Forward Looking Statements
The statements contained in this Quarterly Report on Form 10-Q that are not historical facts are “forward-looking statements”. The business and operations of Win Global Markets, Inc., or the Company, we, us, or our, are subject to substantial risks, which increase the uncertainty described in the forward-looking statements contained in this Quarterly Report on Form 10-Q. Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as “believes,” “intends,” “plan,” “expects,” “may,” “will,” “should,” or “anticipates” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. In particular, our statements regarding future financings and the potential growth of our markets and business outlook are examples of such forward-looking statements. The forward-looking statements include risks and uncertainties, including, but not limited to, our future growth being dependent upon the success of our new business activity in the field of binary options and other factors, including future financings, and general economic conditions and regulatory developments, not within our control. Further information on potential factors that could cause actual results and developments to be materially different from those expressed in or implied by such statements is described in Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 (our “Annual Report”), and expressed from time to time in our filings with the Securities and Exchange Commission (the “SEC”). The forward-looking statements are made only as of the date of this filing, and, except as required by law, we undertake no obligation to update such forward-looking statements to reflect subsequent events or circumstances. Readers are also urged to carefully review and consider the various disclosures we have made in this Quarterly Report on Form 10-Q and our other filings with the SEC, including our Annual Report.
Overview
Our unaudited condensed consolidated financial statements are stated in United States Dollars (US$) and are prepared in accordance with U.S. generally accepted accounting principles.
You should read the following discussion of our financial condition and results of operations together with the unaudited condensed consolidated financial statements and the notes to unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
We are engaged in the business of offering worldwide online trading of binary options. We entered the binary options business in November 2009, and since March 2010, we have been offering online trading of binary options through our wholly-owned Cypriot subsidiary, WGM Services Ltd. (“WGM”). Worldwide trading is being offered by WGM on www.globaloption.com and
www.eztrader.co.il
. On July 31, 2013, we announced our intention to file a Form 15 with the Securities and Exchange Commission to voluntarily deregister our common stock and suspend our reporting obligations under the Securities Exchange Act of 1934, as amended, on or about August 23, 2013.
We derive most of our income from offering worldwide online trading of binary options, and we continue to generate marginal income from revenue sharing arrangements in the interactive gaming industry, through third parties.
RESULTS OF OPERATIONS FOR SIX AND THREE MONTHS ENDED JUNE 30, 2013 COMPARED TO SIX AND THREE MONTHS ENDED JUNE 30, 2012.
Revenues and Cost of Revenues
During the six and three months ended June 30, 2013 and June 30, 2012, we generated revenues from our binary options business and additional marginal revenues from our revenue sharing arrangements with Lodgnet Interactive Corporation (“Lodgenet”).
Total revenues for the six months ended June 30, 2013 increased by 59% to $1,522,543 from $955,168 in the six months ended June 30, 2012. Total revenues for the three months ended June 30, 2013 increased by 65% to $943,627 from $570,577 for the three months ended June 30, 2012. These increases in both periods are primarily attributable to the operation of our acquired website www.eztrader.com. Our revenues from Lodgnet revenue sharing remained marginal in both periods.
Cost of revenues for the six months ended June 30, 2013 increased by 36% to $722,798 from $531,156 for the six months ended June 30, 2012. Cost of revenues for the three months ended June 30, 2013 increased by 42% to $448,986 from $316,702 for the three months ended June 30, 2012. These increases are attributable to the cost of operating our binary options business, including employee payroll, and additional costs of revenues resulting from the significant growth in our acquired website
www.eztrader.com
Selling and Marketing
Selling and marketing expenses for the six months ended June 30, 2013 decreased by 36% to $603,767 from $945,467 for the six months ended June 30, 2012. Selling and marketing expenses for the three months ended June 30, 2013 decreased by 4% to $493,942 compared to $511,968 for the three months ended June 30, 2012. The decrease in selling and marketing expenses are attributable to cash constrains of the Company in the first quarter of 2013 that forced the Company to reduce its expenses. Following the increase of revenues since April 2013, selling and marketing expenses increased during the second quarter of 2013 including expenses relating to employees payroll and payments to affiliates.
General and Administrative
General and administrative expenses for the six months ended June 30, 2013 decreased by 22% to $810,779 from $1,043,795 for the six months ended June 30, 2012. General and administrative expenses for the three months ended June 30, 2013 decreased by 8% to $347,529 from $453,675 for the three months ended June 30, 2012. The decrease for the six month period is also attributable to cash constraints that the Company faced during the beginning of 2013. In the three months ended June 30, 2013, the positive trend of deposits and increase of revenues allowed the Company to maintain its general and administrative expenses compared to the three months ended June 2012.
Research and development
Research and development expenses for the six month ended June 30, 2013 increased by 110% to $169,158 from $80,351 for the six months ended June 30, 2012. Research and development expenses for the three month ended June 30, 2013 increased by 130% to $97,222 from $42,004 for the three months ended June 30, 2012. The increase in three and six month is attributed to expenses incurred in connection with the improvement of the Company's technology platform.
