UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A2
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 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 19422
(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code:
(215) 540-8185
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 March 14, 1997, there were 13,672,040 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 $7,449,182 computed at the
closing price for the Registrant's common stock on the NASD
Bulletin Board on March 14, 1997.
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TABLE OF CONTENTS
Page
Part I
1. Business 1
2. Properties 4
3. Legal Proceedings 5
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 35
Part III
10. Directors and Executive Officers of the Registrant 35
11. Executive Compensation 38
12. Security Ownership of Certain Beneficial Owners
and Management 39
13. Certain Relationships and Related Transactions 40
Part IV
14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 41
Exhibit 27, Financial Data Schedule (For electronic Filing
Purposes Only) 42
Signatures 43
<PAGE>
PART I
ITEM I. BUSINESS
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
<PAGE>
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.
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 three subsidiaries and
two divisions. The Gaming and Licensing Division includes
Sports International, Ltd. (Grenada) ("Sports"), formerly
Sports International, Ltd. (Antigua), and Global Gaming Corp.
(Grenada) ("Global"). The Advertising/Software Division
includes Intersphere Communications, Ltd. (Grenada)
("Intersphere"). A fourth subsidiary was formed in January
1997, Global Casinos, Ltd. (Grenada) ("Casinos"), and will be
a member of the Gaming and Licensing Division in 1997. 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.
Sports operates the world's first international Internet
sports book. Sports betting enthusiasts, once they have
established an account, can place a wager on just about any
sporting event over the phone or the Internet via a personal
computer. Wagers are accepted on all major sporting events in
the U.S. and Europe. Sports operates its business under a
gaming license issued and authorized by the government of
Grenada. Sports is the principle source of revenue for the
Company, generally accounting for 95% and 100% of the Company's
net revenues for the years ended December 31, 1996 and 1995,
respectively.
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 in development for over a year and is
now in use by Sports. 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.
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The Company's newest subsidiary, Casinos, operates the world's
first Internet Casino and Sports book. Casinos, in
conjunction with its joint venture partner, has developed
proprietary casino gaming and sports wagering software for use
by customers over the Internet.
Industry Segments
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.
Currently, the Company operates primarily in the sports book
segment and secondarily in horse racing. In 1997, the Company
will also operate in the casino segment via the Internet.
Marketing
The Company's Gaming and Licensing Division primarily
advertises its 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. Recently, the Company commenced advertising its
wagering services on the Internet. Initial responses have been
good and the Company plans to continue the advertising on a
year round basis.
Intellectual Property
The Company holds no patents or trademarks for its software.
Government Regulation
The business of the Company's Gaming and Licensing Division is
conducted through its wholly owned subsidiaries which are
legally organized in Grenada and licensed by the Grenadan
government to conduct its business. The subsidiaries'
business activities 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
via its Casino subsidiary. The first entertainment offered to
its customers was a slot machine tournament. The Company
plans to introduce more live games in the second quarter of
1997.
The Company also has plans to eventually develop an interactive
gaming system for the Internet World Wide Web.
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Employees
As of March 21, 1997, the Company had 32 full-time employees:
3 software engineers; 3 graphic designers; 14 computer
operators engaged in accepting and processing wagers; 6
marketing personnel; 1 HTML writer; and 5 employees engaged in
service support. The Company 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 are 20 sports books and 80 online
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
To conduct the business of its Gaming and Licensing Division,
its subsidiaries presently lease and occupy approximately
5,500 square feet in St. George's, Grenada for its office and
living quarters for non-Grenadan employees. The leases are for
a maximum of three years and, in some cases, on a month-to-month
basis. The leases expire on various dates through August 1997.
The leases provide for current annualized rent of approximately
$70,000. All leases scheduled to expire have renewal clauses
which the Company intends to extend, if appropriate, when said
leases expire.
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.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
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.
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, 1996.
<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.
1996 1995 1994
High Low High Low High Low
First Quarter 1 3/16 5/8 5 1/4 3/4 N/A N/A
Second Quarter 3 3/16 5/8 3 3/4 N/A N/A
Third Quarter 2 5/8 1 1/2 2 7/8 N/A N/A
Fourth Quarter 2 7/8 2 1/8 3/4 3 1/2 2
On March 14, 1997, the last reported sales price for the
Common Stock was $1.4375.
On March 14, 1997, the Company had approximately 500
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
13,672,040 shares are issued and outstanding as at March 14,
1997.
<PAGE>
Approximately 11,789,849 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.
