Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2009
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition periods from ________to________
Commission file number 000-32509
GLOBAL PARI-MUTUEL SERVICES, INC.
---------------------------------
(Exact name of registrant as specified in its charter)
Nevada 88-0396452
------ ----------
(State of Incorporation) (IRS Employer Identification No.)
1231 West Honeysuckle Lane, Chandler, AZ 85248
----------------------------------------------
(Address of principal executive offices)
(415) 302-8621
--------------
(Telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods 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 [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or small reporting company. See the
definitions of "large accelerated filer," "accelerated filer," and "small
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Small reporting company [ X ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
State the number of shares outstanding of each of the issuer's classes of common
stock as of November 3, 2009. Common Stock, $.001 par value 19,205,030
i
GLOBAL PARI-MUTUEL SERVICES, INC.
FORM 10-Q
September 30, 2009
INDEX
Page No.
--------
PART I Financial Information
Item 1 Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets (Unaudited) -
September 30, 2009 and December 31, 2008 1
Condensed Consolidated Statements of Operations
(Unaudited) - For the Three and Nine Months Ended
September 30, 2009 and 2008 2
Condensed Consolidated Statements of Cash Flows
(Unaudited) - For the Nine Months Ended
September 30, 2009 and 2008 3
Notes to Condensed Consolidated Financial Statements (Unaudited) 4
Item 2 Management's Discussion and Analysis or Plan of Operation 10
Item 4T Controls and Procedures 13
PART II Other Information
Item 6 Exhibits and Reports on Form 8-K 13
Signature Pages 13
ii
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
GLOBAL PARI-MUTUEL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
2009 2008
------------ ------------
ASSETS
Current Assets:
Cash $ 3,471 $ 30,075
Accounts receivable, net of allowance for doubtful accounts
of $41,975 and $28,722, respectively 153,071 42,399
Accounts receivable related party 39,976 --
Prepaid expenses -- 5,001
Other current assets 1,500 3,000
------------ ------------
Total Current Assets 198,018 80,475
Property and equipment, net of accumulated depreciation of
$6,791 and $3,877, respectively 21,441 24,356
------------ ------------
Total Assets $ 219,459 $ 104,831
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $ 231,861 $ 132,108
Accounts payable related party 5,753 107,745
Track settlements and wagering deposits 598,007 228,634
Accrued expenses 6,625 22,673
Accrued interest payable 41,823 20,747
Notes payable, current portion 340,000 65,000
------------ ------------
Total Current Liabilities 1,224,069 576,907
Long-term notes payable, net of current portion -- 175,000
------------ ------------
Total Liabilities 1,224,069 751,907
------------ ------------
Stockholders' Deficit:
Global Pari-Mutuel Services, Inc. Stockholders' Deficit:
Preferred stock - 5,000,000 authorized; none issued -- --
Common stock - $0.001 par value; authorized 25,000,000
shares; 19,125,030 and 18,330,712 shares issued and
outstanding, respectively 19,125 18,331
Additional paid in capital 10,188,278 9,570,376
Accumulated deficit (11,759,070) (10,741,719)
------------ ------------
Total Global Pari-Mutuel Services, Inc. Stockholders' Deficit (1,551,667) (1,153,012)
------------ ------------
Non-controlling interest 547,057 505,936
------------ ------------
Total Stockholders' Deficit (1,004,610) (647,076)
============ ============
Total Liabilities and Stockholders' Deficit $ 219,459 $ 104,831
============ ============
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
GLOBAL PARI-MUTUEL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
---------------------------- ----------------------------
2009 2008 2009 2008
------------ ------------ ------------ ------------
Revenue $ 563,034 $ 360,977 $ 1,417,201 $ 1,038,254
Cost of revenue 462,337 247,046 1,147,674 691,337
------------ ------------ ------------ ------------
Gross profit 100,697 113,931 269,527 346,917
------------ ------------ ------------ ------------
Operating Expenses
General and administrative expense (308,221) (1,137,897) (1,323,214) (1,878,246)
Research and development (67,891) -- (188,241) --
------------ ------------ ------------ ------------
Total operating expenses (376,112) (1,137,897) (1,511,455) (1,878,246)
------------ ------------ ------------ ------------
