MARKED TO SHOW CHANGES
As filed with the Securities and Exchange Commission on
September 11, 1996
Registration No. 33-7113
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
AMENDMENT NO. 1
to
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------------------
VENTURETECH, INC.
(Exact name of registrant as specified in its charter)
Idaho 7999 87-0462258
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization)Classification CodeNumber)IdentificationNumber)
11480 Sunset Hills Road, Suite 110E, Reston, Virginia 22090
(703) 471-5623
(Address, including zip code, and telephone
number, including area code, of registrant's principal
executive office)
Arthur Rosenberg
11480 Sunset Hills Road, Suite 110E, Reston, Virginia 22090
(703) 471-5623
(Name, address, including zip code, telephone number,
including area code, of agent for service)
Copies to:
Leonard E. Neilson, P.C.
1121 East 3900 South, Suite C-200
Salt Lake City, Utah 84124
Telephone: (801) 288-2855
Attn: Leonard E. Neilson, Esq.
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] __________
<PAGE>
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
VENTURETECH, INC.
CROSS-REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
Form S-1 Location in Prospectus
1.Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus Forepart of the
Registration Statement and
Outside Front Cover Page
2.Inside Front and Outside Back
Cover Pages of Prospectus Inside Front Cover Page;
Outside Back Cover Page
3.Summary Information, Risk
Factors and Ratio of Earnings
to Fixed Charges Prospectus Summary; Risk
Factors
4.Use of Proceeds Use of Proceeds
5.Determination of Offering Price *
6.Dilution Risk Factors; Dilution
7.Selling Security Holders Selling Stockholders
8.Plan of Distribution Outside Front Cover Page;
Plan of Distribution;
Selling Stockholders
9.Description of Securities to be
Registered Outside Front Cover Page;
Description of Securities
10.Interests of Named Experts and
Counsel Legal Matters; Experts
11.Information With Respect to the
Registrant Outside Front Cover Page;
Prospectus Summary; The
Company; Risk Factors; Use
of Proceeds; Dividend
Policy; Capitalization;
Selected Financial Data;
Management's Discussion
and Analysis of Financial
Condition and Results of
Operations; Business;
Management; Certain
Transactions; Principal
Stockholders; Description
of Securities; Shares
Eligible for Future Sale;
Financial Statements
12.Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities *
____________________________________
* Not Applicable
<PAGE>
PROSPECTUS
VENTURETECH, INC.
6,000,000 Shares of Common Stock
This Prospectus relates to the sale by certain selling stockholders (the
"Selling Stockholders") of 6,000,000 shares of Common Stock, par value $.001 per
share (the "Common Stock"), of VentureTech, Inc. ("VentureTech" or the
"Company"). The Shares of Common Stock being offered by the Selling Stockholders
were previously issued by the Company in a private transactions on April 29,
1996 and are being held in escrow pending the effectiveness of this Prospectus.
See "Description of Securities." The Company is not offering any shares of
Common Stock hereunder and will not receive any of the proceeds from the sale of
shares of Common Stock by the Selling Stockholders. The Company will receive
from the Selling Stockholders $10.00 per share as payment for the Shares. It is
anticipated that the Selling Stockholders will offer such shares of Common Stock
from time to time in market transactions at the then prevailing market price and
terms, or in negotiated transactions or otherwise, and without the payment of
any underwriting discount or commission, except for usual and customary selling
commissions paid to brokers or dealers. The Selling stockholders also may sell
such shares of Common Stock from time to time, as might be permitted under Rule
144 promulgated under the Securities Act of 1933, as amended (the "Act").
All expenses associated with the sale of shares of Common Stock by the Selling
Stockholders will be paid by the Selling Stockholders.
The Company has applied to have its Common Stock approved for quotation
through the Nasdaq Stock Market System subject to listing guidelines. Currently,
the Common Stock is traded in the over-the-counter market. On September 3,
1996, the bid and asked prices of the Common Stock as reported by the OTC
Bulletin Board were $13.87 and $14.25, respectively. See "Market Information."
Prior to this Offering, there has been a limited public trading market for the
Common Stock and there can be no assurance that a significant public market will
develop after the completion of the Offering or, if developed, that it will be
sustained.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE
OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION. SEE
"RISK FACTORS" PAGE 11 AND "DILUTION."
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Company intends to furnish to the holders of the Common Stock annual
reports containing audited financial statements with a report thereon by
independent certified public accountants and quarterly reports containing
unaudited financial information for the first three quarters of each fiscal
year.
The date of this Prospectus is September 11, 1996.
<PAGE>
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the more
detailed information and financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Unless the context indicates otherwise,
all references in this Prospectus to "VentureTech" or the "Company" include its
predecessors and subsidiaries.
The Company
VentureTech, Inc. ("VentureTech" or the "Company") is engaged in the
development, acquisition and licensing of certain computer based technology
designed to ultimately offer a full range of casino style gaming, entertainment,
information and financial transaction services over the worldwide Internet.
Through its technology agreements and licenses, the Company intends to establish
a series of multi-cultural / multi-ethnic virtual casinos over the Internet from
various locations around the world. A casino is deemed to be "virtual"
when it emulates actual casino style games offered in existing land-based
casinos, but provides such gaming services via computer software and hardware as
opposed to actual gaming equipment such as slot machines and blackjack tables.
The Internet is generally defined as a hierarchical collection of
interconnected computer networks throughout the world. Individual websites, a
collection of files and applications on a specific computer system, are
established by individuals or organizations that seek to provide information
and/or services to the general public. Interested parties access a particular
website at a unique Internet address, typically by way of an off-site computer
and modem, and through the services of a local Internet service provider. The
Company intends to establish unique Internet addresses for its virtual casinos
to clearly distinguish them from others that may be established by competitors.
The Company has created two wholly owned subsidiaries, EuroAsian E-Casinos,
Inc. (hereinafter "E-Casinos"), and Cybernet Currency Clearing, Inc.
(hereinafter "CCCI") to facilitate the distinct operations of its business.
E-Casinos was established as a foreign corporation in the Marshall Islands to
own, either solely or in partnership with joint venturers, and operate multiple
full service virtual gambling casinos over the Internet. CCCI was established as
a Nevada corporation to function as an international currency converter of world
currency in various international business transactions.
In developing its Internet gaming and financial transaction services, the
Company intends to acquire or otherwise obtain, by license or other agreement,
access to newly emerging Internet security and gaming technologies. The Company
has entered into separate agreements with CasinoWorld Holdings, Ltd ("CWH"), a
Delaware corporation, and Alphacom Data Security Services, Inc.
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("Alphacom"), a Nevada corporation, to supply the necessary technology and
related services to conduct the Company's business operations. Operating through
its newly created subsidiaries and in reliance upon its agreements with CWH and
Alphacom, the Company is preparing to commence substantive operations of its
gaming services over the Internet during the second half of 1996 or first
quarter of 1997.
The Company plans to establish its virtual casinos by creating partnerships
and join ventures whereby the venture partners will share revenues with the
Company pursuant to revenue sharing agreements to be negotiated and executed.
The Company's primary strategy is to fully use the CWH technology to establish
its virtual casinos. Management believes, however, that it may improve its
percentages of revenue sharing in the virtual casinos by establishing various
gaming technology license agreements with multiple third parties, although there
can be no assurance that such agreements can be finalized.
The Company intends to establish a series of virtual casinos over the
Internet from "authorized locations" around the world. The Company's licensing
and operating agreements with CWH require that a valid gaming license be
obtained from international jurisdictions acceptable to CWH for each individual
virtual casino to be licensed from CWH, provided that such jurisdiction requires
a gaming license. Once the Company obtains approval from CWH regarding the
submitted foreign gaming license, the Company may offer its Internet gaming
services to any jurisdiction in the world where such Internet gaming is lawful.
These areas where Inernet gaming is considered lawful constitute "authorized
locations." The Company is currently seeking valid gaming licenses from the
jurisdictions of Turkey and the Marshall Islands. As of the date hereof, no
formal agreements have been reached with any recognized authorized location. See
"Business - Government Regulations."
In anticipation of entering into the Internet gaming services business, the
Company on March 14, 1996 effected the sale of its wholly owned
subsidiary, Tessier Resources, Ltd. ("Tessier"), to Kaniksu Ventures, Inc.
("Kaniksu") in exchange for a $3,000,000 debenture convertible into 2,000,000
shares of Kaniksu common stock. The $3,000,000 debenture matures in four (4)
years from the date of issuance, carries no interest, and may be converted at
the conversion price of $1.50 per share into an aggregate of 2,000,000 shares of
authorized but previously unissued shares of Kaniksu common stock at any time
prior to repayment of the debenture. Presently, VentureTech does not have an
ownership interest in Kaniksu. However, if the debenture was totally converted
into 2,000,000 shares of Kaniksu common stock as of the date hereof, and
assuming no additional Kaniksu shares have been issued, VentureTech would own
approximately 40% of Kaniksu's issued and outstanding common stock.
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As additional consideration for the acquisition of Tessier, Kaniksu has
agreed to issue to eligible stockholders of the Company shares of Kaniksu common
stock and rights to purchase additional shares. Under the terms of the
agreement, each individual VentureTech stockholder as of the date of record,
April 5, 1996, is entitled to five (5) shares of authorized but previously
unissued Kaniksu common stock for each 100 shares of VentureTech common Stock
owned. Further, each five shares of Kaniksu common stock issued to VentureTech
stockholders shall include ten (10) rights, each right entitling the holder
thereof to purchase one additional share of Kaniksu common stock for $2.25 per
share for a period of sixty (60) days following receipt of the Kaniksu shares
and rights. Kaniksu intends to provide these shares and rights pursuant to a
registration statement to be filed as soon as practical. See "Business
Background."
Tessier is in the business of developing and supplying snow and ice removal
technology to the commercial market. Management believes that the attention
required by this subsidiary would detract from the potentially more lucrative
business of Internet gaming and it is in the best interest of the Company to
divest itself of this subsidiary.
In April 1996, the Company incorporated E-Casinos in the Republic of the
Marshall Islands primarily to take advantage of favorable tax laws and to avoid
possible conflicts with United States ("US") laws in regard to Internet gaming.
Although the Company does not believe that its intended business actions violate
the letter of the law in regards to any existing regulations of the US,
management intends to focus primarily on the market outside of the US until such
time as US laws, specifically in regard to Internet gaming, are clarified.
A bill to create a national commission to study gambling in the US
(including interactive virtual wagering) was tentatively approved by a Senate
committee in May of 1996. On July 22, 1996, the House gave final
congressional approval to a measure that would create a federal commission to
examine the rapid growth of the US gambling industry. On a voice vote, the House
sent the legislation to President Clinton, who has said he supported the bill.
The bill's sponsor is Rep. Frank R. Wolf (R-Va.). The measure would create a
nine member National Gambling Impact and Policy Commission to study economic and
social impact of gambling and report its findings to Congress and the president
in two years. The commission could recommend changes in state or federal
gambling policies. Among the issues the panel would examine is gambling on the
Internet. As of the date hereof, there is no indication as to any potential
legislation or new laws that may result from this commission . See
"Business - Government Regulations."
Through E-Casinos, the Company intends to establish its first virtual
casino in affiliation with CWH. On March 4, 1996, the Company entered into a
definitive non-exclusive license agreement
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<PAGE>
(the "License Agreement") with CWH for CWH's proprietary technology and a
non-exclusive sublicense to use Durand Communications Network's ("Durand")
MindWireTM software technology. Durand is a privately held corporation founded
in 1993 in Santa Barbara, California and is a software developer of
client-server technologies for real time electronic commerce and other
applications. In consideration of a $2,000,000 license fee, the Company was
granted a non-exclusive license to CWH's revolutionary new Virtual CasinoWorldTM
software application, an interactive service bureau , gaming service and
multimedia virtual casino on the Internet. With a non-exclusive sublicense
to the MindWireTM proprietary technology, the Company will be able to provide
its customers with realistic casino wagering games with high-level 3-D graphics,
player interactivity in real-time scenarios and with automatic updating of
applications and graphics during online sessions. E-Casinos also intends to
ultimately offer a "Sportsbook," capable of providing wagering opportunities on
sporting events, as well as access to various international lottery purchases.
It is expected that these supplemental services will be provided in association
with third parties already engaged and knowledgeable in these business areas.
On April 19, 1996 the Company also entered into an Operating, Revenue
Sharing and Management Services Agreement (the "Operating Agreement") with CWH.
This Operating Agreement provides the Company with a new interactive platform
that will combine Monacall s.a.m. L'Univers Telematique's ("Monacall")
Interactive Voice Response software with CWH's Virtual CasinoWorldTM
application. The integrated technologies will provide secured transaction
processing, gaming, international bank account management and technical
administration, via Monte Carlo, Monaco, of the Virtual CasinoWorldTM
application. E-Casinos has contracted with CWH whereby CWH will provide,
pursuant to a joint venture between CWH and Monacall, facilities in Monaco,
telecom bandwith, Tandem banking services, business licenses, Monaco operating
approvals, banking relationships and expertise. Monacall, a Monegasque
corporation with headquarters in Monte Carlo, has been authorized by the
Principality of Monaco by way of an approval letter executed by the Department
of Finances and Economy, to provide a platform for interactive wagering and
gaming for telecom and Internet activities. This will allow transaction
processing for Internet gaming that is legally initiated outside of Monaco and
provide a safe and plausible operation of its online interactive gaming
activities.
Under its revenue sharing agreement with CWH, the Company shall receive
33.333% of the gross win/loss disbursed from operations of the virtual casino.
CWH and its affiliated telephony and transaction facility (Monacall) shall share
the balance of win/loss distributions.
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The Company will market and focus its casino operations primarily in
Europe, Asia, and the Middle East offering a full range of gambling, information
and other entertainment services over the Internet. E-Casinos will operate under
strict guidelines and laws to assure fair opportunities for its Internet
clients. The Company is currently engaged in discussions and negotiations with
interested parties and potential partners and joint venturers in various parts
of the world. Based on the success of these discussions, of which there can be
no assurance, the Company intends to establish multi cultural/multi-ethnic
casinos around the world over the next several years as satisfactory agreements
can be entered into.
Presently, US laws are vague on the matter of Internet wagering within the
US. Management believes that until such time as new legislation is passed or
current statutes are adequately defined, it is in the Company's best interest to
delay marketing its Internet gaming services within the US. Thus, all of the
Company's initial marketing will be directed outside the US.
In March 1996, the Company entered into an agreement with Alphacom Data
Security Services, Inc., a Nevada corporation ("Alphacom"), for a license to use
and to further sublicense Alphacom's Internet gaming software integrated with
the Alpha Guard computer security application. The Company has paid an aggregate
of $250,000 toward an exclusive license for the software technology as it
relates to the Internet gaming industry. In further consideration for the
license, E-Casinos will pay to Alphacom an additional license fee (royalty) of
up to ten percent (10%) of the net win/loss earned by the Company, after payouts
and certain license fees (as applicable), generated from casino operations using
the Alphacom software.
In September 1995, the Company entered into a letter of understanding with
CD MAX, Inc. ("CD-MAX"), a Delaware corporation, to license CD-MAX's propriety
software encoding, encryption and billing system for exclusive use within the
Internet gaming industry. Management anticipates using CD-MAX's encryption
expertise with both of its subsidiaries, E-Casinos and CCCI, as a supplement or
an alternative to other security measures. The CD-MAX technology will likely be
integrated with the Company's other licensed technology to offer maximum
security and provide users anonymity and financial protection in banking,
currency exchanges and playing the full range of casino games, although there
can be no assurance the level of security represented. The CD-MAX system is
not expected to require any additional hardware devices and can be automatically
installed at the initial service log on.
In August 1995, the Company created Cybernet Currency Clearing, Inc.
("CCCI") to become engaged in the business of providing international business
services, primarily the conversion of international currency into "e-cash" or
"e-dollars" on a fee basis.
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<PAGE>
Once operational, CCCI is expected to perform conversions of world
currencies into "e-cash" and then back to hard currency for individual
clients, for associated Internet casinos. Further, management intends to
align CCCI with major banks to provide a secure conversion service for
exchanging their client's money to and from "e-cash". The Company intends to use
a portion of the proceeds from the sale of Common Stock to the Selling
Stockholders to commence CCCI's operations.
Through its subsidiary, E-Casinos, the Company intends to offer a full
range of Internet gaming, information and entertainment services in the form of
virtual casinos on the Internet, open to all individuals interested in playing
casino style games for real money on a worldwide basis, subject to local laws
and regulations. E-Casinos must adhere to the legal requirements of each
jurisdiction in which it operates from or offers it services. The virtual
casinos will initially offer a cross-section of casino style games including,
but not limited to, blackjack, craps, roulette, poker, keno and slots. Other
casino games, such as baccarat, will be added over time consistent with the
cultural and regional demands of the clientele. In addition, E-Casinos, most
likely through a partnership and/or joint venture, intends to ultimately offer a
"Sportsbook" for wagering on international sporting events and access to
international lottery ticket purchases.
CCCI, when fully operational, intends to secure the currency
transactions for E-Casinos by using the security technologies licensed with its
affiliates. The primary focus of CCCI is to convert the electronic money, known
as "e-cash", into real dollars (or other appropriate currency). CCCI will
perform the conversion of currencies, for transaction fees, into "e-cash" and
then back to dollars for its associated virtual casinos. The actual financial
transactions will be handled by a major bank(s) affiliated with the Company that
will provide the administrative expertise and credibility required by customers
when dealing in personal financial transactions. Neither the Company nor
CCCI has entered into any definitive agreements with prospective affiliated
banks due to the current stage of early development. The Company expects to
materially depend on its pending license and technology agreements with CD-MAX,
Inc. to implement its proposed currency services and strategy. The operation of
CCCI is separate and apart from the Company's agreement with CWH. CWH has no
current obligation to incorporate or integrate these proposed operations or
technology into its virtual casino operations. The Company intends to use a
portion of the proceeds from the sale of Common Stock to the Selling
Shareholders to commence CCCI's operations. See "Business - Business of
Issuer."
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<PAGE>
The Offering
Securities Offered 6,000,000 shares of Common Stock
sold by Selling Stockholders.
Shares of Common Stock
Outstanding:
Before Offering (1) 16,850,186 shares
After Offering (1) 16,850,186 shares
Proposed Nasdaq Symbol(2) "VTEH"
Use of Proceeds Although the Company will not
receive any proceeds from the
sale of shares of Common Stock by
the Selling Stockholders pursuant
to this Prospectus, the Company
will receive $60,000,000 ($10.00
per share) from the private sale
of 6,000,000 shares to the
Selling Stockholders. Net
proceeds after deducting all
costs associated with the sale
and placement of the Shares and
preparation of the registration
statement to which this
Prospectus relates, is estimated
to be $47,850,000 and will be
used for research and
development, marketing and
advertising, licensing and
acquisition of related
technology, licensing fees to
various government agencies, and
working capital and other general
corporate purposes. See "Use of
Proceeds."
Risk Factors The Offering involves a high
degree of risk as well as
immediate and substantial
dilution. See "Risk Factors" and
"Dilution."
(1) The Common Stock being offered hereby has been issued to the Selling
Stockholders and is being held in escrow pending completion of the registration
statement to which this Prospectus relates and receipt of payment for the
Shares. Purchasers pursuant to this Offering will purchase from the Selling
Stockholders and not from the Company. Amounts shown do not include (a)
2,341,968 shares of Common Stock issuable upon exercise of certain
warrants and stock options held by certain individuals at present exercise
prices per share of $1.70 to $6.00 per share, (b) 15,200,000 shares of Common
Stock issuable upon conversion of certain convertible debentures at the present
exercise price of $.03 per share, and (c) additional shares of Common Stock that
may be issued upon conversion of certain other convertible securities that are
either
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<PAGE>
presently outstanding or may be issued in the future. See
""Description of Securities", and "Risk Factors - Additional
Dilution."
(2) Concurrent with the filing of the registration statement to which this
Prospectus relates, the Company has applied to have its Common Stock approved
for quotation through the Nasdaq Stock Market System. Currently, the Common
Stock is traded in the over-the-counter market. See "Risk Factors - Limited
Public Market for Shares; Possible Volatility of Price of Shares" and "Market
Information."
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<PAGE>
Summary Financial Information
Statement of Operations Data:
<TABLE>
<CAPTION>
From
Inception on
Six Months January 1,
Ended Years Ended 1986 Through
June 30, December 31, June 30,
------------- -------------------------------------------- -------------
1996 1995 1994 1993 1996
--------------- ------------ ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Revenue.......................... $ - $ - $ - $ - $ 5,645
------------- -------------- -------------- ----------- ----------
Expenses
Research and development - - - - 50,215
General and administrative 896,792 906,518 29,190 15,200 2,130,854
Depreciation................ 11,568 - - - 11,568
------------ ------------- ------------- ------------- --------------
Total Expenses................... 908,360 906,518 29,190 15,200 2,192,637
----------- ---------- ---------- ---------- ----------
Net income (loss)
from operations.......... (908,360) (906,518) (29,190) (15,200) (2,186,992)
---------- ----------- ---------- ---------- ----------
Other income / expense
Interest expense............ (8,750) (27,709) - - (36,459)
------------ ----------- ------------- ------------- -----------
Total other income / expense (8,750) (27,709) - - (36,459)
------------ ----------- ------------- ------------- -----------
Income (loss) before loss from
discontinued operations and
provisions for income tax..... (917,110) (934,227) (29,190) (15,200) (2,223,451)
Loss from discontinued
operations.................... (34,206) (103,008) - - (137,215)
Income taxes (benefit)........... - - - - -
-------------------------------- ------------- ------------- ------------
Net income (loss)................ $ (951,316) $(1,037,235) $ (29,190) $ (15,200) $ (2,360,666)
=========== =========== =========== =========== ============
Income (loss) per share.......... $ (0.08) $ (0.25) $ (0.01) $ (0.01)
Weighted average number
of shares outstanding.... 11,650,880 4,177,136 3,695,920 1,960,154
</TABLE>
Balance Sheet Data:
June 30, 1996
Actual Pro Forma(1)
Working capital........................... $ (1,772,168) $46,077,832
Total assets.............................. 2,579,213 50,429,213
Total stockholders' equity................ 692,913 48,542,913
(1) Adjusted to give effect to the private sale of the 6,000,000 shares of
Common Stock to the Selling Stockholders and hereby offered for resale by
the Selling Stockholders to the public, and the initial application of the
estimated net proceeds from the sale to the Selling Stockholders.
See "Use of Proceeds."
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RISK FACTORS
An investment in the Common Stock offered hereby is speculative in nature
and involves a high degree of risk. In addition to the other information in this
Prospectus, the following factors should be considered carefully in evaluating
the Company and its business.
History of Losses / No Assurance of Future Profitability The Company has
not generated any revenues from its present and proposed business, and had not
generated any revenue and operated at a net loss for the past several fiscal
years. The accumulated deficit of the Company as of June 30, 1996 was
$2,360,000. There can be no assurance that the Company will be able to
realize revenues and attain profitability in the future. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Limited Operating History / Sole Product in Development Stage. The Company
is in the development stage and its proposed operations are subject to all of
the risks inherent in light of the expenses, difficulties, complications and
delays frequently encountered in connection with the formation of any new
business. The Company has not realized operating revenues to date from its
proposed operations. The Company is currently engaged in the development of
certain computer technology designed to ultimately offer a full range of gaming
services and casino style games over the Internet and the likelihood of success
of the Company must be considered in light of the many unforeseen costs,
expenses, problems, difficulties and delays frequently associated with product
development and with new business ventures. To date, the Company has no
experience in marketing its products and services, and there can be no assurance
of market acceptance of the Company's proposed gaming services or that the
Company will be able to operate profitably. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business."
Uncertain Market Acceptance. The Company's proposed gaming services over
the Internet is a relatively new industry and the Company will compete with
existing and more established recreational services and products now being
offered over the Internet, in addition to certain other forms of entertainment.
There can be no assurance that the Company's gaming services or any other
products currently being developed will be successfully marketed by the Company
or will become widely accepted.
Technological Changes / Competition. The Company's proposed computer
technology designed to offer a full range of gaming services and casino style
games over the Internet is characterized by rapid and significant technological
change in the computer, software and telephony industries. Many entities are
engaged in research and development with respect to offering gaming services on
the Internet. There can be no assurance that the Company's competitors will not
develop technologies and products that are more effective and efficient than the
Company's products or that the Company's
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technology and products will not be rendered obsolete by such developments.
There can be no assurance that other companies with greater financial and
technological resources will not develop gaming services over the Internet with
better capabilities than the Company's.
Presently, the Company is aware of several companies, organizations and
individuals currently offering or purporting to offer on the Internet similar
gaming services as that of the Company. Those organizations with the greatest
visibility to date include, but are not limited to, Internet Casinos,
Interactive Gaming & Communications Corp. (formerly Sports International - USA),
Casinos of the South Pacific, and Virtual Vegas. As of this date, to the best
knowledge of the Company, no entity is offering casino style gambling for other
than fun on the Internet. The Company is aware of several firms currently
offering actual wagering on various sporting events with financial transactions
being administered from off-shore (outside the US) accounts. In addition,
several organizations currently offer lottery tickets for sale from
international lotteries. One particular organization, Interlotto, operates an
Internet lottery authorized by the Liechtenstein Government. The barrier to
entry to most Internet markets, including the gambling segment, is relatively
low making its accessible to a wide number of entities and individuals. Thus, in
addition to those known competitors of the Company, it is most likely several
new competitors may be established in the immediate future. There is no
assurance that the Company will be able to compete successfully with any
existing or newly developed entity offering the same or similar services of
those of the Company. See "Business- Technological Change and Competition."
Risks Associated with Foreign Sales. Initially, it is anticipated that
practically all of the Company's revenues will be derived from sales in foreign
countries. The Company will have to comply with the local laws and regulations
in those foreign jurisdictions in which the Company elects to offers its
services. There can be no assurance that the Company will be able to comply with
such laws and regulations. See "Business - Government Regulations." Because the
Company's virtual casinos will require advance payments by players either by
cash or by recognized credit card, the Company does not anticipate difficulties
in collecting accounts receivable. In the past, there have been significant
fluctuations in the exchange rates between the dollar and the currencies in many
of the countries the Company anticipates doing business in. Further, foreign
countries may impose limitations in the amount of currency that may be withdrawn
from such countries. Such limitations, if imposed, could adversely affect the
Company's liquidity and business. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Risks Associated with Credit Card Sales. Recently, there has been
considerable negative publicity regarding potential security concerns related to
the use of credit cards over the Internet. In this regard, the risk exists that
the fraudulent and illegal misuse of credit cards and stolen credit card numbers
could negatively
-12-
<PAGE>
impact on the Company's operations of its Internet gaming and potential
revenues. Management believes that the risk of loss to the Company related to
the illegal use of credit cards is modest and is incorporating into its
operations certain security systems and encryption applications to thwart any
possible threat of credit card misuse. See "Business of Issuer" (Alphacom Data
Security Services, Inc. and CD-MAX) and "Products and Services."
The Company believes that the concern over the use of credit cards over
the Internet is overstated. When one compares the difficulty of illegally
capturing such credit card information to the free use of credit cards in every
day use, the degree of concern is unwarranted. Individuals routinely use their
credit cards which results in paper copies of their credit card information.
This information is readily available to clerks, servers, accountants, and
managers, among others. The degree of risk is actually greater in these
environments. The industry has, however, recognized this concern and has made
gains both in the advance of encryption applications and associated publicity to
alleviate such concerns.
Dependence on Key Personnel. The Company's future success is dependent on
certain key management and technical personnel. Presently the Company employs
one person who functions as the Company's Chief Operating Officer and Chief
Financial Officer. The Company primarily relies upon consultants and advisors
who are not employees of the Company. The loss of key personnel or the inability
to attract and retain highly qualified personnel, consultants or advisors could
adversely affect the Company's business. The Company faces competition for such
personnel from other companies and organizations. There can be no assurance that
the Company will be successful in hiring or retaining qualified personnel. The
Company has not obtained keyman insurance on any of its key personnel or
management nor has the Company entered into employment agreements with any
employee. See "Management Employment Agreements."
Uncertainty of Protection Afforded by Patents, Copyrights and/or
Proprietary Rights. The Company's current business is based on technologies
acquired or otherwise licensed from third parties. The Company does not own or
otherwise control any patents, copyrights or trademarks, although the
Company has submitted a trademark application for both "VentureTech" and
"E-Casinos." However, those third parties from which the Company does
license its technology have taken the appropriate steps to protect the
intellectual property rights of the technology. CasinoWorld Holdings, Inc. has
copyrighted and trademarked the Virtual CasinoWorldTM software application.
Also, Durand has copyrighted and trademarked the MindWireTM application.
Further, certain modules of the MindWireTM application are currently patent
pending. Certain software code developed through Alphacom has been copyrighted
through its affiliate developer, World Star Holdings, Ltd., a Canadian
corporation. The system security software application, developed by CD-MAX,
Inc., has been copyrighted and trademarked and CD-MAX intends to expand its
current patents to
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<PAGE>
include additional security applications. There can be no assurance that any
remaining patent [or copyright] applications relating to the Company's licensed
technology will result in patents being granted or that, if granted, such
patents will afford protection against competitors with similar technology. Also
there can be no assurance that those entities licensing the Company's technology
will have the financial resources necessary to enforce any patent or copyright
rights it may hold. Although the Company is not aware of any infringement claim
against its technology, in the event that a future claim against the developer
and/or the Company is successful, it may be necessary for the Company to obtain
additional licenses to such patents or to other patents or proprietary
technology. There can be no assurance that the Company will be able to obtain
any such additional licenses on commercially reasonable terms. Any disclosure of
such technology or development of substantially equivalent technology could
result in increased competition that might materially and adversely affect the
Company's revenues and cost of sales.
The Company will attempt to protect its own proprietary technology by
relying on trade secret laws and non-disclosure and confidentiality agreements
with its employees who have access to its proprietary technology. To date, the
Company has not entered into any such agreements. Despite these protections, no
assurance can be given that others will not independently develop or obtain
access to such technology or that the Company's competitive position will not be
adversely affected thereby. See "Business Patents, Trademarks and Copyrights."
Government Regulation. The ownership and operation of land-based gaming
facilities in the United States, in particular, and elsewhere in the world, is
normally subject to extensive state and federal government regulations. However,
the Company intends to offer its casino gaming services over the Internet via
facilities located in Monte Carlo, Monaco and initiated from various authorized
locations. Due to the relatively recent development of casino wagering over the
Internet, there are limited direct regulations that deal with this
application. Although management believes that the Company is in compliance with
all applicable existing regulations in those countries which it intends to offer
its services, there can be no assurance that the Company can remain in
compliance with existing and new regulations at a reasonable cost. Failure to
comply with all such regulations may have a material adverse effect on the
Company. The Company is presently in the process of obtaining licenses from
those jurisdictions in which it intends to operate in order to satisfy its
contractual requirements with the Monacall facility in Monaco. The Company
has applied for gaming licenses in Turkey and the Marshall Islands, although as
of the date hereof, no formal agreements have been reached with any recognized
authorized location. See "Business - Business of Issuer - Government
Regulations." The Company is fully cognizant of the fact that Internet
related laws and regulations are just beginning to emerge and that such national
and international legislation is expected to develop over the next few years.
Such legislation could negatively
-14-
<PAGE>
impact the Company or hinder its ability to offer its services in the futures.
There can be no assurance that the Company's gaming services over the Internet
will continue to be accepted in those jurisdictions in which they are presently
accepted, or that a government or court system will not disallow the use of
Internet gaming services. The Company intends to employ stringent procedures
to reasonably eliminate the possibility of United States ("US") residents
placing wagers for real money on the Company's system where such wagers are
initiated within the geographical and legal boundaries of the US. Until laws
relating to such matters are clarified, the Company will not directly market nor
solicit its services in the US. As an added measure, the Company will post
advisories on its website clearly stating the Company's position on this matter
and its intention not to provide such services within the US. See "Business
Government Regulation."
