards now available through other banks.
COMPETITION
We are in competition with companies such as Star Net and MPact Media
in regard to Internet gaming financial processing. These companies provide the
credit card processing similar to us. Our services are also expanded to
facilitate financial processing in multi-currencies including, but not limited
to, the British pound, the German marc, the Canadian dollar, the Australian
dollar, the Swiss franc, the French franc and the Dutch gilder. Our competitors
also perform a type of payout service which returns funds to customers via
credit cards and checks while our services are also expanded to facilitate
refunds to customers via credit cards and check disbursements in the customer's
currency where they reside. We currently have customers in 16 countries which
represent 8 different currencies. We are able to send payments to these
customers in their own currency where its competitors would have to send the
customers a check in U.S. dollars.
We have not been accepted by most Internet casinos as we serve only 17
websites. In this regard, we have refused to accept deposits from the player who
resides in an illegal jurisdiction. We consider an illegal jurisdiction to
include any state or country where there is a law which makes it illegal to
participate in on-line gaming. It is believed that this decision by our
management to prevent play from these jurisdictions is the reason that we serve
only 17 websites.
TRADEMARKS, LICENSE AND INTELLECTUAL PROPERTY
Our proprietary software is a material aspect of our business. We rely
upon a combination of licenses, confidentiality agreements and other contractual
covenants to establish and protect our technology and other intellectual
property rights. If we infringe on the intellectual property of another party we
could be forced to seek a license to those intellectual property rights of the
third party. If we are required to obtain a license to another party's
proprietary rights, that license could be expensive, if we could obtain it at
all. Although we do not believe that our intellectual property infringes on the
rights of any other party, third-parties may assert claims for infringement
which may be successful or require substantial resources to defend. In addition
our confidentiality agreements may not effectively prevent copying and
disclosure of our technology and may not provide us with an adequate remedy if
unauthorized disclosure occurs.
<PAGE> 4
DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
We were incorporated in the state of Washington on May 23, 1967 as
Empire Exploration, Inc. Empire Exploration was involved in the business of
purchasing and exploring mining properties but ceased such operations in 1992.
In July of 1988 Empire Exploration, Inc. changed its name to Comstock-Empire
International, Inc. (A "Comstock-Empire"). Winners Internet Network, Inc. was
incorporated in the state of Nevada on July 16, 1997. On July 21, 1997,
Comstock-Empire merged with Winners Internet for the sole purpose of changing
its domicile from Washington to Nevada. Winners Internet is a Nevada corporation
authorized to do business in the state of Florida and the countries of Austria
and Liechtenstein.
On July 31, 1997 Winners Internet acquired Davki Agency LTD, a Delaware
corporation (Davki Agency). Davki Agency was incorporated on June 16, 1997 and
held the license to the test prototype of proprietary software we currently use.
Pursuant to the terms of the acquisition Winners Internet issued 8,000,000
common shares for 100% of the 1,500 common shares of Davki Agency and Davki
Agency became a wholly owned subsidiary of Winners Internet. Davki Agency was
later dissolved in December of 1997.
We develop and own proprietary software and technology which processes
financial transactions for Internet commerce. Initially the software and
processing system was used exclusively for processing credit cards for payment
to Internet on-line licensed casinos. The system was also used to provide
accounting and transaction history for the on-line casino tracking all deposits
and payments from and to the casino customer. The system was also used to
provide players with full tracking of all deposits and transfers to casinos for
play. In addition, the system was interfaced with banks for payment to players
for withdrawal from their accounts or payments for winnings. The system was
developed to handle all type of internet transactions to connect the customer to
the merchant, handle the processing of payments for goods or services, provide
an accounting to the merchant and the customer, and process customer requests
for transfer to merchants or repayment for refunds at the request of the
merchant or customer. In specific reference to Internet casino play, the
software was able to identify the jurisdiction that the transaction began to
prevent illegal jurisdictions from having access to the Internet gaming sites
for play. The advantage to the customer in use of the system was that all
transactions required a second tier for approval requiring password entry in an
attempt to prevent fraud. The system was linked to established banking
structures in Europe including LGT Bank in Liechtenstein and BTV Bank in
Austria, both of which were used for processing the transaction via credit card
authorization centers.
Our administrative offices are located in St. Augustine, Florida
which manages the overall operations, including licensing agreements, corporate
accounting and communications with the public. Our operations center is located
in located in Ruggell, Liechtenstein which maintains, monitors and manages our
processing, technical operations and merchant and customer accounting records.
The European Division programs software, creates upgrades as needed, monitors
our bank processing, and prepares graphics for our web site and for other
publications. Our multi-lingual programmers monitor the functions performed by
this division. We have recently begun processing e-commerce transactions in the
first quarter of 2000 in order to expand the available market. These new markets
are located in Europe where the greatest emphasis for growth is being placed by
us.
In the first quarter of 2000, we completed negotiations and acquired a
19% interest in the Internet Service Provider in Liechtenstein. SupraNet AG has
been in existence since 1995 and is a very successful provider with offices in
Ruggell, Liechtenstein. SupraNet has provided us with the ability to house our
servers for immediate access to the Internet Hub by providing a direct
connection to the world wide web. The expansion capabilities with this location
and ownership has enabled us to be able to offer hosting of web sites coupled
with processing availability with the Winners System. This has also enabled us
to be able to look forward to the e-commerce expansion that we are seeking.
<PAGE> 5
The following describes the typical transaction which would be the same
for any type of e-commerce. Software can be modified to accommodate all
transaction processing that wishes to offer their goods and services via the
Internet:
After the customer has gone to a site that is processed by us, the
customer would select a method of payment for goods or services. In the case of
both gaming or e-commerce the credit cards accepted or other method of payment
such as Western Union will be shown on the site. Once a payment request is made
by the customer, the customer's transaction will immediately be sent via
Internet with encrypted transmission to the processing center in Ruggell,
Liechtenstein. The processing software simultaneously submits through the
CyberLink Monetary System the card for approval via the credit card
authorization company. CyberLink Monetary System has the existing accounts with
all of the payment options that are utilized by us. CyberLink will be discussed
in detail later in this filing. Upon approval of the transactions by a credit
card company issuing bank, the merchant and customer are simultaneously notified
of the approval and the customer receives confirmation that the order has been
paid. This format is standard whether the transaction for Internet gaming or
e-commerce processing.
The software provides the merchant with a complete accounting of all
transactions which the merchant can access at any time in addition to receiving
a monthly statement of all changes that have been credited to the respective
accounts. The software provides a complete accounting reconciliation to the
merchant in the form of a bank type statement reflecting all income to the
merchant and disbursement of monies. Similarly for the customer, the customer
has a complete account of all transactions including date, amount, merchant and
a historical accounting summary for personal reconciliation and verification
purposes.
The payment function to a customer in connection with Internet gaming
allows a customer to request a payment from the merchant from the Internet
casino which is then simultaneously transmitted to our processing division for
payment request. The processing division verifies the account balance and issues
instructions via the CyberLink Monetary System which handles the disbursements
to the Internet casino customers. A complete accounting reconciliation for these
payments is available to both the merchant and the customer for verification and
reconciliation purposes. Our processing system provides a complete transaction
and tracking analysis which reconciles the merchant, the customer and the
issuing bank for payment which are balanced simultaneously with each
transaction.
We receive a 5.5% fee of the amount of the transaction to the merchant.
In addition, if a payment is requested through the Winners System a $5.00 fee is
charged for returning funds back to a credit card, a $24.00 fee for an
international bank draft check and a $24.00 fee for an international bank wire.
All processing fees are based on a per transaction computation. Fees for both
Internet e-commerce and Internet gaming are based upon licensee agreements which
list the fees for each transaction.
Winners Secure Online Financial Processing System (A Winners Processing
System).
CyberLink Monetary System (CMS) is a Liechtenstein Company, managed by
the Directors of the Intertreuhand Trust, for the beneficial interest of those
of our clients for whom we handle financial transaction processing. This
structure insures our financial processing clients that their funds are secure,
separate, and managed by a licensed trust company. Bank accounts are maintained
in the name of CMS on behalf of clients under the trust, and are subject to the
full fiduciary and financial privacy laws of Liechtenstein. CMS provides the
facility for us to offer financial transaction processing to our clients within
a secure and protected financial structure.
We are the exclusive beneficiary of CMS and are provided protection
under Intertreuhand Aktiengesellschaft, an Asset Management Trust that has been
licensed by the Government of Liechtenstein since 1954. CMS is managed by
Intertreuhand Aktiengesellschaft, which has DDr. Reinhard Proksch serving
<PAGE> 6
as Managing Director. DDr. Proksch, a Fulbright Scholar, holds dual doctorates
in law and information systems and was admitted to practice law in New York
State.