Loss from operations (275,415) (1,023,966) (1,241,928) (1,531,329)
------------ ------------ ------------ ------------
Other income (expense)
Interest expense (8,035) (19,230) (27,483) (56,184)
Interest income -- 8 3 32
------------ ------------ ------------ ------------
Total other expenses, net (8,035) (19,222) (27,480) (56,152)
------------ ------------ ------------ ------------
Net loss (283,450) (1,043,188) (1,269,408) (1,587,481)
------------ ------------ ------------ ------------
Less net loss attributable to the non-controlling interest 46,202 86,730 252,057 234,108
------------ ------------ ------------ ------------
Net loss attributable to Global Pari-Mutuel Services, Inc. $ (237,248) $ (956,458) $ (1,017,351) $ (1,353,373)
============ ============ ============ ============
Basic and Diluted Loss Per Share $ (0.01) $ (0.06) $ (0.06) $ (0.08)
============ ============ ============ ============
Basic and Diluted Weighted-Average Shares Outstanding 18,330,712 16,903,499 18,330,712 16,595,899
------------ ------------ ------------ ------------
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
GLOBAL PARI-MUTUEL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Nine Months Ended
September 30,
--------------------------
2009 2008
----------- -----------
Cash Flows from Operating Activities
Net loss $(1,269,408) $(1,587,481)
Adjustments to reconcile net loss to net cash
used by operating activities:
Net expenses paid by non-controlling interest holders 171,193 292,154
Expenses settled through the issuance of common stock -- 75,800
Allowance for bad debt 13,253 23,863
Depreciation and amortization 2,915 1,963
Stock based compensation and interest 340,685 905,026
Change in operating assets and liabilities:
Accounts receivable (123,925) (8,054)
Prepaid expenses 5,001 --
Other current assets 1,500 (3,000)
Accounts payable and accrued expenses 762,182 505,482
----------- -----------
Net Cash Provided (Used) in Operating Activities (96,604) 205,753
----------- -----------
Cash Flows from Investing Activities
Purchase of equipment -- (2,500)
----------- -----------
Net Cash Used in Investment Activities -- (2,500)
----------- -----------
Cash Flows from Financing Activities
Proceeds from borrowings 70,000 108,750
----------- -----------
Net Cash Provided by Financing Activities 70,000 108,750
----------- -----------
Net Decrease in Cash (26,604) 312,003
Cash - Beginning of Period 30,075 40,822
----------- -----------
Cash - End of Period $ 3,471 $ 352,825
=========== ===========
Supplemental Cash Flow Information
Cash paid for interest $ -- $ 11,233
Non Cash Investing and Financing Activities
Notes payable issued to settle accrued expenses $ 30,000 $ 31,250
Related party payable settled through non-controlling interest $ 121,985 $ --
Common stock issued to settle accounts payables and accrued
expenses $ 278,011 $ 35,000
Accounts payable settled through issuance of shareholder common
stock $ -- $ 14,200
Common stock issued to settle notes payable and accrued interest $ -- $ 669,826
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
GLOBAL PARI-MUTUEL SERVICES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation -- The unaudited condensed consolidated financial
statements of Global Pari-mutuel Services, Inc. and subsidiaries have been
prepared by management. These financial statements are prepared in accordance
with generally accepted accounting principles for interim financial information
and the related rules and regulations of the Securities and Exchange Commission.
Accordingly, certain financial statement information and footnote disclosures
normally included in annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted from
these interim financial statements. For further information, refer to our
financial statements and footnotes thereto included in Global Pari-mutuel
Services' Annual Report on Form 10-K, which was filed with the Securities and
Exchange Commission on April 1, 2009.
In the opinion of management, all adjustments necessary for a fair presentation
have been included in the accompanying unaudited condensed consolidated
financial statements and consist of only normal recurring adjustments. Results
for the three and nine month periods ended September 30, 2009, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2009.
Principles of Consolidation -- The accompanying interim condensed consolidated
financial statements include the accounts and transactions of Global Pari-mutuel
Services, Inc. and its subsidiaries (the Company). All significant intercompany
transactions have been eliminated in consolidation.
