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 1934For the quarterly period ended August 31, 2010o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______________ to _____________
 
 Commission File Number  000-50643
  
 GLOBAL ENTERTAINMENT CORPORATION
 (Exact name of registrant as specified in its charter)
 
 Nevada
86-0933274(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)1600 N Desert Drive, Suite 301, Tempe, AZ
85281(Address of principal executive offices)
(Zip Code)
 
 (480) 994-0772
 (Registrant’s telephone number, including area code )
   (Former name, former address and former fiscal year, if changed since last report)
 
 Indicate by check mark if the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o
 
 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 o No o
 
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
  Large accelerated filer o
Accelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)
Smaller 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 o  No x


At October 14, 2010, 6,646,062 shares of Global Entertainment Corporation common stock were outstanding.





GLOBAL ENTERTAINMENT CORPORATION


INDEX


REPORT ON FORM 10-Q


FOR THE QUARTER ENDED AUGUST 31, 2010







PART I. FINANCIAL INFORMATIONItem 1.Financial Statements
3Condensed Consolidated Balance Sheets – As of August 31, 2010 (Unaudited) and May 31, 2010
3Condensed Consolidated Statements of Operations (Unaudited) – Three Months EndedAugust 31, 2010 and 2009
4Condensed Consolidated Statements of Changes in Equity – Year Ended May 31, 2010and Three Months Ended August 31, 2010 (Unaudited)
5Condensed Consolidated Statements of Cash Flows (Unaudited) – Three Months EndedAugust 31, 2010 and 2009
6Notes to Condensed Consolidated Financial Statements (Unaudited)
7Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
20Item 3. Quantitative and Qualitative Disclosures about Market Risk
25Item 4T. Controls and Procedures
25PART II. OTHER INFORMATIONItem 1. Legal Proceedings
26Item 1A. Risk Factors
26Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
26Item 3. Defaults upon Senior Securities
27Item 4. Submission of Matters to a Vote of Security Holders
27Item 5. Other Information
27Item 6. Exhibits
27


2





PART I – FINANCIAL INFORMATION





Item 1.  Financial Statements





GLOBAL ENTERTAINMENT CORPORATION AND SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS


As of August 31, 2010 (Unaudited) and May 31, 2010


(in thousands, except share and per share amounts)








August 31,


May 31,2010


2010ASSETSCurrent Assets:Cash and cash equivalents

$
212


$
193Accounts receivable, net of $194 allowance at August 31, 2010 and May 31, 2010


1,283



1,042Prepaid expenses and other assets


160



257Total Current Assets


1,655



1,492Property and equipment, net


98



107Accounts receivable


215



215Goodwill


519



519Other assets


119



119Total Assets

$
2,606


$
2,452LIABILITIES AND EQUITYCurrent Liabilities:Accounts payable

$
979


$
739Accrued liabilities


837



871Deferred revenues


423



86Contractual obligation-current  portion


33



41Notes payable - current portion


310



79Total Current Liabilities


2,582



1,816Deferred income tax liability, net


5



5Contractual obligation-long-term  portion


27



35Total Liabilities


2,614



1,856Commitments and ContingenciesEquity:Global Entertainment Corporation Equity -Preferred stock - $.001 par value; 10,000,000 shares authorized; no shares issued or outstanding


—



—Common stock - $.001 par value; 50,000,000 shares authorized; 6,646,062  shares issued and

outstanding as of August 31, 2010 and as of May 31, 2010


7



7Paid-in capital


10,989



10,987Retained deficit


(10,976
)


(10,410
)Total Global Entertainment Corporation Equity


20



584Noncontrolling interest


(28
)


12Total Equity (Deficit)


(8
)


596Total Liabilities and Equity

$
2,606


$
2,452














The accompanying notes are an integral part of the condensed consolidated financial statements.


3


GLOBAL ENTERTAINMENT CORPORATION AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


For the Three Months Ended August 31, 2010 and 2009


(Unaudited) (in thousands, except share and per share amounts)











2010


2009Revenues:Project development fees

$
—


$
50Project management fees


211



446Facility management fees


815



904Ticket service fees


123



199Food service revenue


120



72Advertising sales commissions


68



71License fees - league dues and other


226



374License fees - initial and transfer


—



100Other revenue


261



154Total Revenues


1,824



2,370Operating Costs:Cost of revenues


1,126



1,136General and administrative costs


1,236



1,464Total Operating Costs


2,362



2,600Operating Loss


(538
)


(230
)Other Income (Expense):Interest income


—



1Interest expense


(4
)


(3
)Loss on investment in PVEC, LLC


(52
)


-Total Other Expense


(56
)


(2
)Loss from Operations Before Tax


(594
)


(232
)Income Tax Benefit


—



—Net Loss


(594
)


(232
)Net Income (Loss), attributable to noncontrolling interest


(28
)


17Net Loss, attributable to Global

$
(566
)

$
(249
)Loss Per Share - basic and diluted:Net loss, attributable to Global common shareholders

$
(0.09
)

$
(0.04
)Weighted Average Number of Shares Outstanding - basic and diluted


6,646,062



6,633,112














The accompanying notes are an integral part of the condensed consolidated financial statements.


4


GLOBAL ENTERTAINMENT CORPORATION AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


For the Year Ended May 31, 2010 and the Three Months Ended August 31, 2010


(Unaudited)


(in thousands, except share amounts)







Global Entertainment Corporation


Non-


TotalCommon Stock


Paid-in


Retained





Controlling


EquityShares


Amount


Capital


Deficit


Total


Interest


(Deficit)Balance at May 31, 2009


6,633,112


$
7


$
10,961


$
(7,788
)

$
3,180


$
19


$
3,199Issuance of restricted stock


12,950



—



—



—



—



—



—Stock-based compensation - restricted stock


—



—



26



—



26



—



26Net loss, attributable to noncontrolling interest


—



—



—



—



—



(7
)


(7
)Net loss, attributable to Global


—



—



—



(2,622
)


(2,622
)


—



(2,622
)Balance at May 31, 2010


6,646,062



7



10,987



(10,410
)


584



12



596Stock-based compensation - restricted stock


—



—



2



—



2



—



2Distribution to non-controlling interest


—



—



—



—



—



(12
)


(12
)Net loss, attributable to noncontrolling interest


—



—



—



—



—



(28
)


(28
)Net loss, attributable to Global


—



—



—



(566
)


(566
)


—



(566
)Balance at August 31, 2010


6,646,062


$
7


$
10,989


$
(10,976
)

$
20


$
(28
)

$
(8
)


The accompanying notes are an integral part of the condensed consolidated financial statements


5


GLOBAL ENTERTAINMENT CORPORATION AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


For the Three Months Ended August 31, 2010 and 2009


(Unaudited) (in thousands)








2010


2009Cash flows from operating activities:Net loss, attributable to Global

$
(566
)

$
(249
)Adjustments to reconcile net loss to net cash used in operating activities-Depreciation


9



42Provision for doubtful accounts


2



18Noncontrolling interest


(40
)


17Stock-based compensation - restricted stock


2



9Loss on investment in PVEC, LLC


53



-Changes in assets and liabilities-Accounts receivable


(243
)


(1,157
)Prepaid expenses and other assets


97



63Accounts payable


240



685Accrued liabilities


(34
)


(101
)Deferred revenues


337



394Net cash used in operating activities


(143
)


(279
)Cash flows from investing activities:Investment in PVEC, LLC


(53
)


—Purchase of fixed assets


—



(49
)Net cash used in investing activities


(53
)


(49
)Cash flows from financing activities:Notes payable proceeds


250



—Notes payable payments


(19
)


(27
)Payment of contractual obligation


(16
)


—Net cash provided by (used in) financing activities


215



(27
)Net increase (decrease) in cash and cash equivalents


19



(355
)Cash and cash equivalents, beginning of period


193



1,111Cash and cash equivalents, end of period

$
212


$
756Supplemental Disclosures:Interest  paid

$
4


$
3Income taxes paid (received)

$
—


$
—














The accompanying notes are an integral part of the condensed consolidated financial statements.


