UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997
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.)
4070 Butler Pike, Suite 300, Plymouth Meeting, PA 19462
(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code:
(610) 941-0305
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001/par value per share
(Title of class)
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 [X] No [ ]
As of June 18, 1998, there were 13,701,290 shares of the
Registrant's common stock outstanding. The aggregate market
value of the Registrant's voting stock held by nonaffiliates of
the Registrant was approximately $517,651 computed at the closing
price for the Registrant's common stock on the NASD Bulletin
Board on June 18, 1998.
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TABLE OF CONTENTS
Page
Part I
1. Business 1
2. Properties 4
3. Legal Proceedings 4
4. Submission of Matters to a Vote of Securities Holders 5
Part II
5. Market Price for Registrants Common Equity and Related
Stockholder Matters 6
6. Selected Financial Data 8
7.Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
8. Financial Statements and Supplementary Data 13
9, Changes in and Disagreement with Accountants on
Accounting and Financial Disclosure 34
Part III
10. Directors and Executive Officers of the Registrant 34
11. Executive Compensation 37
12. Security Ownership of Certain Beneficial Owners
and Management 38
13. Certain Relationships and Related Transactions 39
Part IV
14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 40
Exhibit 27, Financial Data Schedule (For electronic Filing
Purposes Only) 41
Signatures 42
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General
History and Organization
Interactive Gaming & Communications Corp. (formerly, Sports
International, Ltd.) (the "Company") was incorporated in the state
of Delaware in June 1986 under the name of "Entertainment Tonight
Video Express Ltd." to develop a market for the home delivery of
video cassette rentals, which effort was abandoned in November 1987.
From December 1987 until August 1994, the Company did not conduct
any operations, transactions or business activities. In August
1994, the Company began negotiations to acquire Sports
International, Ltd. (Antigua) and its business from the
stockholders of Sports International, Ltd. (Antigua), and
successfully closed the transaction in October 1994, in
accordance with its Plan of Reorganization.
Plan of Reorganization
At the Special Meeting of Shareholders held on September 9, 1994,
the shareholders of the Company approved a Plan of Reorganization
which required; (1) the reverse split of one (1) for four (4)
shares of the common stock of the Company; (2) the acquisition of
Sports International, Ltd. (Antigua) by the exchange of Stock and
Notes; (3) the election of former officers and directors of Sports
International, Ltd. (Antigua) to the Board of Directors of the
Company, and (4) the amendment of the Company's Certificate of
Incorporation changing the Company's name from Entertainment Tonight
Video Express Ltd. to Sports International, Ltd. Effective March 27,
1996, the Company changed its name to Interactive Gaming &
Communications Corp. to reflect its expanding operations.
Acquisition - Exchange of Stock and Notes
The acquisition of all of the capital stock of Sports International,
Ltd. (Antigua) was completed on October 20, 1994 by the issuance of
4,500,000 common shares (post split) and an aggregate of $4,000,000
of the Company's Convertible Notes (the "Notes") to shareholders of
Sports International, Ltd. (Antigua).
The Notes were scheduled to mature on December 31, 1996, together
with interest at the prevailing prime rate, accrued quarterly, and
were convertible into common stock at the rate of one share for
each $1.00 of outstanding principal amount and accrued interest.
All the shares issued to the Sports International, Ltd. (Antigua)
stockholders and the shares issuable upon conversion of the Notes,
together with accrued interest, are "restricted" shares, as such
term is used in Rule 144, promulgated under the Securities Act of
1933, as amended.
<PAGE>
These Notes were converted into 4,000,000 shares of common stock
effective December 31, 1994 and the interest thereon was waived
in connection with the conversion.
Nature of Operations
The Company is a holding company publicly trading on the National
Association of Securities Dealers Automated Over the Counter (OTC)
Market Bulletin Board under the trading symbol "SBET". The Company
is comprised of two subsidiaries, Global Gaming Corp. (Grenada)
("Global") and Intersphere Communications, Ltd. (Grenada)
("Intersphere"). Each of the Company's subsidiaries provides
several unique and proprietary products and services to the
emerging Internet, national and international marketplaces. The
Company is responsible for supplying its subsidiaries with
administrative and management assistance, accounting, consulting
and necessary funding to complete projects or initiate endeavors.
As discussed in Note 17 to the financial statements, incorporated
herein, the Company implemented a plan to divest its subsidiaries
engaged in international Internet sports book and casino gaming.
Therefore, the consolidated financial statements include the
accounts of Sports International, Ltd. (Grenada) ("Sports") and
Global Casinos, Ltd. (Grenada) ("Casinos"), the two subsidiaries
sold on March 18, 1998, as discontinued operations.
Global is the exclusive principal international gaming license
holder in the country of Grenada, West Indies. Through this
exclusive licensing agreement with the government of Grenada,
Global has the right to operate and issue sub licenses to
qualified gaming companies for operating international casinos or
sports books via the Internet or other telecommunications.
Revenues are derived from annual licensing fees and a percentage
of the sub licensees' net revenues.
Intersphere is a software development, marketing and
communications company specializing in the Internet market.
Intersphere developed the WiseGuy Sports Wagering (Wise Guy)
system, the first sports wagering system that allows casino
sports books to take a wager from a customer over the Internet.
The WiseGuy system was used by Sports in 1997. Intersphere's
revenues are derived from Web Page Development and Design,
traditional advertising, licensing of the Wise Guy system and the
development of other related software products.
Casinos operated one of the world's first Internet Casino and
Sports book. By accessing the Company's Internet site, a betting
enthusiast could play and place wagers on a variety of casino
games and sporting events. Casinos operated its business under
a gaming license issued and authorized by the government of
Grenada.
Sports operated an international Internet sports book. Sports
betting enthusiasts, once they established an account, could
place a wager on just about any sporting event over the phone
or the Internet via a personal computer. Wagers were accepted
on all major sporting events in the U.S. and Europe. Sports
operated its business under a gaming license issued and
authorized by the government of Grenada. Sports was the
principle source of revenue for the Company, generally
accounting for 73%, 95% and 100% of the Company's net revenues
for the years ended December 31, 1997 and 1996, and 1995,
respectively, before discontinuance of operations.
Industry Segments
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The gaming industry is comprised of five separate service
industries; (1) traditional pari-mutuel wagering on horse and
dog racing; (2) casino and riverboat gambling; (3) lotteries;
(4) charitable organization gambling (Bingo and Las Vegas Nights);
and (5) sports book.
The Company operates in the casino segment via the Internet
utilizing proprietary software developed by its subsidiaries and
joint venture affiliates. The Company derives its revenues from
licensing, royalties, traditional advertising and Internet
related development and design services.
Marketing
The Company primarily advertises its licenses and services
during peak periods of sporting events (September through April)
in gambling related magazines and newspapers, and will continue
this method of advertising in the future. The success of increased
revenues is directly dependent upon the amount of advertising in
both conventional and Internet markets.
Intellectual Property
The Company holds no patents or trademarks for its software.
Government Regulation
The licensing business of the Company is conducted through its
wholly owned subsidiaries, which are legally organized in Grenada
and licensed by the Grenadan government to conduct its business.
The business activities of Sports and Casinos emanating from
outside Grenada (customers' wagers and licensing) may become
materially affected by regulations, laws or statues 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. In this regard, Item 3,
Legal Proceedings, is hereby incorporated by reference and there
are no assurances that the outcome of these proceedings will
materially effect the manner in which the subsidiaries conduct
its business in the future. The Company's legal position, after
extensive advice of counsel, Robert Flynn, Esquire, is that its
gaming and gambling operations, conducted in Grenada, are not
subject to regulation by the United States or its constituent
states or commonwealths therein.
Future Developments
In March 1997, the Company launched its live Internet casino
and sportsbook via its Casino subsidiary and an Internet casino
via its Sports subsidiary. The first entertainment offered to
its customers was a slot machine tournament followed by blackjack
and poker games. Sports and Casinos were sold in March 1998.
The Company plans to develop more live games in the third quarter
of 1998, which will be offered, for licensing by Intersphere to
qualified businesses.
The Company also has plans to develop an interactive horse racing
system for the Internet World Wide Web to be offered by
Intersphere to thoroughbred horse tracks throughout the world.
Employees
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As of June 18, 1998, the Company had 10 full-time employees: 3
software engineers; 1 graphic designers; 2 marketing personnel;
1 HTML writer; and 3 employees engaged in service support. The
ompany also utilizes full-time and part-time consultants on an
as-needed basis. None of the company's employees is represented
by a labor union and the Company believes its relations with its
employees are satisfactory.