We rely on CMS to complete the processing of Internet transactions
using the Winners Processing System. CMS is a data processing center based in
Vaduz, Liechtenstein and is the entity that provides the link between customers,
products and services and licensed banking. In July 1998, CMS agreed to
exclusively license us as the sole provider of Internet gaming for its data
processing operations. The Winners Processing System interfaces with CMS' data
processing and the financial transactions processed by CMS are then interfaced
with the bank accounts managed by CMS.
In addition to the e-commerce aspects of its financial transaction
processing systems, we are developing an integrated e-commerce initiative of our
own, the "-Plus Network". In this regard, we acquired 19% interest in the
Internet Service Provider, SupraNet, AG., in Liechtenstein. This acquisition has
enabled us and SupraNet to offer expanded services to allow Internet Merchants
to house their servers in the facility occupied jointly by SupraNet, AG and us
to be able to provide internet hosting of the site and credit card processing
ability with the Winners Internet software. The "-Plus Network" is an e-commerce
platform consisting of numerous cross-marketed sites under the three main
categories of finance, products, and entertainment. We own a broad cross section
of URLs ending in the suffix "-Plus", such as www.Banks-Plus.com , www.Loans-
Plus.com and the like. With the scarcity of reasonable URL's available, the
"-Plus" suffix provides both an easy to remember and easy to communicate web
address for many common financial and product offerings, and also permits the
building of a family identity among the sites. We plan to develop some of the
sites ourself, joint venture others, and refer the remainder to carefully
selected and screened outside providers. We intend to monitor the sites and
provide a central problem resolution facility, which will build a high level of
customer confidence in the "-Plus" family of sites.
We are also using our solutions to create an integrated "Internet
Financial Platform" which allows consumers to engage in all manner of financial
transactions on the web - from e-shopping, to banking, to trading of stocks,
bonds and mutual funds - with complete security, accountability, tracking,
privacy and peace of mind. By combining our proprietary technology and systems
with strategic partnerships with major financial players in Europe and the U.S.,
we are rapidly working to implement this vision. In this regard we completed the
lease of our "Processing In Software for Banking" to Intertreuhand, a
Liechtenstein Asset Management Trust Company, for the initial payment of Three
Million USD.
We are now actively engaged in expanding the scope of our business
operations to embrace the enormous potential of the e-commerce marketplace. As a
result of the lease of the Processing Software to Intertreuhand, We recently
signed a contract with Winner Market AG, a Swiss e-commerce group, owned by TA
Media AG, one of the most successful media enterprise in Switzerland with daily
newspapers, magazines, radio and TV stations and more than $400 million in
annual revenues. They have chosen Winners Internet's services for its e-commerce
transactions for its group of e-commerce sites, including an Internet job
marketplace, Swiss real estate marketplace, Swiss vehicle marketplace and a
Swiss auction house. We receive a share of revenue on a percentage basis per
processed transaction.
Through our proprietary e-commerce system, we will process all
classified advertising placement over the Internet, and are facilitating the
company's expansion into online magazine subscriptions and other product lines.
This processing technique offers a seamless system interconnecting the customer,
merchant and banking institution with approval and financial transaction
accounting.
CyberLink Monetary System
We rely on the CyberLink Monetary System to complete the processing of
Internet transactions using our Winners Processing System. The CyberLink
Monetary System is based in Vaduz, Liechtenstein and is the entity that provides
the link between customers, products and services and licensed banking. The
<PAGE> 7
CyberLink Monetary System is managed by Intertreuhand Aktiengesellschaft.
Intertreuhand Aktiengesellschaft is an Asset Management Trust licensed by the
Government of Liechtenstein since 1954. Intertreuhand Aktiengesellschaft
maintains bank accounts in the name of CMS for the benefit of our clients. The
Managing Director of Intertreuhand Aktiengesellschaft is DDr. Reinhard Proksch.
DDr. Proksch, a Fulbright Scholar, holds dual doctorates in law and information
systems and is one of our directors.
We became a member of the CyberLink Monetary System in July 1998 when
CyberLink Monetary Systems agreed to exclusively license us as the sole provider
of Internet gaming for its data processing operations. Our Winners Processing
System interfaces with the CyberLink Monetary System's data processing and the
financial transactions processed by the CyberLink Monetary System are then
interfaced with the bank accounts managed by the CyberLink Monetary System for
our clients.
PRODUCT DEVELOPMENT
Currently, our percentage of gaming business operations derived from
U.S. customers is approximately 85%. The U.S. legislation concerning on-line
gaming may have a material impact on its operations. This legislation is set to
make all forms of Internet gambling illegal for U.S. citizens. If this
legislation is passed it will have an impact on our operations since 85% of our
gaming revenues would be eliminated. This potential loss of revenue is in regard
to our gaming operations only. We also provide financial processing for e-
commerce companies unrelated to gaming which would not be affected should
legislation occur.
In July of 1998 CyberLink Monetary System began the development of the
CMS Debit Card. We anticipate that CyberLink Monetary System will provide the
CMS Debit Card for use in our Gaming System and other e-commerce operations.
This card will function like other bank cards, allowing the user to conduct
financial transactions on the Internet. We anticipate that it will provide a
means for complete accounting of all transactions for either our Internet gaming
or other e-commerce transactions. We anticipate that the CMS Debit Card will
provide recognition of parity of the Eurodollar and all foreign currencies for
Internet commerce. However, CyberLink Monetary System has delayed the launching
of the CMS Debit Card pending Internet gaming legislation before the United
States Congress and for other technical reasons. It is not known for certain if
this card will ever be implemented. Any regulation changes would require the CMS
Debit Card to be redesigned with the necessary restrictions on transactions
programmed into the system or the card. AS OF THE DATE OF THIS FILING CONGRESS
HAS FAILED TO MAKE A DEFINITIVE DECISION.
DISTRIBUTION
We market our services and products through software licensing
agreements with distributors and casinos and sportbooks. We currently have five
software license agreements and two distributor agreements. Our license
agreement allows the licensee the non-exclusive right to process data by using
our software and, to load, use, and copy our software. The license may allow
single or multiple processor, single or multiple site, or a national license
which is a licensed domicile. The licensing agreement requires that the licensee
not have a criminal record, that the software be regarded as secret and
confidential and shall remain in the licensee's effective control. The licensee
is required to sign a confidentiality agreement as well.
We have entered into Software Licensing Agreements with the following
companies: Maintain, Inc./March 2000, A&W Ltd./July 99, Corporacion
CentroAmerica El Tesora Sociedad Anonima February 2000, WorldLink International
N.V./October 1999 and Winner Market AG/February 2000.
These agreements may be terminated for failure to perform consistent
with its provisions, bankruptcy by the licensee or if the licensee conducts
business in an illegal territory. Principal terms of the Agreements include a
one-time license fee of $50,000. There is a yearly renewal fee for a license at
$20,000 for
<PAGE> 8
maintenance of the license which includes all upgrades and/or new versions of
our software to meet industry technical and graphic advances. All processing
fees are based on a per transaction computation. Fees for both Internet
e-commerce and Internet gaming are based upon licensee agreements which list the
fees for each transaction. We receive a range between a fee of 5.5% and 7% of
the amount of the transaction to the merchant. In addition, if a payment is
requested through the Winners System a $5.00 fee is charged for returning funds
back to a credit card, a $24.00 fee for an international bank draft check and a
$24.00 fee for an international bank wire.
We currently have two software distributor agreements. Principal terms
of the Agreements include granting the distributor the right to distribute the
Gaming System in a specific territory. We must approve all licenses and the
distributor agrees to promote our product and our good reputation. The
distributor is not our agent and the license cannot be assigned. The commission
structure is 25% of the paid and collected licensing fees and net processing
fees.
We currently have two distributors who own the territorial marketing
rights for our software license in Australia and New Zealand and one for the
Caribbean. In December of 1998 Vaudeville Holding, Inc. became a licensed
distributor with the rights to sell the Gaming System in the assigned territory
of the Caribbean meaning, but not limited to, Antigua-Barbuda, Aruba, the
Bahamas, Belize, Costa Rica, Dominica, Dominican Republic, Granada and St.
Kitts. Vaudeville Holdings began its second year of on-line processing with us
and currently manages seven gaming web sites. In December of 1998 we entered
into a software distributor's licensing agreement with Kenneth Hense, granting
Mr. Hense the exclusive right to sell the Gaming System in the countries of
Australia and New Zealand. Neither Vaudeville Holding nor Kenneth Hense have
sold licenses in 1999.
COMPETITION
We are in competition with companies such as Star Net and MPact Media
in regard to Internet gaming financial processing. These companies provide the
credit card processing similar to ours.