Net Loss Attributable to the Company
Net loss attributable to the Company for the six months ended June 30, 2013 was $910,599 compared to a net loss of $1,666,417 for the six months ended June 30, 2012. Net loss for the three months ended June 30, 2013 was $517,983 compared to a net loss of $756,805 for the three months ended June 30, 2012. Net loss per share from operations for the six months ended June 30, 2013 was $0.01 and for June 30, 2012 was $0.02. Net loss per share from operations for the three months ended June 30, 2013 and June 30, 2012 was $0.01. Net loss for the six and three months ended June 30, 2013 and 2012 was primarily attributable to the operations of our binary options business which required significant marketing and operational expenses, primarily consisting of online advertisement of our online trading of binary options sites, and to the amortization of intangible assets acquired in 2011. Our weighted average number of shares of common stock used in computing basic and diluted net loss per share for the six months ended June 30, 2013 was 79,843,562, while the number of shares of common stock used in computing basic and diluted net income per share for the three months ended June 30, 2013 was 81,141,175 Our weighted average number of shares of common stock used in computing basic and diluted net loss per share for the six months ended June 30, 2012 was 72,200,322, while the number of shares of common stock used in computing basic and diluted net income per share for the three months ended June 30, 2012 was 74,741,531. The increase in our outstanding shares is due to our equity issuances in March 2013 and November 2012, and an investment of $4,295,220 during
June
2013 as described below
Liquidity and Capital Resources
As of
June 30, 2013, our total current assets were $778,957 and our total current liabilities were $2,149,284. On June 30, 2013, we had an accumulated deficit of $23,363,834. We currently finance our operations through revenues from our binary options business.
On November 8, 2012, we entered into securities purchase agreements with three investors pursuant to which we sold an aggregate of 3,790,000 shares of restricted common stock (the “Shares”) at a price of $0.10 per share and warrants to purchase an aggregate of 379,000 shares of common stock (the “Warrants”) at exercise prices per share of $0.10. No separate consideration was paid for the Warrants. The Warrants are exercisable on or after May 8, 2013 until twenty-four months from the date of issuance thereof. The aggregate net proceeds from the sale of the Shares and issuance of the Warrants amounted to $379,000, with $108,000 of such amount being set-off against outstanding loan amounts made to us in August 2012 of $54,000 by each of Mr. Shimon Citron, our CEO and a director, and Mr. Ron Lubash, one of our directors.
On March 5, 2013, we issued an aggregate of 1,368,920 shares of common stock in connection with the cashless and cash-based (aggregate cash amount of $53,513) exercises of warrants issued in connection with our March 2008 convertible debt transaction with Mr. Citron.
On May 12, 2013, we entered into a Finance Agreement with Activa Red Green (the “Lender”), pursuant to which the Lender loaned to the Company $100,000 with a maturity date of May 11, 2014 (the “Loan”).
The Loan bears annual interest of 20%. Until August 14, 2014, the Lender is entitled to convert the loan into shares of common stock of the Company at a conversion price of $0.10 per a share and upon such conversion receive a warrant to purchase 1/10 share of common stock at a price per share of $0.1.
On June 12, 2013, we entered into a securities purchase agreement (the "SPA") with Ricx Investments Ltd. (the “Investor”), pursuant to which we sold to the Investor 4,295,220 shares of restricted common stock (the "Investor's Shares") of the Company at a price of $0.10 per share, and issued a warrant to purchase 859,044 shares of common stock (the "New Warrant") of the Company at an exercise price per share of $0.10. No separate consideration was paid for the New Warrant. The New Warrant expires June 12, 2016.
The net proceeds from the sale of the Investor's Shares and issuance of the New Warrant amounted to $429,522. The transaction closed on June 12, 2013.
We had a negative working capital of $1,370,327 on June 30, 2013 compared with a negative working capital of $1,048,178 on December 31, 2012. Cash and cash equivalents on June 30, 2013 were $437,850, an increase of $374,650 from the $63,200 reported on December 31, 2012. The increase in cash is primarily attributable to our cost reduction , to the Loan of $100,000 from Activa Red Green and to the June 2013 private placement in which we raised $429,522 .
Operating activities used cash of $193,654 in the six months ended June 30, 2013. Cash used by operating activities in the six months ended June 30, 2013 resulted primarily from operating our binary options business, including marketing expenses and payroll for our employees.
Investing activity used cash in the six months ended June 30, 2013 of $22,716, in each case for purchases of property and equipment .
Financing activities provided cash of $545,588 in the six months ended June 30, 2013, which is primarily due to the investment of $429,522 received from our June 2013 equity issuance, as further discussed above, as well as to the Loan of $100,000 received from Activa Red Green as further described above.
Off-Balance Sheet Arrangements
As of June 30, 2013, we had no off balance sheet arrangements that have had or that we expect would be reasonably likely to have a future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Outlook
We believe that our future success will depend upon our ability to enhance our binary options business. Our current anticipated levels of revenues and cash flow are subject to many uncertainties and cannot be assured. In order to have sufficient cash to meet our anticipated requirements for the next twelve months, we will be dependent upon our ability to obtain additional financing. The inability to generate sufficient cash from operations or to obtain required additional funds could require us to curtail our operations. There can be no assurance that acceptable financing to fund our ongoing operations can be obtained on suitable terms, if at all. If we are unable to obtain the financing necessary to support our operations, we may be unable to continue as a going concern. In that event, we may be forced to cease operations and our stockholders could lose their entire investment in our company.