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 June 30, 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 July
25, 1997.
Transitional Small Business Disclosure Format (check one):
Yes No X
International Sports Wagering Inc.
June 30, 1997
Form 10-QSB
Index
Page
Part I: Financial Information
Item 1. Financial Statements
Balance Sheets at June 30, 1997 (Unaudited) and
September 30, 1996. 2
Statements of Operations for the Nine and Three
Months Ended June 30, 1997 and June 30, 1996 and
May 22, 1995 (date of inception) to June 30, 1997.
(Unaudited). 3
Statement of Changes in Stockholders' Equity for
the Nine Months Ended June 30, 1997 (Unaudited). 4
Statements of Cash Flows for the Nine Months Ended
June 30, 1997 and 1996 and May 22, 1995 (date of
inception) to June 30, 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 6. Exhibits and Reports on Form 8-K. 11
Signatures 12
1
International Sports Wagering Inc.
(A Development Stage Company)
Balance Sheets
Assets
June 30, September 30,
1997 1996
(Unaudited) (Note 1)
Current Assets:
Cash and cash equivalents $ 2,184,495 $ 537,546
Short-term investments 5,076,643 --
Prepaid expenses and other
current assets 232,891 8,885
Total Current Assets 7,494,029 546,431
Property and Equipment, net 407,662 304,466
Other Assets 50,273 4,258
Deferred Financing Costs -- 46,406
Total Assets $ 7,951,964 $ 901,561
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 11,500 $ 42,382
Accrued expenses 60,735 143,265
Total Current Liabilities 72,235 185,647
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 10,214,829 1,687,089
Deficit accumulated during the
development stage (2,342,849) (977,199)
Total Stockholders' Equity 7,879,729 715,914
Total Liabilities and
Stockholders' Equity $ 7,951,964 $ 901,561
See Notes to Financial Statements
2
International Sports Wagering Inc.
(A Development Stage Company)
Statements of Operations
May 22, 1995
(Date of
Nine Months Ended Three Months Ended Inception)
June 30, June 30, to June 30
1997 1996 1997 1996 1997
Costs and Expense:
Research and
development
expense $ 611,793 $ 449,470 $ 199,688 $ 176,259 $ 1,403,088
General and
administrative
expense 668,496 88,189 265,525 51,152 894,403
Operating Loss (1,280,289) (537,659) (465,213) (227,411) (2,297,491)
Interest expense (299,098) -- -- -- (299,098)
Interest income 213,737 21,007 91,509 9,418 253,740
Net Loss $(1,365,650) $(516,652) $(373,704) $(217,993) $(2,342,849)
Net Loss per share $ (.18) $ (.08) $ (.05) $ (.03) $ (.34)
Weighted average
common shares
outstanding 7,383,877 6,477,410 7,749,269 6,477,410 6,798,794
See Notes to Financial Statements
International Sports Wagering Inc.
(A Development Stage Company)
Statement of Changes In Stockholders' Equity
For the Nine Months Ended June 30, 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 (1,365,650) (1,365,650)
Issuance of
Common Stock 1,725,000 1,725 8,527,740 -- 8,529,465
Balance at
June 30, 1997 7,749,269 $ 7,749 $10,214,829 $(2,342,849) $7,879,729
See Notes to Financial Statements
International Sports Wagering Inc.
(A Development Stage Company)
Statements of Cash Flows
May 22, 1995
Nine Months Ended (Date of Inception)
June 30, to June 30,
1997 1996 1997
Cash Flows from
Operating Activities:
Net Loss $(1,365,650) $ (516,652) $(2,342,849)
Adjustment to
reconcile net loss
to net cash (Used in)
operating activities:
Depreciation and
amortization 99,589 33,500 171,492
Issuance of options
to consultants -- -- 14,500
Changes in assets
and liabilities:
Prepaid expenses
and other current
assets (224,006) 5,222 (232,891)
Other assets (46,604) -- (51,909)
Accounts payable (30,882) 3,545 11,500
Accrued expenses (82,530) 8,173 60,735
Net Cash (Used In)
Operating Activities (1,650,083) (466,212) (2,369,422)
Cash Flows from Investing
Activities:
Short-term investments (5,076,643) -- (5,076,643)
Purchase of property
and equipment (202,196) (184,819) (577,518)
Net Cash (Used In)
Investing Activities (5,278,839) (184,819) (5,654,161)
Cash Flows from
Financing Activities:
Net Proceeds from
issuance of common
stock 8,575,871 819,618 10,208,078
Net Increase in Cash
and Cash Equivalents 1,646,949 168,587 2,184,495
Cash and Cash Equivalents,
Beginning of Period 537,546 694,810 --
Cash and Cash Equivalents,
End of Period $ 2,184,495 $ 863,397 $ 2,184,495
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 is 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 1,271,859
Weighted average common shares and
equivalents outstanding 7,749,269
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.