Business Condition and Risks -- The Company has only recently begun to generate
revenues, generating $1,417,201 and $1,038,254 during the nine months ended
September 30, 2009 and 2008, respectively. It has an accumulated deficit of
$11,759,070 at September 30, 2009 and net losses of $1,269,408 and $1,587,481
during the nine months ended September 30, 2009 and 2008, respectively, and has
used cash in operating activities of $96,604 and generated cash from operating
activities of $205,753 during the nine months ended September 30, 2009 and 2008,
respectively. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not include
any adjustments relating to the recoverability and classification of recorded
asset amounts or the amount of liabilities that might be necessary should the
Company be unable to continue as a going concern. The Company's ability to
continue as a going concern depends on its ability to deploy technology for its
core businesses that generates sufficient revenue and cash flows to meet its
obligations and on its ability to obtain additional financing or sell assets as
may be required to fund current operations. Management's plans include
generating income from the Company's various pari-mutuel licensing and
operational programs to permit the Company to generate sufficient cash flow to
continue as a going concern. There is no assurance these plans will be realized.
Basic and Diluted Loss Per Common Share -- Basic loss per common share is
computed by dividing net loss by the weighted average number of common shares
outstanding during the period. Diluted loss per common share is computed by
dividing net loss attributable to common stockholders by the weighted average
number of common shares and the dilutive potential common share equivalents then
outstanding. As of September 30, 2009 and 2008 there were 2,575,000 and
2,100,000 potentially issuable common shares from stock options and 301,667 and
151,667 potentially issuable common shares from convertible notes payable,
respectively. These shares were excluded from the calculation of diluted loss
per common share because the effects would be anti-dilutive.
Recent Accounting Standards -- In September 2006, the FASB issued a new
accounting standard which establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. The new standard was effective for the Company as of January
1, 2008. In February 2008, the FASB issued a new standard which extended the
effective date to fiscal years beginning after November 15, 2008. Adoption of
this standard did not cause a material change in financial position or results
of operations.
4
GLOBAL PARI-MUTUEL SERVICES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
In December 2007, the FASB issued a new standard which requires an acquirer to
measure the identifiable assets acquired, the liabilities assumed and any
non-controlling interest in the acquiree at their fair values on the acquisition
date, with goodwill being the excess value over the net identifiable assets
acquired. The FASB also issued a second new standard which seeks to improve the
relevance, comparability, and transparency of the financial information that a
reporting entity provides in its consolidated financial statements by
establishing accounting and reporting standards for the non-controlling interest
in a subsidiary and for the deconsolidation of a subsidiary. These two new
standards were effective for fiscal years beginning on or after December 15,
2008. The adoption of these standards did not have a material effect on the
Company's financial position or results of operations.
In April 2009, the FASB issued a new staff position, to require an entity to
provide disclosures about fair value of financial instruments in interim
financial information. The staff position also amends a previous accounting
standard to require those disclosures about the fair value of financial
instruments in summarized financial information at interim reporting periods.
Under the new staff position, the Company will be required to include
disclosures about the fair value of its financial instruments whenever it issues
financial information for interim reporting periods. In addition, the Company
will be required to disclose in the body or in the accompanying notes of its
summarized financial information for interim reporting periods and in its
financial statements for annual reporting periods, the fair value of all
financial instruments for which it is practicable to estimate that value,
whether recognized or not recognized in the statement of financial position. The
staff position is effective for periods ending after June 15, 2009 and the
adoption of this standard did not have a material impact on the Company's
financial position or results of operations.
In May 2009, the FASB issued a new standard which establishes general standards
of accounting for and disclosure of events that occur after the balance sheet
date but before financial statements are issued or are available to be issued.
The new standard was effective for interim and annual periods ending after June
15, 2009. The adoption of this standard did not have a material effect on the
Company's financial position or results of operations.
NOTE 2 - NOTES PAYABLE & RELATED PARTY PAYABLES
On March 12, 2009, the Company issued a $25,000, 8% promissory note in exchange
for $25,000 in cash. The maturity date on this note is June 12, 2009. On June 3,
2009, the maturity date of the note was extended until September 12, 2009 and on
September 14, 2009 the maturity date of this note was extended to December 12,
2009. The Company issued the note holder stock options to purchase 25,000 share
of the Company's common stock at $1.00 per share. The fair value of the option
was recorded as a debt discount of $6,076. The discount was amortized as
interest expense over the original term of the note. The discount was fully
amortized as of September 30, 2009.