Control of the Company. As of the date hereof and assuming certain
convertible securities held by the Company's executive officers, directors and
other principal stockholders are exercised and shares of Common Stock are
issued, the Company's executive officers, directors and other principal
stockholders will beneficially own approximately 90.5% of the outstanding
Common Stock. In addition, if certain other convertible securities currently
outstanding and held by other persons are converted to Common Stock, the
executive officers, directors and other principal stockholders will beneficially
own approximately 86.7% of the outstanding Common Stock. These
stockholders will be able to effectively control the outcome of all issues
submitted to a vote of stockholders, including the election of all of
the Company's directors. See "Principal Stockholders" and "Description of
Securities."
Dilution. Purchasers from the Selling Stockholders pursuant to this
Offering, assuming that they acquire the Shares at the current market price,
will incur immediate and substantial dilution in that the net tangible book
value of each outstanding share of Common Stock immediately after the Offering
will be significantly less than the current public market price of the shares.
See "Dilution."
Additional Dilution. Presently the Company has outstanding certain
convertible debentures and other warrants and stock options all of which are
convertible into shares of the Company's Common Stock. Upon the conversion of
certain convertible debentures, the Company would issue up to a maximum of
15,200,000 shares of Common Stock at the conversion price of $.03 per share.
Further, other warrants and stock options currently outstanding could be
converted into a maximum of 2,341,968 shares of Common Stock at
conversion prices of from $1.70 to $6.00 per share. The conversion of all or a
portion of these convertible securities at prices below the current market price
and presumably below the price that purchasers in this offering will pay, will
result in immediate and further dilution to the purchasers of those Shares
offered hereby. Prospective purchasers should review thoroughly those sections
of
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<PAGE>
this prospectus relating to the Company's convertible securities. See "Dilution"
and "Description of Securities."
No Dividends. The Company has not paid any cash or other dividends or made
distributions on its Common Stock and the Company does not anticipate paying
cash dividends or making distributions in the foreseeable future. See "Dividend
Policy."
Shares Eligible for Future Sale. Sale of substantial amounts of Common
Stock in the public market by existing stockholders (including shares issued
upon the exercise of stock options, warrants and convertible debentures), or the
perception that such sales could occur, could materially and adversely affect
the prevailing market price for such shares. Actual sales, or the prospect of
sales by the present stockholders of the Company, or by future holders of
restricted securities under Rule 144 of the Act or otherwise, may, in the
future, have a depressive effect upon the price of the Common Stock in the
public trading market. See "Principal Stockholders," "Shares Eligible for Future
Sale." In addition to the above, the holder of certain Convertible Debentures
may, at its sole discretion, presently convert the Debentures into an aggregate
of 15,200,000 shares of the Company's Common Stock, which shares would be
immediately tradeable in the public market subject to all the terms and volume
limitations of Rule 144. See "Description of Securities."
Management's Discretion Over Use of Proceeds. Although none of the proceeds
from the sale of the Shares offered hereby will go to the Company, approximately
18% of the estimated net proceeds from the private sale of the Shares to the
Selling Stockholders will be applied to working capital and other general
corporate purposes. Accordingly, the Company's management will have broad
discretion as to the application of such proceeds. See "Use of Proceeds."
Limited Public Market for Shares; Possible Volatility of Price of
Securities. Presently, the Company's Common Stock is traded in the
over-the-counter market and is included on the OTC Bulletin Board. There can be
no assurance that a significant public market for the Company's securities will
develop or be sustained following this Offering. See "Market Information." The
Company has applied to have its Common Stock approved for quotation through the
Nasdaq Market System. There can be no assurance that such application to Nasdaq
will be approved or be maintained. Because the shares of Common Stock are being
offered by the Selling Stockholders at their discretion, the price any potential
investor will pay for the Shares will be based on the prevailing market price at
the time of purchase. The trading prices of the Company's securities may respond
to quarterly variations in operating results, announcements of innovations or
new products by the Company or its competitors, and other events or factors
including the sale or attempted sale of a large amount of the Company's
securities into the market. These broad market fluctuations may adversely affect
the market price of the Company's securities. The price paid by any public
investor for the Shares offered hereby may be significantly higher or lower that
the current market price.
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<PAGE>
Going Concern. The Company has incurred losses from its inception through
June 30, 1996 and does not presently have an established source of revenues
sufficient to cover its operating costs and to allow it to continue as a going
concern. Therefore, the continued viability of the Company is dependent upon the
success of the sale of its shares to the Selling Stockholders related to this
Prospectus and/or deriving revenues from its proposed Internet gaming
operations. In the alternative, the Company will continue to seek additional
financing through the private placement of its securities. Further, the Company
is currently past due on its payment schedule to CWH, attributed primarily to
the failure of CWH to maintain its demonstration website during a period of time
when prospective private investors were considering an investment in the
Company. The Company reasonably believes that with its sale of shares to the
Selling Stockholders, subject to registration with the Commission, and other
on-going investment prospects, it will soon meet its obligations under the
License Agreement. Although CWH and the Company are negotiating toward adjusting
the payment schedule, further delays in payment of the license fee could result
in delays to the launch of the Company's virtual casino.
THE COMPANY
The Company was organized on July 19, 1948 under the laws of the State of
Idaho as Giant Ledge Mining Company, with the stated purpose of, acquiring,
exploring and developing mineral ore prospects and operating mining and milling
facilities. The Company initially engaged in sporadic mining operations and,
from the time after its inception, the Company has undergone several name
changes and business changes. During 1988, the Company became engaged in
arranging for funding for certain medical research, particularly certain cancer
research being conducted at the Harvard School of Dental Medicine. However, none
of the projects in which the Company was involved proved to be economically
successful and no commercially viable products resulted from the research. The
Company ultimately assigned or transferred any potential marketing rights to its
research products.
In approximately 1992, the Company was engaged in only minimal activities
and the Board of Directors determined that the Company should become active in
seeking potential operating businesses and business opportunities with the
intent to acquire or merge with such businesses. To better reflect the Company's
business, the Company adopted its current corporate name, VentureTech, Inc., in
April 1995.
During 1995, the Company became engaged in the development of certain
computer technology designed to ultimately offer a full range of gaming services
and casino style games over the worldwide Internet. The Company created two new
wholly owned subsidiaries, EuroAsian E-Casinos, Inc. ("E-Casinos"), and Cybernet
Currency Clearing, Inc. ("CCCI"), for the development of certain technologies
applicable to the Internet. E-Casinos was created to establish a foreign
corporation to own and operate full service
-17-
<PAGE>
gambling casinos on the Internet. CCCI was established to focus on acting as an
international currency converter of wold currency into "e-cash" or "e-dollars",
which is used as a monetary instrument in many international business
transactions. See "Business - Business of Issuer."
On March 4, 1996, the Company entered into a licensing agreement with
CasinoWorld Holdings, Ltd. ("CWH") whereby CWH granted to the Company a
nonexclusive license to use and market its Virtual CasinoWorldTM software and
hardware applications, know-how, trade secrets, copyrights and trademarks. The
Company is obligated to market, bankroll and to contribute one or more foreign
gaming licenses under a separate operating agreement with CWH. Operating though
its newly created subsidiaries and in reliance upon its fully effected
licensing agreement with CWH, the Company expects to commence operations of its
gaming services over the Internet during the second half of 1996 or the first
quarter of 1997.
The Company's principal executive offices are located at 11480 Sunset Hills
Road, Suite 110E, Reston, Virginia 22090, and its telephone number is (703)
471-5623.
DILUTION
The Pro Forma net tangible book value of the Company as of June 30,
1996, after giving effect to the private sale of the 6,000,000 shares to the
Selling Stockholders and without taking into account the exercise of any
outstanding convertible securities or any other change in the net tangible book
value of the Company subsequent to June 30, 1996, would have been
$48,542,913 or $2.88 per share of Common Stock. "Net tangible book value"
per share of Common Stock represents the tangible assets of the Company less
total liabilities, divided by the number of shares of Common Stock outstanding.
Because the Company will not receive any proceeds from the purchases of the
Shares offered hereby, current stockholders will not realize an increase in the
net tangible book value. Assuming purchasers of the Shares offered hereby ("New
Investors") acquire the Shares at the current market price of $13.62 per share,
those purchasers will experience an immediate dilution of from their purchase
price to net tangible book value of $10.74 per share. The following table
illustrates this dilution on a per Share basis:
Shares of
Common Stock
Current market price........................ $ 13.62
Pro Forma net tangible book value
per share before offering................. 2.88
---------
Dilution to New Investors................... $ 10.74(79%)
========
The information presented above does not take into account (a)
2,341,968 shares of Common Stock issuable upon exercise of certain
warrants and stock options held by certain individuals at present exercise
prices per share of $1.70 to $6.00 per share,
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<PAGE>
(b) 15,200,000 shares of Common Stock issuable upon conversion of certain
convertible debentures at the present exercise price of $.03 per share, and (c)
additional shares of Common Stock that may be issued upon conversion of certain
other convertible securities that are either presently outstanding or may be
issued in the future. Thus, in the event that these additional shares are issue,
it is likely that purchasers of the Shares offered hereby at the prevailing
market price will experience even greater dilution that set forth above. See
""Description of Securities", and "Risk Factors - Additional Dilution."
The following table sets forth as of August 30, 1996 the number of
shares of Common Stock purchased for cash from the Company by officers,
directors, promoters and affiliates during the past five years, the total
consideration paid and the average price per share paid by these existing
stockholders and by New Investors in this Offering, assuming purchases by New
Investors are at the current market price. Included in the number of shares
purchased by officers, directors, promoters and affiliates are the conversion of
certain options, warrants and convertible debentures.
Shares Purchased Total Consideration Average
Price
Number Percent(2) Amount Percent Per Share
Existing stockholders
acquiring shares for cash
within past five years 24,629,086(1) 76% $63,476,196 44% $ 2.59
New Investors 6,000,000 18% $81,750,000(3) 56% $13.625
(1) Included in the determination of the number of shares purchased by
officers, directors, promoters and affiliates are (a) 6,000,000 shares
issued to the Selling Stockholders, (b) 2,300,000 shares issued upon
conversion of certain convertible debentures, (c) 710,000 shares issuable
to current and former officers and directors upon conversion of
certain warrants and stock options, and (d) 15,200,000 shares of Common
Stock issuable upon conversion of certain convertible debentures.
(2) Percent of total shares outstanding following the Offering includes those
items set forth in footnote (1) above but does not include (a)
1,631,968 shares of Common Stock issuable upon exercise of certain
warrants and stock options held by certain individuals at present exercise
prices per share of $1.70 to $6.00 per share, and (b) additional shares of
Common Stock that may be issued upon conversion of certain other
convertible securities that are either presently outstanding or may be
issued in the future.
(3) Based on the current market price per share of the Common Stock.
USE OF PROCEEDS
Although the Company will not receive any proceeds from the sale of Shares
by the Selling Stockholders pursuant to this Prospectus, the Company will
receive a total of $60,000,000 for the sale of the
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<PAGE>
Shares to the Selling Stockholders. Net proceeds to the Company from the private
sale of the 6,000,000 Shares to the Selling Stockholders are estimated to be
$47,850,000 after deducting the estimated expenses of $150,000 associated with
the Registration Statement concerning this Offering by the Selling Stockholders,
and $12,000,000 in costs associated with the private sale and placement of the
Shares to the Selling Stockholders.
On April 22, 1996, the Company's Board of Directors authorized the payment
of a "finder's fee" of up to 20% of the gross proceeds of any financing received
by the Company and facilitated by the Draco Group of Companies ("DGC"). DGC is a
private company located in Northern Cypress engaged in the business of financial
consulting and business management was directly responsible for the sale of the
Common Stock to the Selling Stockholders. The Company believes that the extent
of this finders fee is consistent with industry practice for a development stage
company. No member of DGC has any other affiliation with the Company or its
affiliates.
It is presently anticipated that the estimated net proceeds will be used by
the Company substantially as follows:
Percentage of
Amount Net Proceeds
Product development and research and
development, including capital equipment,
additional engineering personnel, virtual
casino unique graphics, and multiple
language translation (See "Business -
Business of Issuer")................. $ 5,000,000 10 %
Marketing and sales activities, including
advertising and international marketing
representatives(See "Business -
Marketing")........................ 10,000,000 21 %
Further licensing and acquisition of
related technologies and/or facilities
to support, enhance and/or supplement
service offerings(1) (See "Business -
Business of Issuer") ................. 18,000,000 38 %
Payment of applicable license fees to
various international government agencies 3,500,000 7 %
Bankroll requirements for various
virtual casinos...................... 3,000,000 6 %
Working capital and other general
corporate purposes................... 8,350,000 18 %
----------- -------
Total.................. $ 47,850,000 100 %
============ =======
(1) The Company intends to use a portion of the proceeds from the sale of the
Shares to the Selling Stockholders for the possible future acquisition of
facilities, related technologies, and/or additional businesses that might
broaden the Company's services and possibly reduce potential license and
revenue share fees payable by the Company. Currently, the Company has no
agreement, understanding or commitment with respect to any possible future
acquisition.
Although the above table sets forth the proposed expenditures based upon
current business plans and current cost estimates, future events may require a
change in the allocation of funds or in their order of priority. The Company's
management is afforded broad discretion as to the application of net proceeds
from the
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sale of the Shares to the Selling Stockholders. See "Risk Factors - Management's
Discretion Over Use of Proceeds."
The Company anticipates that the estimated net proceeds from the private
sale of the 6,000,000 Shares to the Selling Stockholders and its cash flow from
operations will sustain the Company's operating needs for a period of at least
24 months from the date hereof. Pending use of the net proceeds, the funds will
be invested in short-term interest-bearing securities or their equivalent.
MARKET INFORMATION
The Company's Common Stock has been traded in the over-the-counter market
since 1994 and quotations are published on the OTC Bulletin Board under the
current symbol VTEH, and in the National Quotation Bureau, Inc. "pink sheets"
under VentureTech, Inc. There has not been an established trading market for the
Common Stock and the below-described quotations, when available, do not
constitute a reliable indication of the price that a holder of the Common Stock
could expect to receive upon a sale of any particular quantity thereof. The
Company has applied to have its securities approved for quotation through the
Nasdaq Stock Market System upon official notice of issuance. The proposed Nasdaq
symbols for the Common is VTEH.
The Company is aware that between December 1993 and June 1994, the Common
Stock traded periodically in the over-the-counter market as Spartan Funding
Company under the symbol "SPFU." However, such trading was only on a sporadic
basis and no price information is being presented for this time period or for
any previously time period when the Common Stock may have traded. The Company's
Common Stock traded under the symbol "SPFU" until June 1995 at which time the
symbol was changed to "VTEK." Between June 1995 and October 1995, trades were
reported under both symbols, "SPFU" and VTEK." In October 1995, the symbol was
changed to the present "VTEH."
The following table sets forth the range of high and low bid prices of
the Common Stock for each quarterly period since the third quarter of 1994 as
reported by the National Quotation Bureau, Inc. Prices reported by the National
Quotation Bureau, Inc. represent prices between dealers, do not include retail
markups, markdowns or commissions and do not necessarily represent actual
transactions.
High Low
1994
Third Quarter............. $ 6.75 $ 2.00
Fourth Quarter............ 8.62 6.50
1995
First Quarter............. $ 7.50 $ 1.87
Second Quarter............ 4.25 2.25
Third Quarter............. 5.50 4.50
Fourth Quarter............ 7.25 5.50
1996
First Quarter............. $ 18.25 $ 6.25
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Second Quarter............ 18.00 11.88
Third Quarter............. 13.87 13.25
(1) Through September 3 , 1996
As of August 30, 1996, there were approximately 185 holders of
record of the Common Stock, which figure does not take into account those
stockholders whose certificates may be held in the name of broker-dealers and/or
nominees. On September 3, 1996, the closing high bid and asked prices of
the Common Stock were $13.87 and $14.25 , respectively.
DIVIDEND POLICY
The Company has not declared or paid cash dividends or made distributions
in the past, and the Company does not anticipate that it will pay cash dividends
or make distributions in the foreseeable future. The Company currently intends
to retain any future earnings to finance its operations.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
June 30, 1996, and the pro forma capitalization giving effect to the private
sale of the 6,000,000 shares of Common Stock to the Selling Stockholders at the
price of $10.00 per share and the receipt of the estimated proceeds therefrom,
less estimated offering expenses payable by the Company. See "Use of Proceeds."
June 30, 1996
Actual Pro Forma
Long-term debt (excluding current maturities).......... $106,000 $ 106,000
-------- ----------
Stockholders' equity:
Common Stock, $.001 par value, 100,000,000
shares authorized and 16,850,186 shares
issued, and 16,850,186 issued pro forma(1) 16,850 16,850
Additional paid-in capital......................... 63,036,729 50,886,729
Stock subscription receivable......................(60,000,000) -
Accumulated deficit................................ (2,360,666) (2,360,666)
----------- ----------
Total stockholders' equity....................... 692,913 48,542,913
---------- ------------
Total capitalization...........................$ 798,913 $48,648,913
=========== ============
(1) Does not include (a) 2,341,968 shares of Common Stock
issuable upon exercise of certain warrants and stock options held by
certain individuals at a present exercise prices per share of from
$1.70 to $6.00 per share, (b) 15,200,000 shares of Common Stock iss
able upon conversion of certain "Convertible Debentures" at present
exercise price
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of $.03 per share, and (c) additional shares of Common Stock that may be
issued upon conversion of certain other convertible securities that
are either presently outstanding or may be issued in the future. See
""Description of Securities", and "Risk Factors - Additional
Dilution."
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SELECTED FINANCIAL DATA
The selected consolidated financial data set forth below have been derived
from the Company's consolidated financial statements. Such consolidated
financial statements for the six month period ended June 30, 1996 have been
prepared by the Company and are unaudited, and the consolidated financial
statements for the years ended December 31, 1995, 1994 and 1993, have been
audited by Jones, Jensen and Company, independent certified public accountants.
Financial information for the period prior to 1993 has been omitted because the
Company was engaged in only minimal operations and the financial data is deemed
not to be material. The selected consolidated financial data set forth below
should be read in conjunction with the Company's consolidated financial
statements and notes thereto, with Management's Discussion and Analysis of
Financial Condition, and with the other financial information of the Company
included elsewhere in this Prospectus.
Statement of Operations Data:
<TABLE>
<CAPTION>
From
Inception on
Six Months January 1,
Ended Years Ended 1986 Through
June 30, December 31, June 30,
------------ -------------------------------------------- -------------
1996 1995 1994 1993 1996
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Revenue.......................... $ - $ - $ - $ - $ 5,645
------------ ------------ ------------ ------------ -------------
Expenses
Research and development - - - - 50,215
General and administrative 896,792 906,518 29,190 15,200 2,130,854
Depreciation................ 11,568 - - - 11,568
-------------- ------------- ------------- ------------- --------------
Total Expenses................... 908,360 906,518 29,190 15,200 2,192,637
----------- ---------- ---------- ---------- ------------
Net income (loss)
from operations.......... (908,360) (906,518) (29,190) (15,200) (2,186,992)
---------- ---------- ---------- ---------- ----------
Other income / expense
Interest expense............ (8,750) (27,709) - - (36,459)
------------ ----------- ------------- ------------- -----------
Total other income / expense (8,750) (27,709) - - (36,459)
------------ ----------- ------------- ------------- -----------
Income (loss) before loss from
discontinued operations and
provisions for income tax..... (917,110) (934,227) (29,190) (15,200) (2,223,451)
Loss from discontinued
operations.................... (34,206) (103,008) - - (137,215)
Income taxes (benefit)........... - - - - -
----------------------------------------------- ------------- ------------
Net income (loss)................ $ (951,316) $(1,037,235) $ (29,190) $ (15,200) $ (2,360,666)
============ =========== =========== =========== ============
Income (loss) per share.......... $ (0.08)$ (0.25) $ (0.01) $ (0.01)
Weighted average number of
shares outstanding....... 11,650,880 4,177,136 3,695,920 1,960,154
</TABLE>
Balance Sheet Data:
<TABLE>
<CAPTION>
December 31,
June 30, 1996 1995 1994 1993
------------------------------------- ------------ ------------ --------
Actual Pro Forma(1)
--------------- ------------
<S> <C> <C> <C> <C> <C>
Working capital..................... $ (1,772,168) $46,077,832 $ (73,134) $ (30,419) $ (28,729)
Total assets........................ 2,579,213 50,429,213 112,987 251,120 121
Total stockholders' equity.......... 692,913 48,542,913 (143,954) 44,581 (28,729)
</TABLE>
(1) Adjusted to give effect to the private sale of the 6,000,000 shares of
Common Stock to the Selling Stockholders and hereby offered for resale
by the Selling Stockholders to the public, and the initial application
of the estimated net proceeds from the sale to the Selling
Stockholders. See "Use of Proceeds."
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Recent Accounting Pronouncements
The Finacial Accounting Standards Board has recently isssued Statement of
Financial Accounting Standards ("SFAS") No. 123, "Acccounting for Stock Based
Compensation." SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles be reported at the lower of the carrying amount or
their estimated recoverable amount and the adoption of this statement by the
Company is not expected to have an impact on the Company's financial statements.
SFAS No. 123 encourages the accounting for stock-based employee compensation
programs to be reported within the financial statements on a fair value based
method. If the fair value based method is not adopted, then the statement
requires pro-forma disclosure of net income and earnings per share as if the
fair value based method had been adopted. The Company has not yet determined how
SFAS No. 123 will be adopted nor its impact on the Company's financial
statements. Both statements are effective for years beginning after December 15,
1995.
Results of Operations
The Company is a development stage company and has had only minimal
operations for the most recent three years. Since 1995, the Company has been
engaged in the development, acquisition and licensing of certain computer based
technology designed to ultimately offer a full range of casino style gaming,
entertainment, information and financial transaction services over the Internet.
As of the date hereof, the Company has not begun operations of any of its
anticipated virtual casinos and is in the alpha testing stage of development.
Presently, in management's opinion US laws are vague on the matter of
Internet wagering within the US. Management believes that until such time as new
legislation is passed or current statutes are adequately defined, it is in the
Company's best interest to delay marketing its Internet gaming services within
the US. Thus, all of the Company's initial marketing will be directed outside
the US. This fact is not expected to have a material impact on the Company's
operations.
Information is presented for the Company's most recent three fiscal years
and the six month period ended June 30, 1996. Three Months Ended June
30, 1996 Compared to Three Months Ended June 30, 1995
The Company did not have revenues for the three month period ended June 30,
1996 ("second quarter of 1996") as management continued to work towards
attaining operational status of the Company's gaming services on the Internet.
General and administrative expenses for the second quarter of 1996 increased
167% when compared to the three month period ended June 30, 1995 ("second
quarter of 1995). This increase is primarily attributed to the 77% increase in
consulting fees for the second quarter of
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<PAGE>
1996, due to the recruitment of additional technical, Internet and business
consultants in lieu of full-time employees, and the hiring of a full-time Chief
Operating Officer. Other factors influencing the increase in general and
administrative expenses for the second quarter of 1996 was the 505% increase in
advertising expenses due to the Company's promoting and publicizing its entry
into the Internet gaming business, and the 454% increase in legal and
professional fees due to the negotiation of the Company's Internet gaming
agreements and prospective licenses, and to fees associated with the preparation
and filing of the registration statement to which this Prospectus relates.
Additionally, office and utilities expenses increased 75%, attributed to
operating the Company's new corporate offices and activities related thereto,
and travel expenses increased 492% due to travel requirements related to the
negotiation of the Company's Internet gaming agreements and prospective
licenses, technical reviews and technology evaluations. Other material expenses
for the second quarter of 1996 include depreciation of $8,252 compared to $-0-
for the 1995 period, related to certain furniture and fixtures. Further,
interest expense of $4,375 for the second quarter of 1996 was attributed to a
convertible debenture, which represented a 41% decrease from the second quarter
of 1995, although a portion of 1994 interest was recorded in 1995 and, had it
been recorded in 1994, 1995 and 1996 results would have been the same.
The Company's net loss for the second quarter of 1996 was $415,017, or $.04
per share, compared to a loss before deducting loss from discontinued operations
and provisions for income tax of $158,150 for the second quarter of 1996 and,
after recognition of a $27,770 loss from discontinued operations related to the
sale of Tessier Resources, Ltd., the Company's net loss for the second quarter
of 1995 was $185,920, or $0.05 per share. The increase in net loss for the
second quarter of 1996 is due to the Company's 172% increase in total expenses.
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
The Company did not have revenues for the six month period ended June 30,
1996 ("first half of 1996") as management continued to work towards attaining
operational status of the Company's gaming services on the Internet. General and
administrative expenses for the first half of 1996 increased 258% when compared
to the first six months of 1995 ("first half of 1995). This increase is
primarily attributed to the 108% increase in consulting fees for the 1996
period, due to the recruitment of additional technical, Internet and business
consultants in lieu of full-time employees, the hiring of a full-time Chief
Operating Officer, and the increase in advertising expenses from $14,750 for the
first half of 1995 to $239,986 for the first half of 1996, attributed to the
fact that the Company began to extensively promote the Company and publicize its
entry into the Internet gaming business during the first half of 1996. Other
factors contributing to the increase in general and administrative expenses for
the first half of 1996 include the 407% increase in legal and professional fees
due to the negotiation of the Company's Internet gaming agreements and
prospective licenses,
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<PAGE>
and to fees associated with the preparation and filing of the registration
statement to which this Prospectus relates. Also, office and utilities expenses
increased 170%, attributed to the opening of the Company's corporate offices and
activities related thereto, and travel expenses increased 526% due to travel
requirements related to the negotiation of the Company's Internet gaming
agreements and prospective licenses, technical reviews and technology
evaluations.
Management anticipates that general and administrative expenses will
continue to increase for the balance of fiscal year 1996 due to the enhanced
activities related to finalizing the development of marketing strategies,
negotiating potential joint venture opportunities, and doing periodic technology
reviews. Increases were also experienced in marketing, advertising and
promotional expenses related to the Company's new gaming services, and in legal
and professional fees. The only other material expense for the first half of
1996 was depreciation of $11,568 related to furniture and fixtures. In contrast,
interest expense of $8,750 attributed to a convertible debenture for the first
half of 1996 represented a 41% decrease from the first half of 1995, although a
portion of 1994 interest was recorded in 1995 and, had it been recorded in 1994,
1995 and 1996 results would have been the same. The Company's loss for the first
half of 1996 before deducting loss from discontinued operations and provisions
for income tax was $917,110 and, after recognition of a $34,206 loss from
discontinued operations related to the sale of Tessier Resources, Ltd., the
Company's net loss for the first half of 1996 was $951,316, or $0.08 per share.
For the first half of 1995, the Company's loss, before deducting loss from
discontinued operations and provisions for income tax was $265,495 and, after
recognition of a $52,686 loss from discontinued operations related to the sale
of Tessier Resources, Inc., the Company's net loss was $328,181. The increase in
net loss for the first half of 1996 is primarily attributed to the Company's
262% increase in total expenses.
The Company entered into a three year sublease agreement with Multiplex
Technologies Inc. on February 1, 1996 for approximately 2,750 square feet of
space in North Vancouver, B.C. Canada. The Company is required to pay a monthly
rent of $2,807 for the term of the lease. The Company is also obligated to pay a
sum equal to $30,000 for various renovations to the facilities and to reimburse
general costs incurred on behalf of the Company.
Because of the developmental nature of the Company, management cannot
accurately predict future revenues or expenses or the impact on these items by
the sale of the Common Stock to the Selling Stockholders. Fiscal Year Ended
December 31, 1995 Compared To Fiscal Year Ended December 31, 1994
The Company did not have any revenues for either of its fiscal years ended
December 31, 1995 ("1995") or December 31, 1994 ("1994"). General and
administrative expenses increased form
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<PAGE>
$29,190 in 1994 to $906,518 in 1995 primarily due to the Company's
implementation of its new business plan related to its Internet gaming system.
This increase in general and administrative expenses is primarily attributed
to the expenditure of $161,005 for advertising in 1995, compared to $-0- in
1994, due to the need to establish the presence of the Company in the high
technology, finance and investment field, and to consulting fees of $539,991 for
1995 compared to $4,602 for 1994 due to the recruitment of additional technical,
Internet and business consultants in lieu of full-time employees. Other factors
contributing to the increase were office expenses of $76,518 for 1995 compared
to $4,602 for 1994 and utilities expenses of $48,547 for 1995 compared to $-0-
for 1994, attributed to the establishment of a functioning corporate office, and
the increase in travel expenses to $57,960 for 1995 compared to $4,806 for 1994
due to the search for appropriate technology to satisfy the Company's
objectives.
Also during 1995, the Company had interest expenses of $27,709 compared to
$-0- for 1994 attributed to the interest on the outstanding convertible
debenture being recorded in 1995. Thus the Company's loss for 1995 before
deducting the loss from discontinued operations and provisions for income tax
was $934,227 compared to a loss of $29,190 for 1994. During 1995, the Company
recognized a $103,008 loss from discontinued operations attributed to the sale
of Tessier. The Company's net loss for 1995 was $1,037,235, or $0.25 per share,
compared with the 1994 loss of $29,190, or $0.01 per share.
Fiscal Year Ended December 31, 1994 Compared To Fiscal Year Ended December
31, 1993
The Company did not have any revenues for either of its fiscal years ended
December 31, 1994 ("1994") or December 31, 1993 ("1993"). General and
administrative expenses increased approximately 92% from $15,200 in 1993 to
$29,190 in 1994 primarily due to the Company's reorganization in 1994.
Contributing to this increase was the 17% increase in legal and professional
fees in 1994 attributed to the Company's reorganization, and consulting fees of
$4,602, compared to $-0- for both items in 1993 due to the Company's desire to
position itself for a potential merger or acquisition. The Company did not
have any interest expense in either 1993 or 1994. Thus the Company's loss for
1994 was $29,190, or $0.01 per share, compared to a loss of $15,200, or $0.01
per share for 1993.
Research and Development Costs
The Company has relied upon the developers of the technology which it has
acquired or licensed to carry out the research and development related to the
particular technology. Thus, during the most recent three fiscal years and for
the six month period ended June 30, 1996, the Company did not expend any
funds directly on research and development related to the Company's entry into
the Internet gaming business. The Company did expend a total of $19,121 in 1995
through its discontinued and subsequently
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<PAGE>
sold subsidiary, Tessier Resources, Ltd., towards the development of
Tessier's snow and ice removal equipment. Management anticipates that as the
Company begins operation of its virtual casinos, it will likely begin to expend
some funds for ongoing research and development for new products and for enhance
existing ones. However, at this time management has made no estimates as to the
extent of any future research and development expenditures.
Net Operating Losses
The Company has accumulated approximately $2,360,000 of net
operating loss carryforwards as of June 30, 1996, which may be offset
against future taxable income through the year 2010 when the carryforwards
expire. The use of these losses to reduce future income taxes will depend on the
generation of sufficient taxable income prior to the expiration of the net
operating loss carryforwards. In the event of certain changes in control of the
Company, there will be an annual limitation on the amount of net operating loss
carryforwards which can be used. No tax benefit has been reported in the
Company's financial statements because the Company believes there is a 50% or
greater chance the carryforward will expire unused. Accordingly, the potential
tax benefits of the loss carryforward is offset by valuation allowance of the
same amount.
Liquidity and Capital Resources
Historically, the Company's working capital needs have been satisfied
primarily through the Company's private placement of securities and through
borrowing and the Company reasonably expects to do so in the future. At
June 30, 1996, the Company had working capital of a negative
$1,772,168, compared to working capital at December 31, 1995 of a
negative $73,134 and a negative $30,419 at December 31, 1994. This decline in
working capital is directly attributable to the Company's acquisitions of
technology and the payment for services performed and expenses incurred by
consultants. Also, the Company reports as a current liability unearned
revenue of $550,000, which represents the prepayment to the Company pursuant to
an agreement whereby the Company will provide research and development services
related to its Internet expertise. As the Company provides such service, the
liability will be offset by reported income. Further, the Company reports as a
current liability a related party payable of $350,000, whereby Regis Investment
Company Limited ("Regis") has advanced the Company funds which may be offset
upon the exercise of the convertible debenture held by Regis. At June 30,
1996, the Company had $8,132 in cash compared to $2,782 at December
31, 1995 and $1,120 at December 31, 1994.