6


GLOBAL ENTERTAINMENT CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)











Basis of Presentation and Use of Estimates





Description of the Company





Global Entertainment Corporation (referred to in this annual report as “we,” “us” or “Company”) is an integrated event and entertainment company that is engaged, through its wholly owned subsidiaries, in sports management, multipurpose events center development, facility and venue management and marketing, and venue ticketing.  We are primarily focused on projects located in mid-size communities in the United States.





Our current principal operating subsidiaries are Western Professional Hockey League, Inc., Global Properties I, International Coliseums Company, Inc., Global Entertainment Marketing Systems, Inc., Global Entertainment Ticketing, Encore Facility Management and GEC Food Service, LLC.





We, through our wholly owned subsidiary, Western Professional Hockey League, Inc. (WPHL), are the operator of the Western Professional Hockey League, a minor league professional hockey organization, and are the licensor of the independently owned hockey teams which participate in the league.  WPHL has entered into a joint operating agreement with the Central Hockey League, Inc. (CHL, Inc.).  The effect of the joint operating agreement is that the two leagues had their respective teams join together and operate under the “Central Hockey League” name (as the League).  The terms of the joint operating agreement define how the League will operate.





The teams participating in the League are located primarily in mid-sized communities throughout the Central, Western and Southern regions of the United States.  The League is comprised of WPHL licensed teams, CHL, Inc. sanctioned teams and, beginning in the 2010-2011 season, International Hockey League (IHL) teams.  The CHL, Inc. teams operate under a sanction agreement that requires assessment payments to the League pursuant to the terms and conditions of CHL, Inc. agreements.  The IHL teams participate in the League, under a two year agreement, for a fee paid to the League.





During the 2009-2010 season fifteen teams competed in the League: twelve WPHL licensed teams and three CHL, Inc. sanctioned teams.  During the 2010-2011 season we expect eighteen teams to compete in the League: ten WPHL licensed teams, three CHL, Inc. sanctioned teams and five IHL teams.  Certain WPHL licensees do not have teams competing in any given season, but maintain their WPHL licenses.





Global Properties I (GPI) provides services in targeted mid-sized communities across the United States related to the development of multipurpose events centers.  GPI's development of multipurpose events centers promotes the development of the League by assisting potential licensees in securing quality venues in which to play minor professional hockey league games.





International Coliseums Company, Inc. (ICC) manages the construction of multipurpose events centers in mid-market communities.





Global Entertainment Marketing Systems, Inc. (GEMS), promotes, markets, and sells various services related to multipurpose entertainment facilities, including all contractually obligated income (COI) sources such as facility naming rights, luxury suite sales, premium seat license sales, and facility sponsorship agreements.





Global Entertainment Ticketing (GetTix) provides ticketing services for the multipurpose events centers developed by GPI, existing WPHL licensees, and various other entertainment venues, theaters, concert halls, and other facilities and event coordinators.  GetTix provides a full ticketing solution by way of box office, outlet, phone, internet and print-at-home service that utilizes distribution outlets in each market.  GetTix uses third-party, state-of-the-art software to deliver ticketing capabilities that include database flexibility, easy season and group options, financial reporting and marketing resources.


7


Encore Facility Management (Encore) provides a full complement of multipurpose events center operational services.  These services include providing administrative oversight in the areas of facility/property management and finance, event bookings, and food and beverage.  Encore is currently involved with facility management of multipurpose events centers developed by GPI.  Facility management operations are conducted under separate limited liability companies.





GEC Food Service LLC (formerly Global Food Service, LLC) (Food Service) was formed in fiscal 2009 and manages food service operations.





Basis of Presentation





The accompanying condensed consolidated financial statements include the accounts of Global Entertainment Corporation and its wholly owned subsidiaries, WPHL, GPI, ICC, GEMS, Encore, GetTix, and GEC Food Service, as well as the limited liability companies formed for facility management.  Intercompany balances and transactions have been eliminated in consolidation.





The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting  principles for interim financial information and with the instructions for Form 10-Q.  Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included.





The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern (which contemplates the realization of assets and discharge of liabilities in the normal course of business for the foreseeable future).  We have experienced a significant decline in operations, cash flows and liquidity.  The economic downturn, which has affected the markets in which we operate, has negatively impacted our operating results and our liquidity.  The uncertainty regarding our ability to generate sufficient cash flows and liquidity to fund operations raises substantial doubt about our ability to continue as a going concern.  These financial statements do not include any adjustments that might result from the outcome of this uncertainty.  If we were unable to continue as a going concern, substantial adjustments would be necessary to the carrying value of assets, the reported amounts of liabilities, reported revenues and expenses and balance sheet classifications.





Operating results for the three month period ended August 31, 2010, are not necessarily indicative of the results that may be expected for the year ending May 31, 2011, or for any other period.





For further information, refer to the consolidated financial statements and footnotes included in our report on Form 10-K for the year ended May 31, 2010.





Certain reclassifications are reflected in prior periods for the purpose of consistent presentation.





Use of Estimates





Management uses estimates and assumptions in preparing financial statements in accordance with accounting principles generally accepted in the United States.  Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses.  Actual results may vary from the estimates that were assumed in preparing the condensed consolidated financial statements.





We believe our critical accounting policies and material estimates include, but are not limited to, revenue recognition, the allowance for doubtful accounts, arena guarantees and other contingencies, the carrying value of goodwill, the realization of deferred income tax assets, the fair value of a liability related to the secondary guarantee related to a worker’s compensation program, and the allocation of expenses and division of profit or loss relating to the joint operating agreement.  Due to the uncertainties inherent in the estimation process and the significance of these items, it is at least reasonably possible that the estimates in connection with these items could be materially revised within the next year.


8


Accounting Developments





With the exceptions of those discussed below, there  have been no recent accounting  pronouncements or changes in accounting pronouncements during the quarter ended August 31, 2010, that are of significance, or potential significance to us.





In November 2007, the EITF modified GAAP to prohibit application of the equity method of accounting to activities performed outside of a separate legal entity and require revenues and costs incurred with third parties in connection with collaborative agreements be presented gross or net based on other applicable accounting literature.  Payments to or from collaborators should be presented in an income statement based on the nature of the arrangement, whether the payments are within the scope of other accounting literature, and certain other criteria.  We adopted these standards effective June 1, 2009, and applied the standards to our accounting for CHL, Inc.’s interest in the League effective June 1, 2009.  Based on the nature of our arrangement with CHL, Inc., its interest is accounted for by analogy to the standards for the accounting and reporting of noncontrolling interests.





In December 2007, the FASB modified GAAP by establishing accounting and reporting standards for noncontrolling interests in a subsidiary and for the deconsolidation of a subsidiary.  The standards also provide income statement presentation guidance and require expanded disclosures.  We adopted these standards effective June 1, 2009, prospectively, except for the presentation and disclosure requirements which have been applied retrospectively for all periods presented.  We account for CHL, Inc.’s interest in the League in accordance with these new standards effective June 1, 2009.  The impact on our financial position and results of operations was as follows:





·
CHL, Inc.’s share of the results of League operations is reflected separately on the face of the consolidated statements of operations below net income (loss) rather than in other income (expense).





·
CHL, Inc.’s undistributed earnings (loss) in the League is presented as noncontrolling interest in the equity section of the consolidated balance sheets, for all periods presented.  Prior to adoption of these standards, CHL, Inc.’s undistributed earnings (loss) in the League had been presented in the consolidated balance sheets as a liability as of May 31, 2009.





