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As filed with the Securities and Exchange Commission on April 7, 2000
Registration No. 333-_______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
________________________
eLOT, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 86-0449210
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
301 Merritt 7 Norwalk, Connecticut 06851 203-840-8600
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Barbara C. Anderson, Esq.
Senior Vice President, Law and Administration, and Secretary
eLOT, Inc.
301 Merritt 7
Norwalk, Connecticut 06851203-840-8600
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copy to:
Thurston R. Moore, Esq.
Hunton & Williams
Riverfront Plaza
951 East Byrd Street
Richmond, Virginia 23219
(804) 788-8200
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement as determined by
market conditions and other factors.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
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, other than securities offered only in connection with dividend or
interest reinvestment plans, 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 of 1933, please 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 of 1933, 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. [_]
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Proposed
Proposed Maximum
Aggregate Maximum Aggregate Amount of
Title of Each Class of Amount to be Offering Price Offering Registration
Securities to be Registered Registered Per Unit(1)(2) Price(1) Fee(2)
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<S> <C> <C> <C> <C>
Common Stock,
$.01 par value 421,354 $4.5315 $1,909,366 $505
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(1) Estimated solely for purposes of calculating the registration fee.
(2) The registration fee has been calculated in accordance with Rule 457(c)
under the Securities Act of 1933, as amended, and based on the average of the
high and low sales prices of the Common Stock as reported on the Nasdaq National
Market on April 4, 2000.
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 of 1933, as amended, or until this registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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SUBJECT TO COMPLETION, DATED APRIL 7, 2000
eLOT, INC.
421,354 Shares of Common Stock
This Prospectus relates to the offer and sale from time to time of up to
421,354 shares of our common stock that we have issued or that we may issue to
certain selling shareholders named in this Prospectus. We will not receive any
of the proceeds from any sale of shares by the selling shareholders, but we have
agreed to bear the expenses of registration of the shares by this Prospectus.
The common stock is traded on the Nasdaq National Market under the symbol
"ELOT." The last sale price of the common stock on the Nasdaq National Market on
April 6, 2000 was $3.9375.
____________________
THE SHARES REGISTERED HEREBY INVOLVE A HIGH LEVEL OF INVESTMENT RISK. YOU
SHOULD INVEST ONLY IF YOU CAN AFFORD A COMPLETE LOSS: SEE "RISK FACTORS"
BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
____________________
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may be used only where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
The date of this Prospectus is ________ __, 2000.
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THE COMPANY
We, through our wholly-owned subsidiary, eLottery, Inc., are pursuing
opportunities to become a web-based retailer of lottery services and to license
our systems and services to state and international lotteries. We develop,
provide and maintain Internet, Intranet, telephone, communications, accounting,
banking, database and other applications and services to facilitate the
electronic sale of new and existing lottery products worldwide. Using our past
experience and market-tested products, we are committed to leading the
governmental lottery industry into the e-commerce market. On November 9, 1999,
we launched eLotteryFreeWay.com, a "sticky" website designed to attract,
aggregate, entertain, register, retain and derive revenue from an Internet-based
community who we believe will be highly predisposed to playing and purchasing
lottery tickets. eLotteryFreeWay.com is a lottery portal that allows registered
players the opportunity to earn "e-points" that are redeemable for cash and
merchandise. We have positioned ourselves to become a leader in the area by
addressing the many complex legal, political and social issues facing
governmental lotteries as they react to the significant market changes signaled
by the rapid growth in Internet sales. We have developed, installed and operated
Internet, Intranet, telephone, communications, accounting, banking, database and
other applications and services to facilitate the electronic sale of new and
existing lottery products worldwide.
We have developed proprietary lottery technologies designed to take
advantage of the impact that we believe recent advances in telecommunications
and computers will have on the nature and delivery of lottery products and the
support systems necessary to administer them. We believe we are the first to
develop and operate secure, integrated Internet, Intranet and telephone lottery
gaming systems. Our Internet and Intranet systems provide for the electronic
sale and support of both periodic and instant draw lottery games and instant
electronic "scratch-off" games. Using our systems, lotteries will be able to
electronically distribute lottery tickets for both periodic and instant draw
lottery games over the Internet through our website, eLottery.com, through an
Intranet, through telephone networks, and through stand-alone custom-designed
electronic lottery terminals. We believe that the electronic distribution of
lottery tickets through these systems will increase sales for lotteries because
the systems make the purchase of tickets easier and use technology to enhance
the lottery gaming experience. Subject to applicable law, the eLottery.com
website can contain links to the sites of participating lotteries utilizing our
technologies to sell their lottery tickets over the Internet. We also may sell
lottery tickets as an agent for certain lottery operators. We believe that our
systems provide lotteries with numerous advantages relative to traditional means
of distribution, including:
. player tracking ability,
. sale of tickets over the Internet,
. entertaining fast-play instant games and
. access to new and more demographically attractive market segments.
We believe that the combination of the advantages of Internet commerce and
our ability to customize our systems will result in eLottery becoming an agent
and leading provider of products and services for the lottery industry.
We are committed to leading the governmental lottery industry into the e-
commerce market. Consequently, we also have developed transitional e-commerce
solutions for governmental lotteries that leverage the opportunities presented
by the Internet, while simultaneously addressing political, legal and social
issues.
In addition to web-based lottery ticket sales we are pursuing several
additional related revenue opportunities. eLottery is targeting Internet
advertising and marketing dollars from governmental lotteries. Lotteries
worldwide spend billions of dollars annually on promotions with almost none of
that being spent on the Internet. Through the use of eLottery's Internet
Marketing, Analysis, Research and Communications System (IMARCS), we expect to
capture a portion of that market. The IMARCS system also allows eLottery to
begin building relationships with the U.S. State lotteries and potential lottery
ticket purchasers. We have identified a process that we believe will lead to
states permitting web-based lottery ticket sales. The first phase is a contract
with a state to begin an Internet marketing program to gather data
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on customers who both purchase lottery tickets and are Internet users. The next
step is to increase the sales of paper tickets through promotions on the
Internet. Ultimately if approval from the relevant authorities is received,
eLottery can begin selling lottery tickets on the Internet.
eLottery has already begun generating revenues through advertising and e-
commerce transactions on its lottery portal, eLotteryFreeWay.com.
eLotteryFreeWay.com offers customers the opportunity to play a variety of games
for free and win cash or discounts on merchandise. There are significant
potential benefits between eLotteryFreeWay.com and eLottery's goal of selling
lottery tickets over the Internet. eLotteryFreeWay.com is a means through which
eLottery is building a player base with a high propensity to buy lottery tickets
on-net.