Backlog
The nature of the Company's business does not involve any backlog.
Insurance
The Company maintains general liability and workers' compensation
insurance, which covers injury to employees. During 1996, the
Company implemented a medical insurance plan for its officers and
employees.
Competition
Many segments of the gaming industry are characterized by intense
competition, with a large number of companies and syndicates
offering the same wagering or seeking to develop sports wagering.
All of these entities in most instances have vastly greater
resources than the Company. The Company believes that with
telephone betting, a certain trust must be established between the
bettor and the Company, and the personnel who accept, process and
manage the bet. Funds must be deposited by the bettor in advance
and/or left on deposit, which funds are not readily available to
the bettor in case of an emergency or change of plans.
The Company estimates that there are 20 sports books and 80
on-line casinos offering similar type services. However, since
the majority of these enterprises are privately owned, and
financial information is not publicly available, the Company is
unable to evaluate its position among its competitors.
ITEM 2. PROPERTIES
Commencing January 1, 1996, the Company entered into a three-year
lease for its corporate headquarters and the Advertising/Software
Division in Blue Bell, Pennsylvania. The lease provides for
current annualized rent of approximately $72,000.
Commencing December 9, 1997, the Company entered into a new
four-year lease for its corporate and subsidiary, Intersphere,
headquarters in Plymouth Meeting, Pennsylvania. The lease
provides for current annualized rent of approximately $49,000.
ITEM 3. LEGAL PROCEEDINGS
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On February 18, 1997, a search warrant (the "Warrant") was issued,
filed in the United States District Court for the Eastern District
of Pennsylvania, authorizing the Federal Bureau of Investigation
to search the premises of the Company's executive offices and the
offices of Intersphere in Blue Bell, Pennsylvania including any
and all computer hardware, software, peripheral devices and
computer-related documentation on any of such premises. The
Warrant lists a variety of items to be obtained based on the
assumption that there was a violation of federal laws and that an
illegal gambling business was being conducted from its premises
in Pennsylvania. Based on the advice of counsel with significant
criminal law, trial and appellate experience and comprehensive
understanding of the jurisdictional scope of gaming laws, both
domestic and international, management does not believe the
gaming operations of its subsidiaries violate either the laws of
the United States or the Commonwealth of Pennsylvania, since no
gaming or gambling operations are conducted there. Management's
belief is based principally on its understanding, as interpreted
by its counsel, that the operations of the Gaming and Licensing
Division are legally authorized in Grenada and, as such, are
beyond the scope and outside the jurisdiction of the U.S.
criminal laws relating to gaming activities. The Company,
through counsel, while co-operating fully with the officials of
the United States, intends to move to quash the Warrant and
subsequent subpoena in the United States District Court on the
grounds that jurisdiction is lacking. Although the Company
intends to defend vigorously any action that may ultimately be
brought by the United States in connection with the Warrant and
subpoena, no assurance can be given that management's beliefs
as to the criminality of its subsidiaries' operations, or its
basis for such beliefs, are correct and that the Company will
prevail. In addition, the State of Missouri in April 1997 sought
an injunction in its courts seeking to restrict the Company from
offering the Global Casino through the Internet to Missouri
residents. While not admitting personal jurisdiction, the Company
through its counsel agreed not to offer these services to Missouri
residents. The Company posted a notice to this effect within its
Internet web site. Subsequently, an investigator employed by the
State of Missouri accessed the Company's web site; apparently
determining that the Company had breached its agreement with
Missouri. Accordingly, in May 1997, the State of Missouri
indicted the Company and its President, Michael F. Simone, and
filed a judgement in the amount of $66,050 for statutory
"gambling" violations in Missouri. The Company has been advised
by competent legal counsel experienced in civil, criminal and
constitutional matters, that the Missouri proceedings lack merit
because Missouri has no in personum jurisdiction of the Company
or of Mr. Simone. Once again, no assurance can be given that
this view is judicially correct, nor can assurance be given the
Company will prevail in these proceedings which are under appeal.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
There were no matters submitted to a vote of securities holders
during year ended December 31, 1997.
<PAGE>
PART II
ITEM 5. MARKET PRICE FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
After the Company completed a Plan of Reorganization, its Common
Stock resumed trading on the National Association of Securities
Dealers Automated Over the Counter Market (OTC) Bulletin Board
on December 19, 1994, under the trading symbol "SBET". The
following table sets forth high and low closing sales prices for
the Company's Common Stock, as reported on the Bulletin Board,
since trading resumed.
1997 1996 1995
High Low High Low High Low
First Quarter 1 7/8 1 1 3/16 5/8 5 1/4 .75
Second Quarter 1 1/16 5/8 3 3/16 5/8 3 .75
Third Quarter .50 .34 2 5/8 1 1/2 2 7/8
Fourth Quarter 5/16 .13 2 7/8 2 1/8 .75
On June 18, 1998, the last reported sales price for the Common
Stock was $.14.
On June 18, 1998, the Company had approximately 511 shareholders.
Dilution and Absence of Dividends
The Company has not paid any cash dividends on its common stock
in the past and does not anticipate paying any such cash dividends
in the foreseeable future. Earnings, if any, will be retained to
finance future growth. The Company may issue shares of its common
stock in private and/or public offerings to obtain financing,
capital, or to acquire other businesses that can improve the
performance and growth of the Company. Issuance/sales of
substantial amounts of common stock could adversely affect
prevailing market prices in the Common Stock of the Company.
Description of the Company's Securities
Common Stock
The authorized capital stock of the Company consists of 25,000,000
shares, $.001 par value ("Common Stock"), of which 13,701,290
shares are issued and outstanding as at June 18, 1998.
<PAGE>
Approximately 10,807,369 shares of Common Stock issued in connection
with the reverse merger acquisition, conversion of Notes, and for
certain services and the gaming license are "restricted" shares, as
such term is used in Rule 144 of the Securities Act of 1993, as
amended.
The holders of Common Stock are entitled to one vote per share for
the election of directors and all other purposes and do not have
cumulative voting rights. The holders of Common Stock are entitled
to receive dividends when, as, and if declared by the Board of
Directors and, in the event of the liquidation by the Company,
to receive prorata all assets remaining after payment of debts
and expenses. Holders of the Common Stock do not have any
pre-emptive or other right to subscribe for or purchase additional
shares of capital stock. All the outstanding shares of Common
Stock are fully paid and non-assessable.
Sale of Unregistered Common Stock and Common Stock Warrants
Effective June 26, 1996, the Company entered into a stock and
warrant purchase agreement with a software developer and issued
375,000 shares of restricted common stock for $750,001 and a
common stock purchase warrant for $1,000. The common stock
purchase warrant is for 100,000 shares at a purchase price of
$1.00 per share and expires on June 30, 2001. The Company's
private offering represented 3.3% of the outstanding common stock
at June 26, 1996.
On October 11, 1996, the Company issued 254,474 shares of
restricted common stock in settlement of accounts payable of
$508,947 incurred in the development of the "Virtual Casino"
software.
On November 4, 1996, the Company acquired all the outstanding
common stock of Intersphere for 1,000,000 restricted shares of
previously unissued common stock of the Company. Intersphere
developed an exclusive proprietary product known as the WiseGuy
Sports Wagering System. Intersphere's revenue is derived from
software licensing fees related to its proprietary product, as
well as from advertising, marketing and web page design services
primarily to Internet based accounts.
On November 4, 1996, the Company also acquired all the
outstanding common stock of Global for 1,100,000 restricted shares
of previously unissued common stock of the Company. Global owns
the exclusive principal master license to conduct gambling
operations from the Country of Grenada. The exclusive gambling
license is for two six-year terms and allows Global to sell up to
four sub-licenses to qualified applicants.
On June 30, 1997, the Company issued 29,250 shares of restricted
common stock in settlement of service of $42,000 rendered in the
development of the "Virtual Casino" software.
Preferred Stock
In May 1995, the shareholders approved an amendment of the
Company's Certificate of Incorporation to authorize the issuance
of up to 10,000,000 shares of preferred stock. The amendment
permits the Board of Directors to issue from time to time
authorized but unissued shares of preferred stock and to fix and
determine the terms, limitations, relative rights and preferences
of such shares. At December 31, 1997, no preferred stock of the
Company had been issued.
