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 March 31, 1997
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 X No
There were 7,749,269 shares of Common Stock outstanding at May 7,
1997.
Transitional Small Business Disclosure Format (check one):
Yes No X
International Sports Wagering Inc.
March 31, 1997
Form 10-QSB
Index
Page
Part I: Financial Information
Item 1. Financial Statements
Balance Sheets at March 31, 1997 (Unaudited) and
September 30, 1996. 2
Statements of Operations for the Six and Three
Months Ended March 31, 1997 and March 31, 1996 and
May 22, 1995 (date of inception) to March 31, 1997.
(Unaudited). 3
Statement of Changes in Stockholders' Equity for
the Six Months Ended March 31, 1997 (Unaudited). 4
Statements of Cash Flows for the Six Months Ended
March 31, 1997 and 1996 and May 22, 1995 (date of
inception) to March 31, 1997 (Unaudited). 5
Notes to Financial Statements. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations or Plan of
Operation. 7-10
Part II: Other Information
Item 5. Other Events 11
Item 6. Exhibits and Reports on Form 8-K. 12
Signatures 13
1
International Sports Wagering Inc.
(A Development Stage Company)
Balance Sheets
Assets
March 31, September 30,
1997 1996
(Unaudited) (Note 1)
Current Assets:
Cash and cash equivalents $ 3,322,217 $ 537,546
Short-term investments 4,457,548 --
Prepaid expenses and other
current assets 224,346 8,885
Total Current Assets 8,004,111 546,431
Property and Equipment, net 262,703 304,466
Other Assets 53,867 4,258
Deferred Financing Costs -- 46,406
Total Assets $ 8,320,681 $ 901,561
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 1,722 $ 42,382
Accrued expenses 75,036 143,265
Total Current Liabilities 76,758 185,647
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, 7,749,269 and
6,024,269 shares issued and
outstanding, respectively 7,749 6,024
Additional paid-in capital 10,205,319 1,687,089
Deficit accumulated during the
development stage (1,969,145) (977,199)
Total Stockholders' Equity 8,243,923 715,914
Total Liabilities and
Stockholders' Equity $ 8,320,681 $ 901,561
See Notes to Financial Statements
2
International Sports Wagering Inc.
(A Development Stage Company)
Statements of Operations
May 22, 1995
(Date of
Six Months Ended Three Months Ended Inception)
March 31, March 31, to March 31
1997 1996 1997 1996 1997
Costs and Expense:
Research and
development
expense $412,105 $ 273,211 $ 232,832 $129,645 $1,203,400
General and
administrative
expense 402,971 37,037 221,390 16,465 628,878
Operating Loss (815,076) (310,248) (454,222) (146,110) (1,832,278)
Interest expense (299,098) -- -- -- (299,098)
Interest Income 122,228 11,589 103,358 4,379 162,231
Net Loss $(991,946) $(298,659) $(350,864) $(141,731) $(1,969,145)
Net Loss per share $ (.14) $ (.05) $ (.05) $ (.02) $ (.30)
Weighted average
common shares
outstanding 7,201,181 6,477,410 7,696,769 6,477,410 6,671,411
See Notes to Financial Statements
International Sports Wagering Inc.
(A Development Stage Company)
Statement of Changes In Stockholders' Equity
For the Six Months Ended March 31, 1997
Deficit
Accumulated
Additional During The
Common Stock Paid-In Development
Shares Amount Capital Stage Total
Balance at
September 30,1996 6,024,269 $ 6,024 $ 1,687,089 $ (977,199) $ 715,914
Net Loss (991,946) (991,946)
Issuance of
Common Stock 1,725,000 1,725 8,518,230 -- 8,519,955
Balance at
March 31, 1997 7,749,269 $ 7,749 $10,205,319 $(1,969,145) $8,243,923
See Notes to Financial Statements
International Sports Wagering Inc.
