<PAGE>
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, 2000
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 9,030,992 shares of Common Stock outstanding at April 30, 2000.
Transitional Small Business Disclosure Format (check one):
Yes _____ No __X__
<PAGE>
International Sports Wagering Inc.
March 31, 2000
FORM 10-QSB
Index
Page
----
Part I: Financial Information
Item 1. Financial Statements,
Balance Sheets at March 31, 2000 (Unaudited)
and September 30, 1999. 2
Statements of Operations for the Three and Six
Months Ended March 31, 2000 and 1999 (Unaudited) 3
Statement of Changes in Stockholders' Equity for
the Six Months Ended March 31, 2000 (Unaudited) 4
Statements of Cash Flows for the Six Months
Ended March 31, 2000 and 1999
(Unaudited) 5
Notes to Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations or Plan of
Operation 9-13
Part II: Other Information
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
<PAGE>
Part I: Financial Information
Item 1. Financial Statements
International Sports Wagering Inc.
Balance Sheets
March 31, 2000 Sept.30, 1999
(Unaudited) (Note 1)
-------------- -------------
Current assets:
Cash and cash equivalents $ 406,406 $ 121,505
Accounts receivable 1,392 12,081
Investments 2,128,730 1,435,525
Prepaid expenses and other current assets 76,215 35,340
------------ ------------
Total current assets 2,612,743 1,604,451
Property and equipment, net 281,628 430,910
Other assets 4,738 5,131
------------ -----------
Total assets $ 2,899,109 $ 2,040,492
============ ===========
Liabilities and Stockholders' Equity
Current liabilities:
Deposits payable $ 19,124 $ 20,176
Accounts payable 144,031 99,156
Deferred revenues 1,125,000 -
Accrued expenses 98,248 121,858
------------ -----------
Total current liabilities 1,386,403 241,190
------------ -----------
Stockholders' Equity:
Preferred stock, par value $.001 per
share; 2,000,000 shares authorized, none
issued or outstanding - -
Common stock, par value $.001 per
share; 20,000,000 shares authorized,
issued and outstanding 8,697,659
and 7,852,993 shares, respectively 8,698 7,853
Additional paid-in capital 12,783,642 10,288,210
Deferred expense (1,445,700) -
Deficit accumulated during the
development stage (9,833,934) (8,496,761)
----------- -----------
Total stockholders' equity 1,512,706 1,799,302
----------- -----------
Total liabilities and
stockholders' equity $ 2,899,109 $ 2,040,492
=========== ===========
See accompanying notes to financial statements
2
<PAGE>
International Sports Wagering Inc.
Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
Revenues, net $ 124,605 $ 3,847 $ 131,876 $ 8,203
--------- --------- ----------- ----------
Costs and expenses
Research and
development expense 247,956 197,292 480,102 382,785
General and
administrative expense 498,587 385,169 1,055,089 862,657
--------- --------- ---------- -----------
746,543 582,461 1,535,191 1,245,442
--------- --------- ---------- -----------
Operating loss (621,938) (578,614) (1,403,315) (1,237,239)
--------- --------- ---------- -----------
Other income (expense)
Interest income 31,215 54,058 66,142 96,166
Interest expense - - - -
--------- --------- ---------- -----------
31,215 54,058 66,142 96,166
--------- --------- ---------- -----------
Net loss $(590,723) $(524,556) $(1,337,173) $(1,141,073)
========= ========= =========== ===========
Net loss per share-
basic and diluted $ (0.07) $ (0.07) $ (0.16) $ (0.15)
========= ========= =========== ===========
Weighted average common
shares outstanding-
basic and diluted 8,576,363 7,819,660 8,213,128 7,819,660
========= ========= =========== ===========
See accompanying notes to financial statements
3
<PAGE>
International Sports Wagering Inc.