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ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented on the following tables for,
and as of the end of, each of the years or periods ended for the
three year period ended December 31, 1997, are derived from the
financial statements of the Company reflecting both income from
continuing and discontinued operations. The financial statements
for the years ended December 31, 1997, 1996 and 1995 have been
audited by Parente, Randolph, Orlando, Carey & Associates. The
1995 Selected Financial Data includes solely the operations of
Sports International, Ltd. (Antigua). The 1996 and 1997 Selected
Financial Data includes the consolidated reporting of all the
Company's subsidiaries included by reference herein.
The selected financial data should be read in conjunction with
the accompanying consolidated financial statements of the Company
and the notes thereto and "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
<PAGE>
1997 1996 1995
(1)
Income Statement Data :
Revenues $ 689,663 $ 113,386 $ 0
Expenses 2,311,493 972,879 0
Loss from continuing
operations before
income tax benefit (1,621,830) (859,493) 0
Deferred income tax benefit 100,000 0 0
Loss from continuing
operations (1,521,830) (859,493) 0
Income from discontinued
operations 18,637 163,573 209,698
Net (loss) income $ (1,503,193) $ (695,920) $ 209,698
Basic (loss) earnings
per common share:
Continued operations $ (0.11) $ (0.07) $ 0
Discontinued operations 0 0.01 0.02
Net (loss) income per share $ (0.11) $ (0.06) $ 0.02
Weighted average
Common shares Outstanding 13,682,752 11,512,656 10,404,110
<PAGE>
1997 1996 1995
(1)
Balance Sheet Data:
Working capital (deficit) $( 630,477) $( 294,602) $ (352,100)
Total assets $ 2,864,345 $ 4,008,364 $ 1,931,886
Deficit $(2,241,381) $ (738,188) $ (42,268)
Stockholders' equity
(deficit) $ 448,616 $1,909,301 $ 303,926
(1) See Note 13 to the consolidated financial statements of
Item 8 of this Form 10-K for 1996 acquisitions.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
In March 1998, the Company sold its two gaming subsidiaries Sports
and Casinos. Therefore the Consolidated Statement of Operations
for 1997, 1996, and 1995 have been restated to reflect the results
from the continuing operations. The continuing operations for the
Company as restated for those years and as discussed prospectively
herein reflect licensing fees, royalties and other revenues earned
from traditional advertising sources and Internet related
development and design fees. Accordingly, such revenues for 1997
were $553,152 as compared to $113,386 for 1996. There were no such
revenues in 1995. The increase in revenues resulted from the
acquisition of Intersphere and Global in October 1996 which
reflected three months of revenue as compared to twelve months of
revenue in 1997. Licensing and royalties fees for gaming and
software licenses accounted for 46% of the revenues reported for
1997 and 5% of the revenues reported for 1996 from continuing
operations. The remaining revenues were generated from advertising
and other Internet related services. There was no revenue or
related expense from continuing operations in 1995. Expenses from
continuing operations increased from $972,879 in 1996 to $1,465,681
in 1997 mainly as a result of depreciation and amortization,
insurance, interest and other related charges for conducting a full
year of business as primarily a licensing and development company
in the gaming and Internet markets.
Results of operations for the discontinued operations of Sports and
Casinos reflect a decrease in gross handle from $58,482,731 in 1996
to $43,995,036 in 1997 or $14,487,695. Net win and other revenues
also decreased by $1,158,170 from $2,785,109 in 1996 to $1,626,939 in
1997. Expenses decreased by $1,013,234 in 1997. The decreases in both
revenue and expenses resulted from the Company's increased efforts to
sell Sports and Casinos and divest itself from wagering activities.
Liquidity and Capital Resources
The Company's working capital deficit from continuing operations
increased by $335,875, or 114%, from $294,602 in 1996 to $630,477
in 1997. The increase in deficit was attributable, in the main,
to loss from operations amounting to $1,503,193 in 1997.
Further cost reductions and anticipated revenue growth from
licensing as described in the Prospective Outlook discussion
that follows should contribute to a gradual decrease in the
working capital deficit. In addition, current payments of
principal and interest on the $4,990,000 note from the sale of
Sports and Casinos in March 1998 should further enhance the
working capital position and reduction in deficit beginning in
the third quarter of 1998. The first eighteen monts of the note
only require monthly payments of interest on the unpaid principal
portion that would amount to approximately $35,000 per month or
$420,000 per year.
<PAGE>
If the outlook for greater revenues and reduced expenditures does
not meet its goals, then the Company will seek joint venture
partners or private placement funding to obtain capital to meet
current working capital demands. The continuation of the Company
in its present form is dependent upon its ability to obtain
additional financing, if needed, and the eventual achievement of
sustained profitable operations. Although there can be no
assurances that the Company will be able to obtain such financing
in the future, the Company did demonstrate its ability to obtain
such financing in 1996 with its strategic alliances to develop
new proprietary products and the sale of Sports and Casinos in 1998.
However, there are no assurances that management's future actions
will be successful or, if they are not successful, that the Company
would be able to continue as a going concern.
Government Regulation - Effect on Financing
The Company's business is legally constituted and organized in
Grenada, West Indies, and a license fee is paid to the Grenadan
government to conduct its business in the Gaming and Licensing
Division. The Company's business activities emanating from the
United States (customers' wagers) may be materially affected by
regulations and actions that may now be in place or will be
promulgated in the future by the various local, state, and/or
federal government regulators. However, with the sale of Sports
and Casinos in 1998, the Company is no longer involved with
customers' wagers. But there continues to remain the uncertainty
of how the U.S. and other world governments will look upon
gambling on the Internet which may deter major financial and/or
investment companies from participating in any capital venture
with the Company. In this regard, on February 19, 1997, the
Company was served with a warrant to produce all records involving
gambling activities emanating from the U.S. The Company has
co-operated with the U.S. Attorney's office in Philadelphia in
providing such records. In addition, the State of Missouri in April
1997 sought an injunction in its courts seeking to restrict the
Company from offering the Global Casino through the Internet to
Missouri residents. While not admitting personal jurisdiction, the
Company through its counsel agreed not to offer these services to
Missouri residents. The Company posted a notice to this effect
within its Internet web site. Subsequently, an investigator
employed by the State of Missouri accessed the Company's web site;
apparently determining that the Company had breached its agreement
with Missouri. Accordingly, in May of 1997, the State of Missouri
indicted the Company and its President, Michael F. Simone, and filed
a judgement in the amount of $66,050 for statutory "gambling"
violations in Missouri. The Company has been advised by competent
legal counsel experienced in civil, criminal and constitutional
matters, that the Missouri proceedings lack merit because Missouri
has no in personum jurisdiction of the Company or of Mr. Simone.
Once again, no assurance can be given that this view is judicially
correct, nor can assurance be given the Company will prevail in
these proceedings which are under appeal.
Inflation
Inflation has not had a significant impact on the Company's
comparative results of operations.
<PAGE>
Prospective Outlook
Certain matters discussed in this section contain forward-looking
statements, including without limitation, statements containing
the Company's future revenue and earnings. These forward-looking
statements involve risks and uncertainties, which could cause
actual results to differ materially from those projected.
The Company will focus its efforts on software development such
as a platform for Internet horse racing and licensing its
proprietary products and exclusive licensing privileges for
future revenues. The Company has effectively exited the Internet
gaming business involving the acceptance of customers' wagers
with the sale of its gaming subsidiaries Sports and Casinos in
March 1998 and will be engaged principally in its gaming and
entertainment software development business.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements and Supplementary Data
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 14
CONSOLIDATED FINANCIAL STATEMENTS:
Balance Sheet 15
Statement of Operations 16
Statement of Stockholders' Equity 17
Statement of Cash Flows 18 - 19
Notes to Financial Statements 20 - 31
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE 32
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS 33
Financial Statement schedules not included in this Form 10-K have
been omitted because they are not applicable or are the required
information is shown in the financial statements or notes thereto.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Interactive Gaming & Communications Corp.
Plymouth Meeting, Pennsylvania:
We have audited the accompanying consolidated balance sheets
of Interactive Gaming & Communications Corp. and its subsidiaries
at December 31, 1997 and 1996, and the related consolidated
statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Interactive Gaming & Communications Corp. and
its subsidiaries at December 31, 1997, and 1996, and the results of
its operations and its cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have
been prepared on a going concern basis, which contemplates
continuity of operations, the realization of assets and the
satisfaction of liabilities in the normal course of business. As
discussed in Note 3 to the financial statements, the Company has
negative working capital at December 31, 1997 and 1996 and negative
cash flows from operations for the year ended December 31, 1997.