(A Development Stage Company)
Statements of Cash Flows
May 22, 1995
Six Months Ended (Date of Inception)
March 31, to March 31,
1997 1996 1997
Cash Flows from
Operating Activities:
Net Loss $ (991,946) $ (298,659) $ (1,969,145)
Adjustment to
reconcile net loss
to net cash (Used in)
operating activities:
Depreciation and
amortization 62,693 7,417 134,596
Issuance of options
to consultants -- -- 14,500
Changes in assets
and liabilities:
Prepaid expenses
and other current
assets (215,461) 2,003 (224,346)
Other assets (50,001) -- (55,307)
Accounts payable (40,660) (28,408) 1,722
Accrued expenses (68,229) 4,781 75,036
Net Cash (Used In)
Operating Activities (1,303,604) (312,866) (2,022,944)
Cash Flows from Investing
Activities:
Short-term investments (4,457,548) -- (4,457,548)
Purchase of property
and equipment (20,538) (5,751) (395,859)
Net Cash (Used In)
Investing Activities (4,478,086) (5,751) (4,853,407)
Cash Flows from
Financing Activities:
Net Proceeds from
issuance of common
stock 8,566,361 609,342 10,198,568
Net Increase in Cash
and Cash Equivalents 2,784,671 290,725 3,322,217
Cash and Cash Equivalents,
Beginning of Period 537,546 694,810 --
Cash and Cash Equivalents,
End of Period $ 3,322,217 $ 985,535 $ 3,322,217
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 on Form SB-2 filed with
the Securities and Exchange Commission 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:
Pursuant to the Securities and Exchange Commission Staff
Accounting Bulletin Topic 4:D, stock issued and stock
options and warrants granted during the 12-month period
preceding the date of the Initial Public Offering ("IPO")
have been included in the calculation of weighted average
common shares outstanding for the periods prior to the
("IPO"), even when the impact of such incremental shares is
antidilutive. The computation of weighted average common
shares and equivalents outstanding as follows:
Weighted average common shares outstanding,
exclusive of issuances within 12 months
prior to the ("IPO") 4,791,522
Shares, options and warrants issued in
periods prior to and within 12 months prior
to the ("IPO") assumed to be outstanding for
the period 1,685,888
Weighted average common shares applicable
to ("IPO") and over-allotment option 1,219,359
Weighted average common shares and
equivalents outstanding 7,696,769
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations or Plan of
Operation.
On December 17, 1996, International Sports Wagering Inc.
(the "Company") closed its initial public offering of 1,500,000
units ("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
("Warrant"), 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. On January
22,1997, the underwriters exercised an over-allotment option for
an additional 225,000 Units, yielding additional net proceeds to
the Company of approximately $1.2 million. See Part II, Item 5.
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. The trial of
the System at Excalibur was continued until January 5, 1997 to
permit additional evaluation by Circus Circus. On January
10,1997, the Company announced that it had received approval from
the Nevada Gaming Control Board (the "Board") for use of the
System in the State of Nevada. The approval is limited to use of
the System in individual casinos or other sports wagering
establishments.
The Company has commenced sales and marketing activities to
casinos and other sports wagering establishments in Nevada. The
Company intends to open a sales, support and operations office in
Las Vegas, Nevada by the end of June 1997. In addition to
general marketing of the System, the Company is in discussions
with potential establishments to operate a central hub until such
time as the Company receives a gaming license and any other
approvals necessary to permit it to operate the hub. The process
for the Company to obtain a gaming license is expected to take
nine to twelve months from the date all required applications are
filed. The Board may require the Company to obtain additional
approvals in order for it to be permitted to act as a hub
operator. A central hub would link via telecommunications lines
the Company's Player Betting Stations located in individual
casinos or other gaming establishments, resulting in larger
combined pools, reduced operating costs and improved efficiency
for participating gaming establishments. The Company has
completed certain software adaptations necessary to implement its
strategy of using a central hub.
In June 1997, the Company expects to begin a live trial
utilizing a central hub linking multiple sites in Nevada. This
is one of the conditions for obtaining approval from the Board
for use of the System at multiple sites linked to a central hub.
Prior to operation of a central hub, the hub operator would be
required to have proper licensing or other approval from the
Board. The hub operator may also be required to obtain
additional licenses or other approvals to link each individual
participating gaming establishment to the hub.