TRADEMARKS, LICENSE AND INTELLECTUAL PROPERTY
Our proprietary software is a material aspect of our business. We rely
upon a combination of licenses, confidentiality agreements and other contractual
covenants to establish and protect our technology and other intellectual
property rights. If we infringe on the intellectual property of another party we
could be forced to seek a license to those intellectual property rights of the
third party. If we are required to obtain a license to another party's
proprietary rights, that license could be expensive, if we could obtain it at
all. Although we do not believe that our intellectual property infringes on the
rights of any other party, third-parties may assert claims for infringement
which may be successful or require substantial resources to defend.
Our ability to compete effectively will depend in part on our ability
to maintain the proprietary nature of our technology through a combination of
exclusive licensing and the aggressive continued development of our products.
Competition in the Internet market is intense and there can be no assurance that
our competitors will not independently develop or obtain patents or technologies
that are substantially equivalent or superior to our technology.
GOVERNMENT REGULATIONS
Changes in government regulations toward Internet gaming could affect
our operations concerning our Internet gaming processing. United States citizens
in certain state jurisdictions, as well as those in many other countries, are
barred from Internet gaming. We currently do not process transactions for any
state or
<PAGE> 9
territory where gaming is illegal for its citizens. Should those offshore
governments that now allow Internet gaming negatively alter their regulations
toward the industry, the market for new customers would be greatly reduced and
could severely change our revenue projections, growth, and operations. We are
monitoring developments in legislation throughout the world and will adhere to
all legislative decisions or regulations in this regard. Until we are able to
entirely shift processing to non-gaming related activity this would have a
serious impact on our processing and license revenue if gaming were to be
curtailed in the US Market. Our system will immediately terminate gaming from
any illegal jurisdiction. Presently we do not accept any gaming activity from
any state or jurisdiction which forbids Internet gaming whether by law. Winners
Internet currently does not accept any gaming activity from customers in the
U.S. jurisdictions of Florida, Kansas, Louisiana, Missouri, Nevada and Utah, and
the overseas jurisdictions of Austria and Japan. There are currently no laws
which prohibit e-commerce processing in the U.S. or Liechtenstein.
EMPLOYEES
We currently have sixteen (16) full time employees and two (2)
part-time employees. The Administration Division includes four employees and one
part time employee which are located in St. Augustine, Florida. Ten employees
and one (1) part-time employee are employed in the European Division and are
located in Ruggell, Liechtenstein. We believe we have good relations with our
employees and none are covered by any collective bargaining agreement. We
anticipate employing two (2) additional employees for the Technical Division
within the next fiscal quarter.
MANAGEMENTS' DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
OVERVIEW
We have been utilizing our processing software primarily for processing
Internet gaming transactions with limited processing of e-commerce business. In
view of pending legislation in the US which will severally limit or outlaw
Internet gaming for US Citizens, the focus of management is toward the
implementation and marketing of e-commerce non-gaming related activity. In this
regard, the recent acquisition of a percentage ownership of the Internet Service
Provider in Liechtenstein, SupraNet AG, allows us to expand our e-commerce
presence by hosting e-commerce sites. In addition, we acquired the rights to the
-Plus Network offering in excess of 100 separate Website domains for future
processing under the Plus Network. We also recently completed the exclusive
lease of our processing software for processing of banking related transactions
to CyberLink Monetary System in order to expand our scope of financial
processing to other related markets including the most recent signing of a
contract with a subsidiary of one of the largest media groups in Switzerland, TA
Media. Further, we expanded our board of directors to include leaders in
computer software development and management including a MIT graduate and holder
of five patents related to internet networks and security, the CEO of a
successful Internet Service Provider in Europe, a scholar with a doctorate in
information systems, and the former Prime Minister and Minister of Finance in
Liechtenstein. It is our goal to expand our operations to include transaction
processing for e-commerce in both merchant and financial markets. We currently
have added 5 e-commerce sites under the TA Media contract in the past month with
the expectations of this increasing at a very rapid rate. The current website is
being designed to accommodate new direction by us regarding Internet e-commerce
processing. It is expected new sites will be operational during the 2nd quarter
of 2000.
Revenue is recognized when earned on the accrual basis and total
revenues consist of license fees, maintenance renewal fees, and processing
transaction fees. We recorded net losses for the two years end 1997 and 1998;
and a net profit for the last calendar year ending December 31, 1999.
<PAGE> 10
During the years 1997 and 1998 our programmers were performing
consulting services to our first vendor in helping them develop their Internet
gaming software. We recognized revenues as the consulting services were
performed based upon direct labor hours incurred. We no longer provided
consulting services after December 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception we have financed our operations primarily through
private placements of equity securities. During fiscal years 1997 and 1998 we
established our operations and in December of 1998 we granted our first licenses
to customers and distributors, but we failed to generate revenues until January
of 1999. Management believes that the ratio of expenses to revenues will remain
relatively constant now that licensing agreements are in place. However, each
licensee has the option to not renew the license after a term of one year. If
several licensees opt to not renew we could experience a decrease in our
revenues.
During the fiscal year ended December 31, 1999 we have experienced
increased revenues as a result of processing and licensing fees. As of December
31, 1999 cash reserves totaled $1,866 with total current assets of $581,873. 94%
of the total current assets are represented by accounts receivable. We posted
operating losses during fiscal years 1998 and 1997, but we have posted a net
income of $5,067 for the December 31, 1999 fiscal year end. Our total current
liabilities were $176,107 as of December 31, 1999 with $173,796 representing
accounts payable, which are funds in our possession being processed and which
will subsequently be disbursed to vendors, less any processing fees. Our
principal commitments as of December 31, 1999 are $2,683 per month for office
leases.
A summary of our audited balance sheets for the years ended December
31, 1999 and 1998 and our balance sheet for the fiscal year ended December 31,
1999 are as follows:
<TABLE>
<CAPTION>
Years Ended December 31
1999 1998
---------- ----------
<S> <C> <C>
Cash/Cash Equivalents $ 1,866 $ 28,857
Current Assets 581,873 28,857
Total Assets 1,131,013 204,272
Total Current Liabilities 176,107 13,621
Total Stockholders' Equity 945,718 190,651
Total Liabilities & Stockholder Equity 1,131,013 204,272
</TABLE>
We have relied on equity transactions for funding of our business
operations. During fiscal year 1997 we sold 2,539,912 common shares for
$112,700. During fiscal year 1998 we sold an aggregate of 2,435,000 common
shares for $919,750. During the fiscal year ended December 31, 1999 and through
the first quarter of 2000 we sold an aggregate of 572,359 common shares for
$1,042,500. We have also issued common shares in exchange for services rendered
to us by third-parties. We issued an aggregate of 1,521,358 common shares during
1998 for payments for our software and for computer equipment. During 1999 and
through the first quarter of 2000 we issued 1,932,500 shares for services of
which 1,700,000 were issued for public relations and marketing services. We also
issued 120,000 shares in connection with the acquisition of a 19% interest in
SupraNet AG and 2,045,284 the Plus Network Platform acquisition and other
technology, services, and computer equipment from Intertreuhand
Aktiengesellschaft.
<PAGE> 11
We have made a transition to the e-commerce market with our existing
structure. However, in order to fully expand worldwide into the e-commerce
marketplace we anticipate that we will need up to $3,000,000 in order to
continue our growth in this area. We expect that we will need additional
programmers, staff and technical support. Management will evaluate our needs as
we expand into this new area of operations and we may need to form new alliances
with other Internet companies before we realize an expansion into the e-
commerce market.
We anticipate the need for additional funds and we are currently
evaluating the availability of external financing. However, we can not assure
that funds will be available from any source, or, if available, that we will be
able to obtain the funds on terms agreeable to us. Also, the acquisition of
funding through the issuance of debt could result in a substantial portion of
our cash flows from operations being dedicated to the payment of principal and
interest on the indebtedness, and could render us more vulnerable to competitive
and economic downturns.
Any future securities offerings will be effected in compliance with
applicable exemptions under federal and state laws. The purchasers and manner of
issuance will be determined according to exemptions available to us. At this
time we expect to offer securities to raise additional funds, however, we have
not determined the type of offering or the type or number of securities which we
will offer. We have no plans to make a public offering of our common stock at
this time. We also note that if we issue more shares of our common stock our
shareholders may experience dilution in the value per share of their common
stock.
RESULTS OF OPERATIONS
The following table summarizes the results of our operations for the
fiscal years ended December 31, 1999 and 1998.