In September 2009, the EITF issued a consensus which revises the standards for recognizing revenue on arrangements with multiple deliverables.  Before evaluating how to recognize revenue for transactions with multiple revenue generating activities, an entity should identify all the deliverables in the arrangement and, if there are multiple deliverables, evaluate each deliverable to determine the unit of accounting and whether it should be treated separately or in combination.  The consensus removes certain thresholds for separation, provides criteria for allocation of revenue amongst deliverables and expands disclosure requirements.  The standards will be effective June 1, 2011, for our fiscal year 2012.  We have not yet evaluated the impact these standards will have on our financial position or results of operations.





In June 2009, the FASB changed the consolidation rules as they relate to variable interest entities.  The standards changed the model for determining who should consolidate a variable interest entity, and require ongoing reassessment of whether we should consolidate a variable interest entity.  The standards were effective June 1, 2010, for our fiscal year 2011.  We adopted these standards effective June 1, 2010, but the adoption has had no impact on the Company’s financial position or results of operations.


9








Going Concern








The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern (which contemplates the realization of assets and discharge of liabilities in the normal course of business for the foreseeable future).  We have experienced a significant decline in operations, cash flows and liquidity.  The economic downturn, which has affected the markets in which we operate, has negatively impacted our operating results and our liquidity.  The uncertainty regarding our ability to generate sufficient cash flows and liquidity to fund operations raises substantial doubt about our ability to continue as a going concern.  These financial statements do not include any adjustments that might result from the outcome of this uncertainty.  If we were unable to continue as a going concern, substantial adjustments would be necessary to the carrying value of assets, the reported amounts of liabilities, reported revenues and expenses and balance sheet classifications.





As discussed further in the notes below, in June 2010, we entered into an agreement with Boston Pizza Restaurants (USA), Inc. which establishes a credit facility.  As amended in August 2010, we may borrow up to $500 thousand, not to exceed the amount of our collectible accounts receivable.  Borrowings must occur on or prior to June 30, 2011, and must be repaid in full by August 31, 2011.  As of October 14, 2010, we have $425 thousand borrowed on this facility.





We plan to monitor our liquidity, carefully work to reduce the uncertainty regarding our ability to generate sufficient cash flows and liquidity to fund operations and address our cash needs.  We have implemented head count and salary reductions, as well as other operating changes.  While management believes that the actions already taken or planned will mitigate the adverse conditions and events which raise substantial doubt about the validity of the going concern assumption used in the preparation of these consolidated financial statements, there can be no assurance that these actions will be successful.  Realization of management’s plans is dependent on our ability to finalize certain transactions which are inherently risky and difficult to predict as to timing.








Earnings (Loss) Per Share (EPS)





Basic EPS is computed by dividing the income (loss) attributable to Global, by the weighted average number of shares of common stock outstanding during the period.  Diluted EPS is computed by dividing the income (loss) attributable to Global, by the total of the weighted average number of shares of common stock securities outstanding during the period and the effect of dilutive securities outstanding during the period.  The effect of dilutive securities is not included in the weighted average number of shares outstanding when inclusion would increase the earnings per share or decrease the loss per share for income (loss) attributable to Global.


10


Reconciliations of the numerators and denominators in the EPS computations for income (loss) attributable to Global follow:





2010


2009NUMERATOR (in thousands):Basic and diluted - net loss attributal  to Global

$
(566
)

$
(249
)DENOMINATOR:Basic EPS - weighted average number of shares outstanding


6,646,062



6,633,112Effect of dilutive securities outstanding


—



—Diluted EPS - weighted average number of shares outstanding


6,646,062



6,633,112Number of shares of common stock which couldbe purchased with average outstanding securities not included indiluted EPS because effect would be antidilutive-Stock options (average price of $4.81 and $4.99 )


300,868



294,761Warrants (average price of $7.10 and $7.10)


215,800



215,800Restricted stock


26,478



25,900





The impacts of certain options, warrants and restricted stock outstanding at August 31, 2010, were not included in the calculation of diluted EPS for the three months ended August 31, 2010, because to do so would be antidilutive.  Those securities which were antidilutive in the three months ended August 31, 2010 could potentially dilute EPS in the future.








Notes Payable and Contractual Obligations





In June 2010, we entered into an agreement with Boston Pizza Restaurants (USA), Inc. (BPR) which establishes a credit facility.  As amended in August 2010, we may borrow up to $500 thousand, not to exceed the amount of our collectible accounts receivable.  Under the terms of the agreement, borrowings must occur on or prior to June 30, 2011, and must be repaid in full by August 31, 2011.  Interest on the outstanding principal balances is computed daily at the rate of prime plus 7% and is payable quarterly.  In addition, we must pay quarterly an amount equal to 0.5% of any unused commitment.  The agreement is secured by our accounts receivable.  Our directors James Treliving and George Melville are the beneficial owners of 100% of BPR.  In connection with the agreement, James Treliving and George Melville were each granted in July 2010 options for the purchase of 15,000 shares of common stock, at a strike price of $0.20 per share.  The options will vest December 31, 2010, and expire December 31, 2020.





We had a $1.75 million line of credit that matured October 1, 2009.  We did not renew this credit facility.





We entered into a note payable in fiscal 2008 in connection with settlement of a legal matter.  The note calls for 36 payments of $10 thousand monthly through December 2010.  We recorded the present value of the payments, discounted at 7.0%, as notes payable and general and administrative costs.  The note had an initial present value of $0.3 million.  The remaining principal matures in fiscal 2011.





We entered into a contractual obligation in fiscal 2010 with a vendor.  The agreement calls for payment of $12 thousand in June 2010 and 23 monthly payments of $3 thousand through May 2012.  We recorded the present value of the payments, discounted at 10.3%, as contractual obligations payable.  The liability under the agreement had an initial present value of $76 thousand.  Principal maturities are $33 thousand in the next  twelve months and $27 thousand thereafter.


11





PVEC, LLC Joint Venture





During fiscal 2006, we entered into an agreement with Prescott Valley Signature Entertainment, LLC (PVSE, LLC) to form Prescott Valley Events Center, LLC (PVEC, LLC) to engage in the business of developing, managing, and leasing the Prescott Valley Events Center in Prescott Valley, Arizona (the Town).  We are the managing member of PVEC, LLC.  Construction of the center, which opened in November 2006, was funded by proceeds from the issuance of $35 million in Industrial Development Authority of the County of Yavapai Convention Center Facilities Excise Tax Revenue Bonds, Series 2005 (the Bonds).





We account for our investment in PVEC, LLC under the equity method.  Our interest in this entity is not a controlling one, as we do not own a majority voting interest and our ability to affect the business operations is significantly limited by the PVEC, LLC operating agreement.  The operating agreement also provides that a majority-in-interest of the members may replace the managing member, or if the managing member is in default, a majority-in-interest of the remaining members may replace the managing member.





In addition to a $1 thousand initial capital contribution, we contributed $250 thousand as an initial preferred capital contribution and PVSE, LLC contributed land with an approximate value of $1.5 million as an initial preferred capital contribution.  Payment of the $250 thousand was made to PVEC, LLC in December 2008.  We recorded losses on our investment in fiscal 2008, in the amount of $251 thousand, to bring our investment to zero.  Our investment was zero at May 31, 2010.  In fiscal 2010 we advanced $157 thousand of cash to PVEC, LLC.  These advances have been expensed as equity method losses in fiscal 2010.We have advanced $115 thousand to PVEC, LLC in fiscal 2011 through October 14, 2010, and may make additional advances.





PVEC, LLC lease payments on the facility are equal to debt service payments on the Bonds.  In the event of any shortfalls in debt service payments, amounts will be paid by the Town from transaction privilege tax (TPT) collected from the surrounding project area.





Operating revenues of the center, as defined, are first used to pay operating expenses, as defined, second to pay our base management fee (4% of the center’s operating revenue), third to pay debt service, then to fund other items.  As a result, we may be required to defer receipt of our management fees should operating revenues, as defined, be insufficient to pay operating expenses, as defined.  Through August 31, 2010, no management fees had been deferred.





