SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
OR
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number O-21831
International Sports Wagering Inc.
(Exact name of Small Business Issuer as specified in its charter)
Delaware 22-3375134
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
201 Lower Notch Road, Little Falls, NJ 07424
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (201) 256-8181
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(D) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such report) and (2) has been subject to such
filing requirement for the past 90 days.
Yes No X
There were 7,749,269 shares of Common Stock outstanding at
February 10, 1997.
Transitional Small Business Disclosure Format (check one):
Yes No X
International Sports Wagering Inc.
December 31, 1996
Form 10-QSB
Index
Part I: Financial Information
Item 1. Financial Statements
Balance Sheets at December 31, 1996 and September 30,
1996
Statements of Operations for the Three Months Ended
December 31, 1996 and 1995 and May 22, 1995 (date of
inception) to December 31, 1996 and 1995
Statement of Changes in Stockholders' Equity for the
Three Months Ended December 31, 1996
Statements of Cash Flows for the Three Months Ended
December 31, 1996 and 1995 and May 22, 1995 (date of
inception) to December 31, 1996 and 1995
Notes to Financial Statements
International Sports Wagering Inc.
(A Development Stage Company)
Balance Sheets
Assets
December 31, September 30,
1996 1996
(Unaudited) (Note 1)
Current Assets:
Cash and cash equivalents $ 7,357,878 $ 537,546
Prepaid expenses and other
current assets 187,743 8,885
Total Current Assets 7,545,621 546,431
Property and Equipment, net 283,169 304,466
Other Assets 4,062 4,258
Deferred Financing Costs -- 46,406
Total Assets $7,832,852 $ 901,561
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 18,350 $ 42,382
Accrued expenses 384,239 143,265
Total Current Liabilities 402,589 185,647
Stockholders' Equity:
Preferred stock, par value $.001
per share; 2,000,000 shares
authorized, none issued or
outstanding -- --
Common stock, par value $.001 per
share; 20,000,000 shares
authorized, 7,524,269 and
6,024,269 shares issued and
outstanding, respectively 7,524 6,024
Additional paid-in capital 9,041,020 1,687,089
Deficit accumulated during the
development stage (1,618,281) (977,199)
Total Stockholders' Equity 7,430,263 715,914
Total Liabilities and
Stockholders' Equity $ 7,832,852 $ 901,561
See Notes to Financial Statements
International Sports Wagering Inc.
(A Development Stage Company)
Statements of Operations
May 22, 1995
Three Months Ended (Date of Inception)
December 31, to December 31,
1996 1995 1996 1995
Costs and Expense:
Research and
development expense $ 179,273 $ 143,566 $ 970,568 $ 231,909
General and
administrative
expense 480,679 20,572 706,586 50,223
Operating (Loss) (659,952) (164,138) (1,677,154) (282,132)
Interest Income 18,870 7,210 58,873 16,193
Net (Loss) $(641,082) $(156,928) $(1,618,281) $(265,939)
Net (Loss) per
share $ (.10) $ (.02) $ (.25) $ (.04)
Weighted average
common shares
outstanding 6,716,373 6,477,410 6,514,736 6,477,410
See notes to financial statements
International Sports Wagering Inc.
(A Development Stage Company)
Statement of Changes In Stockholders' Equity
For the Three Months Ended December 31, 1996
Deficit
Accumulated
Additional During The
Common Stock Paid-In Development
Shares Amount Capital Stage Total
Balance at
October 1, 1996 6,024,269 $6,024 $ 1,687,089 $ (977,199) $ 715,914
Net (Loss) (641,082) (641,082)
Offering Costs (1,644,569) (1,644,569)
Issuance of
Common Stock 1,500,000 1,500 8,998,500 9,000,000
Balance at
December 31,1996 7,524,269 $7,524 $9,041,020 $(1,618,281) $7,430,263
See notes to financial statements
International Sports Wagering Inc.
