<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 3, 2000
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
INTERNATIONAL SPORTS WAGERING INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
201 LOWER NOTCH ROAD
SUITE 2B
LITTLE FALLS, NJ 07424
(973) 256-8181
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 7373 22-3375134
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER IDENTIFICATION NUMBER)
OF INCORPORATION OR CLASSIFICATION CODE NUMBER)
ORGANIZATION)
</TABLE>
--------------------------
BERNARD ALBANESE
INTERNATIONAL SPORTS WAGERING INC.
201 LOWER NOTCH ROAD
SUITE 2B
LITTLE FALLS, NJ 07424
(973) 256-8181
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE
OF AGENT FOR SERVICE)
--------------------------
COPIES TO:
D. ROGER GLENN, ESQ.
FRIEDMAN KAPLAN & SEILER LLP
875 THIRD AVENUE
NEW YORK, NY 10022
(212) 833-1109
<PAGE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended (the "Securities Act") check the following
box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
<PAGE>
PROSPECTUS
MAY 5, 2000
INTERNATIONAL SPORTS WAGERING INC.
5,885,748 shares of common stock
This Prospectus is being used in connection with the offering from time
to time by the holders (the "Selling Stockholders") of up to 5,885,748 shares of
our common stock, $0.001 par value per share.
Our common stock is traded on The Nasdaq Stock Market (Small Cap) under
the symbol "ISWI". On April 14, 2000, the last reported sale price of our common
stock was $1.281 per share.
An investment in our common stock involves a high degree of risk. See
"Risk Factors" beginning on page 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
ANY OF THESE SECURITIES OR PASSED UPON
THE ADEQUACY OR ACCURACY OF THIS
PROSPECTUS ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
NEITHER THE NEVADA STATE GAMING CONTROL BOARD NOR
THE NEVADA GAMING COMMISSION HAS PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE
INVESTMENT MERITS OF THE SECURITIES OFFERED
HEREBY, ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
2
<PAGE>
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith we file reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Any reports and other
information filed by us with the Commission may be inspected and copied at the
public reference facilities maintained in the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
regional offices in New York, 7 World Trade Center, 13th floor, New York, NY
10048, and in Chicago, 500 West Madison Street, Suite 1400, Chicago, IL 60661.
Copies of such material may also be obtained by mail from the Public Reference
Section of the Commission at the Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission also maintains a web
site that contains reports, proxy statements and other information regarding
registrants, including us, that file information electronically with the
Commission. The address of the Commission's web site is http://www.sec.gov. Our
common stock is quoted on The Nasdaq Stock Market (Small Cap) ("ISWI"), and such
reports, proxy statements and other information concerning us can also be
inspected at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington,
D.C. 20006.
We have filed with the Commission a registration statement of Form S-3
(together with all exhibits, schedules, amendments, and supplements thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act") covering the common stock offered by this Prospectus. This
Prospectus, which forms a part of the Registration Statement, does not contain
all the information set forth in the Registration Statement (certain parts of
which have been omitted in accordance with the rules and regulations of the
Commission). For further information with respect to us and our common stock,
you should refer to the Registration Statement. Statements contained in this
Prospectus that describe the contents of any contract, agreement, or other
document are not necessarily complete, and in each instance, you should refer to
the copy of the document filed as an exhibit to the Registration Statement. Each
statement about the exhibits is qualified in all respects by reference to such
exhibit. The Registration Statement may be inspected and copied at the public
reference facilities at the Commission's offices at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, and at the Commission's regional offices in
Chicago and New York. Copies of all or any part thereof may be obtained from
such office upon payment of prescribed fees.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents that we have filed with the Commission are
incorporated herein by reference:
(1) Our Current Report on Form 8-K as filed with the Commission on
April 11, 2000.
(2) Our Current Report on Form 8-K as filed with the Commission on
March 23, 2000.
(3) Our Quarterly Report on Form 10-QSB (File No.0-21831) for the
fiscal quarter ended December 31, 1999 as filed with the
Commission on February 14, 2000.
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<PAGE>
(4) Our Annual Report on Form 10-KSB/A for the fiscal year ended
September 30, 1999 as filed with the Commission on January 28,
2000.
(5) Our definitive Proxy Statement filed with the Commission on March
1, 2000 for the Annual Meeting of Stockholders held on March 22,
2000.
(6) The description of our common stock contained in our Registration
Statement on Form SB-2, filed October 29, 1996, as amended.
(7) All documents filed by us with the Commission after the date
hereof pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act prior to the termination of this offering shall be
deemed to be incorporated by the reference in this Prospectus. Any
statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a
statement contained herein, modified or supersedes such statement.
Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this
Prospectus.
We will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of such person, a copy of any or all of the documents
that have been incorporated by reference herein, other than exhibits to such
documents (unless such exhibits are specifically incorporated by reference
therein). Requests for such copies should be directed to: Investor Relations,
International Sports Wagering Inc., 201 Lower Notch Road, Suite 2B, Little
Falls, New Jersey 07424; (973) 256-8181.
IMPORTANT FACTORS REGARDING FORWARD LOOKING STATEMENTS
Certain statements in this Prospectus, constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, as amended, including, without limitation, statements regarding
potential market size, the likelihood that we will receive and maintain any
needed gaming licenses or other approvals for use of our products, our ability
to attract adequate numbers of players of our SportXction(TM) sports wagering
game and traditional pre-game wagering from remote (non-casino) locations,
meeting our cash requirements and the ability of our licensees to market their
products and pay the fees required under our license agreements. These
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause our actual results, performance or achievements,
or industry results, to be materially different from any future performance, or
achievements expressed or implied by the forward-looking statements. These
factors include, among others, those described below and those presented
elsewhere by management from time to time. When used in this Prospectus,
statements that are not statements of current or historical fact may be deemed
to be forward-looking statements. Without limiting the foregoing, the words
"anticipates," "plans," "intend," "expects," "believes" and similar expressions
are intended to identify such forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date hereof. We undertake no obligation to publicly release the
result of any revisions to these forward-looking statements that may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
4
<PAGE>
THE COMPANY
We have designed and developed an interactive, proprietary, PC-based
computer system that enables users to wager during the course of a sporting
event, such as football, baseball and basketball. Our system accepts bets not
only on the outcome of a sporting event but also on discrete parts of the event
and on specific game situations, such as will a team get a first down, will a
batter get on base, or will a player make two foul shots. Our system is unique
in that it permits betting while these game situations are in progress, such as
between downs or pitches, permitting more frequent placing and cashing of
wagers. We have also modified the initial version of our SportXction(TM) sports
wagering system in order to accept traditional pre-game wagers and play-by-play
wagers made during the course of a sporting event, from remote locations within
the State of Nevada through means of a personal computer and utilizing the RAVE
(TM) (Remote Access Verification Environment) technology. The RAVE(TM)
technology, provides geographic call origination verification of players using
personal computers and is designed to comply with Nevada legislation regarding
on-line gaming. We are the exclusive licensee of the RAVE(TM) technology, which
was developed by Alliance Gaming Corporation, for a period of 7 years from the
date of final approval by the Nevada Gaming Authorities, 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.