On April 7, 1997, the 1,725,000 shares of Common Stock and
Warrants comprising the Units that were issued in the Company's
initial public offering and subsequent over-allotment exercise
were detached and became separately transferable. The Common
Stock and Warrants are traded on the Nasdaq Small Cap Market, and
quoted under the symbols ISWI and ISWIW, respectively.
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.
On July 6, 1997, the Company completed another live trial of
the System, this time using a central hub for wide area operation
linking multiple sites in Nevada, as one of the conditions for
obtaining approval by Nevada gaming authorities for use of the
System in wide area operation. The Board is currently reviewing
the results of this trial. Licensing for wide area operation is
being applied for simultaneously. Wide area operation of the
System would permit simultaneous wagering during the course of
sporting events at multiple inter-linked casinos or other gaming
establishments in Nevada. A central hub would link, via
telecommunications lines, the Company's Player Betting Stations
located in individual gaming establishments, resulting in larger
combined pools, reduced operating costs and improved efficiency
for participating gaming establishments.
On June 23, 1997, the Company announced that it had signed a
contract with Yarlow, Inc. ("Yarlow") pursuant to which Yarlow
would act as a hub operator for the Company's SportXctionTM
sports wagering system. Yarlow currently operates sportsbooks
across the State of Nevada. The Company intends to implement a
central hub in Las Vegas, Nevada, which will be operated by
Yarlow for at least one year, or until such time as the Company
receives a gaming license and any other approvals necessary to
permit it to operate the hub. Prior to operation of a central
hub, the hub operator will 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.
The Company has also announced that it has signed its first
seven contracts with sports wagering establishments in Nevada,
pursuant to which the Company's Player Betting Stations would be
installed in such establishments and connected to the central
hub. The Company is continuing to negotiate with other casinos.
It is the Company's goal to commence live wide area operations in
September 1997.
The Company has filed an application with the Board to
obtain a gaming license. The process to obtain such license is
expected to take nine to twelve months from the time all required
information has been submitted. The Board may require the
Company to obtain additional approvals in order for it to be
permitted to act as a hub operator. When and if the Company is
issued a gaming license, it intends to assume control and
operation of the hub; according to the terms of the contract with
Yarlow, this will not take place prior to June 18, 1998. There
can be no assurance that the Board will issue the approvals
necessary for operation of a central hub, either by the Company
or a third party, or that the Company will be issued a gaming
license.
In June 1997, the Company opened a sales, support and
operations office in Las Vegas, Nevada, to facilitate its
business in Nevada.
The Company's plan of operation during the next 12 months
focuses primarily on (i) 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, (ii) continued sales and
marketing to casinos and other sportsbook operators in Nevada,
(iii) the hiring of additional personnel in the areas of sales
and marketing, equipment installation, maintenance and training,
(iv) continued research and further product enhancement and
development, including adapting the System for new betting
propositions, (v) obtaining all required Nevada gaming licenses,
including those 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.
For the three month and nine month periods ended June
30,1997, the Company had net losses of $373,704 and $1,365,650
respectively. These compare with net losses of $217,993 and
$516,652, respectively, for the three month and nine month
periods ended June 30, 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 Company incurred
additional expenses in connection with the set-up and operation
of its Las Vegas office and the trial of the System in Nevada for
wide area operation. The Company also began, during the quarter,
to purchase computer equipment needed to fulfill its contracts to
install Player Betting Stations in gaming establishments. The
increased loss for the nine 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 first trial of the System at
Excalibur. The Company incurred approximately $199,688 and
$611,793, respectively, in research and development expenses for
the three month and nine month periods ended June 30, 1997,
compared with approximately $176,259 and $499,470, respectively,
for the three month and nine month periods ended June 30, 1996.
The increases are largely attributable to salary expenses and
expenditures associated with the two trials of the System in
Nevada.
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 and when the System
will commence live wide area operation. 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 to obtain required licenses from the Nevada
gaming authorities, and failure of the Company's SportXctionTM
sports wagering system to be accepted by casinos, sportsbook
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.
II: Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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 June 30, 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: August 13, 1997 By: S/ BARRY MINDES
Barry Mindes, Chairman of the
Board of Directors
(Principal Executive Officer)
Dated: August 13, 1997 S/BERNARD ALBANESE
Bernard Albanese, President
Treasurer and Director
Dated: August 13, 1997 S/JENEENE NORMAN
Jeneene Norman, Chief
Financial and Accounting Officer
12
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<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,184,495
<SECURITIES> 5,076,643
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,494,029
<PP&E> 577,518
<DEPRECIATION> 169,856
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0
0
<OTHER-SE> 7,871,980
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<SALES> 0
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<INCOME-PRETAX> (1,365,650)
<INCOME-TAX> 0
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