On April 1, 2009, the Company issued a $25,000 promissory note convertible at
$0.90 per share of common stock with interest at 8% per annum in exchange for
$25,000 in cash. The maturity date on this note is March 31, 2010.
5
GLOBAL PARI-MUTUEL SERVICES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
On April 1, 2009, the Company issued a $20,000 promissory note convertible at
$0.90 per share of common stock with interest at 8% per annum in exchange for
$20,000 in cash to a related party. The maturity date on this note is March 31,
2010.
On April 20, 2009, the Company issued a $30,000 promissory note convertible at
$0.90 per share of common stock with interest at 8% per annum to settle $30,000
of expenses to the Chairman and CEO. The maturity date on this note is April 20,
2010.
The Company evaluated all of the above convertible promissory notes and
determined that no beneficial conversion features exist.
Notes payable are summarized as follows:
September 30, December 31,
2009 2008
-------- --------
10% notes payable to shareholder, due on demand, unsecured $ 65,000 $ 65,000
8% notes payable convertible at $0.90 per share of common
stock to a related party, due June 2010 40,000 40,000
10% notes payable convertible at $0.60 per share of common
stock to a related party, due January 2010 50,000 50,000
10% notes payable convertible at $0.90 per share of common
stock to a shareholder, due January 2010 30,000 30,000
10% notes payable convertible at $1.00 per share of common
stock to a shareholder, due January 2010 35,000 35,000
8% notes payable convertible at $0.90 per share of common
stock to a shareholder, due June 2010 20,000 20,000
8% notes payable to a shareholder, due December 2009 25,000 --
8% note payable convertible at $0.90 per share of common
stock to a shareholder, due March 2010 25,000 --
8% note payable convertible at $0.90 per share of common
stock to a related party, due March 2010 20,000 --
8% note payable convertible at $0.90 per share of common
stock to a related party, due April 2010 30,000 --
-------- --------
Total notes payable less unamortized discount 340,000 240,000
Less: current portion 340,000 65,000
-------- --------
Long-Term Notes Payable $ -- $175,000
======== ========
Accrued interest at September 30, 2009 and December 31, 2008 was $41,823 and
$20,747, respectively.
Accounts Payable - Related Party - At September 30, 2009, the Company owed
officers and directors $1,253 for expenses and owed an officer and director
$4,500 for a cash advance to the Company.
NOTE 3 - AGREEMENT WITH GLOBAL FINANCIAL SOLUTIONS HOLDINGS, LTD.
Effective December 31, 2006, Royal Turf Club, Inc - Nevada ("RTCN") and Royal
Turf Club, Inc. - Antigua ("RTCA") completed an Agreement with Global Financial
Solutions Holdings, Ltd. ("GFS"), an unaffiliated corporation organized under
the laws and regulations of the Turks and Caicos Islands to transfer 50% of the
outstanding common stock of RTCA for the development, implementation and
operation of a horse and dog racing hub in Antigua.
Under the terms of the agreement, (a) RTCA issued to GFS a fifty percent (50%)
ownership in RTCA's outstanding common stock, (b) GFS committed to make payments
on behalf of RTCA for the purpose of developing, constructing, implementing and
operating a central system horse and dog racing hub, (c) RTCN agreed to manage
the business of RTCA, and (d) RTCN and GFS, as the sole Shareholders of RTCA,
and subject to (c) above will make certain agreements regarding the operations
and their ownership of RTCA.
6
GLOBAL PARI-MUTUEL SERVICES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
For consideration of receiving the RTCA Shares, GFS, as of December 31, 2006,
provided an amount of funds necessary for all expenses related to the initial
development, which includes license fees, construction and implementation of the
Hub Operation aggregating approximately $400,000, and agreed to continue to pay
future Hub Implementation and Operational Expenses as described below.
GFS paid all of the expenses of the Hub Operation on the same basis and upon the
same conditions as Hub Implementation Expenses through April 30, 2007 without
reimbursement. Thereafter, any contributions needed for Hub Operational Expenses
are paid by the Shareholders equally. If either Shareholder fails to make all or
a part of any required contribution, at the option of the other Shareholder
either (i) such other Shareholder shall make said payment or (ii) the
Shareholder failing to make the contribution shall forfeit such portion of its
stock in RTCA as is proportionate to the amount of the failure and a figure
equal to an overall capitalization of RTCA of twice the aggregate amount paid by
GFS for the RTCA Shares (excluding amounts paid by it under this sentence).