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, 1996, 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 table
for, and as of the end of, each of the years or periods ended
for the four year period ended December 31, 1996, are derived
from the financial statements of the Company. For the period
to June 30, 1993, the Company was inactive as Entertainment
Tonight Video Express Ltd. The financial statement for the
period ended December 31, 1993 is unaudited. The financial
statements for the year ended December 31, 1994, have been
audited by Daniel L. Lieberman, independent Certified Public
Accountant. The financial statements for the years ended
December 31, 1996 and 1995 have been audited by Parente,
Randolph, Orlando, Carey & Associates. The 1995, 1994, and
1993 Selected Financial Data includes solely the operations of
Sports International, Ltd. (Antigua). The 1996 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>
Enter-
tainment
Tonight
Video
Express Ltd.
July 1, 1987
to
June 30,
1996 1995 1994 1993 1993 (2)
(3) (Unaudited) (Unaudited)
Income Statement
Data:
Gross handle $58,482,731 $47,817,172 $48,182,264 $31,261,745 $ -
Less customer
win 55,730,479 45,237,227 45,478,223 30,888,933 -
Net win 2,752,252 2,579,945 2,704,041 372,812 -
Other revenues 146,243 47,341 28,963 - -
Net win and
other revenues 2,898,495 2,627,286 2,733,004 372,812 -
Expenses 3,594,415 2,417,588 2,433,536 921,401 -
Net (loss) income $ (695,920) $ 209,698 $ 299,468 $ (548,589) $ -
(Loss) earnings
per common
share $(0.06) $0.02 $0.03 $(0.05) $ -
Weighted average
common shares
outstanding 11,512,656 10,404,110 10,379,066 10,379,066 6,715,913
(1)
<PAGE>
Enter-
tainment
Tonight
Video
Express Ltd.
July 1, 1987
to
June 30,
1996 1995 1994 1993 1993 (2)
(3) (Unaudited) (Unaudited)
Balance Sheet Data:
Working capital
(deficit) $(1,348,972) $ (352,100) $(146,848) $(228,953) $ -
Total assets $ 4,008,364 $ 1,931,886 $ 804,038 $ 317,198 $ -
Deficit $ (738,188) $ (42,268) $(251,966) $(551,434) $(894,208)
(2)
Stockholders'
equity (deficit) $1,909,301 $ 303,926 $ 51,713 $(249,755) $ -
(1) Before one (1) for four (4) reverse split.
(2) Entertainment Tonight Video Express Ltd. ceased all
operations in the beginning of fiscal year 1988. The Company
elected to eliminate, after June 30, 1993, capital in excess
of par value totalling $894,208 against accumulated deficit
totalling $894,208 for the periods ended through June 30, 1994.
(3) See Note 14 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
1996 versus 1995
Gross handle and other revenues increased by $10,665,559, or
22.5%, from $47,817,172 in 1995 to $58,482,731 in 1996. Net
win and other revenues increased by $271,209, or 10.3%, from
$2,627,286 in 1995 to $2,898,495 in 1996. The increase in gross
handle, net win and other revenues in 1996 resulted from
Internet wagering which did not exist in 1995. The Company's
domestic presence in the U.S. together with its move to
Grenada from Antigua and other related costs that flowed
through to the Consolidated Statement of Operations attributed
to the increase of expenses by $1,176,827, or 48.7%, from
$2,417,588 in 1995 to $3,594,415 in 1996. The dramatic increase
in such expenses as Legal and Professional, Salaries and
Telephone were directly related to the acquisitions
of its subsidiaries, Intersphere and Global, on November 4, 1996
and the increased personnel that go along with these acquired
businesses. These subsidiaries were acquired for, in the
aggregate, 2,100,000 of restricted shares previously unissued
common stock of the Company. Intersphere and Global will
contribute additional revenue in future years to the Company
resulting from software license fees related to its proprietary
product and exclusive master license to conduct gambling
operations from the Country of Grenada, respectively.
1995 versus 1994
Customer wagers totalled $47,817,172 in 1995 as compared to
$48,182,264 in 1994. Net win and other revenues decreased by
$105,718 in 1995 or 4% from $2,733,004 in 1994 to $2,627,286
in 1995. The resulting decrease in revenues was attributable
to the interruption in business suffered by the Company and
others during Hurricane Luis in September 1995. In order to
provide for such a natural catastrophe in the future, the
Company had established a second location in the Caribbean
that was used to back-up all wagering emanating over the
telephone. Despite incurring costs to repair the damage
incurred by Hurricane Luis and establishing a second site, the
Company was successful in reducing its expenses by $15,948 in
1995 from $2,433,536 in 1994 to $2,417,588 in 1995. In
addition, both the President and Vice President of the Company
voluntarily reduced and forgave approximately $74,000 of
their salaries in 1995.