The majority of the Company's continuing and discontinued operations
were financed by cash flows from its discontinued operations
including customers' credit balances and security deposits, which
remained on deposit until customers requested repayment. These
subsidiaries were sold in 1998. The Company will need to seek
other financing or generate sufficient cash flows to pay the
current liabilities of continuing operations. The Company incurred
a net loss of $1,503,193 in 1997 and $859,493 in 1996 and there is
no assurance that profitable operations will be achieved in the
future. These factors, among others, raise substantial doubt about
the Company's ability to continue as a going concern. The
consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
PARENTE, RANDOLPH, ORLANDO, CAREY & ASSOCIATES
Philadelphia, Pennsylvania
May 29, 1998
<PAGE>
<TABLE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997 AND 1996
<CAPTION>
1997 1996
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 15,250 $ 66,121
Accounts receivable,
net of allowance for
doubtful accounts
of $113,000 in 1997 68,516 88,702
Deferred tax asset 100,000 -
Net current assets
of discontinued
operations 529,754 595,268
Total current assets 713,520 750,091
EQUIPMENT, Net 100,420 124,349
INTANGIBLE ASSETS:
Systems development costs, net 1,449,235 1,652,149
Gaming and software
sub-licenses, net 377,021 1,150,804
Total intangible assets 1,826,256 2,802,953
OTHER ASSETS 1,118 -
NET NONCURRENT ASSETS OF
DISCONTINUED OPERATIONS 223,031 330,971
TOTAL $ 2,864,345 $ 4,008,364
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $286,065 $ 200,000
Bank overdraft $74,109 -
Accounts payable and accrued
expenses 454,039 249,425
Net current liabilities of
discontinued operations 1,601,516 1,649,638
Total current liabilities $2,415,729 $2,099,063
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par
value, 25,000,000 shares
authorized, 13,701,290 and
13,672,040 shares issued
and outstanding in 1997 and
1996, respectively 13,701 13,672
Additional paid-in capital 2,676,296 2,633,817
Deficit (2,241,381) (738,188)
Total stockholders' equity 448,616 1,909,301
TOTAL $ 2,864,345 $ 4,008,364
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
REVENUES:
Gaming and software
licensing fees, net 328,529 70,000 -
Advertising 159,066 - -
Program and design fees 111,656 - -
Rental Income 67,648 - -
Other 22,764 - -
Interest Income - 43,386 -
Total revenues 689,663 113,386 -
EXPENSES:
Impairment of gaming
sub-license 709,301 - -
Salaries 437,105 456,400 -
Depreciation and amortization 299,798 15,009 -
Advertising 194,284 19,767 -
Legal and professional 159,587 124,472 -
Rent 116,061 106,840 -
Provision for doubtful
accounts 113,000 - -
Office 59,373 65,101 -
Telephone 52,692 69,585 -
Insurance 46,401 23,895 -
Travel and related expenses 26,071 42,663 -
Other 25,578 10,752 -
Auto 22,963 19,270 -
Interest 21,908 5,119 -
Bank Charges 12,856 2,302 -
Repairs and maintenance 7,740 10,110 -
Services and other fees 6,775 1,594 -
Total expenses 2,311,493 972,879 -
Loss from continuing operations
before income tax benefit (1,621,830) (859,493) -
Deferred income tax benefit 100,000 - -
Loss from continuing operations (1,521,830) (859,493) -
Income from discontinuing
operations 18,637 163,573 209,698
Net (loss) income $ (1,503,193) $ (695,920) $ 209,698
Basic (Loss) earnings per
common share:
Continued operations $ (0.11) $ (0.07) $ -
Discontinued operations - $ 0.01 $ 0.02
Net (loss) income per
common share: $ (0.11) $ (0.06) $ 0.02
Weighted average
common shares
outstanding 13,682,752 11,512,656 10,404,110
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<CAPTION>
COMMON STOCK ADDITIONAL STOCK-
SHARES PAID-IN HOLDERS'
OUTSTANDING AMOUNT CAPITAL DEFICIT EQUITY
<S> <C> <C> <C> <C> <C>
BALANCES, JANUARY
1, 1995 $10,379,066 $10,379 $293,300 ($251,966) $51,713
Common stock issued for
services and gaming
license 563,500 563 41,952 - 42,515
Net income for 1995 - - - 209,698 209,698
BALANCES, DECEMBER
31, 1995 10,942,566 10,942 335,252 (42,268) 303,926
Common stock
issued in private
offering 375,000 375 749,626 - 750,001
Warrants issued
in private
offering - - 1,000 - 1,000
Common stock issued for
services 254,474 255 508,692 - 508,947
Common stock issued
for acquisitions 2,100,000 2,100 1,039,247 - 1,041,347
Net loss for 1996 - - - (695,920) (695,920)
BALANCES, DECEMBER
31, 1996 13,672,040 $ 13,672 2,633,817 (738,118) $ 1,909,301
Common stock
issued for 29,250 29 42,479 - 42,508
services
Net loss for 1997 - - - (1,503,193) (1,503,193)
BALANCES, DECEMBER
31, 1997 $13,701,290 $13,701 $2,676,296 ($2,241,381) $448,616
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net (loss) income $ (1,503,193) $ (695,920) $ 209,698
Adjustments to
reconcile net (loss)
income to net
cash (used in)
provided by operating
activities:
Depreciation and
amortization 299,798 15,009 -
Change in net assets
and liabilities of
discontinued operations 167,841 679,235 162,731
Deferred income tax
benefit (100,000) - -
Impairment of gaming
sub license 709,301 - -
(Increase) decrease in
assets:
Accounts receivable 20,186 (88,702) -
Other Assets (1,118) - -
Increase in liabilities
Accounts payable and
accrued expenses 204,614 249,425 -
Net cash (used in)
provided by
operating
activities (202,571) 159,047 372,429
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of equipment (8,474) (139,359) -
Decrease (increase)in
loan receivable - 138,788 (372,429)
Purchase of systems
development costs - (933,899) -
Purchase of software
sub-license - (109,457) -
Net cash used in investing
activities (8,474) (1,043,927) (372,429)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Bank overdraft 74,109 - -
Proceeds from notes payable 86,065 200,000 -
Proceeds from issuance of
common stock - 751,001 -
Net cash provided by
financing activities 160,174 951,001 -
(DECREASE) INCREASE IN CASH (50,871) 66,121 -
CASH, BEGINNING 66,121 - -
CASH, ENDING $ 15,250 $ 66,121 -
(Continued)
</TABLE>
<PAGE>
<TABLE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW
INFORMATION,
Interest paid $ 21,908 $ 5,119 $ -
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING
ACTIVITIES:
Common stock issued for
employee bonuses and
consulting fees $ 42,508 $ - 7,515
Common stock issued for
services (Note 11) $ - $ 508,947 $ -
Common stock issued for
acquisitions (Note 13) $ - $1,041,342 $ -
Common stock issued
for gaming license $ - $ - $ 35,000
</TABLE>
<PAGE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
Interactive Gaming & Communications Corp. (the "Company") is
a holding company publicly trading on the National Association
of Securities Dealers Automated Over the Counter (OTC) Market
Bulletin Board under the trading symbol "SBET". The Company
is comprised of two subsidiaries, Global Gaming Corp. (Grenada)
("Global") and Intersphere Communications, Ltd. (Grenada)
("Intersphere"). Each of the Company's subsidiaries provides
several unique and proprietary products and services to the
emerging Internet, national and international marketplaces.
The Company is responsible for supplying its subsidiaries with
administrative and management assistance, accounting,
consulting and necessary funding to complete projects or
initiate endeavors.
As discussed in note 17, the Company implemented a plan to
divest its subsidiaries engaged in international Internet
sports book and casino gaming. Therefore, the consolidated
financial statements include the accounts of Sports
International, Ltd. (Grenada) ("Sports") and Global Casinos,
Ltd. (Grenada) ("Casinos"), the two subsidiaries sold on
March 18, 1998, as discontinued operations.
Global is the exclusive principal international gaming license
holder in the country of Grenada, West Indies. Through this
exclusive licensing agreement with the government of Grenada,
Global has the right to operate and issue sub licenses to
qualified gaming companies for operating international casinos
or sports books via the Internet or other telecommunications.
Revenues are derived from annual licensing fees and a
percentage of the sub licenses' net revenues.