During the nine months ended September 30, 2009, GFS paid $171,193 towards
operations of the Antigua Hub. At September 30, 2009, the GFS owed the Company
$39,976 for its contribution of half of the operational costs of the Hub
operation from May 1, 2007 through September 30, 2009.
NOTE 4 - STOCK OPTIONS
Non-Qualified Options - The Company granted options for the purchase 575,000 and
200,000 shares of common stock during the nine months ended September 30, 2009
and 2008, respectively. During the nine months ended September 30, 2008, options
for the purchase of 100,000 shares of common stock were exercised at $0.35 per
share.
Qualified Options - During the nine months ended September 30, 2009 and 2008,
the Company did not grant options for the purchase shares of common stock. At
September 30, 2009, there were 1,049,500 qualified options available for future
grants under the Plan.
For the nine months ended September 30, 2009 and 2008 the Company calculated
compensation expense of $334,609 and $274,033 related to stock options,
respectively.
A summary of employee stock option activity for the nine months ended September
30, 2009, is presented below:
Weighted Average
Shares Under Weighted Average Remaining Contractual Aggregate
Option Exercise Price Life Intrinsic Value
------------ ---------------- --------------------- ---------------
Outstanding at
December 31, 2008 2,000,000 $0.52
Granted 575,000 0.76
Exercised - -
Forfeited - -
Expired - -
------------ ---------------- --------------------- ---------------
Outstanding at
September 30, 2009 2,575,000 $0.58 6.33 years $622,500
============ ================ ===================== ===============
Exercisable at
September 30, 2009 2,542,000 $0.57 6.30 years $622,500
============ ================ ===================== ===============
7
GLOBAL PARI-MUTUEL SERVICES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The fair value of the 550,000 stock options granted to employees during the nine
months ended September 30, 2009 was $298,779. The intrinsic value is based on a
September 30, 2009 closing price of the Company's common stock of $0.80 per
share. As of September 30, 2009, there was approximately $17,545 of unrecognized
compensation cost related to stock options that will be recognized over a
weighted average period of 0.9 years.
The Company uses the Black Scholes option pricing model to value the stock
options. The following are weighted-average assumptions used for options granted
during the nine months ended September 30, 2009:
September 30, 2009
------------------
Expected cash dividend yield -
Expected stock price volatility 101.71%
Risk-free interest rate 0.71%
Expected life of options 1.46 years
The expected life of stock options is calculated using the simplified method
allowed under generally accepted accounting principals as the Company does not
have sufficient historical exercise data to provide a reasonable basis upon
which to estimate the expected term. The expected volatility is based on
historical price volatility of our common stock. The risk-free interest rate
represents the U.S. Treasury bill rate for the expected life of the related
stock options. The dividend yield represents our anticipated cash dividend over
the expected life of the stock options.
NOTE 5 - CHANGES IN EQUITY (DEFICIT)
A summary of the composition of Equity (Deficit) of the Company at September 30,
2009 and 2008, and the changes during the nine months then ended is presented in
the following table:
Global Pari - Mutuel
Services, Inc, Non-controlling
stockholders' deficit interest Total Deficit
--------------------- -------- -------------
Balance at December 31, 2008 $(1,153,012) $ 505,936 $ (647,076)
Stock option compensation 340,685 -- 340,685
Stock issued for services and loans 278,011 -- 278,011
Related party payable settled through
non-controlling interest -- 121,985 121,985
Expenses paid by non-controlling interest -- 171,193 171,193
Net loss (1,017,351) (252,057) (1,269,408)
----------- ----------- -----------
Balance at September 30, 2009 $(1,551,667) 547,057 $(1,004,610)
=========== =========== ===========
8
GLOBAL PARI-MUTUEL SERVICES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Global Pari - Mutuel
Services, Inc, Non-controlling
stockholders' deficit interest Total Deficit
--------------------- -------- -------------
Balance at December 31, 2007 $(1,295,964) $ 464,905 $ (831,059)
Stock option compensation 274,033 -- 274,033
Exercise of options 35,000 -- 35,000
Shares issued for conversion of notes payable 1,216,819 -- 1,216,819
Shares issued for services 84,000 -- 84,000
Accounts payable settled through issuance of
shareholder common stock 90,000 -- 90,000
Related party payable settled through
non-controlling interest -- (38,934) (38,934)
Expenses paid by non-controlling interest -- 292,154 292,154
Net loss (1,353,373) (234,108) (1,587,481)
----------- ----------- -----------
Balance at September 30, 2008 $ (949,485) 484,017 (465,468)
=========== =========== ===========
NOTE 6 - SETTLEMENT WITH SOL MUTUEL, LTD.