As of June 30, 1996, the Company had total assets of
$2,579,213 and total stockholders' equity of $692,913 compared
with total assets of $112,987 and total stockholders' equity of a negative
$143,954 at December 31, 1995, and total
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<PAGE>
assets of $251,120 and total stockholders' equity of $44,581 at December 31,
1994. The improvement during the first half of 1996 is directly
attributed to the Company's acquisition of software licenses, which have
been capitalized as deferred license expense and will be amortized over the life
of the product once the virtual casino commences operations. The Company
also recorded an investment of $158,112 related to its minority ownership of
Kaniksu Ventures, Inc. following the sale of Tessier Resources, Ltd. to Kaniksu.
For the first half of 1996, the Company realized cash from financing
activities of $2,179,106 compared to $451,518 for the first half of 1995,
related to the issuance of stock for debt. For the year ended December 31, 1995,
the Company realized cash from financing activities of $1,006,016 related to the
issuance of debt for cash, compared to $277,500 for the year ended December 31,
1994 realized from the issuance of a convertible debenture and from the sale of
Common Stock. For the first half of 1996, cash used by operating activities
increased to $446,211, compared to $346,987 for the first half of 1995
attributed to the increase in net loss and partially offset in 1996 by the
receipt of $550,000 from an advance payment for future services to be rendered.
For the year ended December 31, 1995, cash used by operating activities
increased to $956,257, compared to $26,501 for the year ended December 31, 1994
due to the increase in net loss.
Net cash used by investing activities increased to $1,727,546 for the first
half of 1996 compared to $100,000 for the 1995 period primarily due to the
purchase of license fees. Net cash used by investing activities decreased to
$48,097 for 1995 from $250,000 for 1994 due to the Company's restructuring in
1995.
During the remainder of fiscal year 1996 and into 1997, the Company
anticipates meeting its cash and working capital needs primarily from the
proceeds of the sale of its shares to the Selling Stockholders, the possible
private placement of additional securities and from expected revenues from
operations, which the Company expects to commence during the second half of 1996
or the first quarter of 1997 . Following the sale of its shares to the
Selling Stockholders, the Company does not anticipate the need for additional
capital in the foreseeable future.
Effect of Inflation
In the opinion of management, inflation has not had a material effect on
the operations of the Company.
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<PAGE>
BUSINESS
Background
VentureTech, Inc. (the "Company") is engaged in the development,
acquisition and licensing of certain computer based technology designed to
ultimately offer a full range of casino style gaming, entertainment, information
and financial transaction services over the Internet. Through its technology
agreements and licenses, the Company intends to establish a series of
multi-cultural / multiethnic virtual casinos over the Internet from various
locations around the world. A casino is deemed to be "virtual" when it
emulates actual casino style games offered in existing land-based casinos, but
provides such gaming services via computer software and hardware, as opposed to
actual gaming equipment such as slot machines and blackjack tables.
The Internet is generally defined as a hierarchical collection of
interconnected computer networks throughout the world. Individual websites, a
collection of files and applications on a specific computer system, are
established by individuals or organizations that seek to provide information
and/or services to the general public. Interested parties access a particular
website at a unique Internet address, typically through an off-site computer and
modem, and through the services of a local Internet service provider. The
Company intends to establish unique Internet addresses for its virtual casinos
to clearly distinguish them from others that may be established by potential
competitors.
The Company plans to establish its virtual casinos by creating partnerships
and joint ventures pursuant to revenue sharing agreements to be negotiated and
executed, or funded solely by the Company for its own benefit. Management
believes that it can improve its percentages of revenue sharing in the virtual
casinos by establishing various gaming technology license agreements with
multiple third parties, although there can be no assurance that such agreements
can be finalized.
The Company has created two new wholly owned subsidiaries, EuroAsian
E-Casinos, Inc. (hereinafter "E-Casinos"), and Cybernet Currency Clearing, Inc.
(hereinafter "CCCI") to facilitate the distinct operations of its business.
E-Casinos was established as a foreign corporation in the Islands to own, either
solely or in partnership with joint venturers, and operate multiple full service
virtual gambling casinos over the Internet. CCCI was established as a Nevada
corporation to function as an international currency converter of world currency
in various international business transactions.
In order to establish the Company as a leading provider of Internet related
gaming and financial transaction services, management's strategy is to acquire
or otherwise obtain, by license or other agreement, access to newly emerging
Internet security and gaming technologies. To this end, the Company has entered
into
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<PAGE>
separate agreements with CasinoWorld Holdings, Ltd ("CWH"), a Delaware
corporation, and Alphacom Data Security Services, Inc. ("Alphacom"), a Nevada
corporation, to supply the necessary technology and services to conduct its
business operations. Operating through its newly created subsidiaries and in
reliance upon its fully effected agreements with CWH and Alphacom, the
Company expects to commence substantive operations of its gaming
services over the Internet during the second half of 1996 or the
first quarter of 1997.
In a further effort to focus its strategy on the computer and Internet
related service industry, on March 14, 1996 management effected the sale
of its wholly owned subsidiary, Tessier Resources, Ltd. ("Tessier") to Kaniksu
Ventures, Inc. ("Kaniksu") in exchange for a $3,000,000 debenture convertible
into 2,000,000 shares of Kaniksu common stock. The $3,000,000 debenture
matures in four (4) years for the date of issuance, carries no interest, and may
be converted at the conversion price of $1.50 per share into an aggregate of
2,000,000 shares of authorized but previously unissued shares of Kaniksu common
stock at any time prior to repayment of the debenture. Presently, VentureTech
does not have an ownership interest in Kaniksu. However, if the debenture was
totally converted into 2,000,000 shares of Kaniksu common stock as of the date
hereof, and assuming no additional Kaniksu shares have been issued, VentureTech
would own approximately 40% of Kaniksu's issued and outstanding common stock.
As additional consideration for the acquisition of Tessier, Kaniksu has
agreed to issue to eligible stockholders of the Company shares of Kaniksu common
stock and rights to purchase additional shares. Under the terms of the
agreement, each individual VentureTech stockholder as of the date of record,
April 5, 1996, is entitled to five (5) shares of authorized but previously
unissued Kaniksu common stock for each 100 shares of VentureTech common Stock
owned. Only stockholders owning at least 100 shares of VentureTech Common Stock
are eligible for the distribution. Further, each five shares of Kaniksu common
stock issued to VentureTech stockholders shall include ten (10) rights, each
right entitling the holder thereof to purchase one additional share of Kaniksu
common stock for $2.25 per share for a period of sixty (60) days following
receipt of the Kaniksu shares and rights. Kaniksu intends to provide these
shares and rights pursuant to a registration statement to be filed as soon as
practical.
Tessier is in the business of developing and supplying snow and ice removal
technology to the commercial market. Management believes that the attention
required by this subsidiary would detract from the potentially more lucrative
business of Internet gaming and it is in the best interest of the Company to
divest itself of this subsidiary.
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<PAGE>
Business of Issuer
EuroAsian E-Casinos, Inc.
E-Casinos was incorporated in April, 1996 in the Republic of the Marshall
Islands primarily to take advantage of favorable tax laws and to avoid possible
conflicts with United States ("US") laws in regard to Internet gaming. The
Republic of the Marshall islands is considered to be a foreign tax-haven
jurisdiction because of the favorable income tax treatment afforded
"non-resident domestic Marshall Islands corporations." These corporations are
not subject to any type of Marshall Islands income taxation or income tax
reporting. As a non-resident domestic Marshall Islands corporation, E-Casinos
will not pay any Marshall Islands income tax on any of its income.
Although the Company does not believe that its intended business actions
violate the letter of the law of any existing regulations of the US,
management intends to focus primarily on the market outside of the US until such
time as US laws, specifically in regard to this Internet gaming, are clarified.
A bill to create a national commission to study gambling in the US (including
interactive virtual wagering) was tentatively approved by a Senate committee in
May of 1996. On July 22, 1996, the House gave final congressional approval
to a measure that would create a federal commission to examine the rapid growth
of the US gambling industry. The commission could recommend changes in state or
federal gambling policies. Among the issues the panel would examine is gambling
on the Internet. As of the date hereof, there is no indication as to any
potential legislation or new laws that may result from this commission.
See "Business Government Regulations."
Presently, the Company's primary focus, through its subsidiary E-Casinos,
is on the establishment of its first virtual casino in affiliation with CWH. On
March 4, 1996, pursuant to a previously executed letter of intent, the Company
entered into a definitive non-exclusive license agreement (the "License
Agreement") with CWH for CWH's proprietary technology. The Company has also
entered into a non-exclusive sublicense with CWH to use Durand
Communications Network's ("Durand") MindWireTM software technology. CWH
holds a license to Durand's MindWireTM and has the authority to sublicense such
technology. Durand is a privately held corporation founded in 1993 in Santa
Barbara, California and is a software developer of client - server technologies
for real time electronic commerce and other applications. In consideration of
the $2,000,000 license fee, the Company was granted a non-exclusive license to
CWH's revolutionary new Virtual CasinoWorldTM software application, an
interactive service bureau, gaming service and multimedia virtual casino on the
Internet. In addition, with a non-exclusive sublicense to the MindWireTM
proprietary technology, the Company will be able to provide its customers with
realistic casino wagering games with high-level 3-D graphics, player
interactivity in real-time scenarios and with automatic updating of applications
and graphics during online sessions. E-Casinos also
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<PAGE>
intends to ultimately offer a "Sportsbook," capable of providing wagering
opportunities on sporting events, as well as access to various international
lottery purchases. It is expected that these supplemental services will be
provided in association with third parties already engaged and knowledgeable in
these business areas. The Company intends to assign its rights, duties and
obligations under the License Agreement to E-Casinos.
The total license fee payable by the Company to CWH is $2,000,000, of which
$250,000 was paid upon the execution of the Letter of Intent in January 1996,
with the balance to paid in installments commencing with the execution of the
License Agreement. As of the date hereof, the Company has made various payments
to CWH totaling $1,200,000. The full payment of the license fee is a condition
precedent to the Company's exercise of its rights under the License Agreement.
As of the date hereof, the Company is past due on its payment schedule to
CWH, attributed primarily to the failure of CWH to maintain its demonstration
website during a period of time when prospective private investors were
considering an investment in the Company. The Company reasonably believes that
with its current private placement to the Selling Stockholders, subject to
registration with the Commission, and other on-going investment prospects, it
will soon meet its obligations under the License Agreement. CWH and the Company
are currently negotiating toward adjusting the payment schedule accordingly.
Further delays in payment of the license fee could, however, result in delays to
the launch of the Company's virtual casino.
As a further provision of the License Agreement, the Company is required to
complete certain due diligence obligations and other undertakings as additional
conditions precedent to the Company's enforcement of the terms of the License
Agreement. These conditions precedent include, but are not limited to,
certification of corporate good standing, certification of board of directors
authorization of the License Agreement, evidence that the Company holds a valid
gaming license from an authorized jurisdiction, a $1,000,000 deposit toward a
virtual casino bankroll, a marketing plan with a budget of $1,000,000, and a
final opinion from general counsel.
On April 19, 1996 the Company also entered into an Operating, Revenue
Sharing and Management Services Agreement (the "Operating Agreement") with CWH.
This Operating Agreement provides the Company with a new interactive platform
that will combine Monacall s.a.m. L'Univers Telematique's ("Monacall")
Interactive Voice Response (IVR) software with CWH's Virtual CasinoWorldTM
application. The integrated technologies will provide secured transaction
processing, international bank account management and technical administration,
via Monte Carlo, Monaco, of the Virtual CasinoWorldTM application. E-Casinos has
contracted with CWH whereby CWH will provide, pursuant to a joint venture
between CWH and Monacall, facilities in Monaco, telecom bandwith, Tandem banking
services, business licenses, Monaco operating approvals, banking relationships
and expertise. Monacall, a Monegasque
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<PAGE>
corporation with headquarters in Monte Carlo, has been authorized by the
Principality of Monaco, by way of an approval letter executed by the Department
of Finances and Economy, to provide a platform for interactive wagering and
gaming for telecom and Internet activities. This will allow transaction
processing for Internet gaming that is legally initiated outside of Monaco and
provide a safe and plausible operation of its online interactive gaming
activities.
The License Agreement and Operating Agreement (collectively
the"Agreements") were granted for an initial term of 10 years and are renewable
thereafter, year-to-year, for an additional five year term. The Company has
agreed to comply with specific provisions under the Agreements, including but
not limited to the protection of CWH's trade secrets and other technology, as
well as the submission of one or more gaming licenses in certain jurisdictions
where such gaming is not illegal. Under its revenue sharing agreement with
CWH, the Company shall receive 33.333% of the gross win/loss disbursed from
operations of the virtual casino. CWH and its affiliated telephony and
transaction facility (Monacall) shall share the balance of win/loss
distributions. The Company has also agreed to market the virtual casino(s)
pursuant to a mutually agreed to marketing plan and provide a minimum $1,000,000
casino bankroll for each virtual casino initiated. Under certain conditions, the
Company may be obliged to pay additional licensing fees in jurisdictions where a
separately controlled virtual casino is established.
On May 16, 1996, CWH successfully completed the integration of the Virtual
CasinoWorld application based upon MindWireTM technology with the Monacall
Interactive Voice Response ("IVR") telephony software. This combined platform
represents an integrated solution for online virtual casinos and interactive
wagering via either the Internet or the telephone. CWH, in conjunction with
Monacall, is currently going through alpha testing of its system at file servers
located in Monaco and expects to launch a beta program starting in September
1996. On June 1, 1996, the system successfully logged-in its very first
customer, credited their Monacard account (an audio smartcard system that
electronically debits a user's account), and played thirty-five hands of
blackjack. The system recorded a revenue of 118 French Francs from this first
session of alpha testing.
The Company intends to market and focus its casino operations primarily in
Europe, Asia, and the Middle East offering a full range of gambling, information
and other entertainment services over the Internet. E-Casinos will operate under
strict guidelines and laws to assure fair opportunities for its Internet
clients. The Company is currently engaged in discussions and negotiations with
interested parties and potential partners and joint venturers in various parts
of the world. Based on the success of these discussions, of which there can be
no assurance, the Company intends to establish multi cultural/multi-ethnic
casinos around the world over the next several years as satisfactory agreements
can be entered into. Presently the Company has not finalized any
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<PAGE>
agreements with any third parties for the formation of partnerships or joint
ventures to operate its virtual casinos and there can be no assurance that the
Company will be successful in entering into any such agreements.
Presently, in management's opinion, US laws are vague on the
matter of Internet wagering within the US. Management believes that until such
time as new legislation is passed or current statutes are adequately defined, it
is in the Company's best interest to delay marketing its Internet gaming
services within the US. Thus, all of the Company's initial marketing will be
directed outside the US. The Company intends to undertake stringent
procedures to reasonably eliminate the possibility of US residents accessing its
virtual casinos once fully operational. See "Government Regulations."
Management's strategy is to develop or otherwise acquire or license newly
emerging technology in the Internet related gaming and financial transaction
area. This strategy is expected to minimize any potential dependence on a single
source of technology and service. The Company is also evaluating other sources
of telephony services other than Monacall in the geographical areas under
consideration for virtual casinos. Management believes that establishing a local
service facility for telephony and online transaction processing may facilitate
obtaining local license authorizations and maximize E-Casinos portion of any
revenue sharing arrangements.
Alphacom Data Security Services, Inc.
In March of 1996, the Company entered into an agreement with Alphacom Data
Security Services, Inc., a Nevada corporation ("Alphacom"), for a license to use
and to further sublicense Alphacom's Internet gaming software integrated with
the Alpha Guard computer security application. The Company has paid an aggregate
of $250,000 toward an exclusive license for the software technology as it
relates to the Internet gaming industry. In further consideration of the
license, E-Casinos will pay to Alphacom a license fee (royalty) up to
ten percent (10%) of the net win/loss earned by the Company, after payouts
and certain license fees (as applicable), generated from casino operations using
the Alphacom software.
Alphacom is a recently formed company with minimal business experience. The
Alpha Guard technology is a customized version of World Star Holdings Ltd.'s
Gatekeeper technology and is in its alpha stage of testing. Gatekeeper based
technology is in use by AmeritelTM OnLine Services' worldwide online reservation
services and the Saskatchewan Canada Government's Department of Tourism. The
Gatekeeper has also been used on a limited basis by the Manitoba Canada
Telephone System.
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CD-MAX
The Company has also entered into a letter of understanding in September
1995 with CD MAX, Inc. ("CD-MAX"), a Delaware corporation, to license CD-MAX's
propriety software encoding, encryption and billing system for exclusive use
within the Internet gaming industry. Management anticipate using CD-MAX's
encryption expertise with both of its subsidiaries, E-Casinos and CCCI, as a
supplement or an alternative to other security measures. Management anticipates
that the CD-MAX technology will be integrated with the Company's other licensed
technology to offer maximum security and provide users anonymity and financial
protection in banking, currency exchanges and playing the full range of casino
games. The CD-MAX system is not expected to require any additional hardware
devices and can be automatically installed at the initial service log on.
Due to limited financial and engineering resources at this time, CD-MAX has
requested postponement of material discussions and engineering efforts until
such time as the Company becomes fully funded to support such operations. Upon
the realization of the funds from the sale of shares to the Selling Stockholder,
the Company intends to enter into a definitive license and services agreement
with CD-MAX.
Cybernet Currency Clearing, Inc.
In August 1995, the Company created as a wholly owned subsidiary, Cybernet
Currency Clearing, Inc., a Nevada corporation ("CCCI"). CCCI was formed to
become engaged in the business of providing international business services,
primarily the conversion of international currency into "e-cash" or "e-dollars"
on a fee basis. Once operational, CCCI will perform conversions of world
currencies into "e-cash" and then back to hard currency, for associated Internet
casinos. Further, management intends to align CCCI with major banks to provide a
secure conversion service for exchanging their client's money to and from
"e-cash". Neither the Company nor CCCI has entered into any definitive
agreements with prospective affiliated banks due to the current stage of early
development. The Company expects to materially depend on its pending license and
technology agreements with CD-MAX, Inc. to implement its proposed currency
services and strategy. The operation of CCCI is separate and apart from the
Company's agreement with CWH. CWH has no current obligation to incorporate or
integrate these proposed operations or technology into its virtual casino
operations. The Company intends to use a portion of the proceeds from the
sale of Common Stock to the Selling Stockholders to commence CCCI's operations.
"E-cash" is electronic (digital) money that moves along multiple channels
largely outside the established network of banks, checks, and paper currency
overseen by the Federal Reserve. These channels enable consumers and businesses
to send money to each other more conveniently and quickly and less expensively
than through the conventional banking system. E-cash comes in many forms such as
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"smart cards" (plastic cards embedded with microchips that have the ability to
"load" up preset values or download transactions over phone lines from your bank
or issuer of "e-money" onto a computer). E-cash can be created by various
individual parties, and can be backed by anything customers demand as an
accepted medium of exchange such as gold, dollars, yen or similar asset
instrument. Its diversity and philosophy is well suited to the Internet and its
evolving web of networks around the world.
Products and Services
E-Casinos intends to offer a full range of Internet gaming, information and
entertainment services in the form of virtual casinos on the Internet, open to
all individuals interested in playing casino style games for real money on a
worldwide basis, subject to local laws and regulations. E-Casinos must adhere to
the legal requirements of each jurisdiction in which it operates from or offers
it services. For example, in areas where there are legal age restrictions,
E-Casinos will adopt similar restrictions in signing up prospective players.
Prospective players are required to fill out and sign a membership application
form for the Monacard Services which must be signed and mailed to the offices of
Monacall. Further, prospective players will be required to set up an offshore
account (facilitated by the Company) with an approved bank prior to gaining
access to the Company's virtual casino for wagering purposes. The Company will
only accept and approve applications if the "holder's" stated legal address (for
banking and mailing purposes) is outside of US jurisdictions and if the
applicant meets all other legal restrictions of their respective jurisdiction
such as age and residency requirements. The Company will require identification
evidence, in the form of passport and/or driver's license, faxed or mailed to
the Company. In addition, the Company will supply the account holder with
certain passwords to identify themselves during logon procedures consistent with
industry practices for such activities. See "Government Regulations."
The virtual casinos will initially offer a cross-section of casino style games
including, but not limited to, blackjack, craps, roulette, poker, keno and
slots. Other casino games, such as baccarat, will be added over time consistent
with the cultural and regional demands of the clientele. In addition, E-Casinos
intends to ultimately offer a "Sportsbook" for wagering on international
sporting events and access to international lottery ticket purchases. The
Sportsbook and lottery application are likely to be offered in conjunction with
third parties pursuant to partnerships and/or joint ventures.
E-Casinos' virtual casinos will offer its player many features beyond that
of actual wagering applications. Prospective players will be provided with a
simple electronic means to view the virtual casino and its associated rules and
terms, and them register directly online. At all reasonable times players will
have the ability to communicate with customer assurance on a real-time online
basis. Players will also have the ability to communicate
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online with other registered members of the virtual casino through "e-mail",
live "chat-rooms" and "classified ad posting". Players will have access to
online applications for electronic banking, virtual shopping, and connections
with affiliated hotels and resorts. E-Casinos will to provide its players with a
unique virtual experience intended to transcend a mere gaming application.
The Company intends to provide electronic banking, in connection with its
licensed use of CWH's Virtual Casino WorldTM system, which provides the
Company's customers with the integrated use of Monacall's MonacardTM, and Audio
SmartCard financial services system. Pursuant to a completed and approved
application by a prospective customer, Monacall will create a customer account,
for whom an electronic wallet will be created by charging a positive balance
against a credit card with transactions which will be cleared through Credit
Foncier De Monaco, an authorized bank located in Monte Carlo, Monaco. Approve
Customers who are issued a MonacardTM by Monacall will be able to access the
financial services, either through the Internet or via the telephone. A
customer's MonacardTM will only be active so long as a positive balance exists
in their electronic wallet. E-Casino will accept MonacardTM as a recognized form
of electronic payment. The Company will receive a periodic accounting of
customers use of this payment system and will be paid its proportionate share as
collected by Monacall.
As of the date hereof, the Company has not entered into any electronic
shopping or hotel/resort agreement with third parties. The Company intends to
focus its initial strategy on development of the gaming and information services
and to introduce these supplementary services on an interim basis. The
introduction of these services and the type and location of services offered
will depend on the geographical areas that respond/.
Management anticipates that when CCCI becomes fully operational, it will
eventually provide the facility for players to transfer "e-cash" into their
virtual casino debit account from designated banks or other credit facilities
such as credit cards. However, CWH has no current obligation to incorporate or
integrate this proposed strategy or technology into its virtual casino
arrangements with the Company. Management intends that once the technology and
systems are validated, it will negotiate an equitable arrangement with CWH.
Under this scenario, once the virtual casino's management software confirms that
sufficient funds are available for wagering by a specific player, the player
will be allowed to place wagers consistent with available funds.
CCCI intends to use CD-MAX's proprietary data encryption process which can
be used to protect data being transmitted over the Internet. The system involves
the creation of a special information packet containing identification
information, a description of the amounts and currency types involved in the
transaction, and account information. The packet is created using a
sophisticated process involving information hashing, tagging, and
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encryption. The packet uniquely identifies the sender and is relatively
impossible for either the sender or anyone in the Internet environment, except
for CCCI's authorized central clearing house, to read, tamper with, or otherwise
interfere with the information.
Product Research and Development
The Company has relied upon the developers of the technology which the
Company has acquired or licensed to carry out the research and development
related to the development of the particular technology. Thus, during the most
recent three fiscal years and for the six month period ended June 30,
1996, the Company did not expend any funds on research and development
related to the Company's entry into the Internet gaming business. The Company
did expend a total of $19,121 in 1995 through its discontinued subsidiary,
Tessier Resources, Ltd., towards the development of Tessier's snow and ice
removal equipment. Management anticipates that as the Company begins operation
of its virtual casinos, it will likely begin to expend some funds for ongoing
research and development for new products and for enhance existing ones.
However, at this time management has made no estimates as to the extent of any
future research and development expenditures.
Marketing, Distribution and Customers
The Company's marketing strategy is focused on a two pronged approach to
meet the requirements of its bi-level targeted market. First, the Company will
seek potential partners and joint venturers interested in providing, jointly
with the Company, a unique virtual casino, and second, the end-users (players)
of that virtual casino. The Company will necessarily employ different
methodologies for soliciting these distinctive market segments.
In seeking venture partners for operating the virtual casinos, the
Company's management is expected to continue to take advantage of publicity it
has received in the international community regarding its Internet gaming
activities. In June 1996, the magazine International Gaming & Wagering Business
published a brief notice of he Company's press release regarding its licensing
arrangements with CWH and Monacall. In addition, Virtual Reality News, a United
Kingdom publication, published a similar news report on the Company's gaming
activities in its May 1996 edition. Also, management expects to continue to
avail itself of its personal international contacts with potential qualified
venture partners and government representatives.
The potential market for end-users (players) in the virtual casinos is
difficult, if not impossible, to accurately estimate. This potential market is
made up of such factors as the dollar volume of current worldwide gaming, both
legitimate and illegal gaming, the current market for computer ownership, the
volume of current Internet subscribers, and predictions of growth in these three
sectors. Management believes that the three primary issues
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that must be effectively addressed to maximize its marketing efforts for the
Company's online gaming venture are (i) proper identification of target
demographics and psychographics; (ii) the use of a blend of traditional
marketing and new media marketing techniques such as marketing via the Internet
itself; and (iii) the ability to capture and retain the subscribers.
Management further believes that two distinct populations, gamblers and
Internet users, are potential users of a virtual casino on the Internet. Within
this demographic, the Company will look to define three major target groups; (i)
Internet users with a propensity to gamble; (ii) Internet users that could be
induced to gamble with a viable, credible and secure online application; and
(iii) gamblers with little or no Internet experience that might want to take
advantage of online gambling. Management intends to investigate thoroughly the
demographics, psychographics and attitudinal preferences of all three consumer
groups. The Company's ultimate ongoing marketing plans will evolve from these
investigations.
Management is confident that existing evidence suggests that a significant
market exists for providing gaming activities and services over the Internet and
thus justifies the Company's entry into this business. A sample of the research
and forecasts that management has reviewed is as follows:
Worldwide sales of lottery tickets exceeded $115 Billion in 1995 as stated
in International Gaming and Wagering Business in May 1996.
During 1995, the Internet consisted of 7,000,000 host computers
integrated internationally via 60,000 mostly private networks.
Based upon the 1995 growth rate, there will be 124 million hosts
by the year 2000. Source: The "Internet Gambling" Report, 1996
edition.
Liechtenstein's Internet Lottery can draw potential players from
nearly 50,000,000 Internet users across the globe. Source:
International Gaming & Wagering Business, November 1995.
As of 1994, gross wagering in the US totaled $482 billion.
Source: U.S. News & World Report, January 15, 1996.
Approximately 40% of gaming revenues in the future may be from
"virtual" casinos, Internet lotteries, Bingo, sports wagering
and other online gaming locations. Source: The "Internet Gaming"
Report, 1996 edition.
The above information is presented for informational purposes only and has
been derived from sources believed to be reliable, although some information is
based on estimates. It should be noted that the sources relied upon are various
publications which may or may not have provided supporting validation for their
estimates. International Gaming & Wagering Business and the U.S. News &
World Report are recognized publishers of information in their related fields of
reporting. Both periodicals appear to
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have reasonable validation for their estimates and representations. The
"Internet Gambling" ReportTM is a comprehensive report covering the gambling
industry including the "virtual" on-line gambling industry. This report is
generated by the Ryan Group of La Jolla, California. The Ryan Group represents
that it has substantial information to validate its representations in the
report which is available for purchase by interested parties. The balance of the
publications referred to above did not provide supporting validation for their
estimates. Actual results may not be closely related to forecasts made.
There can be no assurance that the information presented above will approximate
actual results.
The Company is currently in the process of soliciting marketing proposals
from recognized international marketing, advertising, consulting firms and
individuals, such as KPMG Pete Marwick, Asia Pacific Ventures, Time
International and the Asia Times. Management intends to develop distinct
targeted marketing strategies in conjunction with these expert sources. Further,
once the Company has entered into an agreement with a venture partner, it
intends to rely upon the direct experience of that partner related to a specific
target market for the area intended. The Company will also actively promote its
virtual casinos through the Internet itself and promote and advertise its
services through that medium. Presently, management expects that CD-ROMs will be
the primary source of distribution of the company's software application, with
diskettes and online download secondary considerations.
Technological Change and Competition
The offering of casino gambling services on the Internet, although
relatively new, is characterized by rapid and significant technological change
corresponding to similar technology enhancements in the computer, software and
telephony industries. A significant number of companies, organizations and
individuals are currently offering or purporting to offer on the Internet
similar gambling services as that of the Company. Those organizations with the
greatest visibility to date include, but are not limited to the following
entities, with their listed area of operation indicated in parenthesis: Internet
Casinos (St. Martin, Barbados, Monaco and Nevada), Interactive Gaming &
Communications Corp., formerly Sports International - USA (Antigua and Grenada),
Casinos of the South Pacific (Cook Islands), and Virtual Vegas (Venice Beach,
California).
As of this date, however, to the best knowledge of the Company, no firm is
offering casino style gambling for other than fun on the Internet. The Company
is aware of several firms currently offering actual wagering on various sporting
events with financial transactions being administered from off-shore (outside
the US) accounts. In addition, several organizations currently offer lottery
tickets for sale from International Lotteries. One specific organization,
Interlotto, operates an Internet lottery authorized by the Liechtenstein
Government.
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There are also a significant number of organizations and companies
interested in pursuing the business of providing currency change using e-cash.
Some of the competitors currently offering e-cash services include, but are not
limited to, start-up firms such as DigiCash, located in Amsterdam, and
CyberCash, located in Reston, Virginia, as well as more notable corporate
names such as Microsoft, Xerox, Visa and Citicorp. Once both CCCI and
E-Casinos become fully operational, management anticipates to market both
E-Casinos to CCCI customers and CCCI to E-Casinos customers. By making CCCI
services available to the users of the E-Casinos players, the Company believes
that it will establish and enhance the visibility and credibility of CCCI's
operation. The Company intends to use a portion of the proceeds from the
sale of Common Stock to the Selling Stockholders to commence CCCI's operations.
The barrier to entry to most Internet markets, including the gambling
segment, is relatively low making its accessible to a wide number of entities
and individuals. The Company believes, however, that there are substantial
supplemental market barriers that will ultimately preclude the vast majority of
prospective providers from maintaining a material or successful Internet
operation and provide an advantage to the Company. These barriers include, but
are not limited to the following:
Credibility and Integrity. At present, there are no official regulators of
gambling services on the Internet and many of the companies offering gambling
services are located in remote spots in the Caribbean Islands such as Antigua or
St. Martin. Prospective gamblers want some assurance that they are dealing with
credible organizations that will adhere to stated payout percentages and make
distributions of any winnings to the player. Management's goal is that once
operational, E-Casinos will give credibility through its association with
prominent business partners, such as Monacall, located in Monte Carlo, Monaco.
Also, E-Casinos' expected use of state-of-the-art security technology is
intended to instill confidence for prospective players to provide funds on
account and wager at the virtual casino. In addition, E-Casinos will retain a
recognized international auditing firm to audit the operations of the virtual
casinos to assure integrity of its activities, although no such arrangements
have been made as of the date hereof.
Technology. Although most all of the prospective providers of gaming
services on the Internet offer some form of casino style wagering games to the
public, they are typically based on a HTML (HyperText Markup Language) format
that is transmitted and "emulated" or "viewed" by a web browser (such as
Netscape). Thus, the transmission and viewing of these sites is rooted in
Terminal/Host architecture where the terminal or web browser "views" HTML just
like a terminal would emulate traditional mainframe protocols. Consequently, the
animation and graphic viewing esthetics of the gambling action are typically of
a simple nature. E-Casinos' use of the CWH and MindWireTM technology combines
the best elements of terminal/host software design and
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client/server design for the purposes of disseminating information. The Company
believes that this technology will provide robust graphics and animation, as
well as supplemental features such as e- mail, online shopping, chat rooms and
bulletin boards. The Company recognizes, however, that with the rate of
technological change currently in effect, it must continue to evaluate and
develop new technologies to maintain any expected competitive edge.