<TABLE>
<CAPTION>
Years Ended December 31
1999 1998
--------- ---------
<S> <C> <C>
Revenues $ 822,673 $ 2,168
Total Operating Expense 817,606 842,728
Net Profit (loss) 5,067 (840,560)
</TABLE>
1997 to 1998
Revenues for the fiscal year ended December 31, 1998 were $2,168, which
represented a decrease from the $8,604 recorded for the fiscal year ended
December 31, 1997. These revenues were received from consulting services
provided to one of our licensees starting in 1997, and the bulk of the
consulting services were provided in 1997.
Operating expenses for the fiscal year 1998 were $842,728 which
represented an increase from the $111,918 recorded for the fiscal year 1997.
This increase is reflective of the expansion of our operations, including
increased office and equipment expenditures, hiring of additional employees,
expenses associated with Internet use, increased travel costs, increased
expenditures for marketing and advertising, as well as costs of our financing
activities.
<PAGE> 12
During fiscal year 1997 our operating activities provided $187,300
whereas in fiscal year 1998 our operating activities used $1,091,968 because of
our expansion into Europe. We eliminated a payable to Global Gaming Link
Systems, LTD for the software test prototype which resulted in our investing
activities providing $300,000 in fiscal year 1997, compared to $94,335 used for
investing activities in fiscal year 1998. For fiscal year 1997 our financing
activities provided $18,893 from the sale of our common stock compared to
$1,026,473 for fiscal year 1998.
1998 Compared 1999
Our results of operation for the fiscal year ended December 31, 1999
represents operations conducted in our European processing and licensing
operations. Revenues during fiscal year ended December 31, 1999 totaled $822,673
with $422,673 generated from our European processing operations and the
remaining $400,000 coming from license income generated in the Unites States.
Total operating expenses for the fiscal year ended December 31, 1999
were $817,606 which were 99.4% of the total revenues, compared to $842,728 in
operating expenses in the fiscal year ended December 31, 1998 which were
approximately 400% of revenues. Operating expenses in the fiscal year ended
December 31, 1998 reflected start-up costs of our operations, including
marketing expenses posted at $50,000, wages at $233,859, travel at $110,630 and
$179,750 in commissions from our financing activities.
Expenses in the fiscal year ended December 31, 1999 were reflective of
continuing operations. Wages, and Consulting Fees were the largest line items
for the fiscal year ended December 31, 1999 with $107,547 and $450,000,
respectively. The expenses for operations in the United States were primarily
from administrative expense items such as payroll, professional and legal fees,
taxes, etc. In comparison the European expenses were attributed to labor,
consulting fees, office expenses, travel and bank charges.
Net cash used by our operating activities was $303,458 for the fiscal
year ended December 31, 1999 compared to $1,091,968 provided by our operations
for the fiscal year ended December 31, 1998. Net cash provided by investing
activities was $94,335 for fiscal year ended December 31, 1998 compared to
capital expenditures of $441,238 used from investing activities during the
fiscal year ended December 31, 1999. Sales of our common stock provided
$1,026,473 for the fiscal year ended December 31, 1998, compared to $748,800 for
the fiscal year ended December 31, 1999.
DESCRIPTION OF PROPERTIES
Our principal business office in the United States is located in St.
Augustine, Florida. We lease 2,106 square feet of office space in an individual
unit. We have a three year lease which expires March 30, 2001 and management
believes this facility is adequate for our anticipated growth in the United
States. We pay $1,683 per month for this lease, and the agreement does not
provide for termination, other than by a court process. The administrative
office located in St. Augustine, Florida manages our overall operations,
including licensing agreements, corporate accounting and communications with the
public.
In August of 1999 we leased the top floor of a three story building
located in Ruggell, Liechtenstein, which is approximately 10,000 square feet and
houses our technical operations. This facility has state-of-the-art security
and is made of concrete construction and will allow for limited future
expansion, if needed. The lease has a monthly rent of $1,000 and is a
month-to-month open-end lease for a term of one year. The rent will not change
for a twelve month period from the date of said lease and thereafter will be
reviewed for a potential cost-of-living increase anticipated to be between 5-8%.
Our European office maintains, monitors and
<PAGE> 13
manages our technical operations and accounting records. The European office
programs software, creates upgrades as needed, monitors our bank processing, and
prepares graphics for our web site and for other publications. Our multi-lingual
programmers monitor the functions performed by this division.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of our
outstanding common stock of; (i) each person or group known by us to own
beneficially more than 5% of our outstanding common stock, (ii) each of our
executive officers, (iii) each of our director's and (iv) all executive officers
and directors as a group. Beneficial ownership is determined in accordance with
the rules of the SEC and generally includes voting or investment power with
respect to securities. Except as indicated by footnote, the persons named in the
table below have sole voting power and investment power with respect to all
shares of common stock shown as beneficial ownership of those shares. The
percentage of beneficial ownership is based on 19,612,889 shares of common stock
outstanding as of April 17, 2000 and 466,657 shares subject to options granted
to Management.
CERTAIN BENEFICIAL OWNERS
<TABLE>
<CAPTION>
Name and Address of
Beneficial Owners Number of Shares Percentage of Class
------------------------------------ ---------------- -------------------
<S> <C> <C>
Intertreuhand Aktiengesellschaft 1,895,284 9.5%
9494 Schaan
Fuerstentum, Liechtenstein
David Skinner, Sr. 1,510,000 7.5%
126 Staghorn Hollow
Beech Mountain, North Carolina 28604
</TABLE>
<PAGE> 14
MANAGEMENT
<TABLE>
<CAPTION>
Name and Address of
Beneficial Owners Number of Shares Percentage of Class
----------------------------------------------- ---------------- -------------------
<S> <C> <C>
Dr. Reinhard Proksch (1) 1,895,284 9.5%
9494 Schaan
Fuerstentum, Liechtenstein
David Skinner, Jr. (2) 1,288,750 6.4%
145 Oviedo Street
St. Augustine, Florida 32084
Charles E. Scott (3) 956,000 4.8%
145 Oviedo Street
St. Augustine, Florida 32084
Douglas Morgan (4) 610,000 3.0%
4790 Caughlin Pkwy #102
Reno, Nevada 89509
Ronald Oehri (5) 140,000 *
Schlattstrasse 215 FL-9491
Ruggell, Liechtenstein
Markus Buechel 10,000 *
Land Street 153
Ruggell, Liechtenstein
All executive officers and directors as a group 4,900,034 23.7%
(six persons) (1)(2)(3)(4)(5)
* Less than 1%
</TABLE>
(1) Includes the shares held by Intertreuhand Aktiengesellschaft, of which Dr.
Proksch is the Managing Director.
(2) Includes options to acquire 78,750 shares.
(3) Includes options to acquire 40,000 shares.
(4) Includes options to acquire 300,000 shares.
(5) Includes options to acquire 10,000 shares.
As of May 9, 2000, we had a total of 20,684,339 shares issued and outstanding
and total stock options of 677,907.
<PAGE> 15
continued
http://www.freeedgar.com/search/ViewFilings.asp?CIK=1045181&...
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<DESCRIPTION>FORM 8-K
<TEXT>
<PAGE> 1
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Act of 1934
Date of Report (Date of earliest event reported) May 9, 2000
WINNERS INTERNET NETWORK, INC.
(Name of registrant in its charter)
<TABLE>
<S> <C> <C>
NEVADA 000-26665 91-1844567
(State of incorporation) (Commission (I. R. S. Employer Identification No.)
File Number)
</TABLE>
145 OVIEDO STREET
ST. AUGUSTINE, FLORIDA 32084
(Address and telephone number of principal executive offices
and principal place of business)
(904)824-7447
(Registrant's telephone number including area code)
GLENNAIRE FINANCIAL SERVICES, INC.
(Former name of registrant, if changed since last report)
3158 REDHILL AVE., SUITE 240
COSTA MESA, CALIFORNIA 92626
(Former address of registrant, if changed since last report)
<PAGE> 2
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Act of 1934
References in this document to "us," "we," or "the Company" refer to Winners
Internet Network, Inc. and its subsidiary.
Safe Harbor Statement
This Form 8-K contains certain forward-looking statements. For this
purpose any statements contained in this Form 8-K that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, words such as may, will, expect, believe, anticipate, estimate or
continue or comparable terminology are intended to identify forward-looking
statements. These statements by their nature involve substantial risks and
uncertainties, and actual results may differ materially depending on a variety
of factors, many of which are not within our control. These factors include but
are not limited to economic conditions generally and in the industries in which
we may participate; competition within our chosen industry, including
competition from much larger competitors; technological advances and failure by
us to successfully develop business relationships.
Item 1. Changes in Control of Registrant.
We completed our acquisition of 100% of the issued and outstanding common shares
of Glennaire Financial Services, Inc., a private Utah public reporting company
(GFS), in exchange for approximately 10,000 shares of us. We plan to merge GFS
into us in the future. At the present time,GFS is a wholly-owned subsidiary.
