SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
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 0-21831
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: (973) 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 7,841,660 shares of Common Stock outstanding at April 30, 1999.
Transitional Small Business Disclosure Format (check one):
Yes No X
International Sports Wagering Inc.
March 31, 1999
FORM 10-QSB
Index
Page
Part I: Financial Information
Item 1. Financial Statements,
Balance Sheets at March 31, 1999 (Unaudited)
and September 30, 1998. 2
Statement of Operations for the Three and Six
Months Ended March 31, 1999 and 1998 and May 22,
1995 (date of inception) to March 31, 1999
(Unaudited) 3
Statement of Changes in Stockholder s Equity for
the Six Months Ended March 31, 1999
(Unaudited) 4
Statements of Cash Flows for the Six Months
Ended March 31, 1999 and 1998 and May 22,
1995 (date of inception) to March 31, 1999
(Unaudited) 5
Notes to Financial Statements 6-7
Item 2. Management s Discussion and Analysis of Financial
Condition and Results of Operations or Plan of
Operation. 8-14
Part II: Other Information
Item 4. Submission of Matters to a Vote of Security
Holders 15
Item 6. Exhibits and Reports on Form 8-K
16
Signatures 17
<PAGE>
Part I: Financial Information
Item 1. Financial Statements
International Sports Wagering Inc.
(A Development Stage Company)
Balance Sheets
March 31, 1999 Sept.30, 1998
(Unaudited) (Note 1)
Current assets:
Cash and cash equivalents $ 1,598,220 $ 198,607
Accounts receivable 182 3,401
Investments 779,680 3,274,963
Notes receivable 21,120 25,000
Prepaid expenses and other
current assets 103,614 105,486
Total current assets 2,502,816 3,607,457
Property and equipment, net 645,608 800,070
Notes receivable, less current
portion - 8,620
Other assets 5,006 13,423
Total assets $ 3,153,430 $ 4,429,570
Liabilities and Stockholders' Equity
Current liabilities:
Deposits payable $ 9,149 $ 10,490
Accounts payable 16,314 94,629
Accrued expenses 100,499 155,910
Total current liabilities 125,962 261,029
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 auth-
orized, issued and outstanding
7,819,660 7,820 7,820
Additional paid-in capital 10,264,243 10,264,243
Deficit accumulated during the
development stage (7,244,595) (6,103,522)
Total stockholders' equity 3,027,468 4,168,541
Total liabilities and
stockholders' equity $ 3,153,430 $ 4,429,570
See accompanying notes to financial statements
2
International Sports Wagering Inc.
(A Development Stage Company)
Statements of Operations
(Unaudited)
<TABLE>
May 22, 1995
Three Months Ended Six Months Ended (Date of Inception)
March 31, March 31, to March 31,
1999 1998 1999 1998 1999
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 3,847 $ 2,455 $ 8,203 $ 27,150 $ 48,201
Costs and expenses
Research and development
expense 197,292 255,697 382,785 519,660 3,162,408
General and administrative
expense 385,169 425,460 862,657 1,227,953 4,500,178
582,461 681,157 1,245,442 1,747,613 7,662,586
Operating loss (578,614) (678,702) (1,237,239) (1,720,463) (7,614,385)
Other income (expense)
Interest income 54,058 76,382 96,166 141,904 668,888
Interest expense - - - - (299,098)
54,058 76,382 96,166 141,904 369,790
Net loss $(524,556) $(602,320) $(1,141,073) $(1,578,559) $(7,244,595)
Net loss per share-
basic and diluted $ (0.07) $ (0.08) $ (0.15) $ (0.20) $ (1.00)
Weighted average common
shares outstanding-
basic and diluted 7,819,660 7,752,292 7,819,660 7,751,013 7,246,541
</TABLE>
See accompanying notes to financial statements
3
International Sports Wagering Inc.