Through the IMARCS system and eLotteryFreeWay.com, eLottery is generating
revenues and building a database of customers that are Internet users and play
the lottery, the exact demographic eLottery will be targeting for the web-based
sale of lottery tickets. At the same time, we are seeking to build a brand name
among consumers as well as within the lottery industry.
RECENT EVENTS
GTL
On March 6, 2000, we announced a strategic alliance agreement with Global
Technologies Limited (GTL) to facilitate and develop e-commerce sales and
technologies of lottery and other governmental authorized gaming related
products. GTL is a technology incubator that develops and manages emerging
growth businesses focused on the networking solutions, telecommunications,
gaming and e-commerce opportunities. As the first initiative of the strategic
alliance, we announced a four-year agreement with GTL under which eLOT will be
the exclusive web-based retailer and provider of games for a UK charity lottery.
The U.K. charity lottery is authorized by the Gaming Board for Great Britain,
with GTL Management Ltd. serving as the operating company on behalf of Inter
Lotto (UK) Ltd. The initial lottery product is expected to be Great Britain's
first "Pick 3" game called, "The Daily Number." Proceeds will benefit numerous
charitable causes. eLottery will receive a cash commission for every ticket
sold. Internet sales are expected to start in the second quarter of 2000. The U.
K. charitable lottery will be accessible to England, Scotland and Wales. Sales
to residents of jurisdictions outside of Great Britain will not be permitted.
Additional initiatives under the strategic alliance include jointly
marketing the Internet distribution of lottery tickets to additional
jurisdictions and examining the feasibility of using our gaming technology by
GTL's affiliate company, The Network Connection Inc. for use in that Company's
cruise ship, hotel and train market places. The companies also plan to jointly
develop lottery applications using wireless technology.
VGTI
On February 25, 2000, we announced we had entered into a letter of intent
to purchase Virtgame.com Corp. (VGTI), a leading provider of Internet enabling
technology to the lottery industry. It is anticipated that eLOT may issue up to
3.4 million shares to complete the transaction. The proposed agreement is
subject to certain conditions, including the completion of due diligence, the
negotiation of definitive agreements, discontinuation of operations of VGTI's
Constellation virtual casino and VGTI shareholder approval.
Agreement with Idaho Lottery
On November 15, 1999, we entered into an exclusive agreement with the Idaho
Lottery to provide an Internet communications element to the Idaho Lottery's VIP
Club. On January 31, 2000, we unveiled our IMARCS data base marketing solution
for lotteries. The IMARCS solution will allow lotteries to communicate directly
with players and potential players through advanced Internet technology. The
first implementation of the IMARCS solution is through Idaho Lottery's VIP Club.
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Agreement with Jamaica Lottery Corporation
On October 25, 1999, we entered into a software licensing and development
agreement and a management agreement with the Jamaica Lottery Corporation, the
government-authorized provider of Jamaican government lottery products, and
eCaribbean.com, Limited, a Jamaican company that has been designated the
exclusive internet retail agent of the Jamaican Lottery Corporation. Under the
agreement, we have agreed to customize, license and maintain our proprietary
internet lottery software and systems for use in making sales of authorized
Jamaican government lottery products to eligible Jamaican citizens and other
persons in a manner and under circumstances reasonably believed to comply with
applicable law. The agreement has an initial term of ten years and provides for
compensation to eLottery of a percentage of the net lottery revenues from sales
by eCaribbean.com, Limited, after payment of the prize pool, required
governmental and charitable payments, internet service provider fees, and
banking fees not charged to customers' accounts. The Jamaica Lottery Corporation
and eLottery currently plan to launch internet retail sales of Jamaica Lottery
tickets in the second quarter of 2000.
Agreements with International Lottery & Totalizator Systems, Inc.
We have entered into a Joint Venture Agreement, dated July 13, 1999, with
International Lottery & Totalizator Systems, Inc. (ILTS). ILTS provides
computerized wagering systems equipment and services to lottery and racing
organizations in 18 countries worldwide. eLottery and ILTS will jointly market
an on-net lottery to ILTS' international lottery and pari-mutuel customers. The
companies are in the process of developing an interface that will allow ILTS'
lottery systems to process eLottery's web-based retailing of lottery tickets.
On March 7, 2000, we entered into a four-year agreement with ILTS to
process Internet transactions through the central computer system that ILTS
operates on behalf of GTL Management Limited (GTLML), which is scheduled to
launch a new on-line lottery to be operated for the benefit of various charities
in the United Kingdom. On March 14, 2000, we received approval from the Gaming
Board for Great Britain for the initial game and business system for the
Internet segment of the United Kingdom charity lottery.
Discontinued Operations
Effective January 1, 2000, we completed the sale of our computer telephony
business to Inter-Tel, Incorporated. The computer telephony business consisted
of telephone system sales and services through a national network of independent
distributors and company direct sales employees to the small to medium-sized
business customer and to smaller locations of large commercial and governmental
organizations. The results of the computer telephony business are accounted for
as a discontinued operation in the financial statements for the year ended
December 31, 1999.
We have announced our intention to sell our healthcare communications
business and our investment in Dialogic Communications Corporation (DCC).
While negotiations are continuing for the sale of the healthcare communications
business, the business remains dedicated to developing, manufacturing, selling
and servicing communications solutions for healthcare facilities. Nevertheless,
because of our intent to sell it, the results of the healthcare communications
business are accounted for as a discontinued operation in the financial
statements for the year ended December 31, 1999.