Statement of Stockholders' Equity
For the Six Months Ended March 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During The
------------------- Paid-In Deferred Development
Shares Amount Capital Expense Stage Total
--------- ------- ---------- -------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at
September 30,1999 7,852,993 $7,853 $10,288,210 -- $(8,496,761) $1,799,302
Net loss for the
six months ended
March 31, 2000 -- -- -- -- (1,337,173) (1,337,173)
Issuance of common stock
through private placement 800,000 800 999,200 -- -- 1,000,000
Issuance of common stock
through exercise of options 44,666 45 46,232 -- -- 46,277
Deferred expense -- -- 1,450,000 (1,450,000) -- --
Amortization of warrant
charges -- -- -- 4,300 -- 4,300
--------- ------ ----------- ------------ ------------ ----------
Balance at
December 31,1999 8,697,659 $8,698 $12,783,642 $(1,445,700) $(9,833,934) $1,512,706
========= ====== =========== ============ ============ ==========
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
International Sports Wagering Inc.
Statements of Cash Flows
(Unaudited)
Six Months Ended
December 31,
2000 1999
------------ -------------
Cash Flows from
Operating Activities:
Net loss $ (1,337,173) $ (1,141,073)
Adjustment to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization 166,673 163,615
Provision for doubtful accounts - -
Non-cash compensation charge 4,300 -
Issuance of options
to consultants - -
Changes in assets and liabilities:
Accounts receivable 10,689 3,219
Prepaid expenses and other
current assets (40,875) 1,872
Customer deposits (1,052) (1,341)
Other assets - 8,417
Accounts payable 44,875 (78,315)
Deferred revenues 1,125,000 -
Accrued expenses (23,610) (55,411)
------------ ------------
Net Cash Used In
Operating Activities (51,173) (1,099,017)
------------ ------------
Cash Flows from Investing
Activities:
Proceeds from sales of
investments 1,877,612 4,496,720
Short-term investments (2,570,817) (2,001,437)
Purchase of property
and equipment (16,998) (9,153)
Proceeds from repayments
of notes receivable - 12,500
Issuance of notes receivable - -
------------ ------------
Net Cash (Used In)Provided By
Investing Activities (710,203) 2,498,630
------------ ------------
Cash Flows from Financing
Activities:
Net proceeds from issuance
of common stock 1,046,277 -
------------ ------------
Net Cash Provided By Financing
Activities 1,046,277 -
------------ ------------
Net Increase in Cash
and Cash Equivalents 284,901 1,399,613
Cash and Cash Equivalents,
Beginning of Period 121,505 198,607
------------ ------------
Cash and Cash Equivalents,
End of Period $ 406,406 $ 1,598,220
============ ============
See accompanying notes to financial statements
5
<PAGE>
International Sports Wagering Inc.
Notes To Financial Statements
Note l - Basis of Presentation:
The information at March 31, 2000 and for the three and six months
ended March 31, 2000 and 1999, 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, 1999
included in the Company's Annual Report on Form 10-KSB/A filed with the
Securities and Exchange Commission ("SEC").
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
SEC.
Note 2 - Revenue Recognition:
The Company recognizes revenue from its license agreements dated as of
March 17, 2000 (the "Agreements") with Global Interactive Gaming, Inc.
and Global Interactive Gaming AG ("GIG")on a percentage-of-completion
basis and bills GIG at predetermined dates as stipulated in the
contracts. Accordingly, collections received in advance of recognizing
revenue are recorded as deferred revenue on the balance sheet.
For the GIG contracts, revenues are recognized based on the ratio that
total costs incurred to date bear to the total estimated costs of the
contracts. Provisions for losses on contracts are made in the period in
which they are determined.
Note 3 - Basic and Diluted Net Loss per Share:
Basic and diluted net loss per common share is presented in accordance
with SFAS 128, "Earnings Per Share" ("SFAS 128"). SFAS 128 was
effective for financial statements for both interim and annual periods
ending after December 15,1997.
Basic net loss per share is 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
<PAGE>
International Sports Wagering Inc.
Notes To Financial Statements
Note 3 - Basic and Diluted Net Loss per Share (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,
2000 and 1999, and for the six month periods ended March 31, 2000 and
1999 were 8,576,363, 7,819,660, 8,213,128, 7,819,660, 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 net loss per share because of anti-dilution were 3,447,749
and 2,779,141 for three and six month periods ending March 31, 2000 and
1999, respectively.