(A Development Stage Company)
Statements of Cash Flows
May 22, 1995
Three Months Ended (Date of Inception)
December 31, to December 31,
1996 1995 1996 1995
Cash Flows from
Operating Activities:
Net (Loss) $(641,082) $(156,928) $(1,618,281)$(265,939)
Adjustment to
reconcile net (loss)
to net cash provided
by (Used In)
operating activities:
Depreciation and
amortization 31,296 6,224 103,199 8,684
Issuance of
options to
consultants -- -- 14,500 --
Changes in assets
and liabilities:
Prepaid expenses
and other current
assets (178,858) 413 (187,743) (9,450)
Other assets -- -- (5,305) (5,305)
Accounts payable (24,032) (19,906) 18,350 8,502
Accured expenses 240,974 9,903 384,239 23,268
Net Cash (Used In)
Operating Activities (571,702) (160,294) (1,291,041) 240,240
Cash Flows from Investing
Activities:
Purchase of property
and equipment (9,803) (3,242) (385,125) (45,100)
Net Cash (Used In)
Investing Activities (9,803) (3,242) (385,125) (45,100)
Cash Flows from
Financing Activities:
Proceeds from issuance
of common stock 9,000,000 10 10,678,613 816,624
Deferred financing
costs (1,598,163) -- (1,644,569) --
Net Cash Provided
By Financing
Activities 7,401,837 10 9,034,044 816,624
International Sports Wagering Inc.
(A Development Stage Company)
Statements of Cash Flows
May 22, 1995
Three Months Ended (Date of Inception)
December 31, to December 31,
1996 1995 1996 1995
Net Increase (Decrease)
in Cash and Cash
Equivalents 6,820,332 (163,526) 7,357,878 531,284
Cash and Cash
Equivalents,
Beginning of Period 537,546 694,810 -- --
Cash and Cash
Equivalents,
End of Period $ 7,357,878 $ 531,284 $ 7,357,878 $ 531,284
See notes to financial statements
International Sports Wagering Inc.
Notes To Financial Statements
Note 1 - Basis of Presentation:
The balance sheet at the end of the preceding fiscal
year has been derived from the audited balance sheet
contained in the Company's Registration Statement and
is presented for comparative purposes. All other
financial statements presented are unaudited. In the
opinion of Management, all adjustments which include
only normal recurring adjustments necessary to present
fairly the financial position for all periods presented
have been made.
Footnote disclosures normally included in financial
statements prepared in accordance with generally
accepted accounting principles have been omitted in
accordance with the published rules and regulations of
the Securities and Exchange Commission. These
financial statements should be read in conjunction with
the financial statements and notes thereto included in
the Company's Registration Statement.
Note 2 - Net (Loss) Per Share of Common Stock:
Loss per share is based on the weighted average number
of shares of common stock outstanding during the
period.
Item 2. Management's Discussion and Analysis or Plan of
Operation
Plan of Operation
On December 17, 1996, International Sports Wagering Inc. (the
"Company") closed its initial public offering of 1,500,000 units,
each unit consisting of one share of common stock par value $.001
per share ("Common Stock") and one redeemable warrant to purchase
one share of Common Stock at a price of $6.00 per unit. After
underwriting discounts and commissions, other expenses of the
offering, and the repayment of promissory notes issued in
connection with a bridge financing consummated on October 28,
1996, the Company received net proceeds of approximately $7.2
million. Subsequent to the end of the quarter for which this
report is filed, an over-allotment option involving an additional
225,000 units was exercised by the underwriters. This was closed
on January 22, 1997, yielding additional net proceeds to the
Company of approximately $1.2 million.
On November 25, 1996, the Company completed a live trial of its
SportXctionTM sports wagering system (the "System") at the
Excalibur Hotel & Casino ("Excalibur") in Las Vegas, Nevada, (a
casino owned by Circus Circus Enterprises, Inc. ("Circus
Circus")), as one of the conditions for obtaining approval by
Nevada Gaming Authorities for use of the System. On January 10,
1997, the Company announced that it had received approval from
the Nevada Gaming Control Board for use of the System in the
State of Nevada. This approval is limited to use of the System
in individual casinos or other sports wagering establishments.
The trial of the System at Excalibur was continued until January
5, 1997, to permit additional evaluation by Circus Circus.
The Company recently commenced sales and marketing activities to
casinos and other sports wagering establishments in Nevada.
On February 3, 1997, the Company announced that is had hired
Sidney Diamond as its General Manager - Nevada Operations. Mr.
Diamond has spent the past 23 years operating race and sports
books for casinos in Nevada. For five years prior to joining the
Company, he was in charge of all race and sports book operations
for Circus Circus, covering eight casinos in Nevada. The Company
intends to open a sales, support and operations office in Las
Vegas, Nevada. It currently expects the facility to open during
April or May 1997.