When and if the Company is issued a gaming license, it
intends to assume control and operation of the hub. It is the
Company's goal to commence live operation of a central hub by
September 1997. However, there can be no assurance that the live
trial will commence on a timely basis or be successfully
completed or that the Board will issue the approvals necessary
for operation of the central hub, either by the Company or a
third party, or that the Company will be issued a gaming license.
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, (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. It does not expect to purchase such hardware until it
has entered into contracts with sports wagering establishments.
For the three month and six month periods ended March
31,1997, the Company had net losses of $350,864 and $991,946,
respectively. These compare with net losses of $141,731 and
$298,659, respectively, for the three month and six month periods
ended March 31, 1996. No revenues were reported in either
period, as the Company is in the development stage. The
increased quarterly loss resulted primarily from increased salary
expenses attributable to greater research and development and
administrative activity, as well as increased marketing expenses,
professional fees, and insurance expenses. The increased loss
for the six month period also reflects the interest expense and
debt discount ascribed to warrants issued as part of the bridge
financing consummated on October 28, 1996, and expenditures
associated with the trial of the System at Excalibur. The
Company incurred approximately $232,832 and $412,105,
respectively, in research and development expenses for the three
month and six month periods ended March 31, 1997, compared with
approximately $129,645 and $273,211, respectively, for the three
month and six month periods ended March 31, 1996. The increases
are attributed largely to salary expenses and 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 and
baseball; 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.
Based upon its current proposed plans and assumptions
relating to its operations, the Company anticipates that 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.
Part II: Other Information
Item 5. Other Events
Effective 9:30 a.m. on April 7, 1997 (the "Separation Date")
the 1,725,000 shares of Common Stock and Warrants comprising the
Units that were issued in the Company's initial public offering
were detached and became separately transferable. The Units are
no longer traded or quoted on the Nasdaq Small Cap Market. The
Common Stock and Warrants are traded and quoted under the symbols
ISWI and ISWIW, respectively.
Each Warrant entitles the holder to purchase, at any time on
or after April 7, 1997 and until 5:00 p.m. New York City time, on
December 11, 2001, one share of Common Stock at an exercise price
of $7.20, subject to certain adjustments. The Company may, at
its option, redeem the Warrants at any time on or after April 7,
1997, in whole but not in part, upon not less than 15 days'
notice, at a price of $.05 per Warrant, provided that the current
market price of the Common Stock has been at least $12.00 for 15
consecutive trading days ending within 15 days of the date of
notice of redemption. The foregoing description of the terms of
the Warrants is subject to the more detailed information and
other provisions of the Warrant Agreement by and between the
Company and American Stock Trust and Transfer Company filed as
Exhibit 4.5 to the Company's Registration Statement in Form SB-2
No. 333-15005.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Employment Agreement dated as of February 3,
1977 between the Company and Sidney Diamond.
27 - Financial Data Schedule
b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company
during the quarter ended March 31, 1997.
SIGNATURES
In accordance with the requirements of the Securities
Exchange Act of 1934, the registrant caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
International Sports Wagering Inc.
Dated: May 14, 1997 By: S. BARRY MINDES
Barry Mindes, Chairman of the
Board of Directors
(Principal Executive Officer)
Dated: May 14, 1997 S/BERNARD ALBANESE
Bernard Albanese, President
Treasurer and Director
Dated: May 14, 1997 S/JENEENE NORMAN
Jeneene Norman, Chief
Financial and Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,322,217
<SECURITIES> 4,457,548
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,004,111
<PP&E> 395,859
<DEPRECIATION> 133,156
<TOTAL-ASSETS> 8,320,681
<CURRENT-LIABILITIES> 76,758
<BONDS> 0
<COMMON> 7,749
0
0
<OTHER-SE> 8,236,174
<TOTAL-LIABILITY-AND-EQUITY> 8,320,681
<SALES> 0
<TOTAL-REVENUES> 122,228
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 815,076
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 299,098
<INCOME-PRETAX> (991,946)
<INCOME-TAX> 0
<INCOME-CONTINUING> (991,946)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (991,946)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 3rd day of February, 1997 between
International Sports Wagering Inc., a Delaware corporation (the
"Company"), and Sidney Diamond ("Employee").