On February 27, 2000, we called for a special meeting of the shareholders
of Dialogic Communications Corporation to remove all members of the Board of
Directors except Stanley J. Kabala, Chairman and President of eLOT, and replace
them with nominees of eLOT. We also announced that we will request the new Board
to immediately consider various alternatives designed to maximize value for the
shareholders of DCC. eLOT owns 2,186,230 shares of stock in Dialogic
Communications Corporation, which we believe represents approximately 51% of the
currently outstanding shares of that corporation. Dialogic Communications
Corporation is a privately held company headquartered in Franklin, Tennessee
that is an established leader in interactive call processing solutions for
business, industry and government. DCC has been experiencing significant and
sustained profitable growth while investing in a series of products that further
advance closed loop communications.
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RISK FACTORS
An investment in the eLOT common stock offered by this prospectus involves
a high degree of risk. Before you decide to invest in the common stock offered
by this prospectus, you should carefully consider the following risk factors,
together with the other information contained in this prospectus.
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing eLOT. Additional risks and uncertainties not presently known to
us or that we currently deem immaterial may also impair our business operations.
If any of the following risks actually occur, eLOT's business, financial
condition, or results of operations could be materially adversely affected. In
such case, the trading price of our common stock could decline and you could
lose all or part of your investment.
RISKS RELATED TO OUR COMPANY
We are subject to government regulation and legislation on the gaming industry.
The gaming market is highly regulated and the competition to secure new
contracts is often intense. Awards of government contracts to companies in the
industry may be challenged by competitors. Further, governmental authorities may
conduct investigations of various types into possible improprieties and
wrongdoing in connection with efforts to obtain or the awarding of lottery
contracts and related matters. Although we currently have no reason to believe
any such investigations might be initiated with respect to eLOT's conduct, such
incidents could have a material adverse effect on eLOT's ability to carry out
our business plan if they were to occur.
We believe that as of the date of this registration statement, many federal
and state prosecutorial agencies in the United States have taken the position
that the provision of Internet gaming services to residents of the United States
is subject to existing federal and state laws which generally prohibit the
provision of gaming opportunities, except where licensed or subject to
exemption. On the other hand, it is the company's understanding that many
providers of Internet gaming services to citizens and residents of the United
States have taken the position that existing federal and state laws pertaining
to the provision of gaming opportunities do not apply to Internet gaming
services. Legislation has been introduced to the United States Senate and House
of Representatives which, if enacted, would have effectively amended the Federal
Wire Statute, codified at 18 U.S.C. (S)1084, to prohibit the provision of
Internet gaming operations to residents of the United States with certain
exceptions. It is our policy to comply with federal and state laws in the United
States pertaining to gaming and at the present time and in the absence of a
contract to do so with a state authorized lottery, it is our policy not to offer
our Internet gaming services to citizens or residents of the United States.
Currently, there are two bills pending in Congress that may affect internet
lotteries: Senate bill S. 692 ES, also known as the Kyl Bill, and H.R. 3125, or
the Goodlatte/McCollum Bill. If passed in their current form, either bill would
limit the purchase of lottery tickets via an electronic network to terminals in
places open to the general public, and would prohibit the purchase of lottery
tickets from a home computer. This prohibition could have a material adverse
effect on our ability to carry out our current business plan. In their current
forms, which are subject to amendment, neither bill, if passed, would otherwise
materially limit the sale of state lottery tickets offered exclusively to state
residents, as envisioned by our business plan.
The Kyl Bill was passed by the Senate on November 19, 1999. The Kyl Bill
was referred to the House Judiciary Committee on January 27, 2000 and then to
the Subcommittee on Crime on February 3, 2000. The Bill awaits action by the
full House. The Goodlatte/McCollum Bill was referred out of the House Judiciary
Committee on April 6, 2000 and awaits action by the full House. It is uncertain
whether the Kyl Bill, the Goodlatte/McCollum Bill or any bill dealing with
Internet lotteries will be passed by both houses of Congress and signed into
law. If legislation restricting our ability to carry out our business plan is
enacted into law, it could have a material adverse effect on the operations of
eLOT.
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Our sources of revenue have decreased.
We have operated independently of the computer telephony business for only
a limited time. On December 31, 1999, we completed the sale of our computer
telephony business. The computer telephony business generated approximately 74%
of our revenues for the year ended December 31, 1999. The healthcare
communications business generated the remaining 26% of revenues for the year
ended December 31, 1999. We are in the process of attempting to sell the
healthcare communications business and our interest in Dialogic Communications
Corporation. We have entered into only two contracts pursuant to which our
subsidiary, eLottery, will provide capabilities for web-based retail sales of
lottery tickets. These contracts have not begun producing revenue for our
company. Although we project advertising revenues from our eLotteryFreeWay.com
website, the site has not yet produced significant revenue. There can be no
assurance that we will ever generate revenue at a sustainable level or that we
will ever be profitable. As a result of the sale of the computer telephony and
healthcare communications businesses, our revenue base will be significantly
smaller than in the past, and we will be required to absorb corporate overhead
and other fixed costs effectively in order to succeed in our efforts to
profitably expand our internet lottery operations. While we have made
significant investments in establishing the eLottery technologies, the future
prospects of which we believe are attractive, there can be no assurance as to
future prospects.
The market for our products is new, and the growth in market acceptance for
these products is uncertain.
The markets for our Internet-based lottery products have only recently
begun to develop, have not been subject to extensive market exposure, are
rapidly evolving, and are increasingly competitive. Demand and market acceptance
for recently introduced products and services are subject to a high level of
uncertainty and risk. If the market develops more slowly than expected or
becomes saturated with competitors, or if the company's products do not develop
sufficient customer or consumer acceptance, our business, operating results, and
financial condition will be materially and adversely affected.
The Internet is characterized by rapid technological changes, and we must adapt
quickly to these changes to compete effectively.
The market for Internet products and services is characterized by rapid
technological developments, evolving industry standards and customer demands,
and frequent new product introductions and enhancements. For example, to the
extent that higher bandwidth Internet access becomes more widely available, we
may be required to make significant changes to the design and content of our
products. Failure to effectively adapt to these or any other technological
developments could adversely affect our business, operating results, and
financial condition.
Our company is positioning itself to be concentrated in a single industry.