Adequate Financing. As stated previously, the cost to set up and maintain a
low quality casino website is relatively small. However, the collateral expenses
associated with marketing the website and system support remains substantially
high. E-Casinos projects that it will initially spend a minimum of $1 million to
market and promote its initial virtual casino to targeted markets. As the number
of virtual casinos grows and the targeted markets are expanded worldwide, the
marketing costs are expected to increase proportionally. In addition, the
Company's affiliated partners have incurred multi-million dollar expenses to
develop the unique software application and build the telephony and transaction
processing facilities necessary to handle the large volume of accesses to its
website. The Company believes that with the financing obtained from the Selling
Stockholders in the purchase of the securities that are the subject of this
Prospectus and related registration statement, it can reasonably compete with
anticipated competitors.
Patents, Copyrights and Trade Secrets
The Company's current business is based on technologies acquired or
otherwise licensed from third parties. The Company does not own or otherwise
control any patents, copyrights or trademarks, although the Company has
submitted a trademark application for both "VentureTech" and "E-Casinos."
However, those third parties from which the Company does license its technology
have taken the appropriate steps to protect the intellectual property rights of
the technology. CWH has copyrighted and trademarked the Virtual CasinoWorldTM
software application. Also, Durand has copyrighted and trademarked the
MindWireTM application. Further, certain modules of the MindWireTM application
are currently patent pending. Certain software code developed through Alphacom
has been copyrighted through its affiliate developer, World Star Holdings, Ltd.,
a Canadian corporation. The system security software application, developed by
CD-MAX, has been copyrighted and trademarked and CD-MAX intends to expand its
current patents to include additional security applications. There can be no
assurance that any remaining patent (or copyright) applications relating to the
Company's licensed technology will result in patents being granted or that, if
granted, such patents will afford protection against competitors with similar
technology. Also there can be no assurance that those entities licensing the
Company's technology will have the financial resources necessary to enforce any
patent or copyright rights it may hold. Although the Company is not aware of any
infringement claim against this technology, in the event that a future claim
against the developer and/or the Company is successful, it may be necessary for
the Company to
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obtain additional licenses to such patents or to other patents or proprietary
technology. There can be no assurance that the Company will be able to obtain
any such additional licenses on commercially reasonable terms. Any disclosure of
such technology or development of substantially equivalent technology could
result in increased competition that might materially and adversely affect the
Company's revenues and cost of sales.
The Company will attempt to protect its own proprietary technology by
relying on trade secret laws and non-disclosure and confidentiality agreements
with its employees who have access to its proprietary technology. To date, the
Company has not entered into any such agreements. Despite these protections, no
assurance can be given that others will not independently develop or obtain
access to such technology or that the Company's competitive position will not be
adversely affected thereby. See "Risk Factors - Patents, Trademarks and
Copyrights."
Government Regulation
Ownership and operation of land-based gaming facilities in the United
States, in particular, and elsewhere in the world, is normally subject to
extensive state and federal government regulations. However, the Company intends
to offer its casino gaming services over the Internet through facilities located
in Monte Carlo, Monaco and initiated from various authorized locations.
The Company's licensing and operating agreements with CWH requires that a
valid gaming license be obtained from international jurisdictions acceptable to
CWH for each individual virtual casino to be licensed from CWH, provided that
such jurisdiction requires a gaming license. The Internet transaction and
processing requirements of the Company will be carried out by Monacall from
their telephony and banking facility located in Monte Carlo, Monaco. The
authority for transaction and processing by Monacall on behalf of the Company
was created through the Joint Venture Agreement between Monacall and CWH. Once
the Company obtains approval from CWH regarding the submitted foreign gaming
license, the Company may offer its Internet gaming services to any location in
the world where such Internet gaming is lawful. The Company is currently seeking
valid gaming licenses from the jurisdictions of Turkey and the Marshall Islands.
As of the date hereof, the Company has not been issued a gaming license.
Due to the relatively recent introduction of the Internet, few countries,
or other such legal entities, have laws or statutes regulating the use of the
Internet for gaming purposes. The Company believes that it can reasonably offer
its services to most countries , provinces, states or other such geographical
entities and not be in violation of its stated laws or statutes. These areas
where Internet gaming is considered lawful would constitute authorized
locations. The Company recognizes that jurisdictions wherein authorized
locations are designated may initiate new laws or legislation once the Company
begins offering its services in
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those jurisdictions. It is the responsibility of the Company to ensure the
legality of its operations in these authorized locations. The Company believes
that it is in its best long term interest to work with national and/or local
authorities and may seek their consent in advance of operating in the authorized
locations. The Company anticipates that some as of now undetermined percentage
of its revenues will be paid to those authorized locations in conjunction with
its consent. As of the date hereof, no formal agreements have been reached with
any formally authorized location.
Although management believes that the Company is in compliance with all
applicable existing regulations in those countries which it intends to offer its
services, there can be no assurance that the Company can remain in compliance
with existing and new regulations at a reasonable cost. The Company is
fully cognizant of the fact that Internet related laws and regulations are just
beginning to emerge and that such national and international legislation is
expected to develop over the next few years. Such legislation could negatively
impact the Company or hinder its ability to offer its services in the futures.
There can be no assurance that the Company's gaming services over the Internet
will continue to be accepted in those jurisdictions in which they are presently
accepted, or that a government or court system will not disallow the use of
Internet gaming services. See "Risk Factors - Government Regulation."
A bill to create a national commission to study gambling in the US
(including interactive virtual wagering) was tentatively approved by a Senate
committee in May of 1996. On July 22, 1996, the House gave final
congressional approval to a measure that would create a federal commission to
examine the rapid growth of the US gambling industry. On a voice vote, the House
sent the legislation to President Clinton, who has said he supported the bill.
The bill's sponsor is Rep. Frank R. Wolf (R-Va.). The measure would create a
nine member National Gambling Impact and Policy Commission to study economic and
social impact of gambling and report its findings to Congress and the president
in two years. The commission could recommend changes in state or federal
gambling policies. Among the issues the panel would examine is gambling on the
Internet. As of the date hereof, there is no indication as to any potential
legislation or new laws that may result from this commission.
The Company intends to employ stringent procedures to reasonably eliminate
the possibility of United States ("US") residents placing wagers (for real
money) on the Company's system where such wagers are initiated within the
geographical and legal boundaries of the US. Until laws relating to such matters
are clarified, the Company will not directly market nor solicit its services in
the US.
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As an added measure, the Company will post advisories on its website
clearly stating the Company's position on this matter and its intention not to
provide such services within the US. Prospective players are required to fill
out and sign a membership application form for the Monacard Services which must
be signed and mailed to the offices of Monacall. Any submittal with a US address
or with a credit card billing address within the US will be automatically denied
access to the live wagering system. Further, prospective players will be
required to set up an offshore account (facilitated by the Company) with an
approved bank prior to gaining access to the Company's virtual casino for
wagering purposes. The Company will only accept and approve applications where
the "holder's" stated legal address (for banking and mailing purposes) is
outside of US jurisdictions and if the applicant meets all other requirements of
their jurisdiction such as age and residency restrictions. The Company will
require identification evidence, in the form of passport and/or driver's
license, faxed or mailed to the Company. Also, the Company will not accept bank
transfers from branch office banks located in the US. In addition, the Company
expects to distribute its access disks, CD-ROM's or other software application
necessary for virtual casino access only in jurisdictions where the Company
intends to operate. The Company will not distribute such software applications
within the US. In the event that the Company is made aware of an individual
surreptitiously or fraudulently obtaining an account or otherwise utilizing
pirated software from an international source, the Company intends to
immediately terminate such an account holder and cause any winnings credited to
their account to be forfeited.
The Company has not made an independent study as to any federal or state
laws that directly regulate its intended business. Certain laws or regulations
may be put into effect by federal or state governments in the future that may
affect the company's ability to operate in the US if it so chooses. However, in
any event, by following the stringent procedures detailed above, the Company
reasonably believes it will avoid any possible conflicts or ramifications with
US authorities.
Employees
As of the date hereof, the Company has one full time employee
functioning as the Company's Chief Operating Officer and Chief Financial
Officer. Because of the nature of the Company's business at this time,
management intends to primarily use consultants and advisors to provide the
interim services required for its operations. Further, the Company has entered
into certain licensing agreements with third parties as an initial means of
developing its service offerings and, accordingly, relies upon the work
performed by its licensing partners. As the Company's virtual casinos become
operational, it is anticipated that the Company will hire additional qualified
personnel consistent with workload requirements and as business conditions
warrant.
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Facilities
The Company's primary executive office is located at 11480 Sunset Hills
Road, Suite 100E , Reston, Virginia 22090. These facilities, leased by CD-MAX,
Inc., are shared with the Company pursuant to a sublease. Under its arrangement
with CD-MAX, the Company reimburses CD-MAX for its expenses related to the share
use of the space. Two of the Company's directors, Ken Fitzpatrick and Craig
Bampton, primarily use their own independent office space in San Francisco,
California and Winnipeg, Canada, respectively, to conduct the business of the
Company. The Company reimburses Messrs Fitzpatrick and Bampton for
"out-of-pocket expenses" related to the Company's business. The Company also
occupies approximately 2,750 square feet of office space located at 1055
West 14th Street, Vancouver, British Columbia, which is sub-leased through
Multiplex Technologies. This facility is primarily used for the marketing and
investor relations requirements of the Company. The Company believes that its
current facilities are adequate for its current needs and anticipates securing
additional office space as business conditions warrant.
Litigation
There are no material pending legal proceedings to which the Company or its
subsidiaries is a party or to which any of their property is subject.
MANAGEMENT
Executive Officers and Directors
The executive officers and directors of the Company are as follows:
Name Age Position
Kenneth F. Fitzpatrick 55 President, Chief Executive
Officer and Director
Craig J. Bampton 42 Vice President and Director
G. Michael Cartmel 58 Vice President Public Relations
and Director
Arthur Rosenberg 43 Chief Operating Officer, Chief
Financial Officer
Alyssa Bampton 25 Secretary
All directors hold office until the next annual meeting of stockholders and
until their successors have been duly elected and qualified. There are no
agreements with respect to the election of directors. As of June 30,
1996, the Company had not compensated its directors for service on the Board
of Directors or any committee thereof. In addition, the Company reimburses each
Director's out of pocket expenses incurred in connection with their duties as
directors. Each officer of the Company serves at the discretion of the Board of
Directors.
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Kenneth F. Fitzpatrick. Mr. Fitzpatrick joined the Company in August 1995
as the President, Chief Executive Officer and Director. Mr. Fitzpatrick has over
28 years of experience in the investment business. For the past six years, Mr.
Fitzpatrick has owned and operated the VanSan Group of San Francisco, an
investment banking and corporate financing firm doing business in the United
States and Canada. Mr. Fitzpatrick holds a B.S. degree in Business from Babson
College in Wellsley, Massachusetts.
Craig J. Bampton. Mr. Bampton became the Vice President and a director of
the Company following the acquisition of Tessier Resources, Ltd. ("Tessier") in
1994. Mr. Bampton has been the Vice President of Tessier and President of its
wholly owned subsidiary, Pulverizer Systems, Inc., since 1991. Following the
sale by the Company of Tessier to Kaniksu Ventures, Inc., Mr. Bampton became the
President and a director of Kaniksu Ventures, Inc., a publicly traded
corporation. Prior to joining Tessier, Mr. Bampton was employed from 1973 to
1991 by Burlington Northern Railways Manitoba Ltd., where he was an agent /
office manager for the Manitoba, Canada region. Mr. Bampton attended Red River
Community College. Mr. Bampton is the uncle of the Company's Secretary, Alyssa
Bampton.
G. Michael Cartmel. Mr. Cartmel became the Vice President of public
relations and a director of the Company in April 1994. Following the sale by the
Company of Tessier to Kaniksu Ventures, Inc., Mr. Cartmel also became a director
of Kaniksu Ventures, Inc., a publicly traded corporation. Mr. Cartmel has been
self-employed for several years as a consultant to the investment community
providing investor and public relations services to publicly held companies.
From 1991 to the present, Mr. Cartmel has been a principal of BMB Holdings,
Ltd., a provider of investor relations and consulting services. Mr. Cartmel
holds a a B.A. degree in economics and psychology from the University of British
Columbia.
Arthur Rosenberg. Mr. Rosenberg joined the Company in February 1996 as the
Chief Operating Officer and Chief Financial Officer. Since 1992, Mr. Rosenberg
has been an independent corporate consultant offering his clients advise on
financial, strategic, investment and operational matters. From 1992 to 1996, Mr.
Rosenberg was the Chief Operating Officer and Chief Financial Officer of
LottoFone Incorporated, a company located in Alexandria, Virginia providing
telephone based wagering capabilities to state and international lotteries. From
1988 to 1992, Mr. Rosenberg was the Vice President and Chief Financial Officer
of Industrial Training Corporation, multi-media training company located in
Herndon, Virginia. Mr. Rosenberg is a graduate of Northeastern University with a
B.A. degree in chemistry and also earned an M.B.A. in marketing management from
Boston College.
Alyssa Bampton. Ms. Bampton has worked with the Company on a part-time
basis since April 1994 performing various administrative duties. From 1991 to
1993, she worked as an administrator at Eyetel Technologies, Inc. handling a
variety of duties such as customer service, public relations, advertising and
product
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promotion for the video conferencing technology being developed and sold for
that company. Ms. Bampton attended Capilano College for two years. Ms. Bampton
is the niece of the Company's Vice President, Craig J. Bampton.
Executive Compensation
The following table sets forth a summary of cash and non-cash compensation
for the year ended December 31, 1995 and the six month period ended June 30,
1996, with respect to the Company's Chief Executive Officer. No material
salaries were paid by the Company for the two year period prior to 1995. No
executive officer of the Company has earned a salary greater than $100,000
annually for any of the periods depicted.
Summary Compensation Table
Other Annual All Other
Name and Principal Position Year Salary Bonus Compensation Compensation
- --------------------------- ---- ------ ----- ------------ ------------
Kenneth F. Fitzpatrick, 1996 $ - $ - $ - $ -
President and C.E.O. 1995 $ - $ - $ - $ 30,750(1)
(1) Mr. Fitzpatrick was paid primarily as a consultant in 1995.
The preceding table does not include any amounts for noncash compensation,
including personal benefits, paid to the Company's C.E. . The Company believes
that the value of such noncash benefits and compensation paid to Fitzpatrick
during periods presented did not exceed the lesser of $50,000 or 10% of the cash
compensation reported for him.
The following table includes those stock purchase warrants (options) issued
by the Company to its Chief Executive Officer during the Company's last fiscal
year. For purposes of calculating the percent of the total options granted to
employees, the aggregate number issued to all officers, directors and employees
is used.
Options/SAR Grants in Last Fiscal Year
Percent of Total
Options/SARs
Name and Principal Options/SARs (#) Granted Exercise or Base
Position Granted To Employees Price Per Share Expiration Date
- ---------------------- ----------- ------------ --------------- --------------
Kenneth F. Fitzpatrick, 75,000 13% $2.50 05/31/99
President, C.E.O 100,000 18% $5.75 11/06/99
Barry Worshoufsky 100,000 18% $2.50 05/31/99
President, C.E.O.
Employment Agreements
As of the date hereof, the Company has not entered into any employment
contracts with any of its employees, officers or directors, nor has the Company
had a bonus, profit sharing, or
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deferred compensation plan for the benefit of its employees, officers or
directors.
CERTAIN TRANSACTIONS
On March 14, 1996 the Company effected the sale of its wholly owned
subsidiary, Tessier Resources, Ltd. ("Tessier") to Kaniksu Ventures, Inc.
("Kaniksu") in exchange for a $3,000,000 debenture convertible into 2,000,000
shares of Kaniksu common stock. The $3,000,000 debenture matures in four (4)
years for the date of issuance, carries no interest, and may be converted at the
conversion price of $1.50 per share into an aggregate of 2,000,000 shares of
authorized but previously unissued shares of Kaniksu common stock at any time
prior to repayment of the debenture. Presently, VentureTech does not have an
ownership interest in Kaniksu. However, if the debenture was totally converted
into 2,000,000 shares of Kaniksu common stock as of the date hereof, and
assuming no additional Kaniksu shares have been issued, VentureTech would own
approximately 40% of Kaniksu's issued and outstanding common stock.
As additional consideration for the acquisition of Tessier, Kaniksu has
agreed to issue to eligible stockholders of the Company shares of Kaniksu common
stock and rights to purchase additional shares. Under the terms of the
agreement, each individual VentureTech stockholder as of the date of record,
April 5, 1996, is entitled to five (5) shares of authorized but previously
unissued Kaniksu common stock for each 100 shares of VentureTech common Stock
owned. Only stockholders owning at least 100 shares of VentureTech Common Stock
are eligible for the distribution. Further, each five shares of Kaniksu common
stock issued to VentureTech stockholders shall include ten (10) rights, each
right entitling the holder thereof to purchase one additional share of Kaniksu
common stock for $2.25 per share for a period of sixty (60) days following
receipt of the Kaniksu shares and rights. Kaniksu intends to provide these
shares and rights pursuant to a registration statement to be filed as soon as
practical.
Following the sale of Tessier to Kaniksu, Craig J. Bampton, Vice
President and a director of the Company, became the President and a director of
Kaniksu, and G. Michael Cartmel, also Vice President and a director of the
Company, became a director of Kaniksu. Prior to the sale of Tessier, Mr. Bampton
was Vice President of Tessier and President of its wholly owned subsidiary,
Pulverizer Systems, Inc. Mr. Bampton intends to devote the majority of his time
to the operations of Kaniksu. Because of the Company's ongoing interest in
Kaniksu, it is believed desirable to have two of the Company's directors also
serve as directors of Kaniksu.
Since 1994, the Company has received advances from various parties
including officers, directors, stockholders and others in exchange for shares of
Common Stock, warrants, convertible notes and debentures. On June 30, 1996,
the Company issued 419,086 shares of Common Stock to Barry Worshoufsky in
consideration for
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advances to the Company on the basis of $1.70 per share. As of March 31, 1996,
the Company issued 539,172 shares of Common Stock (408,226 shares issued on
February 16, 1996 and 130,946 shares issued on March 31, 1996) to Barry
Worshoufsky in consideration for advances to the Company of $916,660 on the
basis of $1.70 per share. On April 23 and April 29, 1996, the Company issued
300,000 shares and 2,000,000 shares, respectively, to Regis Investment Company
Limited as a partial conversion of a convertible debenture on the basis of $.03
per share. Also, on December 31, 1995 the Company issued 210,888 shares of
Common Stock to Barry Worshoufsky in consideration for advances to the Company
of $358,510 on the basis of $1.70 per share. Further, on October 31, 1995, the
Company issued 380,886 shares of Common Stock to Enterprise Capital in
consideration for advances to the Company of $647,506 on the basis of $1.70 per
share. Additionally, in March 1996, the Company received a note from a
related party, Enterprise Capital International, Inc. ("Enterprise"),
for $200,000 advanced to Enterprise, which note was subsequently repaid
to the Company in April 1996.
From May 1994 through November 1995, the Company granted 1,532,000
warrants to certain individuals, of which 470,000 warrants were granted to
current officers and directors of the Company. Those officers and directors
receiving warrants and the number issued to each include Craig J. Bampton
(50,000), G. Michael Cartmel (50,000), Kenneth F. Fitzpatrick (175,000), Arthur
Rosenberg (135,000), and Alyssa Bampton (60,000). The warrants were issued with
exercise prices ranging from $2.50 to $5.75 per share, which represented the
fair market value of the stock at the time of grant of the warrants, and with
terms ranging from four to five years.
Also, in May 1994, the Company issued an aggregate of 360,000 stock
options to three of its directors, 120,000 options each. Those persons receiving
the options were current director G. Michael Cartmel, current officer Alyssa
Bampton, and former director Barry Worshoufsky. Each option is exercisable at
any time prior to May 2000, unless extended by the Company for an additional
five years, and entitles the holder to purchase one share of the Company's
authorized but unissued Common Stock at the option price of $2.50 per share. As
of the date hereof, none of the options have been exercised. If all of the
options are exercised, an additional 360,000 shares of Common Stock may be
issued at the price of $2.50 per share. See "Risk Factors - Additional Dilution"
and "Principal Stockholders."
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PRINCIPAL STOCKHOLDERS
The following table sets forth information as of August
30, 1996, giving effect to the issuance of 6,000,000 shares to the Selling
Stockholders (See "Selling Stockholders"), with respect to the beneficial
ownership of shares of the Company's Common Stock by (i) each person known by
the Company to be the beneficial owner of more than 5% of the Company's
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each executive officer of the Company, and (iv) all directors and executive
officers as a group. Those names in parenthesis represent the principal
shareholders of the respective entities.
Number of Shares Percentage
Name Beneficially Owned Ownership(1)
- ---- ------------------ ------------
Craig J. Bampton * 1,350,000(2) 8.0%
65 Fletcher Crescent
Winnipeg, Manitoba Canada R3T OK9
G. Michael Cartmel * 170,000(3) 1.0%
304-2170 West Third Avenue
Vancouver, B.C. Canada V6K 1L1
Kenneth F. Fitzpatrick * 175,000(4) 1.0%
1860 Jackson Street
San Francisco, California 94109
Arthur Rosenberg 135,000(5) .8%
11480 Sunset Hills Road, Suite 110E
Reston, Virginia 22090
Alyssa Bampton ...... 180,000(6) 1.1%
1775 Bellevue Avenue
West Vancouver, B.C. Canada
Regis Investments Company Limited 17,670,000(7) 55.1%
701 United Chinese Bank Building
Des Vouex Road Central
( Jose Reyes, Jr.)
Hong Kong
Caledonian Trading Corporation 1,000,000(8) 5.9%
c/o Bank Sarasin & Company
62 Elisabethen Strasse CH-4002
Basil, Switzerland
Eagle Technology Corporation 1,000,000(8) 5.9%
c/o Bank Sarasin & Company
62 Elisabethen Strasse CH-4002
Basil, Switzerland
Falcon Commercial Enterprises Limited 1,000,000(8) 5.9%
c/o Bank Sarasin & Company
62 Elisabethen Strasse CH-4002
Basil, Switzerland
Falcon Sales Corporation 1,000,000(8) 5.9%
c/o Bank Sarasin & Company
62 Elisabethen Strasse CH-4002
Basil, Switzerland
Protex International Limited 1,000,000(8) 5.9%
c/o Bank Sarasin & Company
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62 Elisabethen Strasse CH-4002
Basil, Switzerland
Westminster Computer Services Limited 1,000,000(8) 5.9%
c/o Bank Sarasin & Company
62 Elisabethen Strasse CH-4002
Basil, Switzerland
Monique Tessier 700,000 4.2%
65 Fletcher Crescent
Winnipeg, Manitoba Canada R3T OK9
Robert Tessier 700,000 4.2%
65 Fletcher Crescent
Winnipeg, Manitoba Canada R3T OK9
Barry Worshoufsky 1,404,222(9) 8.2%
3 Hendel Circle
Deer Park, New York 11729
Manatee Investments 1,300,000 7.7%
P.O. Box 1790 Cayman Overseas Bank & Trust
(John Law)
Grand Cayman BWI
All directors and executive officers
as a group (4 persons) 2,010,000(10) 11.1%
* Director
** Unless otherwise indicated in the footnotes below, the Company has been
advised that each person has sole voting power and dispositive power
over the shares indicated above.
(1) As of August 30, 1996, there we e 16,850,186 shares of
Common Stock outstanding, which figure takes into consideration the
6,000,000 shares issued to the Selling Stockholders. Additionally,
certain officers and directors hold certain warrants and/or stock
options to purchase 710,000 shares of Common Stock which are
currently exercisable, subject only to the Company being included on
the Nasdaq Stock Market. Further, certain principal stockholders hold
certain convertible debentures and warrants that may be converted into
15,200,000 shares of Common Stock. Therefore, for purposes of the
table above, as of the date hereof, 32,760,186 shares of Common
Stock are deemed to be issued and outstanding in accordance with Rule
13d-3 adopted by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended. See "Prospectus Summary -
The Offering." Percentage ownership is calculated separately for each
person on the basis of the actual number of outstanding shares as of
August 30, 1996 and assumes the exercise of warrants and/or
options held by such person (but not by anyone else) exercisable
within sixty days.
(2) Includes 50,000 shares which may be acquired by Mr.Bampton pursuant to
the exercise of warrants and/or stock options exercisable within sixty
days at the exercise price of $2.50 per share.
(3) Includes 170,000 shares which may be acquired by Mr. Cartmel pursuant
to the exercise of warrants and/or stock options
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exercisable within sixty days at the exercise price of $2.50 per share.
(4) Includes 175,000 shares which may be acquired by Mr. Fitzpatrick
pursuant to the exercise of warrants and/or stock options exercisable
within sixty days at the exercise price of $2.50 to $5.75 per share.
(5) Includes 135,000 shares which may be acquired by Mr. Rosenberg pursuant
to the exercise of warrants and/or stock options exercisable within
sixty days at the exercise price of $5.75 per share.
(6) Includes 180,000 shares which may be acquired by Ms. Bampton pursuant
to the exercise of warrants and/or stock options exercisable within
sixty days at the exercise price of $2.50 per share.
(7) Includes 15,200,000 shares which may be acquired by Regis Investments
Company Limited pursuant to the conversion of a convertible debenture
and exercise of related warrants exercisable within sixty days at the
exercise price of $.03 per share.
(8) A Selling Stockholder whose shares are held in escrow pending the
effectiveness of this Prospectus, at which time the respective shares
will be delivered to the stockholder upon the payment to the Company of
the purchase price of the shares.
(9) Includes 220,000 shares which may be acquired by Mr. Worshoufsky
pursuant to the exercise of warrants and/or stock options exercisable
within sixty days at the exercise price of $2.50 per share.
(10) Includes 710,000 shares which may be acquired by the Company's
directors or executive officers within sixty days pursuant to the
exercise of warrants and/or stock options at various prices.
SELLING STOCKHOLDERS
On April 24, 1996, the Company agreed in principal to enter into a private
transaction whereby the Company would sell to a consortium of European
investors, consisting of six individual entities (the "Selling Stockholders"),
an aggregate of 6,000,000 shares of authorized but previously unissued Common
Stock for the purchase price of $10.00 per share. This transaction was not
registered under the Securities Act of 1933, as amended (the "Act"), and
therefore the shares of Common Stock issued pursuant to this transaction are
deemed "restricted securities." The agreement was finalized on May 6, 1996 by
Dr. Rocco Guarnaccia, acting as Agent for the Selling Stockholders. On May 6,
1996, the closing market price of the Company's common stock was $14.375 per
share.
As a provision of the private sale of the 6,000,000 shares, the Company
agreed to file a registration statement with the Securities and Exchange
Commission for the purpose of registering the 6,000,000 shares. This Prospectus,
which is part of the Company's
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registration statement, relates to the offer of the 6,000,000 shares by the
Selling Stockholders into the public market. All expenses associated with
the sale of shares of Common Stock by the Selling Stockholders will be paid by
the Selling Stockholders.
The 6,000,000 shares have been issued by the Company and delivered to an
escrow account to be held pending the effectiveness of the registration
statement, to which this Prospectus is a part, and receipt of $60,000,000
payment for the shares. Pursuant to the terms of the escrow, upon the
effectiveness of the Company's registration statement the $60,000,000,
representing the purchase price of the shares, will be delivered to the Company
and, concurrently, the 6,000,000 shares of Common Stock are to be delivered to
the respective Selling Stockholders.
The 6,000,000 shares are being registered for the respective accounts of
the individual Selling Stockholders. The transferability of the 6,000,000 shares
is restricted by federal and state securities laws. Upon registration and
resale, such Selling Stockholders' shares will be free of the restrictions other
than restrictions under the Act with respect to persons who may be deemed to be
affiliates of the Company for the purposes of the Act.
The Selling Stockholders may sell their respective shares directly to
purchasers, through broker-dealers acting as agents for them, or to
broker-dealers who may purchase shares as principal and thereafter sell the
shares from time to time in the over-the-counter market, in negotiated
transactions or otherwise. Such broker-dealer, if any, may receive compensation
in the form of discounts, concessions or commissions from the Selling
Stockholders and/or the purchasers for whom such broker-dealers may act as
agents or to whom they may sell as principals or both (which compensation as to
a particular broker-dealer may be in excess of customary commissions).
The Selling Stockholders, broker-dealers and any other persons, if any,
acting in connection with such sale of the 6,000,000 shares, might be deemed
"underwriters" within the meaning of Section 2(11) of the Act and any commission
received by them or discounts or concessions allowed to such persons, and any
profits received on the resale of the shares may be deemed to be underwriting
discounts and commissions under the Act.
In the event for any reason that the registration statement does not become
effective or the Selling Stockholders do not deliver the $60,000,000 to the
Company, the 6,000,000 shares will be returned to the Company for cancellation
on the Company's stock transfer records. There are no specific conditions
and the Company knows of no reason, with the exception of the failure of its
registration statement to become effective, for the Selling Stockholders not to
deliver the funds for the Common Stock.
The following table sets forth as of the date hereof, certain information
regarding the beneficial ownership of the Company's Common Stock by each Selling
Stockholder. Except as otherwise
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noted, the stockholders shown in the table have sole voting and investment power
with respect to the securities. These Selling Stockholders are presented
together in this table for convenience of presentation only.
Securities Securities to be
Beneficially OwnedBeneficially Owned
Prior to Offering(1 After Offering(1)
Securities
Name Number Percentage Offered Number Percentage
-------- -------- ---------- -------- ------ ---------
Caledonian Trading Corporation 1,000,000 6.1% 1,000,000 -0- 0%
Eagle Technology Corporation 1,000,000 6.1% 1,000,000 -0- 0%
Falcon Commercial Enterprises
Limited 1,000,000 6.1% 1,000,000 -0- 0%
Falcon Sales Corporation 1,000,000 6.1% 1,000,000 -0- 0%
Protex International Limited 1,000,000 6.1% 1,000,000 -0- 0%
Westminster Computer Services
Limited 1,000,000 6.1% 1,000,000 -0- 0%
DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue 100,000,000 shares of Common Stock, par
value $.001 per share, of which 16,850,186 shares are issued and
outstanding as of the date hereof, including the 6,000,000 shares of Common
Stock being offered by the Selling Stockholders.
All shares of Common Stock have equal rights and privileges with respect to
voting, liquidation and dividend rights. Each share of Common Stock entitles the
holder thereof to (i) one non-cumulative vote for each share held of record on
all matters submitted to a vote of the stockholders; (ii) to participate equally
and to receive any and all such dividends as may be declared by the Board of
Directors out of funds legally available therefore; and (iii) to participate pro
rata in any distribution of assets available for distribution upon liquidation
of the Company.
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Stockholders of the Company have no preemptive rights to acquire additional
shares of Common Stock or any other securities. The Common Stock is not subject
to redemption and carries no subscription or conversion rights. All outstanding
shares of Common Stock are, and all shares of Common Stock to be outstanding
upon completion of this Offering will be, fully paid and non-assessable.
As permitted by the provisions of the Idaho General Business Corporation
Law (the "Idaho Code"), the Company has the power to indemnify any officer or
director who, in their capacity as such, is made or threatened to be made a
party to any suit or proceeding, whether criminal, administrative or
investigative, if such officer or director acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
Company. An officer or director shall be indemnified against expenses to the
extent they have been successful on the merits or otherwise in defense of any
action, suit or proceeding. Such indemnification is not exclusive of any other
rights to which those seeking indemnification may be entitled under the By-Laws,
any agreement, vote of stockholders or disinterested directors or otherwise.
Further, the Idaho Code permits a corporation to purchase and maintain liability
insurance on behalf of its officers, directors, employees and agents.
Also pursuant to the Idaho Code, a corporation may set forth in its
articles of incorporation a provision eliminating or limiting in certain
circumstances the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as director.
These provisions do not eliminate or limit the liability of a director (i) for
any breach of the director's duty of loyalty to the corporation or its
stockholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) for liability
arising under Section 30-1-48 of the Idaho Code (relating to the declaration of
dividends and purchase or redemption of shares in violation of the Idaho Code);
or (iv) for any transaction from which the director derived an improper personal
benefit. In addition, these provisions do not limit the right of the corporation
or its stockholders, in appropriate circumstances, to seek equitable remedies
such as injunctive or other forms of non-monetary relief, which remedies may not
be effective in all cases.