INVESTMENT RISKS
LIMITED OPERATING HISTORY
We have recorded revenues and a profit for the fiscal year ended
December 31, 1999. However, we recorded losses for the past two fiscal years. An
investment in our stock is very risky. Potential investors should carefully
consider the factors discussed in this registration statement before purchasing
our common stock.
COMPETING TECHNOLOGICAL DEVELOPMENT
Internet industries are subject to rapid technological change and our
ability to successfully market our products, improve our products and to respond
effectively to new technological changes or new product announcements will
affect our results of operations. Other companies may develop new technology and
systems similar to ours which could materially affect our results in operation.
RELIANCE ON A THIRD PARTY MAINTAINED SYSTEM
We rely on the CyberLink Monetary System to complete the processing of
Internet transactions using our Winners Processing System. The CyberLink
Monetary System is a data processing center based in Vaduz, Liechtenstein and is
the entity that provides the link between the customer, merchant and banking
credit card authorization centers. Our Winners processing System software
interfaces with the CyberLink Monetary System data processing which is the link
between the credit card company and the issuing credit card banking institution.
<PAGE> 3
POTENTIAL REGULATION OF INTERNET GAMING
Internet gaming legislation is pending before the United States
Congress. Regulation could require us to modify our software and that of the CMS
Debit Card described below to accommodate regulatory restrictions. AS OF THE
DATE OF THIS FILING CONGRESS HAS FAILED TO MAKE A DEFINITIVE DECISION. We cannot
provide assurances that if regulations are imposed that we will be able to
modify our software to comply with such regulation or that such regulation would
not have an adverse effect on the market for our software in general by
curtailing Internet gaming.
UNPROVEN TECHNOLOGY AND SOFTWARE APPLICATIONS
We estimate that the time frame for the CMS Debit Card is on or about
the 4th quarter of 2000 through the 1st quarter of 2001.
We cannot assure that the CMS Debit Card will interface with our
customers or other vendors, nor that our CMS Debit Card can compete with debit
cards now available through other banks.
COMPETITION
We are in competition with companies such as Star Net and MPact Media
in regard to Internet gaming financial processing. These companies provide the
credit card processing similar to us. Our services are also expanded to
facilitate financial processing in multi-currencies including, but not limited
to, the British pound, the German marc, the Canadian dollar, the Australian
dollar, the Swiss franc, the French franc and the Dutch gilder. Our competitors
also perform a type of payout service which returns funds to customers via
credit cards and checks while our services are also expanded to facilitate
refunds to customers via credit cards and check disbursements in the customer's
currency where they reside. We currently have customers in 16 countries which
represent 8 different currencies. We are able to send payments to these
customers in their own currency where its competitors would have to send the
customers a check in U.S. dollars.
We have not been accepted by most Internet casinos as we serve only 17
websites. In this regard, we have refused to accept deposits from the player who
resides in an illegal jurisdiction. We consider an illegal jurisdiction to
include any state or country where there is a law which makes it illegal to
participate in on-line gaming. It is believed that this decision by our
management to prevent play from these jurisdictions is the reason that we serve
only 17 websites.
TRADEMARKS, LICENSE AND INTELLECTUAL PROPERTY
Our proprietary software is a material aspect of our business. We rely
upon a combination of licenses, confidentiality agreements and other contractual
covenants to establish and protect our technology and other intellectual
property rights. If we infringe on the intellectual property of another party we
could be forced to seek a license to those intellectual property rights of the
third party. If we are required to obtain a license to another party's
proprietary rights, that license could be expensive, if we could obtain it at
all. Although we do not believe that our intellectual property infringes on the
rights of any other party, third-parties may assert claims for infringement
which may be successful or require substantial resources to defend. In addition
our confidentiality agreements may not effectively prevent copying and
disclosure of our technology and may not provide us with an adequate remedy if
unauthorized disclosure occurs.
<PAGE> 4
DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
We were incorporated in the state of Washington on May 23, 1967 as
Empire Exploration, Inc. Empire Exploration was involved in the business of
purchasing and exploring mining properties but ceased such operations in 1992.
In July of 1988 Empire Exploration, Inc. changed its name to Comstock-Empire
International, Inc. (A "Comstock-Empire"). Winners Internet Network, Inc. was
incorporated in the state of Nevada on July 16, 1997. On July 21, 1997,
Comstock-Empire merged with Winners Internet for the sole purpose of changing
its domicile from Washington to Nevada. Winners Internet is a Nevada corporation
authorized to do business in the state of Florida and the countries of Austria
and Liechtenstein.
On July 31, 1997 Winners Internet acquired Davki Agency LTD, a Delaware
corporation (Davki Agency). Davki Agency was incorporated on June 16, 1997 and
held the license to the test prototype of proprietary software we currently use.
Pursuant to the terms of the acquisition Winners Internet issued 8,000,000
common shares for 100% of the 1,500 common shares of Davki Agency and Davki
Agency became a wholly owned subsidiary of Winners Internet. Davki Agency was
later dissolved in December of 1997.
We develop and own proprietary software and technology which processes
financial transactions for Internet commerce. Initially the software and
processing system was used exclusively for processing credit cards for payment
to Internet on-line licensed casinos. The system was also used to provide
accounting and transaction history for the on-line casino tracking all deposits
and payments from and to the casino customer. The system was also used to
provide players with full tracking of all deposits and transfers to casinos for
play. In addition, the system was interfaced with banks for payment to players
for withdrawal from their accounts or payments for winnings. The system was
developed to handle all type of internet transactions to connect the customer to
the merchant, handle the processing of payments for goods or services, provide
an accounting to the merchant and the customer, and process customer requests
for transfer to merchants or repayment for refunds at the request of the
merchant or customer. In specific reference to Internet casino play, the
software was able to identify the jurisdiction that the transaction began to
prevent illegal jurisdictions from having access to the Internet gaming sites
for play. The advantage to the customer in use of the system was that all
transactions required a second tier for approval requiring password entry in an
attempt to prevent fraud. The system was linked to established banking
structures in Europe including LGT Bank in Liechtenstein and BTV Bank in
Austria, both of which were used for processing the transaction via credit card
authorization centers.
Our administrative offices are located in St. Augustine, Florida
which manages the overall operations, including licensing agreements, corporate
accounting and communications with the public. Our operations center is located
in located in Ruggell, Liechtenstein which maintains, monitors and manages our
processing, technical operations and merchant and customer accounting records.
The European Division programs software, creates upgrades as needed, monitors
our bank processing, and prepares graphics for our web site and for other
publications. Our multi-lingual programmers monitor the functions performed by
this division. We have recently begun processing e-commerce transactions in the
first quarter of 2000 in order to expand the available market. These new markets
are located in Europe where the greatest emphasis for growth is being placed by
us.
In the first quarter of 2000, we completed negotiations and acquired a
19% interest in the Internet Service Provider in Liechtenstein. SupraNet AG has
been in existence since 1995 and is a very successful provider with offices in
Ruggell, Liechtenstein. SupraNet has provided us with the ability to house our
servers for immediate access to the Internet Hub by providing a direct
connection to the world wide web. The expansion capabilities with this location
and ownership has enabled us to be able to offer hosting of web sites coupled
with processing availability with the Winners System. This has also enabled us
to be able to look forward to the e-commerce expansion that we are seeking.
<PAGE> 5
The following describes the typical transaction which would be the same
for any type of e-commerce. Software can be modified to accommodate all
transaction processing that wishes to offer their goods and services via the
Internet:
After the customer has gone to a site that is processed by us, the
customer would select a method of payment for goods or services. In the case of
both gaming or e-commerce the credit cards accepted or other method of payment
such as Western Union will be shown on the site. Once a payment request is made
by the customer, the customer's transaction will immediately be sent via
Internet with encrypted transmission to the processing center in Ruggell,
Liechtenstein. The processing software simultaneously submits through the
CyberLink Monetary System the card for approval via the credit card
authorization company. CyberLink Monetary System has the existing accounts with
all of the payment options that are utilized by us. CyberLink will be discussed
in detail later in this filing. Upon approval of the transactions by a credit
card company issuing bank, the merchant and customer are simultaneously notified
of the approval and the customer receives confirmation that the order has been
paid. This format is standard whether the transaction for Internet gaming or
e-commerce processing.
The software provides the merchant with a complete accounting of all
transactions which the merchant can access at any time in addition to receiving
a monthly statement of all changes that have been credited to the respective
accounts. The software provides a complete accounting reconciliation to the
merchant in the form of a bank type statement reflecting all income to the
merchant and disbursement of monies. Similarly for the customer, the customer
has a complete account of all transactions including date, amount, merchant and
a historical accounting summary for personal reconciliation and verification
purposes.