Our current operating strategy is to focus on lottery technologies and
services, although there can be no assurance that we will be able to consummate
the sale of the healthcare communications business. Although we are
developing our reward entertainment site, eLotteryFreeWay.com, and the IMARCS
system as alternative revenue sources to Internet lottery retailing, and we will
seek to develop other lines of business from the existing lottery business, eLOT
is subject to risks associated with concentrating on a single industry.
Therefore, the adverse effect on our operating revenue resulting from an
economic downturn in the lottery industry would be more pronounced than if we
had more fully diversified our line of business.
The gaming industry is very competitive.
The development, licensing and management of gaming technology and the
provision of gaming entertainment are highly competitive. The gaming market is
served by state and nationally sponsored lotteries and by many domestic and
foreign gaming companies, including several large land-based casino companies. A
number of large, mature lottery services companies serve both the domestic and
international markets. All these competitors have substantially more capital,
and therefore broader based resources to apply to technology and marketing than
we have. eLOT also competes with other forms of leisure and entertainment
activities for the public's disposable income.
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Because our eLottery operations are in an early stage of development and have a
history of losses, it is difficult to evaluate our business and we may face
expenses, delays and difficulties.
Our current electronic lottery has only a limited operating history upon
which an evaluation can be based. Accordingly, our prospects must be considered
in light of the risks, expenses, delays and difficulties frequently encountered
by companies in a similarly early stage of development, particularly companies
engaged in a new and rapidly evolving markets like online lotteries. We incurred
operating losses from continuing operations (excluding non-cash asset impairment
and stock compensation charges) of $6.0 million and $3.1 million in the years
ended December 31, 1999 and 1998, respectively.
We anticipate continued losses.
Although we believe that our success will depend in large part upon our
ability to generate sufficient revenue to achieve profitability and to
effectively maintain existing relationships and develop new relationships with
customers and strategic partners, our revenue may not increase, and we may not
achieve or maintain profitability. In particular, we intend to expend
significant financial and management resources on product development, sales and
marketing, strategic relationships and technology, and operating infrastructure.
As a result, we expect to incur additional losses and continued negative cash
flow from operations for the foreseeable future.
Our quarterly operating results will fluctuate because of a number of factors,
including the reliance on short-term advertising contracts.
Because we will increasingly be relying on advertising revenues as a part
of our business model, our operating results may fluctuate significantly in the
future as a result of a variety of factors, many of which are outside our
control. These factors include:
. the level of usage of the Internet;
. demand for Internet advertising;
. the addition or loss of advertisers;
. the level of user traffic on our eLotteryFreeWay.com website;
. the mix of types of advertising the company sells (targeted advertising
generally has higher rates);
. the amount and timing of capital expenditures and other costs relating
to the expansion of eLOT's operations;
. the introduction of new products or services by the company or its
competitors;
. pricing changes for Internet-based advertising;
. the timing of initial set-up, engineering or development fees that may
be paid in connection with larger advertising and distribution
arrangements;
. technical difficulties with respect to the use of our online properties;
. costs incurred with respect to acquisitions; and
. negative general economic conditions and their resulting effects on
media spending.
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We may from time to time make certain pricing, service or marketing
decisions that may adversely affect our profitability in a given quarterly or
annual period.
We currently derive the majority of our revenues from the sale of
advertisements on our eLotteryFreeWay.com website under short-term contracts,
which are difficult to forecast accurately. Our expense levels are based in part
on expectations of future revenue and, to a large extent, are fixed. We may be
unable to adjust spending quickly enough to compensate for any unexpected
revenue shortfall. Accordingly, the cancellation or deferral of advertising or
sponsorship contracts could have a material adverse effect on our financial
results. Our operating expenses are likely to increase significantly over the
near term. To the extent that our expenses increase but our revenues do not, our
business, operating results, and financial condition may be materially and
adversely affected.
Our advertising revenue is also subject to seasonal fluctuations.
Historically, advertisers spend less in the first and third calendar quarters
and user traffic on online media properties has historically been lower during
the summer and during year-end vacation and holiday periods.
We are subject to U.S. and foreign government regulation of the Internet, the
impact of which is difficult to predict.
There are currently few laws or regulations directly applicable to the
Internet. The application of existing laws and regulations to eLOT relating to
issues such as user privacy, defamation, pricing, advertising, taxation,
gambling, sweepstakes, promotions, content regulation, quality of products and
services, and intellectual property ownership and infringement can be unclear.
In addition, we will also be subject to new laws and regulations directly
applicable to our internet lottery activities. Any existing or new legislation
applicable to eLOT could expose us to substantial liability, including
significant expenses necessary to comply with such laws and regulations, and
dampen the growth in use of the Web.
Other nations, including Germany, have taken actions to restrict the free
flow of material deemed to be objectionable on the Web. The European Union has
recently adopted privacy and copyright directives that may impose additional
burdens and costs on our international operations. In addition, several
telecommunications carriers, including America's Carriers' Telecommunications
Association, are seeking to have telecommunications over the Web regulated by
the FCC in the same manner as other telecommunications services. Many areas with
high Web use have begun to experience interruptions in phone service, and local
telephone carriers, such as Pacific Bell, have petitioned the FCC to regulate
ISPs and OSPs and to impose access fees. A number of proposals have been made at
the federal, state and local level that would impose additional taxes on the
sale of goods and services through the Internet. If any such proposals are
adopted, they could impair the growth of the Internet and adversely affect our
company.
To be successful in the continually evolving market for online services, we must
continue to enhance our products and develop new ones.
To remain competitive, we must continue to enhance and improve the
functionality, features, and content of our eLotteryFreeWay.com site, as well as
future online products. We may not be able to successfully maintain competitive
user response times or implement new features and functions, which will involve
the development of increasingly complex technologies. If we fail to effectively
develop and introduce new products, or those products fail to achieve market
acceptance, our business, results of operations, and financial condition could
be adversely affected.
Our efforts to establish, maintain and strengthen our brands will require
significant expenditures and may not be successful.
