UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1996
Commission file Number 33-7764-C
INTERACTIVE GAMING & COMMUNICATIONS CORP.
(Exact name of registrant as specified in its charter.)
Delaware 23-2838676
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
595 Skippack Pike, Suite 300, Blue Bell, PA 00000
(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code:
(215) 540-8185
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by section
13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [ ] No [X]
As of August 5, 1996, there were 10,942,566 shares
of the Registrant's common stock, par value $0.001 per
share, issued and outstanding.
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INTERACTIVE GAMING & COMMUNICATIONS CORP.
(FORMERLY, SPORTS INTERNATIONAL, LTD.)
CONSOLIDATED BALANCE SHEET
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996
AND YEAR ENDED DECEMBER 31, 1995
<CAPTION>
1996 1995
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 121,076 $667,766
Restricted cash 200,000 200,000
Accounts receivable, net
of allowance for doubtful
accounts of $ 424,047 in
1996 and $348,794 in 1995 424,047 348,794
Loan receivable 55,378 49,000
Other 10,300 10,300
Total current assets 810,801 1,275,860
PROPERTY, EQUIPMENT, AND
LEASEHOLD IMPROVEMENTS, Net 260,269 205,391
LOAN RECEIVABLE, INTERSPHERE 137,267 138,788
INTANGIBLE ASSETS:
Systems development costs 400,196 233,641
Gaming licenses, net of
accumulated amortization
of $3,000 57,000 60,000
Total intangible assets 457,196 293,641
OTHER ASSETS 18,648 18,206
Total 1,684,181 $1,931,886
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<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Customers' credit balances 649,076 $ 877,624
Customers' security deposits 196,475 156,500
Accounts payable and accrued expenses 287,601 393,836
Note paya ble 200,000 200,000
Shareholders' loans payable - -
Total current liabilities 1,333,152 1,627,960
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value,
25,000,000 shares authorized,
10,942,566 issued and outstanding 10,943 10,942
Additional paid-in capital 335,252 335,252
Deficit 4,834 (42,268)
Total stockholders' equity 351,029 303,926
Total 1,684,181 $1,931,886
<FN>
See Accompanying Notes to Financial Statements
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INTERACTIVE GAMING & COMMUNICATIONS CORP.
(FORMERLY, SPORTS INTERNATIONAL, LTD.)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIODS ENDED JUNE 30, 1996 AND 1995
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
1996 1995 1996 1995
(UNAUDITED) (UNAUDITED)
__________________________ ________________________
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REVENUES:
Net win $ 614,206 $ 111,816 $1,474,835 $ 545,619
Membership fees 4,525 1,050 10,100 1,050
Other 7,935 239 15,561 1,982
Total revenues 626,666 113,105 1,500,496 548,651
EXPENSES:
Salaries 155,380 101,020 276,326 252,236
Officers' salaries 63,691 22,307 116,575 97,105
Telephone 126,074 37,427 174,689 167,376
Legal and
professional 70,331 39,968 196,761 107,575
Advertising 140,199 58,328 250,432 95,151
Provision for
doubtful accounts 14,945 - 75,253
Travel and related
expenses 40,126 15,324 90,455 81,006
Rent 53,845 32,561 107,506 103,710
Office 26,601 16,902 60,577 32,318
Depreciation and
Amortization 19,108 11,908 36,132 23,118
Repairs and
maintenance 2,765 2,012 9,913 3,397
Services and other
fees 19 13,049 9,947 33,446
Interest 1,244 6,756
Other 27,579 7,019 42,071 13,234
Total expenses 741,909 357,825 1,453,393 1,009,672
Net income (loss) $(115,243) $(244,720) $ 47,103 $(461,021)
Net income (loss)
per common share $ (0.01) $ (0.02) $ 0.004 $ (0.04)
Weighted average
common shares
outstanding 10,942,566 10,379,066 10,942,566 10,379,066
<FN>
See Accompanying Notes to Financial Statements
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INTERACTIVE GAMING & COMMUNICATIONS CORP.
(FORMERLY, SPORTS INTERNATIONAL, LTD.)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<CAPTION>
JUNE JUNE
1996 1995
(UNAUDITED)
__________ __________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 47,103 $(461,021)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and Amortization 36,132 23,118
Provision for doubtful accounts 75,253 -
(Increase) decrease in assets:
Accounts receivable (150,506) (9,081)
Prepaid expenses (10,000)
Increase (decrease) in
liabilities:
Customers' credit balances (228,548) 145,670
Customers' security deposits 39,975 10,000
Accounts payable and accrued
expenses (106,235) (31,739)
Net cash used in operating
activities (286,826) (333,053)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, equipment,
and leasehold improvements (88,010) (32,036)
Increase in loans receivable (4,857) (59,738)
Increase in security deposits (442)
Refunded security deposits 2,100
Capitalization of systems
development costs (166,555) -
Net cash used in investing
activities (259,864) (89,674)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable -
Repayment of note payable (6,000)
Net cash provided by (used in)
financing activities - (6,000)
DECREASE IN CASH AND CASH EQUIVALENTS (546,690) (428,727)
CASH AND CASH EQUIVALENTS, BEGINNING 667,766 450,793
CASH AND CASH EQUIVALENTS, ENDING $ 121,076 $22,066
<FN>
See Accompanying Notes to Financial Statements
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INTERACTIVE GAMING & COMMUNICATIONS CORP.