The Company's plan of operation during the next 12 months focuses
primarily on (i) sales and marketing to casinos and other sports
book operators in Nevada, (ii) the hiring of additional personnel
in the areas of sales and marketing, equipment installation,
maintenance and training, (iii) continued research and further
product enhancement and development, including adapting the
System for new betting propositions, (iv) obtaining approval to
run the System in the State of Nevada using a central hub to
which the Company's Player Betting Stations at multiple sports
wagering establishments will be connected, reducing costs at each
establishment, (v) obtaining all required Nevada gaming licenses,
including that needed to provide the System to sports wagering
establishments in exchange for a portion of the revenue received
by the establishment or on the basis of a transaction fee, (vi)
securing further intellectual property protection, including
additional patent, trademark and copyright protections, and (vii)
exploring opportunities in foreign markets, and alternative
applications of the Company's proprietary technology, including
adaptation of the System for use in non-wagering activities. The
Company expects to purchase from others all of the hardware used
in the System and believes that all of such hardware is available
from numerous sources.
For the quarter ended December 31, 1996, the Company had a net
loss of $641,082, compared with a net loss of $156,928 for the
quarter ended December 31, 1995. No revenues were reported in
either period, as the Company is in the development stage. The
increased loss resulted primarily from interest expense and the
debt discount ascribed to warrants issued as part of the bridge
financing consummated on October 28, 1996; expenditures
associated with the trial of the System at Excalibur; and
increased salary expenses attributable to greater research and
development and administrative activities. The Company incurred
approximately $179,300 in research and development expenses for
the quarter ended December 31, 1996, compared with approximately
$143,600 in research and development expenses for the quarter
ended December 31, 1995. The increase is attributed largely to
expenditures associated with the trial of the System at
Excalibur. The Company expects to continue to incur substantial
research and development expenses for further product enhancement
and development activities, including adapting the System for use
in sporting events in addition to football, basketball, baseball
and hockey; developing new betting propositions; adapting the
System for use in foreign countries; and exploring alternative
applications of the Company's proprietary technology, including
adaptation of the System for use in non-wagering activities. The
Company also expects to continue to incur substantial losses and
negative cash flow at least through calendar 1997.
Based upon its current proposed plans and assumptions relating to
its operations, the Company anticipates that the net proceeds of
its recent initial public offering, together with existing
resources, will be sufficient to satisfy its contemplated cash
requirements for the next 18 to 24 months.
Except for the historical information contained herein, this quarterly
Report on Form 10-QSB may contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Such forward-looking statements include, but are not
limited to, the length of time that the Company's cash resources will
last. Investors are cautioned that forward-looking statements are
inherently uncertain. Actual performance and results of operations may
differ materially from those projected or suggested in the forward-looking
statements due to certain risks and uncertainties, including, without
limitation, inability of the Company to obtain required licenses from the
Nevada Gaming Authorities; and failure of the Company's SportXctionTM
sports wagering system to be accepted by casinos, sports book operators
and players. Additional information concerning certain risks and
uncertainties that would cause actual results to differ materially from
those projected or suggested in the forward-looking statements is contained
in the Company's filings with the Securities and Exchange Commission,
including those risks and uncertainties discussed in the Company's final
Prospectus, dated December 11, 1996, included as part of the Company's
Registration Statement on Form SB-2 (333-15005), in the section entitled
"Risk Factors." The forward-looking statements contained herein represent
the Company's judgment as of the date of this report, and the Company
cautions readers not to place undue reliance on such matters.
International Sports Wagering Inc.
Part II OTHER INFORMATION
Item 1. Legal Proceedings:
None
Item 2. Change in Securities:
None
Item 3. Default Upon Senior Securities:
None
Item 4. Submission of Matters to a Vote of Security Holders:
None
Item 5. Other Information:
None
Item 6. Exhibits and Reports on Form 8-K:
No reports on Form 8-K were filed during
the quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Date: February 13, 1997 INTERNATIONAL SPORTS WAGERING INC.
(Registrant)
S/BERNARD ALBANESE
Bernard Albanese, President,
Treasurer and Director
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the date indicated.
Dated: February 13, 1997 S/BARRY MINDES
Barry Mindes, Chairman of
the Board of Directors
(Principal Executive Officer)
Dated: February 13, 1997 S/BERNARD ALBANESE
Bernard Albanese, President,
Treasurer and Director
Dated: February 13, 1997 S/JENEENE NORMAN
Jeneene Norman, Chief
Financial and Accounting
Officer
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