Convertible Debentures
In March 1994, the Company issued to Regis Investments Company Limited
("Regis") a convertible debenture in the face amount of $175,000 with an
interest rate of ten percent (10%) per annum (the "Debenture"). The Debenture
was issued by the Company in consideration for monies advanced to the Company by
Regis. The Debenture provides for the holder to convert up to the full face
amount of the Debenture into shares of the Company's authorized but unissued
Common Stock at the conversion price of Three Cents ($.03) per share. Each share
issued upon conversion of all or a portion of the Debenture include an "A" and a
"B" share purchase warrant.
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Each "A" and each "B" share purchase warrant entitles the holder to acquire one
additional share of the Company's authorized but unissued Common Stock at the
conversion price of Three Cents ($.03) per share. Each "A" and each "B" share
purchase warrant is valid and may be converted into Common Stock for a period of
two years following issuance. As of the date hereof, $69,000 of the Debenture
have been converted into a total of 2,300,000 shares of Common Stock, 2,300,000
"A" share purchase warrants and 2,300,000 "B" share purchase warrants. If the
balance of the Debenture and all the "A" and "B" share purchase warrants are
converted into Common Stock, an additional 15,200,000 shares of Common Stock may
be issued at the price of $.03 per share. See "Risk Factors Additional Dilution"
and "Shares Eligible for Future Sales."
Stock Purchase Warrants
From May 1994 through November 1995, the Company has granted an aggregate
of 1,532,000 stock purchase warrants to various individuals, consultants,
directors and officers of the Company. None of these stock purchase warrants
have been registered under the Act. These warrants were granted in consideration
for services rendered or beneficial contributions provided to the Company and/or
for the expectation of future contributions to the success of the Company. The
stock purchase warrants were issued to a total of thirty-six individuals or
organizations at exercise prices ranging from $2.50 to $6.00, which represented
the fair market value of the Common Stock at the time of grant, and for periods
ranging from four to five years. The stock purchase warrants are conditional
upon the Company having its Common Stock listed on the Nasdaq Stock Market and
the Company reserves the right to include the shares underlying the warrants in
a future registration statement by the Company at such time Board of Directors
deems suitable. As of the date hereof, none of the stock purchase warrants have
been exercised. If all of the stock purchase warrants are exercised, an
additional shares of Common Stock may be issued at prices ranging from $2.50 to
$6.00 per share. See "Risk Factors - Additional Dilution" and "Principal
Stockholders."
Directors' Stock Options
In May, 1994, the Company issued an aggregate of 360,000 stock options to
three of its directors (120,000 options each). Each option is exercisable at any
time prior to May 2000, unless extended by the Company for an additional five
years, and entitles the holder to purchase one share of the Company's authorized
but unissued Common Stock at the option price of $2.50 per share. As of the date
hereof, none of the options have been exercised. If all of the options are
exercised, an additional 360,000 shares of Common Stock may be issued at the
price of $2.50 per share. See "Risk Factors - Additional Dilution" and
"Principal Stockholders."
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Miscellaneous
All of the shares of Common Stock to be issued upon conversion of the stock
purchase warrants, directors' stock options and convertible debentures will be
deemed restricted securities as defined by Rule 144 of the Act.
In June 1995, the Company initiated a private placement for 1,000,000 units
at the offering price of $1.70 per unit, with each unit consisting of one share
of Common Stock and one warrant entitling the holder to acquire one additional
share of Common Stock at the exercise price of $1.70 per share. It was the
intent of this private placement to raise funds periodically to finance the
development of the Company. All 1,000,000 shares have been placed and a total of
550,032 additional shares have been issued upon the exercise of warrants.
As of June 30, 1996, 449,968 warrants are still outstanding, which
warrants will expire in June 2000.
In November 1995, the Company initiated a second private placement for
1,000,000 units at the offering price of $5.00 per unit, each unit consisting of
one shares of Common Stock and two warrants entitling the holder to acquire two
additional shares of Common Stock at the exercise price of $5.00 per share for
the first two years after issuance, and $6.00 per share for the subsequent three
years. The private placement expired on August 10, 1996 with no units having
been issued. On that same date, the Company authorized a new offering of 250,000
shares at the offering price of $10.00 per share, to be reserved for the benefit
of certain parties in relation to potential short-term bridge financing.
In March 1996, the Company authorized 1,000,000 stock options for the
possible future allocation to an individual and his associates for their
services related to acquiring financing for the Company and for assisting in the
completion of certain projects on behalf of the Company. These options are
exercisable at $6.00 per share, with no expiration date, and are issuable at the
discretion of the Board of Directors. As of the date hereof, no options have
been issued.
In October 1995, the Company authorized a convertible debenture which
allows for the issuance of up to 900,000 shares of Common Stock and attached
warrants to various individuals and companies in connection with the acquisition
of CWH technology, expertise and operations. The conversion price is set at
$3.00 per share and warrant. As of June 30, 1996, no shares have been
issued pursuant to this debenture.
Transfer Agent and Warrant Agent
The transfer agent and registrar for the Common Stock is Interstate
Transfer Company, 56 West 400 South, Suite 260, Salt
Lake City, Utah 8410.
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PLAN OF DISTRIBUTION
Following the date of this Prospectus, the Selling Stockholders will be
able to sell Common Stock covered hereunder from time to time in one or more
transaction in market transaction at the then prevailing market prices and
terms, or in negotiated transactions or otherwise, and without the payment of
any underwriting discounts or commissions, except for usual and customary
selling commissions paid to brokers or dealers. The Selling Stockholders also
may sell such shares of Common Stock from time to time, as might be permitted
under Rule 144 promulgated under the Act. As of the date hereof, the Company has
not been advised when, or even whether the Selling Stockholders intend to sell
such securities.
SHARES ELIGIBLE FOR FUTURE SALE
The Shares Offered hereby will be freely tradeable without restriction or
further registration under the Act, except for any Common Stock held by or
purchased by an "affiliate" (as defined under the Act) of the Company. As of the
date hereof, approximately 14,705,108 shares of Common Stock (including
the 6,000,000 shares issued to the Selling Stockholders) held by the Company's
current stockholders will constitute "restricted securities" within the meaning
of Rule 144 under the Act and may be sold only pursuant to an effective
registration statement under the Act or an applicable exemption, including an
exemption under Rule 144.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated in accordance with Rule 144) who has beneficially
owned "restricted securities" (defined generally as shares acquired from the
issuer or an affiliate in a non-public transaction) for at least two years, as
well as any person who purchases unrestricted shares in the open market who may
be deemed an "affiliate" of the issuer, is entitled to sell, within any
three-month period, a number of shares of Common Stock that does not exceed the
greater of (i) 1% of the then outstanding shares, or (ii) the average weekly
trading volume in the shares during the four calendar weeks preceding each such
sale. A person who is not deemed to be an "affiliate" of the issuer and who has
held restricted shares for at least three years would be entitled to sell such
shares without regard to the volume limitations described above. As defined in
Rule 144, an "affiliate" of an issuer is a person that directly or indirectly,
through the use of one or more intermediaries, controls, or is controlled by, or
is under common control with, such issuer. Sales of substantial amounts of
restricted shares, or the perception that such sales may occur, could adversely
affect prevailing market prices for the Common Stock.
Beginning 90 days from the date of this Prospectus and during the 90 days
immediately thereafter, in addition to the 6,000,000 shares offered hereby and
2,145,078 tradeable shares of Common Stock outstanding prior to the Offering, an
additional 1,640,000 shares of Common Stock may be sold under Rule 144 of the
Act subject to
-61-
<PAGE>
the volume and other restrictions of Rule 144. Beginning 180 days from the date
of this Prospectus and during the 180 days immediately following, an additional
2,900,000 shares of Common Stock may be sold subject to the volume and other
restrictions of Rule 144. The remaining 4,165,108 shares held by existing
stockholders will become eligible for sale at various times over a period of
less than two years, also under the provisions of Rule 144.
In addition to the above, holders of certain Convertible Debentures may, at
their discretion, currently convert their Debentures into an aggregate of
15,200,000 shares of the Company's Common Stock, which shares, commencing 90
days from the date of this Prospectus, would be immediately tradeable in the
public market pursuant to the terms and volume limitations of Rule 144.
Prior to this Offering, there has been a limited public market for the
Common Stock and no predictions can be made of the effect, if any, that sales of
the Common Stock under Rule 144 or the availability of the Common Stock for sale
will have on the market price prevailing from time to time. Sales of substantial
amounts of the Common Stock pursuant to Rule 144 could subsequently adversely
affect the market price of the Common Stock.
LEGAL MATTERS
Legal matters in connection with this Offering including the validity of
the Shares, offered hereby will be passed upon for the Company by Leonard E.
Neilson, Attorney at Law, P.C., 1121 East 3900 South, Suite C-200, Salt Lake
City, Utah 84124. Mr. Neilson is also the beneficial owner of 7,000 shares of
the Company's Common Stock, and 5,000 stock purchase warrants entitling him to
purchase up to 5,000 shares of Common Stock at the purchase price of $2.50 per
share prior to May 31, 1999.
EXPERTS
The financial statements and schedule included in this Prospectus and in
the Registration Statement have been audited by Jones, Jensen and Company,
independent certified public accountants, to the extent and for the periods set
forth in their report appearing elsewhere herein and in the Registration
Statement, and are included in reliance upon such report given upon the
authority of said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (herein, together with all
amendments and exhibits, referred to as the "Registration Statement") under the
Securities Act of 1933, as amended, with respect to the securities being offered
by this Prospectus. As permitted by the rules and regulations of the Commission,
this Prospectus omits certain information contained in the Registration
Statement and the exhibits and schedules thereto.
-62-
<PAGE>
For further information with respect to the Company and the securities offered,
reference is hereby made to the Registration Statement and the schedules and
exhibits filed as a part thereof. Statements contained in this Prospectus
concerning the contents or provisions of any contract, agreement or other
document are not necessarily complete, and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration
Statement, which documents are materially complete. The Registration
Statement, including the exhibits and schedules thereto, may be inspected,
without charge, at the public reference facilities maintained by the Commission
at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549,
and at the Commission's Regional Offices located at 410 17th Street, Suite 700,
Denver, Colorado 80202, 75 Park Place, 14th Floor, New York, New York 10007 and
500 West Madison Street, Chicago, Illinois 60661. The Commission also
maintains a web site at http://www.sec.gov. Copies of all or any portion of
the Registration Statement can be obtained from the Commission, upon payment of
prescribed fees.
-63-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
VentureTech, Inc.
(A Development Stage Company)
San Francisco, California
We have audited the accompanying consolidated balance sheets of VentureTech,
Inc. (a development stage company) as of December 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity (deficit),
and cash flows for the years ended December 31, 1995, 1994, and 1993. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects the financial position of VentureTech, Inc. (a
development stage company) as of December 31, 1995 and 1994 and the results of
their operations and their cash flows for the years ended December 31, 1995,
1994, and 1993 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in Note 5 to the
financial statements, the company is a development stage company with no
significant operating results to date, there is substantial doubt about its
ability to continue as a going concern. Management's plan in regard to these
matters are also described in Note 5. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Jones, Jensen & Company
Salt Lake City, Utah
June 9, 1996
F - 1
<PAGE>
VENTURETECH, INC.
(A Development Stage Company)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
ASSETS
June 30, December 31, December 31,
1996 1995 1994
CURRENT ASSETS (Unaudited)
<S> <C> <C> <C>
Cash and cash equivalents $ 8,132 $ 2,782 $ 1,120
Tax refunds receivable (Note 6) - 6,025 -
Note receivable - related party (Note 3) - - -
----------- ----------- -----------
Total Current Assets 8,132 8,807 1,120
----------- ----------- -----------
PROPERTY AND EQUIPMENT (Note 2) 162,969 104,180 -
----------- ----------- -----------
OTHER ASSETS
Investment (Note 10) 158,112 - 250,000
License fees (Note 11) 2,250,000 - -
---------- ---------- -----------
Total Other Assets 2,408,112 - 250,000
---------- ----------- ------------
TOTAL ASSETS $ 2,579,213 $ 112,987 $ 251,120
============ ============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F - 2
<PAGE>
VENTURETECH, INC.
(A Development Stage Company)
Consolidated Balance Sheets (Continued)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
June 30, December 31, December 31,
1996 1995 1994
(Unaudited)
CURRENT LIABILITIES
<S> <C> <C> <C>
Accounts payable $ 43,840 $ 22,286 $ 11,122
Interest payable 36,460 27,709 -
Unearned revenue (Note 14) 550,000 - -
Related party payables (Note 3) 350,000 31,946 20,417
License fees payable (Note 11) 800,000 - -
---------------- --------------- -------------
Total Current Liabilities 1,780,300 81,941 31,539
---------------- ---------------- -------------
CONVERTIBLE DEBENTURE - Related
Party (Note 4) 106,000 175,000 175,000
---------------- ---------------- -------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock; 100,000,000 shares authorized of
$0.001 par value, 16,850,186, 7,591,928 and
3,800,154 shares issued and outstanding,
respectively 16,850 7,592 3,800
Additional paid-in capital 63,036,729 1,347,882 412,896
Stock subscription receivable (Note 15) (60,000,000) - -
Deficit accumulated during the
development stage (2,360,666) (1,409,350) (372,115)
Foreign currency translation
adjustment (Note 7) - (90,078) -
--------------- ------------ ---------
Total Stockholders' Equity (Deficit) 692,913 (143,954) 44,581
--------------- ------------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 2,579,213 $ 112,987 $ 251,120
================ ================ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F - 3
<PAGE>
<TABLE>
<CAPTION>
VENTURETECH, INC.
(A Development Stage Company)
Consolidated Statements of Operations
For the Years Ended
December 31,
1995 1994 1993
--------------- -------------- ------------
<S> <C> <C> <C>
REVENUE $ - $ - $ -
--------------- -------------- ----------
EXPENSES
Research and development - - -
General and administrative 906,518 29,190 15,200
Depreciation - - -
--------------- -------------- ----------
Total Expenses 906,518 29,190 15,200
--------------- -------------- ---------------
NET INCOME (LOSS) FROM
OPERATIONS (906,518) (29,190) (15,200)
OTHER INCOME (EXPENSE)
Interest expense (27,709) - -
--------------- -------------- ----------
Total Other Income (Expense) (27,709) - -
--------------- -------------- ----------
INCOME (LOSS) BEFORE LOSS
FROM DISCONTINUED
OPERATIONS AND PROVISION
FOR INCOME TAXES (934,227) (29,190) (15,200)
LOSS FROM DISCONTINUED
OPERATIONS (103,008) - -
INCOME TAXES (BENEFIT) - - -
--------------- -------------- ----------
NET INCOME (LOSS) $ (1,037,235) $ (29,190) $ (15,200)
=============== ============== ===============
INCOME (LOSS) PER SHARE $ (0.25) $ (0.01) $ (0.01)
=============== ============== ===============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 4,177,136 3,695,920 1,960,154
=============== ============== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F - 4
<PAGE>
VENTURETECH, INC.
(A Development Stage Company)
Consolidated Statements of Operations (Continued)
<TABLE>
<CAPTION>
From
Inception on
January 1,
For the Six Months r the Three Months 1986 Through
Ended June 30, Ended June 30, June 30,
1996 1995 1996 1995 1996
---------------- ------------- ------------- ------------- ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
REVENUE $ - $ - $ - $ - $ 5,645
---------------- ------------- ------------- ------------- -------------
EXPENSES
Research and development - - - - 50,215
General and administrative 896,792 250,620 402,390 150,713 2,130,854
Depreciation 11,568 - 8,252 - 11,568
---------------- ------------- ------------- ------------- ------------
Total Expenses 908,360 250,620 410,642 150,713 2,192,637
---------------- ------------- ------------- ------------- ------------
NET INCOME (LOSS) FROM
OPERATIONS (908,360) (250,620) (410,642) (150,713) (2,186,992)
---------------- ------------- ------------- ------------- ------------
OTHER INCOME (EXPENSE)
Interest expense (8,750) (14,875) (4,375) (7,437) (36,459)
---------------- ------------- ------------- ------------- ------------
Total Other Income (Expense) (8,750) (14,875) (4,375) (7,437) (36,459)
---------------- ------------- ------------- ------------- -------------
INCOME (LOSS) BEFORE LOSS
FROM DISCONTINUED
OPERATIONS AND PROVISION
FOR INCOME TAXES (917,110) (265,495) (415,017) (158,150) (2,223,451)
LOSS FROM DISCONTINUED
OPERATIONS (34,206) (62,686) - (27,770) (137,215)
INCOME TAXES (BENEFIT) - - - - -
---------------- ------------- ------------- ------------- ------------
NET INCOME (LOSS) $ (951,316) $ (328,181) $ (415,017) $ (185,920) $ (2,360,666)
================ ============= ============= ============= ============
INCOME (LOSS) PER SHARE $ (0.08) $ (0.08) $ (0.04) $ (0.05)
================ ============= ============= =============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 11,650,880 4,165,502 9,621,404 3,800,154
================ ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F - 5
<PAGE>
VENTURETECH, INC.
(a Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional uring the
Common Stock Paid-in Development
Shares Amount Capital Stage
<S> <C> <C> <C> <C>
Balance at January 1, 1986 278,692 $ 279 $ (279) $ -
Assessment of existing
shareholders to increase
paid-in capital - - 8,722 -
Net loss for the year ended
December 31, 1987 - - - (8,722)
----------- ----------- --------- ---------
Balance, December 31, 1987 278,692 279 8,443 (8,722)
Stock issued to an individual
who became an officer and
director for services performed
to acquire rights to Harvard
Medical Project on July 13, 1988
recorded at predecessor cost of
$0.00 per share 1,188,889 1,189 (1,189) -
Stock issued to Spartan
Medical Corporation to
acquire rights to the Harvard
Medical Project on
November 1, 1988 recorded at
predecessor cost of $0.00 per
share 200,000 200 (200) -
Net loss for the year ended
December 31, 1988 - - - (5,644)
---------- ---------- ---------- -------
Balance, December 31, 1988 1,667,581 $ 1,668 $7,054 $(14,366)
---------- --------- -------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F - 6
<PAGE>
VENTURETECH, INC.
(a Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
Balance forward 1,667,581 $ 1,668 $ 7,054 $ (14,366)
Stock issued for services
at an average price of
$0.21 per share 61,667 62 12,638 -
Stock issued for cash in
private placements at an
average price of $2.48 98,005 98 242,502 -
Stock offering costs offset
against paid-in capital - - (93,687) -
Net loss for the year ended
December 31, 1989 - - - (134,399)
----------- ------ -------- ----------
Balance, December 31, 1989 1,827,253 1,828 168,507 (148,765)
Stock issued for services
valued at $0.06 per share 19,301 19 1,140 -
Stock issued to an individual
for services valued at
$12.00 per share 1,667 1 19,999 -
Stock issued to individuals
for $3.92 per share 11,933 12 46,788 -
Net loss for the year ended
December 31, 1990 - - - (174,522)
-------- --------- --------- ----------
Balance, December 31, 1990 1,860,154 $ 1,860 $236,434 $(323,287)
--------- -------- -------- ---------
Accompanying notes are an integral part of these
consolidated financial statements
F - 7
<PAGE>
VENTURETECH, INC.
(a Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
<S> <C> <C> <C> <C>
Balance forward 1,860,154 $ 1,860 $ 236,434 $ (323,287)
Stock issued to Ballater, Ltd. in
exchange for services recorded
at predecessor cost of $0.00 per
share 100,000 100 (100) -
Net loss for the year ended
December 31, 1991 - - - (2,457)
--------- ----------- ------------- --------------
Balance, December 31, 1991 1,960,154 1,960 236,334 (325,744)
Debt converted into additional
paid-in capital by
Park Avenue, Inc. - - 45,750 -
Debt converted into additional
paid-in capital by
stockholder - - 12,400 -
Net loss for the year ended
December 31, 1992 - - - (1,981)
---------- ---------- ------------ -------------
Balance, December 31, 1992 1,960,154 1,960 294,484 (327,725)
Common stock issued in settlement
of debt at $0.012 per share 1,500,000 1,500 16,252 -
Net loss for the year ended
December 31, 1993 - - - (15,200)
--------- ----------- ----------- -------------
Balance, December 31, 1993 3,460,154 3,460 310,736 (342,925)
Common stock issued for cash
at $0.50 per share 340,000 340 169,660 -
Stock issuance costs - - (67,500) -
Net loss for the year ended
December 31, 1994 - - - (29,190)
---------- ---------- ---------- ----------
Balance, December 31, 1994 3,800,154 $ 3,800 $ 412,896 $(372,115)
---------- --------- ----------- ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F - 8
<PAGE>
VENTURETECH, INC.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Additional Stock
Common Stock Paid-in Subscription Accumulated
Shares Amount Capital Receivable Deficit
<S> <C> <C> <C> <C> <C>
Balance forwarded 3,800,154 $ 3,800 $ 412,896 $ - $ (372,115)
Common stock issued to
acquire Tessier Resources Ltd. 3,200,000 3,200 (80,856) - -
Debt converted into additional
paid-in capital - - 10,417 - -
Common stock issued in
settlement of debt at $1.70
per share 591,774 592 1,005,425 - -
Net loss for the year ended
December 31, 1995 - - - - (1,037,235)
------------- --------------- ---------------- ---------------- --------------
Balance, December 31, 1995 7,591,928 7,592 1,347,882 - (1,409,350)
Common stock issued in
settlement of debt at $1.70
per share (Unaudited) 958,258 958 1,628,147 - -
Common stock issued as a
partial conversion of the
convertible debenture at
$0.03 per share (Unaudited) 2,300,000 2,300 66,700 - -
Common stock issued for
cash at $10.00 per share
(Unaudited) 6,000,000 6,000 59,994,000 (60,000,000) -
Net loss for the six months
ended June 30, 1996
(Unaudited) - - - - (951,316)
------------- --------------- ---------------- ---------------- --------------
Balance, June 30, 1996
(Unaudited) 16,850,186 $ 16,850 $ 63,036,729 $ (60,000,000) $ (2,360,666)
============= =============== ================ ================ ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F - 9
<PAGE>
VENTURETECH, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Years Ended
December 31,
1995 1994 1993
-------------- ------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (loss) $ (1,037,235) $ (29,190) $ (15,200)
Adjustments to reconcile net
Income (loss) to net cash:
Common stock issued for services 400 - -
Depreciation 25,783 - -
Loss on sale of investments - - -
Changes in assets and liabilities:
(Increase) decrease in accounts
receivables and related receivables (6,025) - -
(Increase) decrease note receivable - - -
Increase (decrease) deferred revenue - - -
Increase (decrease) in accounts
payable and other current liabilities 60,820 2,689 (2,753)
------------- ---------- ----------
Net Cash Used by Operating Activities (956,257) (26,501) (17,953)
------------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments - (250,000) -
Sale of investments - - -
Purchase of fixed assets (51,320) - -
Disposal of fixed assets 3,223 - -
Purchase of license fees - - -
-------------- ----------- ----------
Net Cash Used by Investing Activities (48,097) (250,000) -
-------------- ------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of convertible debenture - 175,000 -
Conversion of debt to equity - - 17,752
Proceeds from notes payable 1,006,016 - -
Common stock issued for cash - 102,500 -
Shareholder assessment - - -
------------- ------------ ----------
Net Cash Provided by Financing Activities $ 1,006,016 $ 277,500 $ 17,752
------------ ------------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F - 10
<PAGE>
VENTURETECH, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
For the Years Ended
December 31,
1995 1994 1993
---------- --------- ----------
NET INCREASE (DECREASE)
IN CASH $ 1,662 $ 999 $ (201)
CASH AT BEGINNING OF
PERIOD 1,120 121 322
---------- --------- ---------
CASH AT END OF PERIOD $ 2,782 $ 1,120 $ 121
========== ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID FOR:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
NON CASH FINANCING ACTIVITIES:
Conversion of debt into
additional paid-in capital $ 10,417 $ - $ -
Common stock issued in
settlement of debt $1,006,016 $ - $ 17,752
The accompanying notes are an integral part of these consolidated financial
statements
F - 11
<PAGE>
VENTURETECH, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
From
Inception on
January 1,
For the Six Months For the Three Months 1986 Through
Ended June 30, Ended June 30, June 30,
1996 1995 1996 1995 1996
------------ ------------- ----------- ------------- ----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
CASH FLOWS FROM
OPERATING ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net income (loss) $ (951,316) $ (328,181) $ (415,017) $ (185,920) $ (2,360,666)
Adjustments to reconcile net
Income (loss) to net cash:
Common stock issued for services - - - - 34,259
Depreciation 11,568 18,000 8,252 12,910 37,351
Loss on sale of investments - - - - 20,390
Changes in assets and liabilities:
(Increase) decrease in accounts
receivables and related receivables - (35,642) - - (6,025)
(Increase) decrease note receivable - - 200,000 - -
Increase (decrease) deferred revenue 550,000 - - - 550,000
Increase (decrease) in accounts
payable and other current liabilities (56,463) (1,164) 22,881 1,329 33,701
------- ------- ------ ----- ------
Net Cash Used by
Operating Activities (446,211) (346,987) (183,884) (171,681) (1,690,990)
------------ ------------ ------- --------- ------------
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of investments (103,008) - - - (378,313)
Sale of investments - - - - 7,110
Purchase of fixed assets (174,538) (100,000) (35,167) (15,012) (225,858)
Disposal of fixed assets - - - - 3,223
Purchase of license fees (1,450,000) - (850,000) - (1,450,000)
------------ ------------ ---------- -------- ------------
Net Cash Used by
Investing Activities (1,727,546) (100,000) (885,167) (15,012) (2,043,838)
----------- ------------ ---------- --------- ------------
CASH FLOWS FROM
FINANCING ACTIVITIES
Issuance of convertible debenture - - - - 175,000
Conversion of debt to equity - - - - 75,902
Proceeds from notes payable 2,179,106 451,518 1,062,446 189,820 3,185,122
Common stock issued for cash - - - - 298,213
Shareholder assessment - - - - 8,722
--------------- --------------- ------------- ------------- ---------
Net Cash Provided by
Financing Activities $ 2,179,106 $ 451,518 $ 1,062,446 $ 189,820 $3,742,959
--------------- --------------- ------------- ------------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F - 12
<PAGE>
VENTURETECH, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
From
Inception on
January 1,
For the Six Months For the Three Months 1986 Through
Ended June 30, Ended June 30, June 30,
1996 1995 1996 1995 1996
--------------- --------------- ------------- ------------- ----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
NET INCREASE (DECREASE)
IN CASH $ 5,349 $ 4,531 $ (6,605) $ 3,127 $ 8,131
CASH AT BEGINNING OF
PERIOD 2,782 1,120 14,737 2,524 -
--------------- --------------- ------------- ------------- ----------
CASH AT END OF PERIOD $ 8,131 $ 5,651 $ 8,132 $ 5,651 $ 8,131
=============== =============== ============= ============= ==========
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID FOR:
Interest $ - $ - $ - $ - $ -
Income taxes $ - $ - $ - $ - $ -
NON CASH FINANCING ACTIVITIES:
Conversion of debt into
additional paid-in capital $ - $ - $ - $ - $ 75,902
Common stock issued in
settlement of debt $ 1,979,106 $ - $ 712,446 $ - $ 2,652,874
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F - 13
<PAGE>
VENTURETECH, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
June 30, 1996 and December 31, 1995 and 1994
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
The consolidated financial statements presented are those of
VentureTech, Inc.
VentureTech, Inc. (VTI) was incorporated on July 19, 1948 under the
laws of the State of Idaho. VTI has had limited activity since the
mid 1950's and is considered a development stage company because no
significant revenues have been realized and planned principal
operations have not yet commenced. The Company is engaged in the
development, acquisition and licensing of certain computer based
technology designed to ultimately offer a full range of casino
style gaming, entertainment, information and financial transaction
services over the world-wide Internet. The Company intends to
establish a series of multi-cultural/multi-ethnic virtual casinos
over the Internet from authorized locations around the world.
Tessier Resources Ltd (TRL) was incorporated on September 24, 1990
under the laws of the Province of Manitoba. TRL is currently
engaged in the research and development of an apparatus for
removing ice and is considered a development stage company because
no significant revenues have been realized and planned principal
operations have not yet commenced.
Pulverizer Systems, Inc. (PSI) was incorporated on January 10, 1994
under the laws of the Province of Manitoba. PSI was organized for
the purpose of marketing TRL's snow and ice removal machines and is
a fully owned subsidiary of TRL. PSI is considered a development
stage company as no significant revenues have been realized and
planned principal operations have not yet commenced.
On March 17, 1995, VentureTech, Inc. (VTI) acquired all of the
outstanding common stock of Tessier Resources Ltd. (TRL) in
exchange for $250,000 and 3,200,000 shares of VTI's common stock.
On March 13, 1996, VentureTech, Inc. (VTI) sold Tessier Resources,
Ltd, to Kaniksu Ventures, Inc. (Kaniksu). The financial statements
presented are consolidated at December 31, 1995 and show the
investment in Kaniksu at June 30, 1996 carried at cost.
(Notes 9 and 10)
Cybernet Currency Clearing, Inc. (CCCI) was incorporated on August
23, 1995 under the laws of the state of Nevada as a foreign
corporation to provide encoding protection for secure Internet
transactions. CCC is considered a development stage company because
no revenues have been realized and planned principal operations
have not yet begun.
Euro Asian E-Casinos, Inc (E-Casinos) was incorporated on April 18,
1996 in accordance with the Associates Law of the Republic of the
Marshall Islands as a foreign corporation to own and operate full
service gaming casinos on the internationally accessible Internet.
E-Casinos is considered a development stage company because no
revenues have been realized and planned principal operations have
not yet begun.
F - 14
<PAGE>
VENTURETECH, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
June 30, 1996 and December 31, 1995 and 1994
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting.
b. Loss Per Share
The computation of loss per share of common stock is based on the
weighted average number of shares outstanding at the date of the
financial statements. Common stock equivalents are anti-dilutive.
c. Provision for Taxes
At June 30, 1996, the Company has net operating loss carryforwards
of approximately $2,360,000 that may be offset against future
taxable income through 2010. No tax benefit has been reported in
the 1996 financial statements, because the Company believes there
is a 50% or greater chance the carryforwards will expire unused.
Accordingly, the potential tax benefits of the loss carryforwards
will be offset by a valuation allowance of the same amount.
d. Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents.
e. Principles of Consolidation
The December 31, 1995 and 1994 consolidated financial statements include
those of VentureTech, Inc. and its wholly-owned subsidiaries, Tessier Resources
Ltd. and Pulverizer Systems, Inc. All significant intercompany accounts and
transactions have been eliminated. The June 30, 1996 financial statements are
consolidated with CCCI and E-Casinos.
f. Property and Equipment
Office equipment is recorded at cost. Minor additions and renewals
are expensed in the year incurred. Major additions and renewals are
capitalized and depreciated over their estimated useful lives.
Depreciation of office equipment is computed using the declining
balance method over the estimated useful life of the asset.
Depreciation expense for the period ended June 30, 1996 and the
years ended December 31, 1995 and 1994 was $11,568 and $-0- and
$-0-, respectively.
F - 15
<PAGE>
VENTURETECH, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
June 30, 1996 and December 31, 1995 and 1994
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
f. Property and Equipment (Continued)
Machinery and equipment consists of costs of materials and contract
services provided in connection with the construction of two snow
and ice removal machines. Depreciation of machinery and equipment
is computed using the straight line method over the estimated
useful life of the asset. Depreciation expense for the years ended
December 31, 1995 and 1994 was $25,245 and $569, respectively.
These amounts were subsequently reclassified to loss from
discontinued operations.