W I T N E S S
E T H:
WHEREAS, the
Company
is in the business of developing,
producing,
marketing, leasing,
licensing and servicing computerized
sports wagering systems; and
WHEREAS, the
Company
desires to employ Employee as its General
Manager - Nevada Operations and Employee desires to serve the
Company
in such capacity:
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
1. EMPLOYMENT. Subject to the terms and conditions herein
contained, the
Company
hereby employs Employee as its General
Manager - Nevada Operations and Employee hereby agrees to serve the
Company
in such capacity.
2. DUTIES.
(a) Employee agrees, during the
"Term"
(as herein-
after defined), to devote his full business attention and best
efforts to the business of the
Company
and to perform such duties
of an
executive, marketing
and administrative nature as the Chief
Executive Officer, President or Board of Directors of the
Company
shall assign or
direct,
consistent with his status and position as
General Manager - Nevada Operations, including, without limitation,
such duties as would typically be performed by persons holding
similar positions in other
companies, recognizing that the Company
is a small development stage Company with limited resources and
personnel.
(b) Employee shall conduct himself at all times in
a manner consistent with his position with the
Company.
3. TERM
(a) The term of Employee's
employment pursuant to
this Agreement
(the "Term") shall commence as of February
3,
1997,
and shall terminate on
January 31, 2000, subject
to earlier
termination
by the Company
(
i
) in the event of Employee's death;
(ii) at the option of the
Company,
in the event of
Employee's
"disability"
(as hereinafter
defined);
(iii) for
"cause" or without
cause pursuant to Section 10.
(b) For the purpose of this Agreement, (i)
"disability" shall mean any injury or any physical or mental
condition or illness which shall render Employee unable to perform
his duties in accordance with this
Agreement for 60 consecutive
days or an aggregate of 90 days during any 180 day period during
the Term
and (ii) "cause" shall include, but
not be
limited to,
failure of the Employee to be licensed by any relevant Nevada
gaming
authority
or the revocation or suspension of the Employee's
license by
such gaming
authority.
4. COMPENSATION AND BENEFITS. As compensation for all
duties to be rendered by Employee to the
Company
and any of its
subsidiaries and affiliates, in all capacities, the
Company
shall
pay
to the
Employee during the Term a minimum of the following,
payable in accordance with the
Company's standard
payroll
practice:
(a) During each year of the Term, the Employee
shall be paid a base salary at the rate of $100,000 per year. In
addition, (i) during each of the first two years of the Term, the
Employee shall be paid (x) a non-refundable draw (advance) at the
rate of $100,000 per year (payable in the same manner and time that
the base salary is paid), against "Commissions" (as hereinafter
defined) that may be earned by the Employee, as hereinafter
provided, and (y) any Commissions earned by the Employee with
respect to the Company's Player Betting Stations ("PBS") installed
and first put into operation in excess of the minimums described in
subsection 4(b) or 4(c), as the case may be; and (ii) during the
third year of the Term, the Employee shall be paid any Commissions
earned by the Employee in excess of the minimums described
subsection 4(d).
(b) During the first year of the Term, the Employee
shall be paid a one-time Commission with respect to each PBS first
installed and put into operation in a casino or other gaming
establishment in the State of Nevada during said year in excess of
1,000 PBS' (the "First Year Minimum"); provided that the Employee
shall not be paid a Commission with respect to any PBS installed
and put into operation in a casino or gaming establishment owned or
operated by [Circus Circus
] or any of its subsidiaries or
affiliates (collectively referred to as "Circus"); and provided,
further that PBS' installed and put into operation in a casino or
gaming establishment owned or operated by Circus shall not count
toward reaching
the First Year
Minimum.
(c) During the second year of the Term, the
Employee shall be paid a one-time Commission with respect to each
PBS first installed and put into operation in a casino or other
gaming establishment in the State of Nevada during said year in
excess of the greater of (i) 1,000 or (ii) 2,000 less the number of
PBS' installed and first put into operation during the first year
of the Term (the "Second Year Minimum"); provided that the Employee
shall not be paid a Commission with respect to any PBS installed
and put into operation in a casino or gaming establishment owned or
operated by Circus; and provided, further that PBS' installed and
put into operation in a casino or gaming establishment owned or
operated by Circus shall not count toward reaching the Second Year
Minimum.