RECENT EVENTS
On March 17, 2000, the Company signed License Agreements (the
"Agreement") with Global Interactive Gaming, Inc. ("GIG"), a Delaware
corporation, and an affiliated company, whose majority shareholders are the
Kirch Group, a German corporation (the "Kirch Group"), and Multisport Games
Development, Inc., a Delaware corporation. The Agreement calls for the granting
of exclusive licenses to market, distribute and use the Company's interactive
SportXction(TM) software, technology and patents on the Internet and interactive
television, for contests and wagering on sporting events world-wide. Excluded
from the licenses are the continued use of SportXction(TM) in Nevada for
wagering, and the application of the Company's basic technology and patents to
lotteries and financial transactions (stock, bond, option and currency trading
and the like).
The Kirch Group, which will lead the marketing and distribution effort,
is a media conglomerate and a significant participant in the media market in
Europe. With annual sales of DM 2.7 Billion ($2.1 billion), its subsidiary,
KirchMedia, represents the Kirch Group's core business in the sport's rights
trade, the production of broadcast television and film technology. It is one of
the largest international producers in movie and television entertainment and is
the majority shareholder in Germany's second largest commercial television
network, SAT1. KirchMedia also owns DSF, a 24 hour sports channel, and owns and
operates Premiere World, Germany's leading digital pay TV service. Premiere
World's sports programming package includes the top games from German Football
(Soccer) Leagues 1and 2, plus matches from international soccer. It also offers
Formula 1, boxing, tennis, ice hockey, the handball world championships, the
track and field athletics Golden League, plus NFL football, Major League
Baseball, NBA basketball, NHL hockey, PGA golf and professional wrestling.
5
<PAGE>
Under the Agreement, the Company shall be paid 25% of the gross profit,
less direct expenses (such as credit card fees, prizes and taxes), for the use
of its technology for contests. For wagering, the Company will be paid the
lesser of 25% of the gross profit, or 1% of the gross handle, also less direct
expenses. The Company will bear no share of the cost of equipment, facilities or
other operating expenses. These percentage fees are subject to guaranteed
minimum annual license fees, payable quarterly. The minimum in the first year is
$3 million; increasing to $5 million in the second year; $6 million in the third
year; and continuing to increase by 20% per year thereafter during the 14-year
term. The total minimum license fees during the 14-year term are approximately
$250 million, after which the license is fully paid. At all times the minimum
license fee for the next four quarters is kept in escrow.
The terms of the Agreement require the Company to make certain
modifications to the SportXction(TM) system to enhance its use on the Internet
and other interactive media as an international application. The most
significant of these modifications is to render the system capable of
accommodating 1.5 million simultaneous users in each of 32 inter-connected
regional (country) systems, with each system able to process 25,000 transactions
(wagers or contest selections) in a 5 second interval. Additionally, the system
must support multiple languages and currencies, 10 different sports, and 15
concurrent sporting events. The first phase of the project, with a 10-month
schedule, calls for 10,000 transactions in 5 seconds. The Company will earn a
bonus for early completion of this phase.
Coincident with the signing of the Agreement, GIG was granted a warrant
to purchase 4.9% (approximately 425,000 shares) of the number of shares of the
Company's common stock currently outstanding, at an exercise price of $4.38 per
share. The Warrant becomes exercisable in 18 months, is non-transferable other
than to affiliates of GIG and remains exercisable for five years from the date
of grant.
No assurance can be given that the Company will be successful in making
the required modifications to adapt the System for wagering or for use in
contests in domestic and foreign markets utilizing the internet; whether the
Company will be successful in meeting the software and throughput requirements
of the Agreement; whether the System will result in a marketable product;
whether the System will generate significant amounts of revenue; or if
significant amounts of revenue are not generated, whether the Company will be
able to collect the license fees required by the Agreement.
6
<PAGE>
RISK FACTORS
Single Product; Limited Contracts; Uncertain Market Acceptance. Our
success will depend primarily on the success of a single product, the
SportXction(TM) sports wagering system. We have pursued an aggressive marketing
and advertising campaign to introduce our system to the gaming public in Nevada
and to increase the number of players of the game. We retained the services of a
market research firm, with the goal of increasing public awareness of this new
game and increasing the number of players of the game. We have added several new
features and enhancements to our system to attract players and increase
wagering. Thus far, the total number of players has been limited and the total
amount wagered through our system has been modest. In addition, our system is
currently only in operation in two casinos and gaming establishments. We have
developed a version of our system that may be used for betting from remote
(non-casino) locations utilizing a PC and modem over a secure Intranet within
Nevada that it licensed from another party. This revised version of our system
was approved by the Nevada Gaming Authorities on November 30, 1999. We believe
allowing betting from remote locations, including from home, will provide a more
convenient environment for players to try our system. We have agreements
pursuant to which seven casinos participate in signing up players and
establishing accounts. Of those seven, only four are operational. There is no
assurance that there will be market acceptance of betting from home using PCs in
the State of Nevada, since this has never been attempted previously in Nevada.
To achieve commercial success, our system must be accepted both by casino and
sports book operators and by gaming patrons. We believe that acceptance by
casino and sports book operators will ultimately depend upon acceptance by
patrons as a new and/or alternative form of sports wagering. There can be no
assurance that our system will be accepted by its intended market. If our system
does not achieve sufficient market acceptance, our business, financial condition
and results of operations would be materially and adversely affected.
Development Stage Company; Expectation of Losses. We are in the
development stage and have generated limited revenues from our system. As of
December 31, 1999, we had cumulative net losses since inception of approximately
$9.2 million and we expect to continue to incur substantial losses and negative
cash flow at least through calendar 2000. There can be no assurance that we will
become profitable or that cash flow will become positive at any time in the
future. The likelihood of our success must be considered in light of the
problems, delays, expenses and difficulties encountered by an enterprise in our
stage of development, many of which may be beyond our control. These include,
but are not limited to, unanticipated problems relating to further product
enhancement and development; software design, development and enhancement;
acceptance of our system by the wagering public and casinos; testing; gaming
regulations and taxes; the competitive and regulatory environment in which we
plan to operate; marketing problems; and additional costs and expenses that may
exceed current estimates.