Property and equipment consists of the following:
June 30, December 31, December 31,
1996 1995 1994
--------- ------------ ----------
(Unaudited)
Machinery and equipment $ - $ 128,922 $ -
Office equipment 163,625 1,041 -
Leasehold improvements 10,913 - -
Accumulated depreciation (11,569) (25,783) -
--------- ---------- ----------
Net Equipment $162,969 $ 104,180 $ -
========= ========== ==========
g. Recently Issued Accounting Standards
In March 1995, the Financial Accounting Standards Board issued a
new statement titled "Accounting for Impairment of Long-Lived
Assets." (FAS 121) This new standard is effective for years
beginning after December 15, 1995 and would change the Company's
method of determining impairment of long-lived assets. Although the
Company has not performed a detailed analysis of the impact of this
new standard on the Company's financial statements, the Company
does not believe that adoption of the new standard will have a
material effect on the financial statements.
In October 1995, the Financial Accounting Standards Board issued a
new statement titled "Accounting for Stock-Based Compensation" (FAS
123). The new statement is effective for fiscal years beginning
after December 15, 1995. FAS 123 encourages, but does not require,
companies to recognize compensation expense for grants of stock,
stock options, and other equity instruments to employees based on
fair value. Companies that do not adopt the fair value accounting
rules must disclose the impact of adopting the new method in the
notes to the financial statements. Transactions in equity
instruments with non-employees for goods or services must be
accounted for on the fair value method. The Company currently
intends to adopt the fair value accounting prescribed by FAS 123.
However, the Company intends to continue its analysis of FAS 123 to
determine its ultimate effect in the future.
F - 16
<PAGE>
VENTURETECH, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
June 30, 1996 and December 31, 1995 and 1994
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
h. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
NOTE 3 - RELATED PARTY TRANSACTIONS
On June 30, 1996, the Company issued 419,086 shares of its common
stock in consideration of money owed to a related party. At the
date of the issuance $712,445 was owed. At June 30, 1996 $350,000
was still owed by the Company. This note payable is non interest
bearing and is due upon demand. (Note 13).
In April, 1996, the Company issued 2,300,000 shares of its common
stock as a partial conversion of the convertible debenture. The
shares were issued at $0.03 per share (Note 4).
On March 31, 1996, the Company issued 539,172 shares of its common
stock in consideration of money owed to a related party. At the
date of issuance $916,660 was owed (Note 13).
On December 31, 1995, the Company issued 210,888 shares of its
common stock in consideration of money owed to a related party. At
the date of issuance $358,510 was owed (Note 13).
On October 31, 1995, the Company issued 380,886 shares of its
common stock in consideration of money owed to a related party. At
the date of issuance $647,506 was owed (Note 13).
The Company has granted 470,000 of the 1,532,000 warrants to
officers and directors of the Company (Note 13). The warrants were
issued at prices ranging from $2.50 to $5.75 which represented the
fair market value of the stock at the time of grant, and for
periods ranging from four to five years.
The Company has received advances from certain officers, directors,
shareholders and others in order to pay operating expenses of the
Company. As of June 30, 1996 and December 31, 1995, and December
31, 1994, $350,000, $31,946 and $49,741, respectively, was owed by
the Company as a result of these advances.
F - 17
<PAGE>
VENTURETECH, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
June 30, 1996 and December 31, 1995 and 1994
NOTE 3 - RELATED PARTY TRANSACTIONS (Continued)
On May 14, 1994, officers and directors of the Company were issued
stock options to purchase 120,000 shares of the Company's common
stock at $2.50 per share. No compensation expense has been recorded
as the option price exceeded the fair market value of the shares
when the options were issued.
On November 1, 1993, the Company issued 1,500,000 shares of its
common stock in consideration of money owed to a related party. At
the date of conversion $17,752 was owed.
NOTE 4 - CONVERTIBLE DEBENTURE
In March of 1994, the Company issued a $175,000 fixed and floating
convertible debenture. The debenture bears interest at 10% per
annum. The debenture is convertible into common stock at a rate of
$0.03 per share. The debenture carries "A" and "B" warrants to
purchase additional shares of the Company's common stock. The terms
of the warrants are also $0.03 per share. There is no time limit
associated with the debenture; however, the warrants are
exercisable only within two years of the initial share conversion.
In April 1996, the Company issued 2,300,000 shares of common stock
to convert $69,000 of the debenture. At June 30, 1996, the balance
payable on the debenture was $106,000.
NOTE 5 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company has
incurred losses from its inception through June 30, 1996. The
Company does not have an established source of revenues sufficient
to cover its operating costs and to allow it to continue as a going
concern. It is the intent of the Company to seek additional
financing through private placements of its common stock.
NOTE 6 - TAX REFUNDS RECEIVABLE
As of December 31, 1995 the Company had investment and goods and
services tax refunds receivable of $6,025. The investment tax
refunds are calculated based on research and development costs
incurred during the respective period. The goods and services tax
refunds are based on tax paid on goods purchased and services
provided during the respective period.
NOTE 7 - FOREIGN CURRENCY TRANSLATION ADJUSTMENT
Assets and liabilities of foreign operations have been translated
into U.S. dollars at current, weighted-average and historical rates
of exchange. Gains or losses on such translations are reflected as
currency translation adjustments in stockholders' equity. Income
and expense accounts have been translated into U.S. dollars at
weighted-average rates of exchange.
F - 18
<PAGE>
VENTURETECH, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
June 30, 1996 and December 31, 1995 and 1994
NOTE 8 - STOCK TRANSACTIONS
On June 30, 1996, the Company issued 419,086 shares of is common
stock in settlement of debt, valued at $1.70 per share (Notes 3 and
13).
On May 6, 1996, the Company issued 6,000,000 shares of its common
stock to an escrow agent who is to hold the shares until the
Company is paid $60,000,000. This $60,000,000 is currently recorded
as a stock subscription receivable (Note 15).
During April 1996, the Company issued 2,300,000 shares of common
stock as a partial conversion of the convertible debenture. The
shares were issued at $0.03 per share and represented conversion of
$69,000 of the initial $175,000 debenture.
On March 31, 1996, the Company issued 539,172 shares of its common
stock in settlement of debt, valued at $1.70 per share (Note 3,
13).
On December 31, 1995, the Company issued 210,888 shares of its
common stock in settlement of debt, valued at $1.70 per share (Note
3, 13).
On October 31, 1995, the Company issued 380,886 shares of its
common stock in settlement of debt, valued at $1.70 per share (Note
3, 13).
During 1994, the Company issued 340,000 shares of its common stock
for cash, at $0.50 per share. The Company incurred costs of $67,500
in connection with the stock offering which were offset to
additional paid-in capital (Note 4).
In November 1993, the Company issued 1,500,000 shares of its common
stock in settlement of debt, valued at $0.012 per share (Note 3).
NOTE 9 - DISCONTINUED OPERATIONS
On March 14, 1996 the Company sold its subsidiary, Tessier
Resources, LTD. to a public shell, Kaniksu Ventures, Inc.(Kaniksu).
The financial statements have been restated to reflect this
transaction as discontinued operations. (Note 10)
NOTE 10 - INVESTMENT
The investment represents a minority interest in Kaniksu after
conversion of the convertible debenture. This investment came as a
result of the sale of Tessier Resources, Ltd. Kaniksu gave the
Company a convertible debenture valued at $3,000,000 in exchange
for all of the issued and outstanding stock of Tessier Resources,
Ltd. The debenture will mature in four (4) years and does not carry
any interest. The debenture is convertible at anytime before
repayment into an aggregate of 2,000,000 shares of authorized but
previously issued unissued shares of Kaniksu common stock at a
conversion price of $1.50 per share. The investment is being
carried at its predecessor cost of $158,112 and no gain or loss was
recognized on the sale.
F - 19
<PAGE>
VENTURETECH, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
June 30, 1996 and December 31, 1995 and 1994
NOTE 11 - LICENSE FEES
The fees are amounts paid for software licenses and the rights to
use the software related to the Company's conduct of its Internet
related gaming.
CasinoWorld Holdings, Ltd. (CasinoWorld) $ 2,000,000
AlphaCom Data Security Services, Inc. (AlphaCom) 250,000
Total $ 2,250,000
==============
The CasinoWorld fee will be amortized over a period of 10 years.
The AlphaCom fee will be amortized over a period of 30 years.
Amortization will begin when operations commence. At June 30, 1996,
the amount owing Casino World was $800,000.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
The Company currently has signed license agreements with two
companies (See Note 11) which have revenue sharing provisions. The
first, CasinoWorld requires that the Company commit not less than
$1,000,000 to promote its web site to clients in jurisdictions
where Internet-based gambling is legal and pay CasinoWorld two
thirds (2/3's) of the gross revenues generated by the Company after
winnings and payouts at its website. The second, AlphaCom requires
ongoing payments of 10% of the Company's net revenues which will be
generated using AlphaCom's security software.
Presently all building leases are month-to-month.
NOTE 13 - DILUTIVE INSTRUMENTS
In June 1995 the Company initiated a private placement for
1,000,000 shares of its common stock with accompanying 1,000,000
warrants at $1.70 per share and warrant. As of June 30, 1996, the
Company has issued 1,000,000 shares associated with this placement
as well as 550,032 shares from the exercise of the warrants. Of the
1,550,032 shares which have been issued pursuant to this private
placement, 591,774 shares were issued in 1995, while 958,258 shares
were issued in 1996. As of June 30, 1996, 449,968 warrants are
still outstanding. The remaining warrants expire in June 2000.
In November 1995, the Company initiated a private placement for
1,000,000 shares of its common stock at an issue price of $5.00 per
share. There are also 2,000,000 warrants attached. The warrants are
exercisable at $5.00 per share for the first two years, and $6.00
per share for the next three years. As of June 30, 1996 no shares
have been issued pursuant to this private placement.
In October 1995, the Company authorized a debenture instrument
which allows for the issuance of up to 900,000 shares and attached
warrants to various individuals and companies in connection with
the acquisition of CasinoWorld technology, expertise and
operations. The stock issuance price is set at $3.00 per share and
warrant. As of June 30, 1996, no shares have been issued pursuant
to this debenture.
F - 20
<PAGE>
VENTURETECH, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
June 30, 1996 and December 31, 1995 and 1994
NOTE 13 - DILUTIVE INSTRUMENTS (Continued)
In March 1996, the Company authorized 1,000,000 stock options for
possible future allocation to an individual and his associates for
their services in raising funds and completing projects for the
Company. Issuance of these stock options are at the discretion of
the Company's Board of Directors. The options are exercisable at
$6.00 per share with no time limit associated with the allocation.
Over the period of May 1994 through November 1995, the Company
granted 1,532,000 warrants to certain individuals, consultants,
Directors and Officers of the Company. These warrants were granted
for services or beneficial contributions provided to the Company
and/or for the expectation of future contributions to the success
of the Company. The warrants were issued to thirty-five individuals
or organizations at exercise prices ranging from $2.50 to $5.75,
which represented the fair market value of the stock at the time of
grant, and for periods ranging from four to five years. The
warrants will be issued to these individuals or organizations
pursuant to a warrant agreement with the Company. The Company
intends to register the shares underlying these warrants at a time
deemed suitable by management. The warrants are conditional upon
the Company achieving its listing with the NASDAQ stock exchange.
NOTE 14 - UNEARNED REVENUE
On February 15, 1996 the Company entered into an agreement to
provide research and development services related to its Internet
expertise. In connection with the agreement, the Company was paid
$550,000. The Company is required to report the results of its
research within a one (1) year period. As of June 30, 1996, the
Company had not completed any of the research and development,
accordingly the revenue is deferred in the accompanying financial
statements.
NOTE 15 - STOCK SUBSCRIPTION RECEIVABLE
On May 6, 1996 the Company executed an escrow agreement which
requires the Company to file with the Securities and Exchange
Commission a registration statement relating to 6,000,000 shares of
the Company's common stock. Upon the effectiveness of the
registration statement, the escrow agent is obligated to deliver
$60,000,000 to the Company and also to release the 6,000,000 shares
of stock.
NOTE 16 - SUBSEQUENT EVENTS
In anticipation of the expiration (on August 10, 1996) of the
private placement authorized in November 1995, the Company approved
a private placement for 250,000 shares at $10.00 per share.
F - 21
<PAGE>
No dealer, salesman or any other
person has been authorized to give any
information or to make any representations
other than those contained in this
Prospectus, and, if given or made, such
information or representation must not VENTURETECH, INC.
be relied upon as having been authorized
by the Company. Neither the delivery of
this Prospectus nor any sale made hereunder
shall under any circumstances create
any implication that there has been no
change in the affairs of the Company 6,000,000 Shares of
since the date hereof. This Prospectus does Common Stock
not constitute an offer to sell or a
solicitation of an offer to buy any
securities offered hereby by anyone in
any jurisdiction in which such offer or
solicitation is not authorized or in which
the person making such offer or solicitation
is not qualified to do so or to anyone to
whom it is unlawful to make such offer or
solicitation.
TABLE OF CONTENTS
Page
Prospectus Summary.................................2
Risk Factors......................................11
The Company.......................................17
Dilution..........................................18
Use of Proceeds...................................19
Market Information................................21
Dividend Policy...................................22
Capitalization....................................22 PROSPECTUS
Selected Financial Data...........................24
Management's Discussion and Analysis of Financial
Condition and Results of Operations 25
Business..........................................31
Management........................................48
Certain Transactions..............................51
Principal Stockholders............................53
Selling Stockholders..............................55
Description of Securities.........................57
Plan of Distribution..............................61
Shares Eligible for Future Sale 61
Legal Matters.....................................62
Experts...........................................62
Additional Information............................62
Consolidated Financial Statements F-1 Septmeber 11, 1996
F - 22
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other expenses of Issuance and Distribution.
The Company estimates that expenses in connection with the Offering will
be as follows:
Securities and Exchange Commission
registration fee............................. $ 28,190
Nasdaq Stock Market Application Fee.......... 10,000
Accountants' fees and expenses............... 20,000
Legal fees and related expenses.............. 60,000
Printing..................................... 10,000
Transfer agent and registrar fees and
expenses..................................... 5,000
Cost related to private sale to Selling
Stockholders................................. 12,000,000
Miscellaneous................................ 16,810
------------
Total........................................ $ 12,150,000
============
Item 14. Indemnification of Directors and Officers.
The Company is incorporated under the laws of the State of Idaho. As
permitted by the provisions of the Idaho General Business Corporation Law (the
"Idaho Code"), the Company has the power to indemnify any officer or director
who, in their capacity as such, is made or threatened to be made a party to any
suit or proceeding, whether criminal, administrative or investigative, if such
officer or director acted in good faith and in a manner reasonably believed to
be in or not opposed to the best interest of the Company. An officer or director
shall be indemnified against expenses to the extent they have been successful on
the merits or otherwise in defense of any action, suit or proceeding. Such
indemnification is not exclusive of any other rights to which those seeking
indemnification may be entitled under the By-Laws, any agreement, vote of
stockholders or disinterested directors or otherwise. Further, the Idaho Code
permits a corporation to purchase and maintain liability insurance on behalf of
its officers, directors, employees and agents. Neither the Company's Articles of
Incorporation or By-Laws make provisions for the indemnification of the
Company's officers and directors nor for the purchase of liability insurance on
behalf of its officers, directors, employees and agents. The Company does not
maintain any such liability insurance.
Also pursuant to the Idaho Code, a corporation may set forth in its
articles of incorporation a provision eliminating or limiting in certain
circumstances, the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
These provisions do not eliminate or limit the liability of a director (i) for
any breach of the director's duty of loyalty to the corporation or its
stockholders;
II - 1
<PAGE>
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (iii) for liability arising under
Section 30-1-48 of the Idaho Code (relating to the declaration of dividends and
purchase or redemption of shares in violation of the Idaho Code); or (iv) for
any transaction from which the director derived an improper personal benefit. In
addition, these provisions do not limit the right of the corporation or its
stockholders, in appropriate circumstances, to seek equitable remedies such as
injunctive or other forms of non-monetary relief, which remedies may not be
effective in all cases.
The Company's Articles of Incorporation do not include a provision to
eliminate the personal liability for monetary damages for breach of fiduciary
duty by a director of the Company. If the Company does adopt such a proposal in
the future, it would not eliminate or limit the liability of a director for any
act or omission occurring prior to the date when such provision becomes
effective.
Item 15. Recent Sales of Unregistered Securities.
The following table sets forth information relating to all previous sales
of securities by the Registrant within the past three years that were not
registered under the Securities Act of 1933, as amended (the "Act").
Date of Sale Name of Purchaser Type Number Consideration
- ------------ ----------------- ---- ------ -------------
12-28-93 Manatee Investments (a) 1,500,000 Settlement of debt
valued by the Company
at $17,752
03-20-94 Regis Investment (b) 17,500,000 $ 175,000
Company Limited
05-18-94 to Thirty-six persons (c) 1,532,000 Services, not valued
by the 11-10-95
Company because exercise
prices of warrants equal
to current market price
at time of issuance
05-18-94 Three directors (d) 360,000 Services, not valued by
the Company because
exercise price ofoptions
equal to current market
price at timeof issuance
08-29-94 Regis Investment (a) 170,000 $ 85,000
Company Limited
09-29-94 Barry Bampton (a) 170,000 $ 85,000
03-17-95 Shareholders and (a) 3,200,000 Exchange of shares of
assigns Tessier Tessier Resources, Inc.
Resources, Inc.
10-31-95 Enterprise Capital (a) 380,886 Settlement of debt at
International, Inc. $1.70 per share (e)
12-31-95 Barry Worshoufsky (a) 210,888 Settlement of debt at
$1.70 per share (e)
II - 2
<PAGE>
02-16-96 Barry Worshoufsky (a) 408,226 Settlement of debt at
$1.70 per share (e)
03-31-96 Barry Worshoufsky (a) 130,946 Settlement of debt at
$1.70 per share (e)
04-23-96 Regis Investment (a) 300,000 Conversion of debenture
Company Limited at $.03 per share
04-29-96 Regis Investment (a) 2,000,000 Conversion of debenture
Company Limited at $.03 per share
04-29-96 Six Selling (a) 6,000,000 $60,000,000 upon
Stockholders effectiveness of this
registration statement.
shares held in escrow
06-30-96 Barry Worshoufsky (a) 419,086 Settlement of debt at
$1.70 per share (e)
Notes on following page
(a) Common Stock.
(b) Convertible Debenture in the face amount of $175,000 which can
ultimately be converted into 17,500,000 shares of Common Stock. The
Convertible Debenture was issued on March 20, 1994 for the
consideration of $175,000. Upon the conversion of all of the underlying
shares of Common Stock at $.03 per share, the Company would receive
$525,000 in consideration.
(c) Stock purchase warrants issued with various exercise prices equal to
current market value of the Common Stock at time of issuance.
(d) Directors stock options with exercise price equal to current market
value of the Common Stock at time of issuance.
(e) A total of 1,000,000 units issued periodically, each unit consisting of
one shares of Common Stock and warrant, both the Common Stock and
warrant valued at $1.70 each. A total of 550,032 warrants have been
converted into shares of Common Stock.
With respect to the issuance and/or sale of the aforementioned shares, the
Registrant relied on the exemption from registration provided by Section 4(2) of
the Act. Issuances of Common Stock for services were made in consideration for
services rendered to the Company by employees or services performed for the
Company by persons not otherwise affiliated with the Company. All of the shares
issued to the aforementioned persons bore restrictive legends preventing their
transfer except in accordance with the Act and the regulations promulgated
thereunder. In addition, stop transfer instructions pertaining to these shares
will be lodged with the Registrant's transfer agent.
II - 3
<PAGE>
Item 16. Exhibits and Financial Statements Schedules.
(a) The following exhibits are filed with this Registration
Statement:
Exhibit No. Exhibit Name
3.1 Articles of Incorporation and Amendments
3.2 By-Laws
4.1 Specimen Common Stock Certificates of Registrant
5.1 Opinion of Leonard E. Neilson, P.C.
10.1 Non-Exclusive License Agreement
10.2 Operating, Revenue Sharing, and Management Services Agreement
10.3* AlphaCom License Agreement
10.4 Escrow Agreement
10.5 Letter of Understanding with InfoServe
22.1 Subsidiaries of Registrant
23.1 Consent of Jones Jensen & Company, Independent Certified Public
Accountants
23.2 Consent of Leonard E. Neilson, P.C. (included in Exhibit 5.1)
*To be filed
(b) Financial Statement Schedules for Registrant.
Schedules other than those listed above are omitted for the reason that
they are not required or are not applicable, or the required
information is shown in the financial statements or notes therein.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offer or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply
if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by
the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in
the registration statement.
II - 4
<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, the Registrant's Certificate of
Incorporation or provisions of Idaho law, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of a
Registration Statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act of 1933 shall be deemed to be part of the Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II - 5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Reston, State of
Virginia, on this 10th day of September, 1996.
VENTURETECH, INC.
(REGISTRANT)
By: /S/ KENNETH F. FITZPATRICK
Kenneth F. Fitzpatrick, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicate
Signature Title Date
September 10, 1996
/S/ KENNETH F. FITZPATRICK President,
Kenneth F. Fitzpatrick Chief Executive
Officer and Director
September 10, 1996
/s/ CRAIG J. BAMPTON Vice President
Craig J. Bampton and Director
September 10, 1996
/S/ G. MICHAEL CARTMEL Vice President
G. Michael Cartmel and Director
September 10, 1996
/S/ ARTHUR ROSENBERG Chief Financial
Arthur Rosenberg Officer and Principal
Accounting Officer
II - 6
<PAGE>
EXHIBIT INDEX
Exhibit
Number Document Description
3.1 Articles of Incorporation and Amendments
3.2 By-Laws
4.1 Specimen Stock Certificate
5.1 Opinion of Leonard E. Neilson, P.C.
10.1 Non-Exclusive License Agreement
10.2 Operating, Revenue Sharing, and Management Services
Agreement
10.3* AlphaCom License Agreement
10.4 Escrow Agreement
10.5 Letter of Understanding with InfoServe
21.1 Subsidiaries of Registrant
23.1 Consent of Jones, Jensen and Company, Independent
Certified Public Accountants
23.2 Consent of Leonard E. Neilson, P.C. (included in
Exhibit 5.1)
- ---------------
* To be filed
II - 7
<PAGE>
EXHIBIT 4.1
SPECIMEN STOCK CERTIFICATE
<PAGE>
NOT VALID UNLESS COUNTERSIGNED EY TRANSFER AGENT INCORPORATED UNDER THE LAWS OF
THE STATE OF IDAHO
VENTURE TECH, INC. CUSIP NO 92327N 10 2
AUTHORIZED COMMON SHARES 100,000,000
PAR VALUE $.001
THIS CERTIFIES TIIAT 5 P E C I M E N C E R T I E I C A T E
IS THE RECORD HOLDER OF *******VOID*******
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This
Certificate is not valid until countersigned by the Transfer Agent and
registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
EXHIBIT 5.1
OPINION OF LEONARD E. NEILSON, P.C.
(INCLUDES EXHIBIT 23.2
CONSENT OF LEONARD E. NEILSON, P.C.)
<PAGE>
VentureTech, Inc.
September 10, 1996
Page 1
Leonard E. Neilson
Attorney at Law
1121 East 3900 South
Suite 200, Bldg. C
Salt Lake City, UT 84124
Phone: (801) 288-2855 Fax: (801) 288-2850
September 10, 1996
VentureTech, Inc.
11480 Sunset Hills Road, Suite 110E
Reston, Virginia
Re: Amendment No. 1 to
S-1 Registration Statement of
VentureTech, Inc.
S.E.C. File No. 33-7113
To the Board of Directors:
I have acted as counsel to VentureTech, Inc., an Idaho corporation (the
"Company"), in connection with Amendment No. 1 to its Registration Statement on
Form S-1 and the public offering by certain selling stockholders of 6,000,000
shares of previously issued common stock, par value One Tenth of a Cent ($.001)
per share (the "Common Stock"). The subject 6,000,000 shares of Common Stock
(the "Shares") are to offered and sold by the selling stockholders pursuant to
fulfillment of the terms and conditions set forth in Amendment No. 1 to the
Registration Statement filed on Form S-1 in accordance with the registration
provisions of the Securities Act of 1933, as amended.
I have examined the Articles of Incorporation and all amendments
thereto, By-Laws, minutes of corporate proceedings and other corporate documents
with respect to the issuance of the Shares. I have been furnished with
originals, or copies certified to my satisfaction, of all such corporate or
other records of the Company (the "Corporate Records") and I have made such
other legal and factual examinations and inquiries as I have considered
necessary as a basis for the opinions expressed herein. In the examination of
the Corporate Records, I have presumed the authenticity of all signatures which
existed on the Corporate Records and have presumed the veracity and regularity
of all Corporate Records.
As to the question of fact material to this opinion letter, I have
relied upon the representations and warranties, certificates of and
conversations and correspondences with, officers and representatives of the
Company. Based upon the foregoing, I am of the opinion that:
<PAGE>
VentureTech, Inc.
September 10, 1996
Page 2
1. The Company is a corporation duly organized and validly
existing under the laws of the State of Idaho.
2. The Shares have been legally and validly authorized under the
Articles of Incorporation and Board of Directors of the
Company and when distributed and paid for in accordance with
the terms set forth in the Registration Statement, the Shares
will be duly and validly issued and outstanding, fully paid
and nonassessable.
I hereby consent to the reference to myself in Amendment No. 1 to the
Registration Statement covering the offering of the Shares and the use of my
name beneath the caption "Legal Matters" in the Prospectus forming a part
thereof, and to the filing of a copy of this opinion as Exhibit 5.1 thereof.
Yours truly,
/S/
Leonard E. Neilson
:ae
EXHIBIT 10.1
NON-EXCLUSIVE LICENSE AGREEMENT
<PAGE>
NONEXCLUSIVE LICENSE AGREEMENT
This ABreen~u made this go 1 day of March 1996, by and
between CasinoWorld
Holdings, Ltd. (CWH or Licensor), a Delaware corporation,
and VentureTech, Inc. (Licensee),
an Idaho corporation.
RECITALS
WEIEREAS, CWH teas developed certain software and hardware applications,
Know-How, Trade Secrets, copyrights and trademarks, and has obtained a license
to certain operating Platform Software, for use by Content Providers on an
Internet Website as part of Licensor's Virtual CasinoWorldTu service; and
WHEREAS, Licensee desires a nonexclusive license to CWH's Proprietary Technology
and a nonexclusive sublicense to CWH's license to use Durand Communications
Network's ("Durand") MindWire~ software technology. NOW, 11IEREFORE, in
consideration of the foregoing premises and the covenants and agrees recited in
this Agreement and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by each Party, the Parties hereby
agree as follows
ARTICLE I
DEFINITIONS
1.1 Software, shall mean computer-readable programs for computer operating
systems or specific applications. 1.2 Hardware, shall mean the equipment and
fixtures with which Software is used.
Page 1 of 11
<PAGE>
13 Wobble,ball mean a location on the Internet where a sconce provider employs
its Software.
1.4 Bet, steal mean a Network of compute Networlcs accessible
through telephonic now by computer for specific uses, including, but not limited
to recreational activities, such as games, wig. betting, and row support
activities.
1.5 l!latferms, shall mean the equipment, programs, and telecom
Networlc access nicely for the provision of specific b_Networlc activities,
including but not limited to, games, activities, Ad other specific uses.
1.6
Networlc(s), shall mean a system by which individual computer operators may
communicate with one another Ma telephonic or wireless means.
1.7 On-Line
Operating Systems, shall mean that Software which supports communication and
specific applications over one or more Networks.
1.8 Propne~ry Technology, shall
mean CWH's Know-How, whether patented or unpatented, registered or unregistered,
copyrighted or uncopyrighted, confidential or in the public domain, or acquired
by assignment, license, or other means. The term Proprietary Technology shall
include, but shall not be limited to CWH's Virtual Casino.
1.9 Vial Casino,
shall mean casino simulation Software applications and use by On- Line Opera
Systems access or any other Internet-related means, including Licensor's Vrbual
Casino World TM sauce, as defined in the specifications of the Operating
Agreement between the Parties.
1.10 Going, shall mean gambling.
Page 2 of 11
<PAGE>
1.11 Oo-Iine Cameog, shall mean getting activities of any land performed
over network(s).
1.12 Paled, sbaB mean the de - , development, construction, and
operation of any casino or other Gaming industry applications in cyberspace
under this and related agreements.
1.13 Content lo rider, shall mean an operator
of a Website on the ~ al Casino.
1.14 Tarhory, steal mean those courtesies or
political mbdivisK~ns in the world where OnLine Casino Wagaing is lawful.
l.lS Percent, means the process, method, procedure, sequence, steps,
or use of apparatus including, in whole or in part, Licensor's Trade Secrets and
Know-How.
1.16 Trade Secrets, means the Process, drawings, engineering designs,
computations, specifications, materials, customer lists, vendor sources,
formulas and any and all other secrets owned by Licensor to the method, Process,
and equipment necessary to enable Licensee to use the Virtual Casino as a
Content Provider.
1.17 Know-bow, means the knowledge, skills, and experience of
Licensor to the method, Process, and equipment to use the Virtual Casino as a
Content Provider.
A.RTIC" n
THE LICENSE
2.1. Grant of Nooe~uave License and Nonexclusive Sublicense In consideration of
Lica~see's payment of the license fees described in Section
2.2 below, and for
other good and valuable condJ=a~ Licensor grubs to Licensee (a) a nonexclusive
right and license to market and use the Proprietary Technology in the Territory
and in the Field as a Content Provider at a single
Page 3 of 11
<PAGE>
InterDet Webb on the Veal Casino and (b) a rye s~se to marlcet and use Durand's
MindW're software technology in the Territory and in the Field as a content
Provider at a single Inten~et Website on the formal Caine. 2~2 License Feea. See
shall pay to CWH a license fee of Two "[lion Dollars (S2,000,000 U.S.D.) as
follows: ~ 1 Two Hid Fey Thousand Dollars (S250,000), the receipt of which CWH
acknowledges pled upon execution of that certain letter of intent signed January
15, 1996, by the Parties. 2.2.2 Two Hundred Thousand Dollus ($200,000), the
receipt of which CWH acknowledges paid February 2, 1g96. 2.2~3 One Million
Five-Hundred Fifty Thousand Dollars (S1,550,000), payable in six (6) equal
bi-weekly instants commencing Much 18, 1996. 2.3 Revenue Sharing. In addition to
the foregoing payments for the License fee, the Parties shall execute a Revenue
Sharing Agreement by which CWH shall be entitled to two thirds (2/3's) ofthe
gross revenues generated by Licensee at the Website. The execution of such
Revenue Sharing Agreement shall be a condition precedent to Licensee's exercise
of its rights under this License. 2.4 Operating Agreement. In addition to the
foregoing Revenue Sharing Agreement the Pardes shall execute an Operating
Agreement defining the terms Ad conditions of the operating services to be
provided by CWH. The execution of such Operating Agreement shall be a condition
precedent to Licensee's exacise of its rights under this License.
Page 4 of 11
<PAGE>
2~5 Condition ~t. This Agreement mall not be effective until the Agreements
required under Pu~pbs 2.3 and 2.4 above shall have been executed by the Parties.
3.1 Ter - . This Agreement shall ranain in force for an initial term of Ten (10)
years, unless sooner taminauJ for default under Paragraph S. 1 of this
Agreemant. It shall be renewed tba~ year-to year for an additional five (5) year
teen, unless either party provides written notice of its intention to terminate
the License within Thirty (30) days before inception of the next yearly tam
during the additional Five (5) year term. 3.2 Representations by CWEI. Licensor
represents that it has kept the Proprietary TO proprietary, has not revealed the
Trade Secrets and Know-How to anyone who has not agreed to observe the
confidential nature of such Proprietary Technology, its service marks and ighs
ate free of any known infringement or any known dilution by others, it is the
sole owner of such P~aq Technology and has the right to grant the nonexclusive
license described in this Agreement, the execution of which will not violate any
other agreement to which CWH is a party, and it holds a valid and enforceable
license agreement to Durand's MindUr~reT~ software technology and may validly
grant for use on the Virtual Casino a nonexclusive sublicense to such technology
to Licensee. 33 Nece~aq I~on~on and Documents. CWH shall Finish Licensee all
information and does regarding the licensed Proprietary Technology and
sublicensed MindW're Software b~, including the Software and such Software's
source codes (to the extent to which CWH
Page 5 of 11
<PAGE>
is entitled ouch sowee codes) and hardware applications, Know-How, Trade
Secrets, copyrights, doa~on, and oaks for Licensee to operate under this
Agreement. CWH shall render to Licensee ~ ahnini~ve support and operational
assistance services as may be reasonably required to marled and use the
Proprietary Technology and sublicensed Mindur~re Software toc~obgy. 3~4 C -
fidential I6f~ation. Licensee shall not, during or after the term of this Al,
disclose to any pa son, firm, or corporation any Proprietary Technology licensed
under this Agreement without the prior written approval of CWH, except Licensee
shall be authorized to provide such Proprietary Technology to its attorneys,
engineers, and other individuals operating as its representatives, consultants,
or agents, provided such attorneys, engineers, representatives, sms, and agents
execute Licensor's standard confidentiality agreement and further provided this
provision shall not apply to services or assistance rendered to Licensee by CWH,
its affiliates, agents, and joint venturer. 3.5 Warranteea Except ~ expressly
provided under the Operating Agreement between the P via, CWU disclaims all
warranties or representations, expressed or implied, on the merchandise or
operation of its Virtual C - ino.