(d) During
the third year of the Term, the Employee
shall be paid a one-time Commission with respect to each
PBS
first
installed and put into operation in a casino or other gaming
establishment in
the State of Nevada
during
said year
in
excess of
the greater of (i) 0 or (ii) the Second Year Minimum less the
number of PBS' installed and first put into operation during the
second year of the Term; provided
that the Employee shall not be
paid a Commission
with respect to
any PBS installed
and put into
operation in
a casino or gaming establishment owned or operated by
Circus; and provided, further that PBS' installed and put into
operation in a casino or gaming establishment owned or operated by
Circus shall not count toward reaching any Minimum.
For example (and not by way of limitation) (i) if during
the first year of the Term, 1,150 PBS' are installed and put into
operation in Nevada, of which 250 are put into operation in casinos
owned by Circus and 900 are put into operation in casinos not owned
by Circus, the Employee would not, during such first year, be
entitled to any Commission beyond the non-refundable draw
(advance); and if thereafter, during the second year of the Term,
1,250 additional PBS' are installed in casinos in Nevada, all of
which were not owned by Circus, the Employee would be entitled to
a Commission with respect to 150 PBS'. (ii) If during the first
year of the Term 2,500 PBS' are installed and first put into
operation, of which 1,050 are in casinos owned by Circus and 1,450
are in casinos not owned by Circus, the Employee would be entitled
to a Commission with respect to 450 PBS (in addition to the
$100,000 draw (advance)); if thereafter, during the second year of
the Term, 550 PBS are installed in casinos not owned by Circus, the
Employee would not be entitled to any Commission (although the
Employee would receive the $100,000 draw (advance)).
(e) If a Commission
is due and payable as provided
above, it shall be a
one-time payment of $100 for each PBS first
installed and placed in operation in a casino or other gaming
establishment in the State of Nevada; provided that such PBS
remains in operation in the casino or other gaming establishment in
which it was
first installed and
placed in operation for at least
one year. If a PBS is placed in operation in a casino or other
gaming establishment and within less than one year thereafter
that
PBS is removed from
operation for any reason whatsoever (other than
maintenance),
any Commission earned by the Employee with respect
thereto shall
offset any Commission that may be earned by the
Employee thereafter. A PBS shall be deemed to have been placed in
operation after (i) it is installed in a casino or other gaming
establishment in Nevada and (ii) is used in conjunction with the
Company's SportXction sports wagering game for the placement of
real money bets for at least one
sporting
event. A PBS installed
and put into operation in order to replace a PBS that is removed
for maintenance shall not be considered a new PBS installed and put
into operation for purposes of calculating any Commission.
(f) The
Company and the Employee each agree to use
their best efforts during each year of the Term, to maximize the
number of PBS' installed and put into operation in Nevada in all
casinos and gaming establishments including, but not limited to,
those owned or operated by Circus.
(g) If
a PBS is installed and put into operation in
one casino or gaming establishment and thereafter is moved to
another casino or gaming establishment, it shall be counted only
once for purposes of determining the Commission
due or
any Minimum
number of PBS' installed.
All Commissions earned shall be paid
within 30 days after the end of the month in which the PBS with
respect to which the Commission was earned was installed and placed
in operation.
(h) In
addition, Employee shall be entitled to
receive (a) such salary increases, bonuses or other incentive
compensation as may be approved by the Board of Directors; (b) two
weeks vacation during each year of the Term; (c) such health
insurance as the Company may from time to time provide to its other
employees; (d) such life insurance, if any, as the Company may from
time to time provide to all other employees; and (e) such other
fringe benefits as the Company may from time to time provide to all
other employees.
(i) During
the Term the Employee shall be required
to maintain his principal residence in Las Vegas, Nevada.
5. REIMBURSEMENT OF EXPENSES. The Company shall reimburse
Employee for all reasonable business expenses paid or incurred by
him on behalf of the Company during the Term in connection with the
performance of his duties hereunder including, but not limited to,
reasonable travel and entertainment expenses, provided that he
submits, in a timely manner, receipts or other expense records and
reports in such detail as may be required by the Company.