Small Wagering Pools. Our system was designed to operate most
effectively when there are large numbers of players and a substantial number of
wagers being placed through our system simultaneously. When the number of
players wagering through our system is modest, as has been the case during the
period of time that our system has been in operation, and there are relatively
small amounts wagered on each available betting proposition, it is more
difficult to attempt to create balanced pools. Also under such circumstances,
odds may change rapidly causing participants to be required to reconfirm bets at
changing odds before a wager is accepted. These circumstances could cause player
dissatisfaction to this form of sports wagering resulting in gaming
establishments not wishing to have our system operated in their sports books,
which could have a material adverse effect on our business and prospects. To
avoid such rapidly changing odds, our system could be run with larger pre-set
limits for the amount of imbalance our system will tolerate before changing the
odds. Increasing the size of these pre-set limits increases our financial
exposure to the players' ability to wager on the winning side of the betting
propositions offered. This could reduce the revenues generated by our system and
could have a material adverse effect on our business and prospects. Since May
11, 1998, we have been the operator of our system and thereby have acted as the
house. We, therefore, have assumed all pool imbalance risks associated with
being the house.
7
<PAGE>
Limited Number of Casinos. Our system is currently operating in only
five gaming establishments. One sports book has in-casino Player Betting Station
("PBSs") only, one sports-book has both in-casino PBSs and also participates in
signing up accounts for our remote wagering product. Three other sports-books
(two of which are affiliated) participate in only the remote wagering business.
Each gaming establishment receives a fixed percentage of either the handle (the
amount wagered through our system) or the hold (the handle minus the amount paid
to winners of wagers) generated through our system from its establishment.
Because only a modest amount of money is currently being wagered through our
system, one or several casinos may be unwilling or unable to continue to operate
our system in their casino. Under such circumstances, we would be forced to
cease operations in those casinos, thereby reducing the availability of our
system to potential patrons. No assurance can be given that we could make
arrangements with additional gaming establishments to install our system in a
timely manner, or at all.
Capital Requirements; Need for Additional Financing. We anticipate that
our existing resources will be adequate to fund our capital and operating
requirements through the next 12 months based upon our current business plan.
Our capital requirements may vary materially from those now planned due to a
number of factors, including the rate at which we can introduce our system, the
market acceptance and competitive position of our system, the response of
competitors to our system and our ability to satisfy applicable licensing
requirements. We may need to raise additional capital to fund our future
operations since, as of December 31, 1999, we had cash and marketable securities
equal to approximately $899,317. There can be no assurance that additional
financing will be available when needed on terms acceptable to us, or at all. If
additional funds are raised by issuing equity securities, further dilution to
existing stockholders will result and future investors may be granted rights
superior to those of existing stockholders. Insufficient funds may prevent us
from implementing our business strategy or may require us to limit our
operations significantly.
Governmental Regulation. Our system qualifies as "associated equipment"
as that term is defined in Nevada Law. Associated equipment is generally defined
as any equipment or mechanical, electromechanical or electronic contrivance,
component or machine used remotely or directly in connection with gaming, any
game, race book or sports pool that would not otherwise be classified as a
gaming device. All associated equipment that is manufactured, sold, transferred,
offered or distributed for use or play in Nevada must first be administratively
approved by the Nevada Board Chairman. The administrative approval process for
associated equipment includes an evaluation by the Nevada Board's audit division
and, in some cases, by the Nevada Board's electronic services laboratory,
followed by a field trial.
On April 23, 1998, the Nevada Commission granted an OILS license to us
and registered us as a publicly-traded corporation. The Nevada Commission
further granted an exemption from the requirements of its Regulation 16.100(1),
which would have otherwise prohibited us, as a publicly-traded corporation, from
a holding a Nevada OILS License. Our OILS License was renewed without time
limitation and has a number of conditions, which we agreed to, relating to our
method of operation and to the manner in which our system would account for
gaming transactions.
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The Nevada Commission has the discretion, at any time, to require that
we apply for a finding of suitability to be a manufacturer and distributor of
associated equipment. The operation of licensed gaming in general, and the
operation of race books and sports pools in particular, is subject to strict
licensing and regulatory control by the Nevada Board, the Nevada Commission and
various local, city and county regulatory agencies. No applicant for a
registration, license, finding of suitability or approval (individually, a
"Gaming License" and collectively, "Gaming Licenses") has any right to the
Gaming License. Any Gaming License issued or granted is a revocable privilege,
and no holder acquire any vested rights therein or thereunder. In connection
with our application for renewal of our Gaming License, or any further Gaming
Licenses, the Nevada Commission will have the authority to require that any
beneficial owner of our voting securities be investigated and found suitable,
although the Nevada Act does not require a finding of suitability unless a
person is the beneficial owner of more than 10% of the outstanding voting
securities. In addition, if any of our officers, directors, key employees or
stockholders are denied a license or finding of suitability, or are found
unsuitable to continue having a relationship with us, we would have to sever our
relationship with that person. Furthermore, if our Gaming Licenses are not
renewed, any existing approval for our system could be revoked and the Nevada
Commission could order the termination of any existing contracts for our system.
Moreover, we would be prevented from selling or distributing our system for use
or play in Nevada after the date of expiration of our Gaming License.
No person is permitted to acquire control of us, as the holder of a
Gaming License, without the prior approval of the Nevada Commission upon the
recommendation of the Nevada Board. The Nevada Commission may require
controlling stockholders, officers, directors and other persons having a
material relationship or involvement with the entity proposing to acquire
control, to be investigated and licensed as part of the approval process
relating to an acquisition of control. The applicant is required to pay all
costs of investigation.
Under 1997 Nevada legislation, persons are prohibited from accepting or
placing wagers through any "medium of communication." The term "medium of
communication" is broadly defined and includes, without limitation, mail,
telephone, television, telegraph, facsimile, cable, wire, the Internet or any
other similar medium. The network through which our system operates qualifies as
a "medium of communication." However, this statute specifically exempts wagers
accepted or received by persons or establishments licensed to engage in wagering
under Nevada law, provided such wagers are accepted or received within Nevada
and otherwise comply with all other applicable gaming laws and regulations. This
statute does not, therefore, prevent our system from being operated in its
present form or from home pursuant to the revised Regulation 22.
We have recently obtained approval, pursuant to Regulation 22.130, for
the use of the RAVE(TM) technology as a "communications technology" (as defined
in Regulation 22.010(5)), in connection with a system for wagering outside
licensed gaming establishments, but within the state of Nevada. This approval
relates to both pre-game sports wagering and wagering using our system during
the course of an event. In order to use the RAVE(TM) technology in this manner,
however, we will need to operate under agreements with licensed Nevada sports
pools, which will in turn be required to comply with a number of strict
requirements set forth in Regulation 22.140. Furthermore, there can be no
assurance that future regulations will not be placed upon remote wagering
through the use of "communications technology."