Liquidity and Capital Resources
The Company continued its growth trend of doubling its asset
base from $804,038 in 1994 to $1,931,886 in 1995 to $4,008,364
in 1996. The Company's growth was achieved through the
subsidiary acquisitions of Intersphere and Global described
above and the resulting capitalization of the acquired
proprietary software product and exclusive gaming license.
There are no significant plans or demands for any further
capital expenditures within the next year.
The anticipated revenues from Global, Casinos and Intersphere
together with the cost reduction measures described in the
Prospective Outlook discussion which follows will remedy the
<PAGE>
working capital deficit of $1,348,972 in 1996 as compared to
$352,100 in 1995 and $146,848 in 1994.
If our outlook for greater revenues and reduced expenditures
does not meet our 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.
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. The
uncertainty of how the U.S. and other world governments will
look upon gambling on the Internet 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. However, the Company
has initiated legal action on its own behalf to defend its
position on Internet and off shore wagering.
Inflation
Inflation has not had a significant impact on the Company's
comparative results of operations.
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 estimates that its investments in 1996 will
significantly increase its revenues and earnings. The
investment in Global will enable its subsidiary to sell four
gaming sub licenses annually for two six year periods.
Management estimates that these revenues together with
royalties at 1% of licensees' net win will be approximately
$500,000 per year. In addition,
<PAGE>
Global has been granted by the Government of Grenada an
exclusive duty free concession which will enable it to
purchase equipment for sale to its licensees. Management
estimates that the Company will earn an additional $25,000 per
licensee as a result of this duty free concession.
The investment in Intersphere should provide an additional
$100,000 per year in licensing and royalty revenues. Prior to
1996, Intersphere devoted approximately 90% of its time on the
development of the proprietary WiseGuy system. Management
estimates that in the future, this product should consume only
25% of Intersphere's available productive resources.
Accordingly, Intersphere will sell more of its time and design
services to unrelated businesses thereby increasing its
revenues by about $250,000 per year.
Management also anticipates that the Company's revenues from
Casinos and its Internet activity will produce an additional
$500,000 of annual net win after splitting revenues with its
joint venture partner.
A major expense to the business is the cost of international
telephone and wire services. Last year Sports incurred in
excess of $520,000 for such services. The Company has
committed to an investment of $85,000 for a commercial
telephone switch and fixed cost leased lines which management
estimates will generate savings in excess of $300,000 per year
into the future.
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>
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Interactive Gaming & Communications Corp.
Blue Bell, Pennsylvania:
We have audited the accompanying consolidated balance
sheets of Interactive Gaming & Communications Corp. at December
31, 1996 and 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for the years
then ended. 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.
The consolidated financial statements of Sports International,
Ltd. as of December 31, 1994, were audited by another auditor,
who has ceased operations, and whose report dated April 4, 1995
expressed an unqualified opinion on those statements.
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 1996 and 1995 consolidated financial
statements referred to above present fairly, in all material
respects, the financial position of Interactive Gaming &
Communications Corp. at December 31, 1996 and 1995, and the
results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting
principles.