Cash distributions and distributions in liquidation are to be made to each member in the following priority: 1) to the extent needed to pay taxes, 2) to each member to the extent of loans in the form of our unpaid management fees and PVSE, LLC’s unpaid parking fees, and 3) to PVSE, LLC, until their preferred account equals ours (including preferred returns of 5% thereon) and then 50/50.  Therefore, in fiscal 2008 we recognized 100% of PVEC, LLC’s losses to the extent of our funding commitment ($251 thousand).  We will recognize additional losses to the extent of any loans to PVEC, LLC, should they accumulate, in the form of deferred management fees.  We will also recognize additional losses to the extent of any additional advances to PVEC, LLC.





PVEC, LLC’s unaudited financial information for our three months ended August 31, 2010 and 2009, follows (in thousands):


12





2010


2009Operating revenue

$
283


$
343Operating loss


215



309Net loss


227



319





August 31,


May 31,2010


2010Property and equipment, net

$
27,333


$
27,710Receivable from Town - current and long-term funding obligation


10,210



10,066Total assets


41,314



40,738Debt payable


35,000



35,000Retained deficit


2,034



1,804Members' equity (deficit)


(292
)


(65
)





Effective September 1, 2009, we ceased recognizing PVEC, LLC advertising sales commissions and facility management fees, exclusive of payroll costs and reimbursed expenses, as collections are deemed no longer reasonably assured.  Our consolidated financial statements reflect the following related to transactions between us and PVEC, LLC (in thousands):




2010


2009Facility management fees, exclusive of payroll costs (Encore)

$
—


$
2Facility management fees, payroll costs (Encore)


118



134Facility management fees, reimbursed expenses (Encore)


7



10Advertising sales commission (GEMS)


—



40Ticket service fees (GetTix)


11



20Cost of revenues, facility payroll (Encore)


118



134Cost of revenues, reimbursed expenses (Encore)


7



10General and administrative expense, bad debt expense


—



—Loss on investment in PVEC, LLC


53



—





August 31,


May 31,2010


2010Accounts payable

$
11


$
3





During fiscal 2010 we wrote-off $432 thousand in accounts receivable from PVEC, LLC.  PVEC, LLC financial information as of May 31, 2010, reflect the $432 thousand as payables to us.  During fiscal 2010 we advanced $157 thousand to PVEC, LLC which we have recorded as loss on investment in PVEC, LLC.  PVEC, LLC financial information as of May 31, 2010, reflect the $157 thousand as a payable to us.


13








Commitments and Contingencies


Operating Leases





We lease 10,392 square feet of office space for our Tempe, Arizona headquarters pursuant to a lease with a sixty-six month initial term beginning January 2008.  The lease is renewable for an additional sixty-month period.  Leasehold improvements at the location are depreciated over the initial lease term.  Non-level rents are recognized on a straight-line basis over the initial lease term.  Liabilities related to non-level rents of $76 thousand and $80 thousand were included in accrued liabilities at August 31, 2010 and May 31, 2010.





In addition we are committed under an equipment lease to pay $1 thousand monthly through June 2013.





Litigation





As with all entertainment facilities there exists a degree of risk that the general public may be accidentally injured.  As of  August 31, 2010, there were various claims outstanding in this regard that management does not believe will have a material effect on our financial condition or results of operations.  To mitigate this risk, we maintain insurance coverage, which we believe effectively covers any reasonably foreseeable potential liability.  There is no assurance that our insurance coverage will adequately cover all liabilities to which we may be exposed.








We are a plaintiff and a counter-defendant in a lawsuit involving the City of Rio Rancho, New Mexico filed June 24, 2009, in the New Mexico 13th Judicial District, Sandoval County, Case No. 01329 CV091504.  Our claim seeks resolution of matters stemming from the time during which we managed the events center in Rio Rancho, New Mexico.  Specifically, our claim is based on breach of contract and other matters.  The complaint seeks payment of monies due in excess of $0.3 million and declaratory judgment that we have no liability to third-party creditors of the center.  The city’s counterclaim alleges breach of contract, among other claims, and seeks judgment in excess of $0.2 million.  We believe the counterclaim is without merit.





Global Entertainment Corporation, PVEC, LLC and two of our directors (James Treliving and Richard Kozuback) are four of sixteen defendants in a series of suits consolidated under 1) Covin, et al. v. Robert W. Baird & Co., Global Entertainment Corporation, et al, United States District Court, District of Arizona, Case No. 3:09-cv-8174-MEA filed September 30, 2009 and 2) Wells Fargo Bank, N.A. v. Robert W. Baird & Co., Global Entertainment Corporation, et al, Maricopa County Superior Court, Case No. CV2009-030148 filed September 30, 2009.  The litigations relate to the offering for the Bonds, issued to support the construction of the events center in Prescott Valley, Arizona.  The complaints allege the bond offering failed to properly disclose certain facts, that the underwriters and certain law firms acted with deliberate recklessness and that the bond documents are defective.  The plaintiffs are bond holders or their representatives and seek unspecified damages and/or reimbursement of bond investments, in excess of $26 million.  We have indemnified all our former and current directors and officers in connection with this matter.  We believe the claims against Global Entertainment Corporation, PVEC, LLC and the two directors are without merit.  Our insurance carrier has been notified.Our insurance carrier has declined coverage of Global Entertainment Corporation in this matter, based on the assumption that we did not issue or sell the Bonds.  Defense costs are allocated 45% to defense of Global Entertainment Corporation and 55% to defense of the directors.  Defense costs allocated to Global Entertainment Corporation are being expensed as incurred and defense costs allocated to the directors are being expensed as incurred up to the amount of a $75 thousand insurance deductible.  As of August 31, 2010, the deductible has not yet been met.





We are defendant in Alerus Financial Corporation as Assignor of First Bank &Trust Leasing Services, a division of Kinetic Leasing, Inc. v. Global of Prescott Valley, LLC and Global Entertainment Corporation, District Court of Cass County, North Dakota, dated June 8, 2010.  This litigation stems from our guarantee of a lease for equipment used by PVEC, LLC.  The lease is secured by the equipment.  The lessor seeks to recover the equipment and $300 thousand, including the remaining lease balance.  As of August 31, 2010, we have established no reserve for this matter, based on the status of current negotiations with the lessor and other parties which we expect to provide funding sources to PVEC, LLC.


14


We are defendant in Prescott Valley Hockey Club, LLC v. Western Professional Hockey League, Inc.; United States District Court, District of Arizona, Case No. 3:09-cv-08165-JAT filed September 3, 2010.  This suit was filed by the prior license holder for the WPHL team in Prescott Valley, Arizona.  The League terminated the subject license agreement for cause.  The Complaint alleges trademark infringement and conversion of certain personal property.  The plaintiff seeks an unspecified amount of money damages and injunctive relief.





All litigation settlement expenses are included in general and administrative costs.  The following summarizes litigation settlement activity for three months ended August 31, 2010 and 2009 (in thousands).








Three Months EndedAugust 31,2010


2009Litigation settlement liabilities, beginning of period

$
79


$
330Litigation settlement expense - initial reserves


—



—Cash payments


(19
)


(127
)Litigation settlement liabilities, end of period

$
60


$
203








August 31,


May 31,2010


2010Balance sheet classification, at end of period-Notes payable - current portion

$
60


$
79Notes payable - long-term portion


—



—Accounts payable


—



—Accrued liabilities


—



—$
60


$
79





Legal services costs are expensed as incurred.  At August 31, 2010 and May 31, 2010, accounts payable included $205 thousand and $134 thousand in legal services costs.  At August 31, 2010 and May 31, 2010, accrued liabilities included $35 thousand and $17 thousand in legal services costs.