The payment function to a customer in connection with Internet gaming
allows a customer to request a payment from the merchant from the Internet
casino which is then simultaneously transmitted to our processing division for
payment request. The processing division verifies the account balance and issues
instructions via the CyberLink Monetary System which handles the disbursements
to the Internet casino customers. A complete accounting reconciliation for these
payments is available to both the merchant and the customer for verification and
reconciliation purposes. Our processing system provides a complete transaction
and tracking analysis which reconciles the merchant, the customer and the
issuing bank for payment which are balanced simultaneously with each
transaction.
We receive a 5.5% fee of the amount of the transaction to the merchant.
In addition, if a payment is requested through the Winners System a $5.00 fee is
charged for returning funds back to a credit card, a $24.00 fee for an
international bank draft check and a $24.00 fee for an international bank wire.
All processing fees are based on a per transaction computation. Fees for both
Internet e-commerce and Internet gaming are based upon licensee agreements which
list the fees for each transaction.
Winners Secure Online Financial Processing System (A Winners Processing
System).
CyberLink Monetary System (CMS) is a Liechtenstein Company, managed by
the Directors of the Intertreuhand Trust, for the beneficial interest of those
of our clients for whom we handle financial transaction processing. This
structure insures our financial processing clients that their funds are secure,
separate, and managed by a licensed trust company. Bank accounts are maintained
in the name of CMS on behalf of clients under the trust, and are subject to the
full fiduciary and financial privacy laws of Liechtenstein. CMS provides the
facility for us to offer financial transaction processing to our clients within
a secure and protected financial structure.
We are the exclusive beneficiary of CMS and are provided protection
under Intertreuhand Aktiengesellschaft, an Asset Management Trust that has been
licensed by the Government of Liechtenstein since 1954. CMS is managed by
Intertreuhand Aktiengesellschaft, which has DDr. Reinhard Proksch serving
<PAGE> 6
as Managing Director. DDr. Proksch, a Fulbright Scholar, holds dual doctorates
in law and information systems and was admitted to practice law in New York
State.
We rely on CMS to complete the processing of Internet transactions
using the Winners Processing System. CMS is a data processing center based in
Vaduz, Liechtenstein and is the entity that provides the link between customers,
products and services and licensed banking. In July 1998, CMS agreed to
exclusively license us as the sole provider of Internet gaming for its data
processing operations. The Winners Processing System interfaces with CMS' data
processing and the financial transactions processed by CMS are then interfaced
with the bank accounts managed by CMS.
In addition to the e-commerce aspects of its financial transaction
processing systems, we are developing an integrated e-commerce initiative of our
own, the "-Plus Network". In this regard, we acquired 19% interest in the
Internet Service Provider, SupraNet, AG., in Liechtenstein. This acquisition has
enabled us and SupraNet to offer expanded services to allow Internet Merchants
to house their servers in the facility occupied jointly by SupraNet, AG and us
to be able to provide internet hosting of the site and credit card processing
ability with the Winners Internet software. The "-Plus Network" is an e-commerce
platform consisting of numerous cross-marketed sites under the three main
categories of finance, products, and entertainment. We own a broad cross section
of URLs ending in the suffix "-Plus", such as www.Banks-Plus.com , www.Loans-
Plus.com and the like. With the scarcity of reasonable URL's available, the
"-Plus" suffix provides both an easy to remember and easy to communicate web
address for many common financial and product offerings, and also permits the
building of a family identity among the sites. We plan to develop some of the
sites ourself, joint venture others, and refer the remainder to carefully
selected and screened outside providers. We intend to monitor the sites and
provide a central problem resolution facility, which will build a high level of
customer confidence in the "-Plus" family of sites.
We are also using our solutions to create an integrated "Internet
Financial Platform" which allows consumers to engage in all manner of financial
transactions on the web - from e-shopping, to banking, to trading of stocks,
bonds and mutual funds - with complete security, accountability, tracking,
privacy and peace of mind. By combining our proprietary technology and systems
with strategic partnerships with major financial players in Europe and the U.S.,
we are rapidly working to implement this vision. In this regard we completed the
lease of our "Processing In Software for Banking" to Intertreuhand, a
Liechtenstein Asset Management Trust Company, for the initial payment of Three
Million USD.
We are now actively engaged in expanding the scope of our business
operations to embrace the enormous potential of the e-commerce marketplace. As a
result of the lease of the Processing Software to Intertreuhand, We recently
signed a contract with Winner Market AG, a Swiss e-commerce group, owned by TA
Media AG, one of the most successful media enterprise in Switzerland with daily
newspapers, magazines, radio and TV stations and more than $400 million in
annual revenues. They have chosen Winners Internet's services for its e-commerce
transactions for its group of e-commerce sites, including an Internet job
marketplace, Swiss real estate marketplace, Swiss vehicle marketplace and a
Swiss auction house. We receive a share of revenue on a percentage basis per
processed transaction.
Through our proprietary e-commerce system, we will process all
classified advertising placement over the Internet, and are facilitating the
company's expansion into online magazine subscriptions and other product lines.
This processing technique offers a seamless system interconnecting the customer,
merchant and banking institution with approval and financial transaction
accounting.
CyberLink Monetary System
We rely on the CyberLink Monetary System to complete the processing of
Internet transactions using our Winners Processing System. The CyberLink
Monetary System is based in Vaduz, Liechtenstein and is the entity that provides
the link between customers, products and services and licensed banking. The
<PAGE> 7
CyberLink Monetary System is managed by Intertreuhand Aktiengesellschaft.
Intertreuhand Aktiengesellschaft is an Asset Management Trust licensed by the
Government of Liechtenstein since 1954. Intertreuhand Aktiengesellschaft
maintains bank accounts in the name of CMS for the benefit of our clients. The
Managing Director of Intertreuhand Aktiengesellschaft is DDr. Reinhard Proksch.
DDr. Proksch, a Fulbright Scholar, holds dual doctorates in law and information
systems and is one of our directors.
We became a member of the CyberLink Monetary System in July 1998 when
CyberLink Monetary Systems agreed to exclusively license us as the sole provider
of Internet gaming for its data processing operations. Our Winners Processing
System interfaces with the CyberLink Monetary System's data processing and the
financial transactions processed by the CyberLink Monetary System are then
interfaced with the bank accounts managed by the CyberLink Monetary System for
our clients.
PRODUCT DEVELOPMENT
Currently, our percentage of gaming business operations derived from
U.S. customers is approximately 85%. The U.S. legislation concerning on-line
gaming may have a material impact on its operations. This legislation is set to
make all forms of Internet gambling illegal for U.S. citizens. If this
legislation is passed it will have an impact on our operations since 85% of our
gaming revenues would be eliminated. This potential loss of revenue is in regard
to our gaming operations only. We also provide financial processing for e-
commerce companies unrelated to gaming which would not be affected should
legislation occur.
In July of 1998 CyberLink Monetary System began the development of the
CMS Debit Card. We anticipate that CyberLink Monetary System will provide the
CMS Debit Card for use in our Gaming System and other e-commerce operations.
This card will function like other bank cards, allowing the user to conduct
financial transactions on the Internet. We anticipate that it will provide a
means for complete accounting of all transactions for either our Internet gaming
or other e-commerce transactions. We anticipate that the CMS Debit Card will
provide recognition of parity of the Eurodollar and all foreign currencies for
Internet commerce. However, CyberLink Monetary System has delayed the launching
of the CMS Debit Card pending Internet gaming legislation before the United
States Congress and for other technical reasons. It is not known for certain if
this card will ever be implemented. Any regulation changes would require the CMS
Debit Card to be redesigned with the necessary restrictions on transactions
programmed into the system or the card. AS OF THE DATE OF THIS FILING CONGRESS
HAS FAILED TO MAKE A DEFINITIVE DECISION.
DISTRIBUTION
We market our services and products through software licensing
agreements with distributors and casinos and sportbooks. We currently have five
software license agreements and two distributor agreements. Our license
agreement allows the licensee the non-exclusive right to process data by using
our software and, to load, use, and copy our software. The license may allow
single or multiple processor, single or multiple site, or a national license
which is a licensed domicile. The licensing agreement requires that the licensee
not have a criminal record, that the software be regarded as secret and
confidential and shall remain in the licensee's effective control. The licensee
is required to sign a confidentiality agreement as well.
We have entered into Software Licensing Agreements with the following
companies: Maintain, Inc./March 2000, A&W Ltd./July 99, Corporacion
CentroAmerica El Tesora Sociedad Anonima February 2000, WorldLink International
N.V./October 1999 and Winner Market AG/February 2000.