PARENTE, RANDOLPH, ORLANDO, CAREY & ASSOCIATES
Plymouth Meeting, Pennsylvania
March 17, 1997
<PAGE>
<TABLE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
(FORMERLY, SPORTS INTERNATIONAL, LTD.)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995 AND 1996
<CAPTION>
1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 208,020 667,766
Restricted cash 200,000 200,000
Accounts receivable, net
of allowance for doubtful
accounts of $ 61,802 in
1996 and $348,794 in 1995 274,108 348,794
Loan receivable 56,994 49,000
Other 10,969 10,300
Total current assets 750,091 1,275,860
PROPERTY, EQUIPMENT, AND
LEASEHOLD IMPROVEMENTS, Net 401,436 205,391
LOAN RECEIVABLE, INTERSPHERE - 138,788
INTANGIBLE ASSETS:
Systems development costs 1,652,149 233,641
Gaming and software sub-
licenses 1,150,804 -
Gaming licenses, net of
amortization of $20,000
in 1996 25,000 60,000
Total intangible assets 2,827,953 293,641
OTHER ASSETS 28,884 18,206
Total 4,008,364 $1,931,886
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable $ 400,000 $ 200,000
Customers' credit balances 1,114,698 877,624
Customers' security deposits 146,051 156,500
Accounts payable and accrued expenses 438,314 393,836
Total current liabilities 2,099,063 1,627,960
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value,
25,000,000 shares authorized,
13,672,040 issued and 10,942,566
shares issued and outstanding in
1996 and 1995 respectively 11,572 10,942
Additional paid-in capital 2,633,817 335,252
Deficit (738,188) (42,268)
Total stockholders' equity 1,909,301 303,926
Total 4,008,364 $1,931,886
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
(FORMERLY, SPORTS INTERNATIONAL, LTD.)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
1996 1995 1994
___________________________________
<S> <C> <C> <C>
GROSS HANDLE $58,482,731 $47,817,172 $48,182,264
LESS CUSTOMER WIN 55,730,479 45,237,227 45,478,223
NET WIN 2,752,252 2,579,945 2,704,041
OTHER REVENUES:
Licensing fees, net $ 70,000 - -
Membership fees 11,675 25,160 24,175
Other 64,568 22,181 4,788
Total other revenues 2,898,495 2,627,286 2,733,004
EXPENSES:
Salaries 875,285 468,372 668,469
Telephone 520,311 378,497 479,647
Legal and
professional 414,905 277,096 283,588
Advertising 353,431 276,027 154,138
Provision for
doubtful accounts 286,992 246,649 84,104
Rent 238,799 172,917 178,403
Officer's Salaries 193,267 188,450 272,720
Office 190,382 77,074 62,011
Travel and related
expenses 157,885 178,974 146,129
Depreciation 88,882 49,338 21,504
Amortization 80,000 - -
Auto 31,828 25,111 -
Relocation expense 29,707 - -
Insurance 28,590 - -
Interest 22,839 - -
Bank Charges 22,035 13,640 15,738
Repairs and
maintenance 21,598 24,655 3,003
Services and other
fees 19,593 9,398 34,776
Other 18,086 31,390 29,306
Total expenses 3,594,415 2,417,588 2,433,536
Net income (loss) $(695,920) $206,698 $299,468
Net income (loss)
per common share $ (0.06) $ 0.02 $ 0.03
Weighted average
common shares
outstanding 11,512,656 10,404,110 10,379,066
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
(FORMERLY, SPORTS INTERNATIONAL, LTD.)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION THROUGH DECEMBER 31, 1996
<CAPTION>
COMMON STOCK ADDITIONAL STOCK-
SHARES PAID-IN HOLDERS'
OUTSTANDING AMOUNT CAPITAL DEFICIT EQUITY
<S> <C> <C> <C <C> <C>
BALANCES, JANUARY 1, 1994
PRIOR TO
REORGANIZATION 6,715,913 $ 6,715 $ 889,172 $(895,887) $ -
Reverse stock split
4 for 1 (5,036,847) (5,036) 5,036 -
Elimination of
paid-in capital - - (894,208) 894,208 -
BALANCES, BEFORE REVERSE
MERGER ACQUISITION AND
REORGANIZATION 1,679,066 1,679 - (1,679) -
Common stock issued to Sports
International, Ltd. (Antigua)
stockholders to effect the
reverse merger acquisition and
reorganization (including the net
loss of $549,755 through
December 31, 1993) 4,500,000 4,500 295,500 (549,755) (249,755)
Common stock issued for
services 200,000 20 1,800 - 2,000
Common stock issued for
Convertible Note 4,000,000 4,000 (4,000) - -
Net income for 1994 - - - 299,468 299,468
BALANCES,
DECEMBER 31, 1994 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 $(738,188) 1,909,301
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
(FORMERLY, SPORTS INTERNATIONAL, LTD.)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>
1996 1995 1994
________ _________ __________
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (695,920) $ 209,698 $ 299,468
Adjustments to reconcile net (loss)
income to net cash (used in) provided
by operating activities:
Depreciation and amortization 168,882 49,338 21,504
Abandonment of leasehold improvements 8,297 - -
Common stock issued for employee
bonuses and consulting fees - 7,515 2,000
(Increase) decrease in assets:
Accounts receivable 74,686 (237,410) (84,103)
Other assets (11,347) (11,456) (10,150)
Increase (decrease) in liabilities:
Customers' credit balances 237,074 370,900 97,787
Customers' security deposits (10,449) 156,500 -
Accounts payable and accrued
expenses 68,816 222,329 121,495
Net cash (used in) provided
by operating activities (159,961) 767,414 448,001
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and leasehold
improvements (293,224) (73,218 (149,713)