Contingencies





We enter into indemnification provisions under our agreements with other companies in our ordinary course of business, typically with business partners and customers.  Under these provisions we generally indemnify and hold harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of our activities.  The maximum potential amount of future payments we could be required to make under these indemnification provisions is unlimited.  We have not incurred material costs to defend lawsuits or settle claims related to these indemnification agreements.  As a result, we believe the estimated fair value of these agreements is minimal.  Accordingly, we have no liabilities recorded for these agreements as of August 31, 2010.





As of August 31, 2010, we have entered into various employment contracts with key employees.  Under certain circumstances we may be liable to pay amounts based on the related contract terms.





We were plaintiff in a lawsuit against a former employee seeking damages for breach of fiduciary duty and other matters.  In July 2010, we received a judgment in settlement of the suit for $100 thousand.  In September 2010, we received an initial payment on the judgment of $30 thousand, and expect monthly payments of $5 thousand until the judgment is fully extinguished.  We have recorded the $100 thousand gain on this suit in the three months ended August 31, 2010.


15


Guarantees





In February 2008, we entered into an agreement with a City in Texas to manage a multi-purpose events center in Texas.  The facility opened in November 2009.  The initial term of this agreement was fifteen years, with an option by the city to renew for an additional five years under certain conditions.  This agreement included a guarantee that the events center would operate at a break-even point and without cost to the city, not including any capital reserves and any other off-sets described in the agreement.  In addition, in April 2009, we entered into an agreement with the same city in Texas to fund a performance reserve related to having a hockey team play in the facility.  Under the agreement we delayed receipt of advertising sales commissions otherwise payable to us to fund a performance reserve account.  The required performance reserve level was $150 thousand at August 31, 2010.





In June 2010, the management of the facility was transferred to the City.  In connection with this change, we are negotiating a modification to the management agreement with the City under which our obligations under the contract are being clarified.  We recorded a $0.4 million liability during fiscal 2010 for our best estimate of our ultimate obligations under the management agreement.  This is only an estimate of our obligation and is subject to change based on the final negotiated agreement.  All receivables from the City, totaling $0.2 million at August 31, 2010, and the amounts in the performance reserve account, may not be collected in cash and may be offset against this liability in fiscal 2011.





In May 2008, we entered into an agreement to manage a multi-purpose events center to be constructed in Missouri.  The initial term of this agreement ends fifteen years from facility opening, and the city may renew the agreement for an additional five years under the same terms.  The facility opened in November 2009.  Our compensation under the agreement may only come from the facility operating account, which is to be funded by facility operations, as defined in the agreement.  The management agreement includes a guarantee that we will subsidize the operations of the facility to the extent that funds in the facility operating account and a temporary operating account are not adequate.  Under the terms of the agreement the city has paid $0.5 million to fund a temporary operating reserve account, which may be used to fund shortfalls in the facility operations account.  Excess funds in the facility operating account each operating year, after paying operating expenses, our base Encore fee and GEMS commission, are to be used in the following priority: 1) to reimburse us for any subsidy payments we have made, 2) to replenish the temporary operating reserve account, 3) to fund the capital reserve account and 4) to pay on a co-equal basis our incentive fee and deposits to three additional reserve accounts.  The maximum amount of future payments we could be required to make under the guarantee is theoretical due to various unknown factors.  However, once the temporary operating reserve account is depleted, the guarantee subsidy payments would be limited to the operational loss each operating year, plus the amount of our facility management fees and advertising sales commissions.  We do not expect to make guarantee subsidy payments based on operating results of similar facilities, however, no assurance can be made that a payment pursuant to this guarantee would not be paid in the future and that such payment would not be material.





In addition, under the terms of the management agreement, an amount not to exceed $0.50 per ticket, and excess operating funds, are to be used to fund a capital reserve account up to $150 thousand in each of the first five operating years and up to $250 thousand thereafter.  Should the capital reserve account not be fully funded for two consecutive years, the management agreement terminates, unless the city elects to renew the agreement.





We provide a secondary guarantee on a standby letter of credit in favor of Ace American Insurance Company for $0.6 million related to a guarantee under a workers compensation program.  This letter of credit is fully collateralized by third parties.  No amounts have been drawn on this letter of credit as of August 31, 2010.  We believe the amount of payments under this guarantee will be negligible, and as such, have assigned no value to this guarantee at August 31, 2010.





We have guaranteed payment of a lease for equipment used by PVEC, LLC.  We are currently being sued in connection with our guarantee as described above in the Litigation section of this note.


16


In addition to our commitments and guarantees described above we also have the commitments and guarantees described in the PVEC, LLC Joint Venture Note.





Credit Risk





Our business activities and accounts receivable are with customers in various industries located throughout the United States.  We perform ongoing credit evaluations of our customers and maintain allowances for potential credit losses.





The League operates primarily in mid-sized communities in the Central, Western and Southern regions of the United States, including Arizona, Colorado, Kansas, Louisiana, Mississippi, Missouri, Oklahoma, South Dakota, and Texas. Our facility management fees and project management fees are derived from events centers currently operating in, or being constructed in, Arizona, Kansas, Missouri and Texas.  The economic downturn which has affected these markets has negatively impacted our operating results and will most likely continue to do so until an economic recovery is complete.





We depend on contracts with cities or related governmental entities to design, develop, and manage new multipurpose facilities and adjacent real estate.  Typically we must expend 20-30 months of effort to obtain such contracts.  We depend on these contracts for the revenue they generate and the facilities resulting from these contracts are potential facilities in which our licensees may operate.  Failure to timely secure these contracts may negatively impact our results.  Many governments are struggling to maintain tax revenue and raise capital in the current economic environment and may have less interest in developing new multipurpose facilities or less ability to finance construction of new multipurpose facilities.  Our revenues, project development fees and project management fees in particular, could be negatively impacted.





Purchasing a League license requires significant capital and commencing operation is a significant expense which limits the pool of potential licensees.  We depend on a critical mass of licensees to capture the economies of scale inherent in the League’s operations and to facilitate intra-league play.  There can be no assurance that we will be able to attract qualified candidates for licenses.  We anticipate that expansion of the League will be difficult because of the high capital costs of licenses, competitive pressures from sports leagues and entertainment providers both within and outside of the markets where we currently operate, and the lack of arenas for new licensees.





The minor league hockey industry in which we conduct business is subject to significant competition from other sports and entertainment alternatives as well as both the National Hockey League and its minor league hockey system, the American Hockey League, and other independent minor hockey leagues.  Even teams of the National Hockey League, which is the largest professional hockey league with the greatest attendance, have struggled to remain financially viable.  A significant portion of our revenues result from payments made by our licensees.  There can be no assurance that licensees will not default under their license agreements.





The League may be unable to attract new licensees and existing licensees may not be able to make the continuing payments required by their license agreements in the current economic environment.  There can be no assurance that any payments will be made by new or current licensees.


17


Related Party Investment Banking and Financial Consulting Transactions


We have entered into agreements with Miller Capital Markets, LLC (MCM) and Miller Capital Corporation (MCC).  Rudy Miller, a principal and major equity holder of MCM and MCC, beneficially held over 5% of our common stock as of the date of these agreements and the date of this filing.  During the quarters ended August 31, 2010 and 2009, fees and expenses of approximately $27 thousand and $45 thousand, were incurred under these, and predecessor agreements.





Investment Banking Service Agreement





In March 2010, we entered into an investment banking service agreement with MCM.  The agreement is effective February 2010, and has a term of one year.  Pursuant to this agreement, MCM will advise us with respect to potential mergers, acquisitions, and public and private financing transactions.