9
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In August 1996, the United States Congress passed legislation which
created the National Gaming Commission. The National Gaming Commission will
generally have the duty to conduct a comprehensive legal and factual study of
gambling in the United States and existing Federal, state and local policies and
practices with respect to the legalization or prohibition of gambling
activities, to formulate and propose changes in such policies and practices and
to recommend legislation and administrative actions for such changes. It is not
possible to predict the future impact of these proposals on us and our
operations. Any such proposals could have a material adverse affect on our
business.
Legislation is currently pending in the United States Congress to
prohibit certain forms of betting or wagering or engaging in the business of
gambling over the Internet. A bill which has been passed by the Senate would
also prohibit betting or wagering or engaging in the business of gambling over
"interactive computer services." Although our system does not appear to fit
within the definition of an "interactive computer service" a contrary
interpretation may be adopted by the courts in the future. Therefore if enacted,
this bill may prohibit the operation of our system in all or certain forms. To
date, the U.S. House of Representatives has not passed this or any similar bill
and it is unclear whether it will do so.
As of the present time, the SportXction(TM) sports wagering game is not
deemed by the Nevada Gaming Authorities to be either a sports pool or a
pari-mutuel wagering pool. If the SportXction(TM) game was deemed to be a sports
pool or pari-mutuel wagering pool, in order for us to receive a portion of the
revenue obtained therefrom or to receive compensation on a transaction fee basis
from either a sports pool or a pari-mutuel wagering pool, we might need to
obtain appropriate licensing from the Nevada Gaming Authorities. It is unclear
whether the Nevada Gaming Authorities will in the future consider the
SportXction(TM) game or System utilized in casinos or the modified System to be
used in connection with wagering from home, to be a sports pool or pari-mutuel
wagering pool and if so whether we would be required to obtain any additional
licensing, or the conditions that might be imposed by the Nevada Gaming
Authorities in connection with any such licensing. There can be no assurance
that we will be able to receive the necessary licensing.
Competition and Rapid Technological Change. Our operations compete with
other forms of gambling, both within and outside of Nevada, including, but not
limited to, sports wagering as currently conducted in Nevada (including betting
by means of a PC from remote locations within Nevada), casino games (such as
traditional slot machines, video slot, poker and blackjack machines, roulette,
card games, keno and craps), bingo, state-sponsored lotteries, on-and off- track
betting on horses and dogs, jai alai, offshore cruise ships, riverboats, illegal
wagering of all types including that conducted over the Internet and Native
American gaming operations. The gaming industry is also subject to shifting
consumer preferences and perceptions. A shift in consumer acceptance or interest
in gaming could adversely affect us. Moreover, competition is intense and
increasing among providers of wagering and gaming equipment, both hardware and
software, and we believe that new competitors will emerge in the future. Many of
our competitors or potential competitors may have products that may compete
directly with our system and such competitors may have significantly greater
financial, technological, manufacturing, marketing, operating and other
resources than we do. In addition, certain of our potential competitors,
including large providers of wagering, gaming and computer equipment, may have
technological capabilities that would allow them to develop new or alternative
systems. The wagering and gaming equipment industry is subject to rapid change
and is characterized by constant technological innovation. There can be no
assurance that future technological advances will not result in improved
products or services that could adversely affect our business or that we will be
able to develop and introduce competitive uses for our products and to bring
such uses to market in a timely manner. Increased competition is likely to
result in price reductions, reduced operating margins and loss of market share,
any of which could materially and adversely affect our business, operating
results or financial condition. Furthermore, any success we might have may
induce new competitors to enter the market. There can be no assurance that we
will be a successful competitor in the wagering and gaming equipment and service
industry.
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Uncertainties Regarding Intellectual Property. We regard our system and
related technology as proprietary and rely primarily on a combination of patent,
trademark, copyright and trade secret laws and employee and third-party
non-disclosure agreements to protect our proprietary rights. We have two United
States patents for our proprietary wagering methods and our related computer
processing system. Corresponding applications have been or will be filed in
certain foreign countries some of which have been issued and some of which are
pending. No assurance can be given that any of our pending foreign patent
applications will issue as patents, that any issued patents will provide us with
significant competitive advantages, or that challenges will not be instituted
against the validity or enforceability of any patent owned by us or, if
instituted, that such challenges will not be successful. Defense of intellectual
property rights can be difficult and costly, and there can be no assurance that
we will be able effectively to protect our technology from misappropriation by
competitors. Additionally, third party infringement claims may result in our
being required to enter into royalty arrangements or pay damages, any of which
could materially and adversely affect our business, financial condition and
results of operations. It is our policy that all employees and consultants
involved in research and development activities sign non-disclosure agreements;
however, this may not afford us sufficient protection for our know-how and our
proprietary information and products. Other parties may independently develop
similar or more advanced technologies or design around aspects of our technology
which may be patented or duplicate our trade secrets.
As the number of software products in the industry increases and the
functionality of these products further overlaps, software developers and
publishers may increasingly become subject to infringement claims. Although we
have not received any claim that we are infringing any patent or trade secrets
and are not currently aware of any claim that we are infringing any such rights
of others, there can be no assurance that we will not face such claims, with or
without merit, in the future. Any such claims or litigation could be costly and
could result in a diversion of management's attention, which could have a
material adverse effect on our business, financial condition and results of
operations. Any settlement of any claims or adverse determinations in such
litigation could also have a material adverse effect on our business, financial
condition and results of operations.
Management of Growth. Execution and implementation of our plan of
operation will require significant growth. Our current plans for growth will
place a significant strain on our financial, managerial and other resources. Our
ability to manage our growth effectively will require us to continue to improve
our operational, financial and management information systems and to attract,
motivate and train key employees. If our executives are unable to manage growth
effectively, our business, operating results and financial condition will be
materially and adversely affected.
11
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Dependence on Key Personnel. We are dependent upon the continued
efforts and abilities of our executive officers and other key personnel such as
Barry Mindes, our founder and Chairman of the Board, and Bernard Albanese, a
Director and our President and Treasurer. The loss or unavailability of Messrs.
Mindes or Albanese for any significant period could have a material adverse
effect on our business, financial condition and results of operations. Messrs.