If the marketplace does not associate the eLottery or eLotteryFreeWay.com
brands with high quality Internet-based gaming entertainment, it may be more
difficult for us to attract new customers or introduce future products and
services. The market for our services is new. Therefore, our failure to
establish brand recognition at this stage could harm our ability to compete in
the future with other companies that successfully establish a brand name for
their services. We must succeed in our marketing efforts, provide high quality
services and increase our user base in order to build our brand awareness and
differentiate our products from those of our competitors. These
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efforts have required significant expenditures to date. Moreover, we believe
that these efforts will require substantial commitments of resources in the
future as our brands become increasingly important to our overall strategy and
as the market for our services grows.
We may encounter system failure.
The ability of our customers to use our services depends on the efficient
and uninterrupted operation of the computer and communications hardware and the
software and Internet network systems that we maintain. Although our ability to
manage the effects of system failures which occur in computer hardware, software
and network systems is limited, the occurrences of these failures could harm our
reputation, business and prospects. The Internet has experienced a variety of
outages and other delays as a result of damage to portions of its
infrastructure, and the Internet could face similar outages and delays in the
future.
Our computer systems and operations may be vulnerable to security breaches.
Our success depends on the confidence of customers in our ability to
securely transmit confidential information over the Internet. Our business plan
envisions substantial transfer of financial and personal confidential
information. Any failure to provide secure online services could harm our
business and reputation. Our products rely on encryption and authentication
technology licensed from third parties to provide the security and
authentication necessary to achieve secure transmission of confidential
information. Despite the focus on Internet security, we may not be able to stop
unauthorized attempts to gain access to or disrupt the transmission of
communications by customers or their end-users. Advances in computer
capabilities, new discoveries in the field of cryptography, or other events or
developments could result in a compromise or breach of the algorithms used by
our products to protect data contained in customer databases and the information
being transferred.
Although we generally limit warranties and liabilities relating to security
in customer contracts, customers may seek to hold us liable for any losses
suffered as a result of unauthorized access to communications. We may not have
adequate insurance to cover these losses. We may be required to expend
significant capital and other resources to protect against these security
breaches or to alleviate the problems caused. Moreover, concerns over the
security of transactions conducted on the Internet and commercial online
services, which may be heightened by any well-publicized compromise of security,
may also deter future customers from using our products. Our security measures
may not be sufficient to prevent security breaches, and failure to prevent
security breaches could harm our reputation, business and prospects.
Our computer systems and operations may be vulnerable to viruses and other
disruptions.
Despite the implementation of security measures by customers and other
third parties, customers' servers or systems may be vulnerable to computer
viruses, physical or electronic break-ins and similar disruptions. We may not be
able to prevent any or all of these disruptions, and failure to do so could
limit use of our products, cause customers to incur substantial expenses, and
otherwise harm our customers. Specifically, computer viruses, break-ins and
other disruptions could lead to interruptions, delays, loss of data or the
inability to accept and confirm the receipt of information. Anyone who is able
to circumvent security measures could misappropriate confidential customer or
proprietary company information or cause interruptions in the operations of the
company and our eLotteryFreeWay.com website and harm our customers. This could
occur through the introduction of known or undetected errors, or bugs, viruses
or by other means. In addition to purposeful security breaches, the inadvertent
transmission of computer viruses could expose us to litigation and a significant
loss of revenue.
Because we utilize the Internet to deliver our products, if use of the
Internet does not increase, the level of use of our products will suffer.
If the Internet and other products and services necessary for the
utilization of our technologies are not sufficiently developed, fewer customers
will use our website and related technologies and our business will be harmed.
In particular, the success of our products and services will depend on the
development and maintenance of adequate Internet infrastructure, such as a
reliable network backbone with the necessary speed, data capacity and other
features demanded by users. Moreover, our success will also depend on the timely
development of complementary products or services such as high speed modems for
providing reliable Internet access and services
-8-
<PAGE>
and this may not occur. Because the online exchange of information is new and
evolving, the Internet may not prove to be a viable platform for secure online
services in the long term. The Internet has experienced, and is expected to
continue to experience, significant growth in the numbers of users and amount of
traffic. As the Internet continues to experience increased numbers of users and
frequency of use, or if its users require increasingly more resources, the
Internet infrastructure may not be able to support the demands placed on it. As
a result, the performance or reliability of the Internet may be harmed. This in
turn could decrease the level of Internet usage and also the level of
utilization of our products and services.
We will continue to expand into international markets in which we have limited
experience.
A key part of our strategy is to develop our online lottery technologies in
international markets. To date, we have only contracts to develop and operate,
through joint ventures and related arrangements, lottery systems in the United
Kingdom and Jamaica and no actual operating experience in any foreign markets.
We or our partners may not be able to successfully market and operate our
products and services in foreign markets.
To date, eLOT has only limited or no experience in developing localized
versions of its products and marketing and operating its products and services
internationally. We rely on the efforts and abilities of our foreign business
partners and marketing experts in such activities. We also believe that in light
of substantial anticipated competition, we will need to move quickly into
international markets in order to effectively obtain market share. For example,
in a number of international markets, we face substantial competition from more
traditional lottery providers such as GTECH Holdings, Inc., Scientific Games,
Inc. and Creative Games International, which have a dominant market share in
their territories and that offer or may offer their own new lottery products. We
expect to continue to experience higher costs as a percentage of revenues in
connection with international online ventures. International markets we have
selected may not develop at a rate that supports our level of investment. In
particular, international markets may be slower in adoption of the Internet as
an advertising and commercial medium.
In addition to uncertainty about our ability to continue to generate
revenues from foreign operations and expand our international presence, there
are certain risks inherent in doing business on an international level,
including:
. unexpected changes in regulatory requirements;
. trade barriers;
. difficulties in staffing and managing foreign operations including, as a
result of distance, language and cultural differences;
. longer payment cycles;
. currency exchange rate fluctuations;
. problems in collecting accounts receivable;
. political instability;
. export restrictions;
. seasonal reductions in business activity; and
. potentially adverse tax consequences.
One or more of these factors could have a material adverse effect on the
company's future international operations and, consequently, on our business,
operating results, and financial condition.
-9-
<PAGE>
Any claim of infringement by third parties could be costly to defend.