On July 7, 2009, in connection with the Company's termination of its contract
with Sol Mutuel, Ltd, the Company entered into a settlement agreement with SOL
Mutuel, Ltd, wherein the Company agreed to release funds previously collected on
Sol Mutuel's behalf in exchange for $60,000 in additional fees. The Company was
required to pay Sol Mutuel $30,000 in July 2009, $40,000 on August 1, 2009,
$40,000 on September 1, 2009 and $41,842 on October 1, 2009. As of September 30,
20009, the Company had paid $75,000 toward the settlement and has paid an
additional $20,000 since September 30, 2009.
NOTE 7 - ISSUANCE OF COMMON STOCK
On September 21, 2009 the Board of Directors authorized the issuance of 794,318
shares of common stock at $0.35 per share to settle $145,011 of unpaid payroll
expenses, $105,000 of expenses related to software development and $28,000 of
temporary loans.
NOTE 8 - SUBSEQUENT EVENTS
Issuance of Convertible Note - On October 27, 2009 the Company issued a $120,000
convertible note payable to a shareholder in exchange for $100,000 in cash and
prepaid interest of $20,000. This note is convertible to shares of the Company's
common stock at $0.40 per share. The maturity date for this note is April 27,
2011.
Issuance of Common Stock - On November 3, 2009 the Company issued 80,000 shares
of common stock to a consultant for assistance in raising additional working
capital.
9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
"Safe Harbor" Statement under the United States Private Securities Litigation
Reform Act of 1995. Any statements contained in this document that are not based
on historical fact are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
include statements which generally may be identified by the use of
forward-looking terminology such as "may," "will," "expect," "estimate,"
"anticipate," or similar terms, variations of those terms or the negative of
those terms. These forward-looking statements involve risks and uncertainties
that could cause actual results to differ from projected results. All
forward-looking statements included in this Quarterly Report are made as of the
date hereof, based on information available to us as of such date, and we assume
no obligation to update any forward-looking statement. It is important to note
that such statements may not prove to be accurate and that our actual results
and future events could differ materially from those anticipated in such
statements.
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of our results of
operations, financial condition, and cash flows, and should be read in
conjunction with the condensed consolidated financial statements and notes
thereto that are contained in this Report, as well as Management's Discussion
and Analysis of Financial Condition and Results of Operations in our Annual
Report on Form 10-K for the year ended December 31, 2008.
During the nine months ended September 30, 2009 and 2008 our revenues were
$1,417,201 and $1,038,254, respectively. During the nine months ended September
30, 2009, $1,368,737 of the revenue was generated from providing pari-mutuel hub
and content services, $18,428 from settlement and reconciliation services and
$30,036 from sales and rental of equipment related to pari-mutuel wagering.
During the nine months ended September 30, 2008, $778,095 of the revenue was
generated from providing pari-mutuel hub and content services, $223,598 from
settlement and reconciliation services and $36,561 from sales and rental of
equipment related to pari-mutuel wagering. Revenues during the nine months ended
September 30, 2009 were approximately $379,000 more than the nine months ended
September 30, 2008 due primarily to an $446,000 increase in revenues from a new
contract with an off track betting operation, a $53,000 increase from a new
contract with a high volume bettor, increase from and an $214,000 increase in
volume from previously existing customers. These increases were offset by a
reduction in revenues of $205,000 due to a decrease in volume processed with our
settlement and reconciliation customer, Sol Mutuel, and the eventual termination
of that contract (see footnote 6 to the financial statements) and an $129,000
decrease from call-in business.