Intersphere is a software development, marketing and
communications company specializing in the Internet market.
Intersphere developed the Wise Guy Sports Wagering (Wise Guy)
system, the first sports wagering system that allows casino
sports books to take a wager from a customer over the Internet.
The Wise Guy system was in development for over a year and in
1997 became operational. Intersphere's revenues are derived
from Web Page Development and Design, traditional advertising,
licensing of the Wise Guy system and the development of other
related software products.
Casinos operated the world's first Internet Casino. By
accessing the Company's Internet site, a betting enthusiast
could play and place wagers on a variety of casino games.
Casinos operated its business under a gaming license issued
and authorized by the government of Grenada.
<PAGE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sports operated an international Internet sports book. Sports
betting enthusiasts, once they established an account, could
place a wager on just about any sporting event over the phone
or the Internet via a personal computer. Wagers were accepted
on all major sporting events in the U.S. and Europe. Sports
operated its business under a gaming license issued and
authorized by the government of Grenada. Sports was the
principal source of revenue for the Company, generally
accounting for 70%, 95% and 100% of the Company's net revenues
for the years ended December 31, 1997 and 1996, and 1995,
respectively, before discontinuance of operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries, Global,
Intersphere, Sports and Casinos. All intercompany
balances and transactions have been eliminated in
consolidation.
USE OF ESTIMATES
The preparation of the financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of
revenues and expenses during the reported period. Actual
results could differ from those estimates.
FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable, notes
payable and accounts payable approximate fair value at
December 31, 1997 and 1996.
EQUIPMENT
Equipment is recorded at cost. Depreciation is provided
on the straight-line method over the estimated useful
lives of the assets and was $32,400 and $15,009 in 1997
and 1996, respectively.
SOFTWARE REVENUE RECOGNITION
Software revenue is recognized when an arrangement exists,
installation has occurred, fees are determinable and
collection is probable.
<PAGE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SYSTEMS DEVELOPMENT COSTS
The Company capitalizes the cost of developing certain
software products it plans to market in accordance with
Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed" (Note 8). Amortization is
computed on an individual product basis and is the greater
of: (a) the ratio of current gross revenues for a product
to the total amount and anticipated future gross revenues
for the product or (b) the straight-line method over the
estimated economic life of the product. The Company is
using an estimated economic life of ten years.
GAMING AND SOFTWARE SUB-LICENSES
Through its subsidiaries Global and Intersphere, the
Company has obtained the exclusive right to sub-license
gaming operations and sports wagering software. The
Company has valued those sub-licensing agreements at
their fair value as determined by the present value of
anticipated future cash flows. Amortization is provided
using the straight-line method over 10 to 12 years and was
$102,184 in 1997.
At December 31, 1997, the Company evaluated the ongoing
value assigned to these gaming and software agreements as
required by Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of." Based on such an
evaluation, the Company determined that a gaming license
asset with a carrying value of $709,301 was impaired due to
changes in estimates relating to future sales. The change
in estimates was a result of recent sales of the licenses
and delays in development and marketing of the Company's
products which could result in the loss of the exclusive
license agreement. As a result, the Company wrote down its
license by $709,301 to its estimated fair value. Fair value
was estimated based on the estimated future cash flows
discounted at a market rate of interest. Considerable
management judgment is necessary to estimate discounted
future cash flows. Accordingly, actual results could vary
significantly from such estimates.
COMMON STOCK
The Company has from time to time issued restricted common
stock, unregistered with the Securities and Exchange
Commission. The Company's restricted shares are only
limited as to the holders' ability to resell the stock into
the public trading markets. At December 31, 1997 and 1996,
10,807,369 shares and 11,789,379 shares of the total issued
and outstanding shares of 13,701,290 and 13,672,040,
respectively, were restricted as described above.
<PAGE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMON STOCK TRANSACTIONS
The Company adopted the recognition provisions of Statement
of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" in 1995 which requires fair value
measurement for stock-based compensation plans.
ADVERTISING COSTS
Costs incurred for advertising are expensed as incurred.
INCOME TAXES
The Company accounts for income taxes under the liability
method. Under this method, deferred tax assets and
liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that
will be in effect when the differences are expected to
reverse.
BASIC (LOSS) EARNINGS PER COMMON SHARE
In 1997, the Financial Accounting Standard Board issued
Statement of Financial Standards No. 128 "Earnings Per
Share" ("SFAS 128"). SFAS 128 replaced the calculation of
primary and fully diluted earnings per share. Unlike
primary earnings per share, basic earnings per share exclude
any dilutive effects of options. Additionally, the dilutive
effects of options are not included when losses from
continuing operations exist. (Loss) earnings per common
share is computed for 1997, 1996 and 1995 by dividing the
net (loss) earnings by the weighted average number of
shares of common stock outstanding.
RECLASSIFICATIONS
Certain balances and amounts in the 1996 and 1995 financial
statements have been reclassified to conform with the 1997
presentation.
3. BASIS OF PRESENTATION 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.
<PAGE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company had a working capital deficiency of $630,477 and
$294,602 at December 31, 1997 and 1996, respectively, and
negative cash flows from operating activities of $202,571 in
1997. The majority of the Company's continuing and
discontinued operations were financed by cash flows from its
discontinued operations including customers' credit balances
and security deposits, which remained on deposit until
customers requested repayment. These subsidiaries were sold
in 1998. The Company will need to seek other financing or
generate sufficient cash flows to pay the current liabilities
of continuing operations. Additionally, the Company incurred
a net loss from continuing operations of $1,503,193 in 1997
and $859,493 in 1996 and there is no assurance that profitable
operations will be achieved in the future.
These factors, among others, indicate the Company's ability to
continue in existence is dependent upon favorable governmental
regulations, its ability to achieve adequate profitable operations
and/or obtain additional debt or equity financing. The financial
statements do not include any adjustments relating to the
recoverability and classification of recorded assets amounts that
might be necessary should the Company be unable to continue in
existence.
Management anticipates significant revenue and cash flows from
its software and gaming licensing agreements. Additionally,
management plans to continue to refine its operations, 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, and
sharing of development costs, or other resources. There can be
no assurance that the Company's efforts will be successful.
4. SIGNIFICANT ESTIMATES AND CONCENTRATIONS
Most of the Company's cash is held outside the United States
and is not covered by FDIC insurance.
The Company has provided an allowance for doubtful accounts of
$113,000 at December 31, 1997, based on management's analysis
and estimates. As a result, it is reasonably possible that
management's estimate of the carrying amount of accounts
receivable will change in the near term.
The Company has recognized the value of its gaming and software
sub-licensing agreements based on the present value of
anticipated future cash flows. Additionally, the Company has
capitalized software development costs and believes these costs
are more than recoverable through anticipated future revenues.
These anticipated future revenues are management's best estimates
of future cash flows to be derived from these products. The
Company's value of these products is based on certain assumptions
management has made based on information available at December 31,
1997. It is reasonably possible that these estimates and
assumptions may change within one year from the balance sheet
date based on changes in operations and revenues.
At December 31, 1997 and 1996, 16% and 33% of the Company's net
assets of continuing operations were located in Grenada,
respectively. Revenues from foreign customers, primarily in
Grenada, represented 81% and revenues from U.S. customers
represented 19% of 1997 revenues.
<PAGE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. RELATED PARTY TRANSACTIONS
The net current assets of discontinued operations includes a
note receivable for approximately $56,000 from a Company
consultant and shareholder, which is unsecured, payable on
demand and bears interest at the prime rate plus 1%.
The Company paid consulting fees of $47,000 and $35,331 to
its Chief Financial Officer in 1997 and 1996, respectively.
6. EQUIPMENT
Equipment consists of the following at December 31, 1997 and
1996:
1997 1996
Furniture, fixtures and equipment $157,353 $148,882
Less accumulated depreciation 56,933 24,533
Net $100,420 $124,349
7. SYSTEMS DEVELOPMENT COSTS
In May 1995, the Company signed a definitive letter of intent
with a major software developer to produce and market a
"Virtual Casino" by offering its customers the opportunity to
play classic casino games, such as blackjack, craps, roulette,
baccarat and slot machine games, on their personal computers
using the Internet World Wide Web, with the Company managing
the wagering. Additionally in September 1996, the Company
entered into a software development and licensing agreement
with another software developer to develop a "Global Casino" to
provide services similar to the above on a state-of-the-art
operating platform.