Intellectual property claims can be time consuming to defend, result in
costly litigation, divert management's attention and resources and cause delays
in the provision of our services. These claims could require us to enter into
royalty or license agreements. A successful claim of product infringement
against the company could harm our business and prospects. Although we believe
many of our products are proprietary, we could face a claim of infringement by
third parties with respect to our current or future products or services. In
addition, we may increasingly become subject to claims of intellectual property
infringement by third parties as the number of competitors grows and the
functionality of products and services increasingly overlap. Because we are in a
new and evolving market, customers may demand features that could increase the
likelihood of infringement claims.
We may be unable to recruit or retain qualified personnel, which could harm our
business and product development.
We are dependent upon the ability and experience of our executive officers
and other employees. Although we currently have oral agreements as to the terms
of employment with several of our executive officers, we do not yet have written
contracts in place and do not maintain key man life insurance on the lives of
such executive officers.
We also must continue to identify, recruit, hire, train, retain and
motivate highly skilled sales, technical, managerial, marketing and customer
service personnel. Particularly in the Internet industry, competition for these
personnel is intense, and we may be unable to successfully recruit, assimilate
or retain sufficiently qualified personnel. In particular, we may encounter
difficulties in recruiting a sufficient number of sales personnel and qualified
software developers, and may not be able to retain these sales personnel and
developers, which could harm relationships with our existing and future
customers at a critical stage of development. The failure to recruit and retain
necessary sales, technical, managerial, marketing and customer service personnel
could harm our business and our ability to obtain new customers and develop new
products.
There is no assurance that we will consummate the merger with Virtual Gaming
Technologies, Inc.
Although we have entered into a letter of intent with Virtual Gaming
Technologies, Inc. with respect to a merger between the two companies, we have
not completed due diligence or entered into a definitive agreement. In the event
that we enter into a definitive merger agreement, the agreement will be subject
to customary closing conditions and there is no assurance that the merger will
be consummated.
INVESTMENT RISKS
Our stock price has historically been volatile, which may make it more difficult
for you to resell shares when you want at prices you find attractive.
The trading price of eLOT common stock has been and may continue to be
subject to wide fluctuations. During 1999, the closing sale prices of our common
stock on the Nasdaq Stock Market ranged from $1.60 to $10.38. The stock price
may fluctuate in response to a number of events and factors, such as quarterly
variations in operating results, announcements of technological innovations or
new products by eLOT or its competitors, changes in financial estimates and
recommendations by securities analysts, the operating and stock price
performance of other companies that investors may deem comparable, and news
reports relating to trends in our markets. In addition, the stock market in
general, and the market prices for Internet-related companies in particular,
have experienced extreme volatility that often has been unrelated to the
operating performance of such companies. These broad market and industry
fluctuations may adversely affect the price of our stock, regardless of our
operating performance.
-10-
<PAGE>
We do not anticipate paying any cash dividends in the foreseeable future.
We currently intend to retain our future earnings, if any, to fund the
development and growth of our businesses and, therefore, we do not anticipate
paying any cash dividends in the foreseeable future.
Certain provisions of Virginia law, our Articles of Incorporation and Bylaws
make a takeover by a third party difficult.
Certain provisions of Virginia law and our Articles of Incorporation and
our Bylaws could have the effect of making it more difficult for a third party
to acquire, or of discouraging a third party from attempting to acquire, control
of us, which could limit the price investors might be willing to pay in the
future for our common stock. These provisions include:
. a provision allowing us to issue preferred stock with rights senior to
those of the common stock without any further vote or action by the
holders of the common stock. The issuance of preferred stock could
decrease the amount of earnings and assets available for distribution to
the holders of common stock or could adversely affect the rights and
powers, including voting rights, of the holders of the common stock. In
certain circumstances, such issuance could have the effect of decreasing
the market price of the common stock;
. the Bylaws' requirement that shareholders provide advance notice when
nominating our directors;
. provisions of our Articles of Incorporation which eliminate or limit the
liability of directors and officers in the performance of their duties;
and
. the application of Virginia law prohibiting us from entering into a
business combination with the beneficial owner of 10% or more of our
outstanding voting stock for a period of three years after the 10% or
greater owner first reached that level of stock ownership, unless
certain criteria are met.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares by the
selling shareholders, but we have agreed to bear certain expenses of
registration of the shares under federal and state securities laws.
SELLING SHAREHOLDERS
The following table provides the names of and the number of shares of
common stock beneficially owned by each selling shareholder, and the number of
shares of common stock beneficially owned by each selling shareholder upon
completion of the offering or offerings pursuant to this Prospectus, assuming
each selling shareholder offers and sells all of its or his/her respective
selling shareholder. Selling shareholders, however, may offer and sell all, some
or none of their shares. The respective donees, pledgees and transferees or
other successors in interest of the selling shareholders also may sell the
shares listed below as being held by the selling shareholders. No selling
shareholder will beneficially own one percent or greater of eLOT's outstanding
common stock upon the sale of their shares offered hereby.
<TABLE>
<CAPTION>
Beneficial
Beneficial Percentage Number Ownership
Ownership Prior to the of Shares After the
Prior to Offering Offering (1) Offered Offering
<S> <C> <C> <C> <C>
Twelve Oaks Liquidating Trust 254,686 * 254,686 -0
(2)
</TABLE>
-11-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
VerticalForce.com, Inc. 166,668(3) * 166,668 0
</TABLE>
(1) Percentage of 63,946,867 shares of common stock, based on shares
outstanding as of February 29, 2000.
(2) The 254,686 shares are held by Mr. Philip Gunn as trustee of Twelve Oaks
Liquidating Trust. Mr. Gunn has served on the Board of Directors since May
1999 and has served as the Interim Chief Executive Officer of eLOT's
subsidiary, eLottery, Inc., since January 11, 2000. Mr. Gunn beneficially
owns 286,166 shares that may be acquired upon his exercise of options and
warrants within the next sixty days.
(3) To be issued upon exercise of warrants to be granted to VerticalForce.com,
Inc. upon the attainment of certain performance goals.