(A Development Stage Company)
Statement of Stockholders' Equity
For the Six Months Ended March 31, 1999
(Unaudited)
Deficit
Accumulated
Additional During The
Common Stock Paid-In Development
Shares Amount Capital Stage Total
Balance at
September 30,1998 7,819,660 $7,820 $10,264,243 $(6,103,522) $4,168,541
Net loss for the
six months ended
March 31, 1999 - - - (1,141,073) (1,141,073)
Balance at
March 31,1999 7,819,660 $7,820 $10,264,263 $(7,244,595) $3,027,468
See accompanying notes to financial statements
4
International Sports Wagering Inc.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
May 22, 1995
Six Months Ended (Date of Inception)
March 31, to March 31,
1999 1998 1999
Cash Flows from
Operating Activities:
Net loss $ (1,141,073) $ (1,578,559) $(7,244,595)
Adjustment to reconcile net
loss to net cash (Used in)
operating activities:
Depreciation and amortization 163,615 205,871 858,798
Provision for doubtful accounts - 75,124 79,497
Issuance of options
to consultants - - 14,500
Changes in assets and liabilities:
Accounts receivable 3,219 (22,174) (79,679)
Prepaid expenses and other
current assets 1,872 19,495 (103,614)
Customer deposits (1,341) - 9,149
Other assets 8,417 (742) (7,623)
Accounts payable (78,315) (46,687) 16,314
Accrued expenses (55,411) (126,695) 100,499
Net Cash (Used In)
Operating Activities (1,099,017) (1,474,367) (6,356,754)
Cash Flows from Investing
Activities:
Proceeds from sales of
investments 4,496,720 6,207,529 40,691,210
Short-term investments (2,001,437) (4,703,531) (41,470,890)
Purchase of property
and equipment (9,153) (142,676) (1,501,789)
Proceeds from repayments
of notes receivable 12,500 19,230 78,880
Issuance of notes receivable - (50,000) (100,000)
Net Cash Provided By (Used In)
Investing Activities 2,498,630 1,330,552 (2,302,589)
Cash Flows from Financing
Activities:
Net proceeds from issuance
of common stock - 2,125 10,257,563
Net Cash Provided By Financing
Activities - 2,125
10,257,563
Net (Decrease) Increase in
Cash and Cash Equivalents 1,399,613 (141,690) 1,598,220
Cash and Cash Equivalents,
Beginning of Period 198,607 1,026,313 -
Cash and Cash Equivalents,
End of Period $ 1,598,220 $ 884,623 $1,598,200
See accompanying notes to financial statements
5
International Sports Wagering Inc.
Notes To Financial Statements
Note l Basis of Presentation:
The information at March 31, 1999 and for the three and six
months ended March 31, 1999 and 1998, is unaudited, but
includes all adjustments (consisting only of normal recurring
adjustments) which in the opinion of management, are necessary
to state fairly the financial information set forth therein in
accordance with generally accepted accounting principles. The
interim results are not necessarily indicative of results to
be expected for the full fiscal year period. These financial
statements should be read in conjunction with the audited
financial statements for the year ended September 30, 1998
included in the Company s Annual Report on Form 10-KSB filed
with the Securities and Exchange Commission.
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.
Note 2 - Net Losses per Share of Common Stock:
During March 1997, the Financial Accounting Standards Board
( FASB ) Released statement of Financial Accounting Standards
No. 128, Earnings Per Share ( SFAS128 ). SFAS 128
establishes standards for computing and presenting earnings
per share and is effective for financial statements for both
interim and annual periods ending after December 15,1997.
Accordingly, the accompanying net loss per share information
has been calculated and presented in accordance with the
provisions of SFAS 128 and as further prescribed by Securities
and Exchange Commission, Staff Accounting Bulletin No. 98,
which is effective Feb. 1998.
Basic net loss per share was computed by dividing net loss by
the weighted average number of common shares outstanding
during the applicable reporting periods. The computation of
diluted net loss per share is similar to the computation of
basic net loss per share except that the denominator is
increased to include the number of additional common shares
that would have been outstanding if the dilutive potential
common shares had been issued. However, the Company s
computations of dilutive net loss per share does not assume
any conversion or exercise of securities as their effect is
anti-dilutive for all periods presented.
6
International Sports Wagering Inc.
Notes To Financial Statements
Note 2 - Net Losses per Share of Common Stock(continued):
The weighted average number of shares used in the basic and
diluted net loss per share computations for the three month
periods ended March 31, 1999 and 1998, for the six month
periods ended March 31, 1999 and 1998, and the period from
May 22, 1995 (date of inception) to March 31, 1999 were
7,819,660, 7,752,292, 7,819,660, 7,751,013, 7,246,541,
respectively.