In consideration for these services, MCM will receive 10% of the gross proceeds of any private placement of equity and 4% of the gross proceeds of any private placement of debt.  With respect to public offerings, MCM will receive a percentage of the gross proceeds of such offerings as follows: (i) 2.75% for offerings of $10 million or less, (ii) 2.25% for offerings of $10 million to $20 million, (iii) 1.75% for offerings of $20 million to $30 million, and (iv) 1.25% of offerings of $30 million or more.  MCM will also have the right to receive warrants to purchase shares or units equivalent to 10% of the shares or units issued as part of any equity transaction wherein MCM provided services under this agreement, with the exercise price of such warrants being equal to 110% of the per share or unit value of the equity securities issued.  Warrants would expire in five years from the date of the equity offering, and would include piggyback registration rights for MCM on any future registration statements we file.  At any time within 12 months of a successful debt or equity financing event during the term of this agreement, MCM will have the right of first refusal to serve as our investment banker for any other financing transaction.





If we are acquired or involved in a merger with or acquisition of another business or entity, MCM will receive (i) 5% of the consideration from $1 up to $3 million, plus (ii) 4% of the consideration from $3 million to $6 million, plus (iii) 3% of the consideration from $6 million to $9 million, plus (iv) 2% of the consideration from $9 million to $12 million, plus (v) 1% of the consideration in excess of $12 million.





Financial Services Consulting Agreement





In March 2010, we entered into a consulting agreement with MCC.  The agreement is effective February 2010, with a term of one year.  MCC will provide financial consulting services related to our funding requirements, public and private debt and equity financing, potential merger and acquisition transactions, and investor relations.  As consideration for its services, MCC will receive twelve monthly payments of $9 thousand each; additionally, MCC received a restricted stock grant of 2,000 shares of our common stock February 2010, with 1,000 shares vesting February 2011, and the remaining 1,000 shares vesting February 2012.





Segment Information





Each of our subsidiaries is a separate legal entity with a separate management structure.  Our corporate operations exist solely to support our subsidiary segments.  As such, certain corporate overhead costs are allocated to the operating segments.  There are no differences in accounting principles between the operations.





At August 31, 2010 and at May 31, 2010, goodwill relates to our International Coliseums segment.





The Food Service segment began operations in fiscal 2009.


18





Three Months EndedGross Revenues


Income (Loss) from Operations Before Tax


Identifiable AssetsAugust 31, 2010Global Entertainment Corporate Operations

$
261


$
(118
)

$
538
(a)Global Food Service (b)


120



(59
)


122Central Hockey League/WPHL


226



(20
)


527Global Properties I


—



(87
)


12International Coliseums


211



2



713
(c)Encore Facility Management


815



(40
)


294Global Entertainment Marketing Systems


68



(38
)


222Global Entertainment Ticketing


123



(234
)


178Global Entertainment Coporation Consolidated

$
1,824


$
(594
)

$
2,606August 31, 2009Global Entertainment Corporate Operations

$
154


$
(342
)

$
1,628Global Food Service (b)


72



(26
)


598Central Hockey League/WPHL


474



192



846Global Properties I


50



(72
)


150International Coliseums


446



271



1,808Encore Facility Management


904



(22
)


484Global Entertainment Marketing Systems


71



(30
)


212Global Entertainment Ticketing


199



(203
)


170Global Entertainment Coporation Consolidated

$
2,370


$
(232
)

$
5,896





(a)
Global Entertainment Corporate Operations assets include cash and cash equivalents of $0.2 million and $0.8 million at August 31, 2010 and 2009.





(b)
The Global Food Service segment manages food service operations in the Independence, Missouri facility.  In October 2009, this segment sold $0.6 of equipment previously used in its Wenatchee, Washington location.





(c)
The International Coliseums segment assets at August 31, 2009, include $1.0 million in accounts receivable from a city to fund furniture, fixture and equipment purchases made as agent for the city.  August 31, 2010 assets included no comparable amounts.


19


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations





Forward-Looking Disclosure





This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995 regarding future events, including statements concerning our future operating results and financial condition and our future capital needs and sources.  These statements are based on current expectations, estimates, forecasts, and projections as well as our beliefs and assumptions.  Words such as “outlook”, “believes”, “expects”, “appears”, “may”, “will”, “should”, “anticipates” or the negatives thereof or comparable terminology, are intended to identify such forward-looking statements.  These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict.  Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements.  Factors that might cause or contribute to such differences include, but are not limited to those discussed in our report on Form 10-K for the fiscal year ended May 31, 2010.  You should not place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report.  We undertake no obligation to revise or update publicly any forward-looking statements for any reason, unless otherwise required by law.





General





The following is management’s discussion and analysis of certain significant factors affecting our financial position and operating results during the periods included in the accompanying condensed consolidated financial statements.





Description of the Company





Our current operating subsidiaries are Western Professional Hockey League, Inc., Global Properties I, International Coliseums Company, Inc., Global Entertainment Marketing Systems, Inc., Global Entertainment Ticketing, Encore Facility Management and GEC Food Service, LLC.





Pursuant to a joint operating agreement between us and Central Hockey League Inc. (CHL, Inc.), along with a two year agreement with the International Hockey League (IHL), WPHL operates and manages a minor professional hockey league known as the Central Hockey League (the League), which currently consists of eighteen teams  located in mid-market communities throughout the Central, Western and Southern regions of the United States.





Global Properties I (GPI) provides services in targeted mid-sized communities across the United States related to the development of multipurpose events centers.  GPI's development of multipurpose events centers promotes the development of the League by assisting potential licensees in securing quality venues in which to play minor professional hockey league games.





International Coliseums Company, Inc. (ICC) manages the construction of multipurpose events centers in mid-market communities.





Global Entertainment Marketing Systems, Inc. (GEMS), promotes, markets, and sells various services related to multipurpose entertainment facilities, including all contractually obligated income (COI) sources such as facility naming rights, luxury suite sales, premium seat license sales, and facility sponsorship agreements.





Global Entertainment Ticketing (GetTix) provides ticketing services for the multipurpose events centers developed by GPI, existing League licensees, and various other entertainment venues, theaters, concert halls, and other facilities and event coordinators.  GetTix provides a full ticketing solution by way of box office, outlet, phone, internet and print-at-home service that utilizes distribution outlets in each market.  GetTix uses third-party, state-of-the-art software to deliver ticketing capabilities that include database flexibility, easy season and group options, financial reporting and marketing resources.


20


Encore Facility Management (Encore) provides a full complement of multipurpose events center operational services.  These services include providing administrative oversight in the areas of facility/property management and finance, event bookings, and food and beverage.  Encore is currently involved with facility management of multipurpose events centers developed by GPI.  Facility management operations are conducted under separate limited liability companies.





GEC Food Service, LLC (formerly Global Food Service, LLC) (Food Service), formed in fiscal 2009, manages facility food service operations.





Critical Accounting Policies, Estimates and Judgments





Significant accounting policies are described in the audited consolidated financial statements and notes thereto included in our Report on Form 10-K for the year ended May 31, 2010.  We believe our most critical accounting policies and estimates relate to revenue recognition, the allowance for doubtful accounts, arena guarantees and other contingencies, the carrying value of goodwill, the realization of deferred income tax assets, the fair value of a liability related to the secondary guarantee related to a worker’s compensation program, and the allocation of expenses and division of profit or loss relating to the joint operating agreement.  Due to the uncertainties inherent in the estimation process and the significance of these items, it is at least reasonably possible that the estimates in connection with these items could be materially revised within the next year.





Overview and Forward Looking Information





We are currently managing a construction project for a facility in Dodge City, Kansas.  We have contracted to provide facility management service, food service, ticket service and advertising sales at this facility.    We expect to obtain food service revenues from this facility beginning in February 2011.  We earned advertising sales commissions and certain pre-opening related facility management fees from the facility in the quarter ended August 31, 2010, and expect to earn advertising sales commissions and facility management fees after the openings under our multi-year contracts.





Our multi-year contracts with PVEC, LLC to provide facility management services, ticket services and advertising sales were active in the quarter ended August 31, 2010, and remain active through the date of this filing.





We believe high unemployment levels and continued economic weakness have impacted our revenues and, in particular, contributed to 1) a decline in our ticket service fees and advertising sales commissions in the first quarter ended August 31, 2010, compared to the prior year quarter and 2) our inability to enter into arrangements to generate additional project development and management fees.