ARTICLE IV
INFRINGEMENT AND RELATED ISSUES
4.1 Con of 1;~ Against Infringement by Othem within Thirty (30) days of
discovery, License shall notify CWH in writing of any infringement, then, or
dilution of CWH's Prop~ry TechcK'Iogy by any third party. Licensee shall be
under no duty affimnatively to search
Page 6 of 11
<PAGE>
r arch infix_.. tl , or &~ Provided such ~ is received within Thirty (30) days
of its tiscovay by Iic~oe, Al co - , attorneys' fees, "d other expenses of any
action, suit, or ing CWH mar Me ~ collected from the person or entity against
whom such action, alit, or p~iDg is brought, steal be home by CWH and all danuga
recovered in such action shall be paid to CWH. I Owe shall cooperate in any way
nay, but without expense to it, in the Win of ally such action, ~it, or prying.
If Licensee Vigils to provide such notice in writing within Thirtr (30) days, it
shall r~r# CWH for CWH's reasonable costs, attorney's flea, and ot~ Does of such
action, suit, or proceeding reasonably Dated to or caused by such failure to
provide timely notice, unless CWH is otherwise reimbursed in hill by the person
or entity against whom it is brought. 4.2 Protection of Licensee Against Actions
for Infringement. Provided Licensee notifies CWH in writing within Thirty (30)
days of Licensee's receipt of any material claims, demands, or suits against
Licensee, based upon invalidity of or infringement by any Proprietary T~b~ Mused
under this Age, CWH shall indemnify, hold harmless, and defend Licensee from any
such claims, demands, or suits against Licensee. 43 Accnal of Iieeose Fee Dunng
Infringement Action. If it is finally adjudged by an bb jud~na~t entered by a
Cowt of competent jurisdiction that the Proprietary Technology or Durand's
"ndwire whonb~ infiinges any pay technology owned by another or is invalid and
Licensee is substantially unable to conduct its business at the Website,
Licensee may, by thirty (30) days' prior written notice, terminate this AT
without any obligation to pay any remaining in~a~t of license fees unda
Paragraph 2.2.3 of this Agreement.
Page 7 of 11
<PAGE>
, _, ARTICLE
M~CELLANEOUS
5. Near Technob~r. Lf dunag the term of this Agreement, CWH makes any it
improvements in the Proprietary Technology or becomes the owna or licensee of
such incremental improvements in the MindWire technology and through Software
and hardware io - , Know-How, Trade Secrets, copyrights, and trademarks, it
shall communicate such improvema~s to licensee Ed give Licensee full information
regarding their use. If such v~s constitute or require a new On-Line Operating
System, CWH shall provide Licensee a first right of refusal to purchase a
nonexclusive license to such improvements before CWH offers such a nonexclusive
license to any other party. The exclusive right and license for such incremental
improvements and any improvements made by Licensee to the system, which
improvements by Licensee shall be cross-licensed to Licensor for the paid-up
License fee of Ten Dollars (S10), shall immediately attach to Licensee with all
rights which are granted to Licensee for the Proprietary Technology, without
payment of any additional License fee for such improvements. 5.1 Tennination.
S.1.1 By Lice~or. CWH may terminate this Agreement for Licensee's failure to pay
the Resee fee under Paragraph 2, or Licensee's material breach of any other
agreement with CWH, which breach remains in eject for a period of seven (7) days
after Licensee's receipt of CWH's notice to cure. Upon any such terniination by
Licensor, no license fee previously paid by Licensee shall be refunded to
Licensee and Licensee shall pay to CWH within thirty (30) days of such
terminator all unpaid license fees.
Page 8 of 11
<PAGE>
5~12 By L'ce~ee. Licensee may terminate this Agreement upon a final and
unappealable declaring the Proprietary Technology or Durand's MindWire
technology invalid or as substs~lly infringing upon the claims of any third
party to substantially pride to l~vfi'l operation oftbe Prq~ary Technology or
Durand's Mind~'re technology with row to the opinion of the V.umal Casino. 5.2
Arbib~ A! d-;~ danand~ or disputes of any kind between the Parties arising r or
related to this Alp_ shall first be submitted to mediation before a single
mediator ~bctod by the Pardes. It aria Thirty (30) days after such mediation has
been initiated, the dispute has not been resolved to the satisfaction of both
Parties, the Parties shall then submit the dispute to binding aversion ~ in the
English language in Geneva, Switzerland, under the rules of the Chafer of
Commerce. Each Party shall select an arbitrator, after which the arbitrators
selected by each Party shall select a third arbitrator. Any award from the panel
of arbitrators shall be corpse in any court of competent jurisdiction and shall
be entered as a judgment enforceable by the prevailing Party. Any award from the
pang of arbitrators shall include an award of reasonable attorneys' fees and
costs to the substantially prevailing Party. S.3 Mark Licensee agrees it will
mark all literature and Website communications of any lid under this Agreement
with the appropriate trademark, copyright, or patent marking under the laws of
the licensed Territory. 5.4 C - ice of Law. A! disputes concerning the validity,
interpretation, or performance of this Agr_t and any of its teens or conditions,
or of any rights or obligations of the Parties, shall be govanot by the laws of
the State of California, except its conflicts of laws.
Page 9 of 11
<PAGE>
5.5 Complete Untent~d~g and Modif~tion~ This Agreement constitutes the complete
expression of the tame of the grant of this nonexclusive license. All previous
and a~yeem~, repracatations, and negotiations, whether oraL written or implied,
rid to such license are ~ by this Agreement, except those inched in the recitals
to this Agr_. Amy Is to ~ Age must be reduced to writing, signed by both
Parties, and attached to this Agr_, to be effective. Ed A - pubBity. T. ;catsee
shall have the right, subject to CWH's reasonable consent, to Reign this License
to an affiliate or a purchaser of all or substantially all the stock or assets
of Licensee, after which any such assignee or purchaser shall become a party to
this License. Notwi~ing any such assignment or sale, VentureTech shall remain
liable as an unconditional guarantor of such assignee's or purchaser's
obligations under this Agreement. 5.7 No Waiver. The failure by either Party to
this Agreement to insist upon performance by the other Party shall not
constitute a waiver of any rights unda this Agreement and shall not bar, by
waiver or estoppel, insistence upon performance by the other Party. 5.l
Relationship of Parties. Nothing in this Agreement shall be construed in a
manner which would create the relationship between the parties of
employee-employer, principal- agent, joint venture, p~bip, or anything other
than a licensor-licensee relationship. S.9 Rebution of Owoenhip. This Agreement
is not to be construed as an assignment of or transfer of ownership in the Pay
TED. Licensor retains ownership of the licensed Pm~hary TO and license to all
its improvements or additions, subject to this Agreement.
Page 10 of 11
<PAGE>
5~10 Sev~;lity. If any provision of this Agreement is illegal or unenforceable,
it shall be deemedclcen ant all the Mung provisions shall remain in full force
and effect.. S.11 Survival of 0~_ Each Party does for it and its successors,
heirs, executors, unknit apra~uives, insurers, agents, and assigns, covermats
and agrees that it and they will co~eto a&eto the ~ and obligations ofthis
Agreement and this Agreement shall i are to their ~imW' benefit. 5.12 Itocitala
The recitals shall be considered part of this Agreement. 5.13 Headings. The
Headings are for informational purposes only and shall not constitute part of
this Agreement. 5.14 Multiply Counted This Age has been executed in multiple
counterparts, each of which shall be considered an original executed version of
this document. 5.15 Lateral UP Nothing in this Agreement shall permit Licensee
to violate the law of any courtly or political ~bJividon where Gaming is
unlawful. Licensee agrees to defend, indemnify, and hold Licensor harmless for
any violations ofthis paragraph. S.16 I ice Licensee must obtain and keep a
license to conduct on-line casino gaming from a courtly or political subdivision
ra~sorsb~ acceptable to CWH. Alternatively, Licensee shall provide an order,
Gabon, or opinion of counsel reasonably satisfactory to CWH that no such license
is required in such selected country or political subdivision. 5.17 Notices. Any
notice given by either Party to the other Party shall be deemed to have boa' -
ffl~y given if sent by registered air mail or by cable, telex, or telecopier, to
the address of the Party as follows, unless such other Party designates another
address in writing:
Page l l of l l
<PAGE>
If to Licensor:
C~noWorlt Holdings, Ltd.
915 CumDo Del Mar, Suite 100
Del Mar, California 92014
Attention: Mr. Kendall R Lang, CEO
With Copy to:
W'lli~n H. Shawls Esq.
Shawn, Mann ~ N~edermayer
1850 M St., N.W., Suite 280
Washington, D.C. 20036
If to Licensee:
VentureTech, inc.
11480 Sunset Hills Road, Suite 110
Restore V~'rg~a 22090-5208
Attention: Arthur Rosenberg. COO
With Copy to:
Gerald D. Stoltz, Esq.
Thompson & Mitchell
700 14tb Street, N.W., Suite 900
Washington D.C. 20005-2010
CASlNOWORLD HOLDINGS, LTD.
VENTURETECH, INC.
Page 12 of 1 clams
<PAGE>
EXHIBIT 10.2
OPERATING, REVENUE SHARING, AND MANAGEMENT
SERVICES AGREEMENT
CasinoWorld Holdings, Ltd.
A Delaware Corporation
OPERATING, REVENUE S~NG'
AND MANAGEMENT SERVICES
AGREEMENT
FOR
VentureTech. Inc.
An Idaho Corporation
05~
OPERATING, REVENUE SHARING, ANDMANAGEMENT SERVICES
AGREEMENT1
RECITALS .1
ARTICLE I.2
DEFrNITIONS. . 2
1.1 Bankroll 2
1.2 Casino Bank 2
1.3 CasinoWorld Intemational 2
1.4 Client 2
1.5 Content Provider 2
1.6 DCN 3
1.7 Distribution and Payment Instructions, 3
1.8 Gaming 3
1.9 Guarantor 3
1.10 Gross WinlLoss 3
1. 11. . . . . . . . .Hardware 3
1.12 Internet 3
1.13 Joint Venture Agreement, 3
1.14 Know-how 3
1.15 Letter of Intent, 3
1.16 License Agreement 3
1.17 Lock-Box 3
1.18 Marketing Plan 4
1. 19. . . . . . . . .Network 4
1.20 On-Line Casino Wagering 4
1.21 On-Line Operating Systems 4
1.22 Party 4
1.23 Platforms 4
1.24 Process 4
1.25 Proprietary Technology ] 5
1.26 Server `
1.27 Service Provider `
1.28 Site .
1.29 Software D
1.30 Territory O
1.31 Trade Secrets
1.32 URL t
1.33 Virtual Casino(s)
1.34 Virtual CasinoWorld
1.35 Wagering 6
1~
<PAGE>
ARTICLE II 6
2.1 Terrn 6
2.2 Conditions Precedent
2.2. 1 . . . . . . . . . . . . . . . . . . . . . /
2.2.2 . . . . . . . . . . . . . . . . . . . . . . 7
2.2.3
2.2.4 . . . . . . . . . . . . . . . :
2.2.5 . . . . . . . . . . . . . . . 7
2.2.6 . . . . . . . . . . . . . . . 7
2.2.7 . . . . . . . . . . . . . . . 7 ~
2.2.8 . . . . . . . . . . . . . . . . . . .;l ~ Am_
ARTICLE III
SYSTEMS REQUIREMENTS ANDPERFORMANCE
STANDARDS .]
3.1 System Requirements 7
3.1.1 I.anguage 8
3.1.2 (2ustomizing 8 . . . . . . . . . . . . . . Ad,
3.1.3 ProprietaryDataBases l
3.1.4 Contents and Games ]
3.1.5 Player Hardware and Software . .~ 2 /~
. . . . . . . . . . . . . . . . . . . . . .3.1.6
Specific Games ~/= . . . . . . . . . . . . .C
3.1.6.1 Video Poker
.................................................
3.1.6.2
Blackjac}~...................................
3.1.6.3 Craps 2
3.1.6.4 Keno 9
3.1.6.5 Slot Machine(s) . . . . . .16
3.1 .6.6 Roulette...........................................
3.1.6.7 Chess 9
3.1.6.8 Strategies............................................
3.1.7 Player
Registration.................................................
3.1.8 Player Assistance . . . . . . . . . .10
3.1.9 e-mail and Related Corn~nunications Functions 10
3.1.10 Links. . . . . . . . . . . . . . . . . BY
3.1.11 F inancial Transactions . . . . . . 04
3.1.12 Virtual Shopping . . . . . . . . . ...............
3.1.13 Security . .1 )
3.2 Software System ....~ .. .1 l/~
3.3 Hardware . . . . .I ALGA
3.4 Operation and Repair. . . . . . . . . . . . . . . .1 L
3.4.1 'ierver. . .1 L
Conning, Revolve. & Manasernent Agreern0' ii 01996 CasinoWorld Holdings.
Ltd. All
Rights Reserved
<PAGE>
3.4.2 Site. . . . . ... ~ ~c`:
3.5 Alteratiorls. . . . .1 2 l 3
3.6 Flaws or Glitches . .1 Q
3.7 Site Control. . . . .jE /4 y
3.8 Master Gold Disk. . .1 3 -6
3.9 Audit of Software . .1 3
3.10 Audit of Books and Records
1 3
3.11 . . . . . . . . . . Performance Disputes . ........... . . : 1 3
ARTICLE IV
MARKETING.
4.1 Marketing
Plan.....................................................................
ARTICLE V . . .
CASINO BANK AND BANKROLL
ARTICLE VI
REVENUE SHARJNG
. . . . . .6.1.1 Revenue Sharing to CWH 1
. . . . . .6.1.2 Revenue Sharing to Licensee l ~
ARTICLE VII. . . ~ ~ 7
AGGREGATE LOSSES. . . 4
7.1 . . . . ~ 11~
. . . . . .7.1.1 .
. . . . . .7.1.2 .
7.2 . . . . ll5
ARTICLE VIII
OTHER AGREEMENTS 4
. . .S. 1 Incorporation and Cross Covenants ...... 1,[ l
1
. . .8.2 Governing Agreement . . . . . . l~
ARTICLE IX . . . . L~
fly
Operating. Revenue, & Management Agreement iii
01996 CiuinoWorld Holdings, Lld. All Rights Reserved
<PAGE>
WARRANTIES AND REPRESENTATIONS . . ~
Am, 9.1 Warranty
9.2 NO OTHER WARRANTIES .. . .~ l 8 =~
9.3 NO LIABILITY FOR CONSEQUENTL\L DAMAGES ~ ~e:
ARTICLE X.~9
DEFAULTS AND REMEDIES . .: ll. .l
10.1 Event of Defaults and Remedies.1 lo
10.1.1 ByLicensee . . . . . . . . . . . . . . . .1 l hi
Gem
10.1.1.1
10.1.1.2
10.1.1.3
10.1.1.4 1
10.1.1.5 1 3
10.1.2
ByLicensor . 1 3 id
. . . . . . . . . . . . . . . . . . . .10.1.2.3 1 3
. . . . . . . . . . . . . . . . . . . .10.1.2.4 1 3
. . . . . . . . . . . . . . . . . . . .10.1.2.5 . ~a/
r Cam
10.1.3 C'WH's Rights and Remedies . 119 j
10.1.3.1 ^ 1 ~:
10.1.3.2 ' 1 Am/ of
. . . 10.1.4 Licensee's Rights and Remedies 3 )
ARTICLE XI . . ~ ;2 lit
JUDGMENT OF INFRINGEMENT
11.1 . . .~
L~
ARTICLE XII .. ~ 33 {/~c~
MISCELLANEOUS . . . ~
12.1 Arbitration ~ 7`,~,
12.2 Marking ~ ~ 3'L'~R_
12.3 Choice of Law . ~
12.4 Regulatory Compliance . 2n V`.`
12.5 Complete Understanding and Modifications l'
12.6 Assignability . ~ ~L( Cam
12.7 No Waiver 27 '>
12.8 Relationship of Parties q ;,~,; _
12.9 Retention of Ownership 29
Opennng, Revenue. & Managernor'Agreernen' iV
C1996 C:rsinoWorld Holdings, Lid. All Rights Ret ;/
<PAGE>
12.10 Application of Licensee's Improvements .. . . .~ >,l'
12.11 Severability. . . . . . . . . . . . . . . . . .0 :,$ =~_
12.12 Survival of Obligations . . . . . . . . . . . .2t
12.13 Representation by Counsel; Interpretation . . .2]
12.14 Recitals. . . . . . . . . . . . . . . . . . . .2 3
12.15 Headings . . . . . . . . . . . . . . . . . . .) 3
12.16 Multiple Counterparts . . . . . . . . . . . . .Z 3
12.17 Lawful Use. . . . . . . . . . . . . . . : 2 . . . . .~
`0
12.18 Licenses. . . . . . . . . . . . . . . . 2 ~
12.19 Force Majeure . . . . . . . . . . . . . 2 l
12.20 Partial Invalidity. . . . . . . . . . . 2 I . . . .~
12.21 Further Assurances. . . . . . . . . . . 2 . . . . :11
Cite
12.22 Notices . . . . . . . . . . . . . . . . 2
12.23 Condition Subsequent. . . . . . . . . . . . . .~ Arc
<PAGE>
OPERATING, REVENUE SHARING,
AND
MANAGEMENT SERVICES
AGREEMENT
This Agreement ("Agreement") made this 19th day of April 1996, by and
between CasinoWorld Holdings, Ltd. (CWH or Licensor), a Delaware corporation,
and VentureTech, Inc. (\rteh or Licensee), an Idaho corporation.
RECITALS
WHEREAS, CWH has developed certain Software and Hardware applications,
Know- how, Trade Secrets, copyrights and trademarks, and has obtained a license
to certain operating Platform Software, for use by Content Providers on Internet
websites as part of Licensor's Virtual CasinoWorld service;
WHEREAS, the Parties have entered into the License Agreement by which CWH
granted Licensee a non-exclusive license to CWH's Proprietary Technology and a
non-exclusive sublicense to CWH's license to use the MindWire Software
technology of Durand Communications Network, Inc. ("DCN"); WHEREAS, CWH has
entered into a Joint Venture Agreement dated December 15, 1995 (the "Joint
Venture Agreement"), with Virtual Casinos Gaming and Wagering Corporation Ltd.,
Monacall sam L'Universe Telematique, and Monacall International, Ltd., to form a
joint venture named CasinoWorld International, Ltd., to develop a platform to
operate a virtual casino and on-line Intemet sports betting applications using
such parties' respective technology and operating platforms.
WHEREAS, CWH will establish, operate, and maintain, on Vteh's behalf, the
Virtual Casino Site and CWH shall provide other support services, including
Software, Hardware, maintenance, repairs, and alteration to the Site;
WHEREAS, in connection with the establishment of the Site, CWH will provide
to Vteh certain resources of CasinoWorld International; and
WHEREAS, Vteh will provide the Bankroll and marketing of the Virtual Casino
Site to be established, managed, and operated by CWH.
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants and agreements recited in this Agreement and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by each Party, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
I.1 Bankroll, shall mean the deposit placed by Licensee with a bank or
other financial institution reasonably acceptable to CWH, which deposit shall be
used by the Casino Bank to cover losses. I.2 Casino Bank, shall mean the
Software application for On-Line financial processing for the designated Virtual
Casino to debit and credit Client Wagering wins and losses, provide financial
transfers to and from the casino account and the Bankroll, and disburse the
Gross Win/Loss to the Parties by a joint Lock-Box administered under the revenue
sharing provisions of this Agreement.
<PAGE>
I.3 CasinoWorld
International, shall mean that certain joint venture established under the Joint
Venture Agreement between CWH and Monacall sarn L'Universe Telematique.
I.4 Client, shall mean a user of the On-Line Operating System who visits
the Site.
I.S Content Provider, shall mean the licensee of a website on the Virtual
CasinoWorld application.
I.6 DCN, shall have the Gleaning set forth on page one of this Agreement.
I.7 Distribution and Payment Instructions, shall mean those procedures and
arrangements for payment to the Parties from the Lock-Box.
I.8 GamIng, shall mean gambling.
I.9 Guarantor, shall mean the entity or entity which unconditionally
guarantees the performance of Licensee.
1.10 Gross Win/Loss, shall mean gross revenues before taxes or deductions
of any kind, which gross revenues are generated from Wagering at the Virtual
Casino less any returns, or payouts.
1.11 Hardware, shall mean the equipment and fixtures with which Software is
used.
1.12 Internet, shall mean a Network of computer Networks accessible through
telephonic means by computer for specific uses, including, but not limited to
recreational activities, including games, wagering, betting, and related support
activities.
1.13 Joint Venture Agreement, shall have the meaning set forth on page one
of this Agreement.
<PAGE>
1.14 Know-how, means the knowledge, skills, and experience of Licensor to
the method, Process, and equipment to make available the Virtual CasinoWorld
application. 1.15 Letter of Intent, shall mean the Letter of Intent dated
January 17, 1996, between the Parties. 1.16 License Agreement, shall mean the
License Agreement dated March 4, 1996, between the Parties. 1.17 Lock-Box, shall
mean the depository bank account jointly opened, maintained, and administered by
the Parties. 1.18 Marketing Plan, shall mean that certain written document by
which Licensee shall define its effort to create and develop a demand for its
Site and CWH's service. 1.19 Network, shall mean a system by which individual
computer operators may communicate with one another via telephonic or wireless
means. 1.20 On-Line Casino Wagering, shall mean Gaming activities of any kind
performed over network(s). 1.21 On-Line Operating Systems, shall mean that
MindWire Software and any updates thereof which support communication and
specific applications over one or more Networks. L22 Party, shall mean each
signatory to this Agreement, and 'Parties" shall mean both parties to this
Agreement. 1.23 Platforms, shall mean the equipment, programs, and
telecommunications network access necessary for the provision of specific
telecommunication Network activities, including
<PAGE>
owned by Licensor to the method, Process, and equipment necessary to enable
Licensee to use the Virtual CasinoWorld as a Content Provider. 1.32 URL, shall
mean Uniform Resource Location. 1.33 Virtual Casino(s), shall mean Vteh's unique
identity casino(s), derived from the Virtual CasinoWorld template operating on
the Site. 1.34 Virtual CasinoWorldlM, shall mean casino simulation Software
applications as currently demonstrated at CWH's site accessed at
http:\\www.vcw.com, or reasonable variations thereof, and use by On-Line
Operating Systems access or any other means, including but not limited to
Licensor's Virtual CasinoWorld service. Such Software shall be the template by
which unique identity Virtual Casino(s) shall be developed by CWH for Vteh. 1.35
Wagering, shall mean betting.
ARTICLE II
TERM AND CONDITIONS
PRECEDENT
II.1 Term. This Agreement shall remain in force for an initial term of Ten
(10) years from the first day the Site is operational, unless sooner terminated
for default under Paragraph 9 of this Agreement. It shall be renewed thereafter
year-to-year for an additional maximum five (5) year term, unless either Party
provides written notice of its intention to terminate this Agreement within
thirty (30) days before inception of any next yearly term during the additional
five (5) year term. II.2 Conditions Precedent. Licensor's duties under this
Agreement shall not be enforceable until Licensee shall have provided its due
diligence obligations and other documentation or undertakings as follows:
<PAGE>
II.2.1 Licensee's and Guarantor's certifications that they are corporations
in good standing and validity existing under the laws of their jurisdiction of
incorporation. II.2.2 Licensee's and Guarantor's certifications that their
actions entering the License Agreement have been duly authorized by their board
of directors and no consents or approvals are required to be obtained (not
otherwise already obtained) from any governmental agencies of any kind having
jurisdiction over them and their activities. II.2.3 Licensee's and Guarantor's
certifications that entering the License Agreement will not violate any other
agreements of any kind to which they are parties and that the License Agreement
will be enforceable by its terms. II.2.4 Licensee's submission to Licensor, in a
form and manner reasonably acceptable to Licensor, that it holds one or more
valid Gaming license(s) (provided a gaming license is required), from a
jurisdiction(s) acceptable to Licensor. Such approval of submitted jurisdictions
shall not be unreasonably withheld. If Licensee believes that a license is not
required from any such jurisdiction(s), Licensee shall provide substantiation
for such belief in a form and content satisfactory to Licensor. II.2.5 Licensee
shall deposit a Bankroll under the terms of Article V, Casino Bank, and
Bankroll. II.2.6 Licensee shall submit a marketing plan under the terms of
Article IV, Marketing. II.2.7 Licensee's and Guarantor's counsel's opinion, in a
form and content satisfactory to Licensor, under Paragraphs
<PAGE>
II.2.8 Licensee's and Guarantor's confirmation of Guarantor's previous agreement
that all publicity, press releases, and public announcements of any kind, by
whatever means of dissemination, shall be subject to the prior approval of
Licensor.
ARTICLE III
SYSTEMS REQUIREMENTS
AND
PERFORMANCE STANDARDS
III.1 System Requirements. CWH shall design and deliver on Licensee's
behalf a turn-key Software and Hardware system to operate and support a unique
on line Virtual Casino at the Site on the Internet based on a. specification(s)
to be mutually developed by the Parties. Such specification(s) shall not be part
of this Agreement and the enforceability of this Agreement shall not depend upon
any obligation to reach an agreement on such specifications. The system shall
have the following operating features: III.1.1 Language. Version l.0 of the
Virtual Casino Site shall communicate by the English language. For future
versions of the Virtual Casino, CWH shall promptly and reasonably adapt the
Vteh's Virtua]. Casino Site to other languages as may be technically feasible,
at Licensee's sole expense under a budget approved by Licensee in advance of
such adaptation
III.1.2 Customizing. At Licensee's request and sole expense, CWH shall promptly
and reasonably customize the original Site and Licensee's Virtual Casino located
there, by additional programming, to create multi-ethnic identities and other
required languages. All costs for adapting Licensee's Virtual Casino Site as
described in Section7F.lC~and this Section shall be incurred pursuant to a
budget agreed to by the Parties. The adaptation of Vteh's Virtual
<PAGE>
Casino, to include the customization to create multi-ethnic and
multi-language identities, shall, for the purpose of this Paragraph, be deemed
to occur at but one website and under a single license fee. However, any
additional website shall be subject to an additional license fee. III.1.3
Proprietary Data Bases. CWH shall provide a reasonable system design to create
proprietary data bases of Clients who visit, register, or wager at the Site. CWH
will not solicit Licensee's clients or sell, disclose, or knowingly transmit,
any proprietary client data to any third party without Licensee's written
consent. Upon request, CWH agrees to provide to Licensee a complete listing of
the proprietary data base of clients in a computer readable form or other form
mutually agreed to by the Parties.
III.1.4 Contents and Games. CWH shall provide casino Wagering games with
high-level 3-D graphics, single player interactivity, in single-player real-time
scenarios, and automatic updating of applications and graphics during on-line
sessions. CWH may, at its sole discretion, periodically provide upgrades and
enhancements of such games and "content", including but not limited to providing
multi-player capability and a sports book. Licensee shall be responsible for
reasonably approving the Virtual Casino "contents" to be installed by CWH for
Licensee.
III.1.5 Player Hardware and Software. The Site shall require that
Licensee's Clients have a minimum Hardware configuration to include a 386 PC to
run Windows 3.1 or greater, 16 MB RAM, 20 MB free hard disk space, a 14400 modem
and a direct PPP Internet connection. CWH shall provide all games in
Windows-based, menu driven formats with "point Amen and click" interactivity,
where required under Paragraph is. 1.4 above.
<PAGE>
III.1.6 Specific Games. CWH shall provide at least the following games, to
satisfy the requirements in Paragraphs 3.1.1 through 3.1.5 above:
IlI.1.6.1 Video Poker
III.1.6.2 Blackjack
III.1.6.3 Craps
III.1.6.4 Keno
III.1.6.5 Slot Machine(s)
III.1.6.6 Roulette
III.1.6.7 Chess (non-wagering two-player interactivity)
III.1.6.8Strategies (suggested strategies for wagering games)
CWH shall promptly incorporate new games into the Virtual Casino as may be
reasonably requested by Licensee. Such games shall be added at Licensee's
expense and pursuant to a budget agreed to by the Parties. Such new games may be
originally developed by the Parties or those licensed from third parties.
III.1.7 Player Registration. CWH shall provide user access to allow users to
register electronically as prospective account holders of the Site and to review
all rules, terms, and conditions applicable to Gaming and other uses on the
Site. III.1.8 Player Assistance. CWH shall provide a program capability for
real-time, on-line player assistance. III.1.9 e-mail and Related Communications
Functions. CWH, in conjunction with CasinoWorld International or such other
entity as Licensee shall reasonably designate, shall provide e-mail, "live chat
rooms", "bulletin board messaging", and "classified ad posting" capability to
allow clients to communicate with Casino support staff and other players.
<PAGE>
III.1.10 Links. At Licensee's sole expense, CWH shall provide programming
links to third party hotel and resort reservation systems and to such other
third parties, including advertisers, by which Clients may reasonably access
such facilities.on-line and connect to electronic reservations or other services
under programs created by, paid for, and licensed to Licensee. No such links
shall require CWH to establish a hotel or resort reservation or sales, shipping,
or related support services.
III.1.11 Financial Transactions. CWH shall provide to Licensee such
applications as are necessary to provide electronic access to banks conducting
e-cash transactions on-line, casino accounts, the Casino Bank to administer the
Bankroll required by this Agreement and to transfer daily Gross Win/Loss to a
joint Lock-Box administered under the revenue sharing provisions of Article VI
of this Agreement, as well as archival storage capabilities for later audit and
verification purposes.
III.1.12 Virtual Shopping. CWH shall provide Licensee's Clients access to
virtual shopping by clients for products and services offered for sale by
Licensee under "Window Shopper" or "Catalogues Plus" applications. Licensee
shall be responsible for acquisition, license, or resale of products to be made
available in such application and shall provide CWH with electronic origination.
III.1.13 Security. The Parties may jointly agree upon and install a further
security program to be developed by the Parties and later attached to this
Agreement as a future Exhibit. Operating, Revenue, & Manase~nen' A',e~nent 1 1
/// 01 .96 C"inoWorld Holdings, Lid. All Risks Reserved ink
<PAGE>
III.2 Software
System. CWH shall provide a toolkit of software applications as are currently
provided in the M~ndWire system and any updates made available to CWH by DCN and
the demonstration Virtual Casino system, which toolkit shall allow various
systems solutions, including On-Line real time Gaming, generation and
reconciliation of. Wagering, player accounting, and reporting such data to
Licensee in a form and manner reasonably agreed between CWH and Licensee. III.3
Hardware. CWH shall provide, at its sole cost and expense, a Server and related
equipment necessary to operate the Licensee's Casino Site. CWH shall also, at
its sole cost and expense, provide or cause to be provided by a third party of
its designation, all utilities and services furnished to or to be used at the
Site or by the Server, including, if necessary, electricity, telephone service,
connection charges, meter fees, satellite linkages, and access to bank clearing
services. III.4 Operation and Repair. The following performance standards shall
apply to Licensor's obligations under this Agreement: III.4.1 Server. CWH shall,
during the term of this Agreement, keep the Server in good working condition and
repair, except for any damage caused to the Server by any negligent act of
Licensee or its agents, employees, or invitees, and except for reasonable wear
and tear and events beyond CWH's control. CWH shall, during the term of this
Agreement, provide sufficient server capacity such that users of the Virtual
Casino may reasonably operate the applications contained in the Virtual (2asino.