Purchase of systems development costs (933,899) (233,641) -
Purchase of software sub-license (109,457) - -
Purchase of gaming licenses (45,000) (25,000) -
Increase in note and loans receivable (7,994) (144,488) (8,300)
Intersphere loan assumed 138,788 - -
Increase in restricted cash - (200,000) -
Net cash used in
investing activities (1,250,786) (676,347) (158,013)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 751,001 - -
Proceeds from notes payable 200,000 200,000 -
Repayment of notes payable - (16,000) (11,000)
Shareholder' loans payable - (58,094) (22,910)
Net cash provided by
(used in) financing
activities 951,001 125,906 (33,910)
(DECREASE) INCREASE IN CASH (459,746) 216,973 256,078
CASH, BEGINNING 667,766 450,793 194,715
CASH, ENDING $ 208,020 $ 667,76 $ 450,793
<FN>
(Continued)
</TABLE>
<PAGE>
<TABLE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
(FORMERLY, SPORTS INTERNATIONAL, LTD.)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>
1996 1995 1994
__________ __________ __________
<S> <C> <C> <C>
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING
ACTIVITIES:
Common stock issued for
services (Note 12) $ 508,947 $ - $ -
Common stock issued
for acquisitions (Note 14) $ 1,041,342 $ - $ -
Common stock issued for
gaming license $ - $ 35,000 $ -
Common stock issued for
employee bonuses and
consulting fees $ - 7,515 $ 2,000
Common stock issued to Sports
International, Ltd.
(Antigua) stockholders
to effect the reverse
merger acquisition
and reorganization $ - $ - $ 87,231
Common stock issued for
Convertible Note $ - $ - $ 4,000
SUPPLEMENTAL CASH FLOW INFORMATION,
Interest paid $ 22,839 $ - $ -
<FN>
See Notes to Consolidated Financial Statements
(Concluded)
</TABLE>
<PAGE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BACKGROUND AND NATURE OF OPERATIONS
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. and its
business from the stockholders of Sports International,
Ltd. 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 for four shares of the common stock of the
Company; (2) the acquisition of Sports International, Ltd.
by the exchange of Stock and Notes; (3) the election of
former officers and directors of Sports International,
Ltd. 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. 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. The excess of cost over the fair
value of net assets acquired, related to the $4,000,000
Notes, was recorded as an adjustment to common stock and
additional paid-in capital upon the conversion of the
Notes to common stock effective in 1994 to reflect the
substance of the transaction.
<PAGE>
Notes to Financial Statements (Continued)
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. 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.
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 three
subsidiaries and two divisions. The Gaming and Licensing
Division includes Sports International, Ltd. (Grenada)
("Sports") and Global Gaming Corp. (Grenada) ("Global").
The Advertising/Software Division includes Intersphere
Communications, Ltd. (Grenada) ("Intersphere"). A fourth
subsidiary was formed in January 1997, Global Casinos,
Ltd. (Grenada) ("Casinos"), and will be a member of the
Gaming and Licensing Division in 1997. 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.
Sports operates the world's first
international Internet sports book. Sports betting
enthusiasts, once they have established an account, can
place a wager on just about any sporting event over the
phone or the Internet via a personal computer. Wagers
are accepted on all major sporting events in the U.S. and
Europe. Sports operates its business under a gaming
license issued and authorized by the government of
Grenada. Sports is the principle source of revenue for
the Company, generally accounting for 95% and 100% of
the Company's net revenues for the years ended December
31, 1996 and 1995, respectively.
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.
<PAGE>
Notes to Financial Statements (Continued)
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 in development for over a year and is now in use by
Sports. 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.
The Company's newest subsidiary, Casinos, operates the
world's first Internet Casino and Sports book. Casinos,
in conjunction with its joint venture partner, has
developed proprietary casino gaming and sports wagering
software for use by customers over the Internet
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries,
Sports, Global and Intersphere. 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.
Restricted Cash
Restricted cash represents a thirty-day
certificate-of-deposit held by a financial institution
as collateral for a note payable which bears interest at
an average rate of 5%.
Accounts Receivable
The Company extends credit to "Platinum Members" for whom
the Company holds a security deposit as collateral for
the credit extended. Management believes that the
security deposit and the allowance for doubtful accounts
are sufficient to cover any potential losses on
collection of such accounts.