Common equivalent shares that could potentially dilute basic
earnings per share in the future and that were not included in
the computation of diluted loss per share because of anti-
dilution were 2,779,141 and 2,853,408 for three and six month
periods ending March 31, 1999 and 1998, respectively.
Note 3 - Accounts and Notes Receivable:
In June 1997, the Company entered into an agreement with a
Nevada casino whereby the Company granted the casino a license
to function as the hub operator(the "Hub Operator")of the
Company's sports wagering system ( System ). Under the
agreement, the Company was to receive a fixed fee based on a
per-terminal use basis. In October 1997, an affiliate of the
Hub Operator executed a promissory note to the Company for
$50,000 loaned to the Hub Operator by the Company. The note
provided for principal in the amount of $5,000 and accrued
interest at the rate of 10% per annum to be paid in
consecutive monthly installments commencing in February 1998
and continuing thereafter, with all amounts fully due by
September 1998. The note was guaranteed by two principals of
the affiliate of the Hub Operator. The Hub Operator agreement
was to terminate in March 1999 or sooner as specified in the
agreement. In January 1998, the Hub Operator ceased doing
business as a result of financial difficulties unrelated to
the operation of the System. For the year ending September 30,
1998, the Company has posted a reserve of $79,497, which
represents the above loan of $50,000, and $29,497 in
receivables.
7
Item 2. Management s Discussion and Analysis of Financial
Condition and Results of Operations or Plan of Operation.
Financial Results
For the three months ended March 31, 1999 the Company had a
net loss of $524,556 or $0.07 loss per share on a basic and fully
diluted basis on the 7,819,660 weighted average common shares
outstanding, compared with a net loss of $602,320 or $ 0.08 loss
per share on a basic and fully diluted basis on the 7,752,292
weighted average common shares outstanding for the three months
ended March 31, 1998. Revenues of $3,847 were reported for the
three months ended March 31, 1999, compared with revenues of $2,455
reported for the prior period. Prior to being granted an OILS
license, including during the three months ended March 31, 1998,
the Company charged fixed fees for the use of the System to the
System operator (see Background ). Subsequent to the granting of
the OILS license to the Company, including during the three months
ended March 31, 1999, while the Company was operating the System,
the Company's revenues represented the net win (i.e. total amount
wagered less total amount paid out) of the System.
The net win is affected by the success (or lack thereof) of the
players in making sports wagering bets. The System seeks to induce
balanced betting action. It operates most efficiently when there
are a substantial number of wagers being placed through the System
simultaneously. When the number of wagers through the System is
modest, as it has been most of the time the System has been in
operation, it is more difficult to attempt to create balanced
pools. This tends to result in a lower net win.
The decreased loss for the three months ended March 31, 1999
resulted primarily from: bad debt expense which decreased by
$26,735 to $0, reflecting a non-recurring expense; professional
fees which decreased by $25,441 to $57,695, reflecting an increased
reliance on in-house accounting and SEC report preparation;
depreciation expenses, which decreased by $21,898 from the prior
year to $81,841; marketing expenses which decreased by $19,920 to
$9,569, primarily reflecting a decrease in advertising to promote
the SportXction game; salary expenses, which increased by $16,105
to $274,323; general liability insurance, which decreased $13,853
to $27,438 due to lower renewal rates; travel expenses, which
decreased by $4,847 to $11,859; rent expense which increased by
$2,774 to $16,305 due to increased lease rates; and a decline in
interest income which decreased by $29,078 to $54,058 due to
reduced investments.
The Company incurred approximately $197,097 in research and
development costs for the three months ended March 31, 1999,
compared with approximately $255,697 for the comparable prior
period.
The Company continues to be in the development stage, with
limited revenues generated from the System. As of March 31, 1999,
the Company had cummulative net losses since inception of
$7,244,595. It expects to continue to incur substantial losses and
negative cash flow at least through fiscal
8
year ended September 30, 1999. Contributing to this are the fact
that revenues currently being generated since the resumption of the
operation of the System in mid-May, 1998 have been insignificant
and the Company's expectation that it will continue to incur
substantial research and development expenses for further product
enhancement and development activities. As of March 31, 1999, the
Company had liquid resources totaling $2,377,900. These include
cash and cash equivalents in the amount of $1,598,220, and short
term investments in the amount of $779,680. Investments are
limited to investment grade marketable securities with maturities
of less than 18 months. 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 approximately 12 months.