After the economic and technical feasibility of the projects
had been established, the Company began funding them. Costs
incurred subsequent to the establishment of technological
feasibility and directly related to the project have been
capitalized. Capitalized project costs were $1,652,149 at
December 31, 1997 and 1996, respectively. The "Global Casino"
project was completed in 1997 and amortization expense was
$165,214 in 1997. As management has made estimates in
determining the net realizable value of system development
costs, it is reasonably possible that these values will change
in the near term.
8. NOTES PAYABLE
On August 27, 1996, the Company issued a promissory note
payable to a financial institution in the amount of $200,000.
The note is collateralized by 1,000,000 shares of Company stock
owned by the Company's President. The note payable bears
interest at a variable rate of prime plus 1.5%
<PAGE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(10.0% at December 31, 1997) and is payable on demand.
Note payable, shareholder, for $86,065 at December 31, 1997
is payable on demand, unsecured and bears interest at prime
plus 1.5% (10% at December 31, 1997).
9. INCOME TAXES
Prior to 1997, the Company derived its revenue from its wholly
owned subsidiaries, Sports International, Ltd., Intersphere and
Global, all of which are incorporated in Grenada. The
government of Grenada does not presently impose income taxes on
the Company. Accordingly, no provision for income taxes has
been reflected in the financial statements. In 1997, a deferred
tax asset of $100,000 was recognized for the future tax
consequences attributable to U.S. net operating loss
carryforwards of approximately $300,000, which expire in 2012.
Reconciliation of the U.S. federal statutory rate to the
Company's effective tax rate on continuing operations follows:
1997 1998
U.S. federal statutory tax rate 34.0% 34.0%
Non-U.S. net operating loss carryforwards (27.8) (21.0)
Net operating loss carryforwards with no
current tax benefit - (13.0)
Effective tax rate on continuing operations 6.2% 0.0%
In 1996, the U.S. tax benefit resulting from net operating
loss carryforwards were offset by an allowance as it was more
likely than not that any benefit would be realized. In 1997, a
tax benefit of approximately $100,000 was recognized to reflect
future taxes relating from the sale of its subsidiaries.
10. COMMITMENTS
Commencing December 9, 1997, the Company entered into a four
year lease for its corporate headquarters in Plymouth Meeting,
Pennsylvania. Future minimum rental payments under the leases
are as follows:
Year ending December 31:
1998 $63,000
1999 49,000
2000 51,000
2001 54,000
<PAGE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. COMMON STOCK TRANSACTIONS
On December 13, 1995, the Company:
* Issued 23,500 shares of restricted common stock as an employee
stock bonus to all employees, exclusive of officers and
directors, and recognized $4,115 in employee bonuses (based on
the fair market value of the stock received);
* Issued 340,000 shares of restricted common stock as a bonus to
management consultants engaged by the Company, and recognized
$3,400 in consulting fees (based on the fair market value of
services performed); and
* Issued 200,000 shares of restricted common stock for $35,000
and cash of $25,000 to purchase the gaming license. The total
amount capitalized, $60,000, was based on the fair market value
of the gaming license.
On October 11, 1996, the Company issued 254,474 shares of
restricted common stock in settlement of accounts payable of
$508,947 incurred in the development of the "Virtual Casino"
software.
On June 30, 1997, the Company issued 29,250 shares of
restricted common stock in settlement of services of $42,508
rendered in the development of the "Virtual Casino" software.
12. PRIVATE OFFERING OF COMPANY STOCK
Effective June 26, 1996, the Company entered into a stock
and warrant purchase agreement with a software developer
and issued 375,000 shares of restricted common stock for
$750,001 and a common stock purchase warrant for $1,000.
The common stock purchase warrant is for 100,000 shares at
a purchase price of $1.00 per share and expires on June 30,
2001. The Company's private offering represented 3.3% of
the outstanding common stock at June 26, 1996.
13. ACQUISITIONS
On November 4, 1996, the Company acquired all the outstanding
common stock of Intersphere for 1,000,000 restricted shares of
previously unissued common stock of the Company. Intersphere
developed an exclusive proprietary product known as the WiseGuy
Sports Wagering System. Intersphere's revenue is derived from
software licensing fees related to its proprietary product, as
well as from advertising, marketing and web page design
services primarily to Internet based accounts.
On November 4, 1996, the Company also acquired all the
outstanding common stock of Global for 1,100,000 restricted shares
of previously unissued common stock of the Company. Global owns
the exclusive principal master license to conduct gambling
operations from the island of Grenada. The
<PAGE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
exclusive gambling license is for two six-year terms and allows
Global to sell up to four sub-licenses to qualified applicants.
Both the Intersphere and Global acquisitions were recorded
under the purchase method of accounting; and, accordingly,
the results of operations of Intersphere and Global for the
period from November 4, 1996 to December 31, 1996 are included
in the accompanying consolidated financial statements. The
purchase price of each acquisition was based on the fair
market value of the net assets acquired as follows:
Intersphere Global
Current assets $ 63,056 $ 100
Equipment 60,574 -
Security deposits 15,676 -
Software development 166,293 -
Software license 377,021 -
Gaming license - 773,783
Current liabilities (415,161) -
$267,459 $773,883
The following unaudited proforma financial information for the
Company gives effect to the Intersphere and Global
acquisitions as if they had occurred on January 1, 1996.
These proforma results have been prepared for comparative
purposes only and do not purport to be indicative of the
results of operations which actually would have resulted had
the acquisitions occurred on the date indicated, or which may
result in the future. The proforma information includes
revenues for Intersphere of $104,149 and net losses of $201,165
for the year ended December 31, 1996. Prior to January 1, 1996,
Intersphere had no appreciable results of operations.
Additionally, Global was a development stage enterprise as of
the acquisition date and had no results of operations in 1996.
The unaudited proforma financial information for 1996 is as
follows:
Net win and other revenues $3,002,644
Net loss (897,085)
Weighted average common shares
outstanding 13,290,464
Loss per common share (0.07)
14. STOCK OPTION PLANS
In May 1995, the stockholders approved the 1995 Stock Option
and Stock Award Plan (the "Plan") and the 1995 Directors Stock
Option Plan (the "Director's Plan"). The purpose of the Plan
is to attract and retain qualified and competent persons as
officers, employees, consultants, agents, and independent
contractors. The purpose of the Director's Plan is to attract
and retain nonemployee directors to the Company's board.
<PAGE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Under the Plan and the Director's Plan, the Company may grant
up to 600,000 and 300,000 stock options, respectively. The
terms of options granted shall be determined by the Stock
Options Committee appointed by the Board of Directors.
At December 31, 1995, no stock options had been awarded. On
October 25, 1996, the Company issued 50,000 stock options to
a departing Company officer. The options have an exercise
price 33% higher than the fair market value of the Company's
common stock on the date of the grant or $1.25 per share. The
options remain exercisable for a three year period ending
October 25, 1999. The fair value of the options at the date
of grant was nominal. Accordingly, no compensation expense
related to the options granted has been recognized by the
Company.
During 1997, no stock options were awarded.
15. PREFERRED STOCK
In May 1995, the shareholders approved an amendment to the
Company's Certificate of Incorporation to authorize the
issuance of up to 10,000,000 shares of preferred stock. The
amendment permits the Board of Directors to issue from time to
time authorized but unissued shares of preferred stock and to
fix and determine the terms, limitations, relative rights and
preferences of such shares. At December 31, 1997 and 1996, no
preferred stock had been issued.