<PAGE>
Notes to Financial Statements (Continued)
Financial Instruments
The carrying amounts of cash, restricted cash, accounts
receivable, note and loans receivable, notes payable and
accounts payable approximate fair value at December 31,
1996 and 1995.
Equipment and Leasehold Improvements
Equipment and leasehold improvements are recorded at cost.
Depreciation and amortization are provided for on the
straight-line method over the estimated useful lives of
the assets, estimated at 5 years for equipment and for
leasehold improvements.
Systems Development Costs
The Company capitalizes the cost of developing certain
software products it plans to market in accordance with
Statement of Financial Accounting Standard No. 86,
"Accounting for the Costs of Computer Software to be
Sold, Leased, or Otherwise Marketed" (Note 8).
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
interactively. The Company has valued those sub-licensing
agreements at their fair value as determined by the
present value of anticipated future cash flows.
Gaming Licenses
Gaming licenses primarily relate to the Company's
Granadian operations. Annually, the Company pays a fee
to the Granadian government which it amortizes over the
one year term.
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, 1996
and 1995, 11,789,849 shares and 9,263,000 shares of the
total issued and outstanding shares of 13,672,040 and
10,942,566, respectively, were restricted as described
above.
<PAGE>
Notes to Financial Statements (Continued)
Common Stock Transactions
The Company adopted the recognition provisions of
Statement of Financial Accounting Standard No. 123,
"Accounting for Stock-Based Compensation" in 1995.
Advertising Costs
Costs incurred for advertising are expensed as incurred.
Income Taxes
The Company derives 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.
(Loss) Earnings Per Common Share
(Loss) earnings per common share for 1996 and 1995 is
based on the weighed average number of shares of common
stock outstanding during those years. Earnings per
share for 1994 is based on the number of shares of
common stock outstanding as of December 31, 1994, which
reflects the number of shares of common stock exchanged
in the reverse merger including the number of shares
issued in exchange for the Convertible Note as of
December 31, 1994.
Reclassifications
Certain balances and amounts in the 1995 and 1994
financial statements have been reclassified to conform
with the presentation for 1996.
3. 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 had a working capital deficiency of $1,348,972 and
$352,100 at December 31, 1996 and 1995, respectively. The
majority of the Company's operations are financed by cash flows
from operations including customers' credit balances and
security deposits, which remain on deposit until customers
request repayment. Accordingly, the ability of the Company to
continue to finance its operations internally is contingent on
customer repayment requests. The Company may need to seek
other financing if a significant
<PAGE>
Notes to Financial Statements (Continued)
amount of customers' credit balances and/or security
deposits are required to be repaid in a concentrated time
period.
The Company's business activities, operations and net income
are derived primarily from its wagering business in Grenada.
The Company incurred a net loss of $695,920 in 1996 and
although the business had been profitable during 1995 and
1994, there is no assurance that profits will return.
Customers' credit balances and security deposits exceeded
cash by $1,052,729 and $366,358 at December 31, 1996 and
1995, respectively. There is no assurance that the Company
will develop the liquidity to repay customers, if required,
without other financing.
Sports is legally constituted in Grenada and pays a license
fee to the Granadian government to conduct its business.
The Company's business activities emanating from the United
States (customers' wagers) may become materially affected by
regulations and actions that may now be in place or will be
promulgated by the various foreign, federal, state and/or
local government agencies 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 new Global Casino operations and gaming and
software 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, joint
venturing and sharing of development costs, or other
resources.
4. SIGNIFICANT ESTIMATES AND CONCENTRATIONS
Most of the Company's unrestricted cash is held outside the
United States and is not covered by FDIC insurance.
The Company has provided an allowance for doubtful accounts
of $61,802 and $348,794 at December 31, 1996 and 1995,
respectively, 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
<PAGE>
Notes to Financial Statements (Continued)
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, 1996. 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, 1996 and 1995, 74% and 100% of the Company's
net assets were located in Grenada and Antigua, respectively.
Substantially all of the Company's revenues are derived from
an exclusive gaming license from the government of Grenada.
The exclusive gaming license expires in 2008.
5. RELATED PARTY TRANSACTIONS
The note receivable is from a Company consultant and
shareholder, is unsecured, payable on demand and bears
interest at the prime rate plus 1%.
Also, the Company paid consulting fees of $35,331 to its
Chief Financial Officer.
6. EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements consist of the
following at December 31, 1996 and 1995:
1996 1995
Furniture, fixtures and
equipment $542,218 $270,777
Leasehold improvements 29,628 12,307
Total cost 571,846 283,084
Less accumulated depreciation
and amortization 170,410 77,693
Net $401,436 $205,391
<PAGE>
Notes to Financial Statements (Continued)
7. LOAN RECEIVABLE, INTERSPHERE
The Company advanced funds to an Internet World Wide Web
service company for the purpose of advertising, marketing,
promotion, and communications in the print and electronic
media. On November 4, 1996, the Company acquired the
Internet World Wide Web service company (Intersphere).
8. 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 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. 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 and
$233,641 at December 31, 1996 and 1995, respectively.
Subsequent to December 31, 1996, both projects were
substantially completed and amortization will commence in
1997.
9. CUSTOMERS' CREDIT BALANCES AND SECURITY DEPOSITS
The Company administers accounts for its customers by
depositing funds into a single bank account and maintaining
separate records for the amount each customer has on deposit.
Customers open accounts by mailing checks or sending funds
by wire transfer to an offshore bank account administrated
by Sports. The usual wager/bet procedure requires a
toll-free telephone call to Sports for the odds on various
sporting events. When a bet is placed in Grenada, the amount
of the wager is removed from the customer's account.
Winnings are credited to the customer's account and may be
collected by the customer by requesting that the funds be
issued by check to their home address or wire transferred to
their bank account.
10. NOTES PAYABLE
On December 8, 1995, the Company issued a promissory note
payable to a financial institution in the amount of $200,000.
The note is collateralized by a certificate-of-deposit
<PAGE>
Notes to Financial Statements (Continued)
in the amount of $200,000. The note bears interest at a
fixed rate of 8% and is due on demand.
On August 27, 1996, the Company issued a second promissory
note payable to the same 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%
(9.5% at December 31, 1996) and is due on demand.
11. COMMITMENTS
Commencing January 1, 1996, the Company entered into a three
year lease for its corporate headquarters in Blue Bell,
Pennsylvania. In June 1996, the Company entered into a
three-year lease agreement for its wagering operations in
St. George's, Grenada. Future minimum rental payments under
the leases are as follows:
Year ending December 31:
1997 $139,200
1998 140,388
1999 33,732
12. 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 of $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.
<PAGE>
Notes to Financial Statements (Continued)
13. 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.
14. 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
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
<PAGE>
Notes to Financial Statements (Continued)
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 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)
15. 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.
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.
16. 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,
<PAGE>
Notes to Financial Statements (Continued)
relative rights and preferences of such shares. At December
31, 1996 and 1995, no preferred stock had been issued.
17. CONTINGENCY
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.
<PAGE>
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
Board of Directors
Interactive Gaming & Communications Corp.
Blue Bell, Pennsylvania:
We have audited the basic 1996 and 1995 consolidated
financial statements of Interactive Gaming & Communications
Corp. as of December 31, 1996 and 1995 and for each of the years
in the two year period ended December 31, 1996 and have issued
our report thereon dated March 17, 1997, 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 in
Item 14. 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
Plymouth Meeting, Pennsylvania
March 17, 1997
<PAGE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
Balances at Provision Accounts Balances at
Beginning Charged to Written- End of
of Year Expense Off Year
For the year ended
December 31, 1996
Allowance for doubtful
accounts $348,794 $286,992 $573,984 $ 61,802
For the year ended
December 31, 1995:
Allowance for doubtful
accounts $111,384 $246,649 $ 9,239 $348,794
For the year ended
December 31, 1994:
Allowance for doubtful
accounts $ 27,280 $ 84,104 $ - $111,384
See Notes to Consolidated Financial Statements
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
On March 27, 1996, the Company filed Form 8-K announcing the
change in independent accountants. The Company engaged Parente,
Randolph, Orlando, Carey and Associates to perform an audit for
the year ended December 31, 1995. This decision was approved
by the Company's management. No disagreements were reported.
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 48 Chairman of the Board, Director, 1997 Annual Meeting
President, Secretary and Chief
Executive Officer
Lawrence E. Hirsch, 57 Director and Vice President 1997 Annual Meeting
Esquire
Fred Michini, CPA 54 Chief Financial Officer 1997 Annual Meeting
There were three officers and two directors who tendered their
voluntary resignations citing personal reasons, namely, Rina
Moscariello, Joseph A. Lashinger, Esquire and Jack Scott.
All the directors were re-elected to the Board of Directors at
the Annual Meeting of Shareholders on June 21, 1996. 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
<PAGE>
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 The University of Miami in 1972, and
holds a BS Degree in Finance.