Note 4 - Capital Transaction:
On January 12, 2000, the Company sold to accredited investors in a
private transaction not registered under the Securities Act of 1933, as
amended (the "Act"), in reliance upon the exemption afforded by Section
4(2) of the Act, 800,000 shares of the Company's Common Stock, for
$1,000,000, or $1.25 per share, which was approximately $0.50/share
below the last sales price on the date the transaction was negotiated.
The Company also agreed to promptly file a Registration Statement with
the SEC in order to register all the shares. These shares were
subsequently registered on a registration statement on Form S-3 filed
with the SEC on April 20, 2000 and declared effective on May 5, 2000.
The Company believes that it was in the best interest of the Company
and its stockholders to enter into this transaction because the
proceeds of this transaction plus the Company's existing resources (a)
provided the Company with the funds necessary to continue its business
and its research and development activities while pursuing negotiation
of several domestic and international licensing opportunities; and (b)
helped the Company in its attempt to meet the Net Tangible Asset
requirements for continued listing on NASDAQ(SmallCap).
Note 5 - License Contracts:
On March 17, 2000, the Company signed Agreements with GIG, whose
majority shareholders are the Kirch Group, a German media conglomerate,
and Multisport Games Development, Inc, a Delaware corporation. Pursuant
to the Agreements, the Company granted to GIG exclusive licenses to use
the Company's interactive SportXction(TM) software, technology and
patents on the Internet and interactive television, in all business
activities in which such technology is legally usable, including on
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).
7
<PAGE>
International Sports Wagering Inc.
Notes To Financial Statements
Note 5 - License Contracts (continued):
Under these Agreements, the Company will be paid 25% of the gross
profit for the use of its technology for contests and other
non-wagering transactions. For wagering, the Company will be paid the
lesser of 25% of the gross profit or 1% of the gross handle. The
Company will bear no share of the cost of equipment, facilities or
other operating expenses of GIG. 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, after which the licenses
are fully paid. At all times the minimum license fee for the next four
quarters is kept in a third party escrow account. As of March 31, 2000,
the Company has received $1,250,000 in connection with the Agreements.
The terms of the Agreements 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.
These enhancements are scheduled to be delivered over a 30 month
schedule. The first phase of the project, which will allow deployment
of the system in the first market area to be targeted, has a 10-month
implementation schedule. The Company will earn a bonus for early
completion of this phase.
Coincident with the signing of the Agreements, GIG was granted a
warrant to purchase 426,087 shares of the Company's Common Stock, at an
exercise price of $4.38 per share. The value of the warrant using a
Black-Scholes option pricing model was $1,450,000. Such amount is being
amortized over the term of the Agreements and shall be offset against
the revenue. The warrant is exercisable 18 months after issuance, is
non-transferable other than to affiliates of GIG and remains
exercisable for five years from the date of issuance. The $1,450,000
has been accounted for as an increase in additional paid-in capital
with a corresponding offset amount recorded as deferred expense within
stockholders' equity. Amortization expense related to the warrant for
the three months ended March 31, 2000 was $4,300, which has been netted
against $125,000 of revenue generated from the Agreements.
Note 6 - Subsequent Events:
On April 10, 2000, the Company sold to accredited investors in a
private transaction not registered under the Act, in reliance upon the
exemption afforded by Section 4(2) thereof, 333,333 shares of the
Company's Common Stock, par value $.001 per share, for a total of
$500,000, or $1.50 per share, which was approximately $0.50/share below
the last sales price on the date that this transaction was negotiated.
The Company also agreed to promptly file a Registration Statement with
the SEC in order to register these shares. These shares were
subsequently registered on a registration statement on Form S-3 filed
with the SEC on April 20, 2000 and declared effective on May 5, 2000.
The Company suspended wagering operations at its Las Vegas office as of
April 30, 2000. A decision concerning the future of the Las Vegas
operation will be made in the near future. The options, all of which
have the Company ceasing wagering operations in Nevada, include selling
the operation or licensing the rights to the system and software
currently used in the operation to one or more Nevada gaming operators.