PLAN OF DISTRIBUTION
This Prospectus relates to the offer and sale from time to time by the
holders of up to 421,354 shares of our common stock. This Prospectus has been
prepared in connection with registering the shares to allow for sales of shares
by the applicable selling shareholders to the public, but registration of such
shares does not necessarily mean that any of such shares will be offered and
sold by the holders thereof.
We will not receive any proceeds from the offering by the selling
shareholders. The shares may be sold from time to time to purchasers directly by
any of the selling shareholders, or donees, pledgees, transferees or other
successors in interest thereof. Alternatively, the selling shareholders, or
transferees thereof, may from time to time offer the shares through dealers or
agents. These dealers or agents may receive compensation in the form of
commissions from the selling shareholders, or transferees thereof, and/or the
purchasers of shares for whom they may act as agent. The selling shareholders,
or transferees thereof, and any dealers or agents that participate in the
distribution of shares may be deemed to be "underwriters" within the meaning of
the Securities Act of 1933. Any profit on the sale of shares by them and any
commissions received by any such dealers or agents might be deemed to be
underwriting commissions under the Securities Act of 1933.
At the time a particular offer of shares is made, a prospectus supplement,
if required, will be distributed that will set forth the name and names of any
dealers or agents and any commissions and other terms constituting compensation
from the selling shareholders, or transferees thereof, and any other required
information. The shares may be sold from time to time at varying prices
determined at the time of sale or at negotiated prices.
In order to comply with the securities laws of certain states, if
applicable, the shares may be sold only through registered or licensed brokers
or dealers. In addition, in certain states, the shares may not be sold unless
they have been registered or qualified for sale in such state or an exemption
from such registration or qualification requirement is available and is complied
with.
The shares may also be sold in one or more of the following transactions:
. block transactions, which may involve crosses, in which a broker-dealer
may sell all or a portion of such stock as agent but may position and
resell all or a portion of the block as principal to facilitate the
transaction;
. purchases by any such broker-dealer as principal and resale by such
broker-dealer for its own account pursuant to a prospectus supplement;
. ordinary brokerage transactions and transactions in which any such
broker-dealer solicits purchasers;
. sales "at the market" to or through a market maker or into an existing
trading market, on an exchange or otherwise, for such shares; and
-12-
<PAGE>
. sales in other ways not involving market makers or established trading
markets, including direct sales to purchasers.
In effecting sales, broker-dealers engaged by the selling shareholders may
arrange for other broker-dealers to participate.
EXPERTS
The financial statements and schedule incorporated by reference in this
Prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included in this Prospectus in reliance
upon the authority of that firm as experts in giving such reports.
No person is authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by eLOT or the selling shareholders.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the registered securities to which it
relates or an offer to sell or a solicitation of an offer to buy such securities
in any jurisdiction and to any person to whom it is unlawful to make such an
offer or solicitation in such jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder, under any circumstances, shall create
any implication that there has been no change in the affairs of eLOT since the
date hereof, or that the information herein is correct as of any time subsequent
to its date.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered pursuant
to this Prospectus will be passed upon for eLOT by Barbara C. Anderson, General
Counsel of eLOT. Ms. Anderson beneficially owns 314,264 shares of eLOT
common stock.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by us under the Securities
Exchange Act of 1934 with the Securities and Exchange Commission and are
incorporated herein by reference:
a. eLOT's Annual Report on Form 10-K for the year ended December 31, 1999; and
b. The description of our common stock contained in our Registration Statement
on Form 8-A filed with the Securities and Exchange Commission on January 8,
1992.
Each document filed by us pursuant to Sections 13(a), 13(c), 14 and 15(d)
of the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering made hereby shall be deemed to be incorporated by
reference in this Prospectus and to be part hereof from the date of filing such
documents. Any statement contained herein or 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 (or in the applicable Prospectus supplement) or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies 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.
Copies of all documents that are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner, to whom this
Prospectus is delivered upon written or oral request. Requests should be
directed to the Barbara C. Anderson, Esq., Senior Vice President, Law and
Administration, and Secretary, eLOT, Inc., 301 Merritt 7, Norwalk, Connecticut
06851.
-13-
<PAGE>
WHERE YOU MAY FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, and accordingly we file reports, proxy statements and other
information with the Securities and Exchange Commission. Such reports, proxy
statements and other information filed can be inspected and copied at the
Commission's Public Reference Section, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the following regional offices of the Commission: Seven World
Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a
web site (http://www.sec.gov) containing reports, proxy and information
statements and other information of registrants, including us, that file
electronically with the Commission. In addition, our common stock is listed on
the Nasdaq National Market and similar information concerning eLOT can be
inspected and copied at the offices of the National Association of Securities
Dealers, Inc., 9513 Key West Avenue, Rockville, Maryland 20850.
We have filed with the Commission a registration statement on Form S-3 (of
which this Prospectus is a part) under the Securities Act of 1933 with respect
to the shares offered by this Prospectus. This Prospectus does not contain all
of the information set forth in the registration statement, certain portions of
which have been omitted as permitted by the rules and regulations of the
Commission. Statements contained in this Prospectus as to the contents of any
contract or other documents are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the registration statement, each such statement being qualified in
all respects by such reference and the exhibits and schedules thereto. For
further information regarding us and the shares offered by this Prospectus,
reference is hereby made to the registration statement and such exhibits and
schedules that may be obtained from the Commission at its principal office in
Washington, D.C. upon payment of the fees prescribed by the Commission.
No person has been authorized to give any information or to make any
representations not contained or incorporated by reference in this Prospectus in
connection with the offer described in this Prospectus and, if given or made,
such information and representations must not be relied upon as having been
authorized by us or the selling stockholders. Neither the delivery of this
Prospectus nor any sale made under this Prospectus shall under any circumstances
create any implication that there has been no change in our affairs since the
date of this Prospectus or since the date of any documents incorporated into
this Prospectus by reference. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any securities other than the
securities to which it relates, or an offer or solicitation in any state to any
person to whom it is unlawful to make such offer in such state.
-14-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other expenses of Issuance and Distribution
The following table sets forth the estimated fees and expenses payable by
eLOT in connection with the issuance and distribution of the common stock
registered hereby. All of such fees and expenses are estimates, except the
Securities Act registration fee.