(FORMERLY, SPORTS INTERNATIONAL, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
Note 1. NAME CHANGE AND INTERIM FINANCIAL STATEMENTS
Sports International, Ltd. changed its name to
Interactive Gaming and Communications Corp. effective on
March 27, 1996. The name change is in response to the
Company's expanding and diversified gaming operations and
will more accurately reflect the Company's future operating
activities.
The consolidated balance sheet for the period ended
June 30, 1996 and the related consolidated statement of
operations and statement of cash flows reflect all normal
and recurring adjustments that are, in the opinion of
management, necessary for a fair presentation of the results
for the interim period. The results of operations for the six
month period ended June 30, 1996 are not necessarily
indicative of the operating results for the full year.
Certain information and footnote disclosures normally
included in the financial statements prepared in accordance
with generally accepted accounting principles have been
condensed or omitted. It is suggested that the accompanying
consolidated financial statements be read in conjunction
with the financial statements and notes in the Company's
annual report on form 10-K for the year ended December 31, 1995.
Note 2. RECLASSIFICATION:
Certain amounts in the 1995 financial statements have
been reclassified to conform with the current year presentation.
Note 3. PRIOR PERIOD ADJUSTMENT:
In 1993, the Company capitalized certain organization
costs which totaled $374,667 during its development stage and
prior to the commencement of operations of Sports International,
Ltd. ( Antigua). In 1995, the Company determined that these
costs should have been expensed, in accordance with generally
accepted accounting principles. The prior period adjustment to
properly reflect such costs as expenses of development stage,
resulted in an increase in net income of $18,675 and $37,350 for
the three and six month periods ended June 30, 1995,
respectively.
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Notes to Financial Statements (Continued)
Note 4. BASIS OF PRESENTATION, REGULATION AND CERTAIN
SIGNIFICANT RISKS AND UNCERTAINTIES:
The Company's financial statements have been presented
on the basis that it is a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business.
The Company's business activities, operations and net
income are derived solely from the business acquired by the
Company from its Sports International, Ltd. (Antigua) subsidiary.
Although the business has been profitable during the six month
period ended June 30, 1996 and for the year ended December 31,
1995, there is no assurance that profits will continue or increase.
The amount of customer's credit balance and security
deposits exceed its unrestricted cash and cash equivalents by
$764,474 and $366,358 at June 30, 1996 and December 31, 1995,
respectively.
The Company's business is conducted through its wholly
owned subsidiary which is organized in Antigua and licensed by
the Antiguan government to conduct its business. The subsidiary's
business activities emanating from outside Antigua (customers'
wagers) may become materially affected by regulations, laws or
statutes that may be promulgated by the various
foreign, federal, state and/or local governments or their
respective agencies in the future or the enforcement of such
laws or regulations. To date, the Company has conducted its
business without any interference from the aforementioned
regulatory bodies. There are no assurances that this will
continue.
Management's plans in connection with these matters are
to continue to refine its operations, expand sources of revenues,
control expenses, evaluate alternative methods to conduct its
business, and seek available and attractive sources of debt or
equity financing through a combination of a private placement, a
secondary offering, joint venturing and sharing of development
costs, or other resources.
<PAGE>
Notes to Financial Statements (Continued)
Note 5. PROPERTY, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS:
Property, equipment and leasehold improvements consist of the
following at June 30, 1996 and December 31, 1995:
1996 1995
Furniture, fixtures and equipment $358,787 $270,777
Leasehold improvements 12,307 12,307
371,094 283,084
Less accumulated depreciation 110,825 77,693
Total $260,269 205,391
Note 6. LOAN RECEIVABLE, INTERSPHERE:
The Company advanced funds to an Internet World Wide
Web services company for the purpose of advertising, marketing,
promotion, and communications in the print and electronic media.
The carrying amount of the advanced funds reported on the balance
sheet approximates net realizable value.
Commencing March 5, 1996, funds advanced bear interest
at a minimum of 15% annually or 5% over the New York prime rate,
adjusted monthly. Principal and interest payments have been
deferred until January 1, 1997. The loan is unsecured.