Mindes and Albanese have entered into employment agreements which terminate on
December 31, 2002 and June 30, 2003, respectively. No assurance can be given
that those agreements will be extended or renewed by us or the employees upon
expiration of their term and if not extended or renewed whether individuals with
similar backgrounds and experience could be hired to replace them. We do not
maintain and do not intend to obtain key person life insurance on the life of
either Messrs. Mindes or Albanese. Our operations will also depend to a great
extent on our ability to attract new key personnel and retain existing key
personnel in the future. Competition is intense for highly skilled employees and
there can be no assurance that we will be successful in attracting and retaining
such personnel, or that we can avoid increased costs in order to do so. Our
failure to attract additional qualified employees or to retain the services of
key personnel could have a material adverse effect on our operating results and
financial condition.
Limited Marketing Experience; Need for Additional Personnel. We have
very limited marketing resources and limited experience in marketing and selling
our system. We currently rely on our own personnel in marketing and selling our
system. Presently, only the Chairman of the Board and, to a limited extent,
other employees, are devoting attention to marketing and sales, and we may need
to hire additional personnel to market our system. There can be no assurance
that we will be able to establish adequate marketing and sales capabilities.
Achieving market penetration will require significant efforts by us to create
awareness of, and demand for, our system. Our failure to develop our marketing
capabilities would have a material adverse effect on our business, financial
condition and results of operations. Further, there can be no assurance that the
development of such marketing capabilities will lead to sales or leases of our
system.
Limited Market Size. Presently, the market for our system for wagering
in the United States is limited to casinos and sports book operations in the
State of Nevada. No assurance can be given that new markets will develop or that
legislation permitting sports wagering in other states within the United States
will be adopted. In addition, while sports wagering exists outside of the United
States, no assurance can be given that our system would be accepted in such
foreign markets or that compliance with any regulatory conditions imposed by
foreign jurisdictions will be achieved.
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Seasonality of Sporting Events. Our operations are substantially
dependent on a continuous supply of broadcast sporting events on which bettors
can wager. We believe that certain sports (such as professional football) or
certain sporting events (such as the World Series in baseball and the Superbowl
in football) may generate more wagering revenue than others. A concentration in
any calendar period of sports or sporting events which induce higher wagering,
will, to the extent our revenue is derived based on wagering revenue, result in
higher revenue for such periods. We are aware of one company whose revenue from
sports book operations has been seasonal, with more than half of the wagers
received being placed between September and January, and with wagers on
professional and college football games historically representing approximately
40% of the bets placed. In addition, strikes in professional sports may result
in a significant loss of revenue and adversely affect our results of operations
for the periods in which they occur.
Possible Exclusive Relationships Between Casinos and Third Parties.
Until recently, we have focused our marketing efforts on casinos and sports book
operations in Nevada. We believe that sports wagering facilities in casinos are
currently operated either by the casino itself or pursuant to contractual
relationships with licensed sports book operators. We are aware of one entity
which owns and operates sports book facilities in approximately 48 casinos and
other gaming establishments. It, or any other entity which operates sports books
in casinos, may have exclusive relationships with casinos which could limit the
ability of casinos to contract directly with us. As a result, we might be
required to pay substantial sums to such third parties for the privilege of
supplying our system to any such casino, which could have a material and adverse
effect on our financial condition and results of operations.
Reliance on Third Party Products. Our remote wagering utilizes Alliance
Gaming Corp.'s RAVE(TM) technology, in conjunction with a private closed-loop
network, to provide the geographic call origination verification of the PC users
in order to comply with Nevada regulations regarding on-line gaming. We have a
seven-year license to use the RAVE(TM) technology, after which we will have no
rights thereto. The RAVE system authenticates the user, verifies that the call
originated from within Nevada and that it was made from a pre-approved phone
line. The Nevada Gaming Authorities approved the use of the RAVE(TM) technology
on January 25, 1999 for one year. On November 30, 1999, the Nevada Gaming
Authorities approved the Company's remote wagering system utilizing the RAVE(TM)
technology. The Company has been advised that although the Nevada Gaming
Authorities have not formally extended the approval of the use of the RAVE(TM)
technology beyond January 24, 2000, the Company may continue to use it. There is
no assurance that the RAVE(TM) technology will be able to retain its approval in
the future, or that if changes are required due to new technologies, changed
regulations, tightened security requirements, or for any other reason, that
Alliance or we will be able to comply with those changes. If the RAVE(TM)
technology does not continue to be approved in Nevada, there is no assurance
that we will be able to find a substitute technology from another vendor, or
that we would be able to develop a replacement technology internally, or that
even if a replacement technology is found that it could be procured on the same
cost basis as the RAVE(TM) technology. If the RAVE(TM) technology does not
continue to be approved, and a replacement technology is not found, we may be
forced to discontinue operations of the remote wagering features of its product.
13
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Possible Objections by Leagues and Broadcasters. The in-casino System
has operated in conjunction with live broadcasts of sporting events shown in
casinos or other gaming establishments. The broadcast of sporting events by
television stations is typically covered by agreements with players' leagues
such as the National Football League or the National Basketball Association. In
addition, display by casinos within their sports betting parlors of sporting
events is typically subject to agreement with broadcasters of sporting events.
Players' leagues could attempt to enjoin use of our system in conjunction with
broadcasts of such sporting events and sue us for damages, whether or not such
claims have merit. In the event either leagues or sporting event broadcasters
object to wagering on sporting events in general, or use of our system in
particular, and in the event that we could not eliminate such objections by
modification of our system or otherwise, our financial condition and results of
operations could be materially and adversely affected.
Control by Management. Barry Mindes, Mindes Family Limited Partnership,
the general partner of which is an entity wholly-owned by Mr. Mindes, Bernard
Albanese and the Marie Albanese Trust, a trust for the benefit of Mr. Albanese's
wife, together beneficially own approximately 40% of the outstanding shares of
our common stock (excluding any stock options held by Mr. Albanese which could,
in the future, be exercised). As a result of such ownership, such stockholders
are likely to have the ability to control the election of our directors and the
outcome of issues submitted to a vote of our stockholders.
Possible Volatility of Market Price of Common Stock and Warrants. The
market price of securities of development stage companies and many emerging
companies has been highly volatile, experiencing wide fluctuations not
necessarily related to the operating performance of such companies. Factors such
as our operating results, announcements by us or our competitors concerning
technological innovations, new products or systems may have a significant impact
on the market price of our securities.
NASDAQ Delisting; Low Stock Price; Net Tangible Assets. The trading of
our common stock and warrants on NASDAQ is conditioned upon our meeting certain
asset, capital and surplus earnings and stock price tests set forth by NASDAQ.