These agreements may be terminated for failure to perform consistent
with its provisions, bankruptcy by the licensee or if the licensee conducts
business in an illegal territory. Principal terms of the Agreements include a
one-time license fee of $50,000. There is a yearly renewal fee for a license at
$20,000 for
<PAGE> 8
maintenance of the license which includes all upgrades and/or new versions of
our software to meet industry technical and graphic advances. All processing
fees are based on a per transaction computation. Fees for both Internet
e-commerce and Internet gaming are based upon licensee agreements which list the
fees for each transaction. We receive a range between a fee of 5.5% and 7% of
the amount of the transaction to the merchant. In addition, if a payment is
requested through the Winners System a $5.00 fee is charged for returning funds
back to a credit card, a $24.00 fee for an international bank draft check and a
$24.00 fee for an international bank wire.
We currently have two software distributor agreements. Principal terms
of the Agreements include granting the distributor the right to distribute the
Gaming System in a specific territory. We must approve all licenses and the
distributor agrees to promote our product and our good reputation. The
distributor is not our agent and the license cannot be assigned. The commission
structure is 25% of the paid and collected licensing fees and net processing
fees.
We currently have two distributors who own the territorial marketing
rights for our software license in Australia and New Zealand and one for the
Caribbean. In December of 1998 Vaudeville Holding, Inc. became a licensed
distributor with the rights to sell the Gaming System in the assigned territory
of the Caribbean meaning, but not limited to, Antigua-Barbuda, Aruba, the
Bahamas, Belize, Costa Rica, Dominica, Dominican Republic, Granada and St.
Kitts. Vaudeville Holdings began its second year of on-line processing with us
and currently manages seven gaming web sites. In December of 1998 we entered
into a software distributor's licensing agreement with Kenneth Hense, granting
Mr. Hense the exclusive right to sell the Gaming System in the countries of
Australia and New Zealand. Neither Vaudeville Holding nor Kenneth Hense have
sold licenses in 1999.
COMPETITION
We are in competition with companies such as Star Net and MPact Media
in regard to Internet gaming financial processing. These companies provide the
credit card processing similar to ours.
TRADEMARKS, LICENSE AND INTELLECTUAL PROPERTY
Our proprietary software is a material aspect of our business. We rely
upon a combination of licenses, confidentiality agreements and other contractual
covenants to establish and protect our technology and other intellectual
property rights. If we infringe on the intellectual property of another party we
could be forced to seek a license to those intellectual property rights of the
third party. If we are required to obtain a license to another party's
proprietary rights, that license could be expensive, if we could obtain it at
all. Although we do not believe that our intellectual property infringes on the
rights of any other party, third-parties may assert claims for infringement
which may be successful or require substantial resources to defend.
Our ability to compete effectively will depend in part on our ability
to maintain the proprietary nature of our technology through a combination of
exclusive licensing and the aggressive continued development of our products.
Competition in the Internet market is intense and there can be no assurance that
our competitors will not independently develop or obtain patents or technologies
that are substantially equivalent or superior to our technology.
GOVERNMENT REGULATIONS
Changes in government regulations toward Internet gaming could affect
our operations concerning our Internet gaming processing. United States citizens
in certain state jurisdictions, as well as those in many other countries, are
barred from Internet gaming. We currently do not process transactions for any
state or
<PAGE> 9
territory where gaming is illegal for its citizens. Should those offshore
governments that now allow Internet gaming negatively alter their regulations
toward the industry, the market for new customers would be greatly reduced and
could severely change our revenue projections, growth, and operations. We are
monitoring developments in legislation throughout the world and will adhere to
all legislative decisions or regulations in this regard. Until we are able to
entirely shift processing to non-gaming related activity this would have a
serious impact on our processing and license revenue if gaming were to be
curtailed in the US Market. Our system will immediately terminate gaming from
any illegal jurisdiction. Presently we do not accept any gaming activity from
any state or jurisdiction which forbids Internet gaming whether by law. Winners
Internet currently does not accept any gaming activity from customers in the
U.S. jurisdictions of Florida, Kansas, Louisiana, Missouri, Nevada and Utah, and
the overseas jurisdictions of Austria and Japan. There are currently no laws
which prohibit e-commerce processing in the U.S. or Liechtenstein.
EMPLOYEES
We currently have sixteen (16) full time employees and two (2)
part-time employees. The Administration Division includes four employees and one
part time employee which are located in St. Augustine, Florida. Ten employees
and one (1) part-time employee are employed in the European Division and are
located in Ruggell, Liechtenstein. We believe we have good relations with our
employees and none are covered by any collective bargaining agreement. We
anticipate employing two (2) additional employees for the Technical Division
within the next fiscal quarter.
MANAGEMENTS' DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
OVERVIEW
We have been utilizing our processing software primarily for processing
Internet gaming transactions with limited processing of e-commerce business. In
view of pending legislation in the US which will severally limit or outlaw
Internet gaming for US Citizens, the focus of management is toward the
implementation and marketing of e-commerce non-gaming related activity. In this
regard, the recent acquisition of a percentage ownership of the Internet Service
Provider in Liechtenstein, SupraNet AG, allows us to expand our e-commerce
presence by hosting e-commerce sites. In addition, we acquired the rights to the
-Plus Network offering in excess of 100 separate Website domains for future
processing under the Plus Network. We also recently completed the exclusive
lease of our processing software for processing of banking related transactions
to CyberLink Monetary System in order to expand our scope of financial
processing to other related markets including the most recent signing of a
contract with a subsidiary of one of the largest media groups in Switzerland, TA
Media. Further, we expanded our board of directors to include leaders in
computer software development and management including a MIT graduate and holder
of five patents related to internet networks and security, the CEO of a
successful Internet Service Provider in Europe, a scholar with a doctorate in
information systems, and the former Prime Minister and Minister of Finance in
Liechtenstein. It is our goal to expand our operations to include transaction
processing for e-commerce in both merchant and financial markets. We currently
have added 5 e-commerce sites under the TA Media contract in the past month with
the expectations of this increasing at a very rapid rate. The current website is
being designed to accommodate new direction by us regarding Internet e-commerce
processing. It is expected new sites will be operational during the 2nd quarter
of 2000.
Revenue is recognized when earned on the accrual basis and total
revenues consist of license fees, maintenance renewal fees, and processing
transaction fees. We recorded net losses for the two years end 1997 and 1998;
and a net profit for the last calendar year ending December 31, 1999.
<PAGE> 10
During the years 1997 and 1998 our programmers were performing
consulting services to our first vendor in helping them develop their Internet
gaming software. We recognized revenues as the consulting services were
performed based upon direct labor hours incurred. We no longer provided
consulting services after December 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception we have financed our operations primarily through
private placements of equity securities. During fiscal years 1997 and 1998 we
established our operations and in December of 1998 we granted our first licenses
to customers and distributors, but we failed to generate revenues until January
of 1999. Management believes that the ratio of expenses to revenues will remain
relatively constant now that licensing agreements are in place. However, each
licensee has the option to not renew the license after a term of one year. If
several licensees opt to not renew we could experience a decrease in our
revenues.
During the fiscal year ended December 31, 1999 we have experienced
increased revenues as a result of processing and licensing fees. As of December
31, 1999 cash reserves totaled $1,866 with total current assets of $581,873. 94%
of the total current assets are represented by accounts receivable. We posted
operating losses during fiscal years 1998 and 1997, but we have posted a net
income of $5,067 for the December 31, 1999 fiscal year end. Our total current
liabilities were $176,107 as of December 31, 1999 with $173,796 representing
accounts payable, which are funds in our possession being processed and which
will subsequently be disbursed to vendors, less any processing fees. Our
principal commitments as of December 31, 1999 are $2,683 per month for office
leases.
A summary of our audited balance sheets for the years ended December
31, 1999 and 1998 and our balance sheet for the fiscal year ended December 31,
1999 are as follows:
<TABLE>
<CAPTION>
Years Ended December 31
1999 1998
---------- ----------
<S> <C> <C>
Cash/Cash Equivalents $ 1,866 $ 28,857
Current Assets 581,873 28,857
Total Assets 1,131,013 204,272
Total Current Liabilities 176,107 13,621
Total Stockholders' Equity 945,718 190,651
Total Liabilities & Stockholder Equity 1,131,013 204,272
</TABLE>
We have relied on equity transactions for funding of our business
operations. During fiscal year 1997 we sold 2,539,912 common shares for
$112,700. During fiscal year 1998 we sold an aggregate of 2,435,000 common
shares for $919,750. During the fiscal year ended December 31, 1999 and through
the first quarter of 2000 we sold an aggregate of 572,359 common shares for
$1,042,500. We have also issued common shares in exchange for services rendered
to us by third-parties. We issued an aggregate of 1,521,358 common shares during
1998 for payments for our software and for computer equipment. During 1999 and
through the first quarter of 2000 we issued 1,932,500 shares for services of
which 1,700,000 were issued for public relations and marketing services. We also
issued 120,000 shares in connection with the acquisition of a 19% interest in
SupraNet AG and 2,045,284 the Plus Network Platform acquisition and other
technology, services, and computer equipment from Intertreuhand
Aktiengesellschaft.