Capital expenditures are expected to be limited to purchase of
additional computer equipment and leasing additional computer
equipment, most of which will be required in connection with its
activities relating to legal wagering from remote (non-casino)
locations in Nevada. Existing resources will fund these
requirements.
Recent Developments
On September 23, 1998, the Company announced that it had
developed a version of its SportXction(tm) sports wagering System that
could be used for betting from remote (non-casino) locations
utilizing a PC and modem by bettors who have established and funded
accounts at gaming establishments. This modified version of the
System is designed for use for legal sports wagering by bettors
from locations anywhere throughout the State of Nevada. This System
was designed to run on a third-party secure private network that
assures that players are placing their wagers from within Nevada,
as required by regulations of the Nevada Gaming Authorities. On
October 26, 1998, Alliance Gaming Corp. ("Alliance") announced that
it had developed the Remote Access Verification Environment
(RAVE)(tm)* technology which provides the geographic call origination
verification of its PC users and is designed to comply with
recently adopted Nevada legislation regarding on-line gaming. In
October 1998, the Company's revised version of its System in
combination with the RAVE technology was submitted for approval to
the Nevada Gaming Authorities. The Company further adapted the
System to permit acceptance of traditional pre-game side and totals
wagering and parlays. The Company's revised version of its System,
including all of the enhanced capabilities, in combination with the
RAVE(tm) technology was submitted to the Nevada Gaming Authorities for
approval.
On May 13, 1999 The Company announced that it had received
approval from the Nevada Gaming Control Board to begin a live money
trial of the Company's revised version of the SportXction(tm) wagering
system. The live money trial is a part of the process by which the
Nevada Gaming Authorities test the revised system and determine
whether to grant final approval for its use. The revised version
will accept both traditional pre-game wagers as well as play-by-
play wagers made during the course of the sporting event from
remote (non-casino) locations within the State of Nevada through
means of a personal computer ("PC"). This is the first system
approved for a live money trial by Nevada Gaming Authorities that
allows players to place sports wagers from PC's at remote sites.
The Company is in discussions with several Nevada sports books to
jointly market this product in Nevada. The sports book would sign
up patrons, allowing them to establish accounts, deposit and
withdraw funds. The Company would operate the centralized system,
running consolidated wagering pools across the many participating
sports books. The Company would provide the sports books with a
share of the revenue. No assurance can be given that the revised
system will be approved by the Nevada Gaming Authorities.
* RAVE(tm) is a trademark of Alliance Gaming Corporation
9
On December 14, 1998, the Company and Alliance signed an
agreement pursuant to which the Company received an exclusive
license to use the RAVE(tm) technology in connection with legal on-
line or telephone betting on races or sports events in conjunction
with licensed race and sports books in the State of Nevada. The
agreement to license the RAVE(tm) technology is conditioned upon
approval by the Nevada Gaming Authorities and remains in effect for
a period of seven years after final approval by the Nevada Gaming
Authorities is obtained.
On December 26, 1998, the Company launched free sports
contests on the Internet using its SportXction(tm) System as a non-
wagering game. It conducted approximately 20 contests through
January 31,1999 as a trial of the technology without any marketing.
The technology trial was successful with modest player
participation.
Utilization of the SportXction(tm) sports wagering system in
casinos and other gaming establishments has been disappointing to
date. In order to encourage more potential players to wager
through the System, the Company adapted the System to permit
limited time periods of free play and practice betting during the
course of a sporting event. It also introduced other new features
and enhancements to the System to attract additional players and
increase wagering. Despite these new features and enhancements, the
revenue generated by the casino based Player Betting Stations
("PBSs") remains small, and is likely to remain insufficient to
avoid continuing loses by the Company for the foreseeable future.