To maintain eligibility for trading on NASDAQ, we will be required to, among
other things, maintain net tangible assets of at least $2,000,000 and a minimum
bid price of $1.00 per share and adhere to certain corporate governance
provisions. As of December 31, 1999, our net tangible assets were below the
$2,000,000 minimum. If we fail any of the tests, the common stock or warrants
may be delisted from trading on NASDAQ. On December 20, 1999, we received a
letter from NASDAQ stating that we no longer met the net tangible asset
requirement for continued listing on the NASDAQ Small Cap Market, and that
NASDAQ was reviewing our eligibility for continued listing thereon. We provided
NASDAQ with a plan for achieving compliance with all NASDAQ listing requirements
on January 3, 2000, as requested by NASDAQ. On March 13, 2000, NASDAQ responded
to us stating that it believed that the Company had provided a definitive plan
evidencing its ability to achieve compliance with the listing requirements and
granted the Company a further extension until April 11, 2000, by which time,
among other things, the Company had to provide evidence of completing certain
licensing agreements, one of which is described under the heading "Recent
Events." On April 11, 2000, the Company wrote to NASDAQ enclosing a copy of its
Current Report on Form 8-K filed with the SEC on April 11, 2000. The effects of
delisting include the limited release of the market prices of our securities and
limited news coverage of us. Delisting may restrict investors' interest in our
securities and materially adversely affect the trading market and prices for our
securities and our ability to issue additional securities or to secure
additional financing.
14
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Earlier, on March 10, 1998, we received notice from NASDAQ indicating
that because our shares of common stock failed to maintain a closing bid price
of $1.00 or more for a period of 30 days, we would be subject to delisting. We
were given a period of 90 days in which to regain compliance with the minimum
bid price requirement. Prior to the end of such 90-day period, our shares of
common stock met the minimum bid price requirement and, therefore, our shares of
common stock were not delisted.
If in the future our shares of common stock fail to meet the minimum
bid price requirement, we might have to consider a reverse stock split or any
other means permissible to attempt to meet the minimum bid price requirement, or
our shares could be delisted. In addition to the risk of volatile stock prices
and possible delisting, low price stocks are subject to the additional risks of
federal and state regulatory requirements and the potential loss of effective
trading markets. In particular, if the common stock or warrants were delisted
from trading on NASDAQ and the trading price of the common stock were less than
$5.00 per share, the common stock or warrants could be subject to Rule 15g-9
under the Exchange Act which, among other things, requires that broker/dealers
satisfy special sales practice requirements, including making individualized
written suitability determinations and receiving purchasers' written consent,
prior to any transaction. If our securities were also deemed penny stocks under
the Securities Enforcement and Penny Stock Reform Act of 1990, this would
require additional disclosure in connection with trades in our securities,
including the delivery of a disclosure schedule explaining the nature and risks
of the penny stock market. The Securities and Exchange Commission regulations
define a "penny stock" to be any non-Nasdaq equity security that has a market
price (as therein defined) of less than $5.00 per share or with an exercise
price of less than $5.00 per share, subject to certain exceptions. Such
requirements could severely limit the liquidity of our securities.
Future Sales of Restricted Securities; Registration Rights. We have
9,030,992 shares of common stock outstanding. Of these shares, 1,725,000 were
registered in our initial public offering ("IPO") in December 1996 and generally
are freely tradable by persons other than our affiliates, without restriction or
further registration under the Securities Act. Of the balance, 6,024,269 shares
of common stock (the "Restricted Shares") outstanding, were issued by us prior
to our initial public offering in reliance on exemptions from the registration
requirements of the Securities Act and are "restricted securities" as defined in
Rule 144 promulgated under the Securities Act and may not be sold in the absence
of registration under the Securities Act unless an exemption therefrom,
including an exemption afforded by Rule 144, is available. Under Rule 144 (and
subject to the conditions thereof), 3,477,408 of the Restricted Shares owned by
Barry Mindes, Mindes Family Limited Partnership, Bernard Albanese and The Marie
Albanese Trust and are currently eligible for sale. All of the remaining
2,546,861 Restricted Shares are also currently eligible for sale. Certain of our
existing stockholders and the holders of the bridge warrants and the options
issued to the Underwriters in the IPO are also entitled to certain rights with
respect to the registration under the Securities Act of the securities held by
them. The sale of a substantial number of shares of our common stock or the
availability of common stock for sale could adversely affect the market price of
the common stock and warrants prevailing from time to time.
15
<PAGE>
Federal and State Registration Requirements; Possible Inability to
Exercise Warrants; Possible Redemption of Warrants. Holders of warrants issued
in connection with the Company's initial public offering will have the right to
exercise them only if there is a current registration statement in effect with
the Securities and Exchange Commission and such shares are qualified with or
approved for sale by various state securities agencies, or if in the opinion of
our counsel, there is an effective exemption from registration. There can be no
assurance that we will be able to keep a registration statement covering the
shares underlying the warrants current. If a registration statement covering
such shares of common stock is not kept current for any reason, or if the shares
underlying the warrants are not registered in the state in which a holder
resides, the warrants will not be exercisable and may be deprived of any value.
The warrants are redeemable by us at a price of $.05 per warrant if the trading
price of the common stock is at least $12.00 for a period of 15 consecutive
trading days ending within 15 days of the date upon which the warrants are
called for redemption. If we elect to redeem the warrants, such redemption could
force the holders to exercise the warrants and pay the exercise price at a time
when the holders might not otherwise wish to do so or at a time when the holders
might not be financially able to do so; to sell the warrants at their then
current market price when they might otherwise wish to hold the warrants; or to
accept the redemption price of $.05 per warrant which, at the time the warrants
are called for redemption, is likely to be substantially less than the market
value of the warrants. The warrants and the underwriters' options expire on
December 11, 2001 and December 17, 2001, respectively.
Absence of Dividends. We have not paid any dividends on our outstanding
common stock since inception and do not intend to pay any dividends to our
stockholders in the foreseeable future. We currently intend to reinvest
earnings, if any, in the development and expansion of our business.
Anti-Takeover Effects of Certain Provisions of Certificate of
Incorporation and Delaware Law. Our Certificate of Incorporation authorizes the
issuance of 2,000,000 shares of preferred stock with such designations, rights
and preferences as may be determined from time to time by the Board of
Directors. Accordingly, the Board of Directors is empowered, without obtaining
stockholder approval, to issue such preferred stock with dividend, liquidation,
conversion, voting or other rights that could adversely affect the voting power
or other rights of the holders of the common stock. In the event of issuance,
the preferred stock could be utilized, under certain circumstances, as a method
of discouraging, delaying or preventing a change in our control. Certain
provisions of Delaware law may also discourage third party attempts to acquire
control of us.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of our common
stock. Our common stock is being sold by the selling stockholders. All of the
expenses incurred in connection with the registration of the common stock
offered hereby will be paid by us, except for selling commissions and
underwriting discounts, if any.