6. LOAN. Promptly after the Employee commences employment
with the Company the Company shall lend to the Employee $100,000 in
accordance with agreements containing the following terms:
a) The loan will be interest
free (any tax
consequences of this loan will be the burden of the
Employee).
b) The loan will be secured by a
second mortgage on
the principal residence of the Employee located in
Nevada and certain other property located in
Laughlin, N.V.
c) The loan shall be repaid at the rate of (i) $50,000
during the first year of the Term and (ii) $25,000
during each of the second and third years of the
Term. All such repayments shall be made by means
of payroll
deductions from the base salary, payable
to the Employee as herein
provided.
d) If the Employee resigns prior to expiration of the
Term, the remaining unpaid balance of the loan
shall be repaid to the Company within 30 days of
such
resignation.
e) If the Employee's employment is terminated by the
Company, other than for
cause or as a result of
Employee's death or disability,
prior to the end of
the Term, the outstanding unpaid balance of the
loan will be forgiven.
7. NO CONFLICTING COMMITMENTS.
Employee represents and warrants that he has no commit-
ments or obligations nor is he a party to any agreement with any
prior employer or otherwise of any kind whatsoever inconsistent
with this Agreement which would impair, infringe upon or limit his
ability to enter into this Agreement or to perform the services
required of him hereunder.
8. PROPRIETARY INFORMATION. Simultaneous with the execution
of this Employment Agreement, Employee agrees to sign the
Proprietary Information Agreement attached hereto as Exhibit A.
9. Non-Competition; Non-Solicitation;
Non-Interference. The
Employee acknowledges that during the course of his employment with
the Company he will become apprised of sensitive and proprietary
business, marketing, technical and financial information,
disclosure or use of which other than for the benefit of the
Company could cause serious and irreparable damage to the Company.
The Employee further acknowledges that the Company would not hire
him if he did not agree to and abide by the provisions of this
Section 9 and the Proprietary Information Agreement to be entered
into simultaneously herewith.
(a) Employee
agrees that during the Term and for a
period of two years after the expiration or termination thereof, he
will not, without the prior written consent of the Company in each
case, directly or indirectly, serve as a director, officer,
partner, consultant, joint venturer, agent, representative or
employee of or render any services or advice to, or have any
interest (debt, equity or otherwise) in, or own, manage, operate or
control or participate in the ownership, management, operation or
control of,
the
business in which the Company is
involved
within
the State of Nevada or within any other geographical area or
jurisdiction in which the business of the Company is being
conducted; provided that the foregoing shall not preclude the
Employee (i) from owning less than 1% of the outstanding shares of
any public Company that is involved in interactive sports wagering
and (ii) after the Term, being the manager of a sports book
operation in a casino or other gaming establishment even if such
sports book operation utilizes terminals for interactive sports
wagering that are competitive with the Company's PBS'.
(b) The
Employee shall during the Term and
thereafter (i) use his best efforts to preserve the business
organization of the Company, keep available to the Company the
services of the Company's directors, officers, employees, agents
and representatives; (ii) not cause, induce, encourage or solicit
any of the Company's directors, officers, employees, agents or
representatives to leave the Company; (iii) preserve for the
Company its actual and prospective business relations with its
customers, suppliers, distributors and others; and (iv) not commit
any act or in any way assist others in committing any act which
will injure the Company or its business or in any way be inimical
to the best interests of the Company.
(c) Employee
agrees that this Section 9 is an
independent and severable covenant, which shall be enforceable
notwithstanding any rights or remedies that he may have under any
provision of this Agreement or otherwise; that the remedy for
breach hereof will be inadequate and that the Company shall be
entitled to temporary and permanent injunctive relief for any
breach of this Section 9 without the necessity of proving
damages;
and that in the event a court were to determine that the duration
or geographical scope of any part of this Section 9 were
unreasonably long or broad, such court shall not declare this
Section or part thereof to be void, but shall interpret it and
enforce it to the extent that the court deems reasonable and in a
manner that will fulfill the intent of the parties.