During the three months ended September 30, 2009 and 2008 our revenues were
$563,034 and $360,977, respectively. During the three months ended September 30,
2009, $565,718 of the revenue was generated from providing pari-mutuel hub and
content services offset by a credit of $2,684 for rental of equipment related to
pari-mutuel wagering. During the three months ended September 30, 2008, $282,468
of the revenue was generated from providing pari-mutuel hub and content
services, $68,300 from settlement and reconciliation services and $10,209 from
sales and rental of equipment related to pari-mutuel wagering. Revenues during
the three months ended September 30, 2009 we approximately $202,000 more than
the quarter ended September 30, 2008 due primarily to an $279,000 increase in
revenues from a new contract with an off track betting operation, a $13,000
increase from a new contract with a high volume bettor, and a $51,000 increase
in from call-in business. These increases were offset by a reduction in revenues
of $68,000 due to a decrease in volume processed with our settlement and
reconciliation customer, Sol Mutuel, and the eventual termination of that
contract (see footnote 6 to the financial statements) and a $73,000 reduction in
pari-mutuel hub and content services from previously existing off track betting
customers.
Cost of sales during the nine months ended September 30, 2009 was $1,147,674 and
gross profit was $269,527. Cost of sales during the nine months ended September
30, 2008 was $691,337 and gross profit was $346,917. During the nine months
ended September 30, 2009, cost of sales was 81.0% of revenue as compared to
66.6% of revenue during the nine months ended September 30, 2008. This change is
attributed to the reduction in settlement and reconciliation revenue from
$223,598 during the nine months ended September 30, 2008 to $18,428 during the
nine months ended September 30, 2009. Cost of sales associated with settlement
and reconciliation revenue was minimal. Settlement and reconciliation revenue
declined due to the termination of the contract with Sol Mutuel (see footnote 6
to the financial statements).
10
Cost of sales during the three months ended September 30, 2009 was $462,337 and
gross profit was $100,697. Cost of sales during the three months ended September
30, 2008 was $247,046 and gross profit was $113,931. During the three months
ended September 30, 2009, cost of sales was 82.1% of revenue as compared to
68.4% of revenue during the three months ended September 30, 2008. This change
is attributed to the reduction in settlement and reconciliation revenue from
$68,300 during the three months ended September 30, 2008 to $0 during the three
months ended September 30, 2009. Cost of sales associated with settlement and
reconciliation revenue was minimal. Settlement and reconciliation revenue
declined due to the termination of the contract with Sol Mutuel (see footnote 6
to the financial statements).
The net losses we have incurred were $1,269,408 during the nine months ended
September 30, 2009 and $1,587,481 during the nine months ended September 30,
2008. Included in the losses were $340,685 and $905,026 of non-cash share based
compensation and $0 and $75,800 of non-cash payment of expenses during the nine
months ended September 30, 2009 and 2008, respectively. The decrease in loss of
approximately $318,000 for the nine months ended September 30, 2009 when
compared to the nine months ended September 30, 2008 is attributed to a $60,000
increase in non-cash share based option compensation, an $188,000 increase in
expenditures for research and development on our internet model, a $76,000
increase in costs to acquire track data, a $77,000 reduction in gross profit
associated with the change in revenue mix, offset by a $567,000 reduction in
expenses associated with a "sweetener" given to convert notes to common stock, a
$76,000 reduction in costs associated with the issuance of an option to a
shareholder, a $52,000 reduction of consulting expenses associated with attempts
to raise additional capital, an increase of $18,000 in the loss attributable to
the non-controlling interest and a $2,000 reduction in other general and
administrative expenses.
The net losses we have incurred were $283,450 during the three months ended
September 30, 2009 and $1,043,188 during the three months ended September 30,
2008. Included in the losses were $9,577 and $780,769 of non-cash share based
compensation $0 and $75,800 of non-cash payment of expenses during the three
months ended September 30, 2009 and 2008, respectively. The decrease in loss of
approximately $760,000 for the three months ended September 30, 2009 when
compared to the three months ended September 30, 2008 is attributed to an
$68,000 increase in expenditures for research and development on our internet
model, a $20,000 increase in costs to acquire track data, a $13,000 reduction in
gross profit associated with the change in revenue mix and an decrease of
$41,000 in the loss attributable to the non-controlling interest, offset by a
$567,000 reduction in expenses associated with a "sweetener" given to convert
notes to common stock, a decrease $225,000 in non-cash shares based option
compensation, a $76,000 reduction in costs associated with the issuance of an
option to a shareholder, a $52,000 reduction of consulting expenses associated
with attempts to raise additional capital, and a $38,000 increase in all other
general and administrative expenses.