<TABLE>
<CAPTION>
<S> <C>
Securities Act Registration Fee $ 505
Printing and duplicating fees $ 2,000
Legal fees and expenses $ 9,000
Accounting fees and other advisory services $ 1,000
Miscellaneous expenses $ 495
----------
*Total $13,000
----------
</TABLE>
*None of the expenses listed above will be borne by the selling shareholders.
Item 15. Indemnification Of Directors And Officers
Article 10 of the Virginia Stock Corporation Act and eLOT's Articles of
Incorporation provide for indemnification of officers and directors of eLOT
under certain circumstances. No director or officer of eLOT shall be liable to
eLOT or its shareholders for monetary damages in respect of proceedings brought
by or on behalf of eLOT or its shareholders, unless such person engaged in
willful misconduct or a knowing violation of the criminal law or any federal or
state securities law. eLOT shall indemnify any person who is or was a party to a
proceeding unless the person engaged in willful misconduct or a knowing
violation of criminal law.
Insurance carried by eLOT provides (within limits and subject to certain
exclusions) for reimbursement of amounts that (a) eLOT may be required or
permitted to pay as indemnities to eLOT's directors or officers for claims made
against them, and (b) individual directors, officers and certain employees of
eLOT may become legally obligated to pay as the result of acts committed by them
while acting in their corporate or fiduciary capacities.
Item 16. Exhibits
5.1 - Opinion of Barbara C. Anderson, General Counsel
23.1 - Consent of Arthur Andersen LLP
23.2 - Consent of Barbara C. Anderson, General Counsel
(included in Exhibit 5.1)
24.1 - Power of Attorney (included on signature page hereto)
Item 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 this registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any
-15-
<PAGE>
deviation from the low or high and of the estimated maximum
offering price may be reflected in the form of Prospectus
filed with the Commission pursuant to Rule 424(b) if, in the
aggregate changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this registration
statement or any material change to such information in this
registration statement; provided, however, that subparagraphs
(i) and (ii) do not apply if the information required to be
included in a post-effective amendment by those paragraphs is
contained in the periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in
this 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 herein, 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 these securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby further undertakes that, for the purposes
of determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual reports pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 (and, when 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 to this
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.
The undersigned Registrant hereby further undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of Prospectus filed as part of this
registration statement in reliance under Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4), or 497(h)
under the Securities Act of 1933 shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of Prospectus 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.
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 provisions described under Item 15 of this
registration statement, or otherwise (other than insurance), the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Act 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 such Act and will be governed by the final adjudication
of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, eLOT certifies
that it 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, in the City
of Norwalk, State of Connecticut on April 5, 2000.
eLOT, Inc.
By: /s/ Stanley J. Kabala
___________________________
Stanley J. Kabala
President and Chief Executive Officer
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Stanley J, Kabala, Barbara
C. Anderson and Robert C. Daum as his/her true and lawful attorneys-in-fact and
agents, jointly and severally, with full power of substitution and
resubstitution, for and in his/her stead, in any and all capacities, to sign on
his/her behalf the Registration Statement on Form S-3 in connection with the
sale by the selling shareholders included in the Prospectus of shares of common
stock of eLOT, Inc., and to execute any amendments thereto (including all post-
effective amendments thereto) or certificates that may be required in connection
with this Registration Statement, and to file the same, with all exhibits
thereto, and all other documents in connection therewith, with the Securities
and Exchange Commission and granting unto said attorneys-in-fact and agents,
jointly and severally, the full power and authority to do and perform each and
every act and thing necessary or advisable to all intents and purposes as he/she
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, jointly and severally, or his/her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Stanley J. Kabala
____________________________________ Chairman, President and Chief Executive April 5, 2000
Stanley J. Kabala Officer (Principal Executive Officer)
/s/ Edward W. Stone, Jr.
____________________________________ Senior Vice President and Chief Financial April 5, 2000
Edward W. Stone, Jr. Officer (Principal Financial and Accounting
Officer)
/s/ Richard J. Fernandes
____________________________________ Director April 5, 2000
Richard J. Fernandes
/s/ Philip Gunn
____________________________________ Director April 5, 2000
Philip Gunn
____________________________________ Director April 5, 2000
John P. Hectus
/s/ Jerry M. Seslowe
____________________________________ Director April 5, 2000
Jerry M. Seslowe
</TABLE>
II-1
<PAGE>
File No.: 35636.1
April 5, 2000
eLOT, Inc.
301 Merritt 7
Corporate Park, 1st Floor
Norwalk, Connecticut 06851
eLOT, Inc. Registration Statement on Form S-3
Ladies and Gentlemen:
I have acted as counsel to eLOT, Inc. (the "Company") in connection with
the Registration Statement (the "Registration Statement") on Form S-3 being
filed under the Securities Act of 1933, as amended ("the Act"), on or about the
date of this letter to register the resale of 421,354 shares of common stock,
$.01 par value per share (the "Shares"), of the Company, which from time to time
may be offered and sold by certain selling shareholders listed in the
Registration Statement.
I am familiar with the Registration Statement and the Exhibits thereto. I
have examined, originals or copies, certified and otherwise identified to my
satisfaction, of such corporate documents and records of the Company and
certificates and verbal advice of public officials as I have deemed necessary to
enable me to express this opinion. In rendering this opinion, I have assumed (i)
the genuineness of all signatures, (ii) the authenticity of all documents
submitted to me as originals and (iii) the conformity to authentic original
documents of all documents submitted to me as certified, conformed or
photostatic copies.
Based upon and subject to the foregoing, I am of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the Commonwealth of Virginia.
2. The sale of the Shares pursuant to the Registration Statement has been
duly authorized and, when offered and sold as described in the Registration
Statement, will be legally issued, fully paid and non-assessable.
<PAGE>
I hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement.
Very truly yours,
/s/ Barbara C. Anderson
Barbara C. Anderson
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated February 4, 2000
included in eLot, Inc.'s Form 10-K for the year ended December 31, 1999 and to
all references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
Stamford, Connecticut
April 7, 2000