Note 7. SYSTEM DEVELOPMENT COSTS:
The Company has engaged the services of major software
developers to produce and market a Virtual Casino. That is, at
completion, its customers will have the opportunity to play classic
casino games on their personal computers, such as blackjack, craps,
roulette, baccarat and slot machine games, on the Internet World
Wide Web, with the Company managing the wagering.
<PAGE>
Notes to Financial Statements (Continued)
After the economic and technical feasibility of the
project had been established, the Company began funding the
project. Costs incurred subsequent to the establishment of
technology feasibility and directly related to the project
have been capitalized. Capitalized project costs were $400,196
and $233,641 at June 30, 1996 and December 31, 1995. At
June 30, 1996, the project is on-going. Accordingly no
amortization expense has been recognized.
8. INCOME TAXES
The Company derives all its revenue from its wholly owned
subsidiary, Sports International, Ltd. (Antigua). The government
of Antigua does not presently impose income taxes on the Company.
Accordingly, no provision for income taxes has been reflected in
the financial statements.
9. SUBSEQUENT EVENTS:
At the Annual Meeting of Shareholders, on June 21, 1996
the shareholders: (a) elected four directors, Michael Simone,
Rina Moscariello, Larry Hirsh and Joe Lashinger to serve until
the next Annual Meeting or until their successors are elected;
(b) motion to ratify the appointment of Parente, Randolph, Carry
& Associates as the new auditing firm of the company; (c)
ratification of name, from Sports International, Ltd. to
Interactive Gaming & Communications Corp.
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INTERACTIVE GAMING & COMMUNICATIONS CORP.
(FORMERLY, SPORTS INTERNATIONAL, LTD.)
MANAGEMENTS DISCUSSION and ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
June 30, 1996
General
The proliferation of gambling continues throughout the
United States and international jurisdictions. What was not
socially acceptable sixty years ago is now considered
entertainment, a leisure time activity, and is embraced by
legislators for the easy-to-collect tax dollar. Gaming has
expanded from land-based casinos to riverboat casinos, from
lotteries to simulcast telephone betting on national
horseracing, from charity bingo and "Nevada Nights" to Indian
Reservation casinos, and from the paper slip of the bookmaker
to a telephone call to Antigua, West Indies. The natural
progression for this excitement has led personal computer users
to gaming on the Internet. A recent survey found that more than
$550.3 billion was wagered on all forms of legal games in the
United States.
Throughout 1996, wagering on the Internet has gained
increased media attention and exposure. In 1995, there were a
handful of gaming related sites on the Internet. Today there are
hundreds. The target for each is to reach for a small segment of
the $550.3 billion industry. The Company has paved the way from
the beginning by being the first ever to accept a wager over the
Internet in early 1995. The trend continues today as the Company
continues to be on the leading edge of development in the
Internet gaming area.
The Company, in the second quarter of 1996, introduced
the WiseGuy Sports Wagering System for beta testing by the public
on the Internet. The WiseGuy Sports Wagering System is a PC
based, Internet ready, sports-book wagering, management and
accounting software system.
The system will for a licensing fee be made available to
all legal domestic and off-shore sports wagering companies and
will provide full sports-book wager tracking, account management,
accounting, and Internet access using the World Wide Web. Access
to the sports-book system is accomplished by utilizing any of the
popular Web-Browsers such as Netscape, Prodigy, Compuserve or
America OnLine.
Currently, the Wiseguy Sports Wagering System can be
accessed at the corporate World Wide Web site located in Antigua:
http://www.gamblenet.com/.
As of June 30, 1996, the WiseGuy System had more than
two thousand registered people participating in a weekly contest.
This beta test generated nearly $5 million in handle, but the
weekly contest did not involve actual wagers.
<PAGE>
The Company has engaged leading consultants in the
gaming and software development industry, to develop a
proprietary product that will be marketed to other sports
betting, casino and enterprising operations throughout the
world. With this in mind, the Company has begun to market
its expertise to other enterprises in the gaming industry
by offering management and consulting services in developing
the Internet marketplace for wagering.
Liquidity and Capital Resources
The Company has reached an agreement with Daleen
Technologies, Inc. for the completion of customized gaming
software. The total cost for this software will approximate
$733,000 of which approximately $225,000 has been funded to
date and the balance will be funded by issuing 204,000
restricted shares under Rule 144 upon the signing of the
Daleen agreement and 50,000 restricted shares under Rule 144
upon delivery and acceptance of the software.
In addition, the Company has entered into an agreement
with CyberAd, an affiliate of Cambridge Technology Enterprises,
for both platform and software development involving slot machines
and a blackjack program designed to reach the Internet sometime
in the Fall of 1996. It is estimated that there will be a project
cost of approximately $750,000 through to completion and delivery.