The Company has employed a software development firm to complete the development
of the Company's internet software model that will enable the Company to accept
online wagering on horse and dog races. The Company anticipates that this
software model will be completed during this fiscal year and that the Company
will begin to accept live wagers over the internet. The Company spent
approximately $68,000 on the development of this software during the three
months ended September 30, 2009 and has spent approximately $188,000 on this
software development during the nine months ended September 30, 2009.
11
These losses and negative cash flows from operating activities raise doubt about
our ability to continue as a going concern. Our ability to continue as a going
concern is dependent upon our continued ability to launch our proposed core
service activities and generate sufficient revenue and cash flow to meet our
obligations and/or to obtain additional financing or sell assets as may be
required to fund current operations.
To date, we have financed our operations primarily through private placements of
the sale of our common stock and the issuance of convertible notes in private
offering transactions that were exempt from the registration requirements of the
Securities Act of 1933, as amended (the Securities Act). During the nine months
ended September 30, 2009 we raised $70,000 from borrowings. During the nine
months ended September 30, 2008 we raised $108,750 from borrowings. We used cash
in operating activities of $96,604 and provided cash from operating activities
of $205,753 during the nine months ended September 30, 2009 and 2008,
respectively. As of September 30, 2009, our current assets and current
liabilities were $198,018 and $1,224,069, respectively.
During 2005 our management initiated plans to focus our principal business
activities on pari-mutuel activities. The Company intends to deploy technology
and provide services designed to facilitate pari-mutuel wagering over the
Internet and through international call-centers and physical Off-Track-Betting
("OTBs") facilities. The Company presently has four principal contracts for
pari-mutuel wagering services through our hub operations in Antigua. The Company
also has contracts with approximately 40 horse and dog tracks to provide content
and race simulcasts.
Our working capital and other capital requirements for the next twelve months
will vary based upon a number of factors, including the period required to bring
our proposed services to commercial viability, the level of sales and marketing
costs for our products and services, and the amounts we invest in strategic
relationships. However, because several factors related to the growth of our
operations remain outside of our control, there can be no assurance we will
achieve commercial viability on our anticipated timeline. We anticipate that any
significant changes in the number of employees for 2009 would stem only from the
demonstrated commercial viability of our core business activities.
We believe that existing funds, funds generated from our operations, plus those
we raise from borrowings from our Chairman and others will be sufficient to
support our operations for the next twelve months. However, it is possible we
will not be able to maintain our core services through such period or that we
will not raise sufficient additional funds from asset sales and borrowings to
cover operational expenses. Under those circumstances, we will need to obtain
additional funding to support our operations. Because we have no contractual
commitments with respect to any of these initiatives, there can be no assurance
that additional funds for operations will be available on commercially
reasonable terms or in the necessary amounts. Our inability to obtain any needed
additional financing would have a material adverse effect on us, including
possibly requiring us to significantly curtail our operations.
12
ITEM 4T - CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. Based on their evaluation
of the Company's disclosure controls and procedures (as defined in Rule
13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")), the
Company's principal executive and principal financial officers concluded that
the Company's disclosure controls and procedures were effective as of the end of
the period covered by this report.
(b) Changes in internal control over financial reporting. During the quarter
under report, there was no change in the Company's internal control over
financial reporting that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting
PART II--OTHER INFORMATION
ITEM 6 - Exhibits
Exhibit Number Description of Exhibit
-------------- ----------------------
31.1 Certification of Principal Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002*
31.2 Certification of Principal Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002*
32.1 Certifications of Principal Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002*
32.2 Certifications of Principal Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002*
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GLOBAL PARI-MUTUEL SERVICES, INC.
---------------------------------
Registrant
Date: November 13, 2009 By: /S/ James A. Egide
------------------- --------------------
James A. Egide
Chairman of the Board Directors
(Principal Executive Officer)
Date: November 13, 2009 By: /S/ Michael D. Bard
------------------- ---------------------
(Principal Financial and Accounting
Officer)
1