On November 2, 1998, the Nevada State Gaming Commission
adopted amendments to several of its regulations, including
Regulation 22 "Race Books and Sports Pools." This revised
regulation disallows the acceptance of wagers by race and sports
books made by means of telephone or other communications systems,
unless they "... can demonstrate to the chairman's satisfaction
that the wagering communications originate from within the State of
Nevada." This new regulation became effective on March 1, 1999.
This regulation may ultimately have the effect of preventing race
and sports books, which currently accept telephone wagers, from
taking such wagers unless they are able to fulfill the requirements
of Regulation 22. At the present time, sports books which have
implemented procedures to call back patrons who have placed wagers
by telephone have received permission from the Nevada Gaming
Authorities to continue accepting such wagers. It is unknown
whether or not patron call back procedures will continue to be an
acceptable solution in the future. The purpose of the RAVE(tm)
technology is to fulfill the requirements of the new regulation.
The Company is currently expanding the capabilities of the
System to allow other types of wagers, in addition to the play-by-
play SportXction(tm) wagers. The first phase of this software
development has been completed and allows the acceptance by the
System of traditional pre-game side and totals wagering and
parlays. Ongoing software development will allow the inclusion of
teasers, futures, and other exotic wagers. Future enhancements may
include the ability to allow pari-mutuel wagers on races. Another
possible option is fixed (as opposed to pari-mutuel) odds race
wagering, which is very popular in foreign venues. The Company
intends to market this modified System, in conjunction with the
RAVE(tm) technology, for use for legal sports wagering from remote
(non-casino) sites in the State of Nevada (if approved by the
Nevada Gaming Authorities) as well as internationally where such
forms of wagering are legal.
10
Because of the difficulty of introducing and attracting
SportXction(tm) to tourists, which represent the major potential
player population for this type of game, the Company s major source
of income in the short term cannot be expected to come from players
of SportXction(tm) within casinos. The Company has therefore
intensified its focus in five areas; (i) SportXction(tm) for wagering
from other than casinos within the State of Nevada using the RAVE(tm)
technology, if it is approved by the Nevada Gaming Authorities,
(ii) pre-game betting using the Rave technology, which also
requires Nevada Gaming Authorities approval, (iii) non-wagering
applications, including games and contests nationally, over the
Internet, in all sports, where the Company intends to derive
revenue from advertising, merchandising, and data-mining, (iv)
SportXction(tm) for wagering on the Internet or private networks in
those foreign countries where it is legal, and (v) pre-game
betting in those foreign countries where it is legal. The Company
has recently added soccer, the most popular foreign sport, to the
list of sports contests supported by the System.
Background
In June 1997, the Company retained Yarlow, Inc. ("Yarlow")
d/b/a Tom's Sunset Casino to operate the Company's SportXction(tm)
sports wagering System until the later of June 1998 or such time
as the Company received a Nevada gaming license as an operator of
an inter-casino linked system ("OILS license"), permitting it to
operate the System. The Company applied for an OILS license in
July 1997. On January 13, 1998, the Company announced that Yarlow
had suspended operation of Tom's Sunset Casino, including operation
of the SportXction(tm) System, as a result of financial difficulties
unrelated to the System.
Live operation of the System commenced on September 21, 1997
and by January, 1998, when operation of the System was temporarily
suspended, as described above, the System was in operation at eight
inter-linked casinos and gaming establishments in Nevada, with
simultaneous wagering conducted through approximately 220
player-betting stations installed at those eight establishments.
On April 23, 1998, the Nevada Gaming Authorities granted an
OILS license to the Company. The Company re-commenced operations on
May 11, 1998 with the Company performing the duties of Hub
Operator. During the three months ended March 31, 1999, the System
was in operation in a total of three locations. During the hiatus
in operations, between mid January, 1998 and mid May, 1998, the
Company enhanced the SportXction(tm) System with several new features
including an improved parley of sequential bets which had initial
testing last winter, and free practice bets. By September 30, 1998,
the Company again enhanced the SportXction(tm) System with several new
features including one-sided, long-shot propositions.
11
Use of Proceeds from Initial Public Offering
On December 11, 1996, the Company's Registration Statement on
Form SB-2 (Reg. No. 333-15005) relating to its IPO was declared
effective, pursuant to which it sold 1,725,000 units (including
over-allotments) consisting of one share of Common Stock and one
redeemable warrant to purchase Common Stock at an exercise price of
$7.20 per share, for gross proceeds of $10,350,000. After
underwriting discounts and commissions, expenses paid to or for the
benefit of underwriters, and other costs of the IPO, net proceeds
were approximately $8,576,000.