10. TERMINATION.
(a) This Agreement shall terminate automatically
upon the death of the Employee. The Company in its discretion may
terminate this Agreement in the event the Employee becomes disabled
as provided in Section 3.
(b) In the event the Employee elects to terminate
his employment with the Company, the Employee agrees to give the
Company not less than 60 days prior written notice thereof.
(c) The Company reserves the right to terminate the
Employee either with or without cause. If the Company elects to
terminate the employment of the Employee for cause it may do so
without any prior notice thereof to Employee; in which event this
Agreement and all rights and obligations of either party hereunder
except for the obligations of the Employee set forth in Sections 5,
6, 7, 8, 9, 10 and 16 and the Proprietary Information Agreement
shall terminate and the Employee shall not thereafter be entitled
to any further compensation hereunder. If during the Term, the
Company elects to terminate the Employee's employment without
cause, the Company shall continue to pay the Employee (i) his base
salary for the lesser of six months or until the expiration of the
Term (the "Severance Period") and (ii) any Commissions to which the
Employee is entitled as herein provided based upon PBS' installed
and first put into operation during the Severance Period; provided
that there was a contract between the Company and the casino or
other gaming establishment providing for the installation of PBS,
which contract was entered into prior to the date on which the
Severance Period began. Payments made during the Severance Period
shall be in accordance with the Company's standard payroll
practice.
11. ACCEPTANCE OF ORDERS. The Company reserves the right, in
its discretion, to accept, reject and negotiate all terms and
conditions of arrangements for providing its PBS' to each casino or
other gaming establishment, including but not limited to, number of
PBS' to instal and put into operation, time of delivery of PBS,
fees or other arrangements for the compensation to be received by
the Corporation. The exercise of the Company's discretion shall in
no way affect the Employee's entitlement to any Commissions.
12. ENTIRE AGREEMENT. This Agreement embodies the entire
understanding and agreement of the parties hereto in relation to
the subject matter hereof, and no promise, condition, representa-
tion or warranty, express or implied, not herein set forth shall
bind any party hereto. None of the terms and conditions of this
Agreement may be changed, modified, waived or cancelled orally or
otherwise except in a writing signed by both the parties hereto,
specifying such change, modification, waiver or cancellation. A
waiver at any time of compliance with any of the terms and condi-
tions of this Agreement shall not be considered a modification,
cancellation or waiver of such terms and conditions of any pre-
ceding or succeeding breach thereof unless expressly so stated.
13. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
legal representatives, successors and assigns.
14. GOVERNING LAW. This Agreement shall be governed by the
internal laws of the State of Nevada without regard to principles
of conflicts of law.
15. NOTICES. Any notice or other communication required or
desired to be given shall be in writing and shall be sent by
registered or certified mail return receipt requested or by express
mail. Each such notice shall be deemed given at the time it is
mailed in any post office maintained by the United States to the
following respective addresses, which either party may change as to
such party upon ten (10) days' notice to the other.
To the Company:
International Sports Wagering Inc.
201 Lower Notch Road
Little Falls, New Jersey 07424
Attn: President
With a copy to:
Richard M. Hoffman, Esq.
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza (29th Floor)
New York, New York 10112
To Employee:
Mr. Sidney Diamond
1320 South 17th Street
Las Vegas, Nevada 89104
With a copy to:
[ ]
16. EXTRAORDINARY RELIEF. Employee acknowledges and agrees
that irreparable damage will result to the Company in the event of
a breach of the Proprietary Information Agreement. Accordingly,
Employee agrees that the Company shall be entitled to enforce its
rights under said Proprietary Information Agreement, in the event
of a breach or threatened breach thereof, in the court of equity,
and shall be entitled to a decree of specific performance or
appropriate injunctive relief. Such remedies shall be cumulative
and not exclusive and shall be in addition to any other rights or
remedies available to the Company.
17. INVALIDITY. Any provision of this Agreement found to be
prohibited by law shall be ineffective as written without
invalidating the remainder of this Agreement and shall be deemed
amended to the fullest extent allowable by applicable law to
effectuate the purposes of said provision.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
INTERNATIONAL SPORTS WAGERING INC.
By:
Bernard Albanese, President
Sidney Diamond