All repairs made by CWH shall be at its expense. Licensee expressly waives and
relinquishes the provisions of any law or any other right Opentnng. Revenue, &
Ut~n;tgt~nQt Agrt~nent 1 ~ //J/~ 01996 CasinoWorld Holding. Ltd. All Rigittt
Reserved ~//C
<PAGE>
permitting Licensee to make repairs at CWH's expense. CWH shall
have no liability to Licensee for damages arising from or related to operation
of the Server except for willful misconduct of CWH's employees, agents, or
invitees III.4.2 Site. CWH shall, during the term of this Agreement, keep the
Site in good working condition and repair, except for any damage caused to the
Site by any negligent act of Licensee or its agents, employees, or invitees, and
except for reasonable wear and tear and events beyond CWH's control. All repairs
made by CWH shall be at its expense. Licensee expressly waives and relinquishes
the provisions of any law or any other right permitting Licensee to make repairs
at CWH's expense. CWH shall have no liability to Licensee for damages arising
from or related to operation of the Site except for willful misconduct of CWH's
employees, agents, or invitees. Also, on a reasonable basis, Vteh, in its
discretion, may have its own personnel inspect the Site and its operate.. ~,p,
III.S Alterations. Licensee shall not make any alterations to any programs or
graphic displays used on the Site and shall submit all requests for any such
alteration to CWH in writing. Upon receipt of any such request by Licensee, CWH
shall reasonably determine whether any such alterations may be incorporated into
the Site and CWH shall use report such determinations to Licensee. Thereafter,
if CWH determines such alterations may reasonably be made, it shall do so at
Licensee's expense. III.6 Flaws or Glitches. CWH shall promptly correct any
flaws or glitches in any program or graphic displays. Operating, Revenue, h
Managanen'Agr~rnen' 13 of 01996 CasinoWorld Holdings, Ltd. All Rights Reserved
46 i
<PAGE>
III.7 Site Control. CW H shall have exclusive control of and management
responsibilities for all Servers and shall have the right to establish, modify,
amend, and enforce reasonable rules and regulations for the use of the Servers
and Software at the Site. CWH shall install and seal games, as approved and
provided by Licensee, on all Servers to ensure the continued operation of the
Site. Licensee shall have exclusive control of all contents made available at
the Site. Nothing in this paragraph shall be construed to constitute control of
such contents by CWH and the Licensee agrees to allow display at the Site of any
such disclaimer reasonably requested by CWH. III.8 Master Gold Disk. CWH shall
provide one (1) or more, as reasonably requested, master gold disk and CD ROM to
I icensee, which master gold disk and CD ROM shall be reproduced at the sole
cost of Licensee and shall be used for distribution to clients. III.9 Audit of
Software. At its election and expense, CWH shall provide an audit, by an
independent international firm of certified public accounts, of Licensee's
Software to confirm the algorithmic and related components of such Software to
ensure proper operation of the Site. III.10 Audit of Books and Records. The
Parties shall engage and each pay half the fees of the accounting firm selected
under Paragraph t.9 above to audit the accounts, records, and transactions
established and performed under Articles V and VI of this Agreement. i~ III.11
Performance Disputes. Upon any dispute between the Parties under Paragraph 64
71, the Parties shall mutually select a. third party to determine if the
provisions of Paragraph I. 1 have been met. The decision of said third party
shall be binding on the Parties. Openting, Revenue. & Man~ee~nenl Agreernen' 14
OIC. .6 CasinoWcrld Holdings. Lid All Rights Reserved Con
<PAGE>
ARTICLE IV MARKETING
IV.1 Marketing Plan. Licensee shall prepare a Marketing Plan committing not less
than One Million Dollars ($1,000,000) in U.S. funds to promote its Site to
Clients in those jurisdictions where Internet-based Gaming is lawful. Licensee
shall provide CWH with written confirmation, in a form and content reasonably
acceptable to CWH, that Licensee has available such funds to execute and
implement any Marketing Plan proposed. Licensee's Marketing Plan shall be
subject to the reasonable review and approval by CWH and shall be prepared and
presented by experienced marketing consultants reasonably acceptable to CWH. At
its election, CWH may reasonably require Licensee to produce auditable results
of its implementation and expenses incurred under the Marketing Plan. ARTICLE V
CASINO BANK AND BANKROLL V.1 Licensee shall deposit, not later than one day
before the Site becomes operational, and thereafter continuously maintain not
less than One Million Dollars ($1,000,000) in U.S. funds, in a financial
institution reasonably designated by CWH, to support On-Line Casino Wagering by
Clients at Licensee's Site. Such funds held on account shall be designated as
the Bankroll and is the sole property of Vteh. Any interest generated by such
funds held on account in the Bankroll shall also be the sole property of Vteh
and shall not be included in any Opa~ting, Rtrv0uc &.UyUg0s0t Ag~0s 1 5 01996
CasinoWorld Holding is. Lsd. All Rights Regave am
<PAGE>
calculation of revenue
sharing. CWH, through CasinoWorld International or its other agents or
contractors, shall install an application which shall automatically calculate
the Gross Win/Loss on such account and shall disburse such Gross Win/Loss daily,
through sweep transactions by the designated financial institution, under the
provisions of the next succeeding paragraph. In the event that the Casino Bank
is required to draw down upon the Bankroll funds held on account to offset a
loss, such withdrawn funds shall first be replaced to the Bankroll account prior
to any subsequent distributions under the Gross Win/Loss revenue sharing
provision. ARTICLE VI REVENUE SHARING VI.1 The Gross Win/Loss disbursed from the
Lock-Box under Distributions and Payment Instructions daily, or at such other
regular inters CWH shpall reasonably designates Any revenues derived by Licensee
under Paragraph .l.lO and7Z;.12 of this Agreement, shall be paid to the Parties
as follows: i~ VI.1.1 Revenue Sharing to CWH, Sixty-Six and two-thirds (66_%)
percent of the Gross Win/Loss shall be distributed to CWH. j& ,/3 VI.1.2 Revenue
Sharing to Licensee, Thirty-Three and one-third (33_%) percent of the Gross
Win/Loss shall be distributed to Licensee. Opc~nnns, R - enuc & Managanent
Agrernen' 16 01996 CasinoWorld Holdings, Lid. All Rights Reserved
<PAGE>
ARTICLE VII
AGGREGATE LOSSES VII.1 Licensee hereby instructs Licensor to suspend
automatically operations upon the occurrence of any of the following: VII.1.1
Aggregate Losses from the Lock-Box during any twenty-four (24) hour period
exceed twenty-five (25%) percent of the Bankroll. VII.1.2 Aggregate losses from
the Lock-Box during any thirty (30) day period exceed $900,000.00. VII.2 The
Parties shall mutually agree to reinstate operations following any event of
suspension. ARTICLE VIII OTHER AGREEMENTS VIII.1 Incorporation and Cross
Covenants. The provisions of the License Agreement, to the extent they are not
inconsistent with any provision of this Agreement, are incorporated by reference
and shall become a part of this Agreement. A material breach by either Party of
the License Agreement shall be a breach of this Agreement. VIII.2 Governing
Agreement. In the event of a conflict between the provisions of any Agreement
between CWH and Licensee, on the one hand, and, on the other, that certain
agreement between CWH and Monacall sam L'Universe Telematique, the receipt of
which Licensee hereby acknowledges, the provisions of the latter shall govern.
t~pentins, Rev0ue. & .~1anaegetnenl Ayee~nent 17 4(& OlrJ96 CasinoWorld
Holdings. Ltd. All Rtgitts Rts~ved D my_
<PAGE>
ARTICLE IX WARRANTIES AND
REPRESENTATIONS IX.1 Warranty. CWH warrants that Licensee's Virtual Casino Site
will perform substantially in accordance with the performance specifications of
this Agreement. IX.2 NO OTHER WARRANTIES. TO THE MAXIMUM EXTENT PERMITTED BY
CALIFORNIA LAW OR ANY OTHER LAW FOUND TO GOVERN ITS PERFORMANCE-UNDER THIS
AGREEMENT, CWH DISCLAIMS ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING,
BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE OR USE, FOR THE SERVICE, SOFTWARE, AND HARDWARE INVOLVED IN
OR RELATED TO THE OPERATION OF ITS LICENSEE'S VIRTUAL CASINO SITE. IX.3 NO
LIABILITY FOR CONSEQUENTIAL DAMAGES. TO THE MAXIMUM EXTENT PERMITTED BY
CALIFORNIA LAW OR ANY OTHER LAW FOUND TO GOVERN ITS PERFORMANCE UNDER THIS
AGREEMENT, CWH SHALL NOT BE LIABLE FOR ANY DAMAGES WHATSOEVER (INCLUDING, BUT
NOT LIMITED TO SPECIAL, INCIDENTAL, CONSEQUENTIAL, OR INDIRECT DAMAGES FOR
PERSONAL INJURY, LOSS OF BUSINESS PROFITS, BUSINESS INTERRUPTION, LOSS OF
BUSINESS INFORMATION, EXEMPLARY, OR PUNITIVE DAMAGES) ARISING FROM OR RELATED TO
OPERATION OF LICENSEE'S VIRTUAL CASINO SITE. Operartng. Revenue. h
Managetnert'Agteetnerit 1 8 C1996 CwDoWcrid Holdings, Ltd. All Rigitts Resettled
<PAGE>
ARTICLE X DEFAULTS AND REMEDIES X.1 Event of Defaults and Remedies. X.1.1 By
Licensee. It shall be an Event of Default if any of the following breaches
exists and remains in effect for a period of fifteen (15) days after CWH's
notice to Licensee. X.1.1.1Licensee fails to market the Site under Article IV of
this Agreement. X.1.1.2Licensee fails to maintain the Bankroll as required by
Article V of this Agreement. Al,' X.1.1.3Licensee's rights are subject to
termination under Paragraph I. 1 of the License Agreement. X.1.1.4Licensee
becomes insolvent, calls a meeting of creditors or has creditors' committee
appointed, makes general assignment for the benefits of creditors, or shall
admit in writing its inability to pay its debts as they become due, or shall
file a voluntary petition in bankruptcy or shall seek to be adjudicated bankrupt
or insolvent, or shall file any petition or answer or otherwise commence an
action or proceeding seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under the
U.S. Bankruptcy Code or any other present or future statute, law, or regulation,
or shall file any answer admitting or not contesting the allegations of the
petition filed against any such action or proceeding, or shall seek or consent
or acquiesce to the appointment of any trustee, receiver, or liquidator of
Licensee or of any part of the property of Licensee. Operz~ing. Rat enttc &
M~n;tgt~rnt at Agt~tnt~nt 1 9 1//~/ 01996 CasinoWorid Holdings, Ltd. All Rights
Racr~cd ,;~ - C:
<PAGE>
X.1.1.5Any action or proceeding is commenced against Licensee
seeking any reorganization, arrangement, liquidation, dissolution or similar
relief under the U.S. Bankruptcy Code or any other or future statute, law or
regulation, or the appointment of any trustee, receiver or liquidator of
Licensee or any or all of its property is not dismissed within 60 days of the
commencement or appointment, or Licensee by any act or omission indicates its
consent to, acquiescence in or approval of, any such action, proceeding or
appointment or if the relief requested is granted sooner. X.1.2 By Licensor. It
shall be an Event of Default if any of the following exists: X.1.2.1There e
xists a final and unappealable judgment declaring the Proprietary Technology
invalid in its entirety or as infringing upon the rights of any third party to
preclude or substantially impair the lawful operation of the Proprietary
Technology, Licensee's Site or Licensee's Virtual Casino. X.1.2.2CWH fails to
perform or comply with any of the provisions set forth in Article V of this
Agreement relating to banking functions which failure shall have continued for
fifteen ( l S) days; X.1.2.3CWH fails to perform or comply with any of the
warranties or representations set forth in Article VIII of this Agreement, which
failure shall have continued for 30 days following notice by Licensee to CWH.
X.1.2.4CWH becomes insolvent, calls a meeting of creditors or a creditors'
committee appointed, makes a general assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts as they become due, or
shall file a voluntary petition Operating, Rr.~venue, & Manalernen~ Ayeernen' 20
4 0199h CarinoWorld Holdings. Lid All Rights Rerer~rd l/
<PAGE>
in bankruptcy or
shall seek to be adjudicated bankrupt or insolvent, or shall file any petition
or answer or otherwise commence an action or proceeding seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under the U.S. Bankruptcy Code or any other present or future
statute, law, or regulation, or shall file any answer admitting or not
contesting the allegations of the petition filed against any such action or
proceeding, or shall seek or consent or acquiesce to the
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under the U.S. Bankruptcy Code or any other present or future statute,
law, or regulation, or shall file any answer admitting or not contesting the
allegations of the petition filed against any such action or proceeding, or
shall seek or consent or acquiesce to the appointment of any trustee, receiver,
or liquidator of CWH or of all or any part of the property of CWH. X.1.2.5Any
action or proceeding is commenced against CWH seeking any reorganization,
arrangement, liquidation, dissolution, or similar relief under the U.S.
Bankruptcy Code or any other or future statute, law, or regulation, or the
appointment of any trustee, receiver, or liquidator of CWH or any or all of its
property is not dismissed within 60 days of the commencement or appointment, or
CWH by an act or omission indicates its consent to, acquiescence or approval of
any such action, proceeding, or appointment or if the relief requested is
granted sooner.
X.1.3 CWH's Rights and Remedies. Upon the occurrence of any Event of Default
under Sections. 1.1 and at any time thereafter, in addition to all other rights
and remedies available under the Uniform Commercial Code of California or other
applicable law, this Agreement or otherwise, CWH shall have the following rights
and remedies which may be exercised, in CWH's discretion, at any time or times,
individually or cumulatively, with or without judicial process, with or without
the assistance of others and without notice to or consent by Licensee except if
such notice, consent or judicial process is expressly required by law: Operadn',
Rcvenuc. & Managc~nem Agrn=cm 21 01996 CasinoWorld Holdings, Lld All RiBh~s
Reserved p
<PAGE>
X.1.3.1Terrninate this Agreement and/or: X.1.3.20perate this Site, including
soliciting and having access to Licensee's Clients, and distribute to itself the
entire of the Gross Win/Loss as liquidated damages for Licensee's breach or
license any other entit~y(ies) and assign all Licensee's rights under this
Agreement to such entity(ies). Licensee agrees to execute all documents and to
perform such other acts as CWH may require to operate the Site. X.1.4 Licensee's
Rights and Remedies. Upon occurrence of any Event of Default described in
Sect~lo~.1.2 and at any time thereafter, in addition to all other rights and
remedies available under the Uniform. Commercial Code of California or other
applicable law, this Agreement or otherwise, Licensee shall be entitled to
terminate this Agreement without any further obligation to CWH, with or without
notice to or consent by CWH, except if such notice, consent, or judicial process
is expressly required by law. ARTICLE XI JUDGMENT OF INFRINGEMENT XI.1 If a
court of competent jurisdiction issues a final judgment or issues a final
injunction declaring the Proprietary Technology invalid in its entirety or as
infringing upon the rights of any third party to preclude or substantially
impair the lawful operation of the Proprietary Technology, Licensee's Site or
Licensee's Virtual Casino, this Agreement shall terminate. Operanng, Revenue. &
M - aganent Agreement 22
<PAGE>
ARTICLE XII
MISCELLANEOUS
XII.1 Arbitration. All claims, demands, or disputes of any kind between the
Parties arising under or related to this Agreement shall first be submitted to
mediation before a single mediator selected by the Parties. If; after Thirty
(30) days after such mediation has been initiated, the dispute has not been
resolved to the satisfaction of both Parties, the Parties shall then submit the
dispute to binding arbitration conducted in the English language in Washington,
D.C. under the rules of the American Arbitration Association. Each Party shall
select an arbitrator, after which the arbitrators selected by each Party shall
select a third arbitrator. Any award from the panel of arbitrators shall be
confirmable in any court of competent jurisdiction and shall be entered as a
judgment enforceable by the prevailing Party. Any award from the panel of
arbitrators shall include an. award of reasonable attomeys' fees and costs to
the prevailing Party. XII.2 Marking. Licensee agrees it will mark all literature
and Site communications of any kind under this Agreement with the appropriate
trademark, copyright, or patent marking reasonably required by CWH for itself or
DCN. XII.3 Choice of Law. All disputes concerning the validity, interpretation,
or perfommance of this Agreement and any of its temms or conditions, or of any
rights or obligations of the Parties, shall be governed by the laws of the State
of Califomia, except its conflicts of laws. XII.4 Regulatory Compliance. Nothing
in this Agreement shall be construed as requiring CWH, its affiliates, agents,
and joint-venturer, to operate or act as a casino operator or Opennng. Revenue.
& Manage~Dent Agrmnnu 23 01 .96 CrinoWorld Holdings, Lid. All Rights Reserved I,
<PAGE>
any equivalent entity requiring CWH, its affiliates, agents, or joint venturer
to obtain any license, concession or any other permission to operate.
Notwithstanding the foregoing, each Party mutually acknowledges the existence of
regulatory jurisdiction of national and subnational units in the Territory and
covenant and agrees to cooperate at its own expense with all such units to
obtain any regulatory review, license, concession, or other permission such
units may reasonably require. XII.S Complete Understanding and Modifications.
This Agreement constitutes the complete expression of the terms of the grant of
this Agreement. All previous and contemporaneous agreements, representations,
and negotiations, whether oral, written, or implied, related to this Agreement
are superseded by this Agreement, except those included in the recitals to this
Agreement. Any modifications to this Agreement must be reduced to writing,
signed by both Parties, and attached to this Agreement, to be effective. XII.6
Assignability. Licensee shall have the right, subject to CWH's reasonable
consent, to assign this License to a subsidiary, affiliate, or a purchaser of
all or substantially all the stock or assets of Licensee, after which any such
assignee or purchaser shall become a party to this License. Notwithstanding any
such assignment or sale, VentureTech shall remain liable as an unconditional
guarantor of such assignee's or purchaser's obligations under this Agreement
unless otherwise agreed by Licensor. XII.7 No Waiver. The failure by either
Party to this Agreement to insist upon performance by the other Party shall not
constitute a waiver of any rights under this Agreement and shall not bar, by
waiver or estoppel, insistence upon performance by the other Party. XII.8
Relationship of Parties. Nothing in this Agreement shall be construed in a
manner which would create an employee-employer, principal-agent, joint venture,
partnership relationship between the Parties. XII.9 Retention of Ownership.
Except for those improvements by Licensee referenced at Paragraph 5 of the
License Agreement, this Agreement is not to be construed as an assignment of or
transfer of ownership in the Proprietary Technology. Licensor retains ownership
of and exclusive right to apply, license, or assign the licensed Proprietary
Technology and all its improvements, alterations, or additions to such
Proprietary Technology. XII.10 Application of Licensee's Improvements. Licensee
shall not use, in the performance of its obligations under this Agreement, any
improvements or additions to or in support of the Site developed by or on its
behalf, without the prior written consent of Licensor. XII.11 Severability. If
any provision of this Agreement is illegal or unenforceable, it shall be deemed
stricken and all the remaining provisions shall remain in full force and effect.
XII.12 Survival of Obligations. Each Party does for it and its successors,
heirs, executors, administrators, representatives, insurers, agents, and
assigns, covenants and agrees that it and they will continue to adhere to the
restrictions and obligations of this Agreement and this Agreement shall inure to
their continued benefit. XII.13 Representation by Counsel; Interpretation. CWH
and Licensee each acknowledge that each Party to this Agreement has been
represented by counsel in connection with this Agreement and the transactions
contemplated by this Agreement. Accordingly, any rule of law, or any legal
decision that would require interpretation of any claimed ambiguities in
Operating, Rcvenue~ & ManaBe~nen'Ayeewent 25 Van C1996 C;'sinoWorld Holdings,
Ltd All Rights Rcsn~eo
<PAGE>
this Agreement against the Party that drafted them has no application and
is expressly waived. The provisions of this Agreement shall be interpreted in a
reasonable manner to effect the intent of CWH and Licensee. XII.14 Recitals. The
recitals shall be considered part of this Agreement. XII.15 Headings. The
Headings are for informational purposes only and shall not constitute part of
this Agreement. XII.16 Multiple Counterparts. This Agreement has been executed
in multiple counterparts, each of which shall be considered an original executed
version of this document. XII.17 Lawful Use. Nothing in this Agreement shall
permit Licensee to violate the law of any country or political subdivision where
Gaming or On-Line Casino Wagering is unlawful. Licensee agrees to defend,
indemnify, and hold Licensor harmless for any violations of this paragraph.
XII.18 Licenses. Licensee must obtain and keep a license in good standing to
conduct on-line casino gaming from a country or political subdivision reasonably
acceptable to CWH. Alternatively, Licensee shall provide an order,
interpretation, or opinion of counsel reasonably satisfactory to CWH that no
such license is required in any such selected country or political subdivision.
XII.19 Force Majeure. The Parties shall be excused from performance of their
respective obligations under this Agreement for such period of time within which
they are prevented from perfomming their obligations by acts of God, failures of
Intemet network or other communications facilities to pemmit operation of the
Site, governmental intervention, riot, Opera'~ns, Revenue, & ~n~g0n0' Agrean0'
26 ///~ C 1996 Cas~noWorld Holdings, Lid. All Right Reserved
<PAGE>
revolutions, insurrection, civil disturbances, strikes, or any other causes
beyond their reasonable control. XII.20 Partial Invalidity. If any temm or
provision of this Agreement, or any application of this Agreement to any Party
or circumstance, shall be declared invalid or unenforceable, the remainder of
this Agreement, or its application, shall not be affected by such detemmination
and each other temm and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law. XII.21 Further Assurances.
The Parties covenant and agree to execute such documents and perfomm such things
as may reasonably be necessary to effect the execution and implementation of
this Agreement. XII.22 Notices. Any notice given by either Party to the other
Party shall be deemed to have been sufficiently given if sent by registered air
mail or by cable, telex, or telecopier, to the address of the Party as follows,
unless such other Party designates another address in writing:
If to Licensor:
CasinoWorld Holdings, Ltd. 9 l 5 Camino
Del Mar, Suite l 00 Del Mar, California
92014 Attention: Mr. Kendell R. Lang,
CEO With Copy to:
William H. Shawn, Esq.
Shawn, Mann &
Niedermayer l 850 M St.,
N.W., Suite 280
Washington, D.C. 20036
<PAGE>
If to Licensee:
VentureTech, Inc. 11480 Sunset Hills
Road, Suite 110 Reston, Virginia
22090-5201 Attention: Arthur
Rosenberg. COO With Copy to:
Gerald D. Stoltz, Esq.
Thompson & Coburn
700 14th Street, N.W., Suite 900
Washington, D.C. 20005-2010
XII.23 Condition Subsequent. Within ten (10) days after execution of this
Agreement, or as soon as reasonably practicable, the Parties shall replace this
Agreement with an agreement identical in all respects to this Agreement, except
Licensee's name, which new name shall be EuroAsian E-Casinos, Inc., provided
Vteh shall execute as part of such new agreement a guarantee, of EuroAsian
E-Casino's obligations, in a form and substance reasonably satisfactory to
Licensor. This Agreement shall remain in effect until such new agreement shall
have been signed, sealed, and delivered to Licensor.
CASINOWORLD HOLDrNGS, LTD.
<PAGE>
EXHIBIT 10.4
ESCROW AGREEMENT
ll480 Sunset Hills Rd. #1 l OF Reston, Virginio Q9090-5~08 May 6, 1996. Re:
Deposit into Escrow of VentureTech, Inc. Common Stock To: [Escrow Agent]
Westminister Computer Services Limited, Les Cascades, 5th Floor. Edith Cavell
Street, Port Louis, Republic of Mauritius This shall confirm our deposit to the
Bank Sarasin & CIE, CH~002 Basel, Swittzerland -Depository Vault #579 and the
receipt by Westmimister Computer Services Limited["Escrow Agent"], of 8,000,000
[eight million! shares of the common stock of VentureTech, Inc., [the "Shares"],
which shares are to be held in escrow by you pursuant to all the terms and
conditions of that Escrow Agreement annexed hereto as Exhibit "A" and by this
reference made a part hereof. As the Escrow Agent and by executing this document
you represent and acknowledge that you have received the above referenced Shares
and that you have executed the attached Escrow Agreement and shall be bound by
the terms thereof. You further represent and acknowledge that the Shares are
deemed "restricted securities" as defined by Rule 144 of the Securities Act of
1933, as amended [the "1933 Act"] and although certificates representing the
shares do not contain restrictive legends, such Shares are deemed "restricted"
until such time as an appropriate registration statement relating to the shares
shall be declared effective by the Securities and Exchange Commission. The
Shares may not be offered for sale, sold or otherwise transferred or
hypothecated except in compliance with the registration provisions of the 1933
Act or pursuant to an exception from such registration provisions, the
availability of which must be established to the satisfaction of the Companys
legal counsel. Therefore the Shares must be held in escrow by you until such
time as an appropriate registration statement is declared effective and the
Shares are eligible to be released by you pursuant to the terms of the Escrow
Agreement. By acknowledging receipt of the Shares, you as Escrow Agent agree to
hold such Shares pursuant to the exclusive terms and conditions of the Escrow
Agreement.
Yours truly,
Vet
B
Its: Authorized Signing Agent
The undersigned hereby acknowledges receipt of the 8,000,000 [eight
million] shares of VentureTech, Inc. common stock referenced above, which Shares
the undersigned agrees to hold in escrow pursuant to the terms and conditions of
the Escrow Agreement attached hereto as Exhibit "A".
Westminister Computer Services Limited
<PAGE>
4pril24, 1996
Dr. Rocco Guarnaccia
Basil, Switzerland
Re: Sale and Issuance of VentureTech, Inc. Common
Stock
Dear Dr.
Guarnaccia:
This letter shall confirm our agreement whereby VentureTech, Inc., an Idaho
corporation ("AH") agrees to sell to Dr. Rocco Guarnaccia, agent for buyers
("Buyers"), six million (6,000,000) shares of authorized but previously unissued
cormnon stock of VTEH for the purchase price of TEN UNITED STATES DOLLARS (US$
10.00) per share, or a total purchase price of SIXTY MILLION UNITED STATES
DOLLARS (US$60,000,000), and Buyers agree to purchase said shares at the agreed
upon purchase price and as per the terms and conditions set forth herein. This
letter supersedes the prior letters of agreement dated April 22 and 23 of 1996.
1 Upon the execution below of this letter by Buyers, the Board of Directors
of TEH will immediately cause to be issued six million (6,000,000) shares of
VTEH common stock, to be issued in the registered name of Buyers andlor their
assigns as designated, which shares will then be delivered to an escrow agent,
to be agreed upon by the parties hereto, to be held pending the full
satisfactions of the terms set forth herein. Concurrent with the deposit by VTEH
of the 6,000,000 shares of common stock with the escrow agent, Buyers agree to
make bankable provisions to pay the same escrow agent previously agreed upon by
the parties hereto, the sum of SIXTY ~vIILLION UNITED STATES DOLLARS
(US$60,000,000) to be held pending the satisfaction of the terms set forth
herein.
2. Upon the execution of this letter by Buyers, VTEH will immediately
commence to prepare and cause to be filed with the Securities and Exchange
Commission a registration statement pursuant to the provisions of the Securities
Act of 1933, as amended, relating to the registration of the 6,000,000 shares of
VTEH common stock to be issued to Buyers hereunder, and VTEH -will use its best
efforts to facilitate the effectiveness of the aforementioned registration
statement as soon as practical
3. Upon the effectiveness of the registration statement referred to in
paragraph "2" above, Buyers will cause the escrow agent to deliver to VTEH the
US$60,000,000 due pursuant to the terms of this fetter agreement. Concurrently
with the delivery to VTEH of the By US$60,000,000, VTEH will cause the escrow
agent to deliver to Buyers the 6,000,000 shares of VTEH common stock being held
by the escrow agent pursuant to the terms hereof.
<PAGE>
4. In the event Buyers do not pay to VTEH the full balance due as per paragraph
"3" above within 30 days from the effective date of the registration statement.
then VTEH will instruct the escrow agent to issue to Buyers only that amount of
VTEH shares being held in escrow which equals any payments made by Buyers,
divided by TEN UNITED STATES DOLLARS (US$ 10.()()) per share, and the balance of
the shares held in escrow will be immediately returned to VTEH and Buyers shall
have no further claim to such shares. $. By executing this letter agreement.
Buyers represent and acknowledge that all shares of VTEH common stock to be
issued pursuant to the terms hereof shall be deemed "restricted securities" as
defined by Rule 144 of the Securities Act of 1933, as amended, until such time
as an appropriate registration statement relating to such shares shall be
declared effective by the Securities and Exchange Commission. Upon the
effectiveness of the registration statement, and the delivery of the subject
shares to this letter agreement, it is agreed upon by the parties hereto that
such shares shall be free from restriction and may be resold or otherwise
transferred by Buyers, except for any provisions under Rule 144 that may limit
the transfer of the shares by Buyers or their assigns because of Buyers' or
their assigns' possible status as an affiliate or control person of VTEH. By
executing this letter agreement, VTEH agrees to the terms stated herein. Yours
truly,
VentureTech. Inc.
By: Arthur Rosenberg, Chief Operating !
Officer, Vice President
By: Michael Cartmel, Vice President,
Director
The terms and conditions set forth in the above letter are hereby accepted,
approved and agreed to this 6 day of May, 1996 by the undersigned Buyers
Buyers
0
Dr. Rocco Gurnaccia. Agent for Buyers
<PAGE>
EXHIBIT 10.5
LETTER OF UNDERSTANDING WITH INFOSERVE
<PAGE>
September 15, 1995
Mr. Kenneth F. Fitzpatrick
President
Ve n t u re tech
3524 Scott Street
San Frandsco, CA 94123
Dear Ken:
I am writing to confim CD-MAX's interest in working with Venturetech on the
commercial exploitation of the CD-WVC technology on the lnternet for use in
currencylbanking related transactions and gaming activities.
CD-MAX is prepared to enter into a definitive license and services
agreement With Venturetoch for the use of the CLIMAX ~chnob~y in the above
referenced areas upon the requisite capitalization of VentL~robch, or its
appropriate operating subsidiary, and the recruitment of a managed - nt team for
Me operating subsidiary which will be responsible for exploiting these business
opportunities.
Upon execut on of a definitive license agreement, the CtplVIAX Board mill
variant the right to appoint a member to the Board of the oporaUng subsidiary
which will be responsible for exploiting the licensed technology and the
InfoServe Board mill want the right to appoint 8 member to the Board of
Venturetech.
As you are aware, CLIMAX has recoined US Government approval for the
exposition of its ~chnotogy for use in the publishing arena. Counsel is pursuing
the extension of this approval to currcncy/banWng transactions and gemins1
activities on the Internet. 1~1! keep you informed on the progress of tl`ese
efforts.
In the intenm, lf you require any additional inhtn~ation, please do not
hesitate to contact Bob Ufi6demer or myself.
Sincerely
Philip J. Gross
Vice President
cc: Bob Wiedemer
Barry Bampton
InfoSewo. inc.
6000 Executive Blvd. Suite202 ~ Rocl~ville. MO 2~52
(301) 231~193 Fax (301) 816 077d
OTC Symbol:ISRV
EXHIBIT 21.1
SUBSIDIARIES OF VENTURETECH, INC.
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF VENTURETECH, INC.
The following are subsidiaries of VentureTech, Inc.:
1. Cybernet Currency Clearing, Inc., a Nevada corporation, 100%
owned by VentureTech, Inc.
2. EuroAsian E-Casinos, Inc., a Republic of the Marshall Islands
corporation, 100% owned by VentureTech, Inc.
<PAGE>
EXHIBIT 23.1
CONSENT OF JONES, JENSEN & COMPANY
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
September 9, 1996
VentureTech, Inc.
San Francisco, California
Dear Sirs:
We hereby consent to the use of our audit report dated June 9, 1996 in the form
S-1 registration statement of VentureTech, Inc.
Jones, Jensen & Company