21


Three Months Ended August 31, 2010, Compared to Three Months Ended August 31, 2009





Revenues(in thousands):




Three Months EndedAugust 31, 2010


% of Revenue


August 31, 2009


% of Revenue


Change


% ChangeProject development fees

$
—



—


$
50



2.1


$
(50
)


(100.0
)Project management fees


211



11.6



446



18.8



(235
)


(52.7
)Facility management fees


815



44.7



904



38.1



(89
)


(9.8
)Ticket service fees


123



6.7



199



8.4



(76
)


(38.2
)Food service revenue


120



6.6



72



3.0



48



66.7Advertising sales commissions


68



3.7



71



3.0



(3
)


(4.2
)License fees - league dues and other


226



12.4



374



15.8



(148
)


(39.6
)License fees - initial and transfer


—



—



100



4.2



(100
)


(100.0
)Other


261



14.3



154



6.5



107



69.5Total Revenues

$
1,824



100.0


$
2,370



100.0


$
(546
)


(23.0
)





At $1.8 million, total revenues were 23.0% lower in the quarter ended August 31, 2010, compared to the quarter ended August 31, 2009.





Project development fees for the quarter ended August 31, 2009, relate to the project for the facility in Dodge City, Kansas, signed in fiscal 2009.  No projects were under development during the quarter ended August 31, 2010.





Project management fees of $0.2 million were 52.7 % lower for the quarter ended August 31, 2010, than the prior year quarter. For the quarter ended August 31, 2009, we had project management fees for our projects in Allen, Texas and Independence, Missouri.  Both of these projects were completed in November 2009.  Project management fees for the quarter August 31, 2010 were related to the facility under construction in Dodge City, Kansas.





Facility management fees were $0.8 million for the quarter ended August 31, 2010, compared to $0.9 million in the quarter ended August 31, 2009.  Facility management fees include both recurring fees for management of facilities and fees for preopening services.  The $0.1 million decrease in facility management fees is the result of reduced fees for preopening services on the Allen, Texas and Independence, Missouri projects in the quarter ended August 31, 2010, off-set by facility management fees in those same buildings and preopening fees for the facility in  Dodge  City, Kansas.





Ticket service fees decreased for the quarter ended August 31, 2010.  This decrease in ticket service fees reflects the  continued decline in the number of events held and attendance at events in our facilities, off-set with the addition of the Allen, Texas and Independence, Missouri facilities.





Food service revenue increased 66.7% to $0.1 million for the quarter ended August 31, 2010, due primarily to the addition of the food service operation at the facility in Independence, Missouri.





License fees – league dues and other decreased $0.2 million to $0.2 million for the quarter ended August 31, 2010 from $0.4 million for the quarter ended August 31, 2009.  Other license fees include a reduction of $0.1 million of sponsorship revenue in the quarter ended August 31, 2010, than in the prior year quarter.





License fees – initial and transfer, include fees from a transfer in the quarter ended August 31, 2009 and no such transactions fees in the quarter ended August 31, 2010.  Since initial and transfer fees are not regularly recurring and are difficult to predict, there is no assurance that we will be able to increase or sustain our operating capital through this source.


22


Other revenue includes the $100 thousand gain we recorded in the quarter ended August 31, 2010 from a judgment we received against a former employee of the Company.





Operating Costs(in thousands):





Three Months EndedAugust 31, 2010


% of Revenue


August 31, 2009


% of Revenue


Change


% ChangeCost of revenues

$
1,126



61.7


$
1,136



47.9


$
(10
)


(0.9
)General and administrative costs


1,288



70.6



1,464



61.8



(176
)


(12.0
)Total Operating Costs

$
2,414



132.3


$
2,600



109.7


$
(186
)


(7.2
)





Total operating costs decreased $0.2 million to $2.4 million for the quarter ended August 31, 2010, from $2.6 million in the prior year quarter.  This reduction is due primarily to management’s payroll cost reductions and other  operating cost saving initiatives.





Loss attributable to Global(in thousands):





Three Months EndedAugust 31, 2010


% of Revenue


August 31, 2009


% of Revenue


Change


% ChangeNet loss attributable to Global

$
(566
)


(31.0
)

$
(249
)


(10.5
)

$
(317
)


127.3





Net loss attributable to Global was $0.6 million for the quarter ended August 31, 2010, compared to a loss attributable to Global of $0.2 million for the quarter ended August 31, 2009.  The increased loss was primarily a result of the reduction of revenue from transaction related fees, lower project management fees and sponsorship revenues, off-set by reduced expenses of operating our business, increased food service and ticketing revenues, and a settlement with a previous employee.





Liquidity and Capital Resources





As of August 31, 2010, we had $0.2 million in cash and cash equivalents, including cash collected for GetTix tickets of $0.1 million for events scheduled to occur in the future.





Under our performance guarantee related to the hockey team in Texas, $50 thousand of working capital, included in prepaid and other assets, is currently unavailable to us.  In addition, accounts receivable for advertising sales commissions from the Texas facility, $0.1 million at August 31, 2010, are not being paid to us under normal terms.





Cash used in operating activities was approximately $0.1 million for the quarter ended August 31, 2010 compared to $0.3 for the quarter ended August 31, 2009.





Cash used for investing activities was $0.1 million for the quarter ended August 31,  2010, compared to $0.1 million for the comparable period in 2009.    We advanced PVEC, LLC $0.1 million in the quarter ended August 31, 2010.





Cash provided by financing activities, consisted primarily of draws on the BPR note of $0.3 million and repayments of notes and contractual obligations.





As of August 31, 2010, a $0.2 million receivable is classified as a long-term asset.  This classification was done in contemplation of the current economic conditions and the anticipated timing of collections.  Management, after careful review and analysis, believes this receivable to be fully collectible and as such, no allowance for doubtful accounts has been established against the receivable.


23


We had a $1.75 million line of credit that expired October 1, 2009.  We did not renew the facility.





In June 2010, we entered into an agreement with Boston Pizza Restaurants (USA), Inc. (BPR) which establishes a credit facility.  As amended in August 2010, we may borrow up to $500 thousand not to exceed the amount of our collectible accounts receivable.  Under the terms of the agreement, borrowings must occur on or prior to June 30, 2011, and must be repaid in full by August 31, 2011.  Interest on the outstanding principal balances is computed daily at the rate of prime plus 7% and is payable quarterly.  In addition, we must pay quarterly an amount equal to 0.5% of any unused commitment.  The agreement is secured by our accounts receivable.





We have experienced a significant decline in operations, cash flows and liquidity.  The economic downturn, which has affected the markets in which we operate, has negatively impacted our operating results and our liquidity.  The uncertainty regarding our ability to generate sufficient cash flows and liquidity to fund operations, raises substantial doubt about our ability to continue as a going concern (which contemplates the realization of assets and discharge of liabilities in the normal course of business for the foreseeable future).  As of October 14, 2010, we have $425 thousand borrowed on the BPR facility.





We plan to monitor our liquidity, carefully work to reduce this uncertainty and address our cash needs.  We have implemented head count and salary reductions, as well as other operating changes.  While management believes that the actions already taken or planned will mitigate the adverse conditions and events which raise substantial doubt about the validity of the going concern assumption used in the preparation of these consolidated financial statements, there can be no assurance that these actions will be successful.  Realization of management’s plans is dependent on our ability to finalize certain transactions which are inherently risky and difficult to predict as to timing.





We continue to evaluate the profitability of, and synergies among, our various subsidiaries and may determine to dispose of one or more of them, as we move forward with our business plan.  Based on our current forecast and historical results, we expect to have adequate cash flow from available sources to fund our operating needs through August 31, 2011.  We expect to use the credit facility with BPR to fund our operating shortfalls through August 31, 2011.  We cannot guarantee that, if additional financing is needed, we would be able to obtain financing on terms acceptable to us, if at all.