<PAGE> 11
We have made a transition to the e-commerce market with our existing
structure. However, in order to fully expand worldwide into the e-commerce
marketplace we anticipate that we will need up to $3,000,000 in order to
continue our growth in this area. We expect that we will need additional
programmers, staff and technical support. Management will evaluate our needs as
we expand into this new area of operations and we may need to form new alliances
with other Internet companies before we realize an expansion into the e-
commerce market.
We anticipate the need for additional funds and we are currently
evaluating the availability of external financing. However, we can not assure
that funds will be available from any source, or, if available, that we will be
able to obtain the funds on terms agreeable to us. Also, the acquisition of
funding through the issuance of debt could result in a substantial portion of
our cash flows from operations being dedicated to the payment of principal and
interest on the indebtedness, and could render us more vulnerable to competitive
and economic downturns.
Any future securities offerings will be effected in compliance with
applicable exemptions under federal and state laws. The purchasers and manner of
issuance will be determined according to exemptions available to us. At this
time we expect to offer securities to raise additional funds, however, we have
not determined the type of offering or the type or number of securities which we
will offer. We have no plans to make a public offering of our common stock at
this time. We also note that if we issue more shares of our common stock our
shareholders may experience dilution in the value per share of their common
stock.
RESULTS OF OPERATIONS
The following table summarizes the results of our operations for the
fiscal years ended December 31, 1999 and 1998.
<TABLE>
<CAPTION>
Years Ended December 31
1999 1998
--------- ---------
<S> <C> <C>
Revenues $ 822,673 $ 2,168
Total Operating Expense 817,606 842,728
Net Profit (loss) 5,067 (840,560)
</TABLE>
1997 to 1998
Revenues for the fiscal year ended December 31, 1998 were $2,168, which
represented a decrease from the $8,604 recorded for the fiscal year ended
December 31, 1997. These revenues were received from consulting services
provided to one of our licensees starting in 1997, and the bulk of the
consulting services were provided in 1997.
Operating expenses for the fiscal year 1998 were $842,728 which
represented an increase from the $111,918 recorded for the fiscal year 1997.
This increase is reflective of the expansion of our operations, including
increased office and equipment expenditures, hiring of additional employees,
expenses associated with Internet use, increased travel costs, increased
expenditures for marketing and advertising, as well as costs of our financing
activities.
<PAGE> 12
During fiscal year 1997 our operating activities provided $187,300
whereas in fiscal year 1998 our operating activities used $1,091,968 because of
our expansion into Europe. We eliminated a payable to Global Gaming Link
Systems, LTD for the software test prototype which resulted in our investing
activities providing $300,000 in fiscal year 1997, compared to $94,335 used for
investing activities in fiscal year 1998. For fiscal year 1997 our financing
activities provided $18,893 from the sale of our common stock compared to
$1,026,473 for fiscal year 1998.
1998 Compared 1999
Our results of operation for the fiscal year ended December 31, 1999
represents operations conducted in our European processing and licensing
operations. Revenues during fiscal year ended December 31, 1999 totaled $822,673
with $422,673 generated from our European processing operations and the
remaining $400,000 coming from license income generated in the Unites States.
Total operating expenses for the fiscal year ended December 31, 1999
were $817,606 which were 99.4% of the total revenues, compared to $842,728 in
operating expenses in the fiscal year ended December 31, 1998 which were
approximately 400% of revenues. Operating expenses in the fiscal year ended
December 31, 1998 reflected start-up costs of our operations, including
marketing expenses posted at $50,000, wages at $233,859, travel at $110,630 and
$179,750 in commissions from our financing activities.
Expenses in the fiscal year ended December 31, 1999 were reflective of
continuing operations. Wages, and Consulting Fees were the largest line items
for the fiscal year ended December 31, 1999 with $107,547 and $450,000,
respectively. The expenses for operations in the United States were primarily
from administrative expense items such as payroll, professional and legal fees,
taxes, etc. In comparison the European expenses were attributed to labor,
consulting fees, office expenses, travel and bank charges.
Net cash used by our operating activities was $303,458 for the fiscal
year ended December 31, 1999 compared to $1,091,968 provided by our operations
for the fiscal year ended December 31, 1998. Net cash provided by investing
activities was $94,335 for fiscal year ended December 31, 1998 compared to
capital expenditures of $441,238 used from investing activities during the
fiscal year ended December 31, 1999. Sales of our common stock provided
$1,026,473 for the fiscal year ended December 31, 1998, compared to $748,800 for
the fiscal year ended December 31, 1999.
DESCRIPTION OF PROPERTIES
Our principal business office in the United States is located in St.
Augustine, Florida. We lease 2,106 square feet of office space in an individual
unit. We have a three year lease which expires March 30, 2001 and management
believes this facility is adequate for our anticipated growth in the United
States. We pay $1,683 per month for this lease, and the agreement does not
provide for termination, other than by a court process. The administrative
office located in St. Augustine, Florida manages our overall operations,
including licensing agreements, corporate accounting and communications with the
public.
In August of 1999 we leased the top floor of a three story building
located in Ruggell, Liechtenstein, which is approximately 10,000 square feet and
houses our technical operations. This facility has state-of-the-art security
and is made of concrete construction and will allow for limited future
expansion, if needed. The lease has a monthly rent of $1,000 and is a
month-to-month open-end lease for a term of one year. The rent will not change
for a twelve month period from the date of said lease and thereafter will be
reviewed for a potential cost-of-living increase anticipated to be between 5-8%.
Our European office maintains, monitors and
<PAGE> 13
manages our technical operations and accounting records. The European office
programs software, creates upgrades as needed, monitors our bank processing, and
prepares graphics for our web site and for other publications. Our multi-lingual
programmers monitor the functions performed by this division.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of our
outstanding common stock of; (i) each person or group known by us to own
beneficially more than 5% of our outstanding common stock, (ii) each of our
executive officers, (iii) each of our director's and (iv) all executive officers
and directors as a group. Beneficial ownership is determined in accordance with
the rules of the SEC and generally includes voting or investment power with
respect to securities. Except as indicated by footnote, the persons named in the
table below have sole voting power and investment power with respect to all
shares of common stock shown as beneficial ownership of those shares. The
percentage of beneficial ownership is based on 19,612,889 shares of common stock
outstanding as of April 17, 2000 and 466,657 shares subject to options granted
to Management.
CERTAIN BENEFICIAL OWNERS
<TABLE>
<CAPTION>
Name and Address of
Beneficial Owners Number of Shares Percentage of Class
------------------------------------ ---------------- -------------------
<S> <C> <C>
Intertreuhand Aktiengesellschaft 1,895,284 9.5%
9494 Schaan
Fuerstentum, Liechtenstein
David Skinner, Sr. 1,510,000 7.5%
126 Staghorn Hollow
Beech Mountain, North Carolina 28604
</TABLE>
<PAGE> 14
MANAGEMENT
<TABLE>
<CAPTION>
Name and Address of
Beneficial Owners Number of Shares Percentage of Class
----------------------------------------------- ---------------- -------------------
<S> <C> <C>
Dr. Reinhard Proksch (1) 1,895,284 9.5%
9494 Schaan
Fuerstentum, Liechtenstein
David Skinner, Jr. (2) 1,288,750 6.4%
145 Oviedo Street
St. Augustine, Florida 32084
Charles E. Scott (3) 956,000 4.8%
145 Oviedo Street
St. Augustine, Florida 32084
Douglas Morgan (4) 610,000 3.0%
4790 Caughlin Pkwy #102
Reno, Nevada 89509
Ronald Oehri (5) 140,000 *
Schlattstrasse 215 FL-9491
Ruggell, Liechtenstein
Markus Buechel 10,000 *
Land Street 153
Ruggell, Liechtenstein
All executive officers and directors as a group 4,900,034 23.7%
(six persons) (1)(2)(3)(4)(5)
* Less than 1%
</TABLE>
(1) Includes the shares held by Intertreuhand Aktiengesellschaft, of which Dr.
Proksch is the Managing Director.
(2) Includes options to acquire 78,750 shares.
(3) Includes options to acquire 40,000 shares.
(4) Includes options to acquire 300,000 shares.
(5) Includes options to acquire 10,000 shares.
As of May 9, 2000, we had a total of 20,684,339 shares issued and outstanding
and total stock options of 677,907.
<PAGE> 15
continued
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