8
<PAGE>
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, 2000 the Company had a net loss of
$590,723 or $0.07 loss per share on a basic and fully diluted basis using
8,576,363 weighted average common shares outstanding, compared with a net loss
of $524,556 or $ 0.07 loss per share on a basic and fully diluted basis using
7,819,660 weighted average common shares outstanding for the three months ended
March 31, 1999. Net revenues of $124,605 were reported for the three months
ended March 31, 2000, compared with revenues of $3,847 reported for the prior
period. This large increase in net revenues is attributable to the recognition
of license fees of $125,000 from the Company's contracts with Global Interactive
Gaming, Inc. and Global Interactive Gaming AG ("GIG"), signed on March 17, 2000,
net of $4,300 deferred expense amortization resulting from warrants granted in
connection with the GIG contracts (see "Recent Developments"). A small portion
of the Company's revenues for the three months ended March 31, 2000, as well as
all of the revenue for the prior period, represent 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 increased net loss for the three months ended March 31, 2000,
compared with the three months ended March 31, 1999, resulted primarily from:
professional fees which increased by $136,451 to $194,146 primarily due to
expenses associated with a private placement as well as work associated with
licensing contracts for the Company's products; marketing expenses which
increased by $23,338 to $32,907, primarily reflecting marketing of
SportXction(TM) for use in contests; travel expenses, which increased by $8,409
to $20,268, primarily related to the increase in marketing activity; and a
decrease in interest income, which decreased by $22,843 to $31,215 due to
decreased investments. These factors were partially offset by revenues which
increased by $120,758 to $124,605, and general liability insurance expense,
which decreased $15,081 to $12,357 due to lower renewal rates.
The Company incurred approximately $248,000 in research and development
costs for the three months ended March 31, 2000, compared with approximately
$197,000 for the comparable prior period.
As a result of the revenue generated by the Company's contracts with
GIG, it no longer expects to continue to incur substantial losses. Management
believes that for the remaining half of the current fiscal year, the Company
will be operating on an approximately break-even basis.
As of March 31, 2000, the Company had liquid resources totaling
$2,535,136. These include cash and cash equivalents in the amount of $406,406,
and short term investments in the amount of $2,128,730. Investments are limited
to investment grade marketable securities with maturities of less than 18
months. In January 2000, the Company raised an additional $1,000,000 as a result
of the sale of 800,000 shares of its Common Stock, par value $.001 per share, in
a private transaction to accredited investors, not registered under the
Securities Act of 1933, as amended (the "Act"). Also, in April 2000, the Company
raised an additional $500,000 as a result of the sale of 333,333 shares of its
Common Stock, in a private transaction to other accredited investors, not
registered under the Act (see "Recent Developments").
9
<PAGE>
The Company believes that existing resources will be sufficient to
satisfy its contemplated cash requirements for at least the next 12 months.
Capital expenditures are expected to be limited to the purchase of additional
computer equipment in connection with its research and development activities.
Existing resources will fund these requirements.
Recent Developments
On January 12, 2000, the Company sold to accredited investors in a
private transaction not registered under the Act, in reliance upon the exemption
afforded by Section 4(2) of the Act, 800,000 shares of the Company's Common
Stock, for $1,000,000, or $1.25 per share, which was approximately $0.50/share
below the last sales price on the date the transaction was negotiated. The
Company also agreed to promptly file a Registration Statement with the
Securities and Exchange Commission ("SEC") in order to register all the shares.
These shares were subsequently registered on a registration statement on Form
S-3 filed with the SEC on April 20, 2000 and declared effective on May 5,2000.
The Company believes that it was in the best interest of the Company and its
stockholders to enter into this transaction because the proceeds of this
transaction plus the Company's existing resources (a) provided the Company with
the funds necessary to continue its business and its research and development
activities while pursuing negotiation of several domestic and international
licensing opportunities; and (b) helped the Company in its attempt to meet the
Net Tangible Asset requirements for continued listing on NASDAQ(SmallCap).