16. CONTINGENCY
LITIGATION
On February 18, 1997, a search warrant (the "Warrant") was
issued, filed in the United States District Court for the
Eastern District of Pennsylvania, authorizing the Federal
Bureau of Investigation to search the premises of the
Company's executive offices and the offices of Intersphere
in Blue Bell, Pennsylvania including any and all computer
hardware, software, peripheral devices and computer-related
documentation on any of such premises. The Warrant lists a
variety of items to be obtained based on the assumption that
there was a violation of federal laws and that an illegal
gambling business was being conducted from its premises in
Pennsylvania. Based on the advice of counsel with significant
criminal law, trial and appellate experience and
comprehensive understanding of the jurisdictional scope of
gaming laws, both domestic and international, management does
not believe the gaming operations of its subsidiaries violate
either the laws of the United States or the Commonwealth of
Pennsylvania, since no gaming or gambling operations are
conducted there. Management's belief is based principally on
its understanding, as interpreted by its counsel, that the
operations of the Gaming and Licensing Division are legally
authorized in Grenada and, as such, are beyond the scope and
outside the jurisdiction of the U.S. criminal laws relating
to gaming activities. The Company, through counsel, while
co-operating fully with the officials of the United States,
intends to move to quash the Warrant and subsequent subpoena
in the United States District Court on the grounds that
jurisdiction is lacking. Although the Company intends to
defend vigorously any action that may ultimately be brought
by the United States in connection with the Warrant and
subpoena, no assurance can be given that
<PAGE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
management's beliefs as to the criminality of its subsidiaries'
operations, or its basis for such beliefs, are correct and
that the Company will prevail. In addition, the State of
Missouri in April 1997 sought an injunction in its counts
seeking to restrict the Company from offering the Global
Casino through the Internet to Missouri residents. While
not admitting personal jurisdiction, the Company through
its counsel agreed not to offer these services to Missouri
residents. The Company posted a notice to this effect
within its Internet web site. Subsequently, an investigator
employed by the State of Missouri accessed the Company's web
site; apparently determining that the Company had breached
its agreement with Missouri. Accordingly, in May of 1997,
the State of Missouri indicted the Company and its President,
Michael F. Simone, and filed a judgement in the amount of
$66,050 for statutory "gambling" violations in Missouri.
The Company has been advised by competent legal counsel
experienced in civil, criminal and constitutional matters,
that the Missouri proceedings lack merit because Missouri
has no in personum jurisdiction of the Company or of Mr.
Simone. Once again, no assurance can be given that this
view is judicially correct, nor can assurance be given that
the Company will prevail in these proceedings which are
under appeal.
OTHER LITIGATION
The Company, in the normal course of business, is subject to
litigation and is presently involved as a defendant in
several lawsuits. In the opinion of management, the
ultimate outcome of these cases is unknown and any exposure
to liability, if any cannot be estimated at this time.
Consequently, no amount has been accrued at December 31,
1997.
17. DISCONTINUED OPERATIONS
In September 1997, the Company adopted a plan to dispose of
Sports and Casino (the "Gaming Divisions"). Effective March
18, 1998, the Company sold the Gaming Divisions for $10,000 in
cash, debt forgiveness of $1,400,000 and a $4,990,000 note
receivable. The interest rate on the note is the prime rate.
The first eighteen months of the note only require monthly
payments of interest on the unpaid principal portion. The
second eighteen months require payment of interest plus
principal of $27,725 per month. A balloon payment of
$4,490,950 is payable on the thirty-seventh month. The stock
of the Gaming Divisions has been pledged by the buyer as
collateral. The sale resulted in a pre-tax gain of
approximately $1,400,000 in 1998 after considering costs
incurred in connection with the sale and operating results
through the date of disposition. As collection of the
$4,990,000 note is uncertain, the Company will defer the gain
on the note and recognize revenue as principal is collected.
Net current assets from discontinued operations were primarily
cash and customer receivables. Net noncurrent assets from
discontinued operations were primarily fixed assets. Net
current liabilities were customers' credit balances, security
deposits and accounts payable and accrued expenses.
<PAGE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The financial statements reflect the operating results and
balance sheet items of the discontinued operations separately
from continuing operations. Prior years have been restated.
Operating results for the discontinued operations were:
1997 1996 1995
Gross handle $43,995,036 $58,482,731 $47,817,172
Less customer win 42,368,097 55,730,479 45,237,227
Net win 1,626,939 2,752,252 2,579,945
Other revenues - 32,857 47,341
Net win and other revenues 1,626,939 2,785,109 2,627,286
Expenses 1,608,302 2,621,536 2,417,588
Net income $ 18,637 $ 163,573 $ 209,698
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Interactive Gaming & Communications Corp.
Plymouth Meeting, Pennsylvania:
We have audited the basic 1997, 1996 and 1995 consolidated
financial statements of Interactive Gaming & Communications Corp.
and its subsidiaries at December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997 and have
issued our report thereon dated May 29, 1998, such consolidated
financial statements and report are included elsewhere in this
Form 10-K. Our audit also included the financial statement
schedule of Interactive Gaming & Communications Corp. listed on
page 23. The financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an
opinion on the financial statement schedule based on our audit. In
our opinion, such financial statement schedule referred to above,
when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material
respects the information set forth herein.
PARENTE, RANDOLPH, ORLANDO, CAREY & ASSOCIATES
Philadelphia, Pennsylvania
May 29, 1998
<PAGE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Balances at Provision Accounts Balances at
Beginning of Charge Written-Off End of Year
Year to Expense
For the year
ended December
31, 1997,
Allowance for
doubtful
accounts $ - 0- $113,000 $ - 0 - $113,000
For the year
ended December
31, 1996,
Allowance for
doubtful
accounts $ - 0 - $ - 0 - $ - 0 - $ - 0 -
For the year
ended December
31, 1995,
Allowance for
doubtful
accounts $ - 0 - $ - 0 - $ - 0 - $ - 0 -
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes or disagreements with accountants on
financial disclosure during this period.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Executive Officers and Directors
The following table sets forth the name, age, and position of each
executive officer and director of the Company.
Name Age Position Term Expires
Michael F. Simone 49 Chairman of the Board, 1998 Annual Meeting
Director, President,
Secretary and Chief
Executive Officer
Michael F. Oryl, JR. 30 Director and Vice 1998 Annual Meeting
President
Jeffrey D. Erb 29 Director and Secretary 1998 Annual Meeting
Fred Michini, CPA 55 Chief Financial Officer 1998 Annual Meeting
All the directors were re-elected to the Board of Directors at the
Annual Meeting of Shareholders on June 30,1997. The term of office
for each director is one year or until his or her successor is
elected and qualified at the Company's annual meeting of
shareholders.
Michael F. Simone is a Company Director, and was
President/Treasurer, Organizer and Owner of 50% of the
outstanding shares of Sports International, Ltd. (Antigua)
from inception in November 1992 until the Company acquired
all of the capital stock of Sports International, Ltd.
(Antigua) on October 20, 1994. From 1989 to 1992, Mr. Simone
was a Vice President of Anchor Savings Bank, heading one of
the bank's real estate lending divisions. He graduated from
<PAGE>
The University of Miami in 1972, and holds a BS Degree in
Finance.
Michael F. Oryl, JR. is the President of Intersphere. He
founded the company together with Mr. Erb in December 1994.
He is the primary technical source in the fields of computers
and networks for the Company. Mr. Oryl's experience includes
many aspects of the computer industry, such as, digital
services, UNIX. OS/2, Windows NT, and Internet network
routing. He is an active member of several high tech and
Internet organizations and is proficient with numerous
programming languages on many different computer platforms.
Jeffrey D. Erb is the Vice President of Intersphere. Mr.
Erb is well versed in all aspects of the World Wide Web and
the Internet, as well as design and management. He has
overseen and personally handled much of the layout and
programming of the World Wide Web pages and received
international attention and awards. He is qualified in
HTML programming and all aspects of Internet development.
Mr. Erb is an active member of several high tech and
Internet organizations, is on the board of directors of the Young
Professionals Network as well as the Philadelphia Area New Media
Association, and is a contributing writer in the
advertising industry online magazine "Channel Seven".
Fred Michini, CPA received his Bachelor's Degree from LaSalle
University in 1965 and Master's Degree from Temple University
in 1972. He is certified in Pennsylvania and New Jersey.
His experience included staff auditor for the U.S. General
Accounting Office, partner at a regional Philadelphia CPA firm,
and founder and partner of a second CPA firm. His financial
management experience also includes Chief Financial Officer
for four service related Delaware Valley companies.
Board Meetings and Committees
Directors who are employees of the Company receive no compensation
for services as directors.
The Company plans to establish an Audit Committee, a Compensation
Committee and an Option Committee, each of which will consist of
two directors.
The Audit Committee will review with the Company's independent
accountants the scope and timing of the accountants' audit
services and any other services they are asked to perform, their
report on the Company's financial statements following completion
of their audit and the Company's policies and procedures with
respect to internal accounting and financial controls. In addition,
the Audit Committee will be asked to make annual recommendations to
the Board of Directors for the appointment of independent public
accountants for the ensuing year.
The Compensation Committee will review and recommend to the Board
of Directors the compensation and benefits of all officers and
key employees of the company, and review general
<PAGE>
policy matters relating to compensation and benefits of employees
of the Company.
The Option Committee will determine the number, if any, and terms
of any options granted by the Company, except to members of the
Committee. Options to the members of the Option Committee must be
granted and approved by the majority vote of the Board of Directors.