At or subsequent to the closing of the IPO, the Company expended
approximately $659,000 for repayment of certain Bridge Notes;
approximately $1,326,000 for the purchase of computer equipment
including player betting stations; approximately $503,000 for
professional fees; approximately $364,000 for directors and
officers liability insurance premiums; approximately $552,000 for
marketing the System; approximately $132,000 for the purchase of a
condominium in Henderson, Nevada for use by its employees while
traveling on business in Nevada; and approximately $100,000 for a
loan to an officer, of which approximately $21,000 was outstanding
as of March 31, 1999. After other expenses, including product
enhancement and development, sales and administration,
approximately $2,378,000 remained in cash and short-term, interest-
bearing, investment grade securities as of March 31, 1999.
Year 2000 Issue
The term "Year 2000 ('Y2K') Issue" is a general term used to
describe the various problems that may result from the improper
processing of dates and date-sensitive calculations by computers
and other machinery as the year 2000 is approached and reached.
These problems generally arise from the fact that most of the
world's computer hardware and software have historically used only
two digits to identify the year in a date, often meaning that the
computer will fail to distinguish dates in the "2000's" from the
date in the "1900's." These problems may also arise from other
sources as well, such as the use of special codes and conventions
in software that make use of the date field. The Y2K computer
software compliance issues may affect the Company and most
companies in the world. The Company's SportXction(tm) sports wagering
System was designed and developed during the past several years.
As such, the Company recognized Y2K problem and has attempted to
write all of its proprietary software utilizing four digits in
order to avoid a Y2K problem. The Company also utilizes a variety
of software products in its database manufactured by Microsoft
Corporation, all of which are reported to be Y2K compliant.
The Company's technical staff of software engineers and
programmers are continuing to analyze and test the hardware and
peripheral products that it utilizes in its System to determine
whether they are Y2K compliant. The Company's staff attempts to
identify any hardware or software with potential
12
Y2K problems; assess the magnitude of such problems, if any; remedy
any such problems that are found and test the solutions; and plan for any
contingencies.
Based upon its efforts to date, the Company does not believe
that its System requires any material modifications or replacements
in order to be Y2K compliant. The Company does not believe that
the readiness of its customers and suppliers to be Y2K compliant
will have a material impact on the Company. The Company is in the
process of developing contingency plans relating to the Y2K
problems to the extent such plans are possible. Such plans are
expected to be developed by July 1, 1999. These plans will attempt
to mitigate both internal risks of the Y2K problem with any risks
that may be impacted by the Company's customers and suppliers. The
Company believes, however, that due to the widespread nature of
potential Y2K issues, the contingency planning process is an
ongoing one which may require further modifications as the Company
obtains additional information regarding any Y2K problems affecting
the Company's systems and equipment and regarding the status of its
suppliers and customers regarding their becoming Y2K compliant.
Through March 31, 1999 the Company estimates that it has spent
approximately $35,000 in its efforts to achieve Y2K compliance, all
of which has been recognized as an expense in the Company's
Statement of Operations. The Company does not expect that any
additional costs to be incurred in its efforts to achieve Y2K
compliance will have a material effect on its liquidity or
financial condition. The Company intends to fund the costs of
becoming Y2K compliant from its available liquid assets.
The failure to correct a material Y2K problem could result in an
interruption in, or failure of, certain normal business activities
or operations. Such failures could materially and adversely affect
the Company's results of operations, liquidity and financial
condition. Due to the general uncertainty inherent in the Y2K
problem, resulting in part from the uncertainty of the Y2K
readiness of the Company's customers and suppliers, the Company is
unable to determine at this time whether the consequences of any
Y2K failures will have a material impact on the Company's results
of operations, liquidity or financial condition.