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SELLING STOCKHOLDERS
The Registration Statement of which the Prospectus is a part has been
filed pursuant to Rule 415 under the Securities Act to afford the selling
stockholders the opportunity to sell their common stock in public transactions
rather than pursuant to an exemption from the registration and prospectus
delivery requirements of the Securities Act.
The following table sets forth information with respect to the selling
stockholders that have requested to be included in this prospectus as of the
date of this prospectus. The information set forth in the following table has
been provided by the selling stockholders identified in such table.
17
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Shares of common stock
Name of Selling Stockholder Owned and Offered Hereby
- --------------------------- ------------------------
Barry Mindes 1,512,429
32 Heights Road
Wayne, New Jersey 07470
Mindes Family Limited Partnership 1,511,523
32 Heights Road
Wayne, New Jersey 07470
Bernard Albanese 502,419
18 Doremus Drive
Towaco, New Jersey 07082
The Marie Albanese Trust 302,304
18 Doremus Drive
Towaco, New Jersey 07082
Andrew Harbison 213,990
1 Haverford Road
West Windsor, New Jersey 08550
Fredric Kupersmith 62,696
19101 Mystic Point Drive
Aventura, Florida 33180
Harold Rapaport 60,161
5 Horizon Court (Apt. 2509)
Fort Lee, New Jersey 07024
Rapaport Family Limited Partnership 21,161
5 Horizon Court (Apt. 2509)
Fort Lee, New Jersey 07024
Janet Mandelker 58,661
2420 Quarry Lake Drive
Columbus, Ohio 43204
Phil Bloom 40,000
18-70 211th Street
Bayside, New York 11360
18
<PAGE>
Brookwood Partners, L.P. 40,000
68 Wheatley Road
Brookville, New York 11545
Chet Calamari 40,000
2215 Pearsall Avenue
Bronx, New York 10469
Stephen Katz 80,000
20 East Sunrise Highway
Suite 201
Valley Stream, New York 11581
Irwin Lieber 80,000
c/o GeoCapital LLC
767 Fifth Avenue, 45th Floor
New York, New York 10153
Eli Oxenhorn 80,000
56 The Intervale
Roslyn Estates, New York 11576
Seneca Ventures 120,000
68 Wheatley Road
Brookville, New York 11545
Woodland Partners 80,000
68 Wheatley Road
Brookville, New York 11545
Woodland Venture Fund 240,000
68 Wheatley Road
Brookville, New York 11545
Floyd M. Smith 15,929
372 Kinderhamock Road
Westwood, New Jersey 07675
KGB Investment Partners LLC 8,761
c/o Barrington Capital Corp.
888 Seventh Avenue
New York, New York 10019
Arthur Steinberg IRA Rollover 15,929
381 Park Avenue South (5-A)
New York, New York 10016
19
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James H. Levi 7,964
85 Larchmont Avenue
Larchmont, New York 10538
E&M RP Trust 31,858
655 Brea Canyon Road
Walnut, California 91789
Andrew Gyenes 4,778
1150 Fifth Avenue
New York, New York 10128
Ronald Krinick 7,964
46 Lydecker Street
Englewood, New Jersey 07631
Matthew Smith 6,371
241 Central Park West (2D)
New York, New York 10024
Neal Bellet 7,964
530 Chicken Valley Road
Locust Valley, New York 11560
Lyonshare Venture Capital 31,858
P.O. Box 247
2521 Vestal Parkway East
Vestal, New York 13861
Kenneth Zaslav 3,982
1512 West Avenue
Richmond, Virginia
Craig W. Effron 7,964
983 Park Avenue (Apt. 14A)
New York, New York 10028
Stanley H. Blum 7,964
2 Greenwolde Drive
Great Neck, New York 11024
Jerald Politzer 82,596
2 Mayfair Circle
Purchase, New York 10577
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Edwin K. Dines 7,964
70 Morningside Drive South
Westport, Connecticut 06860
Seymour Stewart 41,297
5 Meadow Lane
Manhasset, New York 11030
Ernest Gottdiener 7,964
911 Sterner Road
Hillside, New Jersey 07205
David Jan Mitchell 7,964
Mitchell & Co., Ltd.
5 East 59th Street (3rd Floor)
New York, New York 10022
Barington Capital Group LP 336,666
888 Seventh Avenue
New York, New York 10019
GKN Securities Corp. 90,000
1 State Street Plaza
New York, New York 10004
Allan R. Lyons 9,000
2521 Vestal Parkway East
Vestal, New York 13850
Piaker & Lyons, P.C. 26,000
Profit Sharing Plan
f/b/o Allan R. Lyons
2521 Vestal Parkway East
Vestal, New York 13850
James Mitarotonda 66,667
888 7th Avenue (17th Floor)
New York, New York 10019
Sara Drennen Hauser 5,000
2 West 67th Street
New York, New York 10023
TOTAL _________
5,885,748
PLAN OF DISTRIBUTION
The common stock may be sold from time to time to purchasers directly
by the selling stockholders. Alternatively, the selling stockholders may from
time to time offer the common stock through brokers, dealers or agents who may
receive compensation in the form of discounts, concessions or commissions from
the selling stockholders and/or the purchasers of the common stock for whom they
may act as agents. The selling stockholders and any such brokers, dealers or
agents who participate in the distribution of the common stock may be deemed to
be "underwriters" within the meaning of the Securities Act and any profit on the
sale of the common stock by them and any discounts, commissions, concessions or
other compensation received by any such brokers, dealers or agents may be deemed
to be underwriting discounts and commissions under the Securities Act. To the
extent the selling stockholders may be deemed to be underwriters, they may be
subject to certain statutory liabilities of the Securities Act, including, but
not limited to, Sections 11, 12 and 17 of the Securities Act and Rule l0b-5
under the Exchange Act.
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The common stock offered hereby may be sold from time to time in one or
more transactions at fixed prices, at prevailing market prices at the time of
sale, at varying prices determined at the time of sale or at negotiated prices.