Limitation of Liability
As a Delaware corporation, the Company is bound by Section 145 of
the General Corporation Law of Delaware which allows the
indemnification of officers, directors, employees or agents of
the Company against liabilities and expenses arising out of
actions brought by a third party, provided that the Board of
Directors determines that such person acted in good faith and in
a manner he reasonably believed to be in or not opposed to the
best interests of the Company, and, with respect to a criminal
matter, had no reasonable cause to believe his conduct was
unlawful. Such law also permits indemnification against expenses
in actions brought by a shareholder on behalf of a corporation or
by the corporation itself if the standards of conduct required for
indemnification in third party actions are met, and either (1)
such person was not adjudged liable to the corporation, or (2) the
Delaware Chancery Court or other court in which the action was
brought determines that such person is fairly and reasonably
entitled to be indemnified. The Company may make advances for
expenses incurred in defending a suit upon the receipt of an
undertaking by an officer, director, employee or agent to repay
such amount if it is ultimately determined that such person is not
entitled to be indemnified.
The Company's Certificate of Incorporation provides that directors
and officers of the Company are indemnified to the fullest extent
permitted by law and states that no director or officer shall have
any personal liability to the Company or its stockholders for any
monetary damages for breach of fiduciary duty as a director except
for liability resulting from (i) breach of the duty of loyalty to
the Company or its stockholders, (ii) acts or omissions not in good
faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of Delaware corporation
law (relating to unlawful dividends or redemptions), or (iv) for
any transaction from which such director or officer derived an
improper personal benefit. The indemnification is against all
expenses arising from the lawsuit or action unless the director or
officer is finally adjudged to be liable for gross negligence,
recklessness or willful misconduct in the performance of his duty
to the Company (unless the Delaware Chancery Court determines that
in view of the circumstances of the case, the person is entitled to
indemnity as determined by the court). Expenses are paid or
reimbursed as incurred in advance of final disposition upon receipt
of an unsecured contractual written undertaking that such amount
must be repaid if it is determined that the person is not entitled
to the indemnity.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), may be
permitted to directors, officers, or persons controlling the
registrant pursuant to the foregoing provisions, the registrant
has been informed that in the opinion of the Securities and
Exchange Commission, such indemnification is against public
<PAGE>
policy as expressed in the Securities Act and is, therefore,
unenforceable.
The Company does not currently maintain any directors' and
officers' liability insurance.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Summary of Compensation Table
Annual Compensation
Name and Principal Position Salary Bonus Other Stock
Michael F. Simone,
Chairman, President,
and Chief Executive
Officer
1997 $30,800 $ - $-
1996 144,230 - -
1995 105,750 - -
1994 150,000 - -
1993 24,000 - -
Michael F. Oryl, JR.
Director and Vice
President
1997 44,923 - -
Jeffrey D.Erb,
Director and
Secretary
1997 44,923 - -
Fred Michini, CPA,
Chief Financial
Officer
1997 47,000 - -
1996 35,331 - -
<PAGE>
Employee Agreements and Benefits
The Company does not have any employment contracts, retirement,
pension, profit sharing, with or covering its officers, directors,
consultants, and employees. During 1996, the Company established
a medical insurance plan for its officers and employees.
Stock Option and Stock Award Plan
In May 1995, the stockholders approved the 1995 Stock Option and
Stock Award Plan (the "Plan) and the 1995 Directors Stock Option
Plan (the "Director's Plan"). The purpose of the Plan is to
attract and retain qualified and competent persons as officers,
employees, consultants, agents, and independent contractors.
The purpose of the Director'' Plan is to attract and retain
nonemployee directors to the Company'' board.
Under the Plan and the Director's Plan, the Company may grant up
to 600,000 and 300,000 stock options, respectively. The terms of
the options granted shall be determined by the Stock options
Committee appointed by the Board of Directors. At December 31,
1995, no stock options had been awarded under either plan. On
October 25, 1996, pursuant with a Director's voluntary resignation,
the Company authorized the purchase of 50,000 shares of stock at
an exercise price 33% higher than the fair market value of the
Company's common stock on the date of the grant or $1.25 per share
with an exercise deadline of October 25, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Principal Shareholders
The table below sets forth information as to each person owning
of record or who was known by the Company to own beneficially
more than 5% of the 13,701,290 shares of issued and outstanding
Common Stock of the Company as of May 14, 1998, and information
as to the ownership of the Company's Common Stock by each of its
directors and executive officers and by the directors and
executive officers as a group. Except as otherwise indicated,
all shares are owned directly, and the persons named in the table
have sole voting and investment power
<PAGE>
with respect to shares shown as beneficially owned by them.
Name and Address of Nature of Number of Shares Percent
Beneficial Owner Ownership Owned
Michael F. Simone
188 Jericho Valley Dr.
Wrightstown, PA 18940 Common Stock, 4,198,280 30.6%
Direct
Rina Moscariello
994 Derring Lane
Bryn Mawr, PA 19110 Common Stock, 3,490,000 25.5%
Direct
Michael F. Oryl, Jr. Common Stock, 113,500 1.0%
Direct
Jeffrey D. Erb Common Stock, 100,000 1.0%
Direct
Fred Michini
2005 North Wales
Road
Lansdale, PA 19446 Common Stock, 2,000 0.0%
Direct
Caribbean
Communications,
Ltd.
Antigua, West
Indies Common Stock, 1,000,000 7.3%
Direct
Arthur Reynolds
Antigua, West
Indies Common Stock, 1,100,000 8.0%
Direct
All Executive Officers and Directors, as a Group (4 Persons)
4,413,780 32.2%
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are no other material relationships or transactions that
qualify for disclosure under this caption.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
Financial Statement Schedules
The consolidated financial statements and related schedules
filed as part of this Form 10-K are included in Part II, Item 8.
Reports on Form 8-K
On November 17, 1997, the Company filed a Form 8-K reporting an
agreement entered into with International Gaming Corp.
("International"), pursuant to which the Company has agreed to sell
the stock of two of the Company's subsidiaries, Sports and Casinos,
for a purchase price of $5 million (US), of which $4,990,000 will
be in a promissory note bearing interest at the prime rate and
payable over three years. The Company also will license certain
of its gaming software to International.
<PAGE>
EXHIBIT 27, FINANCIAL DATA SCHEDULE
(FOR ELECTRONIC FILING PURPOSES ONLY)
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE BALANCE SHEET AND STATEMENT OF
OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
Cash $ 15,240
Marketable Securities 0
Notes and Accounts Receivable 181,516
Allowances for Doubtful Accounts 113,000
Inventory 0
Total Current Assets 713,520
Property, Plant and Equipment 157,353
Accumulated Depreciation 56,933
Total Assets 2,864,345
Total Current Liabilities 2,415,729
Bonds, Mortgages and Similar Debt 0
Preferred Stock - Mandatory Redemption 0
Preferred Stock - No Mandatory Redemption 0
Common Stock 13,701
Other Stockholders' Equity 434,915
Total Liabilities and Stockholders' Equity 2,864,345
Net Sales of Tangible Products 0
Total Revenues 689,663
Cost of Tangible Goods Sold 0
Total Costs and Expenses App.
to Sales and Revenues 0
Other Costs and Expenses 2,176,585
Provision for Doubtful Accounts 113,000
Interest and Amortization of Debt Discount 21,908
Income Before Taxes and Other Items (1,621,830)
Income Tax Expense 100,000
Income/Loss Continuing Operations (1,521,830)
Discontinued Operations 18,637
Extraordinary Items 0
Cumulative Effect-Changes in Accounting Principles 0
Net Income or Loss (1,503,193)
Earnings Per Share - Primary (0.11)
Earnings Per Share - Fully Diluted (0.11)
<PAGE>
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Registrant has
duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERACTIVE GAMING & COMMUNICATIONS CORP.
Dated: July 8, 1998
By:
/s/ Michael F. Simone
Michael F. Simone, President and Chief
Executive Officer
By:
/s/ Fred Michini
Fred Michini, Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this report has been signed below by the
following persons on behalf of the Registrant and in the
capacities indicated on this 8th day of July 1998.
INTERACTIVE GAMING & COMMUNICATIONS CORP.
By:
/s/ Michael F. Simone
Michael F. Simone, Director, President,
and Chief Executive Officer
By:
/s/ Michael Oryl
Michael Oryl, Director and Vice President
By:
/s/ Jeffrey Erb
Jeffrey Erb, Director and Secretary
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