Safe Harbor Statement
The preceding "Y2K problem" discussion contains various forward-
looking statements which represent the Company's beliefs or
expectations regarding future events. When used in the "Y2K
problem" discussion and elsewhere in this Management's Discussion
and Analysis, the words "believes," "expects," "estimates," "may"
and similar expressions are intended to identify forward-looking
statements Forward-looking statements include, without limitation,
the estimated cost of becoming Y2K compliant and the Company's
belief that its Systems and equipment will be Y2K compliant in a
timely manner and that the readiness of its customers and suppliers
to be Y2K compliant will not have a material impact on the Company.
All forward-looking statements involve a number of risks and
uncertainties that could cause the actual results to differ
materially from the projected results, including problems that may
arise on the part of third parties. Factors that
13
may cause these differences include, but are not limited to, the
availability of qualified personnel and other information
technology resources; the ability to identify and rededicate all
date sensitive lines of computer code or to replace embedded
computer chips in affected systems or equipment; and the actions of
governmental agencies or other third parties with respect to Y2K
problems. If the modifications and conversions required to make
the Company Y2K compliant are not made or are not completed on a
timely basis, the resulting problems could have a material impact
on the operations of the Company. This impact could, in turn, have
a material adverse effect on the Company's results of operations
and financial condition.
Except for the historical information contained herein, this
quarterly report on Form 10-QSB contains forward-looking
statements, within the meaning of Section 27A of the Securities
Exchange 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 ability of the Company to
retain any gaming licenses required in order for the Company to be
able to continue to operate the System, the ability of the Company
to attract adequate numbers of players to its SportXction(tm) game,
the ability of the Company to develop and market other
opportunities for its product, the length of time that the
Company s liquid resources will last, the likelihood that the RAVE(tm)
technology and the Company's modified system for betting from
remote locations will be approved by the Nevada Gaming Authorities,
the ability of the Company to generate revenue from wagering at
remote locations in Nevada or from advertising in conjunction with
non-wagering applications of the Company s technology, including
contests, the ability of the Company to adapt its System for pre-
game betting and to attract a sufficient number of players and the
ability of the Company to utilize its System for wagering on the
Internet or private networks in those foreign countries where it is
legal to do so and to attract a sufficient number of players.
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, ability of the Company to attract
adequate numbers of players to the SportXction(tm) game and ability of
the Company to develop and market other opportunities for its
product. Additional information concerning certain risks or
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 its Prospectus dated December 11, 1996 and its Form
10-KSB for the fiscal year ended September 30, 1998. The forward-
looking statements contained herein represent the Company s
judgement as of the date of this report, and the Company cautions
reader not to place undue reliance on such matters.
14
II: Other Information
Item 4. Submission of Matters to a Vote of Security Holders
On February 26, 1999 the Company held its Annual Meeting
of Stockholders for the purpose of acting on (i) the election of a
board of five directors; (ii) a proposal to approve the
continuation of the Company s 1995 Stock Option Plan and the 1996
Stock Option Plan, each as amended; and (iii) a proposal to ratify
the selection of KPMG Peat Marwick LLP as the Company s independent
public accountants for the fiscal year ending September 30, 1999.
Each matter submitted to the stockholders was described in a Notice
of Annual Meeting and Proxy Statement furnished to the Company s
Stockholders in accordance with Regulation 14A under the Securities
Exchange Act of 1934, as amended, and each matter was approved as
follows:
(i) Election of Directors
For Withheld
Bernard Albanese 7,013,402 39,550
Fredric Kupersmith 7,013,402 39,550
Janet Mandelker 7,013,302 39,650
Barry Mindes 7,013,402 39,550
Harold Rapaport 7,013,402 39,550
(ii) The continuation of the 1995 Stock Option Plan and the 1996
Stock Option Plan, each as amended
For Withheld Abstain
6,926,930 108,505 17,517
(iii) Ratification of the selection of KPMG LLP as the
Company s independent public accountants for the fiscal
year ended September 30, 1999
For Withheld Abstain
7,037,052 14,700 1,200
1
5
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 March 31, 1999.
16
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act or 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, 1999 By: /s/ Barry Mindes
Barry Mindes, Chairman of
the Board of Directors
(Principal Executive Officer)
Dated: May 14, 1999 By: /s/ Bernard Albanese
Bernard Albanese, President,
Treasurer and Director
(Principal Financial Officer)
17
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<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> MAR-31-1999
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