The principals of the software development company have further
agreed to purchase 375,000 shares of Rule 144 stock from the
Company at a price of $2 per share.
The Company has a number of proposals out to competitors
that have approached the Company for both licensing and
sub-licensing of the Virtual Casino software and the existing
WiseGuy Sports-book software program currently in use.
Results of Operations
1996 versus 1995
For the quarter ended June 30, 1996 and 1995, customer
wagers totalled $12,032,243 in 1996 as compared to $8,239,919 in
1995. Revenues increased by $502,390 in 1996 or 449% from $111,816
in 1995 to $614,206 in 1996. Customer wagers increased in 1996 by
$3,792,324 as compared to 1995. The net win increased from 1.3% of
wagers in 1995 to 5.1% in 1996. The resulting increase in revenues
was attributable to more efficient management procedures and
increased customer base. Historically, the second quarter in the
sports wagering industry is the slowest and least profitable of any
other quarters. Accordingly, even though the Company experienced a
loss of $115,243 for the second quarter 1996 compared to a net loss
of $244,720 for the second quarter 1995; the Company remains to be
profitable for the six month period ended June 30, 1996.
<PAGE>
For the six month periods ended June 30, 1996 and 1995,
customer wagers totaled $24,883,481 in 1996 as compared to
$22,490,157 in 1995. Revenues from net wins increased by $951,845
in 1996 or 174% from $548,651 in 1995 to $1,500,496 in 1996.
The net win increased from 2.4% in 1995 to 6% in 1996. Once
again, this resulting increase is due to the Company's enhanced
management team and performance driven results and a wider
variety of wagering.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The 1996 Annual Meeting of Shareholders of the Company
was held June 21, 1996. At the annual meeting, management's
nominees, Michael F. Simone, Rina Moscariello and Lawrence E.
Hirsch, were elected to fill the three positions as directors
of the Company. Voting was as follows: Mr. Simone, 4,480,000
shares for; Ms. Moscariello, 4,010,000 shares for; Mr. Hirsch,
10,000 for; and no abstentions or broker non-votes. Effective
June 21, 1996, Joseph A. Lashinger, Jr., Vice President and
Assistant General Counsel of the Company, was appointed to the
Company's Board of Directors.
Item 5. Other Information.
(a) News Release - March 27, 1996
News Release supplied to Business Wire, Stock Brokers
and newspapers, announcing, (a) name change, (b) retaining of
new Independent Accountants, and (c) relocation of executive
offices.
(b) News Release - April 3, 1996
News release supplied to Business Wire, Stock Brokers,
and the Media announcing that internal beta testing of the
WiseGuy Sports Wagering System has begun on the Internet.
(c) News Release - May 1, 1996
News release supplied to Business Wire and Stock
Brokers announcing year end earnings.
(d) News Release - May 9, 1996
News release supplied to Business Wire and Stock Brokers
announcing record first quarter earnings.
(e) News Release - May 13, 1996
<PAGE>
News release supplied to Business Wire, Stock brokers,
and the Media announcing the public beta testing of the WiseGuy
Sports Wagering System and a weekly contest for registered
users.
(f) News Release - June 12, 1996
News release supplied to Business Wire and Stock
Brokers announcing the addition of two experienced casino
and gambling management members and the appointment of Joseph
Lashinger, Esquire to the Board of Directors.
Item 6. Exhibits and Reports on Form 8-K.
(a) Change of Corporate Name - March 18, 1996
The Company amended its corporate charter to change
the name of the Company to Interactive Gaming &
Communications Corp. to better reflect the Company's present
principal business activities.
(b) Relocate Executive Offices - March 18, 1996
To better administer the Company's software
development and marketing activities, for the first time
since inception of the Company's business in 1992, the
executive offices are located in the United States.
(c) Change of Independent Accountants - March 11, 1996
The Company engaged the firm of Parente, Randolph, Orlando,
Carey & Associates, 521 Plymouth Road, Plymouth Meeting, PA
19462 as its Independent Accountants and Auditors. Mr. Daniel
Liberman, CPA, the former Independent Accountant for the
Company, agreed to his termination.
<PAGE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
(FORMERLY, SPORTS INTERNATIONAL, LTD.)
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of
1934, the registrant has duly cause this report to be signed on its
behalf by the undersigned thereunto duly authorized.
INTERACTIVE GAMING & COMMUNICATION CORP.
(FORMERLY, SPORTS INTERNATIONAL, LTD.)
August 15, 1996 Michael F. Simone
Date Michael F. Simone
President
and Chief Executive Officer
August 15, 1996 Fred Michini
Date Fred Michini
Chief Financial Officer