Accounting Developments





In November 2007, the EITF modified GAAP to prohibit application of the equity method of accounting to activities performed outside of a separate legal entity and requires revenues and costs incurred with third parties in connection with collaborative agreements be presented gross or net based on other applicable accounting literature.  Payments to or from collaborators should be presented in an income statement based on the nature of the arrangement, whether the payments are within the scope of other accounting literature, and certain other criteria.  We adopted these standards effective June 1, 2009, and applied the standards to our accounting for CHL, Inc.’s interest in the League effective June 1, 2009.  Based on the nature of our arrangement with CHL, Inc., its interest is accounted for by analogy to the standards for the accounting and reporting of noncontrolling interests.





In December 2007, the FASB modified GAAP by establishing accounting and reporting standards for noncontrolling interests in a subsidiary and for the deconsolidation of a subsidiary.  The standards also provide income statement presentation guidance and require expanded disclosures.  We adopted these standards effective June 1, 2009, prospectively, except for the presentation and disclosure requirements, which have been applied retrospectively for all periods presented.  We account for CHL, Inc.’s interest in the League in accordance with these new standards effective June 1, 2009.  The impact on our financial position and results of operations was as follows:





·
CHL, Inc.’s share of the results of League operations is reflected separately on the face of the consolidated statements of operations below net income (loss) rather than in other income (expense).





·
CHL, Inc.’s undistributed earnings (loss) in the League is presented as noncontrolling interest in the equity section of the consolidated balance sheets, for all periods presented.  Prior to adoption of these standard CHL, Inc.’s undistributed earnings (loss) in the League had been presented in the consolidated balance sheets as a liability as of May 31, 2009, and as an asset as of August, 31 2008.


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In September 2009, the EITF issued a consensus which revises the standards for recognizing revenue on arrangements with multiple deliverables.  Before evaluating how to recognize revenue for transactions with multiple revenue generating activities, an entity should identify all the deliverables in the arrangement and, if there are multiple deliverables, evaluate each deliverable to determine the unit of accounting and whether it should be treated separately or in combination.  The consensus removes certain thresholds for separation, provides criteria for allocation of revenue amongst deliverables and expands disclosure requirements.  The standards will be effective June 1, 2011, for our fiscal year 2012.





In June 2009, the FASB changed the consolidation rules as they relate to variable interest entities.  The standards changed the model for determining who should consolidate a variable interest entity, and require ongoing reassessment of whether we should consolidate a variable interest entity.  The standards were effective June 1, 2010, for our fiscal year 2011.





Item 3.  Quantitative and Qualitative Disclosures about Market Risk.





Not applicable.





Item 4T.  Controls and Procedures





Evaluation of Disclosure Controls and Procedures.





Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15 as of August 31, 2010.  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.  There were no changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.





Our management, including its principal executive officer and the principal financial officer, do not expect that our disclosure controls and procedures will prevent all error and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.  Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.  We monitor our disclosure controls and procedures and internal controls and make modifications as necessary; our intent in this regard is that the disclosure controls and procedures will be maintained as dynamic systems that change (including with improvements and corrections) as conditions warrant.





Changes in Internal Control over Financial Reporting.





There have not been changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the first quarter of fiscal 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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PART II – OTHER INFORMATION





Item 1.  Legal Proceedings





We are a plaintiff and a counter-defendant in a lawsuit involving the City of Rio Rancho, New Mexico filed June 24, 2009, in the New Mexico 13th Judicial District, Sandoval County, Case No. 01329 CV091504.  Our claim seeks resolution of matters stemming from the time during which we managed the events center in Rio Rancho, New Mexico.  Specifically, our claim is based on breach of contract and other matters.  The complaint seeks payment of monies due in excess of $0.3 million and declaratory judgment that we have no liability to third-party creditors of the center.  The city’s counterclaim alleges breach of contract, among other claims, and seeks judgment in excess of $0.2 million.  We believe the counterclaim is without merit.





Global Entertainment Corporation, PVEC, LLC and two of our directors (James Treliving and Richard Kozuback) are four of sixteen defendants in a series of suits consolidated under 1) Covin, et al. v. Robert W. Baird & Co., Global Entertainment Corporation, et al, United States District Court, District of Arizona, Case No. 3:09-cv-8174-MEA filed September 30, 2009 and 2) Wells Fargo Bank, N.A. v. Robert W. Baird & Co., Global Entertainment Corporation, et al, Maricopa County Superior Court, Case No. CV2009-030148 filed September 30, 2009.  The litigations relate to the offering for the Bonds, issued to support the construction of the events center in Prescott Valley, Arizona.  The complaints allege the bond offering failed to properly disclose certain facts, that the underwriters and certain law firms acted with deliberate recklessness and that the bond documents are defective.  The plaintiffs are bond holders or their representatives and seek unspecified damages and/or reimbursement of bond investments, in excess of $26 million.  We have indemnified all our former and current directors and officers in connection with this matter.  We believe the claims against Global Entertainment Corporation, PVEC, LLC and the two directors are without merit.  Our insurance carrier has been notified.Our insurance carrier has declined coverage of Global Entertainment Corporation in this matter, based on the assumption that we did not issue or sell the Bonds.  Defense costs are allocated 45% to defense of Global Entertainment Corporation and 55% to defense of the directors.  Defense costs allocated to Global Entertainment Corporation are being expensed as incurred and defense costs allocated to the directors are being expensed as incurred up to the amount of a $75 thousand insurance deductible.  As of August 31, 2010, the deductible has not yet been met.





We are defendant in Alerus Financial Corporation as Assignor of First Bank &Trust Leasing Services, a division of Kinetic Leasing, Inc. v. Global of Prescott Valley, LLC and Global Entertainment Corporation, District Court of Cass County, North Dakota, dated June 8, 2010.  This litigation stems from our guarantee of a lease for equipment used by PVEC, LLC.  The lease is secured by the equipment.  The lessor seeks to recover the equipment and $300 thousand, including the remaining lease balance.  As of August 31, 2010, we have established no reserve for this matter, based on the status of current negotiations with the lessor and other parties which we expect to provide funding sources to PVEC, LLC.





We are defendant in Prescott Valley Hockey Club, LLC v. Western Professional Hockey League, Inc.; United States District Court, District of Arizona, Case No. 3:09-cv-08165-JAT filed September 3, 2010.  This suit was filed by the prior license holder for the WPHL team in Prescott Valley, Arizona.  The League terminated the subject license agreement for cause.  The Complaint alleges trademark infringement and conversion of certain personal property.  The plaintiff seeks an unspecified amount of money damages and injunctive relief.





Item 1A.  Risk Factors





Not applicable.





Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds





None.


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Item 3.  Defaults upon Senior Securities





None.





Item 4.  Submission of Matters to a Vote of Security Holders





None.





Item 5.  Other Information





None.





Item 6.  Exhibits





See Exhibit Index attached.


27


SIGNATURES





Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




GLOBAL ENTERTAINMENT CORPORATION(Registrant)October 15, 2010
By
/s/Richard KozubackRichard KozubackPresident & Chief Executive OfficerOctober 15, 2010
By
s/James YeagerJames YeagerSenior Vice President & Chief Financial Officer


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Exhibit Index




The following exhibits are filed herewith or incorporated herein pursuant to Regulation S-K, Item 601:




Exhibit31.1
Certifications Pursuant to 18 U.S.C. Section 1350-Section 302, signed by Richard Kozuback, Chief Executive Officer.*31.2
Certifications Pursuant to 18 U.S.C. Section 1350-Section 302, signed by James Yeager, Chief Financial Officer.*32
Certification Pursuant to 18 U.S.C. Section 1350-Section 906, signed by Richard Kozuback, Chief Executive Officer and James Yeager, Chief Financial Officer.*
 *
Filed herewith.