On March 17, 2000, the Company signed Agreements with GIG, whose
majority shareholders are the Kirch Group, a German media conglomerate, and
Multisport Games Development, Inc, a Delaware corporation. Pursuant to the
Agreements, the Company granted to GIG exclusive licenses to use the Company's
interactive SportXction(TM) software, technology and patents on the Internet and
interactive television, in all business activities in which such technology is
legally usable, including on 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).
Under these Agreements, the Company will be paid 25% of the gross
profit for the use of its technology for contests and other non-wagering
transactions. For wagering, the Company will be paid the lesser of 25% of the
gross profit or 1% of the gross handle. The Company will bear no share of the
cost of equipment, facilities or other operating expenses at GIG. 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. At all times the minimum
license fee for the next four quarters is kept in a third party escrow account.
As of March 31, 2000, the Company has received $1,250,000 in connection with the
Agreements.
The terms of the Agreements 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. These enhancements
are scheduled to be delivered over a 30 month schedule. The first phase of the
project, which will allow deployment of the system in the first market area to
be targeted, has a 10-month implementation schedule. The Company will earn a
bonus for early completion of this phase.
10
<PAGE>
Under the terms of the GIG Agreements, the Company can continue to use
its existing technology to engage in development, sales and licensing in the
lottery and securities markets. The Company has several projects under
consideration in those markets using its patented and proprietary software.
Coincident with the signing of the Agreements, GIG was granted a
warrant to purchase 426,087 shares of the Company's Common Stock, at an exercise
price of $4.38 per share. The value of the warrant using a Black-Scholes option
pricing model was $1,450,000. Such amount is being amortized over the term of
the contracts and shall be offset against the revenue. The warrant is
exercisable 18 months after issuance, is non-transferable other than to
affiliates of GIG and remains exercisable for five years from the date of
issuance. Expense related to the warrant for the three months ended March 31,
2000 was $4,300, which has been netted against $125,000 of revenue generated
from the contracts.
On December 20, 1999, the Company received a letter from NASDAQ stating
that the Company did not meet the net tangible assets/market capitalization/net
income requirements for continued listing on The NASDAQ Small Cap Market because
it had neither $2,000,000 of net tangible assets, a market capitalization of
$35,000,000 or net income of $500,000. Pursuant to NASDAQ's request, on December
30, 1999, the Company presented a plan for achieving compliance with such
listing requirements. On January 13, 2000, the Company supplemented its December
30, 1999 letter to NASDAQ. On March 13, 2000, NASDAQ wrote to the Company and
stated that the Company had provided a definitive plan evidencing its ability to
achieve compliance with the continued listing requirements and granted the
Company a further extension to April 11, 2000 in order to fulfill certain
requirements and to demonstrate compliance with NASDAQ's continued listing
requirements.
In order to meet the NASDAQ listing requirements, among other things,
the Company is required to have $2 million of net tangible assets. It should be
noted that in connection with the GIG Agreements, the Company received a
non-refundable initial payment of $1,250,000 which is reflected as a current
asset on the Company's balance sheet, of which $125,000 was recognized as
revenue for the quarter ended March 31, 2000. Although the Company had assets in
excess of the minimum required by NASDAQ for continued listing, those assets
were offset by a deferred revenue liability (non-cash) which reduced the
Company's net tangible assets below the $2 million threshold required by NASDAQ.
In order to meet this requirement, the Company sold on April 10, 2000, to
accredited investors in a private transaction not registered under the Act, in
reliance upon the exemption afforded by Section 4(2) thereof, 333,333 shares of
the Company's Common Stock, par value $.001 per share, for a total of $500,000,
or $1.50 per share, which was approximately $0.50/share below the last sales
price on the date that this transaction was negotiated. The Company also agreed
to promptly file a Registration Statement with the SEC in order to register all
their shares. These shares were subsequently registered on a registration
statement on Form S-3 filed with the SEC on April 20, 2000 and declared
effective on May 5, 2000. The Company believes that it was in the best interests
of the Company and its stockholders to enter into this transaction because the
proceeds of this transaction plus the Company's existing resources were
necessary for the Company to attempt to meet the Net Tangible Asset requirements
for continued listing on NASDAQ.