The common stock may be sold in different ways including, without limitation, by
one or more of the following methods: (a) a block trade in which the broker or
dealer so engaged will attempt to sell the common stock as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer from its account pursuant to this prospectus; (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
(d) an exchange distribution in accordance with the rules of such exchange; (e)
face-to-face transactions between sellers and purchasers without a
broker-dealer; and (f) through the writing of options. At any time a particular
offer of the common stock is made, a revised prospectus or prospectus
supplement, if required, will be distributed which will set forth the aggregate
amount of common stock being offered and the terms of the offering, including
the name or names of any underwriters, dealers or agents, any discounts,
commissions and or other items constituting compensation from the selling
stockholders and any discounts, commissions or concessions allowed or reallowed
or paid to dealers. The registration statement of which this prospectus is a
part, will be filed with the Commission to reflect the disclosure of additional
information with respect to the distribution of the common stock. In addition,
the common stock covered by this prospectus may be sold in private transactions
or under Rule 144 rather than pursuant to this prospectus.
To the best of our knowledge, there are currently no plans,
arrangements or understandings between any selling stockholders and any broker,
dealer, agent or underwriter regarding the sale of the common stock by the
selling stockholders. There is no a assurance that any selling stockholder will
sell any or all of the common stock offered by it hereunder or that any such
selling stockholder will not transfer, devise or gift such common stock by other
means not described herein.
The selling stockholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Regulation
M, which may limit the timing of purchases and sales of any of the common stock
by the selling stockholders and any other such person. Furthermore, under
Regulation M of the Exchange Act, any person engaged in the distribution of the
common stock may not simultaneously engage in market-making activities with
respect to the common stock being distributed for certain periods prior to the
commencement of or during such distribution. All of the foregoing may affect the
marketability of the common stock and the ability of any person or entity to
engage in market-making activities with respect to the common stock.
Pursuant to registration rights agreements entered into in connection
with the offer and sales of our common stock, we and the applicable selling
stockholders will be indemnified by the other against certain liabilities,
including certain liabilities under the Securities Act, or will be entitled to
contribution in connection therewith. We have agreed to pay all of the expenses
incidental to the registration of the common stock.
LEGAL MATTERS
The legality of the common stock offered hereby is being passed upon
for us by Friedman Kaplan & Seiler LLP, our counsel.
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EXPERTS
The financial statements of International Sports Wagering Inc.
appearing in International Sports Wagering Inc.'s Annual Report (Form 10-KSB/A)
for the year ended September 30, 1999, have been audited by KPMG LLP,
independent accountants, as set forth in their report thereon incorporated
herein by reference. Such financial statements are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND ANY ACCOMPANYING PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE
OFFERING DESCRIBED HEREIN AND THEREIN, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US OR THE
SELLING STOCKHOLDERS. NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT
SHALL CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR
SUCH PERSON TO MAKE AN OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR OF SUCH PROSPECTUS
SUPPLEMENT.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses (other than brokerage fees
and commissions) expected to be incurred in connection with the offering
described in this Registration Statement. All amounts are estimated except the
Securities and Exchange Commission filing fee.
Securities and Exchange Commission filing fee..................$ 2,112
Printing expenses .............................................$ 500
Legal fees and expenses........................................$ 7500
Accounting fees and expenses...................................$ 1500
Transfer agent and registrar fees..............................
Miscellaneous expenses ........................................$ 3000
Total..........................................................$14,612
All expenses will be borne by us.
15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the Delaware General Corporation Law ("Section 145")
permits indemnification of directors, officers, agents and controlling persons
of a corporation under certain conditions and subject to certain limitations.
The registrant's Bylaws include provisions to require the registrant to
indemnify its directors and officers to the fullest extent permitted by Section
145, including circumstances in which indemnification is otherwise
discretionary. Section 145 also empowers the registrant to purchase and maintain
insurance that protects its officers, directors, employees and agents against
any liabilities incurred in connection with their service in such positions.
At present, there is no pending litigation or proceeding involving a
director or officer of the registrant as to which indemnification is being
sought nor is the registrant aware of any threatened litigation that may result
in claims for indemnification by any officer or director.
16. EXHIBITS
Exhibit 5.1 - Opinion of Counsel
Exhibit 23.1 - Consent of KPMG LLP*
Exhibit 23.2 - Consent of Friedman Kaplan & Seiler LLP (included in
Exhibit 5)
Exhibit 24.1 - Power of Attorney - included in Signature Page
- ------
*previously filed
24
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17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10 (a) (3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Securities and Exchange Commission by the registrant pursuant to Section 13 or
Section 15 (d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15 (d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
25
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer, or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that is has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized on May 3, 2000.
International Sports Wagering, Inc.
By:
/s/ Bernard Albanese
-------------------------------------
Bernard Albanese
President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Barry Mindes* Chairman of the Board and Director May 3, 2000
- --------------------------------- (Principal Executive Officer)
Barry Mindes
/s/ Bernard Albanese President, Treasurer and Director May 3, 2000
- --------------------------------- (Principal Financial and Accounting Officer)
Bernard Albanese
/s/ Fredric Kupersmith* Director May 3, 2000
- ---------------------------------
Fredric Kupersmith
/s/ Janet Mandelker* Director May 3, 2000
- ---------------------------------
Janet Mandelker
/s/ Harold Rapaport* Director May 3, 2000
- ---------------------------------
Harold Rapaport
*By Bernard Albanese, Attorney in Fact
</TABLE>
<PAGE>
Exhibit 5.1
[LETTERHEAD]
April 19, 2000
International Sports Wagering Inc.
201 Lower Notch Road
Little Falls, NJ 07424
Gentlemen:
We have acted as counsel to International Sports Wagering Inc., a
Delaware corporation (the "Company"), in connection with the registration under
the Securities Act of 1933, as amended (the "1933 Act"), relating to the
offering from time to time by certain holders of 5,885,745 shares of your common
stock, $0.001 par value per share (the "common stock"). This opinion is rendered
to you in connection with the Registration Statement of Form S-3, including all
pre-effective and post-effective amendments thereto (the "Registration
Statement"), for the aforementioned sale, filed with the Securities and Exchange
Commission (the "Commission") under the 1933 Act.
In rendering this opinion, we have examined the Certificate of
Incorporation and By-Laws, the proceedings of the Board of Directors relating to
the issuance of the securities aforementioned and such other documents,
instruments and matters of law as we have deemed necessary to the rendering of
this opinion. In such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, and
the conformity with originals of all documents submitted to us as copies.
Based upon the foregoing, we are of the opinion that the common stock
is duly authorized and is validly issued, fully paid and nonassessable or will
be validly issued, fully paid and nonassessable when such shares of common stock
are issued upon exercise of the Option Agreements (the "Options") or Warrants
("Warrants"), as the case may be, pursuant to which they are exercisable in
accordance with the terms of such Options or Warrants, as the case may be.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving our consent, we do not thereby admit that we
are in the category of persons whose consent is required under Section 7 of the
1933 Act or the Rules and Regulations of the Commission thereunder.
Very truly yours,
/s/ Friedman Kaplan & Seiler LLP