Lawrence E. Hirsch, Esquire has been a practicing attorney
since 1963 and was General Counsel to 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. He now
serves as Special Counsel to the Company on a per diem
basis. Mr. Hirsch holds a Bachelor of Law Degree from
Temple University.
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 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.
<PAGE>
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
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
1996 $ 144,230 $ - $ -
1995 105,750 - -
1994 150,000 - -
1993 24,000 - -
Rina Moscariello, Director,
Vice President, and Secretary
1996 53,844 - -
1995 70,700 - -
1994 100,000 - -
1993 24,000 - -
Lawrence E. Hirsch, Esquire,
Director and Vice President
1996 101,872 - -
1995 12,000 - -
1994 12,000 - -
1993 - - -
Joseph A. Lashinger, Esquire,
Director and Vice President 68,794 - (1)
Jack Scott, Vice President 65,769 - -
Fred Michini, CPA,
Chief Financial Officer 35,331 - -
(1) Terms of his employment resignation agreement provide an
option to purchase 50,000 shares of the Company's stock at $1.75
per share with an exercise deadline of October 25, 1999.
<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 $1.75 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 13,672,040 shares of issued and outstanding
Common Stock of the Company as of March 14, 1997, 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
with respect to shares shown as beneficially owned by them.
<PAGE>
Name and Address of Nature of Number of Shares Percent
Beneficial Owner Ownership Owned
Michael F. Simone
23 Cottonwood Street
Newtown, PA 18940
and
595 Skippack Pike,
Suite 100
Blue Bell, PA 19422 Common Stock, 4,480,000 32.8%
Direct
Rina Moscariello
994 Derring Lane
Bryn Mawr, PA 19110
and
595 Skippack Pike,
Suite 100
Blue Bell, PA 19422 Common Stock, 4,010,000 29.3%
Direct
Lawrence E. Hirsch
1700 Sansom Street,
Suite 501
Philadelphia, PA
19103 Common Stock, 10,000 0.0%
Direct
Fred Michini
2005 North Wales
Road
Lansdale, PA 19446 Common Stock, 1,000 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)
8,501,000 62.1%
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are no other material relationships or transactions which
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 14, 1996, the Company filed a Form 8-K reporting
the acquisition of Intersphere and Global from Caribbean
Communications, Ltd. and Arthur Reynolds in exchange for
1,000,000 and 1,100,000 shares, respectively, of the Company's
restricted common stock.
<PAGE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
(FORMERLY, SPORTS INTERNATIONAL, LTD.)
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: March 28, 1997
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 28th day of March, 1997.
INTERACTIVE GAMING & COMMUNICATIONS CORP.
By: /s/ Michael F. Simone
Michael F. Simone, Director, President, and Chief
Executive Officer
By: /s/ Lawrence E. Hirsch
Lawrence E. Hirsch, Director and Vice President
<PAGE>
Daniel L. Lieberman
Certified Public Accountant
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANT
Board of Directors
Sports International Ltd.
Blue Bell, Pennsylvania
I have audited the consolidated balance sheet of Sports
International, Ltd. (a Delaware corporation) as of December
31, 1994 and the related consolidated statements of operations,
changes in stockholders' equity and cash flows for the year
then ended. These financial statements are the responsibility
of the Corporation's management. My responsibility is to
express an opinion on these financial statements based on my
audit.
I conducted my audit in accordance with generally accepted
auditing standards. Those standards require that I 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. I
believe that my audit provides a reasonable basis for my
opinion.
In my opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the
financial position of Sports International, Ltd. at December
31, 1994, and the results of its operations and its cash flows
for the year then ended, in conformity with generally accepted
accounting principles.
My audit was made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental
schedules listed in the accompanying index to consolidated
financial statements and related information of the Form 10-K
are presented for purposes of complying with the Securities
and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to
the auditing procedures applied in the audit of the basic
financial statements and, in my opinion, fairly state in all
material respects the financial data required to be set forth
therein in relation to the basic financial statements taken
as a whole.
/s/ Daniel L. Lieberman
Old Westbury, New York
April4, 1995
<PAGE>
Daniel L. Lieberman
Certified Public Accountant
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT'S CONSENT
I consent to the incorporation by reference of my report dated
April 4, 1995, on my audit of the consolidated balance sheet of
Sports International, Ltd. (a Delaware corporation) as of
December 31, 1994 and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for
the year then ended, in Form 10-K of Sports International, Ltd.
for the year ended December 31, 1995.
/s/ Daniel L. Lieberman
Old Westbury, New York
March 27, 1996
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