The Company suspended wagering operations at its Las Vegas office as of
April 30, 2000. The signing of the exclusive international licensing Agreements
with GIG changed the focus of the Company. In management's judgment, the Nevada
wagering operation had become an administrative and technical distraction, and
an impediment to dealings with sports leagues in the U.S. concerning use of the
SportXction(TM) system for use in contests. Revenues generated by the Nevada
operations had been insignificant to date. A decision concerning the future of
the Las Vegas operation will be made in the
11
<PAGE>
near future. The options, all of which have the Company ceasing wagering
operations in Nevada, include selling the operation or licensing the rights to
the system and software currently used in the operation to one or more Nevada
gaming operators. In addition to any revenues that such sale or licensing
agreements might produce, the Company anticipates a reduction in expense of over
$600,000, annually.
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
$1,351,000 for the purchase of computer equipment including player betting
stations; approximately $895,000 for professional fees; approximately $412,000
for directors and officers liability insurance premiums; approximately $729,000
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 a former officer,
which has been fully repaid. After other expenses, including product enhancement
and development, sales and administration, approximately $244,000 of such net
proceeds remained in cash and short-term, interest-bearing, investment grade
securities as of March 31, 2000.
Year 2000
The Company experienced no significant issues relating to Year 2000.
Safe Harbor Statement
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 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 Company's belief that its System and
equipment will be and remain Year 2000 compliant and that the readiness of its
customers and suppliers to be Year 2000 compliant will not have a material
impact on the Company; whether 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 as required by the GIG
License Agreements; whether the Company will be successful in meeting the
software and throughput requirements of the GIG License Agreements; 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 GIG License Agreements; the ability of the Company to develop and market
other opportunities for its products; the length of time that the Company's
liquid resources will last; the likelihood that any pending licensing
negotiations being conducted by the Company for the use of its technology in
Nevada will result in the grant of licenses by the Company or that the terms
thereof will be favorable to the Company. Investors
12
<PAGE>
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, the ability of the Company to
attract adequate numbers of players to the SportXction(TM) game and the 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/A for
the fiscal year ended September 30, 1999. 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.
13
<PAGE>
II: Other Information
Item 4. Submission of Matters to a Vote of Security Holders
On March 22, 2000, 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 amend the Company's 1996 Stock Option Plan; and
(iii) a proposal to ratify the selection of KPMG LLP as the Company's
independent public accountants for the fiscal year ending September 30, 2000.
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 8,271,039 7,900
Fredric Kupersmith 8,271,039 7,900
Janet Mandelker 8,271,039 7,900
Barry Mindes 8,271,039 7,900
Harold Rapaport 8,271,039 7,900
(ii) The amendment of the 1996 Stock Option Plan
For Against Abstain
--------- ------- -------
8,234,111 34,828 10,000
(iii) Ratification of the selection of KPMG LLP as the Company's independent
public accountants for the fiscal year ended September 30, 2000
For Against Abstain
--------- ------- -------
8,275,639 600 2,700
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) Reports on Form 8-K
On March 23, 2000, a Form 8-K was filled by the
Company responding to Item 5 thereof.
14
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
International Sports Wagering Inc.
Dated: May 15, 2000 By: /s/ Barry Mindes
---------------------------
Barry Mindes, Chairman of the
Board of Directors
(Principal Executive Officer)
Dated: May 15, 2000 By: /s/ Bernard Albanese
---------------------------
Bernard Albanese, President,
Treasurer and Director
(Principal Financial Officer)
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 406,406
<SECURITIES> 2,128,730
<RECEIVABLES> 1,392
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,612,743
<PP&E> 1,526,658
<DEPRECIATION> (1,245,030)
<TOTAL-ASSETS> 2,899,109
<CURRENT-LIABILITIES> 1,386,403
<BONDS> 0
0
0
<COMMON> 8,698
<OTHER-SE> 1,504,008
<TOTAL-LIABILITY-AND-EQUITY> 2,899,109
<SALES> 131,876
<TOTAL-REVENUES> 198,018
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,535,191
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,337,173)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,337,173)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,337,173)
<EPS-BASIC> (.16)
<EPS-DILUTED> (.16)
</TABLE>
